Document:

EXHIBIT 4.1

 

REGISTRATION
RIGHTS AGREEMENT

 

 

among

 

 

LITHIA
MOTORS, INC.

 

as
Issuer,

 

 

and

 

 

MORGAN
STANLEY & CO. INCORPORATED,

 

STEPHENS
INC.,

 

RAYMOND
JAMES & ASSOCIATES, INC.

 

and

 

JEFFERIES
& COMPANY, INC.

 

as
Initial Purchasers

 

 

Dated
as of May 4, 2004

 

 

THIS REGISTRATION RIGHTS AGREEMENT dated as of May 4, 2004 between
Lithia Motors, Inc., an Oregon corporation (the “Company”), and Morgan Stanley
& Co. Incorporated, Stephens Inc., Raymond James & Associates, Inc. and
Jefferies & Company, Inc. (the “Initial Purchasers”), is entered into
pursuant to the Purchase Agreement dated April 27, 2004 (the “Purchase
Agreement”), among the Company and the Initial Purchasers.  In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Company has agreed to provide to the
Initial Purchasers and their direct and indirect transferees the registration
rights set forth in this Agreement.  The
execution of this Agreement is a condition to the closing under the Purchase
Agreement.

 

The Company agrees with the Initial Purchasers, (i) for their benefit
as Initial Purchasers and (ii) for the benefit of the beneficial owners
(including the Initial Purchasers) from time to time of the Notes (as defined
herein) and the beneficial owners from time to time of the Underlying Common
Stock (as defined herein) issued upon conversion of the Notes (each of the
foregoing a “Holder” and together the “Holders”), as follows:

 

SECTION 1.  Definitions.  Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement.  As used in this Agreement, the following
terms shall have the following meanings:

 

“Additional
Interest Amount” has the meaning set forth in Section 2(e)
hereof.

 

“Affiliate”
means with respect to any specified person, an “affiliate,” as defined in Rule
144, of such person.

 

“Amendment
Effectiveness Deadline Date” has the meaning set forth
in Section 2(d) hereof.

 

“Business
Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in the City of New York are
authorized or obligated by law or executive order to close.

 

“Common
Stock” means the shares of Class A common stock, with no par value
per share, of the Company, and any other shares of common stock as may
constitute “Common Stock” for purposes of the Indenture, including the
Underlying Common Stock.

 

“Conversion
Price” has the meaning assigned such term in the Indenture.

 

“Conversion
Rate” has the meaning assigned such term in the Indenture.

 

“Damages
Accrual Period” has the meaning set forth in Section 2(e)
hereof.

 

“Damages
Payment Date” means each May 1 and November 1.

 

“Deferral
Notice” has the meaning set forth in Section 3(h) hereof.

 

2

 

“Deferral
Period” has the meaning set forth in Section 3(h) hereof.

 

“Effectiveness
Deadline Date” has the meaning set forth in Section 2(a)
hereof.

 

“Effectiveness
Period” means the period commencing on the date hereof and ending on
the date that all Registrable Securities have ceased to be Registrable
Securities.

 

“Event”
has the meaning set forth in Section 2(e) hereof.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.

 

“Filing
Deadline Date” has the meaning set forth in Section 2(a)
hereof.

 

“Holder”
has the meaning set forth in the second paragraph of this Agreement.

 

“Indenture”
means the Indenture, dated as of May 4, 2004, between the Company and U.S. Bank
National Association, as trustee, pursuant to which the Notes are being issued.

 

“Initial
Purchasers” has the meaning set forth in the preamble hereof.

 

“Initial
Shelf Registration Statement” has the meaning set forth in
Section 2(a) hereof.

 

“Issue
Date” means April 27, 2004.

 

“Material
Event” has the meaning set forth in Section 3(h) hereof.

 

“Notes”
means the 2.875% Convertible Senior Subordinated Notes Due 2014 of the Company
to be purchased pursuant to the Purchase Agreement.

 

“Notice
and Questionnaire” means a written notice delivered to the Company
containing all material information called for by the Form of Selling
Securityholder Notice and Questionnaire attached as Annex A to the
Offering Memorandum of the Company dated April 27, 2004 relating to the
Notes.

 

“Notice
Holder” means, on any date, any Holder that has delivered a duly
executed and completed Notice and Questionnaire to the Company on or prior to
such date.

 

“Purchase
Agreement” has the meaning set forth in the preamble hereof.

 

“Prospectus”
means the prospectus included in any Registration Statement (including, without
limitation, a prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any amendment or prospectus supplement,

 

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including post-effective amendments, and all materials incorporated by
reference or explicitly deemed to be incorporated by reference in such
Prospectus.

 

“Record
Holder” means with respect to any Damages Payment Date relating to
any Notes or Underlying Common Stock as to which any Additional Interest Amount
has accrued, the registered holder of such Note or Underlying Common Stock on
the April 15 immediately preceding a Damages Payment Date occurring on a
May 1, and on the October 15 immediately preceding a Damages Payment Date
occurring on a November 1.

 

“Registrable
Securities” means the Notes until such Notes have been converted
into or exchanged for the Underlying Common Stock and, at all times subsequent
to any such conversion, the Underlying Common Stock and any securities into or
for which such Underlying Common Stock has been converted or exchanged, and any
security issued with respect thereto upon any stock dividend, split or similar
event until, in the case of any such security, (A) the earliest of (i) its
effective registration under the Securities Act and resale in accordance with
the Registration Statement covering it, (ii) expiration of the holding period
that would be applicable thereto under Rule 144(k), (iii) its sale to the
public pursuant to Rule 144 under the Securities Act, or (iv) the date such
security ceases to be outstanding 
(whether as a result of redemption, repurchase and cancellation,
conversion or otherwise), and (B) as a result of the event or circumstance
described in any of the foregoing clauses (A)(i) through (A)(iii), the legend
with respect to transfer restrictions required under the Indenture is removed
or removable in accordance with the terms of the Indenture or such legend, as
the case may be.

 

“Registration
Statement” means any registration statement of the Company that
covers the registration of any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus contained therein,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits and all materials incorporated by
reference or explicitly deemed to be incorporated by reference in such
registration statement.

 

“Restricted
Securities” means “Restricted Securities” as defined in Rule 144.

 

“Rule
144” means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.

 

“Rule
144A” means Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.

 

“SEC”
means the Securities and Exchange Commission.

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated by the SEC thereunder.

 

“Shelf
Registration Statement” has the meaning set forth in
Section 2(a) hereof.

 

“Special
Counsel” means Davis Polk & Wardwell or one such other successor
counsel as shall be specified by the Holders of a majority of the Registrable
Securities, but which may, with

 

4

 

the written consent of the Initial Purchasers (which shall not be
unreasonably withheld), be another nationally recognized law firm experienced
in securities law matters designated by the Company, the reasonable fees and
expenses in connection with Blue Sky qualifications of the Registrable
Securities of which will be paid by the Company pursuant to Section 5
hereof.  For purposes of determining the
Holders of a majority of the Registrable Securities in this definition, Holders
of Notes shall be deemed to be the Holders of the number of shares of
Underlying Common Stock into which such Notes are or would be convertible as of
the date the consent is requested.

 

“Subsequent
Shelf Registration Statement” has the meaning set forth in
Section 2(b) hereof.

 

“TIA”
means the Trust Indenture Act of 1939, as amended.

 

“Trustee”
means U.S. Bank National Association, the Trustee or its successors under the
Indenture.

 

“Underlying
Common Stock” means the Common Stock into which the Notes are
convertible or issued upon any such conversion.

 

SECTION 2.  Shelf Registration.  (a) The Company shall prepare
and file or cause to be prepared and filed with the SEC, as soon as practicable
but in any event on or before the date (the “Filing Deadline Date”) ninety
(90) days after the Issue Date, a Registration Statement for an offering to be
made on a delayed or continuous basis pursuant to Rule 415 of the Securities
Act (a “Shelf
Registration Statement”) registering the resale from time to time by
Holders thereof of all of the Registrable Securities (the “Initial Shelf Registration Statement”).  The Initial Shelf Registration Statement
shall be on Form S-3 or another appropriate form permitting registration of
such Registrable Securities for resale by such Holders in accordance with the
methods of distribution elected by the Holders and set forth in the Initial
Shelf Registration Statement.  The
Company shall use its best efforts to cause the Initial Shelf Registration
Statement to be declared effective under the Securities Act as promptly as is
practicable but in any event on or before the date (the “Effectiveness Deadline Date”)
that is one hundred eighty (180) days after the Issue Date, and, subject to the
Company’s right to suspend the use of a Registration Statement pursuant to
Section 3(h) hereof, to keep the Initial Shelf Registration Statement (or
any Subsequent Shelf Registration Statement) continuously effective under the
Securities Act until the expiration of the Effectiveness Period.  At the time the Initial Shelf Registration
Statement is declared effective, each Holder that became a Notice Holder on or
prior to the date ten (10) Business Days prior to such time of effectiveness
shall be named as a selling securityholder in the Initial Shelf Registration
Statement and the related Prospectus in such a manner as to permit such Holder
to deliver such Prospectus to purchasers of Registrable Securities in
accordance with applicable law.  No
holder shall be entitled to be named as a selling securityholder in the Initial
Shelf Registration Statement or to use the Prospectus forming a part thereof
for offers or resales of Registrable Securities unless such holder is a Notice
Holder on or prior to the date ten (10) Business Days prior to such time of
effectiveness.  None of the Company’s
security holders (other than the Holders of Registrable Securities) shall have
the right to include any of the Company’s securities in the Shelf Registration
Statement.

 

5

 

(b)                                 If the Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because all Registrable Securities registered thereunder shall have been
resold pursuant thereto or shall have otherwise ceased to be Registrable
Securities), the Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within thirty (30) days of such cessation of effectiveness amend the
Shelf Registration Statement in a manner reasonably expected to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional Shelf Registration Statement covering all of the securities that as
of the date of such filing are Registrable Securities (a “Subsequent Shelf Registration Statement”).  If a Subsequent Shelf Registration Statement
is filed, the Company shall use its best efforts to cause the Subsequent Shelf
Registration Statement to become effective as promptly as is reasonably practicable
after such filing, and, subject to the Company’s right to suspend the use of a
Registration Statement pursuant to Section 3(h) hereof, to keep such
Registration Statement (or subsequent Shelf Registration Statement)
continuously effective until the end of the Effectiveness Period.

 

(c)                                  The Company shall
supplement and amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement, if required by the Securities
Act or as otherwise necessary to name a Notice Holder as a selling
securityholder pursuant to Section (d) below.

 

(d)                                 Each Holder agrees
that if such Holder wishes to sell Registrable Securities pursuant to a Shelf
Registration Statement and related Prospectus, it will do so only in accordance
with this Section 2(d) and Section 3(h) of this Agreement.  Following the date that the Initial Shelf
Registration Statement is declared effective, each Holder that is not a Notice
Holder wishing to sell Registrable Securities pursuant to a Shelf Registration
Statement and related Prospectus agrees to deliver a Notice and Questionnaire
to the Company at least fifteen (15) Business Days prior to any intended
distribution of Registrable Securities under the Shelf Registration
Statement.  From and after the date the
Initial Shelf Registration Statement is declared effective, the Company shall,
as promptly as reasonably practicable after the date a Notice and Questionnaire
is delivered pursuant to Section 8(c), and in any event upon the later of
(x) fifteen (15) Business Days after such date or (y) five (5) Business Days
after the expiration of any Deferral Period that is in effect when the Notice
and Questionnaire is delivered or that is put into effect within fifteen (15)
Business Days of such delivery date:

 

(i) if required by applicable law, file with
the SEC a post-effective amendment to the Shelf Registration Statement or
prepare and, if required by applicable law, file a supplement to the related
Prospectus or a supplement or amendment to any document incorporated therein by
reference or file any other required document so that the Holder delivering
such Notice and Questionnaire is named as a selling securityholder in the Shelf
Registration Statement and the related Prospectus in such a manner as to permit
such Holder to deliver such Prospectus to purchasers of the Registrable
Securities in accordance with applicable law and, if the Company shall file a
post-effective amendment to the Shelf Registration Statement, use its best
efforts to cause such post-effective amendment to be declared effective under
the Securities Act as promptly as is reasonably practicable, but in any event
by the date (the “Amendment Effectiveness

 

6

 

Deadline
Date”) that is forty-five (45) days after the date
such post-effective amendment is required by this clause to be filed;

 

(ii) provide such Holder copies of any
documents filed pursuant to Section 2(d)(i); and

 

(iii) notify such Holder as promptly as
practicable after the effectiveness under the Securities Act of any
post-effective amendment filed pursuant to Section 2(d)(i);

 

provided,
that if such Notice and Questionnaire is delivered during a Deferral Period,
the Company shall so inform the Holder delivering such Notice and Questionnaire
and shall take the actions set forth in clauses (i), (ii) and (iii) above upon
expiration of the Deferral Period in accordance with Section 3(h).  Notwithstanding anything contained herein to
the contrary, (i) the Company shall be under no obligation to name any Holder
that is not a Notice Holder as a selling securityholder in any Registration
Statement or related Prospectus and (ii) the Amendment Effectiveness Deadline
Date shall be extended by up to ten (10) Business Days from the expiration of a
Deferral Period (and the Company shall incur no obligation to pay Additional
Interest Amount during such extension) if such Deferral Period shall be in
effect on the Amendment Effectiveness Deadline Date.

 

(e)                                  The parties hereto
agree that the Holders of Registrable Securities will suffer damages, and that
it would not be feasible to ascertain the extent of such damages with
precision, if, other than as permitted hereunder,

 

(i)                                     the
Initial Shelf Registration Statement has not been filed on or prior to the
Filing Deadline Date,

 

(ii)                                  the
Initial Shelf Registration Statement has not been declared effective under the
Securities Act on or prior to the Effectiveness Deadline Date,

 

(iii)                               the
Company has failed to perform its obligations set forth in Section 2(d)(i)
within the time period required therein,

 

(iv)                              any
post-effective amendment to a Shelf Registration Statement filed pursuant to
Section 2(d)(i) has not become effective under the Securities Act on or
prior to the Amendment Effectiveness Deadline Date,

 

(v)                                 the
aggregate duration of Deferral Periods in any period exceeds the number of days
permitted in respect of such period pursuant to Section 3(h) hereof, or

 

(vi)                              the
number of Deferral Periods in any period exceeds the number permitted in
respect of such period pursuant to Section 3(h) hereof.

 

Each event described in any of the foregoing clauses in
Section 2(e)(i) through (vi) is individually referred to herein as an “Event.”
For purposes of this Agreement, each Event set forth above shall begin on the
day immediately following each Beginning Date set forth in the table below and
shall end on each Ending Date set forth in the table below:

 

7

 

	
  Type of 

  Event by

  Clause

  	
   

  	
  Beginning

  Date

  	
   

  	
  Ending

  Date

  
	
  (i)

  	
   

  	
  Filing Deadline Date

  	
   

  	
  the date the Initial Shelf Registration Statement is filed

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  Effectiveness Deadline Date

  	
   

  	
  the date the Initial Shelf Registration Statement becomes effective
  under the Securities Act

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  the date by which the Company is required to perform its obligations
  under Section 2(d)(i)

  	
   

  	
  the date the Company performs its obligations set forth in
  Section 2(d)(i)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (iv)

  	
   

  	
  the Amendment Effectiveness Deadline Date

  	
   

  	
  the date the applicable post-effective amendment to a Shelf
  Registration Statement becomes effective under the Securities Act

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (v)

  	
   

  	
  the date on which the aggregate duration of Deferral Periods in any
  period exceeds the number of days permitted by Section 3(h)

  	
   

  	
  termination of the Deferral Period that caused the limit on the
  aggregate duration of Deferral Periods to be exceeded

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (vi)

  	
   

  	
  the date of commencement of a Deferral Period that causes the number
  of Deferral Periods to exceed the number permitted by Section 3(h)

  	
   

  	
  termination of the Deferral Period that caused the number of Deferral
  Periods to exceed the number permitted by Section 3(h)

  

 

Commencing on (and including) any date that an Event has begun and
ending on (but excluding) the next date on which there are no Events that have
occurred and are continuing (a “Damages Accrual Period”), the Company shall
pay, as additional interest and not as a penalty, to Record Holders of
Registrable Securities an amount (the “Additional Interest Amount”) accruing, for
each day in the Damages Accrual Period, (i) in respect of any Note, at a rate
per annum equal to 0.25% of the aggregate principal amount of such Note and
(ii) in respect of each

 

8

 

outstanding share of Underlying Common Stock that is a Registrable
Security at a rate per annum equal to 0.25% of the Conversion Price on such
date, as the case may be to and including the 90th day following the
Beginning Date of such Event, and at a rate per annum equal to 0.50% thereof
with respect to each of (i) and (ii) of this sentence from and after the 91st
day following the Beginning Date of such Event; provided that in no event
shall the Additional Interest Amount accrue at a rate per annum exceeding 0.50%
of the principal amount of the aggregate principal amount of such Note or
Conversion Price, as the case may be, regardless of whether one or multiple
Events exist.  In calculating the
Additional Interest Amount on shares of Underlying Common Stock on any date on
which no Notes are outstanding, the Conversion Price shall be calculated as if
the Notes were still outstanding. 
Notwithstanding the foregoing, no Additional Interest Amount shall
accrue as to any Registrable Security from and after the earlier of (x) the
date such security is no longer a Registrable Security and (y) expiration of
the Effectiveness Period.  The rate of
accrual of the Additional Interest Amount with respect to any period shall not
exceed the rate provided for in this paragraph notwithstanding the occurrence
of multiple concurrent Events.

 

The Additional Interest Amount shall accrue from the first day of the
applicable Damages Accrual Period, and shall be payable on each Damages Payment
Date during the Damage Accrual Period (and on the Damages Payment Date next
succeeding the end of the Damages Accrual Period if the Damage Accrual Period
does not end on a Damages Payment Date) to the Record Holders of the
Registrable Securities entitled thereto; provided that any Additional Interest
Amount accrued with respect to any Note or portion thereof redeemed by the
Company on a redemption date or converted into Underlying Common Stock on a
conversion date prior to the Damages Payment Date, shall, in any such event, be
paid instead to the Holder who submitted such Note or portion thereof for
redemption or conversion on the applicable redemption date or conversion date,
as the case may be, on such date (or promptly following the conversion date, in
the case of conversion).  The Trustee shall
be entitled, on behalf of registered holders of Notes or Underlying Common
Stock, to seek any available remedy for the enforcement of this Agreement,
including for the payment of such Additional Interest Amount.  Notwithstanding the foregoing, the parties
agree that the sole damages payable for a violation of the terms of this
Agreement with respect to which additional interest are expressly provided
shall be such additional interest. 
Nothing shall preclude any Holder from pursuing or obtaining specific
performance or other equitable relief with respect to this Agreement.

 

All of the Company’s obligations set forth in this Section 2(e) to
pay any Additional Interest Amount that is outstanding with respect to any
Registrable Security at the time such security ceases to be a Registrable
Security shall survive until such time as all such obligations with respect to
such security have been satisfied in full (notwithstanding termination of this
Agreement pursuant to Section 8(k)).

 

The parties hereto agree that the additional interest provided for in
this Section 2(e) constitute a reasonable estimate of the damages that may
be incurred by Holders of Registrable Securities by reason of the failure of
the Shelf Registration Statement to be filed or declared effective or available
for effecting resales of Registrable Securities in accordance with the
provisions hereof.

 

9

 

SECTION 3.  Registration Procedures.  In connection with the registration
obligations of the Company under Section 2 hereof, during the
Effectiveness Period, the Company shall:

 

(a)                                  Prepare
and file with the SEC a Registration Statement or Registration Statements on
any appropriate form under the Securities Act available for the sale of the
Registrable Securities by the Holders thereof in accordance with the intended
method or methods of distribution thereof, and use its best efforts to cause
each such Registration Statement to become effective and remain effective as
provided herein; provided that before filing any Registration Statement or
Prospectus or any amendments or supplements thereto with the SEC, the Company
shall furnish to the Initial Purchasers and the Special Counsel for such
offering, if any, copies of all such documents substantially in the form
proposed to be filed (other than correspondence and supplemental information
not directly related to the Holder or the transactions contemplated by the
Purchase Agreement) at least three (3) Business Days prior to the filing of
such Registration Statement or amendment thereto or Prospectus or supplement
thereto and use its best efforts to reflect in each such document when so filed
with the SEC such comments as the Initial Purchasers or the Special Counsel, if
any, reasonably shall propose within three (3) Business Days of the delivery of
such copies to the Initial Purchasers and the Special Counsel.

 

(b)                                 Subject
to Section 3(h), prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the applicable
period specified in Section 2(a); cause the related Prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force) under
the Securities Act; and use its reasonable best efforts to comply with the
provisions of the Securities Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement during the
Effectiveness Period in accordance with the intended methods of disposition by
the sellers thereof set forth in such Registration Statement as so amended or
such Prospectus as so supplemented.

 

(c)                                  As
promptly as practicable give notice to the Notice Holders, the Initial
Purchasers and the Special Counsel, (i) when any Prospectus, prospectus
supplement, Registration Statement or post-effective amendment to a
Registration Statement has been filed with the SEC and, with respect to a Registration
Statement or any post-effective amendment, when the same has been declared
effective, (ii) of any request, following the effectiveness of the Initial
Shelf Registration Statement under the Securities Act, by the SEC or any other
federal or state governmental authority for amendments or supplements to any
Registration Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of any Registration
Statement or the initiation or threatening of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (v) of the occurrence of, but
not the nature of or details concerning, a Material Event and (vi) of the
determination by

 

10

 

the Company that a post-effective amendment
to a Registration Statement will be filed with the SEC, which notice may, at
the discretion of the Company (or as required pursuant to Section 3(h)),
state that it constitutes a Deferral Notice, in which event the provisions of
Section 3(h) shall apply.

 

(d)                                 Use
its best efforts to obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction in which they have been qualified for
sale, in either case at the earliest possible moment, and provide immediate
notice to each Notice Holder and the Initial Purchasers of the withdrawal of
any such order.

 

(e)                                  As
promptly as practicable furnish to each Notice Holder, the Special Counsel and
the Initial Purchasers, upon request and without charge, at least one (1)
conformed copy of the Registration Statement and any amendment thereto,
including exhibits and all documents incorporated or deemed to be incorporated
therein by reference.

 

(f)                                    During
the Effectiveness Period, deliver to each Notice Holder, the Special Counsel,
if any, and the Initial Purchasers, in connection with any sale of Registrable
Securities pursuant to a Registration Statement, without charge, as many copies
of the Prospectus or Prospectuses relating to such Registrable Securities
(including each preliminary prospectus) and any amendment or supplement thereto
as such Notice Holder may reasonably request; and the Company hereby consents
(except during such periods that a Deferral Notice is outstanding and has not
been revoked) to the use of such Prospectus or each amendment or supplement
thereto by each Notice Holder in connection with any offering and sale of the
Registrable Securities covered by such Prospectus or any amendment or
supplement thereto in the manner set forth therein.

 

(g)                                 Prior
to any public offering of the Registrable Securities pursuant to a Registration
Statement, use its best efforts to register or qualify or cooperate with the
Notice Holders and the Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Notice Holder reasonably
requests in writing (which request may be included in the Notice and Questionnaire);
prior to any public offering of the Registrable Securities pursuant to the
Shelf Registration Statement, use its best efforts to keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period in connection with such Notice Holder’s offer and sale of
Registrable Securities pursuant to such registration or qualification (or
exemption therefrom) and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of such
Registrable Securities in the manner set forth in the relevant Registration
Statement and the related Prospectus; provided that the Company will not be
required to (i) qualify as a foreign corporation or as a dealer in securities
in any jurisdiction where it would not otherwise be required to qualify but for
this Agreement or (ii) take any action that would subject it to general service
of process in suits or to taxation in any such jurisdiction where it is not
then so subject.

 

11

 

(h)                                 Upon
(A) the issuance by the SEC of a stop order suspending the effectiveness of the
Shelf Registration Statement or the initiation of proceedings with respect to
the Shelf Registration Statement under Section 8(d) or 8(e) of the
Securities Act, (B) the occurrence of any event or the existence of any fact (a
“Material
Event”) as a result of which any Registration Statement shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or any Prospectus shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or (C) the occurrence or existence
of any pending corporate development that, in the reasonable discretion of the
Company, makes it appropriate to suspend the availability of the Shelf
Registration Statement and the related Prospectus:

 

(i) in the case of clause (B) above, subject
to the next sentence, as promptly as practicable prepare and file, if necessary
pursuant to applicable law, a post-effective amendment to such Registration
Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document that
would be incorporated by reference into such Registration Statement and
Prospectus so that such Registration Statement does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
such Prospectus does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, and, in the case of a
post-effective amendment to a Registration Statement, subject to the next
sentence, use  its best efforts to cause
it to be declared effective as promptly as is practicable, and

 

(ii) give notice to the Notice Holders, and
the Special Counsel, if any, that the availability of the Shelf Registration
Statement is suspended (a “Deferral Notice”) and, upon receipt of any
Deferral Notice, each Notice Holder agrees not to sell any Registrable
Securities pursuant to the Registration Statement until such Notice Holder’s
receipt of copies of the supplemented or amended Prospectus provided for in
clause (i) above, or until it is advised in writing by the Company that the
Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such Prospectus.

 

The Company will use its best efforts to ensure that the use of the
Prospectus may be resumed (x) in the case of clause (A) above, as promptly as
is practicable, (y) in the case of clause (B) above, as soon as, in the sole
judgment of the Company, public disclosure of such Material Event would not be
prejudicial to or contrary to the interests of the Company or, if necessary to
avoid unreasonable burden or expense, as soon as practicable thereafter and (z)
in the case of clause

 

12

 

(C) above, as soon as in the reasonable discretion of the Company, such
suspension is no longer appropriate. 
The Company shall be entitled to exercise its right under this
Section 3(h) to suspend the availability of the Shelf Registration
Statement or any Prospectus, without incurring or accruing any obligation to
pay additional interest pursuant to Section 2(e), no more than one (1)
time in any three month period or three (3) times in any twelve month period,
and any such period during which the availability of the Registration Statement
and any Prospectus is suspended (the “Deferral Period”) shall, without incurring
any obligation to pay additional interest pursuant to Section 2(e), not
exceed thirty (30) days; provided that the aggregate duration of
any Deferral Periods shall not exceed thirty (30)days in any three month period
(or 60 days in any three month period in the event of a Material Event pursuant
to which the Company has delivered a second notice as permitted below) or an
aggregate of ninety (90) days for all periods in any twelve (12) month period; provided
that in the case of a Material Event relating to an acquisition or a probable
acquisition or financing, recapitalization, business combination or other
similar transaction, the Company may, without incurring any obligation to pay
additional interest pursuant to Section 2(e), deliver to Notice Holders a
second notice to the effect set forth above, which shall have the effect of
extending the Deferral Period by up to an additional thirty (30) days, or such
shorter period of time as is specified in such second notice.

 

(i)                                     Cause
the Indenture to be qualified under the Trust Indenture Act of 1939, as amended
(“TIA”),
in connection with the registration of the Notes or Registrable Securities, as
the case may be, cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA and execute, and use its best
efforts to cause the Trustee to execute, all documents as may be required to
effect such changes and all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a timely manner.

 

(j)                                     If
requested in writing in connection with a disposition of Registrable Securities
pursuant to a Registration Statement, make reasonably available for inspection
during normal business hours by a representative for the Notice Holders of such
Registrable Securities, any broker-dealers, attorneys and accountants retained
by such Notice Holders, and any attorneys or other agents retained by a
broker-dealer engaged by such Notice Holders, all relevant financial and other
records and pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the appropriate officers, directors and employees of
the Company and its subsidiaries to make reasonably available for inspection
during normal business hours on reasonable notice all relevant information
reasonably requested by such representative for the Notice Holders, or any such
broker-dealers, attorneys or accountants in connection with such disposition,
in each case as is customary for similar “due diligence” examinations; provided that
such persons shall first agree in writing with the Company that any non-public
information shall be kept confidential by such persons and shall be used solely
for the purposes of exercising rights under this Agreement, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities, (ii) in the
opinion of Special Counsel, disclosure of such information is required by law
(including any disclosure requirements pursuant to federal securities laws in
connection with the filing of any Registration Statement or the use of any
prospectus referred to in

 

13

 

this Agreement), (iii) such information
becomes generally available to the public other than as a result of a
disclosure or failure to safeguard by any such person or (iv) such information
becomes available to any such person from a source other than the Company and
such source is not bound by a confidentiality agreement, and provided
further that the foregoing inspection and information gathering
shall, to the greatest extent possible, be coordinated on behalf of all the
Notice Holders and the other parties entitled thereto by Special Counsel.  Any person legally compelled to disclose any
such confidential information made available for inspection shall provide the
Company with prompt prior written notice of such requirement so that the
Company may seek a protective order or other appropriate remedy.

 

(k)                                  During
the 12-month period commencing on the first day of the first fiscal quarter of
the Company commencing after the effective date of a Registration Statement,
comply with all applicable rules and regulations of the SEC in all material
respects and make generally available to its securityholders earning statements
(which need not be audited) satisfying the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder (or any similar rule promulgated
under the Securities Act), which statements shall be made available no later
than forty-five (45) days after the end of such 12-month period or ninety (90)
days if such 12-month period coincides with the fiscal year of the Company.

 

(l)                                     Cooperate
with each Notice Holder to facilitate the timely preparation and delivery of
certificates representing Registrable Securities sold or to be sold pursuant to
a Registration Statement, which certificates shall not bear any restrictive
legends, and cause such Registrable Securities to be in such denominations as
are permitted by the Indenture and registered in such names as such Notice
Holder may request in writing at least one (1) Business Day prior to any sale of
such Registrable Securities.

 

(m)                               Provide
a CUSIP number for all Registrable Securities covered by each Registration
Statement not later than the effective date of such Registration Statement and
provide the Trustee and the transfer agent for the Common Stock with printed
certificates for the Registrable Securities that are in a form eligible for
deposit with The Depository Trust Company.

 

(n)                                 Cooperate
and assist in any filings required to be made with the National Association of
Securities Dealers, Inc.

 

(o)                                 Upon
(i) the filing of the Initial Shelf Registration Statement and (ii) the
effectiveness of the Initial Shelf Registration Statement, issue a press
release announcing the same, in each case by release to Reuters Economic
Services and Bloomberg Business News.

 

SECTION 4.  Holder’s Obligations.

 

(a)                                  Each
Holder agrees, by acquisition of the Registrable Securities, that no Holder
shall be entitled to sell any of such Registrable Securities pursuant to a
Registration Statement or to receive a Prospectus relating thereto, unless such
Holder has

 

14

 

furnished the Company with a Notice and
Questionnaire as required pursuant to Section 2(d) hereof (including the
information required to be included in such Notice and Questionnaire) and the
information set forth in the next sentence. 
Each Notice Holder agrees promptly to furnish to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Notice Holder not misleading and any other
information regarding such Notice Holder and the distribution of such
Registrable Securities as the Company may from time to time reasonably
request.  Any sale of any Registrable
Securities by any Holder shall constitute a representation and warranty by such
Holder that the information relating to such Holder and its plan of
distribution is as set forth in the Prospectus delivered by such Holder in
connection with such disposition, that such Prospectus does not as of the time
of such sale contain any untrue statement of a material fact relating to or
provided by such Holder or its plan of distribution and that such Prospectus
does not as of the time of such sale omit to state any material fact relating
to or provided by such Holder or its plan of distribution necessary to make the
statements in such Prospectus, in the light of the circumstances under which
they were made, not misleading.

 

(b)                                 In
the event of a sale of Registrable Securities by the Holder under the Registration
Statement, if requested by the Company, the Holder shall deliver to the
Company’s transfer agent, with a copy to the Company, a Certificate of
Subsequent Sale substantially in the form attached hereto as Exhibit A.

 

SECTION 5.  Registration Expenses.  The Company shall bear all fees and expenses
incurred in connection with the performance by the Company of its obligations
under Sections 2 and 3 of this Agreement whether or not any Registration
Statement is declared effective.  Such
fees and expenses shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses with respect to
(x) filings required to be made with the National Association of Securities
Dealers, Inc. and (y) of compliance with federal and state securities or Blue
Sky laws (including, without limitation, reasonable fees and disbursements of
the Special Counsel in connection with Blue Sky qualifications of the
Registrable Securities under the laws of such jurisdictions as Notice Holders
of a majority of the Registrable Securities being sold pursuant to a
Registration Statement may designate)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable
Securities in a form eligible for deposit with The Depository Trust Company),
(iii) duplication expenses relating to copies of any Registration Statement or
Prospectus delivered to any Holders hereunder, (iv) fees and disbursements of
counsel for the Company in connection with the Shelf Registration Statement,
(v) reasonable fees and disbursements of the Trustee and its counsel and of the
registrar and transfer agent for the Common Stock and (vi) any Securities Act
liability insurance obtained by the Company in its sole discretion.  In addition, the Company shall pay the
internal expenses of the Company (including, without limitation, all salaries
and expenses of officers and employees performing legal or accounting duties),
the expense of any annual audit, the fees and expenses incurred in connection
with the listing by the Company of the Registrable Securities on any securities
exchange on which similar securities of the Company are then listed and the
fees and expenses of any person, including special experts, retained by the
Company.  Notwithstanding the provisions
of this Section 5, each seller of Registrable Securities shall pay all
selling expenses, including but not limited to any broker’s commissions, agency
fees,

 

15

 

underwriting discount and commissions,
transfer taxes and all registration expenses to the extent required by
applicable law.

 

SECTION 6.  Indemnification and Contribution.

 

(a)                                  Indemnification by the Company.  The Company agrees to indemnify and hold
harmless each Notice Holder, each person, if any, who controls any Notice
Holder within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, and each affiliate of any Notice Holder
within the meaning of Rule 405 under the Securities Act from and against
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Holder furnished to the Company in writing by such
Holder expressly for use therein; provided that the indemnification
contained in this paragraph shall not inure to the benefit of any Holder (or to
the benefit of any person controlling such Holder or any affiliate of such
Holder) on account of any such losses, claims, damages or liabilities caused by
any untrue statement or alleged untrue statement or omission or alleged
omission made in any preliminary prospectus provided in each case the Company
has performed its obligations under Section 3(f) hereof if either (A) (x)
such Holder failed to send or deliver a copy of the Prospectus with or prior to
the delivery of written confirmation of the sale by such Holder to the person
asserting the claim from which such losses, claims, damages or liabilities
arise and (y) the Prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (B) (x) such
untrue statement or alleged untrue statement, omission or alleged omission is
corrected in an amendment or supplement to the Prospectus and (y) having
previously been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, with or prior to the
delivery of written confirmation of the sale of a Registrable Security to the
person asserting the claim from which such losses, claims, damages or
liabilities arise.

 

(b)                                 Indemnification by Holders.  Each Holder agrees severally and not jointly
to indemnify and hold harmless the Company and its directors, its officers and
each person, if any, who controls the Company (within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act)
or any other Holder, to the same extent as the foregoing indemnity from the
Company to such Holder, but only with reference to information relating to such
Holder furnished to the Company in writing by such Holder expressly for use in
such Registration Statement or Prospectus or amendment or supplement
thereto.  In no event shall the
liability of any Holder hereunder be greater in amount than the dollar amount
of the proceeds received by such Holder upon the sale of the Registrable
Securities pursuant to the Registration Statement giving rise to such
indemnification obligation.

 

16

 

(c)                                  Conduct of Indemnification Proceedings.  In case any proceeding (including any
governmental investigation) shall be instituted involving any person in respect
of which indemnity may be sought pursuant to Section 6(a) or 6(b) hereof,
such person (the “indemnified party”) shall promptly notify
the person against whom such indemnity may be sought (the “indemnifying party”) in
writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding.  In
any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. 
It is understood that the indemnifying party shall not, in respect of
the legal expenses of any indemnified party in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for (i) the fees and
expenses of more than one separate firm (in addition to any local counsel at
its standard non-premium rates) for all Notice Holders and all persons, if any,
who control any Notice Holder within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act or who are affiliates
of any Notice Holder within the meaning of Rule 405 under the Securities
Act and (ii) the fees and expenses of more than one separate firm (in addition
to any local counsel at its standard non-premium rates) for the Company, its
directors, its officers and all persons, if any, who control the Company within
the meaning of either such Section, and that all such fees and expenses shall
be reimbursed as they are incurred.  In
the case of any such separate firm for the Notice Holders and such control
persons and such affiliates of any Notice Holders, such firm shall be
designated in writing by the Holders of a majority (with Holders of Notes
deemed to be the Holders, for purposes of determining such majority, of the number
of shares of Underlying Common Stock into which such Notes are or would be
convertible as of the date on which such designation is made) of the
Registrable Securities covered by the Registration Statement held by Holders
that are indemnified parties pursuant to Section 6(a).  In the case of any such separate firm for
the Company, and such directors, officers and control persons of the Company,
such firm shall be designated in writing by the Company.  The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment that is
indemnifiable pursuant to Section 6(a) or 6(b), as the case may be.  Notwithstanding the foregoing sentence, if
at any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if: (i) the indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
within 30 days of such request, (ii) the indemnified party shall have sent
written notice to the indemnifying party (x) notifying the indemnifying party of
its failure to reimburse the indemnified party within 30 days of such request
and providing the indemnifying party 15 days from the receipt of such notice to
cure the same and (y) indicating the indemnified party’s intent to effect such
settlement

 

17

 

without the indemnifying party’s written
consent pursuant to the provisions of this Section 6(c), and (iii) the
indemnifying party shall not have reimbursed the indemnified party within such
15 day period.  No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.

 

(d)                                 Contribution.  To the extent that the indemnification
provided for in Section 6(a) or 6(b) is unavailable to an indemnified
party or insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party or parties on
the one hand and the indemnified party or parties on the other hand or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the indemnifying
party or parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations.  The relative benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the initial placement pursuant to the Purchase Agreement (before deducting
expenses) of the Registrable Securities to which such losses, claims, damages
or liabilities relate.  The relative
benefits received by any Holder shall be deemed to be equal to the value of
receiving Registrable Securities that are registered under the Securities
Act.  The relative fault of the Company
on the one hand and the Holders on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Holders,
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.  The Holders’ respective obligations to
contribute pursuant to this Section 6 are several in proportion to the
respective number of Registrable Securities that they have sold pursuant to a
Registration Statement, and not joint.

 

The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph.  The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim.  Notwithstanding the
provisions of this Section 6, no indemnifying party that is a selling
Holder shall be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities sold by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such indemnifying party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.  No person guilty of

 

18

 

fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.  The Holders’ obligations to contribute as provided in this
Section 6(d) are several and not joint.

 

(e)                                  The remedies provided
for in this Section 6 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to an indemnified party at law or in
equity, hereunder, under the Purchase Agreement or otherwise.

 

(f)                                    The indemnity and
contribution provisions contained in this Section 6 shall remain operative
and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Holder, any
person controlling any Holder or any affiliate of any Holder or by or on behalf
of the Company, its officers or directors or any person controlling the Company
and (iii) the sale of any Registrable Securities by any Holder.

 

SECTION 7.  Information Requirements.  The Company covenants that, if at any time
before the end of the Effectiveness Period the Company is not subject to the
reporting requirements of the Exchange Act, it will cooperate with any Holder
and take such further reasonable action as any Holder may reasonably request in
writing (including, without limitation, making such reasonable representations
as any such Holder may reasonably request), all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 and Rule 144A under the Securities Act and customarily
taken in connection with sales pursuant to such exemptions.  Upon the written request of any Holder, the
Company shall deliver to such Holder a written statement as to whether it has
complied with such filing requirements, unless such a statement has been
included in the Company’s most recent report filed pursuant to Section 13
or Section 15(d) of Exchange Act. 
Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Company to register any of its securities (other than the
Common Stock) under any section of the Exchange Act.

 

SECTION 8.  Miscellaneous.

 

(a)                                  No Conflicting Agreements.  The Company is not, as of the
date hereof, a party to, nor shall it, on or after the date of this Agreement,
enter into, any agreement with respect to its securities that conflicts with
the rights granted to the Holders in this Agreement.  The Company represents and warrants that the rights granted to
the Holders hereunder do not in any way conflict with the rights granted to the
holders of the Company’s securities under any other agreements.

 

(b)                                 Amendments and Waivers.  The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of
Holders of a majority of the then outstanding Underlying Common Stock
constituting Registrable Securities (with Holders of Notes deemed to be the
Holders, for purposes of this Section, of the number of outstanding shares of
Underlying Common Stock into which such Notes are or would be convertible as of
the date on which such consent is requested). 
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose

 

19

 

securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of at least a majority of the
Registrable Securities being sold by such Holders pursuant to such Registration
Statement; provided
that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence.  Notwithstanding the
foregoing two sentences, this Agreement may be amended by written agreement
signed by the Company and the Initial Purchasers, without the consent of the
Holders of Registrable Securities, to cure any ambiguity or to correct or
supplement any provision contained herein that may be defective or inconsistent
with any other provision contained herein, or to make such other provisions in
regard to matters or questions arising under this Agreement that shall not
adversely affect the interests of the Holders of Registrable Securities.  Each Holder of Registrable Securities
outstanding at the time of any such amendment, modification, supplement, waiver
or consent or thereafter shall be bound by any such amendment, modification,
supplement, waiver or consent effected pursuant to this Section 8(b),
whether or not any notice, writing or marking indicating such amendment,
modification, supplement, waiver or consent appears on the Registrable
Securities or is delivered to such Holder.

 

(c)                                  Notices.  All notices and other communications
provided for or permitted hereunder shall be made in writing by hand delivery,
by telecopier, by courier guaranteeing overnight delivery or by first-class
mail, return receipt requested, and shall be deemed given (i) when made, if
made by hand delivery, (ii) upon confirmation, if made by telecopier, (iii) one
(1) Business Day after being deposited with such courier, if made by a
recognized overnight courier or (iv) on the date indicated on the notice of
receipt, if made by first-class mail, to the parties as follows:

 

(i)            if to a Holder, at the
most current address given by such Holder to the Company in a Notice and
Questionnaire or any amendment thereto;

 

(ii)           if to the Company, to:

 

Lithia Motors, Inc.

360 East Jackson Street

Medford, Oregon 97501

Attention:  Jeffrey B. DeBoer

Senior Vice President and Chief Financial Officer

Telecopy No.:  541-776-6869

 

With a copy to:

 

Foster Pepper Tooze LLP

601 SW 2nd Avenue, Suite 1800

Portland, Oregon 97204

Attention:  Kenneth Roberts,
Esq.

Telecopy No.:  800-601-9234

 

20

 

(iii)          if to the Initial
Purchasers, to:

 

Morgan Stanley & Co. Incorporated

1585 Broadway

New York, New York 10036

Attention: Equity Capital Markets

Telecopy No.: 212-761-0538

 

or to such other address as such person may have furnished to the other
persons identified in this Section 8(c) in writing in accordance herewith.

 

(d)                                 Approval of Holders.  Whenever the consent or approval of Holders
of a specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (as such term is
defined in Rule 405 under the Securities Act) (other than the Initial
Purchasers or subsequent Holders if such subsequent Holders are deemed to be
such affiliates solely by reason of their holdings of such Registrable
Securities) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.

 

(e)                                  Successors and Assigns.  Any person who purchases any Registrable
Securities from any Initial Purchaser shall be deemed, for purposes of this
Agreement, to be an assignee of such Initial Purchaser.  This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties and shall
inure to the benefit of and be binding upon each Holder of any Registrable
Securities, provided
that nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Registrable Securities in violation of the terms of the
Indenture.  If any transferee of any
Holder shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Registrable Securities, such person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this Agreement
and such person shall be entitled to receive the benefits hereof.

 

(f)                                    Counterparts.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be original and all of which taken
together shall constitute one and the same agreement.

 

(g)                                 Headings.  The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

 

(h)                                 Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

(i)                                     Severability.  If any term provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated thereby, and the parties hereto
shall use their reasonable best efforts to find and employ an alternative means
to achieve the same or substantially the

 

21

 

same result as that contemplated by such
term, provision, covenant or restriction, it being intended that all of the
rights and privileges of the parties shall be enforceable to the fullest extent
permitted by law.

 

(j)                                     Entire
Agreement.  This Agreement is
intended by the parties as a final expression of their agreement and is
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and the registration rights granted by the Company with respect to the
Registrable Securities.  Except as
provided in the Purchase Agreement, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities.  This
Agreement supersedes all prior agreements and undertakings among the parties
with respect to such registration rights. 
No party hereto shall have any rights, duties or obligations other than
those specifically set forth in this Agreement.  In no event will such methods of distribution take the form of an
underwritten offering of the Registrable Securities without the prior agreement
of the Company.

 

(k)                                  Termination.  This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Section 4, 5 or 6 hereof and the
obligations to make payments of and provide for the Additional Interest Amount
under Section 2(e) hereof to the extent such amount accrues prior to the
end of the Effectiveness Period, each of which shall remain in effect in
accordance with its terms.

 

22

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

 

	
   

  	
  LITHIA MOTORS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey B. DeBoer

  
	
   

  	
   

  	
  Name: Jeffrey B. DeBoer

  
	
   

  	
   

  	
  Title: Senior Vice President and Chief Financial Officer

  

 

 

Confirmed and accepted as of

the date first above written:

 

MORGAN STANLEY & CO. INCORPORATED

STEPHENS INC.

RAYMOND JAMES & ASSOCIATES, INC.

JEFFERIES & COMPANY, INC.

 

	
  By:

  	
  Morgan Stanley & Co. Incorporated

  on behalf of itself and the other

  Initial Purchasers set forth herein

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Bryan W. Andrzejewski

  	
   

  
	
   

  	
  Name:               Bryan
  W. Andrzejewski

  
	
   

  	
  Title:                     Executive
  Director

  

 

23

 

EXHIBIT
A

 

CERTIFICATE
OF SUBSEQUENT SALE

 

[____________]

 

Attention: ______________

 

RE:                              Sale of Shares of Common
Stock of Lithia Motors, Inc. (the “Company”) pursuant to the Company’s
Prospectus dated ____________, 2004 (the “Prospectus”)

 

Dear Sir/Madam:

 

The undersigned hereby certifies, in connection with the sale of shares
of Common Stock of the Company included in the table of Selling Stockholders in
the Prospectus, that the undersigned has sold the Shares pursuant to the
Prospectus and in a manner described under the caption “Plan of Distribution”
in the Prospectus and that such sale complies with all applicable securities
laws, including, without limitation, the Prospectus delivery requirements of
the Securities Act of 1933, as amended.

 

	
  Selling Stockholder (the beneficial owner):

  	
   

  
	
   

  	
   

  	
   

  
	
  Record Holder (e.g., if held in name of nominee): 

  	
   

  
	
   

  	
   

  	
   

  
	
  Restricted Stock Certificate No.(s):

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Shares Sold:

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of Sale:

  	
   

  
						

 

24

 

In the event that you receive a stock certificate(s) representing more
shares of Common Stock than have been sold by the undersigned, then you should
return to the undersigned a newly issued certificate for such excess shares in
the name of the Record Holder and BEARING A RESTRICTIVE LEGEND.  Further, you should place a stop transfer on
your records with regard to such certificate.

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  cc:

  	
  Investor Relations

  	
   

  	
   

  
	
   

  	
  Lithia Motors, Inc.

  	
   

  	
   

  
	
   

  	
  360 East Jackson Street

  	
   

  	
   

  
	
   

  	
  Medford, Oregon 97501

  	
   

  	
   

  
								

 

25EXHIBIT 4.2

 

 

LITHIA MOTORS, INC.

 

to

 

 

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

 

 

INDENTURE

 

 

Dated as of

 

May 4, 2004

 

 

 

2.875%
Convertible Senior Subordinated Notes Due 2014

 

 

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE 1

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  Section 1.01.  Definitions

  	
   

  
	
   

  	
   

  
	
  ARTICLE 2

  	
   

  
	
  ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
  AND EXCHANGE OF NOTES

  	
   

  
	
   

  	
   

  
	
  Section 2.01.  Designation
  Amount and Issue of Notes

  	
   

  
	
  Section 2.02.  Form
  of Notes

  	
   

  
	
  Section 2.03.  Date
  and Denomination of Notes; Payments of Interest

  	
   

  
	
  Section 2.04.  Execution
  of Notes

  	
   

  
	
  Section 2.05.  Exchange
  and Registration of Transfer of Notes; Restrictions on Transfer

  	
   

  
	
  Section 2.06.  Mutilated,
  Destroyed, Lost or Stolen Notes

  	
   

  
	
  Section 2.07.  Temporary
  Notes

  	
   

  
	
  Section 2.08.  Cancellation
  of Notes

  	
   

  
	
  Section 2.09.  CUSIP
  Numbers

  	
   

  
	
  Section 2.10.  Additional
  Notes

  	
   

  
	
   

  	
   

  
	
  ARTICLE 3

  	
   

  
	
  REDEMPTION AND REPURCHASE OF NOTES

  	
   

  
	
   

  	
   

  
	
  Section 3.01.  Optional
  Redemption of Notes

  	
   

  
	
  Section 3.02.  Notice
  of Optional Redemption; Selection of Notes.

  	
   

  
	
  Section 3.03.  Payment
  of Notes Called for Redemption by the Company.

  	
   

  
	
  Section 3.04.  Conversion
  Arrangement on Call for Redemption

  	
   

  
	
  Section 3.05.  Repurchase
  at Option of Holders upon a Designated Event.

  	
   

  
	
  Section 3.06.  Repurchase
  of Notes by the Company at Option of Holders.

  	
   

  
	
  Section 3.07.  Company
  Repurchase Notice.

  	
   

  
	
  Section 3.08.  Effect
  of Designated Event Repurchase Notice and Repurchase Notice.

  	
   

  
	
  Section 3.09.  Deposit
  of Repurchase Price.

  	
   

  
	
  Section 3.10.  Notes Repurchased in Part

  	
   

  
	
  Section 3.11.  Repayment to the Company

  	
   

  
	
   

  	
   

  
	
  ARTICLE 4

  	
   

  
	
  CONTINGENT INTEREST

  	
   

  
	
   

  	
   

  
	
  Section 4.01.  Contingent Interest.

  	
   

  

 

 

	
  Section 4.02.  Payment of Contingent Interest.

  	
   

  
	
  Section 4.03.  Contingent Interest Notification.

  	
   

  
	
   

  	
   

  
	
  ARTICLE 5

  	
   

  
	
  SUBORDINATION OF NOTES

  	
   

  
	
   

  	
   

  
	
  Section 5.01.  Agreement of Subordination

  	
   

  
	
  Section 5.02.  No Payments to Noteholders upon Defaults Relating
  to Designated Senior Indebtedness

  	
   

  
	
  Section 5.03.  Payments over to Senior Indebtedness upon Dissolution

  	
   

  
	
  Section 5.04.  Prior Payment of Senior Indebtedness upon
  Acceleration of Notes

  	
   

  
	
  Section 5.05.  Payment over to Senior Indebtedness

  	
   

  
	
  Section 5.06.  Subrogation

  	
   

  
	
  Section 5.07.  Payment Obligations Unconditional

  	
   

  
	
  Section 5.08.  Authorization to Effect Subordination

  	
   

  
	
  Section 5.09.  Notice to Trustee

  	
   

  
	
  Section 5.10.  Trustee’s Relation to Senior Indebtedness

  	
   

  
	
  Section 5.11.  No Impairment of Subordination

  	
   

  
	
  Section 5.12.  Certain Conversions Not Deemed Payment

  	
   

  
	
  Section 5.13.  Article Applicable to Paying Agents

  	
   

  
	
  Section 5.14.  Senior Indebtedness Entitled to Rely

  	
   

  
	
  Section 5.15.  Reliance on Judicial Order or Certificate of
  Liquidating Agent

  	
   

  
	
  Section 5.16.  Anti-Layering Covenant

  	
   

  
	
  Section 5.17.  Limitation on Liens

  	
   

  
	
   

  	
   

  
	
  ARTICLE 6

  	
   

  
	
  PARTICULAR COVENANTS OF THE COMPANY

  	
   

  
	
   

  	
   

  
	
  Section 6.01.  Payment of Principal and Interest

  	
   

  
	
  Section 6.02.  Maintenance of Office or Agency

  	
   

  
	
  Section 6.03.  Appointments to Fill Vacancies in Trustee’s Office

  	
   

  
	
  Section 6.04.  Provisions as to Paying Agent

  	
   

  
	
  Section 6.05.  Existence

  	
   

  
	
  Section 6.06.  Rule 144A Information Requirement

  	
   

  
	
  Section 6.07.  Stay, Extension and Usury Laws

  	
   

  
	
  Section 6.08.  Compliance Certificate

  	
   

  
	
  Section 6.09.  Additional Interest Notice

  	
   

  
	
  Section 6.10.  Contingent Debt Tax Treatment

  	
   

  
	
  Section 6.11.  Calculation of Original Issue Discount

  	
   

  
	
   

  	
   

  
	
  ARTICLE 7

  	
   

  
	
  NOTEHOLDERS’ LISTS AND REPORTS BY THE
  COMPANY AND THE TRUSTEE

  	
   

  
	
   

  	
   

  
	
  Section 7.01.  Noteholders’ Lists

  	
   

  
	
  Section 7.02.  Preservation and Disclosure of Lists

  	
   

  
	
  Section 7.03.  Reports by Trustee

  	
   

  

 

ii

 

	
  Section 7.04.  Reports by Company

  	
   

  
	
   

  	
   

  
	
  ARTICLE 8

  	
   

  
	
  REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON
  AN EVENT OF DEFAULT

  	
   

  
	
   

  	
   

  
	
  Section 8.01.  Events of Default

  	
   

  
	
  Section 8.02.  Payments of Notes on Default; Suit Therefor

  	
   

  
	
  Section 8.03.  Application of Monies Collected by Trustee

  	
   

  
	
  Section 8.04.  Proceedings by Noteholder

  	
   

  
	
  Section 8.05.  Proceedings by Trustee

  	
   

  
	
  Section 8.06.  Remedies Cumulative and Continuing

  	
   

  
	
  Section 8.07.  Direction of Proceedings and Waiver of Defaults by
  Majority of Noteholders

  	
   

  
	
  Section 8.08.  Notice of Defaults

  	
   

  
	
  Section 8.09.  Undertaking to Pay Costs

  	
   

  
	
   

  	
   

  
	
  ARTICLE 9

  	
   

  
	
  THE
  TRUSTEE

  	
   

  
	
   

  	
   

  
	
  Section 9.01.  Duties and Responsibilities of Trustee

  	
   

  
	
  Section 9.02.  Reliance on Documents, Opinions, Etc.

  	
   

  
	
  Section 9.03.  No Responsibility for Recitals, Etc.

  	
   

  
	
  Section 9.04.  Trustee, Paying Agents, Conversion Agents or
  Registrar May Own Notes

  	
   

  
	
  Section 9.05.  Monies to be Held in Trust

  	
   

  
	
  Section 9.06.  Compensation and Expenses of Trustee

  	
   

  
	
  Section 9.07.  Officer’s Certificate As Evidence

  	
   

  
	
  Section 9.08.  Conflicting Interests of Trustee

  	
   

  
	
  Section 9.09.  Eligibility of Trustee

  	
   

  
	
  Section 9.10.  Resignation or Removal of Trustee.

  	
   

  
	
  Section 9.11.  Acceptance by Successor Trustee

  	
   

  
	
  Section 9.12.  Succession by Merger

  	
   

  
	
  Section 9.13.  Preferential Collection of Claims

  	
   

  
	
   

  	
   

  
	
  ARTICLE 10

  	
   

  
	
  THE
  NOTEHOLDERS

  	
   

  
	
   

  	
   

  
	
  Section 10.01.  Action by Noteholders

  	
   

  
	
  Section 10.02.  Proof of Execution by Noteholders

  	
   

  
	
  Section 10.03.  Who Are Deemed Absolute Owners

  	
   

  
	
  Section 10.04.  Company-Owned Notes Disregarded

  	
   

  
	
  Section 10.05.  Revocation of Consents; Future Holders Bound

  	
   

  
	
   

  	
   

  
	
  ARTICLE 11

  	
   

  
	
  MEETINGS OF NOTEHOLDERS

  	
   

  
	
   

  	
   

  
	
  Section 11.01.  Purpose of Meetings

  	
   

  

 

iii

 

	
  Section 11.02.  Call of Meetings by Trustee

  	
   

  
	
  Section 11.03.  Call of Meetings by Company or Noteholders

  	
   

  
	
  Section 11.04.  Qualifications for Voting

  	
   

  
	
  Section 11.05.  Regulations

  	
   

  
	
  Section 11.06.  Voting

  	
   

  
	
  Section 11.07.  No Delay of Rights by Meeting

  	
   

  
	
   

  	
   

  
	
  ARTICLE 12

  	
   

  
	
  SUPPLEMENTAL INDENTURES

  	
   

  
	
   

  	
   

  
	
  Section 12.01.  Supplemental Indentures Without Consent of
  Noteholders

  	
   

  
	
  Section 12.02.  Supplemental Indenture With Consent of Noteholders

  	
   

  
	
  Section 12.03.  Effect of Supplemental Indenture

  	
   

  
	
  Section 12.04.  Notation on Notes

  	
   

  
	
  Section 12.05.  Evidence of Compliance of Supplemental Indenture to
  Be Furnished to Trustee

  	
   

  
	
   

  	
   

  
	
  ARTICLE 13

  	
   

  
	
  CONSOLIDATION, MERGER, SALE, CONVEYANCE AND
  LEASE

  	
   

  
	
   

  	
   

  
	
  Section 13.01.  Company May Consolidate on Certain Terms

  	
   

  
	
  Section 13.02.  Successor to Be Substituted

  	
   

  
	
  Section 13.03.  Opinion of Counsel to Be Given to Trustee

  	
   

  
	
   

  	
   

  
	
  ARTICLE 14

  	
   

  
	
  SATISFACTION AND DISCHARGE OF INDENTURE

  	
   

  
	
   

  	
   

  
	
  Section 14.01.  Discharge of Indenture

  	
   

  
	
  Section 14.02.  Deposited Monies to Be Held in Trust by Trustee

  	
   

  
	
  Section 14.03.  Paying Agent to Repay Monies Held

  	
   

  
	
  Section 14.04.  Return of Unclaimed Monies

  	
   

  
	
  Section 14.05.  Reinstatement

  	
   

  
	
   

  	
   

  
	
  ARTICLE 15

  	
   

  
	
  IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
  OFFICERS AND DIRECTORS

  	
   

  
	
   

  	
   

  
	
  Section 15.01.  Indenture and Notes Solely Corporate Obligations

  	
   

  
	
   

  	
   

  
	
  ARTICLE 16

  	
   

  
	
  CONVERSION OF NOTES

  	
   

  
	
   

  	
   

  
	
  Section 16.01.  Right to Convert.

  	
   

  
	
  Section 16.02.  Exercise of Conversion Privilege; Issuance
  of Common Stock on Conversion; No Adjustment for Interest or Dividends.

  	
   

  
	
  Section 16.03.  Cash Payments in Lieu of Fractional Shares

  	
   

  
	
  Section 16.04.  Conversion Rate

  	
   

  
	
  Section 16.05.  Adjustment of Conversion Rate

  	
   

  

 

iv

 

	
  Section 16.06.  Effect of Reclassification, Consolidation, Merger
  or Sale

  	
   

  
	
  Section 16.07.  Taxes on Shares Issued

  	
   

  
	
  Section 16.08.  Reservation of Shares; Shares to Be Fully Paid;
  Compliance with Governmental Requirements; Listing of Common Stock

  	
   

  
	
  Section 16.09.  Responsibility of Trustee

  	
   

  
	
  Section 16.10.  Notice to Holders Prior to Certain Actions

  	
   

  
	
  Section 16.11.  Stockholder Rights Plans

  	
   

  
	
   

  	
   

  
	
  ARTICLE 17

  	
   

  
	
  MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  
	
  Section 17.01.  Provisions Binding on Company’s Successors

  	
   

  
	
  Section 17.02.  Official Acts by Successor Corporation

  	
   

  
	
  Section 17.03.  Addresses for Notices, Etc.

  	
   

  
	
  Section 17.04.  Governing Law

  	
   

  
	
  Section 17.05.  Evidence of Compliance with Conditions Precedent;
  Certificates to Trustee

  	
   

  
	
  Section 17.06.  Legal Holidays

  	
   

  
	
  Section 17.07.  Trust Indenture Act

  	
   

  
	
  Section 17.08.  No Security Interest Created

  	
   

  
	
  Section 17.09.  Benefits of Indenture

  	
   

  
	
  Section 17.10.  Table of Contents, Headings, Etc.

  	
   

  
	
  Section 17.11.  Authenticating Agent

  	
   

  
	
  Section 17.12.  Execution in Counterparts

  	
   

  
	
  Section 17.13.  Severability

  	
   

  
	
   

  	
   

  
	
  Exhibit
  A — Form of Note

  	
   

  

 

v

 

INDENTURE

 

INDENTURE dated as of May 4, 2004 between Lithia Motors, Inc., an
Oregon corporation (hereinafter called the “Company”), having its
principal office at 360 East Jackson Street, Medford, Oregon 97501 and U.S.
Bank National Association, a national banking association, and its successors
and any corporation resulting from or surviving any consolidation or merger,
organized under the laws of the United States, as trustee hereunder (hereinafter
called the “Trustee”).

 

WITNESSETH:

 

WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 2.875% Convertible Senior Subordinated Notes Due
2014 (hereinafter called the “Notes”), in an aggregate principal amount not
to exceed $85,000,000, or $100,000,000 if the Initial Purchasers exercise in
full their option to purchase additional Notes under the Purchase Agreement
dated as of April 27, 2004 among the Company and the Initial Purchasers
(except pursuant to Sections 2.05, 2.06, 2.10, 3.03, 3.05, 3.06, 3.10 and 16.02
hereof), and to provide the terms and conditions upon which the Notes are to be
authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture;

 

WHEREAS, the Notes, the certificate of authentication to be borne by
the Notes, a form of assignment, a form of option to elect repurchase upon a
Designated Event, a form of repurchase notice and a form of conversion notice
to be borne by the Notes are to be substantially in the forms hereinafter
provided for; and

 

WHEREAS, all acts and things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute this Indenture
a valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all respects
been duly authorized,

 

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

 

That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration
of the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:

 

 

ARTICLE 1

DEFINITIONS

 

Section 1.01.  Definitions.  The terms defined in this
Section 1.01 (except as herein otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Indenture and of any
indenture supplemental hereto shall have the respective meanings specified in
this Section 1.01.  All other terms
used in this Indenture that are defined in the Trust Indenture Act or which are
by reference therein defined in the Securities Act (except as herein otherwise
expressly provided or unless the context otherwise requires) shall have the
meanings assigned to such terms in the Trust Indenture Act and in the
Securities Act as in force at the date of the execution of this Indenture.  The words “herein”, “hereof”,
“hereunder”
and words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other Subdivision.  The terms defined in this
Article include the plural as well as the singular.

 

“Additional
Interest” has the meaning specified for “Additional Interest Amount”
in Section 2(e) of the Registration Rights Agreement.

 

“Additional
Interest Notice” has the meaning specified in Section 6.09.

 

“Adjustment
Event” has the meaning specified in Section 16.05(k).

 

“Affiliate”
of any specified Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such specified Person.  For the purposes
of this definition, “control”, when used with respect to any
specified Person means the power to direct or cause the direction of the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms “controlling”
and “controlled”
have meanings correlative to the foregoing.

 

“Agent
Members” has the meaning specified in Section 2.05(b).

 

“Board
of Directors” means the Board of Directors of the Company or a
committee of such Board duly authorized to act for it hereunder.

 

“Business
Day” means any day except a Saturday, Sunday or legal holiday on
which banking institutions in The City of New York or the city in which the
Corporate Trust Office is located are authorized or obligated by law,
regulation or executive order to close.

 

“Closing
Sale Price” of the shares of Common Stock on any date means the
closing sale price per share (or, if no closing sale price is reported, the
average of the closing bid and ask prices or, if more than one in either case,
the average of the average closing bid and the average closing ask prices) on
such date as reported in composite transactions for the principal United States
securities

 

2

 

exchange on which shares of Common Stock are traded or, if the shares
of Common Stock are not listed on a United States national or regional
securities exchange, as reported by the Nasdaq National Market or by the
National Quotation Bureau Incorporated. 
In the absence of such quotations or reporting, the Company shall be
entitled to determine the Closing Sale Price on the basis it considers
appropriate, and such determination shall be conclusive.  The Closing Sale Price shall be determined
without reference to extended or after hours trading.

 

“Commission”
means the Securities and Exchange Commission, as from time to time constituted,
created under the Exchange Act, or, if at any time after the execution of this
Indenture such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.

 

“Common
Stock” means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company.  Subject to the provisions of
Section 16.06, however, shares issuable on conversion of Notes shall
include only shares of the class designated as Class A Common Stock, without
par value, of the Company at the date of this Indenture or shares of any class
or classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable on conversion shall be substantially
in the proportion which the total number of shares of such class resulting from
all such reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.

 

“Company”
means the corporation named as the “Company” in the first paragraph of this
Indenture, and, subject to the provisions of Article 13 and
Section 16.06, shall include its successors and assigns.

 

“Company
Repurchase Notice” has the meaning specified in
Section 3.07(b).

 

“Company
Repurchase Notice Date” has the meaning specified in
Section 3.07(b).

 

“Contingent
Interest” has the meaning specified in Section 4.01.

 

“Contingent
Payment Regulations” has the meaning specified in Section 6.10.

 

3

 

“Conversion Date” has the
meaning specified in Section 16.02(b).

 

“Conversion
Notice” has the meaning specified in Section 16.02(a).

 

“Conversion
Price” as of any day will equal $1,000 divided by the Conversion
Rate as of such date.

 

“Conversion
Rate” has the meaning specified in Section 16.04.

 

“Corporate
Trust Office” or other similar term, means the designated office of
the Trustee at which at any particular time its corporate trust business as it
relates to this Indenture shall be administered, which office is, at the date
as of which this Indenture is dated, located at 555 Southwest Oak Street, PL-6,
Portland, Oregon 97204, Telecopier: 503-275-5738, Attention: Corporate Trust
Services.

 

“Credit
Agreement” means the Credit Agreement dated as of February 23,
2003, among the Company, the various lenders that are party thereto and
DaimlerChrysler Services North America LLC, as amended (and any refunding,
extension or refinancing thereof).

 

“Current
Market Price” has the meaning specified in Section 16.05(g).

 

“Custodian”
means U.S. Bank National Association, as custodian with respect to the Notes in
global form, or any successor entity thereto.

 

“Default”
means any event that is, or after notice or passage of time, or both, would be,
an Event of Default.

 

“Defaulted
Interest” has the meaning specified in Section 2.03.

 

“Depositary”
means the clearing agency registered under the Exchange Act that is designated
to act as the Depositary for the Global Notes. 
The Depository Trust Company shall be the initial Depositary, until a
successor shall have been appointed and become such pursuant to the applicable
provisions of this Indenture, and thereafter, “Depositary” shall mean or
include such successor.

 

 “Designated Event” means the
occurrence of (a) a Fundamental Change or (b) the termination of trading in the
Company’s Common Stock (or other common stock into which the Notes are at such
time convertible) on the New York Stock Exchange, any other United States
national securities exchange or the NASDAQ National Market, following which the
Company’s Common Stock (or other common stock into which the Notes are at such
time convertible) is no longer listed for trading on the New York Stock
Exchange or any other United States national securities exchange or approved
for trading on the NASDAQ National Market or any similar United States system
of automated dissemination of quotations and security prices.

 

4

 

“Designated
Event Expiration Time” has the meaning specified in
Section 3.05(b).

 

“Designated
Event Notice” has the meaning specified in Section 3.05(b).

 

“Designated Event
Repurchase Date” has the meaning specified in
Section 3.05(a).

 

“Designated
Event Repurchase Notice” has the meaning specified in Section 3.05(a).

 

“Designated
Event Repurchase Price” has the meaning specified in
Section 3.05(a).

 

“Designated
Senior Indebtedness” means (1) the Company’s Indebtedness pursuant
to the Credit Agreement and (2) the Company’s financing pursuant to agreements
with Ford Motor Credit Company, General Motors Acceptance Corporation,
DaimlerChrysler Services North America LLC, Toyota Motor Credit Corporation, or
any other bank or asset-based lender pursuant to which the Company or any
Subsidiary incurs Indebtedness all of the net proceeds of which are used to
purchase, finance or refinance vehicles and/or vehicle parts and supplies to be
sold in the ordinary course of business of the Company and its Subsidiaries or
to purchase, finance or refinance service loaner vehicles.  If any payment made to any holder of any
Designated Senior Indebtedness or its Representative with respect to such
Designated Senior Indebtedness is rescinded or must otherwise be returned by
such holder or Representative upon the insolvency, bankruptcy or reorganization
of the Company or otherwise, the reinstated Indebtedness of the Company arising
as a result of such rescission or return shall constitute Designated Senior
Indebtedness effective as of the date of such rescission or return.

 

“Determination
Date” has the meaning specified in Section 16.05(k).

 

“Dividend
Threshold Amount” has the meaning specified in
Section 16.05(e).

 

“Event
of Default” means any event specified in Section 8.01 as an
Event of Default.

 

“Ex-Dividend
Date” has the meaning specified in Section 16.05(d).

 

“Ex-Dividend
Time” has the meaning specified in Section 16.01(b).

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time.

 

“Expiration
Time” has the meaning specified in Section 16.05(f).

 

5

 

“Fair
Market Value” has the meaning specified in Section 16.05(g).

 

“Fundamental
Change” means the occurrence of any transaction or event (whether by
means of an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise) in connection
with which all or substantially all of the Common Stock shall be exchanged for,
converted into, acquired for or constitutes solely the right to receive,
consideration which is not all or substantially all common stock that is (or,
upon consummation of or immediately following such transaction or event, will
be) listed on a United States national securities exchange or approved (or,
upon consummation of or immediately following such transaction or event, will
be approved) for quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of securities prices.

 

“Global
Note” has the meaning specified in Section 2.02.

 

“Indebtedness”
means, with respect to any Person, and without duplication, whether recourse is
to all or a portion of the assets of such Person and whether or not contingent,
(a) all indebtedness, obligations and other liabilities of such Person for
borrowed money (including obligations of the Person in respect of overdrafts,
foreign exchange contracts, currency exchange agreements, interest rate
protection agreements, and any loans or advances from banks, whether or not
evidenced by notes or similar instruments) or evidenced by bonds, debentures,
notes or similar instruments, other than any account payable, trade payable or
other accrued current liability or obligation incurred in the ordinary course
of business in connection with the obtaining of materials or services; (b) all
reimbursement obligations and other liabilities of such Person with respect to
letters of credit, bank guarantees or bankers’ acceptances; (c) all obligations
and liabilities in respect of leases of such Person required, in conformity
with generally accepted accounting principles, to be accounted for as
capitalized lease obligations on the balance sheet of such Person and all
obligations and other liabilities under any lease or related document
(including a purchase agreement) in connection with the lease of real property
which provides that such Person is contractually obligated to purchase or cause
a third party to purchase the leased property and thereby guarantee a minimum
residual value of the leased property to the lessor and the obligations of such
Person under such lease or related document to purchase or to cause a third
party to purchase such leased property; (d) all net obligations of such Person
with respect to an interest rate or other swap, cap or collar agreement or
other similar instrument or agreement or foreign currency hedge, exchange,
purchase or similar instrument or agreement; (e) all direct or indirect
guaranties or similar agreements by such Person in respect of, and obligations
or liabilities of such Person to purchase or otherwise acquire or otherwise
assure a creditor against loss in respect of, indebtedness, obligations or
liabilities of another Person of the kind described in clauses (a) through (d);
(f) any indebtedness or other obligations described in clauses (a) through (e)
secured by any mortgage, pledge, Lien or other encumbrance existing on property
which is owned or held by such Person, regardless of whether the indebtedness
or other

 

6

 

obligation secured thereby shall have been assumed by such Person; and
(g) any and all deferrals, renewals, extensions and refundings of, or
amendments, modifications or supplements to, any indebtedness, obligation or
liability of the kind described in clauses (a) through (f).

 

“Indenture”
means this instrument as originally executed or, if amended or supplemented as
herein provided, as so amended or supplemented.

 

“Initial
Purchasers” means Morgan Stanley & Co. Incorporated, Stephens
Inc., Raymond James & Associates, Inc. and Jefferies & Company, Inc.

 

“Interest”
means, when used with reference to the Notes, any interest payable under the
terms of the Notes, including Additional Interest, if any, payable under the
terms of the Registration Rights Agreement and Contingent Interest, if any.

 

“Junior
Securities” has the meaning specified in Section 5.12.

 

“Lien”
means any mortgage or deed of trust, charge, pledge, lien (statutory or
otherwise), privilege, security interest, assignment, deposit, arrangement,
easement, hypothecation, claim, preference, priority or other encumbrance upon
or with respect to any property of any kind (including any conditional sale,
capital lease or other title retention agreement, any leases in the nature
thereof, and any agreement to give any security interest), real or personal,
movable or immovable, now owned or hereafter acquired. A Person will be deemed
to own subject to a Lien any property which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease obligation or other title retention agreement.

 

“Measurement Period” has the
meaning specified in Section 16.01(a).

 

“Non-Electing
Share” has the meaning specified in Section 16.06.

 

“Non-Payment
Default” has the meaning specified in Section 5.02.

 

“Note”
or “Notes”
means any Note or Notes, as the case may be, authenticated and delivered under
this Indenture, including any Global Note.

 

“Note
Obligations” means the obligations of the Company under this
Indenture and under the Notes to pay principal of, premium, if any, and
interest when due and payable, and all other amounts due or to become due under
or in connection with this Indenture and the Notes and the performance of all
other obligations to the Trustee and the holders under this Indenture and the
Notes and the Registration Rights Agreement, according to the respective terms
hereof and thereof.

 

“Note
Register” has the meaning specified in Section 2.05.

 

7

 

“Note
Registrar” has the meaning specified in Section 2.05.

 

“Noteholder”
or “holder”
as applied to any Note, or other similar terms (but excluding the term
“beneficial holder”), means any Person in whose name at the time a particular
Note is registered on the Note Registrar’s books.

 

“Officer’s
Certificate”, when used with respect to the Company, means a
certificate signed by any of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President (whether or not designated by a
number or numbers or word or words added before or after the title “Vice
President”), the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company.

 

“Opinion
of Counsel” means an opinion in writing signed by legal counsel, who
may be an employee of or counsel to the Company, or other counsel reasonably
acceptable to the Trustee.

 

“Outstanding”,
when used with reference to Notes and subject to the provisions of
Section 10.04, means, as of any particular time, all Notes authenticated
and delivered by the Trustee under this Indenture, except:

 

(a)                                  Notes
theretofore canceled by the Trustee or delivered to the Trustee for
cancellation;

 

(b)                                 Notes
in lieu of which, or in substitution for which, other Notes shall have been
authenticated and delivered pursuant to the terms of Section 2.06; and

 

(c)                                  Notes
converted into Common Stock pursuant to Article 16 and Notes deemed not
outstanding pursuant to Article 3.

 

“Payment
Blockage Notice” has the meaning specified in Section 5.02.

 

“Payment
Default” has the meaning specified in Section 5.02.

 

“Person”
means a corporation, an association, a partnership, a limited liability
company, an individual, a joint venture, a joint stock company, a trust, an
unincorporated organization or a government or an agency or a political
subdivision thereof.

 

“Portal
Market” means The Portal Market operated by the National Association
of Securities Dealers, Inc. or any successor thereto.

 

“Predecessor
Note” of any particular Note means every previous Note evidencing
all or a portion of the same debt as that evidenced by such particular Note,
and, for the purposes of this definition, any Note authenticated and delivered
under Section 2.06 in exchange for a mutilated Note or in lieu of a lost,

 

8

 

destroyed or stolen Note shall be deemed to evidence the same debt as
the mutilated, lost, destroyed or stolen Note that it replaces.

 

“Purchase
Agreement” means the Purchase Agreement dated as of April 27,
2004, among the Company and the Initial Purchasers, as amended from time to
time in accordance with its terms.

 

“Purchased
Shares” has the meaning specified in Section 16.05(f).

 

“QIB”
means a “qualified
institutional buyer” as defined in Rule 144A.

 

“Record
Date” has the meaning specified in Section 16.05(g).

 

“Representative”
means (a) the indenture trustee or other trustee, agent or representative for
holders of Senior Indebtedness or (b) with respect to any Senior Indebtedness
that does not have any such trustee, agent or other representative, (i) in the
case of such Senior Indebtedness issued pursuant to an agreement providing for
voting arrangements as among the holders or owners of such Senior Indebtedness,
any holder or owner of such Senior Indebtedness acting with the consent of the
required persons necessary to bind such holders or owners of such Senior
Indebtedness and (ii) in the case of all other such Senior Indebtedness, the
holder or owner of such Senior Indebtedness.

 

“Repurchase
Date” has the meaning specified in Section 3.06.

 

“Repurchase
Notice” has the meaning specified in Section 3.06(a).

 

“Registration
Rights Agreement” means the Registration Rights Agreement, dated as
of May 4, 2004, among the Company and the Initial Purchasers, as amended from
time to time in accordance with its terms.

 

“Responsible
Officer” shall mean, when used with respect to the Trustee, any
officer within the corporate trust department of the Trustee, including any
vice president, assistant vice president, assistant treasurer or trust officer
with direct responsibility for the administration of this Indenture and also
means, with respect to a particular corporate trust matter, any other officer
to whom such matter is referred because of such person’s knowledge of any
familiarity with the particular subject.

 

“Restricted
Securities” has the meaning specified in Section 2.05(c).

 

“Rule
144A” means Rule 144A as promulgated under the Securities Act.

 

“Securities”
has the meaning specified in Section 16.05(d).

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, as in effect from time to time.

 

9

 

“Senior
Indebtedness” means (a) the principal of, premium, if any, and
accrued and unpaid interest on (i) the Company’s Indebtedness for money
borrowed, whether outstanding on the date of execution of this Indenture or
thereafter created, incurred or assumed, (ii) guarantees by the Company of
Indebtedness for money borrowed by any other Person, whether outstanding on the
date of execution of this Indenture or thereafter created, incurred or assumed,
(iii) Indebtedness evidenced by notes, debentures, bonds or other instruments
of Indebtedness for the payment of which the Company is responsible or liable,
by guarantees or otherwise, whether outstanding on the date of execution of
this Indenture or thereafter created, incurred or assumed, and (iv) obligations
of the Company under any agreement to lease, or lease of, any real or personal
property, whether outstanding on the date of execution of this Indenture or
thereafter created, incurred or assumed; (b) any other Indebtedness, liability
or obligation, contingent or otherwise, of the Company and any guarantee,
endorsement or other contingent obligation in respect thereof, whether
outstanding on the date of execution of this Indenture or thereafter created,
incurred or assumed; (c) modifications, renewals, extensions and refundings of
any such Indebtedness, liabilities or obligations; and (d) for purposes of
clarification, any Designated Senior Indebtedness; provided that (x) in all
instances, “Senior Indebtedness” shall include, without limitation, interest
accruing after the filing of a petition initiating any proceeding under any
state, federal or foreign bankruptcy or insolvency law, whether or not such
interest is allowed or allowable in such proceeding and (y) “Senior
Indebtedness” shall not include any of the above in which, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding,
it is provided that such Indebtedness, liabilities or obligations, or such
modification, renewal, extension or refunding thereof, or the Company’s
obligations pursuant to such a guarantee, are not senior in right of payment to
the Notes.  If any payment made to any
holder of any Senior Indebtedness or its Representative with respect to such
Senior Indebtedness is rescinded or must otherwise be returned by such holder
or Representative upon the insolvency, bankruptcy or reorganization of the
Company or otherwise, the reinstated Indebtedness of the Company arising as a
result of such rescission or return shall constitute Senior Indebtedness
effective as of the date of such rescission or return.

 

“Significant
Subsidiary” means, as of any date of determination, a Subsidiary of
the Company that would constitute a “significant subsidiary” as such term is
defined under Rule 1-02(w) of Regulation S-X of the Commission as in effect on
the date of this Indenture.

 

“Subsidiary”
means, with respect to any Person, (i) any corporation, association or other
business entity of which more than 50% of the total voting power of shares of
capital stock or other equity interest entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by such Person or one or more of the other subsidiaries of that Person (or a

 

10

 

combination thereof) and (ii) any partnership (a) the sole general
partner or managing general partner of which is such Person or a subsidiary of
such Person or (b) the only general partners of which are such Person or one or
more subsidiaries of such Person (or any combination thereof).

 

“Tax Original Issue Discount”
means the amount of ordinary interest income on a Note that must be accrued as
original issue discount for United States federal income tax purposes pursuant
to United States Treasury Regulation section 1.1275-4 or any successor
provision.

 

“Trading
Day” has the meaning specified in Section 16.05(g).

 

“Trigger
Event” has the meaning specified in Section 16.05(d).

 

“Trust
Indenture Act” means the Trust Indenture Act of 1939, as amended, as
it was in force at the date of this Indenture, except as provided in Sections
12.03;
provided that if the Trust Indenture Act of 1939 is amended after
the date hereof, the term “Trust Indenture Act” shall mean, to the extent
required by such amendment, the Trust Indenture Act of 1939 as so amended.

 

“Trustee”
means U.S. Bank National Association and its successors and any corporation
resulting from or surviving any consolidation or merger to which it or its
successors may be a party and any successor trustee at the time serving as
successor trustee hereunder.

 

11

 

ARTICLE 2

ISSUE, DESCRIPTION, EXECUTION,
REGISTRATION AND EXCHANGE OF NOTES

 

Section 2.01.  Designation
Amount and Issue of Notes.  The Notes shall be designated as “2.875% Convertible Senior Subordinated
Notes Due 2014”.  Notes not
to exceed the aggregate principal amount of $85,000,000, or if the Company
sells up to an additional $15,000,000 principal amount of its Notes pursuant to
the option of the Initial Purchasers granted pursuant to the Purchase Agreement
dated as of April 27, 2004 among the Company and the Initial Purchasers,
limited in aggregate principal amount to $100,000,000, (except pursuant to
Sections 2.05, 2.06, 2.10, 3.03, 3.05, 3.06, 3.10 and 16.02 hereof) upon the
execution of this Indenture, or from time to time thereafter, may be executed
by the Company and delivered to the Trustee for authentication, and the Trustee
shall thereupon authenticate and deliver said Notes to or upon the written
order of the Company, signed by its Chairman of the Board, Chief Executive
Officer, President, any Vice President (whether or not designated by a number
or numbers or word or words added before or after the title “Vice President”),
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary,
without any further action by the Company hereunder.

 

Section 2.02.  Form of
Notes.  The
Notes and the Trustee’s certificate of authentication to be borne by such Notes
shall be substantially in the form set forth in Exhibit A.  The terms and provisions contained in the
form of Note attached as Exhibit A hereto shall constitute, and are hereby
expressly made, a part of this Indenture and, to the extent applicable, the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.

 

Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends, endorsements or changes as the
officers executing the same may approve (execution thereof to be conclusive
evidence of such approval) and as are not inconsistent with the provisions of
this Indenture, or as may be required by the Custodian, the Depositary, the
National Association of Securities Dealers, Inc. or the New York Stock Exchange
in order for the Notes to be tradable on The Portal Market or as may be
required for the Notes to be tradable on any other market developed for trading
of securities pursuant to Rule 144A or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any securities exchange or automated quotation system on
which the Notes may be listed, or to conform to usage, or to indicate any
special limitations or restrictions to which any particular Notes are subject.

 

So long as the Notes are eligible for book-entry settlement with the
Depositary, or unless otherwise required by law, or otherwise contemplated by

 

12

 

Section 2.05(a), all of the Notes will be represented by one or
more Notes in global form registered in the name of the Depositary or the
nominee of the Depositary (a “Global Note”).  The transfer and exchange of beneficial interests in any such
Global Note shall be effected through the Depositary in accordance with this
Indenture and the applicable procedures of the Depositary.  Except as provided in Section 2.05(a),
beneficial owners of a Global Note shall not be entitled to have certificates
registered in their names, will not receive or be entitled to receive physical
delivery of certificates in definitive form and will not be considered holders
of such Global Note.

 

Any Global Note shall represent such of the outstanding Notes as shall
be specified therein and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be increased or reduced to reflect redemptions, repurchases, conversions,
transfers or exchanges permitted hereby. 
Any endorsement of a Global Note to reflect the amount of any increase
or decrease in the amount of outstanding Notes represented thereby shall be
made by the Trustee or the Custodian, at the direction of the Trustee, in such
manner and upon instructions given by the holder of such Notes in accordance
with this Indenture.  Payment of
principal of and Interest on any Global Note shall be made to the holder of
such Note.

 

Section 2.03.  Date and
Denomination of Notes; Payments of Interest.  The Notes shall be issuable in
registered form without coupons in denominations of $1,000 principal amount and
integral multiples thereof.  Each Note
shall be dated the date of its authentication and shall bear Interest from the
date specified on the face of the form of Note attached as Exhibit A
hereto.  Interest on the Notes shall be
computed on the basis of a 360-day year comprised of twelve 30-day months.

 

The Person in whose name any Note (or its Predecessor Note) is
registered on the Note Register at the close of business on any record date
with respect to any Interest payment date shall be entitled to receive the
Interest payable on such Interest payment date, except that the Interest
payable upon redemption or repurchase will be payable to the Person to whom
principal is payable pursuant to such redemption or repurchase, as the case may
be (unless the redemption date or repurchase date, as the case may be, falls
after a record date and prior to the corresponding Interest payment date, in
which case accrued and unpaid Interest to, but excluding, such redemption date
or repurchase date shall be payable on such Interest payment date to the
holders of such Notes registered as such on the applicable record date).  Interest shall be payable at the office of
the Company maintained by the Company for such purposes in the Borough of
Manhattan, City of New York, which shall initially be an office or agency of
the Trustee.  The Company shall pay
Interest (i) on any Notes in certificated form by (x) check mailed to the
address of the Person entitled thereto as it appears in the Note Register (or upon
written notice by such Person, by wire transfer in immediately available funds,
if such Person is entitled to Interest on aggregate principal in

 

13

 

excess of $2 million) or (y) by transfer to an account maintained by
such person in the United States or (ii) on any Global Note by wire transfer of
immediately available funds to the account of the Depositary or its
nominee.  The term “record date” with respect to
any Interest payment date shall mean the April 15 or October 15
preceding the applicable May 1 or November 1 Interest payment date,
respectively.

 

Any Interest on any Note which is payable, but is not punctually paid
or duly provided for, on any May 1 or November 1 (herein called “Defaulted
Interest”) shall forthwith cease to be payable to the Noteholder on
the relevant record date by virtue of his having been such Noteholder, and such
Defaulted Interest shall be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below:

 

(1)                                  The
Company may elect to make payment of any Defaulted Interest to the Persons in
whose names the Notes (or their respective Predecessor Notes) are registered at
the close of business on a special record date for the payment of such
Defaulted Interest, which shall be fixed in the following manner.  The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each Note
and the date of the proposed payment (which shall be not less than twenty-five
(25) days after the receipt by the Trustee of such notice, unless the Trustee
shall consent to an earlier date), and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount to be
paid in respect of such Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit on or prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.  Thereupon the Trustee shall fix a special
record date for the payment of such Defaulted Interest which shall be not more
than fifteen (15) days and not less than ten (10) days prior to the date of the
proposed payment, and not less than ten (10) days after the receipt by the Trustee
of the notice of the proposed payment. 
The Trustee shall promptly notify the Company of such special record
date and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the special record date
therefor to be mailed, first-class postage prepaid, to each holder at his
address as it appears in the Note Register, not less than ten (10) days prior
to such special record date.  Notice of
the proposed payment of such Defaulted Interest and the special record date
therefor having been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Notes (or their respective Predecessor Notes) are
registered at the close of business on such special record date and shall no
longer be payable pursuant to the following clause (2) of this
Section 2.03.

 

(2)                                  The
Company may make payment of any Defaulted Interest in any other lawful manner
not inconsistent with the requirements of any securities exchange or automated
quotation system on which the Notes may be listed or designated for issuance,
and upon such notice as may be required by such exchange or automated quotation
system, if, after notice given by the Company to

 

14

 

the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.

 

Section 2.04.  Execution
of Notes.  The
Notes shall be signed in the name and on behalf of the Company by the manual or
facsimile signature of its Chairman of the Board, Chief Executive Officer,
President or any Vice President (whether or not designated by a number or
numbers or word or words added before or after the title “Vice President”).  Only such Notes as shall bear thereon a certificate
of authentication substantially in the form set forth on the form of Note
attached as Exhibit A hereto, manually executed by the Trustee (or an
authenticating agent appointed by the Trustee as provided by
Section 17.11), shall be entitled to the benefits of this Indenture or be
valid or obligatory for any purpose. 
Such certificate by the Trustee (or such an authenticating agent) upon
any Note executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.

 

In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company, and any Note may be signed on behalf of the Company by such persons
as, at the actual date of the execution of such Note, shall be the proper
officers of the Company, although at the date of the execution of this
Indenture any such person was not such an officer.

 

Section 2.05.  Exchange
and Registration of Transfer of Notes; Restrictions on
Transfer.  (a)  The Company shall cause to be kept at the
Corporate Trust Office a register (the register maintained in such office and
in any other office or agency of the Company designated pursuant to
Section 6.02 being herein sometimes collectively referred to as the “Note
Register”) in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Notes and of
transfers of Notes.  The Note Register
shall be in written form or in any form capable of being converted into written
form within a reasonably prompt period of time.  The Trustee is hereby appointed “Note Registrar” for the
purpose of registering Notes and transfers of Notes as herein provided. The
Company may appoint one or more co-registrars in accordance with
Section 6.02.

 

Upon surrender for registration of transfer of any Note to the Note
Registrar or any co-registrar, and satisfaction of the requirements for such
transfer set forth in this Section 2.05, the Company shall execute, and
the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Notes of any authorized
denominations and of a like aggregate principal amount and bearing such
restrictive legends as may be required by this Indenture.

 

15

 

Notes may be exchanged for other Notes of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency maintained by the Company pursuant to
Section 6.02.  Whenever any Notes
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Notes which the Noteholder making the
exchange is entitled to receive bearing registration numbers not
contemporaneously outstanding.

 

All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.

 

All Notes presented or surrendered for registration of transfer or for
exchange, redemption, repurchase or conversion shall (if so required by the
Company or the Note Registrar) be duly endorsed, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company, and
the Notes shall be duly executed by the Noteholder thereof or his attorney duly
authorized in writing.

 

No service charge shall be made to any holder for any registration of,
transfer or exchange of Notes, but the Company may require payment by the
holder of a sum sufficient to cover any tax, assessment or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes.

 

Neither the Company nor the Trustee nor any Note Registrar shall be
required to exchange or register a transfer of (a) any Notes or portions
thereof surrendered for conversion pursuant to Article 16, (b) any Notes
for a period of fifteen (15) days next preceding any selection of Notes to be
redeemed, (b) any Notes or portions thereof called for redemption pursuant to
Section 3.01 or (c) any Notes or portions thereof tendered for repurchase
(and not withdrawn) pursuant to Section 3.05 or Section 3.06.

 

Neither the Company nor the Trustee nor any Note Registrar shall be
required to exchange or register a transfer of (a) any Notes or portions
thereof surrendered for conversion pursuant to Article 16 or (b) any Notes
or portions thereof tendered for repurchase (and not withdrawn) pursuant to
Section 3.05(a).

 

(b)                                 The following
provisions shall apply only to Global Notes:

 

(i)                                     Each
Global Note authenticated under this Indenture shall be registered in the name
of the Depositary or a nominee thereof and delivered to such Depositary or a
nominee thereof or Custodian therefor, and each such Global Note shall
constitute a single Note for all purposes of this Indenture.

 

16

 

(ii)                                  Notwithstanding
any other provision in this Indenture, no Global Note may be exchanged in whole
or in part for Notes registered, and no transfer of a Global Note in whole or
in part may be registered, in the name of any Person other than the Depositary
or a nominee thereof unless (A) the Depositary (i) has notified the Company
that it is unwilling or unable to continue as Depositary for such Global Note
and a successor depositary has not been appointed by the Company within ninety
days or (ii) has ceased to be a clearing agency registered under the Exchange
Act or (B) an Event of Default has occurred and is continuing.  Any Global Note exchanged pursuant to clause
(A) or (B) above shall be so exchanged in whole and not in part and any Global
Note exchanged pursuant to clause (C) above may be exchanged in whole or from
time to time in part as directed by the Company.  Any Note issued in exchange for a Global Note or any portion
thereof shall be a Global Note; provided that any such Note so issued
that is registered in the name of a Person other than the Depositary or a
nominee thereof shall not be a Global Note.

 

(iii)                               Securities
issued in exchange for a Global Note or any portion thereof pursuant to clause
(ii) above shall be issued in definitive, fully registered form, without
interest coupons, shall have an aggregate principal amount equal to that of
such Global Note or portion thereof to be so exchanged, shall be registered in
such names and be in such authorized denominations as the Depositary shall
designate and shall bear any legends required hereunder.  Any Global Note to be exchanged in whole
shall be surrendered by the Depositary to the Trustee, as Note Registrar.  With regard to any Global Note to be
exchanged in part, either such Global Note shall be so surrendered for exchange
or, if the Trustee is acting as Custodian for the Depositary or its nominee
with respect to such Global Note, the principal amount thereof shall be
reduced, by an amount equal to the portion thereof to be so exchanged, by means
of an appropriate adjustment made on the records of  the Trustee.  Upon any
such surrender or adjustment, the Trustee shall authenticate and make available
for delivery the Note issuable on such exchange to or upon the written order of
the Depositary or an authorized representative thereof.

 

(iv)                              In
the event of the occurrence of any of the events specified in clause (ii)
above, the Company will promptly make available to the Trustee a reasonable supply
of certificated Notes in definitive, fully registered form, without interest
coupons.

 

(v)                                 Neither
any members of, or participants in, the Depositary (“Agent Members”) nor any other
Persons on whose behalf Agent Members may act shall have any rights under this
Indenture with respect to any Global Note registered in the name of the
Depositary or any nominee thereof, and the Depositary or such nominee, as the
case may be, may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner and holder of such Global

 

17

 

Note for all
purposes whatsoever.  Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or such
nominee, as the case may be, or impair, as among the Depositary, its Agent
Members and any other Person on whose behalf an Agent Member may act, the
operation of customary practices of such Persons governing the exercise of the
rights of a holder of any Note.

 

(vi)                              At
such time as all interests in a Global Note have been redeemed, repurchased,
converted, canceled or exchanged for Notes in certificated form, such Global
Note shall, upon receipt thereof, be canceled by the Trustee in accordance with
standing procedures and instructions existing between the Depositary and the
Custodian.  At any time prior to such
cancellation, if any interest in a Global Note is redeemed, repurchased,
converted, canceled or exchanged for Notes in certificated form, the principal
amount of such Global Note shall, in accordance with the standing procedures
and instructions existing between the Depositary and the Custodian, be
appropriately reduced, and an endorsement shall be made on such Global Note, by
the Trustee or the Custodian, at the direction of the Trustee, to reflect such
reduction.

 

(c)                                  Every Note that bears
or is required under this Section 2.05(c) to bear the legend set forth in
this Section 2.05(c) (together with any Common Stock issued upon
conversion of the Notes and required to bear the legend set forth in this
Section 2.05(c), collectively, the “Restricted Securities”) shall be subject to
the restrictions on transfer set forth in this Section 2.05(c) (including
those set forth in the legend below) unless such restrictions on transfer shall
be waived by written consent of the Company, and the holder of each such
Restricted Security, by such Noteholder’s acceptance thereof, agrees to be
bound by all such restrictions on transfer. 
As used in Sections 2.05(c) and 2.05(d), the term “transfer” encompasses any
sale, pledge, loan, transfer or other disposition whatsoever of any Restricted
Security or any interest therein.

 

Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
certificate evidencing such Note (and all securities issued in exchange
therefor or substitution thereof, other than Common Stock, if any, issued upon
conversion thereof, which shall bear the legend set forth in this
Section 2.05(c), if applicable) shall bear a legend in substantially the
following form, unless such Note has been sold pursuant to a registration
statement that has been declared effective under the Securities Act (and which
continues to be effective at the time of such transfer) or sold pursuant to
Rule 144 under the Securities Act or any similar provision then in force, or
unless otherwise agreed by the Company in writing, with written notice thereof
to the Trustee:

 

18

 

THE NOTE
EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A
“QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT); (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS
NOTE OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE EXCEPT (A) TO
LITHIA MOTORS, INC., OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND THAT CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); (3) PRIOR TO SUCH TRANSFER (OTHER THAN
A TRANSFER PURSUANT TO CLAUSE 2(D) ABOVE), IT WILL FURNISH TO U.S. BANK
NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT; AND (4) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF
THIS NOTE PURSUANT TO CLAUSE 2(D) ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER
RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTION.

 

Any Note (or security issued in exchange or substitution therefor) as
to which such restrictions on transfer shall have expired in accordance with
their terms or as to conditions for removal of the foregoing legend set forth
therein have been satisfied may, upon surrender of such Note for exchange to
the Note Registrar in accordance with the provisions of this Section 2.05,
be exchanged for a new Note or Notes, of like tenor and aggregate principal
amount, which shall not bear the restrictive legend required by this
Section 2.05(c).  If the Restricted

 

19

 

Security surrendered for exchange is represented by a Global Note
bearing the legend set forth in this Section 2.05(c), the principal amount
of the legended Global Note shall be reduced by the appropriate principal
amount and the principal amount of a Global Note without the legend set forth
in this Section 2.05(c) shall be increased by an equal principal
amount.  If a Global Note without the
legend set forth in this Section 2.05(c) is not then outstanding, the
Company shall execute and the Trustee shall authenticate and deliver an
unlegended Global Note to the Depositary.

 

(d)                                 Until the expiration
of the holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision), any stock certificate representing
Common Stock issued upon conversion of any Note shall bear a legend in
substantially the following form, unless such Common Stock has been sold
pursuant to a registration statement that has been declared effective under the
Securities Act (and which continues to be effective at the time of such
transfer) or pursuant to Rule 144 under the Securities Act or any similar
provision then in force, or such Common Stock has been issued upon conversion
of Notes that have been transferred pursuant to a registration statement that
has been declared effective under the Securities Act or pursuant to Rule 144
under the Securities Act or any similar provision then in force, or unless
otherwise agreed by the Company in writing with written notice thereof to the
transfer agent:

 

THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE COMMON STOCK
EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON STOCK
EVIDENCED HEREBY EXCEPT (A) TO LITHIA MOTORS, INC., OR TO ANY SUBSIDIARY
THEREOF, (B) TO A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND THAT CONTINUES TO BE EFFECTIVE AT THE
TIME OF SUCH TRANSFER); (2) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE 1(D) ABOVE), IT WILL FURNISH TO COMPUTERSHARE TRUST COMPANY
INC., AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS SUCH TRANSFER AGENT MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS

 

20

 

BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT
WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS
TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(D) ABOVE) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE
EARLIER OF THE TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE
1(D) ABOVE OR UPON ANY TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY AFTER THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED
HEREBY UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION).

 

Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms or as to which the conditions for
removal of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.05(d).

 

(e)                                  Any Note or Common
Stock issued upon the conversion of a Note that, prior to the expiration of the
holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision), is purchased or owned by the
Company or any Affiliate thereof may not be resold by the Company or such
Affiliate unless registered under the Securities Act or resold pursuant to an
exemption from the registration requirements of the Securities Act in a
transaction which results in such Notes or Common Stock, as the case may be, no
longer being “Restricted Securities” (as defined under Rule 144).

 

(f)                                    The Trustee shall
have no responsibility or obligation to any Agent Members or any other Person
with respect to the accuracy of the books or records, or the acts or omissions,
of the Depositary or its nominee or of any participant or member thereof, with
respect to any ownership interest in the Notes or with respect to the delivery
to any Agent Member or other Person (other than the Depositary) of any notice
(including any notice of redemption) or the payment of any amount, under or
with respect to such Notes.  All notices
and communications to be given to the Noteholders and all payments to be made
to Noteholders under the Notes shall be given or made only to or upon the order
of the registered Noteholders (which shall be the Depositary or its nominee in
the case of a Global Note).  The rights
of beneficial owners in any Global Note shall be exercised only through the
Depositary subject to the customary procedures of the Depositary.  The Trustee may rely and shall be fully
protected in relying upon information furnished by the Depositary with respect
to its Agent Members.

 

21

 

The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Note (including any transfers between or among Agent Members in any
Global Note) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and
when expressly required by, the terms of this Indenture, and to examine the
same to determine substantial compliance as to form with the express
requirements hereof.

 

Section 2.06.  Mutilated,
Destroyed, Lost or Stolen Notes.  In case any Note shall become
mutilated or be destroyed, lost or stolen, the Company in its discretion may
execute, and upon its written request the Trustee or an authenticating agent
appointed by the Trustee shall authenticate and make available for delivery, a
new Note, bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated Note, or in lieu of and in substitution for the
Note so destroyed, lost or stolen.  In
every case, the applicant for a substituted Note shall furnish to the Company,
to the Trustee and, if applicable, to such authenticating agent such security
or indemnity as may be required by them to save each of them harmless for any
loss, liability, cost or expense caused by or connected with such substitution,
and, in every case of destruction, loss or theft, the applicant shall also
furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent evidence to their satisfaction of the destruction, loss or
theft of such Note and of the ownership thereof.

 

Following receipt by the Trustee or such authenticating agent, as the
case may be, of satisfactory security or indemnity and evidence, as described
in the preceding paragraph, the Trustee or such authenticating agent may
authenticate any such substituted Note and make available for delivery such
Note. Upon the issuance of any substituted Note, the Company may require the
payment by the holder of a sum sufficient to cover any tax, assessment or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith.  In case
any Note that has matured or is about to mature or has been called for
redemption or has been tendered for repurchase upon a Designated Event (and not
withdrawn) or has been tendered for repurchase on a Repurchase Date (and not
withdrawn) or is to be converted into Common Stock shall become mutilated or be
destroyed, lost or stolen, the Company may, instead of issuing a substitute
Note, pay or authorize the payment of or convert or authorize the conversion of
the same (without surrender thereof except in the case of a mutilated Note), as
the case may be, if the applicant for such payment or conversion shall furnish
to the Company, to the Trustee and, if applicable, to such authenticating agent
such security or indemnity as may be required by them to save each of them
harmless for any loss, liability, cost or expense caused by or in connection
with such substitution, and, in every case of destruction, loss or theft, the
applicant shall also furnish to the Company, the Trustee and, if applicable,
any

 

22

 

paying agent or conversion agent evidence to their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.

 

Every substitute Note issued pursuant to the provisions of this
Section 2.06 by virtue of the fact that any Note is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Note shall be found at any time,
and shall be entitled to all the benefits of (but shall be subject to all the
limitations set forth in) this Indenture equally and proportionately with any
and all other Notes duly issued hereunder. 
To the extent permitted by law, all Notes shall be held and owned upon
the express condition that the foregoing provisions are exclusive with respect
to the replacement, payment, conversion, redemption or repurchase of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement, payment, conversion, redemption
or repurchase of negotiable instruments or other securities without their
surrender.

 

Section 2.07.  Temporary
Notes.  Pending
the preparation of Notes in certificated form, the Company may execute and the
Trustee or an authenticating agent appointed by the Trustee shall, upon the
written request of the Company, authenticate and deliver temporary Notes
(printed or lithographed).  Temporary
Notes shall be issuable in any authorized denomination, and substantially in
the form of the Notes in certificated form, but with such omissions, insertions
and variations as may be appropriate for temporary Notes, all as may be
determined by the Company.  Every such
temporary Note shall be executed by the Company and authenticated by the
Trustee or such authenticating agent upon the same conditions and in
substantially the same manner, and with the same effect, as the Notes in
certificated form. Without unreasonable delay, the Company will execute and
deliver to the Trustee or such authenticating agent Notes in certificated form
and thereupon any or all temporary Notes may be surrendered in exchange
therefor, at each office or agency maintained by the Company pursuant to
Section 6.02 and the Trustee or such authenticating agent shall
authenticate and make available for delivery in exchange for such temporary
Notes an equal aggregate principal amount of Notes in certificated form.  Such exchange shall be made by the Company
at its own expense and without any charge therefor.  Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits and subject to the same limitations under this
Indenture as Notes in certificated form authenticated and delivered hereunder.

 

Section 2.08. 
Cancellation of Notes.  All Notes surrendered for the
purpose of payment, redemption, repurchase, conversion, exchange or registration
of transfer shall, if surrendered to the Company or any paying agent or any
Note Registrar or any conversion agent, be surrendered to the Trustee and
promptly canceled by it, or, if surrendered to the Trustee, shall be promptly
canceled by it, and no Notes shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture.  The Trustee shall dispose of such canceled
Notes in accordance with its customary procedures.  If the Company shall acquire

 

23

 

any of the Notes, such acquisition shall not
operate as a redemption, repurchase or satisfaction of the indebtedness
represented by such Notes unless and until the same are delivered to the
Trustee for cancellation.

 

Section 2.09.  CUSIP
Numbers.  The
Company in issuing the Notes may use “CUSIP” numbers (if then generally in
use), and, if so, the Trustee shall use “CUSIP” numbers in notices of
redemption or repurchases as a convenience to Noteholders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of a
redemption or repurchase and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption or
repurchase shall not be affected by any defect in or omission of such
numbers.  The Company will promptly
notify the Trustee of any change in the “CUSIP” numbers.

 

Section 2.10.  Additional
Notes.  The
Company may, without the consent of the holders, issue Additional Notes (the “Additional
Notes”) under this Indenture with the same terms and with the same
CUSIP numbers as the Notes offered hereby in an unlimited aggregate principal
amount, provided that such Additional Notes must be part of the same issue as
the notes offered hereby for United States federal income tax purposes.

 

ARTICLE 3

REDEMPTION AND REPURCHASE OF NOTES

 

Section 3.01.  Optional
Redemption of Notes. 
The Company may not redeem any Notes prior to May 6,
2009.  At any time on or after May 6,
2009 and prior to maturity, the Notes may be redeemed at the option of the
Company, in whole or in part, upon notice as set forth in Section 3.02, at
a cash redemption price equal to 100% of the principal amount of the Notes
being redeemed, together with accrued and unpaid Interest, if any, to, but
excluding, the date fixed for redemption; provided that if the redemption date falls
after a record date and on or prior to the corresponding Interest payment date,
then accrued and unpaid Interest, if any, to, but excluding, the date fixed for
redemption shall be paid on such Interest payment date to the holders of record
of such Notes on the applicable record date instead of the holders surrendering
such Notes for redemption on such date.

 

Section 3.02.  Notice of
Optional Redemption; Selection of Notes.

 

In case the Company shall
desire to exercise the right to redeem all or, as the case may be, any part of
the Notes pursuant to Section 3.01, it shall fix a date for redemption and
it or, at its written request received by the Trustee not fewer than forty-five
(45) days prior (or such shorter period of time as may be acceptable to the
Trustee) to the date fixed for redemption, the Trustee in the name of and at
the expense of the Company, shall mail or cause to be mailed a

 

24

 

notice of such redemption
not fewer than thirty (30) nor more than sixty (60) days prior to the
redemption date to each holder of Notes to be redeemed as a whole or in part at
its last address as the same appears on the Note Register; provided that if the Company
shall give such notice, it shall also give written notice of the redemption
date to the Trustee.  Such mailing shall
be by first class mail.  The notice, if
mailed in the manner herein provided, shall be conclusively presumed to have
been duly given, whether or not the holder receives such notice.  In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Note designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Note.  Concurrently with the mailing of any such notice of redemption,
the Company shall issue a press release announcing such redemption, the form
and content of which press release shall be determined by the Company in its
sole discretion.  The failure to issue
any such press release or any defect therein shall not affect the validity of
the redemption notice or any of the proceedings for the redemption of any Note
called for redemption.

 

Each such notice of
redemption shall specify the aggregate principal amount of Notes to be
redeemed, the CUSIP number or numbers of the Notes being redeemed, the date
fixed for redemption (which shall be a Business Day), the redemption price at
which Notes are to be redeemed, the place or places of payment, that payment
will be made upon presentation and surrender of such Notes, that Interest
accrued to the date fixed for redemption will be paid as specified in said
notice, and that on and after said date Interest thereon or on the portion
thereof to be redeemed will cease to accrue. 
Such notice shall also state the current Conversion Rate and the date on
which the right to convert such Notes or portions thereof into Common Stock
will expire.  If fewer than all the
Notes are to be redeemed, the notice of redemption shall identify the Notes to
be redeemed (including CUSIP numbers, if any). 
In case any Note is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that, on and after the redemption date, upon surrender
of such Note, a new Note or Notes in principal amount equal to the unredeemed
portion thereof will be issued.

 

On or prior to the
redemption date specified in the notice of redemption given as provided in this
Section 3.02, the Company will deposit with the Trustee or with one or
more paying agents (or, if the Company is acting as its own paying agent, set
aside, segregate and hold in trust as provided in Section 6.04) an amount
of money in immediately available funds sufficient to redeem on the redemption
date all the Notes (or portions thereof) so called for redemption (other than
those theretofore surrendered for conversion into Common Stock) at the
appropriate redemption price, together with accrued Interest to, but excluding,
the redemption date; provided that if such payment is made on
the redemption date it must be received by the Trustee or paying agent, as the
case may be, by 11:00 a.m. New York City time on such date.  The Company shall be entitled to retain any
interest, yield or gain on amounts deposited with the Trustee or any paying
agent pursuant to this Section 3.02 in excess of amounts required
hereunder to pay the redemption price and accrued Interest to, but excluding,
the redemption date.  If any Note called
for redemption is converted pursuant hereto prior to such redemption date, any money
deposited with the Trustee or any paying

 

25

 

agent or so segregated
and held in trust for the redemption of such Note shall be paid to the Company
upon its written request, or, if then held by the Company, shall be discharged
from such trust.  Whenever any Notes are
to be redeemed, the Company will give the Trustee written notice in the form of
an Officer’s Certificate not fewer than forty-five (45) days (or such shorter
period of time as may be acceptable to the Trustee) prior to the redemption
date as to the aggregate principal amount of Notes to be redeemed.

 

If less than all of the
outstanding Notes are to be redeemed, the Trustee shall select the Notes or
portions thereof of the Global Note or the Notes in certificated form to be
redeemed (in principal amounts of $1,000 or multiples thereof) by lot, on a pro
rata basis or by another method the Trustee deems fair and appropriate.  If any Note selected for partial redemption
is submitted for conversion in part after such selection, the portion of such
Note submitted for conversion shall be deemed (so far as may be possible) to be
the portion to be selected for redemption. 
The Notes (or portions thereof) so selected shall be deemed duly
selected for redemption for all purposes hereof, notwithstanding that any such
Note is submitted for conversion in part before the mailing of the notice of
redemption.

 

Upon any redemption of
less than all of the outstanding Notes, the Company and the Trustee may (but
need not), solely for purposes of determining the pro rata allocation among
such Notes as are unconverted and outstanding at the time of redemption, treat
as outstanding any Notes surrendered for conversion during the period of
fifteen (15) days next preceding the mailing of a notice of redemption and may
(but need not) treat as outstanding any Note authenticated and delivered during
such period in exchange for the unconverted portion of any Note converted in
part during such period.

 

Section 3.03.  Payment of
Notes Called for Redemption by the Company.

 

If notice of redemption
has been given as provided in Section 3.02, the Notes or portion of Notes
with respect to which such notice has been given shall, unless converted into
Common Stock pursuant to the terms hereof, become due and payable on the date
fixed for redemption and at the place or places stated in such notice at the
applicable redemption price, together with Interest accrued to (but excluding)
the redemption date, and on and after said date (unless the Company shall
default in the payment of such Notes at the redemption price, together with
Interest accrued to said date) Interest on the Notes or portion of Notes so
called for redemption shall cease to accrue and, after the close of business on
the second Business Day immediately preceding the redemption date (unless the
Company shall default in the payment of such Notes at the redemption price,
together with Interest accrued to said date) such Notes shall cease to be

 

26

 

convertible into Common
Stock and, except as provided in Section 9.05 and Section 14.04, to
be entitled to any benefit or security under this Indenture, and the holders
thereof shall have no right in respect of such Notes except the right to
receive the redemption price thereof and unpaid Interest to (but excluding) the
redemption date.  On presentation and
surrender of such Notes at a place of payment in said notice specified, the
said Notes or the specified portions thereof shall be paid and redeemed by the
Company at the applicable redemption price, together with Interest accrued
thereon to, but excluding, the redemption date; provided that if the
redemption date falls after a record date and on or prior the corresponding
Interest payment date, then accrued and unpaid Interest, if any, to, but
excluding, the date fixed for redemption shall be paid on such Interest payment
date to the holders of record of such Notes on the applicable record date
instead of the holders surrendering such Notes for redemption on such date.

 

Upon presentation of any
Note redeemed in part only, the Company shall execute and the Trustee shall
authenticate and make available for delivery to the holder thereof, at the
expense of the Company, a new Note or Notes, of authorized denominations, in
principal amount equal to the unredeemed portion of the Notes so presented.

 

Notwithstanding the
foregoing, the Trustee shall not redeem any Notes or mail any notice of
redemption during the continuance of a default in payment of Interest on the
Notes.  If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal shall, until paid or duly provided for, bear interest from the
redemption date at a rate equal to 1% per annum plus the rate borne by the Note
and such Note shall remain convertible into Common Stock until the principal
and Interest shall have been paid or duly provided for.

 

Section 3.04.  Conversion
Arrangement on Call for Redemption.  In connection with any redemption
of Notes, the Company may arrange for the purchase and conversion of any Notes
by an agreement with one or more investment banks or other purchasers to
purchase such Notes by paying to the Trustee in trust for the Noteholders, on
or before the date fixed for redemption, an amount not less than the applicable
redemption price, together with Interest accrued to, but excluding, the date
fixed for redemption, of such Notes. 
Notwithstanding anything to the contrary contained in this
Article 3, the obligation of the Company to pay the redemption price of
such Notes, together with Interest accrued to, but excluding, the date fixed
for redemption, shall be deemed to be satisfied and discharged to the extent
such amount is so paid by such purchasers. 
If such an agreement is entered into, a copy of which will be filed with
the Trustee prior to the date fixed for redemption, any Notes not duly
surrendered for conversion by the holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and (notwithstanding anything to the contrary
contained in Article 16) surrendered by such purchasers for conversion,
all as of immediately prior to the close of business on the second Business Day
immediately preceding the date fixed for redemption (and the right to convert
any

 

27

 

such Notes shall be extended through such
time), subject to payment of the above amount as aforesaid.  At the direction of the Company, the Trustee
shall hold and dispose of any such amount paid to it in the same manner as it
would monies deposited with it by the Company for the redemption of Notes.  Without the Trustee’s prior written consent,
no arrangement between the Company and such purchasers for the purchase and
conversion of any Notes shall increase or otherwise affect any of the powers,
duties, responsibilities or obligations of the Trustee as set forth in this
Indenture.

 

Section 3.05.  Repurchase
at Option of Holders upon a Designated Event.

 

(a)                                  If there shall occur
a Designated Event at any time prior to maturity of the Notes, then each
Noteholder shall have the right, at such holder’s option, to require the
Company to repurchase for cash such holder’s Notes, in whole or any portion
thereof that is a multiple of $1,000 principal amount, on the date (the “Designated
Event Repurchase Date”) that is thirty (30) days after the date of
the Designated Event Notice (as defined in Section 3.05(b)) of such
Designated Event (or, if such 30th day is not a Business Day, the next
succeeding Business Day) at a repurchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid Interest, if any, to, but excluding,
the Designated Event Repurchase Date (the “Designated Event Repurchase Price”); provided that
if such Designated Event Repurchase Date falls after a record date and on or
prior to the corresponding Interest payment date, then accrued and unpaid
Interest, if any, to, but excluding, the Designated Event Repurchase Date shall
be paid on such Interest payment date to the holders of record of the Notes on
the applicable record date instead of the holders surrendering the Notes for
repurchase on such date.  Repurchases of
Notes under this Section 3.05(a) shall be made at the option of the
Noteholder, upon:

 

(i)             delivery to the
Trustee (or other paying agent appointed by the Company) by a Noteholder of a
duly completed notice entitled “Option to Elect Repayment Upon a Designated
Event” (the “Designated Event Repurchase Notice”) in the form set forth on
the reverse of the Note during the period beginning at any time from the
opening of business on the date the Designated Event Notice is mailed until the
close of business on the Designated Event Repurchase Date; and

 

(ii)          delivery or book-entry
transfer of the Note or Notes to the Trustee (or other paying agent appointed
by the Company) at any time after delivery of the Designated Event Repurchase
Notice (together with all necessary endorsements) at the Corporate Trust Office
of the Trustee (or other paying agent appointed by the Company) in the Borough
of Manhattan, The City of New York, as provided in Section 6.02, such
delivery being a condition to receipt by the holder of the repurchase price
therefor;
provided that such repurchase price shall be so paid pursuant to
this Section 3.05(a) only if the Note so delivered to the Trustee (or
other

 

28

 

paying agent appointed by the Company) shall
conform in all respects to the description thereof in the related Designated
Event Repurchase Notice.

 

The Company shall repurchase, pursuant to this Section 3.05(a), a
portion of a Note, if the principal amount of such portion is $1,000 or a
multiple of $1,000.  Provisions of this
Indenture that apply to the repurchase of all of a Note also apply to the
repurchase of such portion of such Note. 
Upon presentation of any Note redeemed in part only, the Company shall
execute and, upon the Company’s written direction to the Trustee, the Trustee
shall authenticate and make available for delivery to the holder thereof, at
the expense of the Company, a new Note or Notes, of authorized denominations,
in aggregate principal amount equal to the unredeemed portion of the Notes
presented.

 

Notwithstanding anything herein to the contrary, any holder delivering
to the Trustee (or other paying agent appointed by the Company) the Designated
Event Repurchase Notice contemplated by this Section 3.05(a) shall have
the right to withdraw such Designated Event Repurchase Notice at any time prior
to the close of business on the Designated Event Repurchase Date by delivery of
a written notice of withdrawal to the Trustee (or other paying agent appointed
by the Company) in accordance with Section 3.08.

 

The Trustee (or other paying agent appointed by the Company) shall
promptly notify the Company of the receipt by it of any Designated Event
Repurchase Notice or written notice of withdrawal thereof.

 

(b)                                 On or before the tenth
day after the occurrence of any Designated Event of which it is aware, the
Company or, at its written request (which must be received by the Trustee at
least five (5) Business Days prior to the date the Trustee is requested to give
notice as described below, unless the Trustee shall agree in writing to a
shorter period), the Trustee, in the name of and at the expense of the Company,
shall mail or cause to be mailed to all holders of record on the date of the
Designated Event a notice (the “Designated Event Notice”) of the occurrence
of such Designated Event and of the repurchase right at the option of the
holders arising as a result thereof. 
Such notice shall be mailed by first class mail.  The notice, if mailed in the manner herein
provided, shall be conclusively presumed to have been duly given, whether or
not the holder receives such notice.  If
the Company shall give such notice, the Company shall also deliver a copy of
the Designated Event Notice to the Trustee at such time as it is mailed to
Noteholders.  Concurrently with the
mailing of any Designated Event Notice, the Company shall issue a press release
announcing such Designated Event referred to in the Designated Event Notice,
the form and content of which press release shall be determined by the Company
in its sole discretion.  The failure to
issue any such press release or any defect therein shall not affect the
validity of the Designated Event Notice or any proceedings for the repurchase
of any Note which any Noteholder may elect to have the Company repurchase as
provided in this Section 3.05.

 

29

 

Each Designated Event Notice shall specify the circumstances
constituting the Designated Event, the Designated Event Repurchase Date, the
price at which the Company shall be obligated to repurchase Notes, that the
holder must exercise the repurchase right on or prior to the close of business
on the Designated Event Repurchase Date (the “Designated Event Expiration Time”),
that the holder shall have the right to withdraw any Notes surrendered prior to
the Designated Event Expiration Time, a description of the procedure which a
Noteholder must follow to exercise such repurchase right and to withdraw any
surrendered Notes, the place or places where the holder is to surrender such
holder’s Notes, the amount of Interest accrued on each Note to the Designated
Event Repurchase Date and the CUSIP number or numbers of the Notes (if then
generally in use) and include a form of Designated Event Repurchase Notice.

 

No failure of the Company to give the foregoing notices and no defect
therein shall limit the Noteholders’ repurchase rights or affect the validity
of the proceedings for the repurchase of the Notes pursuant to this
Section 3.05.

 

(c)                                  A Designated Event
Repurchase Notice may be withdrawn by means of a written notice of withdrawal
delivered to the office of the Trustee (or other paying agent appointed by the
Company) in accordance with the Designated Event Repurchase Notice at any time
prior to the close of business on the Designated Event Repurchase Date,
specifying:

 

(i)             the certificate
number, if any, of the Note in respect of which such notice of withdrawal is
being submitted, or the appropriate Depositary information if the Note in
respect of which such notice of withdrawal is being submitted is represented by
a Global Note;

 

(ii)          the principal amount of
the Note with respect to which such notice of withdrawal is being submitted;
and

 

(iii)       the principal amount, if
any, of such Note which remains subject to the original Designated Event
Repurchase Notice and which has been or will be delivered for purchase by the
Company.

 

(d)                                 On or prior to the
Designated Event Repurchase Date, the Company will deposit with the Trustee (or
other paying agent appointed by the Company or if the Company is acting as its
own paying agent, set aside, segregate and hold in trust as provided in
Section 6.04) an amount of money sufficient to repurchase on the
Designated Event Repurchase Date all the Notes to be repurchased on such date
at the appropriate repurchase price, together with accrued Interest to, but
excluding, the Designated Event Repurchase Date; provided that if such
payment is made on the Designated Event Repurchase Date, it must be received by
the Trustee or paying agent, as the case may be, by 11:00 a.m. New York City
time, on such date.  Subject to receipt
of funds and/or Notes by the Trustee (or other paying agent appointed by the
Company), payment for Notes surrendered for repurchase (and not withdrawn)
prior to the Designated Event Expiration Time

 

30

 

will be made promptly (but in no event more
than five (5) Business Days) following the later of (x) the close of
business on the Designated Event Repurchase Date with respect to such Note (provided
the holder has satisfied the conditions in Section 3.05(a)) and
(y) the time of delivery of such Note to the Trustee (or other paying
agent appointed by the Company) by the holder thereof in the manner required by
Section 3.05 by mailing checks for the amount payable to the holders of such
Notes entitled thereto as they shall appear in the Note Register.

 

If the Trustee (or other
paying agent appointed by the Company) holds money sufficient to repurchase on
the Designated Event Repurchase Date all the Notes or portions thereof that are
to be purchased as of the Designated Event Repurchase Date, then on or after
the Designated Event Repurchase Date (i) the Notes will cease to be
outstanding, (ii) Interest on the Notes will cease to accrue, and
(iii) all other rights of the holders of such Notes will terminate,
whether or not book-entry transfer of the Notes has been made or the Notes have
been delivered to the Trustee or paying agent, other than the right to receive
the repurchase price upon delivery of the Notes.

 

(e)                                  In the case of a
reclassification, change, consolidation, merger, combination, sale or
conveyance to which Section 16.06 applies, in which the Common Stock of
the Company is changed or exchanged as a result into the right to receive
stock, securities or other property or assets (including cash), which includes
shares of Common Stock of the Company or shares of common stock of another
Person that are, or upon issuance will be, traded on a United States national
securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate Fair Market Value of such stock, securities or other property or
assets (including cash) (as determined by the Company, which determination
shall be conclusive and binding), then the Person formed by such consolidation
or resulting from such merger or which acquires such assets, as the case may
be, shall execute and deliver to the Trustee a supplemental indenture
(accompanied by an Opinion of Counsel that such supplemental indenture complies
with this Indenture and the Trust Indenture Act as in force at the date of
execution of such supplemental indenture) modifying the provisions of this
Indenture relating to the right of holders of the Notes to cause the Company to
repurchase the Notes following a Designated Event, including without limitation
the applicable provisions of this Section 3.05(a) and the definitions of
Common Stock and Designated Event, as appropriate, as determined in good faith
by the Company (which determination shall be conclusive and binding), to make
such provisions apply to such other Person if different from the Company and
the common stock issued by such Person (in lieu of the Company and the Common
Stock of the Company).

 

(f)                                    The Company will
comply with the provisions of Rule 13e-4 and any other tender offer rules under
the Exchange Act (including, without

 

31

 

limitation, filing a Schedule TO or
other schedule) to the extent then applicable in connection with the repurchase
rights of the holders of Notes in the event of a Designated Event.

 

Section 3.06.  Repurchase
of Notes by the Company at Option of Holders.

 

Unless the Company has
elected to redeem all of the Notes in accordance with Section 3.01, Notes
shall be purchased by the Company pursuant to the terms of the Notes at the
option of the holder on May 1, 2009 (the “Repurchase Date”), for cash, at a
repurchase price of 100% of the principal amount, plus any accrued and unpaid
Interest to, but excluding, the Repurchase Date, subject to the satisfaction by
or on behalf of the holder of the requirements set forth in the provisions of
Section 3.06(a); provided that no Notes may be repurchased
by the Company pursuant to this Section 3.06 if the principal amount of
the Notes has been accelerated and such acceleration has not been rescinded on
or prior to the Repurchase Date. 
Repurchases of Notes under this Section 3.06 shall be made, at the
option of the holder thereof, upon:

 

(a)                                  delivery to the
Trustee (or other paying agent appointed by the Company) by a holder of a duly
completed notice (the “Repurchase Notice”) in the form set forth
on the reverse of the Note during the period beginning at any time from the
opening of business on the date that is 20 Business Days prior to the
Repurchase Date until the close of business on the date that is two Business
Days prior to the Repurchase Date; and

 

(b)                                 delivery or book-entry
transfer of the Notes to the Trustee (or other paying agent appointed by the
Company) at any time after delivery of the Repurchase Notice (together with all
necessary endorsements) at the Corporate Trust Office or any other office of
the Trustee (or other paying agent appointed by the Company) in the Borough of
Manhattan as provided in Section 6.02, such delivery being a condition to
receipt by the holder of the repurchase price therefor; provided that such
repurchase price shall be so paid pursuant to this Section 3.06 only if
the Note so delivered to the Trustee (or other paying agent appointed by the
Company) shall conform in all respects to the description thereof in the
related Repurchase Notice.

 

The Company shall
purchase from the holder thereof, pursuant to this Section 3.06, a portion
of a Note, if the principal amount of such portion is $1,000 or a multiple of
$1,000.  Provisions of this Indenture
that apply to the purchase of all of a Note also apply to the purchase of such
portion of such Note.

 

Any purchase by the
Company contemplated pursuant to the provisions of this Section 3.06 shall
be consummated by the delivery of the consideration to be received by the
holder promptly following the later of the Repurchase Date and the time of the
book-entry transfer or delivery of the Note.

 

32

 

Notwithstanding anything
herein to the contrary, any holder delivering to the Trustee (or other paying
agent appointed by the Company) a Repurchase Notice contemplated by this Section 3.06
shall have the right to withdraw such Repurchase Notice at any time prior to
the close of business on the Repurchase Date by delivery of a written notice of
withdrawal to the Trustee (or other paying agent appointed by the Company) in
accordance with Section 3.08.  The
Company is not obligated under this Section 3.06 to repurchase notes
listed in such written notice of withdrawal.

 

The Trustee (or other
paying agent appointed by the Company) shall promptly notify the Company of the
receipt by it of any Repurchase Notice or written notice of withdrawal thereof.

 

Section 3.07.  Company
Repurchase Notice.

 

(a)                                  The Notes to be
repurchased on any Repurchase Date pursuant to Section 3.06 will be paid
for in cash.

 

Unless the Company has
elected to redeem all of the Notes in accordance with Section 3.01, at
least three Business Days before the Company Repurchase Notice Date, the
Company shall deliver an Officer’s Certificate to the Trustee specifying:

 

(i)             the information
required by Section 3.07(b) in the Company Repurchase Notice; and

 

(ii)          whether the Company
desires the Trustee to give the Company Repurchase Notice required by
Section 3.07(b).

 

(b)                                 Unless the Company has
elected to redeem all of the Notes in accordance with Section 3.01, in
connection with any repurchase of Notes, the Company shall, no less than 20
Business Days prior to the Repurchase Date (the “Company Repurchase Notice Date”),
give notice to holders at their addresses shown in the Note Register setting
forth information specified in this Section 3.07(b) (the “Company
Repurchase Notice”).  The
Company will also give notice to beneficial owners as required by applicable
law.

 

The Company Repurchase
Notice shall:

 

(1)          state the repurchase
price and the Repurchase Date to which the Company Repurchase Notice relates;

 

(2)          state the last date on
which a holder may exercise its repurchase right;

 

(3)          include a form of
Repurchase Notice;

 

33

 

(4)          state the name and
address of the Trustee (or other paying agent appointed by the Company);

 

(5)          state that Notes must be
surrendered to the Trustee (or other paying agent appointed by the Company) to
collect the repurchase price;

 

(6)          if the Notes are then
convertible, state that Notes as to which a Repurchase Notice has been given
may be converted only if the Repurchase Notice is withdrawn in accordance with
the terms of this Indenture; and

 

(7)          state the CUSIP number
of the Notes.

 

(c)                                  The Company will
comply with the provisions of Rule 13e-4 and any other tender offer rules under
the Exchange Act (including, without limitation, filing a Schedule TO or
other schedule) to the extent then applicable in connection with the repurchase
rights of the holders of Notes.

 

Section 3.08.  Effect of
Designated Event Repurchase Notice and Repurchase
Notice.

 

(a)                                  Upon receipt by the
Trustee (or other paying agent appointed by the Company) of the Designated
Event Repurchase Notice specified in Section 3.05(a), the holder of the
Note in respect of which such Designated Event Repurchase Notice was given
shall (unless such Designated Event Repurchase Notice is validly withdrawn)
thereafter be entitled to receive solely the repurchase price with respect to
such Note.  Such repurchase price shall
be paid to such Noteholder, subject to receipt of funds and/or Notes by the
Trustee (or other paying agent appointed by the Company), promptly following
the later of (x) the Designated Event Repurchase Date with respect to such Note
(provided the holder has satisfied the conditions in Section 3.05(a)) and
(y) the time of delivery of such Note to the Trustee (or other paying agent
appointed by the Company) by the holder thereof in the manner required by
Section 3.05(a).  Notes in respect of
which a Designated Event Repurchase Notice has been given by the holder thereof
may not be converted pursuant to Article 16 hereof on or after the date of
the delivery of such Designated Event Repurchase Notice unless such Designated
Event Repurchase Notice has first been validly withdrawn.

 

(b)                                 Upon receipt by the
Trustee (or other paying agent appointed by the Company) of the Repurchase
Notice specified in Section 3.06(a), the holder of the Note in respect of
which such Repurchase Notice was given shall (unless such Repurchase Notice is
validly withdrawn) thereafter be entitled to receive solely the repurchase
price with respect to such Note.  Such
repurchase price shall be paid to such Noteholder, subject to receipt of funds
and/or Notes by the Trustee (or other paying agent appointed by the Company), promptly
following the later of (x) the Repurchase Date with respect to such Note
(provided the holder has satisfied the conditions in Section 3.06(a)) and
(y) the time of delivery of such

 

34

 

Note to the Trustee (or other paying agent
appointed by the Company) by the holder thereof in the manner required by
Section 3.06(a).  Notes in respect
of which a Repurchase Notice has been given by the holder thereof may not be
converted pursuant to Article 16 hereof on or after the date of the
delivery of such Repurchase Notice unless such Repurchase Notice has first been
validly withdrawn.

 

(c)                                  A Designated Event
Repurchase Notice or Repurchase Notice may be withdrawn by means of a written
notice of withdrawal delivered to the office of the Trustee (or other paying
agent appointed by the Company) in accordance with the Designated Event
Repurchase Notice or Repurchase Notice, as the case may be, at any time prior
to the close of business on the Designated Event Repurchase Date or Repurchase
Date, as the case may be, specifying:

 

(i)             the certificate
number, if any, of the Note in respect of which such notice of withdrawal is
being submitted, or the appropriate Depositary information if the Note in
respect of which such notice of withdrawal is being submitted is represented by
a Global Note,

 

(ii)          the principal amount of
the Note with respect to which such notice of withdrawal is being submitted,
and

 

(iii)       the principal amount, if
any, of such Note which remains subject to the original Designated Event
Repurchase Notice or Repurchase Notice, as the case may be, and which has been
or will be delivered for repurchase by the Company.

 

Section 3.09.  Deposit of
Repurchase Price.

 

(a)                                  Prior to 10:00 a.m.
(New York City Time) on the Business Day following a Designated Event
Repurchase Date or Repurchase Date, the Company shall deposit with the Trustee
(or other paying agent appointed by the Company; or, if the Company or a
Subsidiary or an Affiliate of either of them is acting as the paying agent,
shall segregate and hold in trust as provided in Section 6.04) an amount
of cash (in immediately available funds if deposited on such Business Day),
sufficient to pay the aggregate repurchase price of all the Notes or portions
thereof that are to be redeemed as of such Designated Event Repurchase Date or
Repurchase Date.

 

(b)                                 If the Trustee or
other paying agent appointed by the Company, or the Company or a Subsidiary or
Affiliate of either of them, if such entity is acting as the paying agent,
holds cash sufficient to pay the aggregate repurchase price of all the Notes,
or portions thereof, that are to be repurchased as of a Designated Event
Repurchase Date or Repurchase Date, then on or after such Designated Event
Repurchase Date or Repurchase Date, as the case may be, (i) the Notes will
cease to be outstanding, (ii) Interest on the Notes will cease to accrue, and
(iii) all other rights of the holders of such Notes will terminate, whether or
not book-entry

 

35

transfer of the Notes has been made or the
Notes have been delivered to the Trustee or paying agent, other than the right
to receive the repurchase price upon delivery of the Notes.

 

Section 3.10.  Notes
Repurchased in Part. 
Upon presentation of any Note repurchased pursuant to
Section 3.05 or Section 3.06, as the case may be, only in part, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to the holder thereof, at the expense of the Company, a new Note or
Notes, of any authorized denomination, in aggregate principal amount equal to
the unrepurchased portion of the Notes presented.

 

Section 3.11.  Repayment
to the Company. 
The Trustee (or other paying agent appointed by the Company)
shall return to the Company any cash or money that remains unclaimed as
provided in Section 14.04 held for them for the payment of the repurchase
price pursuant to Section 3.05 or Section 3.06, as the case may be;
provided that to the extent that the aggregate amount of cash or money
deposited by the Company pursuant to Section 3.05(d) or Section 3.09,
as the case may be, exceeds the aggregate repurchase price of the Notes or
portions thereof which the Company is obligated to purchase as of the
Designated Event Repurchase Date or the Repurchase Date, as the case may be,
then, unless otherwise agreed in writing with the Company, promptly after the
Business Day following the Designated Event Repurchase Date or the Repurchase
Date, as the case may be, the Trustee shall return any such excess to the
Company together with interest, if any, thereon.

 

ARTICLE 4

CONTINGENT INTEREST

 

Section 4.01.  Contingent
Interest.

 

Beginning with the
six-month period commencing May 1, 2009, the Company will pay contingent
interest (“Contingent Interest”) to the Noteholders for any six-month
period if the average Trading Price for the five Trading Days immediately
preceding the first day of the applicable six-month period equals or exceeds
120% of the principal amount of the Notes. 
For any six-month period when Contingent Interest is payable, the
Contingent Interest payable on each $1,000 principal amount of Note shall equal
0.25% of the average Trading Price for $1,000 principal amount of Notes during
the five Trading Day measuring period immediately preceding the first day of
applicable six-month period used to determine whether Contingent Interest must
be paid.

 

The Trustee’s sole
responsibility pursuant to this Section 4.01 shall be to obtain the
Trading Price of the Notes for each of the five Trading Days immediately
preceding the first day of the applicable six-month period and to provide such
information to the Company.  The Company
shall determine whether holders are entitled to receive Contingent Interest,
and if so, provide

 

36

 

notice pursuant to
Section 4.03.  Notwithstanding any
term contained in this Indenture or any other document to the contrary, the
Trustee shall have no responsibilities, duties or obligations for or with respect
to (i) determining whether the Company must pay Contingent Interest or (ii)
determining the amount of Contingent Interest, if any, payable by the Company.

 

Section 4.02.  Payment of
Contingent Interest.

 

Contingent Interest for
any six-month period shall be paid on the applicable Interest payment date to
the Person in whose name any Note (or its Predecessor Note) is registered on
the Note Register at the corresponding record date.  Contingent Interest due under this Article 4 shall be
treated for all purposes of this Indenture like any other interest accruing on
the Notes.

 

Section 4.03.  Contingent
Interest Notification.

 

By the third Business Day
of a six-month period for which Contingent Interest will be paid, the Company
will disseminate a press release through Reuters Economic Services and
Bloomberg Business News stating that Contingent Interest will be paid on the
Notes and identifying such six-month period as the six-month period for which
such Contingent Interest will be paid.

 

ARTICLE 5

SUBORDINATION OF NOTES

 

Section 5.01.  Agreement
of Subordination. 
The Company covenants and agrees, and each holder of Notes
issued hereunder by its acceptance thereof likewise covenants and agrees, that
all Notes shall be issued subject to the provisions of this Article 5, and
each Person holding any Note, whether upon original issue or upon registration
of transfer, assignment or exchange thereof, accepts and agrees to be bound by
such provisions.

 

The payment of all Note Obligations (including, but not limited to, the
redemption price with respect to the Notes called for redemption in accordance
with Section 3.01 or the repurchase price with respect to Notes submitted
for repurchase in accordance with Section 3.05 or Section 3.06, as
the case may be, as provided in this Indenture or any other payment payable in
respect of Notes pursuant to the provisions of this Indenture) issued hereunder
shall, to the extent and in the manner hereinafter set forth, be subordinated
and subject in right of payment to the prior payment in full in cash (or as
otherwise agreed to by the holders of Senior Indebtedness) of all Senior
Indebtedness, whether outstanding at the date of this Indenture or thereafter
incurred.

 

No provision of this Article 5 shall prevent the occurrence of any
default or Event of Default hereunder or have any effect on the rights of the
holders of the Notes or the Trustee to accelerate the maturity of the Notes.

 

37

 

Section 5.02.  No Payments
to Noteholders upon Defaults Relating to Designated
Senior Indebtedness.  (a)  No
payment shall be made with respect to the principal (including, but not limited
to, the redemption price with respect to Notes called for redemption in
accordance with Section 3.01 or the repurchase price with respect to Notes
submitted for repurchase in accordance with Section 3.05 or
Section 3.06, as the case may be, as provided in this Indenture or any
other payment payable in respect of Notes pursuant to the provisions of this Indenture)
of or Interest (including interest accruing after filing of a petition
initiating any proceeding under state, federal or foreign bankruptcy law,
whether or not such interest is allowed or allowable under such proceedings) on
the Notes or any other Note Obligations, except payments and distributions made
by the Trustee as permitted by the first or second paragraph of
Section 5.09, if:

 

(i)                                     a
default in the payment of principal (including any letter of credit
reimbursement obligations), premium, if any, interest, rent, commissions or
other obligations in respect of Designated Senior Indebtedness occurs and is
continuing (or, in the case of Designated Senior Indebtedness for which there
is a period of grace, in the event of such a default that continues beyond the
period of grace, if any, specified in the instrument or lease evidencing such
Designated Senior Indebtedness) or any other default on Designated Senior
Indebtedness occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms (a “Payment Default”); or

 

(ii)                                  a
default or event of default, other than a Payment Default, on any Designated
Senior Indebtedness occurs and is continuing that permits holders of such
Designated Senior Indebtedness to accelerate its maturity without further
notice (except such notice as may be required to effect such acceleration) (or
in the case of any lease that is Designated Senior Indebtedness, a default
occurs and is continuing that permits the lessor to either terminate the lease
or require the Company to make an irrevocable offer to terminate the lease
following an event of default thereunder) and the Trustee receives a notice of
the default (a “Payment Blockage Notice”) from a holder of Designated Senior
Indebtedness or a Representative of Designated Senior Indebtedness (a “Non-Payment
Default”).

 

Any number of Payment Blockage Notices may be given during the period
referred to in clause (b)(2) below; provided that during any period of 360
consecutive days only one such period may commence and the duration of such
period may not exceed 179 days.  No
Non-Payment Default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice unless such Non-Payment Default shall have
been cured or waived for a period of not less than 90 consecutive days (it
being acknowledged that any subsequent action or any breach of a financial
covenant for a period ending after the date on which such Payment Blockage
Notice becomes effective that, in either case, would give

 

38

 

rise to an event of default pursuant to any provision under which an
event of default previously existed or was continuing shall constitute a new
event of default for this purpose).

 

(b)                   The Company may and shall resume
payments on and distributions in respect of the Notes (including, but not
limited to, the redemption price with respect to Notes called for redemption in
accordance with Section 3.01 or the repurchase price with respect to Notes
submitted for repurchase in accordance with Section 3.05 or
Section 3.06):

 

(1)                                  in
the case of a Payment Default, the date upon which any such Payment Default is
cured or waived or ceases to exist, or

 

(2)                                  in
the case of a Non-Payment Default, the earlier of (a) the date upon which such
default (and all other Non-Payment Defaults as to which a Payment Blockage
Notice has been provided) is cured or waived or ceases to exist or (b) 179 days
after the applicable Payment Blockage Notice is received by the Trustee if the
maturity of such Designated Senior Indebtedness has not been accelerated and
there is no Payment Default (or in the case of any lease, 179 days after notice
is received if the Company and the Trustee have not received notice that the
lessor under such lease has exercised its right to terminate the lease or
require the Company to make an irrevocable offer to terminate the lease
following an event of default thereunder and there is no Payment Default),
unless this Article 5 otherwise prohibits the payment or distribution at
the time of such payment or distribution (including, without limitation, by
reason of the existence of a Payment Blockage Notice that is still in effect by
the holders of other Designated Senior Indebtedness).

 

Section 5.03.  Payments
over to Senior Indebtedness upon Dissolution.  Upon any payment by the Company,
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to creditors upon any dissolution or winding up
or liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings,
all amounts due or to become due upon all Senior Indebtedness, including all
interest accrued or accruing on Senior Indebtedness after the commencement of
any such proceedings (whether or not allowed or allowable in such proceedings),
shall first be paid in full in cash (or as otherwise agreed to by the holders of
Senior Indebtedness) before any payment is made on account of the Note
Obligations (except payments made pursuant to Article 14 from monies
deposited with the Trustee pursuant thereto prior to commencement of
proceedings for such dissolution, winding up, liquidation or reorganization),
and upon any such dissolution or winding up or liquidation or reorganization of
the Company or bankruptcy, insolvency, receivership or other similar
proceeding, any payment by the Company, or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to which the
holders of

 

39

 

the Notes or the Trustee would be entitled,
except for the provisions of this Article 5, shall (except as aforesaid)
be paid by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
holders of the Notes or by the Trustee under this Indenture if received by them
or it, directly to the holders of Senior Indebtedness (pro rata to such holders
on the basis of the respective amounts of Senior Indebtedness held by such
holders, or as otherwise required by law or a court order) or their
Representative or Representatives, as their respective interests may appear, to
the extent necessary to pay all Senior Indebtedness in full in cash (or as
otherwise agreed to by the holders of Senior Indebtedness), after giving effect
to any concurrent payment or distribution to or for the holders of Senior
Indebtedness, before any payment or distribution is made to the holders of the
Securities or to the Trustee.

 

For purposes of this Article 5, the words, “cash, property or securities”
shall not be deemed to include shares of Common Stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this
Article 5 with respect to the Notes to the payment of all Senior
Indebtedness which may at the time be outstanding; provided that (i) the Senior
Indebtedness is assumed by the new corporation, if any, resulting from any
reorganization or readjustment, and (ii) the rights of the holders of Senior
Indebtedness (other than leases which are not assumed by the Company or the new
corporation, as the case may be) are not, without the consent of such holders,
altered by such reorganization or readjustment. The consolidation of the
Company with, or the merger of the Company into, another corporation or the
liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety, to another
Person upon the terms and conditions provided for in Article 13 shall not
be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 5.02 if such other Person shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions
stated in Article 13.

 

Section 5.04.  Prior
Payment of Senior Indebtedness upon Acceleration of
Notes.  If the maturity of
the Notes has been accelerated because of an Event of Default, no payment or
distribution shall be made to the Trustee or any holder of Notes in respect of
the Note Obligations (including, but not limited to, the redemption price with
respect to the Notes called for redemption in accordance with Section 3.01
or submitted for repurchase in accordance with Section 3.05 or Section 3.06,
as the case may be, as provided in this Indenture), except payments and
distributions made by the Trustee as permitted by the first or second paragraph
of Section 5.09, until all Senior Indebtedness has been paid in full in
cash (or as otherwise agreed to by the holders of Senior Indebtedness) or such
acceleration is rescinded in accordance with the terms of this Indenture. If
payment of the Notes is accelerated because of an Event of Default, the Company

 

40

 

or, at the Company’s request and expense, the
Trustee shall promptly notify holders of Senior Indebtedness of the
acceleration.

 

Section 5.05.  Payment
over to Senior Indebtedness.  In the event that, notwithstanding Sections 5.02, 5.03
or 5.04, any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (including, without
limitation, by way of setoff or otherwise), prohibited by Section 5.02,
5.03 or 5.04 shall be received by the Trustee or the holders of the Notes
before all Senior Indebtedness is paid in full in cash (or as otherwise agreed
to by the holders of Senior Indebtedness), such payment or distribution shall
be held in trust for the benefit of and shall be forthwith paid over or
delivered to the holders of Senior Indebtedness or their Representative or
Representatives, as their respective interests may appear, for application to
the payment of any Senior Indebtedness remaining unpaid to the extent necessary
to pay all Senior Indebtedness in full in cash (or as otherwise agreed to by
the holders of Senior Indebtedness) after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness.

 

Nothing in Section 5.02, 5.03 or 5.04 and this Section shall
apply to claims of, or payments to, the Trustee under or pursuant to
Section 9.06.

 

Section 5.06.  Subrogation.  Subject to the payment in full in
cash (or as otherwise agreed to by the holders of Senior Indebtedness) of all
Senior Indebtedness, the rights of the holders of the Notes shall be subrogated
to the extent of the payments or distributions made to the holders of such
Senior Indebtedness pursuant to the provisions of this Article 5 (equally
and ratably with the holders of all Indebtedness of the Company which by its
express terms is subordinated to other Indebtedness of the Company to
substantially the same extent as the Notes are subordinated and is entitled to
like rights of subrogation) to the rights of the holders of Senior Indebtedness
to receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Indebtedness until the principal of and
Interest on the Notes shall be paid in full, and, for the purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the holders of the
Notes or the Trustee would be entitled except for the provisions of this
Article 5, and no payment pursuant to the provisions of this Article 5,
to or for the benefit of the holders of Senior Indebtedness by holders of the
Notes or the Trustee, shall, as among the Company, its creditors other than
holders of Senior Indebtedness, and the holders of the Notes, be deemed to be a
payment by the Company to or on account of the Senior Indebtedness, and no
payments or distributions of cash, property or securities to or for the benefit
of the holders of the Notes pursuant to the subrogation provisions of this
Article 5, which would otherwise have been paid to the holders of Senior
Indebtedness, shall, as among the Company and its creditors other than the
holders of Notes, be deemed to be a payment by the Company to or for the
account of the Notes. It is understood that the provisions of this Article 5
are intended solely for the purposes of defining the

 

41

 

relative rights of the holders of the Notes,
on the one hand, and the holders of the Senior Indebtedness, on the other hand.

 

Section 5.07.  Payment
Obligations Unconditional.  Nothing contained in this Article 5 or elsewhere
in this Indenture or in the Notes is intended to or shall impair, as among the
Company, its creditors other than the holders of Senior Indebtedness, and the
holders of the Notes, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Notes the principal of, premium, if
any, and Interest on the Notes  as and
when the same shall become due and payable in accordance with their terms, or
is intended to or shall affect the relative rights of the holders of the Notes
and creditors of the Company other than the holders of the Senior Indebtedness,
nor shall anything herein or therein prevent the Trustee or, subject to
Section 8.04, the holder of any Note from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,
subject to the rights, if any, under this Article 5 of the holders of
Senior Indebtedness in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.

 

Section 5.08. 
Authorization to Effect Subordination.  Each holder of a Note by the
holder’s acceptance thereof authorizes and directs the Trustee on the holder’s
behalf to take such action as may be necessary or appropriate to effectuate the
subordination as provided in this Article 5 and appoints the Trustee to
act as the holder’s attorney-in-fact for any and all such purposes. If the
Trustee does not file a proper proof of claim or proof of debt in the form
required in any proceeding referred to in the third paragraph of
Section 8.02 hereof at least thirty (30) days before the expiration of the
time to file such claim, the holders of any Senior Indebtedness or their
Representatives are hereby authorized to file an appropriate claim for and on
behalf of the holders of the Notes.

 

Section 5.09.  Notice to
Trustee.  The
Company  shall
give prompt written notice in the form of an Officer’s Certificate to a
Responsible Officer of the Trustee and to any paying agent of any fact known to
the Company that would prohibit the making of any payment of monies to or by
the Trustee or any paying agent in respect of the Notes pursuant to the
provisions of this Article 5. Notwithstanding the provisions of this
Article 5 or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts that would prohibit the
making of any payment of monies to or by the Trustee in respect of the Notes
pursuant to the provisions of this Article 5, unless and until a
Responsible Officer of the Trustee shall have received written notice thereof
at the Corporate Trust Office from the Company (in the form of an Officer’s
Certificate) or a Representative or a holder or holders of Senior Indebtedness,
and before the receipt of any such written notice, the Trustee, subject to the
provisions of Section 9.01, shall be entitled in all respects to assume
that no such facts exist; provided that if on a date not less than
one Business Day prior to the date upon which by the terms hereof any such
monies may become payable for any purpose (including, without limitation, the
payment of the principal of, or premium, if any, or Interest on any Note) the
Trustee shall not

 

42

 

have received, with respect to such monies,
the notice provided for in this Section 5.09, then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power
and authority to apply monies received to the purpose for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it on or after such prior date.

 

Notwithstanding anything in this Article 5 to the contrary,
nothing shall prevent any payment by the Trustee to the Noteholders of monies
deposited with it pursuant to Section 14.01.

 

The Trustee, subject to the provisions of Section 9.01, shall be
entitled to rely on the delivery to it of a written notice by a Representative
or a person representing himself to be a holder of Senior Indebtedness (or a
trustee on behalf of such holder) to establish that such notice has been given
by a Representative or a holder of Senior Indebtedness or a trustee on behalf
of any such holder or holders. The Trustee shall not be required to make any
payment or distribution to or on behalf of a holder of Senior Indebtedness
pursuant to this Article 5 unless it has received satisfactory evidence as
to the amount of Senior Indebtedness held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such Person under this Article 5.

 

Section 5.10.  Trustee’s
Relation to Senior Indebtedness.  The Trustee, in its individual
capacity, shall be entitled to all the rights set forth in this Article 5
in respect of any Senior Indebtedness at any time held by it, to the same
extent as any other holder of Senior Indebtedness, and this Indenture shall not
deprive the Trustee of any of its rights as such holder.

 

With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 5, and no implied covenants
or obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 9.01, the Trustee shall not be liable to any holder
of Senior Indebtedness (i) for any failure to make any payments or
distributions to such holder or (ii) if it shall pay over or deliver money to
holders of Notes, the Company or any other Person in compliance with this
Article 5.

 

Section 5.11.  No
Impairment of Subordination. 
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in  good faith, by any such holder, or by any noncompliance by the
Company with the terms, provisions and covenants of this Indenture, regardless
of any knowledge thereof which any such holder may have or otherwise be charged
with. Senior Indebtedness may be created, renewed or extended and holders of
Senior

 

43

 

Indebtedness may exercise any rights under
any instrument creating or evidencing such Senior Indebtedness, including,
without limitation, any waiver of default thereunder, without any notice to or
consent from the holders of the Notes or the Trustee.  No compromise, alteration, amendment, modification, extension,
renewal or other change of, or waiver, consent or other action in respect of,
any liability or obligation under or in respect of the Senior Indebtedness or
any terms or conditions of any instrument creating or evidencing such Senior
Indebtedness shall in any way alter or affect any of the provisions of this
Article 5 or the subordination of the Notes provided thereby.

 

Section 5.12.  Certain
Conversions Not Deemed Payment.  For the purposes of this
Article 5 only, (1) the issuance and delivery of Junior Securities upon
conversion of Notes in accordance with Article 16 and (2) the payment,
issuance or delivery of cash, property or securities upon conversion of a Note
as a result of any transaction specified in Section 16.06 shall not be
deemed to constitute a payment or distribution on account of the principal of
or Interest on Notes or on account of the purchase or other acquisition of
Notes.  For the purposes of this
Section 5.12, the term “Junior Securities” means (a) Common Stock
of the Company or (b) securities of the Company that are subordinated in right
of payment to all Senior Indebtedness that may be outstanding at the time of
issuance or delivery of such securities to substantially the same extent as, or
to a greater extent than, the Notes are so subordinated as provided in this
Article 5. Nothing contained in this Article 5 or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as among the Company,
its creditors (other than holders of Senior Indebtedness) and the Noteholders,
the right, which is absolute and unconditional, of the holder of any Note to
convert such Note in accordance with Article 16.

 

Section 5.13. 
Article Applicable to Paying
Agents.  If at any time any
paying agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term “Trustee” as used in this Article 5
shall (unless the context otherwise requires) be construed as extending to and
including such paying agent within its meaning as fully for all intents and
purposes as if such paying agent were named in this Article 5 in addition
to or in place of the Trustee; provided that the first paragraph of
Section 5.09 shall not apply to the Company or any Affiliate of the
Company if it or such Affiliate acts as paying agent.

 

The Trustee shall not be responsible for the actions or inactions of
any other paying agents (including the Company if acting as its own paying
agent) and shall have no control of any funds held by such other paying agents.

 

Section 5.14.  Senior
Indebtedness Entitled to Rely.  The holders of Senior Indebtedness shall have the
right to rely upon the provisions of this Article 5, and no amendment or
modification of the provisions contained herein shall diminish the rights of
such holders unless such holders shall have agreed in writing thereto.

 

44

 

Section 5.15.  Reliance on
Judicial Order or Certificate of Liquidating
Agent.  Upon any payment or
distribution of assets of the Company referred to in this Article 5, the
Trustee and the Noteholders shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction (provided that the foregoing
shall apply only if such court has been fully apprised of the provisions of
this Article 5) in which such insolvency, bankruptcy, receivership,
liquidation, reorganization, dissolution, winding up or similar case or
proceeding is pending, or a certificate of the trustee in bankruptcy,
liquidating trustee, custodian, receiver, assignee for the benefit of
creditors, agent or other Person making such payment or distribution or a
certificate of a Representative of the holders of Designated Senior
Indebtedness, delivered to the Trustee or to the Noteholders, for the purpose
of ascertaining the Persons entitled to participate in such payment or distribution,
the holders of Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 5.

 

Section 5.16.  Anti-Layering
Covenant.  The
Company covenants and agrees that it shall not incur, directly or indirectly,
any Indebtedness that is subordinated or junior in right of payment to Senior
Indebtedness unless such Indebtedness (a) is senior subordinated Indebtedness
that is pari
passu with the Notes or (b) is expressly subordinated in right of
payment to the Company’s existing senior subordinated Indebtedness, including
the Notes.  For these purposes,
unsecured Indebtedness shall not be deemed to be subordinated or junior in
right of payment to any secured Indebtedness merely because it is unsecured.

 

Section 5.17.  Limitation
on Liens.  The
Company will not, directly or indirectly, incur or permit to exist any Lien
securing Indebtedness that is not Senior Indebtedness unless contemporaneously
therewith effective provision is made to secure the Notes equally and ratably
with (or on a senior basis to, in the case of Indebtedness subordinated in
right of payment to the Notes) such secured Indebtedness for so long as such
secured Indebtedness is secured by any Lien.

 

ARTICLE 6

PARTICULAR COVENANTS OF THE COMPANY

 

Section 6.01.  Payment of
Principal and Interest.  The Company covenants and agrees that it will duly and
punctually pay or cause to be paid the principal (including the redemption
price or repurchase price upon redemption or repurchase, in each case pursuant
to Article 3, as applicable) and Interest on each of the Notes at the
places, at the respective times and in the manner provided herein and in the Notes.

 

Section 6.02.  Maintenance
of Office or Agency.  The Company will maintain an office or agency in the
Borough of Manhattan, The City of New York, where the Notes may be surrendered
for registration of transfer or exchange

 

45

 

or for presentation for payment or for
conversion, redemption or repurchase and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served.  The Company will give prompt written notice
to the Trustee of the location, and any change in the location, of such office
or agency not designated or appointed by the Trustee.  If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office.

 

The Company may also from time to time designate co-registrars and one
or more offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such
designations.  The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.

 

The Company hereby initially designates the Trustee as paying agent,
Note Registrar, Custodian and conversion agent and the Corporate Trust Office
shall be considered as one such office or agency of the Company for each of the
aforesaid purposes.

 

So long as the Trustee is the Note Registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 9.10(a) and
the third paragraph of Section 9.11. 
If co-registrars have been appointed in accordance with this Section, the
Trustee shall mail such notices only to the Company and the holders of Notes it
can identify from its records.

 

Section 6.03. 
Appointments to Fill Vacancies in
Trustee’s Office.  The
Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 9.10, a Trustee,
so that there shall at all times be a Trustee hereunder.

 

Section 6.04.  Provisions
as to Paying Agent. 
(a) If the Company shall appoint a paying agent other than
the Trustee, or if the Trustee shall appoint such a paying agent, the Company
will cause such paying agent to execute and deliver to the Trustee an
instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section 6.04:

 

(1)                                  that it will hold all
sums held by it as such agent for the payment of the principal of or Interest
on the Notes (whether such sums have been paid to it by the Company or by any
other obligor on the Notes) in trust for the benefit of the holders of the
Notes;

 

(2)                                  that it will give the
Trustee notice of any failure by the Company (or by any other obligor on the
Notes) to make any payment of the principal of or Interest on the Notes when
the same shall be due and payable; and

 

46

 

(3)                                  that at any time
during the continuance of an Event of Default, upon request of the Trustee, it
will forthwith pay to the Trustee all sums so held in trust.

 

The Company shall, one Business Day before each due date of the
principal of or Interest on the Notes, deposit with the paying agent a sum (in
funds which are immediately available on the due date for such payment)
sufficient to pay such principal or Interest, and (unless such paying agent is
the Trustee) the Company will promptly notify the Trustee of any failure to
take such action.

 

(b)                                 If the Company shall
act as its own paying agent, it will, on or before each due date of the
principal of or Interest on the Notes, set aside, segregate and hold in trust
for the benefit of the holders of the Notes a sum sufficient to pay such
principal or Interest so becoming due and will promptly notify the Trustee of
any failure to take such action and of any failure by the Company (or any other
obligor under the Notes) to make any payment of the principal of or Interest on
the Notes when the same shall become due and payable.

 

(c)                                  Anything in this
Section 6.04 to the contrary notwithstanding, the Company may, at any
time, for the purpose of obtaining a satisfaction and discharge of this
Indenture, or for any other reason, pay or cause to be paid to the Trustee all
sums held in trust by the Company or any paying agent hereunder as required by
this Section 6.04, such sums to be held by the Trustee upon the trusts
herein contained and upon such payment by the Company or any paying agent to
the Trustee, the Company or such paying agent shall be released from all
further liability with respect to such sums.

 

(d)                                 Anything in this
Section 6.04 to the contrary notwithstanding, the agreement to hold sums
in trust as provided in this Section 6.04 is subject to Sections 14.03 and
14.04.

 

The Trustee shall not be responsible for the actions of any other
paying agents (including the Company if acting as its own paying agent) and
shall have no control of any funds held by such other paying agents.

 

Section 6.05.  Existence.  Subject to Article 13, the
Company will do or cause to be done all things necessary to preserve and keep
in full force and effect its existence and rights (charter and statutory); provided
that the Company shall not be required to preserve any such right if the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Noteholders.

 

Section 6.06.  Rule 144A
Information Requirement.  Within the period prior to the expiration of the
holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision), the Company covenants and agrees
that it shall, during any period in which it is not subject to

 

47

 

Section 13 or 15(d) under the Exchange
Act, make available to any holder or beneficial holder of Notes or any Common Stock
issued upon conversion thereof which continue to be Restricted Securities in
connection with any sale thereof and any prospective purchaser of Notes or such
Common Stock designated by such holder or beneficial holder, the information
required pursuant to Rule 144A(d)(4) under the Securities Act upon the request
of any holder or beneficial holder of the Notes or such Common Stock and it
will take such further action as any holder or beneficial holder of such Notes
or such Common Stock may reasonably request, all to the extent required from
time to time to enable such holder or beneficial holder to sell its Notes or
Common Stock without registration under the Securities Act within the
limitation of the exemption provided by Rule 144A, as such Rule may be amended
from time to time.  Upon the request of
any holder or any beneficial holder of the Notes or such Common Stock, the
Company will deliver to such holder a written statement as to whether it has
complied with such requirements.

 

Section 6.07.  Stay, Extension
and Usury Laws. 
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other similar law which would prohibit or forgive the Company from
paying all or any portion of the principal of or Interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Indenture and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.

 

Section 6.08.  Compliance
Certificate. 
The Company shall deliver to the Trustee, within one hundred
twenty (120) days after the end of each fiscal year of the Company, a
certificate signed by either the principal executive officer, principal
financial officer or principal accounting officer of the Company, stating
whether or not to the best knowledge of the signer thereof the Company is in
default in the performance and observance of any of the terms, provisions and
conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and, if the Company shall be in
default, specifying all such defaults and the nature and the status thereof of
which the signer may have knowledge.

 

The Company will deliver to the Trustee, promptly upon becoming aware
of (i) any default in the performance or observance of any covenant, agreement
or condition contained in this Indenture, or (ii) any Event of Default, an
Officer’s Certificate specifying with particularity such default or Event of
Default and further stating what action the Company has taken, is taking or
proposes to take with respect thereto.

 

48

 

Any notice required to be given under this Section 6.08 shall be
delivered to a Responsible Officer of the Trustee at its Corporate Trust
Office.

 

Section 6.09.  Additional
Interest Notice. 
In the event that the Company is required to pay Additional
Interest to holders of Notes pursuant to the Registration Rights Agreement, the
Company will provide written notice (an “Additional Interest Notice”) to the Trustee
of the Company’s obligation to pay Additional Interest no later than fifteen
(15) days prior to the proposed payment date for such Additional Interest, and
the Additional Interest Notice shall set forth the amount of Additional
Interest to be paid by the Company on such payment date.  The Trustee shall not at any time be under
any duty or responsibility to any holder of Notes to determine the Additional
Interest, or with respect to the nature, extent or calculation of the amount of
Additional Interest when made, or with respect to the method employed in such
calculation of the Additional Interest.

 

Section 6.10.  Contingent
Debt Tax Treatment. 
The Company agrees, and by acceptance of a beneficial
interest in a Note each holder and any beneficial owner of a Note shall be
deemed to have agreed, to treat the Note as indebtedness of the Company for
United States federal income tax purposes that is subject to Treasury
Regulation Section 1.1275-4 or any successor provision (the “Contingent
Payment Regulations”) and to be bound (in the absence of an administrative
determination or judicial ruling to the contrary) by the Company’s
determination of the comparable yield and the projected payment
schedule within the meaning of the contingent payment regulations.  A holder of Notes may obtain the issue
price, amount of Tax Original Issue Discount, issue date, yield to maturity,
comparable yield and projected payment schedule for the Notes, determined
by the Company pursuant to the contingent payment regulations, by submitting a
written request for it to the Company at the following address:  Lithia Motors, Inc., 360 East Jackson
Street, Medford, Oregon 97501, Attention: Senior Vice President and Chief
Financial Officer.

 

Section 6.11.  Calculation
of Original Issue Discount.  The Company shall file with the
Trustee promptly at the end of each calendar year (i) a written notice
specifying the amount of Tax Original Issue Discount (including daily rates and
accrual periods) accrued on outstanding Notes as of the end of such year and
(ii) such other specific information relating to such Tax Original Issue
Discount as may then be required under the Internal Revenue Code of 1986, as
amended from time to time, or the Treasury regulations promulgated thereunder.

 

ARTICLE 7

NOTEHOLDERS’ LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE

 

Section 7.01. 
Noteholders’ Lists.  The Company covenants and agrees
that it will furnish or cause to be furnished to the Trustee, semiannually, not
more than fifteen (15) days after each April 1 and October 1 in each
year beginning with October 1, 2004, and at such other times as the
Trustee may request in

 

49

 

writing, within thirty (30) days after
receipt by the Company of any such request (or such lesser time as the Trustee
may reasonably request in order to enable it to timely provide any notice to be
provided by it hereunder), a list in such form as the Trustee may reasonably
require of the names and addresses of the holders of Notes as of a date not
more than fifteen (15) days (or such other date as the Trustee may reasonably
request in order to so provide any such notices) prior to the time such
information is furnished, except that no such list need be furnished by the
Company to the Trustee so long as the Trustee is acting as the sole Note
Registrar.

 

Section 7.02. 
Preservation and Disclosure of
Lists.  (a) The Trustee shall
preserve, in as current a form as is reasonably practicable, all information as
to the names and addresses of the holders of Notes contained in the most recent
list furnished to it as provided in Section 7.01 or maintained by the
Trustee in its capacity as Note Registrar or co-registrar in respect of the
Notes, if so acting.  The Trustee may
destroy any list furnished to it as provided in Section 7.01 upon receipt
of a new list so furnished.

 

(b)                                 The rights of
Noteholders to communicate with other holders of Notes with respect to their
rights under this Indenture or under the Notes, and the corresponding rights
and duties of the Trustee, shall be as provided by the Trust Indenture Act.

 

(c)                                  Every Noteholder, by
receiving and holding the same, agrees with the Company and the Trustee that
neither the Company nor the Trustee nor any agent of either of them shall be
held accountable by reason of any disclosure of information as to names and
addresses of holders of Notes made pursuant to the Trust Indenture Act.

 

Section 7.03.  Reports by
Trustee.  (a)
Within sixty (60) days after May 15 of each year commencing with the year 2005,
the Trustee shall transmit to holders of Notes such reports dated as of May 15
of the year in which such reports are made concerning the Trustee and its
actions under this Indenture as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant thereto.  In the event that no events have occurred
under the applicable sections of the Trust Indenture Act the Trustee shall be
under no duty or obligation to provide such reports.

 

(b)                                 A copy of such report
shall, at the time of such transmission to holders of Notes, be filed by the
Trustee with each stock exchange and automated quotation system upon which the
Notes are listed or quoted and with the Company.  The Company will promptly notify the Trustee in writing when the
Notes are listed on any stock exchange or automated quotation system or
delisted therefrom.

 

Section 7.04.  Reports by
Company.  The
Company shall file with the Trustee (and the Commission during any period the
Indenture is qualified under

 

50

 

the Trust Indenture Act), and transmit to
holders of Notes, such information, documents and other reports and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to such Act, whether or not the
Notes are governed by such Act; provided that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be made available to the
Trustee within fifteen (15) days after the same is so required to be filed with
the Commission.  Delivery of such
reports, information and documents to the Trustee is for informational purposes
only and the Trustee’s receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information contained
therein, including the Company’s compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on an Officer’s
Certificate).

 

ARTICLE 8

REMEDIES OF THE TRUSTEE AND
NOTEHOLDERS ON AN EVENT OF DEFAULT

 

Section 8.01.  Events of
Default.  In
case one or more of the following Events of Default (whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body) shall have occurred and be continuing:

 

(a)                                  default in the
payment of the principal of any of the Notes as and when the same shall become
due and payable either at maturity or in connection with any redemption or
repurchase pursuant to Article 3, by acceleration or otherwise, whether or
not such payment is prohibited by the subordination provisions of Article 5;
or

 

(b)                                 default in the payment
of any installment of Interest on any of the Notes as and when the same shall
become due and payable, and continuance of such default for a period of thirty
(30) days, whether or not such payment is prohibited by the subordination
provisions of Article 5; or

 

(c)                                  default in the
Company’s obligation to convert any Notes following the exercise by the
Noteholder of the right to convert such Notes into Common Stock pursuant to and
in accordance with Article 16; or

 

(d)                                 default in the
Company’s obligation to provide a Designated Event Notice on a timely basis
upon a Designated Event of which the Company is aware as provided in
Section 3.05(a); or

 

(e)                                  failure on the part
of the Company duly to observe or perform any other of the covenants or
agreements on the part of the Company in the Notes or in this Indenture (other
than a covenant or agreement a default in whose performance or whose breach is
elsewhere in this Section 8.01 specifically dealt

 

51

 

with) continued for a period of sixty (60)
days after the date on which written notice of such failure, requiring the
Company to remedy the same, shall have been given to the Company by the
Trustee, or the Company and a Responsible Officer of the Trustee by the holders
of at least twenty-five percent (25%) in aggregate principal amount of the
Notes at the time outstanding determined in accordance with Section 10.04;
or

 

(f)                                    failure on the part
of the Company duly to observe or perform the covenants contained in Sections
5.16 or 5.17 hereof continued for a period of thirty (30) days after the date
thereof; or

 

(g)                                 the Company shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to the Company or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of the Company or any substantial part of the property of the
Company, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against the Company, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due; or

 

(h)                                 an involuntary case or
other proceeding shall be commenced against the Company seeking liquidation,
reorganization or other relief with respect to the Company or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of the Company or any substantial part of the property of the
Company, and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of sixty (60) consecutive days; or

 

(i)                                     default in the
payment of principal when due at stated maturity of other Indebtedness or
resulting in acceleration of such other Indebtedness for borrowed money where
the aggregate principal amount with respect to which the default or
acceleration has occurred exceeds $5 million, and such acceleration has not
been rescinded or annulled within a period of 30 days after written notice of
such failure, requiring the Company to remedy the same, shall have been given
to the Company by the Trustee, or to the Company and the Trustee by the holders
of at least 25% in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 10.04;

 

then, and in each and every such case (other than an Event of Default
specified in Section 8.01(g) or 8.01(h)), unless the principal of all of
the Notes shall have already become due and payable, either the Trustee or the holders
of not less than twenty-five percent (25%) in aggregate principal amount of the
Notes then outstanding hereunder determined in accordance with
Section 10.04, by notice in writing to the Company (and to the Trustee if
given by Noteholders), may declare the principal of all the Notes and any
Interest accrued thereon to be due and payable immediately, and upon any such
declaration the same shall become and

 

52

 

shall be immediately due and payable, anything in this Indenture or in
the Notes contained to the contrary notwithstanding; provided that, if the Credit
Agreement is in effect, such principal and Interest shall become due any
payable only upon the first to occur of an acceleration under the Credit Agreement
or five Business Days after receipt of written notice of such declaration by
the Company and the Representative with respect to the Credit Agreement.  If an Event of Default specified in
Section 8.01(g) or 8.01(h) occurs, the principal of all the Notes and the
Interest, if any, accrued thereon shall be immediately and automatically due
and payable without necessity of further action.  This provision, however, is subject to the conditions that if, at
any time after the principal of the Notes shall have been so declared due and
payable, and before any judgment or decree for the payment of the monies due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of Interest upon all Notes and the principal of any and all Notes
which shall have become due otherwise than by acceleration (with interest on
overdue installments of Interest, if any (to the extent that payment of such
interest is enforceable under applicable law) and on such principal at the rate
borne by the Notes, to the date of such payment or deposit) and amounts due to
the Trustee pursuant to Section 9.06, and if any and all defaults under
this Indenture, other than the nonpayment of principal of and accrued Interest
on Notes which shall have become due by acceleration, shall have been cured or
waived pursuant to Section 8.07, then and in every such case the holders
of a majority in aggregate principal amount of the Notes then outstanding, by
written notice to the Company and to the Trustee, may waive all defaults or
Events of Default and rescind and annul such declaration and its consequences;
but no such waiver or rescission and annulment shall extend to or shall affect
any subsequent default or Event of Default, or shall impair any right
consequent thereon.  The Company shall
notify in writing a Responsible Officer of the Trustee, promptly upon becoming
aware thereof, of any Event of Default.

 

In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such
case the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been taken.

 

Section 8.02.  Payments of
Notes on Default; Suit Therefor.  The Company covenants that (a) in
case default shall be made in the payment of any installment of Interest upon
any of the Notes as and when the same shall become due and payable, and such
default shall have continued for a period of thirty (30) days, or (b) in case
default shall be made in the payment of the principal of any of the Notes as
and when the same shall have become due and payable, whether at maturity of the
Notes or in connection with any redemption or repurchase, by or

 

53

 

under this Indenture, declaration or
otherwise, then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the holders of the Notes, the whole amount that
then shall have become due and payable on all such Notes for principal or
Interest as the case may be, with interest upon the overdue principal and (to
the extent that payment of such interest is enforceable under applicable law)
upon the overdue installments of Interest at the rate borne by the Notes, plus
1% and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including reasonable compensation
to the Trustee, its agents, attorneys and counsel, and all other amounts due
the Trustee under Section 9.06. 
Until such demand by the Trustee, the Company may pay the principal of
and Interest on the Notes to the registered holders, whether or not the Notes
are overdue.

 

In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.

 

In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative
to the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand pursuant to the provisions of this
Section 8.02, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount of principal and Interest owing and unpaid in respect of the Notes, and,
in case of any judicial proceedings, to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee and of the Noteholders allowed in such judicial
proceedings relative to the Company or any other obligor on the Notes, its or
their creditors, or its or their property, and to collect and receive any
monies or other property payable or deliverable on any such claims, and to
distribute the same after the deduction of any amounts due the Trustee under
Section 9.06, and to take any other action with respect to such claims,
including participating as a member of any official committee of creditors, as
it reasonably deems necessary or advisable, and, unless

 

54

 

prohibited by law or applicable regulations, and any receiver, assignee
or trustee in bankruptcy or reorganization, liquidator, custodian or similar
official is hereby authorized by each of the Noteholders to make such payments
to the Trustee, and, in the event that the Trustee shall consent to the making
of such payments directly to the Noteholders, to pay to the Trustee any amount
due it for reasonable compensation, expenses, advances and disbursements,
including counsel fees and expenses incurred by it up to the date of such
distribution.  To the extent that such
payment of reasonable compensation, expenses, advances and disbursements out of
the estate in any such proceedings shall be denied for any reason, payment of
the same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.

 

All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession
of any of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.

 

In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the
holders of the Notes, and it shall not be necessary to make any holders of the
Notes parties to any such proceedings.

 

Section 8.03.  Application
of Monies Collected by Trustee.  Subject to Article 5 hereof,
any monies collected by the Trustee pursuant to this Article 8 shall be
applied in the order following, at the date or dates fixed by the Trustee for
the distribution of such monies, upon presentation of the several Notes, and
stamping thereon the payment, if only partially paid, and upon surrender
thereof, if fully paid:

 

FIRST: To the payment of all amounts due the Trustee under
Section 9.06;

 

SECOND: In case the principal of the outstanding Notes shall not have
become due and be unpaid, to the payment of Interest on the Notes in default in
the order of the maturity of the installments of such Interest, with interest
(to the extent that such interest has been collected by the Trustee) upon the
overdue installments of Interest at the rate borne by the Notes, such payments
to be made ratably to the Persons entitled thereto;

 

THIRD: In case the principal of the outstanding Notes shall have become
due, by declaration or otherwise, and be unpaid to the payment of the whole

 

55

 

amount then owing and unpaid upon the Notes for principal and Interest,
with interest on the overdue principal and (to the extent that such interest
has been collected by the Trustee) upon overdue installments of Interest at the
rate borne by the Notes, and in case such monies shall be insufficient to pay
in full the whole amounts so due and unpaid upon the Notes, then to the payment
of such principal and Interest without preference or priority of principal over
Interest, or of Interest over principal, or of any installment of Interest over
any other installment of Interest, or of any Note over any other Note, ratably
to the aggregate of such principal and accrued and unpaid Interest; and

 

FOURTH: To the payment of the remainder, if any, to the Company or any
other Person lawfully entitled thereto.

 

Section 8.04.  Proceedings
by Noteholder. 
No Noteholder shall have any right by virtue of or by
reference to any provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture,
or for the appointment of a receiver, trustee, liquidator, custodian or other
similar official, or for any other remedy hereunder, unless such holder
previously shall have given to the Trustee written notice of an Event of
Default and of the continuance thereof, as hereinbefore provided, and unless
also the holders of not less than twenty-five percent (25%) in aggregate
principal amount of the Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name
as Trustee hereunder and shall have offered to the Trustee such reasonable
security or indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for sixty (60)
days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding and
no direction inconsistent with such written request shall have been given to
the Trustee pursuant to Section 8.07; it being understood and intended,
and being expressly covenanted by the taker and holder of every Note with every
other taker and holder and the Trustee, that no one or more Noteholders shall
have any right in any manner whatever by virtue of or by reference to any
provision of this Indenture to affect, disturb or prejudice the rights of any
other holder of Notes, or to obtain or seek to obtain priority over or preference
to any other such holder, or to enforce any right under this Indenture, except
in the manner herein provided and for the equal, ratable and common benefit of
all Noteholders (except as otherwise provided herein).  For the protection and enforcement of this
Section 8.04, each and every Noteholder and the Trustee shall be entitled
to such relief as can be given either at law or in equity.

 

Notwithstanding any other provision of this Indenture and any provision
of any Note, the right of any Noteholder to receive payment of the principal
(including the redemption price upon redemption or the repurchase price upon
repurchase, in each case pursuant to Article 3), and accrued Interest on
such Note, on or after the respective due dates expressed in such Note or in
the event of redemption, or to institute suit for the enforcement of any such
payment on or

 

56

 

after such respective dates against the Company shall not be impaired
or affected without the consent of such Noteholder.

 

Anything in this Indenture or the Notes to the contrary
notwithstanding, any Noteholder, without the consent of either the Trustee or
any other Noteholder, in its own behalf and for its own benefit, may enforce,
and may institute and maintain any proceeding suitable to enforce, its rights
of conversion as provided herein.

 

Section 8.05.  Proceedings
by Trustee. 
In case of an Event of Default, the Trustee may, in its
discretion, proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as are necessary to protect
and enforce any of such rights, either by suit in equity or by action at law or
by proceeding in bankruptcy or otherwise, whether for the specific enforcement
of any covenant or agreement contained in this Indenture or in aid of the
exercise of any power granted in this Indenture, or to enforce any other legal
or equitable right vested in the Trustee by this Indenture or by law.

 

Section 8.06.  Remedies
Cumulative and Continuing.  Except as provided in Section 2.06, all powers
and remedies given by this Article 8 to the Trustee or to the Noteholders
shall, to the extent permitted by law, be deemed cumulative and not exclusive
of any thereof or of any other powers and remedies available to the Trustee or
the Noteholders, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any Noteholder to
exercise any right or power accruing upon any default or Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or any acquiescence
therein, and, subject to the provisions of Section 8.04, every power and
remedy given by this Article 8 or by law to the Trustee or to the
Noteholders may be exercised from time to time, and as often as shall be deemed
expedient, by the Trustee or by the Noteholders.

 

Section 8.07.  Direction
of Proceedings and Waiver of Defaults by Majority of
Noteholders.  The holders of
a majority in aggregate principal amount of the Notes at the time outstanding
determined in accordance with Section 10.04 shall have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee;
provided that (a) such direction shall not be in conflict with any
rule of law or with this Indenture, (b) the Trustee may take any other action
which is not inconsistent with such direction, (c) the Trustee may decline to
take any action that would benefit some Noteholder to the detriment of other
Noteholders and (d) the Trustee may decline to take any action that would involve
the Trustee in personal liability.  The
holders of a majority in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 10.04 may, on behalf of
the holders of all of the Notes, waive any past, current or future breach of
any provision hereof, or default or Event of

 

57

 

Default hereunder and its consequences except
(i) a default in the payment of Interest on, or the principal of, the Notes,
(ii) a failure by the Company to convert any Notes into Common Stock, (iii) a
default in the payment of the redemption price or repurchase price pursuant to
Article 3 or (iv) a default in respect of a covenant or provisions hereof
which under Article 12 cannot be modified or amended without the consent
of the holders of each or all of the Notes then outstanding or affected
thereby.  Upon any such waiver, the
Company, the Trustee and the holders of the Notes shall be restored to their
former positions and rights hereunder; but no such waiver shall extend to any
subsequent other breach of any provision hereof or other default or Event of
Default or impair any right consequent thereon.  Whenever any other breach of any provision hereof or default or
Event of Default hereunder shall have been waived as permitted by this
Section 8.07, said other breach of any provision hereof or default or
Event of Default shall for all purposes of the Notes and this Indenture be
deemed to have been cured and to be not continuing; but no such waiver shall
extend to any subsequent other breach of any provision hereof or other default
or Event of Default or impair any right consequent thereon.

 

Section 8.08.  Notice of
Defaults.  The
Trustee shall, within ninety (90) days after a Responsible Officer of the
Trustee has knowledge of the occurrence of a default, mail to all Noteholders,
as the names and addresses of such holders appear upon the Note Register,
notice of all defaults known to a Responsible Officer, unless such defaults
shall have been cured or waived before the giving of such notice; provided
that except in the case of default in the payment of the principal of or
Interest on any of the Notes, the Trustee shall be protected in withholding
such notice if and so long as a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interests of the Noteholders.

 

Section 8.09.  Undertaking
to Pay Costs. 
All parties to this Indenture agree, and each Noteholder by
his acceptance thereof shall be deemed to have agreed, that any court may, in
its discretion, require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken
or omitted by it as Trustee, the filing by any party litigant in such suit of
an undertaking to pay the costs of such suit and that such court may in its
discretion assess reasonable costs, including reasonable attorneys’ fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; provided
that the provisions of this Section 8.09 (to the extent permitted by law)
shall not apply to any suit instituted by the Trustee, to any suit instituted
by any Noteholder, or group of Noteholders, holding in the aggregate more than
ten percent in principal amount of the Notes at the time outstanding determined
in accordance with Section 10.04, or to any suit instituted by any
Noteholder for the enforcement of the payment of the principal of or Interest
on any Note on or after the due date expressed in such Note or to any suit for
the enforcement of the right to convert any Note in accordance with the
provisions of Article 16.

 

58

 

ARTICLE 9

THE TRUSTEE

 

Section 9.01.  Duties and
Responsibilities of Trustee.  The Trustee, prior to the
occurrence of an Event of Default and after the curing of all Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture.  In case an Event of Default has occurred (which has not been
cured or waived), the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.

 

No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:

 

(a)                                  prior to the
occurrence of an Event of Default and after the curing or waiving of all Events
of Default which may have occurred:

 

(i)                                     the
duties and obligations of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trust Indenture Act, and the Trustee shall
not be liable except for the performance of such duties and obligations as are
specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture and the Trust Indenture Act
against the Trustee; and

 

(ii)                                  in
the absence of bad faith and willful misconduct on the part of the Trustee, the
Trustee may conclusively rely as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of this
Indenture; but, in the case of any such certificates or opinions which by any
provisions hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts stated
therein);

 

(b)                                 the Trustee shall not
be liable for any error of judgment made in good faith by a Responsible Officer
or Officers of the Trustee, unless the Trustee was negligent in ascertaining
the pertinent facts;

 

(c)                                  the Trustee shall not
be liable with respect to any action taken or omitted to be taken by it in good
faith in accordance with the written direction of the holders of not less than
a majority in principal amount of the Notes at the time outstanding determined
as provided in Section 10.04 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture;

 

59

 

(d)                                 whether or not therein
provided, every provision of this Indenture relating to the conduct or
affecting the liability of, or affording protection to, the Trustee shall be
subject to the provisions of this Section;

 

(e)                                  the Trustee shall not
be liable in respect of any payment (as to the correctness of amount,
entitlement to receive or any other matters relating to payment) or notice
effected by the Company or any paying agent or any records maintained by any
co-registrar with respect to the Notes;

 

(f)                                    if any party fails
to deliver a notice relating to an event the fact of which, pursuant to this
Indenture, requires notice to be sent to the Trustee, the Trustee may
conclusively rely on its failure to receive such notice as reason to act as if
no such event occurred; and

 

(g)                                 the Trustee shall not
be deemed to have knowledge of any default or Event of Default hereunder unless
it shall have been notified in writing of such default or Event of Default by
the Company or the holders of at least 10% in aggregate principal amount of the
Notes.

 

None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.

 

Section 9.02.  Reliance on
Documents, Opinions, Etc.  Except as otherwise provided in Section 9.01:

 

(a)                                  the Trustee may
conclusively rely and shall be protected in acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, Note, note, coupon or other paper or document (whether in its
original or facsimile form) believed by it in good faith to be genuine and to
have been signed or presented by the proper party or parties;

 

(b)                                 any request, direction,
order or demand of the Company mentioned herein shall be sufficiently evidenced
by an Officer’s Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors may be
evidenced to the Trustee by a copy thereof certified by the Secretary or an
Assistant Secretary of the Company;

 

(c)                                  the Trustee may
consult with counsel of its own selection and any advice or Opinion of Counsel
shall be full and complete authorization and protection in respect of any
action taken or omitted by it hereunder in good faith and in accordance with
such advice or Opinion of Counsel;

 

60

 

(d)                                 the Trustee shall be
under no obligation to exercise any of the rights or powers vested in it by
this Indenture at the request, order or direction of any of the Noteholders
pursuant to the provisions of this Indenture, unless such Noteholders shall
have offered to the Trustee reasonable security or indemnity satisfactory to it
against the costs, expenses and liabilities which may be incurred therein or
thereby;

 

(e)                                  the Trustee shall not
be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, Note or other paper or document, but
the Trustee may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney at the
sole cost of the Company and shall incur no liability or additional liability
of any kind by reason of such inquiry or investigation;

 

(f)                                    the Trustee may
execute any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents or attorneys and the Trustee shall not
be responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it with due care hereunder;

 

(g)                                 the Trustee shall not
be liable for any action taken, suffered or omitted to be taken by it in good
faith and reasonably believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Indenture;

 

(h)                                 the rights,
privileges, protections, immunities and benefits given to the Trustee,
including, without limitation, its right to be indemnified, are extended to,
and shall be enforceable by, the Trustee in each of its capacities hereunder,
and each agent, custodian and other Person employed to act hereunder;

 

(i)                                     the Trustee may
request that the Company deliver an Officer’s Certificate setting forth the
names of individuals and/or titles of officers authorized at such time to take
specified actions pursuant to this Indenture, which Officer’s Certificate may
be signed by any person authorized to sign an Officer’s Certificate, including
any person specified as so authorized in any such certificate previously
delivered and not superseded;

 

(j)                                     any permissive
right or authority granted to the Trustee shall not be construed as a mandatory
duty; and

 

(k)                                  in no event shall the
Trustee be responsible or liable for special, indirect or consequential loss or
damage of any kind whatsoever (including, but not limited to, loss of profit)
irrespective of whether the Trustee has been advised of the likelihood of such
loss or damage and regardless of the form of action.

 

61

 

Section 9.03.  No
Responsibility for Recitals, Etc.  The recitals contained herein and in the Notes (except
in the Trustee’s certificate of authentication) shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for the correctness
of the same.  The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes.  The Trustee shall not be
accountable for the use or application by the Company of any Notes or the
proceeds of any Notes authenticated and delivered by the Trustee in conformity
with the provisions of this Indenture.

 

Section 9.04.  Trustee,
Paying Agents, Conversion Agents or Registrar May Own
Notes.  The Trustee, any
paying agent, any conversion agent or Note Registrar, in its individual or any
other capacity, may become the owner or pledgee of Notes with the same rights
it would have if it were not Trustee, paying agent, conversion agent or Note
Registrar.

 

Section 9.05.  Monies to
be Held in Trust. 
Subject to the provisions of Section 14.04, all monies
received by the Trustee shall, until used or applied as herein provided, be
held in trust for the purposes for which they were received.  Money held by the Trustee in trust hereunder
need not be segregated from other funds except to the extent required by
law.  The Trustee shall be under no
liability for interest on any money received by it hereunder except as may be
agreed in writing from time to time by the Company and the Trustee.

 

Section 9.06. 
Compensation and Expenses of
Trustee.  The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, such compensation for all services rendered by it
hereunder in any capacity (which shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust) as mutually
agreed to from time to time in writing between the Company and the Trustee, and
the Company will pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances reasonably incurred or made by
the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of
its counsel and of all Persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence or bad
faith.  The Company also covenants to
indemnify the Trustee and any predecessor Trustee (and any officer, director or
employee of the Trustee), in any capacity under this Indenture and its agents
and any authenticating agent for, and to hold them harmless against, any and
all loss, liability, damage, claim or expense including taxes (other than taxes
based on the income of the Trustee) incurred without negligence or bad faith on
the part of the Trustee or such officers, directors, employees and agent or
authenticating agent, as the case may be, and arising out of or in connection
with the acceptance or administration of this trust or in any other capacity
hereunder, including the costs and expenses of defending themselves against any
claim (whether asserted by the Company, any holder or any other Person) or
liability in connection with enforcing the provisions of the Section 9.06,
except to the extent that such loss, damage, claim, liability or expense is due
to its own negligence or

 

62

 

bad faith. 
The obligations of the Company under this Section 9.06 to
compensate or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien prior to that
of the Notes upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the benefit of the holders of particular
Notes.  The obligation of the Company
under this Section shall survive the satisfaction and discharge of this
Indenture and the resignation or removal of the Trustee.

 

When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in
Section 8.01(g) or (h) with respect to the Company occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency or similar laws.

 

Section 9.07.  Officer’s
Certificate As Evidence.  Except as otherwise provided in Section 9.01,
whenever in the administration of the provisions of this Indenture the Trustee
shall deem it necessary or desirable that a matter be proved or established
prior to taking or omitting any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may, in the
absence of bad faith or willful misconduct on the part of the Trustee, be
deemed to be conclusively proved and established by an Officer’s Certificate
delivered to the Trustee.

 

Section 9.08.  Conflicting
Interests of Trustee.  If the Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the Trustee shall
either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the Trust Indenture Act and this
Indenture.

 

Section 9.09.  Eligibility
of Trustee. 
There shall at all times be a Trustee hereunder which shall
be a Person that is eligible pursuant to the Trust Indenture Act to act as such
and has a combined capital and surplus of at least $50,000,000 (or if such
Person is a member of a bank holding company system, its bank holding company
shall have a combined capital and surplus of at least $50,000,000).  If such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of any
supervising or examining authority, then for the purposes of this Section the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.  If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this
Section 9.09, it shall resign immediately in the manner and with the
effect hereinafter specified in this Article.

 

Section 9.10.  Resignation
or Removal of Trustee.

 

(a)                                  The Trustee may at
any time resign by giving written notice of such resignation to the Company and
to the holders of Notes.  Upon receiving
such

 

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notice of resignation, the Company shall
promptly appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor
trustee.  If no successor trustee shall
have been so appointed and have accepted appointment sixty (60) days after the
mailing of such notice of resignation to the Noteholders, the resigning Trustee
may, upon ten (10) Business Days’ notice to the Company and the Noteholders,
appoint a successor identified in such notice or may petition, at the expense
of the Company, any court of competent jurisdiction for the appointment of a
successor trustee, or, if any Noteholder who has been a bona fide holder of a
Note or Notes for at least six (6) months may, subject to the provisions of
Section 8.09, on behalf of himself and all others similarly situated,
petition any such court for the appointment of a successor trustee.  Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, appoint a successor trustee.

 

(b)                                 In case at any time
any of the following shall occur:

 

(i)                                     the
Trustee shall fail to comply with Section 9.08 after written request
therefor by the Company or by any Noteholder who has been a bona fide holder of
a Note or Notes for at least six (6) months; or

 

(ii)                                  the
Trustee shall cease to be eligible in accordance with the provisions of Section 9.09
and shall fail to resign after written request therefor by the Company or by
any such Noteholder; or

 

(iii)                               the
Trustee shall become incapable of acting, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation;

 

then, in any such case, the Company may remove the Trustee and appoint
a successor trustee by written instrument, in duplicate, executed by order of
the Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 8.09, any Noteholder who has been a bona fide holder
of a Note or Notes for at least six (6) months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee; provided
that if no successor Trustee shall have been appointed and have accepted
appointment sixty (60) days after either the Company or the Noteholders has
removed the Trustee, or the Trustee resigns, the Trustee so removed may petition,
at the expense of the Company, any court of competent jurisdiction for an
appointment of a successor trustee. 
Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor trustee.

 

64

 

(c)                                  The holders of a
majority in aggregate principal amount of the Notes at the time outstanding may
at any time remove the Trustee and nominate a successor trustee which shall be
deemed appointed as successor trustee unless, within ten (10) days after notice
to the Company of such nomination, the Company objects thereto, in which case
the Trustee so removed or any Noteholder, or if such Trustee so removed or any
Noteholder fails to act, the Company, upon the terms and conditions and
otherwise as in Section 9.10(a) provided, may petition any court of
competent jurisdiction for an appointment of a successor trustee.

 

(d)                                 Any resignation or
removal of the Trustee and appointment of a successor trustee pursuant to any
of the provisions of this Section 9.10 shall become effective upon
acceptance of appointment by the successor trustee as provided in
Section 9.11.

 

(e)                                  Notwithstanding the
replacement of the Trustee pursuant to this Section, the Company’s obligations
under Section 9.06 shall continue for the benefit of the retiring Trustee.

 

Section 9.11.  Acceptance by Successor
Trustee.  Any successor
trustee appointed as provided in Section 9.10 shall execute, acknowledge
and deliver to the Company and to its predecessor trustee an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as trustee herein; but, nevertheless, on the
written request of the Company or of the successor trustee, the trustee ceasing
to act shall, upon payment of any amount then due it pursuant to the provisions
of Section 9.06, execute and deliver an instrument transferring to such
successor trustee all the rights and powers of the trustee so ceasing to act.  Upon request of any such successor trustee,
the Company shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers.  Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such trustee as such, except for funds held in trust for the benefit of holders
of particular Notes, to secure any amounts then due it pursuant to the
provisions of Section 9.06.

 

No successor trustee shall accept appointment as provided in this
Section 9.11 unless, at the time of such acceptance, such successor
trustee shall be qualified under the provisions of Section 9.08 and be
eligible under the provisions of Section 9.09.

 

Upon acceptance of appointment by a successor trustee as provided in
this Section 9.11, the Company (or the former trustee, at the written
direction of the Company) shall mail or cause to be mailed notice of the
succession of such trustee hereunder to the holders of Notes at their addresses
as they shall appear on the

 

65

 

Note Register.  If the Company
fails to mail such notice within ten (10) days after acceptance of appointment
by the successor trustee, the successor trustee shall cause such notice to be
mailed at the expense of the Company.

 

Section 9.12.  Succession
by Merger. 
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee (including any trust created by this
Indenture), shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that in the case of any corporation succeeding to
all or substantially all of the corporate trust business of the Trustee, such
corporation shall be qualified under the provisions of Section 9.08 and
eligible under the provisions of Section 9.09.

 

In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Notes shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any predecessor trustee or authenticating
agent appointed by such predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee or any authenticating agent
appointed by such successor trustee may authenticate such Notes in the name of
the successor trustee; and in all such cases such certificates shall have the
full force that is provided in the Notes or in this Indenture; provided
that the right to adopt the certificate of authentication of any predecessor
Trustee or authenticate Notes in the name of any predecessor Trustee shall
apply only to its successor or successors by merger, conversion or
consolidation.

 

Section 9.13. 
Preferential Collection of
Claims.  If and when the
Trustee shall be or become a creditor of the Company (or any other obligor upon
the Notes), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or
any such other obligor).

 

ARTICLE 10

THE NOTEHOLDERS

 

Section 10.01.  Action by
Noteholders. 
Whenever in this Indenture it is provided that the holders of
a specified percentage in aggregate principal amount of the Notes may take any
action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action), the fact that at
the time of taking any such action, the holders of such specified percentage
have joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by Noteholders in person or by

 

66

 

agent or proxy appointed in writing, or (b)
by the record of the holders of Notes voting in favor thereof at any meeting of
Noteholders duly called and held in accordance with the provisions of
Article 11, or (c) by a combination of such instrument or instruments and
any such record of such a meeting of Noteholders.  Whenever the Company or the Trustee solicits the taking of any
action by the Noteholders, the Company or the Trustee may fix in advance of
such solicitation a date as the record date for determining holders entitled to
take such action.  The record date shall
be not more than fifteen (15) days prior to the date of commencement of
solicitation of such action.

 

Section 10.02.  Proof of
Execution by Noteholders.  Subject to the provisions of Sections 9.01, 9.02 and
11.05, proof of the execution of any instrument by a Noteholder or its agent or
proxy shall be sufficient if made in accordance with such reasonable rules and
regulations as may be prescribed by the Trustee or in such manner as shall be
satisfactory to the Trustee.  The
holding of Notes shall be proved by the registry of such Notes or by a
certificate of the Note Registrar.

 

The record of any Noteholders’ meeting shall be proved in the manner
provided in Section 11.06.

 

Section 10.03.  Who Are Deemed
Absolute Owners.  The
Company, the Trustee, any paying agent, any conversion agent and any Note
Registrar may deem the Person in whose name such Note shall be registered upon
the Note Register to be, and may treat it as, the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon made by any Person other than the Company or
any Note Registrar) for the purpose of receiving payment of or on account of
the principal of and Interest on such Note, for conversion of such Note and for
all other purposes; and neither the Company nor the Trustee nor any paying
agent nor any conversion agent nor any Note Registrar shall be affected by any
notice to the contrary.  All such payments
so made to any holder for the time being, or upon his order, shall be valid
and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for monies payable upon any such Note.

 

Section 10.04. 
Company-Owned Notes Disregarded.  In determining whether the
holders of the requisite aggregate principal amount of Notes have concurred in
any direction, consent, waiver or other action under this Indenture, Notes
which are owned by the Company or any other obligor on the Notes or any
Affiliate of the Company or any other obligor on the Notes shall be disregarded
and deemed not to be outstanding for the purpose of any such determination; provided
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, consent, waiver or other action, only Notes
which a Responsible Officer knows are so owned shall be so disregarded.  Notes so owned which have been pledged in
good faith may be regarded as outstanding for the purposes of this Section 10.04
if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s
right to vote such Notes and that the

 

67

 

pledgee is not the Company, any other obligor
on the Notes or any Affiliate of the Company or any such other obligor.  In the case of a dispute as to such right,
any decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.  Upon request
of the Trustee, the Company shall furnish to the Trustee promptly an Officer’s
Certificate listing and identifying all Notes, if any, known by the Company to
be owned or held by or for the account of any of the above described Persons,
and, subject to Section 9.01, the Trustee shall be entitled to accept such
Officer’s Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Notes not listed therein are outstanding for the purpose
of any such determination.

 

Section 10.05.  Revocation
of Consents; Future Holders Bound.  At any time prior to (but not
after) the evidencing to the Trustee, as provided in Section 10.01, of the
taking of any action by the holders of the percentage in aggregate principal
amount of the Notes specified in this Indenture in connection with such action,
any holder of a Note which is shown by the evidence to be included in the Notes
the holders of which have consented to such action may, by filing written
notice with the Trustee at its Corporate Trust Office and upon proof of holding
as provided in Section 10.02, revoke such action so far as concerns such
Note.  Except as aforesaid, any such
action taken by the holder of any Note shall be conclusive and binding upon
such holder and upon all future holders and owners of such Note and of any
Notes issued in exchange or substitution therefor, irrespective of whether any
notation in regard thereto is made upon such Note or any Note issued in
exchange or substitution therefor.

 

ARTICLE 11

MEETINGS OF NOTEHOLDERS

 

Section 11.01.  Purpose of
Meetings.  A
meeting of Noteholders may be called at any time and from time to time pursuant
to the provisions of this Article 11 for any of the following purposes:

 

(1)                                  to give any notice to
the Company or to the Trustee or to give any directions to the Trustee
permitted under this Indenture, or to consent to the waiving of any default or
Event of Default hereunder and its consequences, or to take any other action
authorized to be taken by Noteholders pursuant to any of the provisions of
Article 8;

 

(2)                                  to remove the Trustee
and nominate a successor trustee pursuant to the provisions of Article 9;

 

(3)                                  to consent to the
execution of an indenture or indentures supplemental hereto pursuant to the
provisions of Section 12.02; or

 

68

 

(4)                                  to take any other
action authorized to be taken by or on behalf of the holders of any specified
aggregate principal amount of the Notes under any other provision of this
Indenture or under applicable law.

 

Section 11.02.  Call of
Meetings by Trustee. 
The Trustee may at any time call a meeting of Noteholders to
take any action specified in Section 11.01, to be held at such time and at
such place as the Trustee shall determine. 
Notice of every meeting of the Noteholders, setting forth the time and
place of such meeting and in general terms the action proposed to be taken at
such meeting and the establishment of any record date pursuant to
Section 10.01, shall be mailed to holders of Notes at their addresses as
they shall appear on the Note Register. 
Such notice shall also be mailed to the Company.  Such notices shall be mailed not less than
ten (10) nor more than ninety (90) days prior to the date fixed for the
meeting.

 

Any meeting of Noteholders shall be valid without notice if the holders
of all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.

 

Section 11.03.  Call of
Meetings by Company or Noteholders.  In case at any time the Company,
pursuant to a resolution of its Board of Directors, or the holders of at least
ten percent (10%) in aggregate principal amount of the Notes then outstanding,
shall have requested the Trustee to call a meeting of Noteholders, by written
request setting forth in reasonable detail the action proposed to be taken at
the meeting, and the Trustee shall not have mailed the notice of such meeting
within twenty (20) days after receipt of such request, then the Company or such
Noteholders may determine the time and the place for such meeting and may call
such meeting to take any action authorized in Section 11.01, by mailing
notice thereof as provided in Section 11.02.

 

Section 11.04. 
Qualifications for Voting.  To be entitled to vote at any
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes on the record
date pertaining to such meeting.  The
only persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.

 

Section 11.05.  Regulations.  Notwithstanding any other
provisions of this Indenture, the Trustee may make such reasonable regulations
as it may deem advisable for any meeting of Noteholders, in regard to proof of
the holding of Notes and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination
of proxies,

 

69

 

certificates and other evidence of the right
to vote, and such other matters concerning the conduct of the meeting as it
shall think fit.

 

The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 11.03, in which case the
Company or the Noteholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. 
A permanent chairman and a permanent secretary of the meeting shall be
elected by vote of the holders of a majority in principal amount of the Notes
represented at the meeting and entitled to vote at the meeting.

 

Subject to the provisions of Section 10.04, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Notes held or represented by him; provided that no vote shall
be cast or counted at any meeting in respect of any Note challenged as not
outstanding and ruled by the chairman of the meeting to be not
outstanding.  The chairman of the
meeting shall have no right to vote other than by virtue of Notes held by him
or instruments in writing as aforesaid duly designating him as the proxy to
vote on behalf of other Noteholders. 
Any meeting of Noteholders duly called pursuant to the provisions of
Section 11.02 or 11.03 may be adjourned from time to time by the holders
of a majority of the aggregate principal amount of Notes represented at the
meeting, whether or not constituting a quorum, and the meeting may be held as
so adjourned without further notice.

 

Section 11.06.  Voting.  The vote upon any resolution
submitted to any meeting of Noteholders shall be by written ballot on which
shall be subscribed the signatures of the holders of Notes or of their
representatives by proxy and the outstanding principal amount of the Notes held
or represented by them.  The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. 
A record in duplicate of the proceedings of each meeting of Noteholders
shall be prepared by the secretary of the meeting, and there shall be attached
to said record the original reports of the inspectors of votes on any vote by
ballot taken thereat and affidavits by one or more persons having knowledge of
the facts setting forth a copy of the notice of the meeting and showing that
said notice was mailed as provided in Section 11.02.  The record shall show the principal amount
of the Notes voting in favor of or against any resolution.  The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one
of the duplicates shall be delivered to the Company and the other to the
Trustee to be preserved by the Trustee, the latter to have attached thereto the
ballots voted at the meeting.

 

Any record so signed and verified shall be conclusive evidence of the
matters therein stated.

 

70

 

Section 11.07.  No Delay of
Rights by Meeting. 
Nothing contained in this Article 11 shall be deemed or
construed to authorize or permit, by reason of any call of a meeting of
Noteholders or any rights expressly or impliedly conferred hereunder to make
such call, any hindrance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Noteholders under any of
the provisions of this Indenture or of the Notes.

 

ARTICLE 12

SUPPLEMENTAL INDENTURES

 

Section 12.01. 
Supplemental Indentures Without
Consent of Noteholders.  The
Company, when authorized by the resolutions of the Board of Directors, and the
Trustee may, from time to time, and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:

 

(a)                                  make provision with
respect to the conversion rights of the holders of Notes pursuant to the
requirements of Section 16.06 and the repurchase obligations of the
Company pursuant to the requirements of Section 3.05 and
Section 3.06;

 

(b)                                 to convey, transfer,
assign, mortgage or pledge to the Trustee as security for the Notes, any
property or assets;

 

(c)                                  to evidence the
succession of another Person to the Company, or successive successions, and the
assumption by the successor Person of the covenants, agreements and obligations
of the Company pursuant to Article 13;

 

(d)                                 to add to the
covenants of the Company such further covenants, restrictions or conditions as
the Board of Directors and the Trustee shall consider to be for the benefit of
the holders of Notes, and to make the occurrence, or the occurrence and
continuance, of a default in any such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement of all
or any of the several remedies provided in this Indenture as herein set forth; provided
that in respect of any such additional covenant, restriction or condition, such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default
or may limit the remedies available to the Trustee upon such default;

 

(e)                                  to provide for the
issuance under this Indenture of Notes in coupon form (including Notes
registrable as to principal only) and to provide for exchangeability of such
Notes with the Notes issued hereunder in fully registered form and to make all
appropriate changes for such purpose;

 

71

 

(f)                                    to cure any
ambiguity or to correct or supplement any provision contained herein or in any
supplemental indenture that may be defective or inconsistent with any other
provision contained herein or in any supplemental indenture, or to change,
eliminate or add any new provisions in regard to matters or questions arising
under this Indenture that shall not materially and adversely affect the
interests of the holders of the Notes;

 

(g)                                 to evidence and
provide for the acceptance of appointment hereunder by a successor Trustee with
respect to the Notes; or

 

(h)                                 to modify, eliminate
or add to the provisions of this Indenture to such extent as shall be necessary
to effect the qualifications of this Indenture under the Trust Indenture Act,
or under any similar federal statute hereafter enacted.

 

Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture, the Trustee
is hereby authorized to join with the Company in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations that may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder; provided that the Trustee
shall not be obligated to, but may in its discretion, enter into any
supplemental indenture that affects the Trustee’s own rights, duties or
immunities under this Indenture or otherwise.

 

Any supplemental indenture authorized by the provisions of this Section 12.01
may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 12.02.

 

Notwithstanding any other provision of this Indenture or the Notes, the
Registration Rights Agreement and the obligation to pay Additional Interest
thereunder may be amended, modified or waived only in accordance with the
provisions of the Registration Rights Agreement.

 

Section 12.02. 
Supplemental Indenture With Consent
of Noteholders.  With the
consent (evidenced as provided in Article 10) of the holders of at least a
majority in aggregate principal amount of the Notes at the time outstanding,
the Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may, from time to time and at any time, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture
or any supplemental indenture or of modifying in any manner the rights of the
holders of the Notes; provided that no such supplemental
indenture shall, without the consent of the holder of each Note so affected,
(i) extend the fixed maturity of any Note, (ii) reduce the rate or extend the
time of payment of any Interest

 

72

 

thereon, (iii) reduce the principal amount
thereof or reduce any amount payable on redemption or repurchase thereof, (iv)
change the obligation of the Company to repurchase any Note upon the happening
of a Designated Event in a manner adverse to the Noteholders, (v) change the
obligation of the Company to repurchase any Note at the option of a Noteholder
on a Repurchase Date in a manner adverse to the Noteholders; (vi) impair the
right of any Noteholder to institute suit for the payment thereof, (vii) make
the principal thereof or any Interest thereon payable in any coin or currency
other than that provided in the Notes, (viii) impair the right to convert the
Notes or reduce the number of shares of Common Stock or the amount of any other
property receivable by a Noteholder upon conversion, subject to the terms set
forth herein, including Section 16.06, in each case, (ix) modify any of
the provisions of this Section 12.02 or Section 8.07, except to
increase any such percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the holder
of each Note so affected, (x) change any obligation of the Company to maintain
an office or agency in the places and for the purposes set forth in
Section 6.02, (xi) modify any of the provisions of Article 5 in a
manner adverse to the Noteholders, (xii) reduce the quorum or voting
requirements set forth in Article 11 or (xiii) reduce the aforesaid
percentage of Notes, the holders of which are required to consent to any such
supplemental indenture.

 

Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee’s
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.

 

It shall not be necessary for the consent of the Noteholders under this
Section 12.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

 

Section 12.03.  Effect of
Supplemental Indenture.  Any supplemental indenture executed pursuant to the
provisions of this Article 12 shall comply with the Trust Indenture Act,
as then in effect, provided that this Section 12.03
shall not require such supplemental indenture or the Trustee to be qualified
under the Trust Indenture Act prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act, nor shall it constitute any admission
or acknowledgment by any party to such supplemental indenture that any such
qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act. 
Upon the execution of any supplemental indenture pursuant to the
provisions of

 

73

 

this Article 12, this Indenture shall be
and be deemed to be modified and amended in accordance therewith and the
respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of Notes shall
thereafter be determined, exercised and enforced hereunder, subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.

 

Section 12.04.  Notation on
Notes.  Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to the provisions of this Article 12 may bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
indenture.  If the Company or the
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental indenture may, at the Company’s
expense, be prepared and executed by the Company, authenticated by the Trustee
(or an authenticating agent duly appointed by the Trustee pursuant to
Section 17.10) and delivered in exchange for the Notes then outstanding,
upon surrender of such Notes then outstanding.

 

Section 12.05.  Evidence of
Compliance of Supplemental Indenture to Be
Furnished to Trustee.  Prior
to entering into any supplemental indenture, the Trustee shall be provided with
an Officer’s Certificate and an Opinion of Counsel as conclusive evidence that
any supplemental indenture executed pursuant hereto complies with the
requirements of this Article 12 and is otherwise authorized or permitted
by this Indenture.

 

ARTICLE 13

CONSOLIDATION, MERGER, SALE,
CONVEYANCE AND LEASE

 

Section 13.01.  Company May
Consolidate on Certain Terms.  Subject to the provisions of
Section 13.02, the Company shall not consolidate or merge with or into any
other Person or Persons (whether or not affiliated with the Company), nor shall
the Company or its successor or successors be a party or parties to successive
consolidations or mergers, nor shall the Company sell, convey, transfer or
lease the property and assets of the Company substantially as an entirety, to
any other Person (whether or not affiliated with the Company), unless: (i) the
Company is the surviving Person, or the resulting, surviving or transferee
Person is organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia;  (ii) upon any such
consolidation, merger, sale, conveyance, transfer or lease, the due and
punctual payment of the principal of and Interest on all of the Notes,
according to their tenor and the due and punctual performance and observance of
all of the covenants and conditions of this Indenture to be performed by the
Company, shall be expressly assumed, by supplemental indenture satisfactory in
form to the Trustee, executed and delivered

 

74

 

to the Trustee by the Person (if other than the
Company) formed by such consolidation, or into which the Company shall have
been merged, or by the Person that shall have acquired or leased such property,
and such supplemental indenture shall provide for the applicable conversion
rights set forth in Section 16.06; and (iii) immediately after giving
effect to the transaction described above, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have happened and be continuing.

 

Section 13.02.  Successor
to Be Substituted. 
In case of any such consolidation, merger, sale, conveyance,
transfer or lease and upon the assumption by the successor Person, by
supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the due and punctual payment of the principal of and
Interest on all of the Notes and the due and punctual performance of all of the
covenants and conditions of this Indenture to be performed by the Company, such
successor Person shall succeed to and be substituted for the Company, with the
same effect as if it had been named herein as the party of this first
part.  Such successor Person thereupon
may cause to be signed, and may issue either in its own name or in the name of
Lithia Motors, Inc. any or all of the Notes, issuable hereunder that
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor Person instead of the Company
and subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver, or cause to be
authenticated and delivered, any Notes that previously shall have been signed
and delivered by the officers of the Company to the Trustee for authentication,
and any Notes that such successor Person thereafter shall cause to be signed
and delivered to the Trustee for that purpose. 
All the Notes so issued shall in all respects have the same legal rank
and benefit under this Indenture as the Notes theretofore or thereafter issued
in accordance with the terms of this Indenture as though all of such Notes had
been issued at the date of the execution hereof.  In the event of any such consolidation, merger, sale, conveyance,
transfer or lease, upon compliance with the provisions of this Article 13,
the Person named as the “Company” in the first paragraph of this
Indenture or any successor that shall thereafter have become such in the manner
prescribed in this Article 13 may be dissolved, wound up and liquidated at
any time thereafter and such Person shall be released from its liabilities as
obligor and maker of the Notes and from its obligations under this Indenture.

 

In case of any such consolidation, merger, sale, conveyance, transfer
or lease, such changes in phraseology and form (but not in substance) may be
made in the Notes thereafter to be issued as may be appropriate.

 

Section 13.03.  Opinion of
Counsel to Be Given to Trustee.  The Trustee shall receive an
Officer’s Certificate and an Opinion of Counsel as conclusive evidence that any
such consolidation, merger, sale, conveyance, transfer or lease and any such
assumption complies with the provisions of this Article 13.

 

75

ARTICLE 14

SATISFACTION AND DISCHARGE OF
INDENTURE

 

 Section 14.01.  Discharge of Indenture.  When the Company shall deliver to
the Trustee for cancellation all Notes theretofore authenticated (other than
any Notes that have been destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
and not theretofore canceled, or  all
the Notes not theretofore canceled or delivered to the Trustee for cancellation
shall have become due and payable, and the Company shall deposit with the Trustee,
in trust, funds sufficient to pay all of the Notes (other than any Notes that
shall have been mutilated, destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
not theretofore canceled or delivered to the Trustee for cancellation,
including principal and any Interest due, and if the Company shall also pay or
cause to be paid all other sums payable hereunder by the Company, then this
Indenture shall cease to be of further effect (except as to (i) rights
hereunder of Noteholders to receive payments of principal of and Interest on
the Notes and the other rights, duties and obligations of Noteholders, as
beneficiaries hereof with respect to the amounts, if any, so deposited with the
Trustee and (ii) the rights, obligations and immunities of the Trustee
hereunder), and the Trustee, on written demand of the Company accompanied by an
Officer’s Certificate and an Opinion of Counsel as required by
Section 17.05 and at the cost and expense of the Company, shall execute
proper instruments acknowledging satisfaction of and discharging this
Indenture; the Company, however, hereby agrees to reimburse the Trustee for any
costs or expenses thereafter reasonably and properly incurred by the Trustee and
to compensate the Trustee for any services thereafter reasonably and properly
rendered by the Trustee in connection with this Indenture or the Notes.

  

 Section 14.02.  Deposited Monies to Be Held in Trust
by Trustee.  Subject to
Section 14.04, all monies deposited with the Trustee pursuant to
Section 14.01 shall be held in trust for the sole benefit of the
Noteholders, and such monies shall be applied by the Trustee to the payment,
either directly or through any paying agent (including the Company if acting as
its own paying agent), to the holders of the particular Notes for the payment,
redemption or repurchase of which such monies have been deposited with the
Trustee, of all sums due and to become due thereon for principal of and
Interest on the Notes.

  

 Section 14.03.  Paying Agent to Repay Monies
Held.  Upon the satisfaction
and discharge of this Indenture, all monies then held by any paying agent of
the Notes (other than the Trustee) shall, upon written request of the Company,
be repaid to it or paid to the Trustee, and thereupon such paying agent shall
be released from all further liability with respect to such monies.

  

 Section 14.04.  Return of Unclaimed Monies.  Subject to the requirements of
applicable law, any monies deposited with or paid to the Trustee for payment of
the principal of or Interest on Notes and not applied but remaining unclaimed 

 

76

 

by the holders of Notes for two years after the date upon which the
principal of or Interest on such Notes, as the case may be, shall have become
due and payable, shall be repaid to the Company by the Trustee on demand and
all liability of the Trustee shall thereupon cease with respect to such monies;
and the holder of any of the Notes shall thereafter look only to the Company
for any payment that such holder may be entitled to collect unless an
applicable abandoned property law designates another Person.

  

 Section 14.05.  Reinstatement.  If the Trustee or the paying
agent is unable to apply any money in accordance with Section 14.02 by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company’s
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to Section 14.01 until such
time as the Trustee or the paying agent is permitted to apply all such money in
accordance with Section 14.02; provided that if the Company makes any
payment of Interest on or principal of any Note following the reinstatement of
its obligations, the Company shall be subrogated to the rights of the holders
of such Notes to receive such payment from the money held by the Trustee or
paying agent.

  

ARTICLE 15

IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS

 

 Section 15.01.  Indenture and Notes Solely Corporate
Obligations.  No recourse for
the payment of the principal of or Interest on any Note, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in this Indenture or in any
supplemental indenture or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator,
stockholder, employee, agent, officer, director or subsidiary, as such, past,
present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the Notes.

  

ARTICLE 16

CONVERSION OF NOTES

 

 Section 16.01.  Right to Convert.

  

(a)           Subject to and upon compliance with the
provisions of this Indenture, prior to the close of business on May 1,
2014, the holder of any Note 

 

77

 

shall have the right, at such holder’s option, to convert the principal
amount of the Note, or any portion of such principal amount which is a multiple
of $1,000, into fully paid and non-assessable shares of Common Stock (as such
shares shall then be constituted) at the Conversion Rate in effect at such
time, by surrender of the Note so to be converted in whole or in part, together
with any required funds, under the circumstances described in this
Section 16.01 and in the manner provided in Section 16.02.  The Notes shall be convertible only upon the
occurrence of one of the following events:

 

(i)    prior to the close of business
on May 1, 2009, and during any calendar quarter commencing after June 30,
2004, if the Closing Sale Price of the Common Stock exceeds 120% of the
then-effective Conversion Price for at least 20 Trading Days in the 30
consecutive Trading Day period ending on the last Trading Day of the
immediately preceding calendar quarter (it being understood for purposes of
this Section 16.01(a)(i) that the Conversion Price in effect at the close
of business on each of the 30 consecutive Trading Days should be used).  If this condition is satisfied, then the
Notes will become and remain convertible at any time thereafter at the option
of the Holder, through maturity;

 

(ii)   after May 1, 2009, if the
Closing Sale Price of the Common Stock exceeds 120% of the then-effective
Conversion Price.  If this condition is
satisfied, then the Notes will become and remain convertible at any time
thereafter at the option of the Holder, through maturity;

 

(iii)  during the five Business Day
(the “Measurement
Period”) period immediately following any five consecutive Trading
Day period in which the Trading Price per $1,000 principal amount of the Notes
for each day of such Measurement Period was less than 98% of the product of the
Closing Sale Price and the number of shares of Common Stock issuable upon
conversion of $1,000 principal amount of the Notes; provided that no conversion
pursuant to this clause (ii) may be made after May 1, 2009, if on any Trading
Day during the Measurement Period, the Closing Sale Price is more than 100% but
less than 120% of the Conversion Price on such Trading Day;

 

(iv)  if such Note has been called for
redemption, at any time on or after the date the notice of redemption has been
given until the close of business on the second Business Day immediately
preceding the redemption date unless the Company defaults in the payment of the
redemption price; or

 

(v)   as provided in Section (b)
of this Section 16.01.

 

The Trustee (or other
conversion agent appointed by the Company) shall, on behalf of the Company,
determine on a daily basis during the time period 

 

78

 

specified in
Section 16.01(a)(i) and  (ii)
whether the Notes shall be convertible as a result of the occurrence of an
event specified in clause (i) or  (ii)
above and, if the Notes shall be so convertible, the Trustee (or other
conversion agent appointed by the Company) shall promptly deliver to the
Company and the Trustee (if the Trustee is not the conversion agent) written
notice thereof.  Whenever the Notes
shall become convertible pursuant to this Section 16.01, the Company or,
at the Company’s request, the Trustee in the name and at the expense of the
Company, shall notify the holders of the event triggering such convertibility
in the manner provided in Section 17.03, and the Company shall also
publicly announce such information and publish it on the Company’s web
site.  Any notice so given shall be
conclusively presumed to have been duly given, whether or not the holder
receives such notice.

 

The Trustee (or other
conversion agent appointed by the Company) shall have no obligation to
determine the Trading Price under this Section 16.01 unless the Company
has requested such a determination; and the Company shall have no obligation to
make such request unless a holder provides it with reasonable evidence that the
Trading Price per $1,000 principal amount of Notes would be less than 98% of
the product of the Closing Sale Price and the number of shares of Common Stock
issuable upon conversion of $1,000 principal amount of Notes.  If such evidence is provided, the Company
shall instruct the Trustee (or other conversion agent) to determine the Trading
Price of the Notes beginning on the next Trading Day and on each successive
Trading Day until the Trading Price per $1,000 principal amount of Notes is
greater than or equal to 98% of the product of the Closing Sale Price and the
number of shares issuable upon conversion of $1,000 principal amount of the
Notes; provided
that the Trustee shall be under no duty or obligation to make the calculations
described in Section 16.01(a)(iii) hereof or to determine whether the
Notes are convertible pursuant to such section.  For the avoidance of doubt, the Company shall make the
calculations described in Section 16.01(a)(iii) using the Trading Price
provided by the Trustee.

 

The Trustee shall be
entitled at its sole discretion to consult with the Company and to request the
assistance of the Company in connection with the Trustee’s duties and
obligations pursuant to Section 16.01(a)(i), (ii) and (iii) hereof
(including without limitation the calculation or determination of the Conversion
Price, the Closing Sale Price and the Trading Price), and the Company agrees,
if requested by the Trustee, to cooperate with, and provide assistance to, the
Trustee in carrying out its duties under this Section 16.01; provided
that nothing herein shall be construed to relieve the Trustee of its duties
pursuant to  Section 16.01(a)(i),
(ii) or (iii)  hereof.

 

(b)           In addition, if:

 

(i)    (A) the Company
distributes to all holders of its Common Stock rights or warrants entitling
them (for a period expiring within 45 days of such distribution) to subscribe
for or purchase shares of Common Stock, at a price per share less than the
average of the Closing Sale Price 

 

79

 

for the ten Trading Days immediately preceding,
but not including, the date such distribution is first publicly announced by
the Company, or (B) the Company distributes to all holders of its Common
Stock cash or other assets, debt securities or rights to purchase its
securities, where the Fair Market Value of such distribution per share of
Common Stock exceeds 5% of the Closing Sale Price on the Trading Day
immediately preceding the date such distribution is first publicly announced by
the Company, then, in either case, the Notes may be surrendered for conversion
at any time on and after the date that the Company gives notice to the holders
of such distribution, which shall be not less than 20 days prior to the
Ex-Dividend Time for such distribution, until the earlier of the close of
business on the Business Day immediately preceding, but not including, the
Ex-Dividend Time or the date the Company publicly announces that such
distribution will not take place; provided that neither any adjustment to
the Conversion Price will be made if the holder will otherwise participate in
such distribution without conversion nor will a holder of a Note have the
ability to convert pursuant to this Section 16.01(b); or

 

(ii)   the Company consolidates with
or merges with or into another Person or is a party to a binding share exchange
or conveys, transfers, sells, leases or otherwise disposes of all or
substantially all of its properties and assets in each case pursuant to which
the Company’s Common Stock is converted into cash, securities or other
property, then the Notes may be surrendered for conversion at any time from and
after the date fifteen (15) days prior to the anticipated effective date of the
transaction and ending on and including the date fifteen (15) days after the
consummation of the transaction.  If
such transaction constitutes a Designated Event, the Notes may be surrendered
for conversion until the corresponding Designated Event Purchase Date.  In such an event, a holder of Notes may
elect to exercise its option to require the Company to repurchase all or a
portion of such holder’s Notes.  The
Board of Directors shall determine the anticipated effective date of the
transaction, and such determination shall be conclusive and binding on the
holders and shall be publicly announced by the Company and posted on its web
site not later than two Business Days prior to such 15th day.  If Notes are not surrendered pursuant to
this paragraph for conversion prior to the transaction, on the effective date
of the transaction, the right to convert the Notes into Common Stock will
convert into a right to convert the Notes into the kind and amount of cash,
securities and other property that a Noteholder would have received if such
holder had converted such holder’s Notes immediately prior to the transaction.

 

“Ex-Dividend
Time” means, with respect to any distribution on shares of Common
Stock, the first date on which the shares of Common Stock trade regular 

 

80

 

way on the principal securities market on which the shares of Common
Stock are then traded without the right to receive such distribution.

 

(c)           A Note in respect of which a holder is
electing to exercise its option to require the Company to repurchase such
holder’s Notes upon a Designated Event pursuant to Section 3.05, or at the
option of the holder pursuant to Section 3.06, may be converted only if
such holder withdraws its election in accordance with Section 3.05(c) or
Section 3.08, respectively.  A
holder of Notes is not entitled to any rights of a holder of Common Stock until
such holder has converted his Notes to Common Stock, and only to the extent
such Notes are deemed to have been converted to Common Stock under this
Article 16.

 

 Section 16.02.  Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment for Interest or Dividends.

  

(a)           In order to exercise the conversion
privilege with respect to any Note in certificated form, the Company must
receive at the office or agency of the Company maintained for that purpose or,
at the option of such holder, the Corporate Trust Office, such Note with the
original or facsimile of a notice (the “Conversion Notice”) in the form set forth
on the reverse of the Note, duly completed and manually signed, together with
such Notes duly endorsed for transfer, accompanied by the funds, if any,
required by Section 16.02(c).  Such
notice shall also state the name or names (with address or addresses) in which
the certificate or certificates for shares of Common Stock which shall be
issuable on such conversion shall be issued, and shall be accompanied by
transfer or similar taxes, if required pursuant to Section 16.07.

 

In order to exercise the conversion privilege with respect to any
interest in a Global Note, the beneficial holder must complete, or cause to be
completed, the appropriate instruction form for conversion pursuant to the
Depositary’s book-entry conversion program, deliver, or cause to be delivered,
by book-entry delivery an interest in such Global Note, furnish appropriate
endorsements and transfer documents if required by the Company or the Trustee
or conversion agent, and pay the funds, if any, required by this
Section 16.02 and any transfer taxes if required pursuant to
Section 16.07.

 

(b)           As promptly as practicable after
satisfaction of the requirements for conversion set forth above, subject to
compliance with any restrictions on transfer if shares issuable on conversion
are to be issued in a name other than that of the Noteholder (as if such
transfer were a transfer of the Note or Notes (or portion thereof) so
converted), the Company shall issue and shall deliver to such Noteholder at the
office or agency maintained by the Company for such purpose pursuant to
Section 6.02, a certificate or certificates for the number of full shares
of Common Stock issuable upon the conversion of such Note or portion thereof as
determined by the Company in accordance with the provisions of this
Article 16 and a check or cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such conversion, calculated by
the Company as 

 

81

 

provided in Section 16.03.  In case any Note of a denomination greater
than $1,000 shall be surrendered for partial conversion, and subject to
Section 2.03, the Company shall execute and the Trustee shall authenticate
and deliver to the holder of the Note so surrendered, without charge to him, a
new Note or Notes in authorized denominations in an aggregate principal amount
equal to the unconverted portion of the surrendered Note.

 

Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date (the “Conversion Date”) on which
the requirements set forth above in this Section 16.02 have been satisfied
as to such Note (or portion thereof), and the Person in whose name any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become on said date the holder of
record of the shares represented thereby; provided that any such surrender on any
date when the stock transfer books of the Company shall be closed shall
constitute the Person in whose name the certificates are to be issued as the
record holder thereof for all purposes on the next succeeding day on which such
stock transfer books are open, but such conversion shall be at the Conversion
Rate in effect on the date upon which such Note shall be surrendered.

 

(c)           Any Note or portion thereof surrendered for
conversion during the period from the close of business on the record date for
any Interest payment date to the close of business on the Business Day
preceding such Interest payment date shall be accompanied by payment, in
immediately available funds or other funds acceptable to the Company, of an
amount equal to the Interest otherwise payable on such Interest payment date on
the principal amount being converted; provided that no such payment need be
made (1) if the Company has specified a redemption date that is after a record
date and prior to the next interest payment date, (2) if the Company has
specified a repurchase date following a Designated Event that is during such
period, or (3) to the extent of any overdue Interest at the time of conversion
with respect to such Note.  Except as
provided above in this Section 16.02, no payment or other adjustment shall
be made for Interest accrued on any Note converted or for dividends on any
shares issued upon the conversion of such Note as provided in this
Article 16.

 

Upon the conversion of a Note, that portion of the accrued but unpaid
Interest, if any, through the Conversion Date, with respect to the converted
Note shall not be cancelled, extinguished or forfeited, but rather shall be
deemed to be paid in full to the holder thereof through delivery of the Common
Stock (together with the cash payment, if any, in lieu of fractional shares) in
exchange for the Note being converted pursuant to the provisions hereof; and
the Fair Market Value of such shares of Common Stock (together with any such
cash payment in lieu of fractional shares) shall be treated as issued, to the
extent thereof, first in exchange for and in satisfaction of our obligation to
pay the principal amount of the converted Note, the accrued but unpaid
Interest, if any, through the Conversion Date, and the balance, if any, of such
Fair Market Value of such Common Stock (and any such cash payment) shall be
treated as issued in 

 

82

 

exchange for and in satisfaction of the right to convert the Note being
converted pursuant to the provisions hereof.

 

The Company agrees, and by acceptance of a beneficial interest in a
Note each holder and any beneficial owner of a Note shall be deemed to have
agreed, to treat, for United States federal income tax purposes, the Fair
Market Value of the Common Stock received upon a conversion of the Note
(together with any cash payment in lieu of fractional shares) as a contingent
payment on the Note for purposes of Treasury Regulation Section 1.1275-4
or any successor provision.

 

(d)           Upon the conversion of an interest in a
Global Note, the Trustee (or other conversion agent appointed by the Company),
or the Custodian at the direction of the Trustee (or other conversion agent
appointed by the Company), shall make a notation on such Global Note as to the
reduction in the principal amount represented thereby.  The Company shall notify the Trustee in
writing of any conversions of Notes effected through any conversion agent other
than the Trustee.

 

 Section 16.03.  Cash Payments in Lieu of Fractional
Shares.  No fractional shares
of Common Stock or scrip certificates representing fractional shares shall be
issued upon conversion of Notes.   If
more than one Note shall be surrendered for conversion at one time by the same
holder, the number of full shares that shall be issuable upon conversion shall
be computed on the basis of the aggregate principal amount of the Notes (or
specified portions thereof to the extent permitted hereby) so surrendered.   If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment and payment therefor in cash at the current price thereof to the
holder of Notes.  The current price of a
share of Common Stock shall be the Closing Sale Price on the last Trading Day
immediately preceding the Conversion Date of the Notes (or specified portions
thereof).

  

 Section 16.04.  Conversion Rate.  Each $1,000 principal amount of
the Notes shall be convertible into 26.5331 shares of Common Stock (herein
called the “Conversion Rate”), subject to adjustment as provided in this
Article 16.

  

 Section 16.05.  Adjustment of Conversion Rate.  The Conversion Rate shall be
adjusted from time to time by the Company as follows:

  

(a)           In case the Company shall hereafter pay a dividend
or make a distribution to all holders of the outstanding Common Stock in shares
of Common Stock, the Conversion Rate shall be increased so that the same shall
equal the rate determined by multiplying the Conversion Rate in effect at the
opening of business on the date following the date fixed for the determination
of stockholders entitled to receive such dividend or other distribution by a
fraction,

 

(i)    the numerator of which shall
be the sum of the number of shares of Common Stock outstanding at the close of
business on the date 

 

83

 

fixed for the determination of stockholders
entitled to receive such dividend or other distribution plus the total number
of shares of Common Stock constituting such dividend or other distribution; and

 

(ii)   the denominator of which shall
be the number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination,

 

such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination.  For the purpose of this clause (a), the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company. 
The Company will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company.  If any dividend or distribution of the type described in this
Section 16.05(a) is declared but not so paid or made, the Conversion Rate
shall again be adjusted to the Conversion Rate that would then be in effect if
such dividend or distribution had not been declared.

 

(b)           In case the Company shall issue rights or
warrants to all holders of its outstanding shares of Common Stock entitling
them (for a period expiring within forty-five (45) days after the date fixed
for determination of stockholders entitled to receive such rights or warrants)
to subscribe for or purchase shares of Common Stock at a price per share less
than the Current Market Price on the date fixed for determination of
stockholders entitled to receive such rights or warrants, the Conversion Rate
shall be increased so that the same shall equal the rate determined by
multiplying the Conversion Rate in effect immediately prior to the date fixed for
determination of stockholders entitled to receive such rights or warrants by a
fraction,

 

(i)    the numerator of which shall
be the number of shares of Common Stock outstanding on the date fixed for
determination of stockholders entitled to receive such rights or warrants plus
the total number of additional shares of Common Stock offered for subscription
or purchase, and

 

(ii)   the denominator of which shall
be the sum of the number of shares of Common Stock outstanding at the close of
business on the date fixed for determination of stockholders entitled to
receive such rights or warrants plus the number of shares that the aggregate
offering price of the total number of shares so offered would purchase at such
Current Market Price.

 

Such adjustment shall be successively made whenever any such rights or
warrants are issued, and shall become effective immediately after the opening
of business on the day following the date fixed for determination of
stockholders entitled to receive such rights or warrants.  To the extent that shares of Common Stock
are not delivered after the expiration of such rights or warrants, the 

 

84

 

Conversion Rate shall be readjusted to the Conversion Rate that would
then be in effect had the adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered.  If
such rights or warrants are not so issued, the Conversion Rate shall again be
adjusted to be the Conversion Rate that would then be in effect if such date
fixed for the determination of stockholders entitled to receive such rights or
warrants had not been fixed.  In
determining whether any rights or warrants entitle the holders to subscribe for
or purchase shares of Common Stock at less than such Current Market Price, and
in determining the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received by the Company for
such rights or warrants and any amount payable on exercise or conversion
thereof, the value of such consideration, if other than cash, to be determined
by the Board of Directors.

 

(c)           In case outstanding shares of Common Stock
shall be subdivided into a greater number of shares of Common Stock, the
Conversion Rate in effect at the opening of business on the day following the
day upon which such subdivision becomes effective shall be proportionately
increased, and conversely, in case outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Conversion Rate
in effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately reduced, such
increase or reduction, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.

 

(d)           In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock shares of any class of
capital stock of the Company or evidences of its indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
Section 16.05(b), and excluding any dividend or distribution (x) paid
exclusively in cash or (y) referred to in Section 16.05(a) (any of the
foregoing hereinafter in this Section 16.05(d)) called the “Securities”)),
then, in each such case, the Conversion Rate shall be increased so that the
same shall be equal to the rate determined by multiplying the Conversion Rate
in effect on the Record Date with respect to such distribution by a fraction,

 

(i)    the numerator of which shall
be the Current Market Price on such Record Date; and

 

(ii)   the denominator of which shall
be the Current Market Price on such Record Date less the Fair Market Value (as
determined by the Board of Directors, whose determination shall be conclusive,
and described in a resolution of the Board of Directors) on the Record Date of
the portion of the Securities so distributed applicable to one share of Common
Stock,

 

85

 

such adjustment to become effective immediately prior to the opening of
business on the day following such Record Date; provided that if the then
Fair Market Value (as so determined) of the portion of the Securities so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Noteholder shall have
the right to receive upon conversion the amount of Securities such holder would
have received had such holder converted each Note on the Record Date.  If such dividend or distribution is not so
paid or made, the Conversion Rate shall again be adjusted to be the Conversion
Rate that would then be in effect if such dividend or distribution had not been
declared.  If the Board of Directors
determines the Fair Market Value of any distribution for purposes of this
Section 16.05(d) by reference to the actual or when issued trading market
for any securities, it must in doing so consider the prices in such market over
the same period used in computing the Current Market Price on the applicable
Record Date.

 

If the dividend or distribution requiring an adjustment pursuant to
this clause (d) consists of capital stock of any class or series, or similar
equity interests, of or relating to a Subsidiary or other business unit of the
Company, for purposes of making such adjustment, (i) the Current Market Price
shall be determined as of the date (the “Ex-Dividend Date”) on which “ex-dividend
trading” commences for such distribution on the NASDAQ National Market or such
other national or regional exchange or market on which such securities are then
listed or quoted, based on the average of the Closing Sale Prices of the Common
Stock for the ten (10) Trading Days commencing on and including the fifth
Trading Day after the Ex-Dividend Date and (ii) the Fair Market Value of such
dividend or distribution shall equal the number of securities distributed in
respect of each share of Common Stock multiplied by the average of the closing
sale prices of those securities distributed for the ten (10) Trading Days
commencing on and including the fifth Trading Day after the Ex-Dividend Date.

 

Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company’s capital stock (either initially or under certain circumstances),
which rights or warrants, until the occurrence of a specified event or events
(“Trigger
Event”): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 16.05 (and no adjustment to the Conversion Rate
under this Section 16.05 will be required) until the occurrence of the
earliest Trigger Event, whereupon such rights and warrants shall be deemed to
have been distributed and an appropriate adjustment (if any is required) to the
Conversion Rate shall be made under this Section 16.05.  If any such right or warrant, including any
such existing rights or warrants distributed prior to the date of this
Indenture, are subject to events, upon the occurrence of which such rights or
warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the 

 

86

 

date of the occurrence of any and each such event shall be deemed to be
the date of distribution and record date with respect to new rights or warrants
with such rights (and a termination or expiration of the existing rights or
warrants without exercise by any of the holders thereof).  In addition, in the event of any
distribution (or deemed distribution) of rights or warrants, or any Trigger
Event or other event (of the type described in the preceding sentence) with
respect thereto that was counted for purposes of calculating a distribution
amount for which an adjustment to the Conversion Rate under this
Section 16.05 was made, (1) in the case of any such rights or warrants
that shall all have been redeemed or repurchased without exercise by any
holders thereof, the Conversion Rate shall be readjusted upon such final
redemption or repurchase to give effect to such distribution or Trigger Event,
as the case may be, as though it were a cash distribution, equal to the per share
redemption or repurchase price received by a holder or holders of Common Stock
with respect to such rights or warrants (assuming such holder had retained such
rights or warrants), made to all holders of Common Stock as of the date of such
redemption or repurchase, and (2) in the case of such rights or warrants that
shall have expired or been terminated without exercise by any holders thereof,
the Conversion Rate shall be readjusted as if such rights and warrants had not
been issued.

 

For purposes of this Section 16.05(d) and Section 16.05(a)
and (b), any dividend or distribution to which this Section 16.05(d) is
applicable that also includes shares of Common Stock, or such rights or
warrants to subscribe for or purchase shares of Common Stock of the type described
in Section 16.05(b) (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any Conversion Rate adjustment required by this Section 16.05(d) with
respect to such dividend or distribution shall then be made) immediately
followed by (2) a dividend or distribution of such shares of Common Stock or
such rights or warrants (and any further Conversion Rate adjustment required by
Sections 16.05(a) and 16.05(b) with respect to such dividend or distribution
shall then be made), except (A) the Record Date of such dividend or
distribution shall be substituted as “the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution”, “the
date fixed for the determination of stockholders entitled to receive such
rights or warrants” and “the date fixed for such determination” within the
meaning of Section 16.05(a) and 16.05(b) and (B) any shares of Common
Stock included in such dividend or distribution shall not be deemed
“outstanding at the close of business on the date fixed for such determination”
within the meaning of Section 16.05(a).

 

(e)       In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock cash (excluding any
dividend or distribution in connection with the liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, or any quarterly
cash dividend on its Common Stock to the extent that the aggregate cash
dividend paid per share of Common 

 

87

 

Stock in any quarter does not exceed $0.08
(the “Dividend
Threshold Amount”)), then, in such case, the Conversion Rate shall
be increased so that the same shall equal the rate determined by multiplying
the Conversion Rate in effect immediately prior to the close of business on
such Record Date by a fraction,

 

(i)    the numerator of which shall
be the Current Market Price on such Record Date minus the Dividend Threshold
Amount; and

 

(ii)   the denominator of which shall
be the Current Market Price on such Record Date less the amount of cash so
distributed applicable to one share of Common Stock,

 

such adjustment to be effective immediately prior to the opening of
business on the day following the record date; provided that if the
portion of the cash so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price on the Record Date, in lieu
of the foregoing adjustment, adequate provision shall be made so that each
Noteholder shall have the right to receive upon conversion the amount of cash
such holder would have received had such holder converted each Note on the
Record Date.  If such dividend or
distribution is not so paid or made, the Conversion Rate shall again be
adjusted to be the Conversion Rate that would then be in effect if such
dividend or distribution had not been declared.  The Dividend Threshold Amount shall be adjusted whenever the
Conversion Rate is adjusted by multiplying the Dividend Threshold Amount by a
fraction, the numerator of which is the Conversion Rate in effect immediately
prior to the adjustment thereof and the denominator of which is the Conversion
Rate as so adjusted.  If an adjustment
is required to be made as set forth in this Section 16.05(e) above as a
result of a distribution that is not a regular quarterly dividend, the Dividend
Threshold Amount shall be deemed to be zero.

 

(f)       In case a tender or exchange offer made by the
Company or any Subsidiary for all or any portion of the Common Stock shall
expire and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders of consideration per share
of Common Stock having a Fair Market Value (as determined by the Board of
Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors) that as of the last time (the “Expiration
Time”) tenders or exchanges may be made pursuant to such tender or
exchange offer (as it may be amended) exceeds the Closing Sale Price of a share
of Common Stock on the Trading Day next succeeding the Expiration Time, the
Conversion Rate shall be increased so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to
the Expiration Time by a fraction,

 

(i)    the numerator of which shall
be the sum of (x) the Fair Market Value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance (up to
any maximum specified in the terms of the tender or exchange offer) of all
shares validly 

 

88

 

tendered or exchanged and not withdrawn as of
the Expiration Time (the shares deemed so accepted up to any such maximum,
being referred to as the “Purchased Shares”) and (y) the product of
the number of shares of Common Stock outstanding (less any Purchased Shares) at
the Expiration Time and the Closing Sale Price of a share of Common Stock on
the Trading Day next succeeding the Expiration Time, and

 

(ii)   the denominator of which shall
be the number of shares of Common Stock outstanding (including any tendered or
exchanged shares) at the Expiration Time multiplied by the Closing Sale Price
of a share of Common Stock on the Trading Day next succeeding the Expiration
Time,

 

such adjustment to become effective immediately prior to the opening of
business on the day following the Expiration Time.  If the Company is obligated to purchase shares pursuant to any
such tender or exchange offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all such purchases are
rescinded, the Conversion Rate shall again be adjusted to be the Conversion
Rate that would then be in effect if such tender or exchange offer had not been
made.

 

(g)      For purposes of this Section 16.05, the
following terms shall have the meaning indicated:

 

(i)    “Current Market Price” shall
mean the average of the daily Closing Sale Prices per share of Common Stock for
the ten consecutive Trading Days ending on the earlier of such date of
determination and the day before the “ex” date with respect to the issuance,
distribution, subdivision or combination requiring such computation immediately
prior to the date in question.  For
purpose of this clause (i), the term “ex” date, (1) when used with respect to any
issuance or distribution, means the first date on which the Common Stock
trades, regular way, on the relevant exchange or in the relevant market from
which the Closing Sale Price was obtained without the right to receive such
issuance or distribution, and (2) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date on which the Common
Stock trades, regular way, on such exchange or in such market after the time at
which such subdivision or combination becomes effective.

 

If another issuance, distribution,
subdivision or combination to which Section 16.05 applies occurs during
the period applicable for calculating “Current Market Price” pursuant to the
definition in the preceding paragraph, “Current Market Price” shall be calculated
for such period in a manner determined by the Board of Directors to reflect the
impact of such issuance, distribution, subdivision or combination on the
Closing Sale Price of the Common Stock during such period.

 

89

 

(ii)   “Fair Market Value” shall mean
the amount which a willing buyer would pay a willing seller in an arm’s-length
transaction.

 

(iii)  “Record Date” shall mean, with
respect to any dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any cash, securities or
other property or in which the Common Stock (or other applicable security) is
exchanged for or converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders entitled to receive
such cash, securities or other property (whether such date is fixed by the
Board of Directors or by statute, contract or otherwise).

 

(iv)  “Trading Day” shall mean a day
during which trading in securities occurs on the New York Stock Exchange or, if
the Common Stock is not listed on the New York Stock Exchange, on the principal
national or regional securities exchange on which the Common Stock is then
listed or, if the Common Stock is not listed on a national or regional
securities exchange, on the principal market on which the Common Stock is then
traded.

 

(h)           The Company may make such increases in the
Conversion Rate, in addition to those required by Section 16.05(a), (b),
(c), (d), (e) or (f) as the Board of Directors considers to be advisable to
avoid or diminish any income tax to holders of Common Stock or rights to
purchase Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes.

 

To the extent permitted by applicable law, the Company from time to
time may increase the Conversion Rate by any amount for any period of time if
the period is at least twenty (20) days, the increase is irrevocable during the
period and the Board of Directors shall have made a determination that such
increase would be in the best interests of the Company, which determination
shall be conclusive.  Whenever the
Conversion Rate is increased pursuant to the preceding sentence, the Company
shall mail to holders of record of the Notes a notice of the increase at least
fifteen (15) days prior to the date the increased Conversion Rate takes effect,
and such notice shall state the increased Conversion Rate and the period during
which it will be in effect.

 

(i)            No adjustment in the Conversion Rate shall
be required unless such adjustment would require an increase or decrease of at
least one percent (1%) in such rate; provided that any adjustments that by
reason of this Section 16.05(i) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.  All calculations under this Article 16
shall be made by the Company and shall be made to the nearest cent or to the
nearest one-ten thousandth (1/10,000) of a share, as the case may be.  No adjustment need be made for rights to
purchase Common Stock pursuant to a Company plan for reinvestment of dividends
or interest or for any issuance of Common Stock or 

 

90

 

convertible or exchangeable securities or
rights to purchase Common Stock or convertible or exchangeable securities.  To the extent the Notes become convertible
into cash, assets, property or securities (other than capital stock of the
Company), no adjustment need be made thereafter as to the cash, assets, property
or such securities.  Interest will not accrue
on any cash into which the Notes are convertible.

 

(j)            Whenever the Conversion Rate is adjusted as
herein provided, the Company shall promptly file with the Trustee and any
conversion agent other than the Trustee an Officer’s Certificate setting forth
the Conversion Rate after such adjustment and setting forth a brief statement
of the facts requiring such adjustment. 
Unless and until a Responsible Officer of the Trustee shall have
received such Officer’s Certificate, the Trustee shall not be deemed to have
knowledge of any adjustment of the Conversion Rate and may assume that the last
Conversion Rate of which it has knowledge is still in effect.  Promptly after delivery of such certificate,
the Company shall prepare a notice of such adjustment of the Conversion Rate
setting forth the adjusted Conversion Rate and the date on which each
adjustment becomes effective and shall mail such notice of such adjustment of
the Conversion Rate to the holder of each Note at his last address appearing on
the Note Register provided for in Section 2.05 of this Indenture, within
twenty (20) days after execution thereof. 
Failure to deliver such notice shall not affect the legality or validity
of any such adjustment.

 

(k)           In any case in which this Section 16.05
provides that an adjustment shall become effective immediately after (1) a
Record Date for an event, (2) the date fixed for the determination of
stockholders entitled to receive a dividend or distribution pursuant to
Section 16.05(a), (3) a date fixed for the determination of stockholders
entitled to receive rights or warrants pursuant to Section 16.05(b) or (4)
the Expiration Time for any tender or exchange offer pursuant to
Section 16.05(f) (each a “Determination Date”), the Company may elect
to defer until the occurrence of the applicable Adjustment Event (as
hereinafter defined) (x) issuing to the holder of any Note converted after such
Determination Date and before the occurrence of such Adjustment Event, the
additional shares of Common Stock or other securities issuable upon such
conversion by reason of the adjustment required by such Adjustment Event over
and above the Common Stock issuable upon such conversion before giving effect
to such adjustment and (y) paying to such holder any amount in cash in lieu of
any fraction pursuant to Section 16.03. 
For purposes of this Section 16.05(k), the term “Adjustment
Event” shall mean:

 

(i)    in any case referred to in
clause (1) hereof, the occurrence of such event,

 

(ii)   in any case referred to in
clause (2) hereof, the date any such dividend or distribution is paid or made,

 

91

 

(iii)  in any case referred to in
clause (3) hereof, the date of expiration of such rights or warrants, and

 

(iv)  in any case referred to in
clause (4) hereof, the date a sale or exchange of Common Stock pursuant to such
tender or exchange offer is consummated and becomes irrevocable.

 

(l)            For purposes of this Section 16.05,
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of Common
Stock.  The Company will not pay any
dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.

 

 Section 16.06.  Effect of Reclassification,
Consolidation, Merger or Sale.  If
any of the following events occur, namely (i) any reclassification or change of
the outstanding shares of Common Stock (other than a subdivision or combination
to which Section 16.05(c) applies), (ii) any consolidation, merger or
combination of the Company with another Person as a result of which holders of
Common Stock shall be entitled to receive stock, other securities or other property
or assets (including cash) with respect to or in exchange for such Common
Stock, or (iii) any sale or conveyance of all or substantially all of the
properties and assets of the Company to any other Person as a result of which
holders of Common Stock shall be entitled to receive stock, other securities or
other property or assets (including cash) with respect to or in exchange for
such Common Stock, then the Company or the successor or purchasing Person, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture) providing that each Note shall be convertible
into the kind and amount of shares of stock, other securities or other property
or assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder of a number
of shares of Common Stock issuable upon conversion of such Notes (assuming, for
such purposes, a sufficient number of authorized shares of Common Stock are
available to convert all such Notes) immediately prior to such
reclassification, change, consolidation, merger, combination, sale or
conveyance assuming such holder of Common Stock did not exercise his rights of
election, if any, as to the kind or amount of stock, other securities or other
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance (provided
that, if the kind or amount of stock, other securities or other property or
assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance is not the same for each
share of Common Stock in respect of which such rights of election shall not
have been exercised (each, a “Non-Electing Share”), then for the purposes
of this Section 16.06 the kind and amount of stock, other securities or
other property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance for each
Non-Electing Share shall be deemed to 

 

92

 

 be the kind and
amount so receivable per share by a plurality of the Non-Electing Shares).  Such supplemental indenture shall provide
for adjustments which shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Article 16.

 

The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at its address appearing on the
Note Register provided for in Section 2.05 of this Indenture, within
twenty (20) days after execution thereof. 
Failure to deliver such notice shall not affect the legality or validity
of such supplemental indenture.

 

The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.

 

If this Section 16.06 applies to any event or occurrence, Section 16.05
shall not apply.

 

 Section 16.07.  Taxes on Shares Issued.  The issue of stock certificates
on conversions of Notes shall be made without charge to the converting
Noteholder for any documentary, stamp or similar issue or transfer tax in
respect of the issue thereof.  The
Company shall not, however, be required to pay any such tax which may be
payable in respect of any transfer involved in the issue and delivery of stock
in any name other than that of the holder of any Note converted, and the Company
shall not be required to issue or deliver any such stock certificate unless and
until the Person or Persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.

  

 Section 16.08.  Reservation of Shares; Shares to Be
Fully Paid; Compliance with Governmental Requirements; Listing of Common
Stock.  The Company shall
provide, free from preemptive rights, out of its authorized but unissued shares
or shares held in treasury, sufficient shares of Common Stock to provide for
the conversion of the Notes from time to time as such Notes are presented for
conversion.

  

Before taking any action which would cause an adjustment increasing the
Conversion Rate to an amount that would cause the Conversion Price to be
reduced below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Rate.

 

The Company covenants that all shares of Common Stock which may be
issued upon conversion of Notes will upon issue be fully paid and
non-assessable 

 

93

 

by the Company and free from all taxes, Liens and charges with respect
to the issue thereof.

 

The Company covenants that, subject to the registration statement
filing and effectiveness periods set out in the Registration Rights Agreement,
if any shares of Common Stock to be provided for the purpose of conversion of
Notes hereunder require registration with or approval of any governmental
authority under any federal or state law before such shares may be validly
issued upon conversion, the Company will in good faith and as expeditiously as
possible, to the extent then permitted by the rules and interpretations of the
Commission (or any successor thereto), endeavor to secure such registration or
approval, as the case may be.

 

The Company further covenants that, subject to the provisions of the
Registration Rights Agreement, if at any time the Common Stock shall be listed
on the New York Stock Exchange or any other national securities exchange or on
the Nasdaq National Market or any other automated quotation system, the Company
will, if permitted by the rules of such exchange or automated quotation system,
list and keep listed, so long as the Common Stock shall be so listed on such exchange
or automated quotation system, all Common Stock issuable upon conversion of the
Notes;
provided that if the rules of such exchange or automated quotation
system permit the Company to defer the listing of such Common Stock until the
first conversion of the Notes into Common Stock in accordance with the
provisions of this Indenture, the Company covenants to list such Common Stock
issuable upon conversion of the Notes in accordance with the requirements of
such exchange or automated quotation system at such time.

 

 Section 16.09.  Responsibility of Trustee.  The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any Noteholder to determine the Conversion Rate or whether any facts exist
which may require any adjustment of the Conversion Rate, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. 
The Trustee and any other conversion agent shall not be accountable with
respect to the validity or value (or the kind or amount) of any shares of
Common Stock, or of any securities or property, which may at any time be issued
or delivered upon the conversion of any Note; and the Trustee and any other
conversion agent make no representations with respect thereto.  Neither the Trustee nor any conversion agent
shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any Note for the purpose of conversion
or to comply with any of the duties, responsibilities or covenants of the
Company contained in this Article 16. 
Without limiting the generality of the foregoing, neither the Trustee
nor any conversion agent shall be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture entered
into pursuant to Section 16.06 relating either to the kind or amount of
shares of stock or securities or property (including 

 

94

 

 cash) receivable by
Noteholders upon the conversion of their Notes after any event referred to in
such Section 16.06 or to any adjustment to be made with respect thereto,
but, subject to the provisions of Section 9.01, may accept as conclusive
evidence of the correctness of any such provisions, and shall be protected in
relying upon, the Officer’s Certificate (which the Company shall be obligated
to file with the Trustee prior to the execution of any such supplemental
indenture) with respect thereto.

  

 Section 16.10.  Notice to Holders Prior to Certain
Actions.  In case:

  

(a)           the Company shall declare a dividend (or any
other distribution) on its Common Stock that would require an adjustment in the
Conversion Rate pursuant to Section 16.05; or

 

(b)           the Company shall authorize the granting to
the holders of all or substantially all of its Common Stock of rights or
warrants to subscribe for or purchase any share of any class or any other
rights or warrants; or

 

(c)           of any reclassification or reorganization of
the Common Stock of the Company (other than a subdivision or combination of its
outstanding Common Stock, or a change in par value, or from par value to no par
value, or from no par value to par value), or of any consolidation or merger to
which the Company is a party and for which approval of any stockholders of the
Company is required, or of the sale or transfer of all or substantially all of
the assets of the Company; or

 

(d)           of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;

 

the Company shall cause to be filed with the Trustee and to be mailed
to each Noteholder at his address appearing on the Note Register provided for
in Section 2.05 of this Indenture, as promptly as possible but in any
event at least ten (10) days prior to the applicable date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up is expected to
become effective or occur, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up.  Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.

 

 Section 16.11.  Stockholder Rights Plans.  Each share of Common Stock issued
upon conversion of Notes pursuant to this Article 16 shall be entitled to 

 

95

 

receive the appropriate number of rights, if any,
and the certificates representing the Common Stock issued upon such conversion
shall bear such legends, if any, in each case as may be provided by the terms
of any shareholder rights plan adopted by the Company, as the same may be
amended from time to time.  If at the
time of conversion, however, the rights have separated from the shares of
Common Stock in accordance with the provisions of the applicable shareholder
rights agreement so that the holders of the Notes would not be entitled to
receive any rights in respect of Common Stock issuable upon conversion of the
Notes, the conversion rate will be adjusted in accordance with
Section 16.05(d) treating all rights previously issued as Securities for
purposes of such adjustment, subject to readjustment in the event of the
expiration, termination or redemption of the rights.

  

ARTICLE 17

MISCELLANEOUS PROVISIONS

 

 Section 17.01.  Provisions Binding on Company’s
Successors.  All the
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.

  

 Section 17.02.  Official Acts by Successor
Corporation.  Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any Person that shall at the time be the lawful sole successor of
the Company.

  

 Section 17.03.  Addresses for Notices, Etc.  Any notice or demand which by any
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box or sent by telecopier transmission addressed as follows: to Lithia
Motors, Inc., 360 East Jackson Street, Medford, Oregon 97501, Telecopier
No. 541-776-6861, Attention: Chief Financial Officer, with a copy to
Foster Pepper Tooze LLP, 601 SW Second Avenue, Suite 1800, Portland, Oregon
97204, Telecopier No. 503-221-1510, Attention: Kenneth E. Roberts.  Any notice, direction, request or demand
hereunder to or upon the Trustee shall be deemed to have been sufficiently
given or made, for all purposes, if given or served by being deposited, postage
prepaid, by registered or certified mail in a post office letter box or sent by
telecopier transmission addressed as follows: U.S. Bank National Association,
555 Southwest Oak Street, PL-6, Portland, Oregon 97204, Telecopier No.
503-275-5738, Attention: Corporate Trust Services.

  

The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.

 

96

 

Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note Register and shall be sufficiently given to him if so mailed within the
time prescribed.

 

Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders.  If a notice or communication is mailed in
the manner provided above, it is duly given, whether or not the addressee
receives it.

 

 Section 17.04.  Governing Law.  This Indenture and each Note
shall be deemed to be a contract made under the laws of the State of New York,
and for all purposes shall be construed in accordance with the laws of the
State of New York, without regard to conflicts of laws principles thereof.

  

 Section 17.05.  Evidence of Compliance with
Conditions Precedent; Certificates to Trustee. 
Upon any application or demand by the Company to the Trustee
to take any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officer’s Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, and an Opinion of Counsel stating that, in the
opinion of such counsel, all such conditions precedent have been complied with.

  

Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or
covenant provided for in this Indenture shall include: (1) a statement that the
person making such certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statement or opinion contained in such certificate
or opinion is based; (3) a statement that, in the opinion of such person, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.

 

 Section 17.06.  Legal Holidays.  In any case in which the date of
maturity of Interest on or principal of the Notes or the redemption or repurchase
date of any Note will not be a Business Day, then payment of such Interest on
or principal of the Notes need not be made on such date, but may be made on the
next succeeding Business Day with the same force and effect as if made on the
date of maturity or the redemption or repurchase date, and no Interest shall
accrue for the period from and after such date.

  

 Section 17.07.  Trust Indenture Act.  This Indenture is hereby made
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern indentures qualified under the Trust
Indenture 

 

97

 

Act; provided that unless
otherwise required by law, notwithstanding the foregoing, this Indenture and
the Notes issued hereunder shall not be subject to the provisions of
subsections (a)(1), (a)(2), and (a)(3) of Section 314 of the Trust
Indenture Act as now in effect or as hereafter amended or modified; provided
further that this Section 17.07 shall not require this Indenture or the
Trustee to be qualified under the Trust Indenture Act prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act,
nor shall it constitute any admission or acknowledgment by any party to this Indenture
that any such qualification is required prior to the time such qualification is
in fact required under the terms of the Trust Indenture Act.  If any provision hereof limits, qualifies or
conflicts with another provision hereof which is required to be included in an
indenture qualified under the Trust Indenture Act, such required provision
shall control.

  

 Section 17.08.  No Security Interest Created.  Nothing in this Indenture or in
the Notes, expressed or implied, shall be construed to constitute a security
interest under the Uniform Commercial Code or similar legislation, as now or
hereafter enacted and in effect, in any jurisdiction in which property of the
Company or its subsidiaries is located.

  

 Section 17.09.  Benefits of Indenture.  Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto, any paying agent, any authenticating agent, any Note Registrar and
their successors hereunder and the holders of Notes any benefit or any legal or
equitable right, remedy or claim under this Indenture.

  

 Section 17.10.  Table of Contents, Headings,
Etc.  The table of contents
and the titles and headings of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a
part hereof, and shall in no way modify or restrict any of the terms or
provisions hereof.

  

 Section 17.11.  Authenticating Agent.  The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf, and subject
to its direction, in the authentication and delivery of Notes in connection
with the original issuance thereof and transfers and exchanges of Notes
hereunder, including under Sections 2.04, 2.05, 2.06, 2.07, 3.03, 3.05, 3.06,
3.10 and 16.02, as fully to all intents and purposes as though the
authenticating agent had been expressly authorized by this Indenture and those
Sections to authenticate and deliver Notes. 
For all purposes of this Indenture, the authentication and delivery of
Notes by the authenticating agent shall be deemed to be authentication and
delivery of such Notes “by the Trustee” and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent shall be deemed to
satisfy any requirement hereunder or in the Notes for the Trustee’s certificate
of authentication.  Such authenticating
agent shall at all times be a Person eligible to serve as trustee hereunder
pursuant to Section 9.09.

 

98

 

Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 17.11, without the execution or filing of any paper or any further
act on the part of the parties hereto or the authenticating agent or such
successor corporation.

 

Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company.  The Trustee may at any time terminate the
agency of any authenticating agent by giving written notice of termination to
such authenticating agent and to the Company. 
Upon receiving such a notice of resignation or upon such a termination,
or in case at any time any authenticating agent shall cease to be eligible
under this Section, the Trustee shall either promptly appoint a successor
authenticating agent or itself assume the duties and obligations of the former
authenticating agent under this Indenture and, upon such appointment of a successor
authenticating agent, if made, shall give written notice of such appointment of
a successor authenticating agent to the Company and shall mail notice of such
appointment of a successor authenticating agent to all holders of Notes as the
names and addresses of such holders appear on the Note Register.

 

The Company agrees to pay to the authenticating agent from time to time
such reasonable compensation for its services as shall be agreed upon in
writing between the Company and the authenticating agent.

 

The provisions of Sections 9.02, 9.03, 9.04 and 10.03 and this
Section 17.11 shall be applicable to any authenticating agent.

 

 Section 17.12.  Execution in Counterparts.  This Indenture may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.

  

 Section 17.13.  Severability.  In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, then (to
the extent permitted by law) the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

  

The Trustee hereby accepts the trusts in this Indenture declared and
provided, upon the terms and conditions herein above set forth.

 

99

 

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed.

 

	
   

  	
  LITHIA MOTORS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jeffrey B. DeBoer

  
	
   

  	
   

  	
   Name:

  	
  Jeffrey B. DeBoer

  
	
   

  	
   

  	
   Title:

  	
  Senior Vice President and Chief

  Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  U.S. Bank National Association, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Linda A. McConkey

  
	
   

  	
   

  	
   Name:

  	
  Linda A. McConkey

  
	
   

  	
   

  	
   Title:

  	
  Vice President

  

 

 

EXHIBIT A

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
“DEPOSITARY”, WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE
CERTIFICATES) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT HEREIN IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

THE NOTE
EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A
“QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT); (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS
NOTE OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE EXCEPT (A) TO
LITHIA MOTORS, INC., OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND THAT CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); (3) PRIOR TO SUCH TRANSFER (OTHER THAN
A TRANSFER PURSUANT TO CLAUSE 2(D) ABOVE), IT WILL FURNISH TO U.S. BANK
NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION 

 

 

REQUIREMENTS
OF THE SECURITIES ACT; AND (4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS
NOTE PURSUANT TO CLAUSE 2(D) ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER RULE
144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER
OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTION.

 

THE
OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATED IN THE MANNER AND TO THE EXTENT
SET FORTH IN ARTICLE 5 OF THE INDENTURE TO THE OBLIGATIONS (INCLUDING
INTEREST) OWED BY THE COMPANY TO ALL SENIOR INDEBTEDNESS; AND EACH HOLDER
HEREOF BY ITS ACCEPTANCE HEREOF SHALL BE BOUND BY THE PROVISIONS OF THE
SUBORDINATION AS SET FORTH IN SAID ARTICLE 5 OF THE INDENTURE.

 

A-2

 

LITHIA MOTORS, INC.

 

2.875% CONVERTIBLE SENIOR SUBORDINATED NOTE
DUE 2014

 

	
   

  	
  CUSIP:

  	
  [                   ]

  
	
   

  	
   

  	
   

  
	
  No. 1

  	
  $

  	
   

  

 

Lithia Motors, Inc., a corporation duly organized and validly existing
under the laws of the State of Oregon (herein called the “Company”, which term includes
any successor corporation under the Indenture referred to on the reverse
hereof), for value received hereby promises to pay to Cede & Co. or its
registered assigns, the principal sum set forth on Schedule I hereto on
May 1, 2014 at the office or agency of the Company maintained for that purpose
in accordance with the terms of the Indenture, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for
the payment of public and private debts, and to pay Interest, semiannually on
May 1 and November 1 of each year, commencing November 1, 2004, on
said principal sum, in like coin or currency, at the rate per annum of 2.875%,
from the May 1 or November 1, as the case may be, next preceding the date
of this Note to which Interest has been paid or duly provided for, unless the
date hereof is a date to which Interest has been paid or duly provided for, in
which case from the date of this Note, or unless no Interest has been paid or
duly provided for on the Notes, in which case from May 3, 2004, until payment
of said principal sum has been made or duly provided for.  Contingent Interest, if any, will accrue for
any six-month period and be payable on the applicable Interest payment date to
the person in whose name this Note is registered on the corresponding record
date.  Except as otherwise provided in
the Indenture, the Interest payable on this Note on any May 1 or
November 1 will be paid to the Person entitled thereto as it appears in
the Note Register at the close of business on the record date, which shall be
the April 15 or October 15 (whether or not a Business Day) next
preceding such May 1 or November 1, as provided in the Indenture; provided
that any such Interest not punctually paid or duly provided for shall be
payable as provided in Section 8.01 of the Indenture.   Interest on the Notes shall be computed on
the basis of a 360-day year of twelve 30-day months.

 

The Company shall pay Interest (i) on any Notes in certificated form by
check mailed to the address of the Person entitled thereto as it appears in the
Note Register; provided that the holder of Notes with an aggregate
principal amount in excess of $2,000,000 shall, at the written election of such
holder, be paid by wire transfer of immediately available funds or (ii) on any
Global Note by wire transfer of immediately available funds to the account of the
Depositary or its nominee.

 

The Company promises to pay interest on overdue principal and (to the
extent that payment of such interest is enforceable under applicable law)
Interest at the rate borne by the Notes, plus 1% per annum.

 

A-3

 

Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions giving the holder
of this Note the right to convert this Note into Common Stock of the Company on
the terms and subject to the limitations referred to on the reverse hereof and
as more fully specified in the Indenture. 
Such further provisions shall for all purposes have the same effect as
though fully set forth at this place.

 

This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of the State of New York, without regard to conflicts
of laws principles thereof.

 

This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.

 

Reference is made to the further provisions of this Note set forth on
the reverse hereof, which further provisions shall, for all purposes, have the
same effect as if set forth here.

 

Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

 

A-4

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.

 

	
   

  	
  LITHIA MOTORS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

A-5

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes described in the within-named Indenture.

 

 

Dated:

 

 

U.S. Bank National Association, as Trustee

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
    Authorized Signatory

  

 

A-6

 

FORM OF REVERSE OF NOTE

 

LITHIA MOTORS, INC.

 

2.875% CONVERTIBLE SENIOR SUBORDINATED NOTE
DUE 2014

 

This Note is one of a duly authorized issue of Notes of the Company,
designated as its 2.875% Convertible Senior Subordinated Notes Due 2014 (herein
called the “Notes”), limited in aggregate principal amount to $85,000,000
or, if the Company sells an additional $15,000,000 principal amount of its
Notes pursuant to the option of the Initial Purchasers granted pursuant to the
Purchase Agreement dated as of April 27, 2004 between the Company and the
Initial Purchasers, limited in the aggregate principal amount to $100,000,000
(except pursuant to Sections 2.05, 2.06, 2.10, 3.03, 3.05, 3.06, 3.10 and 16.02
hereof), issued and to be issued under and pursuant to an Indenture dated as of
May 4, 2004 (herein called the “Indenture”), between the Company and U.S.
Bank National Association, as trustee (herein called the “Trustee”), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the Notes.

 

In case an Event of Default shall have occurred and be continuing, the
principal and accrued and unpaid Interest on all Notes may be declared by
either the Trustee or the holders of not less than 25% in aggregate principal
amount of the Notes then outstanding, and upon said declaration shall become,
due and payable, in the manner, with the effect and subject to the conditions
provided in the Indenture.

 

The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinate and junior in right of payment to
the prior payment in full in cash (or as otherwise agreed) of all Senior
Indebtedness of the Company.  Any holder
by accepting this Note agrees to and shall be bound by the subordination
provisions and authorizes the Trustee to give them effect and appoints the
Trustee its attorney-in-fact for such purposes.  In addition to all other rights of Senior Indebtedness described
in the Indenture, the Senior Indebtedness shall continue to be Senior
Indebtedness and entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any terms of any
instrument relating to the Senior Indebtedness or any extension or renewal of
the Senior Indebtedness or increase in amount thereof.

 

The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of at least a majority in aggregate
principal amount of the Notes at the time outstanding, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or
modifying in any manner the rights of the holders of the Notes, subject to the
exceptions set 

 

A-7

 

forth in Section 12.02 of the Indenture.  Subject to the provisions of the Indenture, the holders of a
majority in aggregate principal amount of the Notes at the time outstanding may
on behalf of the holders of all of the Notes waive any past, current or future
breach of any provision of the Indenture, default or Event of Default, in each
case subject to the exceptions set forth in the Indenture.  Any such consent or waiver by the holder of
this Note (unless revoked as provided in the Indenture) shall be conclusive and
binding upon such holder and upon all future holders and owners of this Note
and any Notes which may be issued in exchange or substitution hereof,
irrespective of whether or not any notation thereof is made upon this Note or such
other Notes.

 

No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and Interest on this Note
at the place, at the respective times, at the rate and in the coin or currency
herein prescribed.

 

Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.

 

The Notes are issuable in fully registered form, without coupons, in denominations
of $1,000 principal amount and any multiple of $1,000.  Upon due presentment for registration of
transfer of this Note at the office or agency of the Company maintained for
that purpose in accordance with the terms of the Indenture, a new Note or Notes
of authorized denominations for an equal aggregate principal amount will be
issued to the transferee in exchange thereof, subject to the limitations
provided in the Indenture, without charge except for any tax, assessment or
other governmental charge imposed in connection therewith.

 

At any time on or after May 6, 2009, and prior to maturity, the Notes
may be redeemed at the option of the Company, in whole or in part, upon mailing
a notice of such redemption not less than 30 days but not more than 60 days
before the redemption date to the holders of Notes at their last registered
addresses, all as provided in the Indenture, at a cash redemption price equal
to 100% of the principal amount of the Notes being redeemed and accrued and
unpaid Interest, to, but excluding, the redemption date; provided that if the
redemption date falls after a record date and on or prior to the corresponding
Interest payment date, then accrued and unpaid Interest to, but excluding, the
redemption date shall be paid on such Interest payment date to the holders of
record of such Notes on the applicable record date instead of to the holders
surrendering such Notes for redemption on such date.

 

The Company may not give notice of any redemption of the Notes if a
default in the payment of Interest on the Notes has occurred and is continuing.

 

The Notes are not subject to redemption through the operation of any
sinking fund.

 

A-8

 

If a Designated Event occurs at any time prior to maturity of the
Notes, the Company shall become obligated to repurchase, at the option of the
holder, all or any portion of this Note held by such holder of this Note may
require the Company to repurchase this Note at a redemption price equal to 100%
of the principal amount hereof, together with Interest to (but excluding) the
redemption date, as provided in Article 3 of the Indenture.

 

Subject to the terms and
conditions of the Indenture, the Company shall become obligated to purchase, at
the option of the holder, all or any portion of the Notes held by such holder
on May 1, 2009, in multiples of $1,000 at a cash repurchase price of 100% of
the principal amount, plus any accrued and unpaid Interest on such Note up to,
but excluding, the Repurchase Date.  To
exercise such right, a holder shall deliver to the Company such Note with the
form entitled “Repurchase Notice” on the reverse thereof duly completed,
together with the Note, duly endorsed for transfer, at any time from the
opening of business on the date that is 20 Business Days prior to such
Repurchase Date until the close of business on the date that is two Business
Days prior to the Repurchase Date, and shall deliver the Notes to the Trustee
(or other paying agent appointed by the Company) as set forth in the Indenture.

 

Holders have the right to
withdraw any Designated Event Repurchase Notice or Repurchase Notice, as the
case may be, by delivering to the Trustee (or other paying agent appointed by
the Company) a written notice of withdrawal up to the close of business on the
Designated Event Repurchase Date or the Repurchase Date, as the case may be,
all as provided in the Indenture.

 

If money sufficient to
pay the repurchase price of all Notes or portions thereof to be purchased as of
the Designated Event Repurchase Date or the Repurchase Date, as the case may
be, is deposited with the Trustee (or other paying agent appointed by the
Company), on the Designated Event Repurchase Date or the Repurchase Date, as
the case may be, Interest will cease to accrue on such Notes (or portions
thereof) immediately after such Designated Event Repurchase Date or Repurchase
Date, and the holder thereof shall have no other rights as such other than the
right to receive the repurchase price upon surrender of such Note.

 

Subject to the occurrence of certain events and in compliance with the
provisions of the Indenture, prior to the final maturity date of the Notes, the
holder hereof has the right, at its option, to convert each $1,000 principal
amount of the Notes into 26.5331 shares (the “Conversion Rate”) of the
Company’s Common Stock, as such shares shall be constituted at the date of
conversion and subject to adjustment from time to time as provided in the
Indenture, upon surrender of this Note with the form entitled “Conversion
Notice” on the reverse thereof duly completed, to the Company at the office or
agency of the Company maintained for that purpose in accordance with the terms
of the Indenture, or at the option of such holder, the Corporate Trust Office,
and, unless the shares issuable on conversion are to be issued in the same name
as this Note, duly 

 

A-9

 

endorsed by, or accompanied by instruments of transfer in form
satisfactory to the Company duly executed by, the holder or by his duly
authorized attorney.  The Company will
notify the holder thereof of any event triggering the right to convert the
Notes as specified above in accordance with the Indenture.

 

No adjustment in respect of Interest on any Note converted or dividends
on any shares issued upon conversion of such Note will be made upon any
conversion except as set forth in the next sentence.  If this Note (or portion hereof) is surrendered for conversion
during the period from the close of business on any record date for the payment
of Interest to the close of business on the Business Day preceding the
following Interest payment date, this Note (or portion hereof being converted)
must be accompanied by payment, in immediately available funds or other funds
acceptable to the Company, of an amount equal to the Interest otherwise payable
on such Interest payment date on the principal amount being converted; provided
that no such payment shall be required (1) if the Company has specified a
redemption date following a Designated Event that is after a record date and on
or prior to the next Interest payment date or (2) to the extent of any overdue
Interest at the time of conversion with respect to this Note.

 

No fractional shares will be issued upon any conversion, but an
adjustment and payment in cash will be made, as provided in the Indenture, in
respect of any fraction of a share which would otherwise be issuable upon the
surrender of any Note or Notes for conversion.

 

A Note in respect of which a holder is exercising its right to require
repurchase upon a Designated Event or on a Repurchase Date may be converted
only if such holder withdraws its election to exercise either such right in
accordance with the terms of the Indenture.

 

The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note Registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note
shall be overdue and notwithstanding any notation of ownership or other writing
hereon made by anyone other than the Company or any Note Registrar) for the
purpose of receiving payment hereof, or on account hereof, for the conversion
hereof and for all other purposes, and neither the Company nor the Trustee nor
any other authenticating agent nor any paying agent nor other conversion agent
nor any Note Registrar shall be affected by any notice to the contrary.  All payments made to or upon the order of
such registered holder shall, to the extent of the sum or sums paid, satisfy
and discharge liability for monies payable on this Note.

 

No recourse for the payment of the principal of or Interest on this
Note, or for any claim based hereon or otherwise in respect hereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
the Indenture or any supplemental indenture or in any Note, or because of the
creation of any indebtedness represented thereby, shall be had against any
incorporator, shareholder, employee, agent, officer or director or subsidiary,
as such, past, 

 

A-10

 

present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.

 

For purposes of sections
1272, 1273 and 1275 of the Internal Revenue Code of 1986, as amended, this Note
is being issued with Tax Original Issue Discount and the issue date of this
Note is May 4, 2004.  In addition, this
Note is subject to the United States federal income tax regulations governing
contingent payment debt instruments. 
For purposes of sections 1272, 1273 and 1275 of the Internal Revenue
Code, the comparable yield of this Note is 9.0% per year, compounded
semi-annually (which will be treated as the yield to maturity for United States
federal income tax purposes).

 

The Company agrees, and
by acceptance of a beneficial interest in a Note each holder and any beneficial
owner of a Note shall be deemed to have agreed, to treat the Note as
indebtedness of the Company for United States federal income tax purposes that
is subject to Treasury Regulation Section 1.1275-4 or any successor
provision (the “contingent payment regulations”) and to be bound (in the
absence of an administrative determination or judicial ruling to the contrary) by
the Company’s determination of the comparable yield and the projected payment
schedule within the meaning of the contingent payment regulations.  A holder of Notes may obtain the issue
price, amount of Tax Original Issue Discount, issue date, yield to maturity,
comparable yield and projected payment schedule for the Notes, determined
by the Company pursuant to the contingent payment regulations, by submitting a
written request for it to the Company at the following address:  Lithia Motors, Inc., 360 East Jackson
Street, Medford, Oregon 97501, Attention: Chief Financial Officer.

 

This Note shall be deemed
to be a contract made under the laws of New York, and for all purposes shall be
construed in accordance with the laws of New York, without regard to conflicts
of laws principles thereof.

 

Terms used in this Note and defined in the Indenture are used herein as
therein defined.

 

A-11

 

ABBREVIATIONS

 

The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations.

 

	
  TEN COM -

  	
   

  	
  as tenants in common

  	
   

  	
  UNIF GIFT MIN ACT -____Custodian____

  
	
  TEN ENT -

  	
   

  	
  as tenant by the entireties

  	
   

  	
  (Cust)     (Minor)

  
	
  JT TEN -

  	
   

  	
  as joint tenants with right of survivorship and not as tenants in
  common

  	
   

  	
  under Uniform Gifts to Minors Act 

  
	
   

  	
   

  	
   

  	
   

  	
  (State)

  

 

Additional abbreviations may also be used though not in the above list.

 

 

CONVERSION NOTICE

 

TO:         LITHIA MOTORS, INC.

U.S. BANK, NATIONAL ASSOCIATION

 

The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion thereof (which is
$1,000 or a multiple thereof) below designated, into shares of Common Stock of
Lithia Motors, Inc. in accordance with the terms of the Indenture referred to
in this Note, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Notes representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below.  Capitalized terms used
herein but not defined shall have the meanings ascribed to such terms in the
Indenture.  If shares or any portion of
this Note not converted are to be issued in the name of a person other than the
undersigned, the undersigned will provide the appropriate information below and
pay all transfer taxes payable with respect thereto.  Any amount required to be paid by the undersigned on account of
Interest accompanies this Note.

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature(s)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature(s) must be guaranteed by an “eligible guarantor institution”
  meeting the requirements of the Note Registrar, which requirements include
  membership or participation in the Security Transfer Agent Medallion Program
  (“STAMP”)
  or such other “signature guarantee program” as may be determined by the
  Note Registrar in addition to, or in substitution for, STAMP, all in
  accordance with the Securities Exchange Act of 1934, as amended.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature Guarantee

  

 

Fill in the registration of shares of Common Stock if to be issued, and
Notes if to be delivered, other than to and in the name of the registered
holder:

 

 

	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Street Address)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (City, State and Zip Code)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Please print name and address

  	
   

  
	
   

  	
   

  
	
  Principal amount to be converted

  	
   

  
	
  (if less than all):

  	
   

  
	
   

  	
   

  
	
  $

  	
   

  	
   

  
	
   

  	
   

  
	
  Social Security or Other Taxpayer

  	
   

  
	
   Identification Number:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
				

 

 

OPTION TO ELECT REPURCHASE

UPON A DESIGNATED EVENT

 

TO:         LITHIA MOTORS, INC.

U.S. BANK NATIONAL ASSOCIATION

 

The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Lithia Motors, Inc. (the “Company”)
as to the occurrence of a Designated Event with respect to the Company and
requests and instructs the Company to repay the entire principal amount of this
Note, or the portion thereof (which is $1,000 or a multiple thereof) below
designated, in accordance with the terms of the Indenture referred to in this
Note at the price of 100% of such entire principal amount or portion thereof,
together with accrued Interest to, but excluding, the Designated Event
Repurchase Date, to the registered holder hereof.  Capitalized terms used herein but not defined shall have the
meanings ascribed to such terms in the Indenture.  The Notes shall be repurchased by the Company as of the
Designated Event Repurchase Date pursuant to the terms and conditions specified
in the Indenture.

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature(s)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NOTICE: The above signatures of the holder(s) hereof must correspond
  with the name as written upon the face of the Note in every particular
  without alteration or enlargement or any change whatever.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Principal amount to be redeemed (if less than all):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Social Security or Other Taxpayer Identification Number

  

 

 

REPURCHASE NOTICE

 

TO:         LITHIA MOTORS, INC.

U.S. BANK, NATIONAL ASSOCIATION

 

The undersigned registered owner of this Note hereby requests and
instructs Lithia Motors, Inc. (the “Company”) to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 or a multiple
thereof) below designated, in accordance with the terms of the Note and the
Indenture referred to in this Note at the price of 100% of such entire
principal amount or portion thereof, together with accrued Interest to, but
excluding, the Repurchase Date, to the registered holder hereof.  Capitalized terms used herein but not
defined shall have the meanings ascribed to such terms in the Indenture.  The Notes shall be repurchased by the
Company as of the Repurchase Date pursuant to the terms and conditions
specified in the Indenture.

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature(s)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NOTICE: The above signatures of the holder(s) hereof must correspond
  with the name as written upon the face of the Note in every particular
  without alteration or enlargement or any change whatever.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Principal amount to be redeemed (if less than all):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Social Security or Other Taxpayer Identification Number

  

 

 

ASSIGNMENT

 

For value received ______________________________hereby sell(s)
assign(s) and transfer(s) unto ___________________________________ (Please
insert social security or other Taxpayer Identification Number of assignee) the
within Note, and hereby irrevocably constitutes and appoints
______________________________________ attorney to transfer said Note on the
books of the Company, with full power of substitution in the premises.  Capitalized terms used herein but not
defined shall have the meanings ascribed to such terms in the Indenture.

 

In connection with any transfer of the Note prior to the expiration of
the holding period applicable to sales thereof under Rule 144(k) under the Securities
Act (or any successor provision) (other than any transfer pursuant to a
registration statement that has been declared effective under the Securities
Act), the undersigned confirms that such Note is being transferred:

 

o            To Lithia Motors, Inc.
or a subsidiary thereof; or

 

o            To a “qualified
institutional buyer” in compliance with Rule 144A under the
Securities Act of 1933, as amended; or

 

o            Pursuant to and in
compliance with Rule 144 under the Securities Act of 1933, as amended; or

 

o            Pursuant to a Registration
Statement which has been declared effective under the Securities Act of 1933,
as amended, and which continues to be effective at the time of transfer;

 

and unless the Note has been transferred to Lithia Motors, Inc. or a
subsidiary thereof, the undersigned confirms that such Note is not being
transferred to an “affiliate” of the Company as defined in
Rule 144 under the Securities Act of 1933, as amended.

 

Unless one of the
boxes is checked, the Trustee will refuse to register any of the Notes evidenced
by this certificate in the name of any person other than the registered holder
thereof.

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature(s)

  

 

 

	
   

  	
   

  	
  Signature(s) must be guaranteed by an “eligible guarantor institution”
  meeting the requirements of the Note Registrar, which requirements include
  membership or participation in the Security Transfer Agent Medallion Program
  (“STAMP”)
  or such other “signature guarantee program” as may be determined by the
  Note Registrar in addition to, or in substitution for, STAMP, all in
  accordance with the Securities Exchange Act of 1934, as amended.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature Guarantee

  

 

NOTICE: The signature on the Conversion Notice, the Option to Elect
Repurchase Upon a Designated Event, the Repurchase Notice or the Assignment
must correspond with the name as written upon the face of the Note in every
particular without alteration or enlargement or any change whatsoever.

 

 

Schedule I

 

LITHIA MOTORS, INC.

2.875% Convertible Senior Note Due 2014

 

No.  1

 

	
  Date

  	
   

  	
  Principal
  Amount

  	
   

  	
  Notation
  Explaining Principal

  Amount Recorded

  	
   

  	
  Authorized
  Signature

  of Trustee or

  Custodian

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