-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IHkceS6nEu5mACNZngwAl3Hwpg9Ayg1UaaiAleWhAKdbneSNZnRwX/pzh7/BiGMw TIAsxDLRGyPwhJu+mmRdDQ== 0001038838-04-000593.txt : 20040708 0001038838-04-000593.hdr.sgml : 20040708 20040708172204 ACCESSION NUMBER: 0001038838-04-000593 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040707 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040708 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEADWATERS INC CENTRAL INDEX KEY: 0001003344 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PRODUCTS OF PETROLEUM & COAL [2990] IRS NUMBER: 870547337 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27808 FILM NUMBER: 04906723 BUSINESS ADDRESS: STREET 1: 10653 SOUTH RIVERFRONT PARKWAY STREET 2: SUITE 300 CITY: SOUTH JORDAN STATE: UT ZIP: 84095 BUSINESS PHONE: 801-984-9400 MAIL ADDRESS: STREET 1: 10653 SOUTH RIVERFRONT PARKWAY STREET 2: SUITE 300 CITY: SOUTH JORDAN STATE: UT ZIP: 84095 FORMER COMPANY: FORMER CONFORMED NAME: COVOL TECHNOLOGIES INC DATE OF NAME CHANGE: 19951113 8-K 1 form8k070704.txt FORM 8-K DATED JULY 7, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 July 7, 2004 ------------------------------------------------ Date of Report (Date of earliest event reported) HEADWATERS INCORPORATED ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Delaware 0-27808 87-0547337 - -------------------------------- ------------------------ ------------------- (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.) 10653 South River Front Parkway, Suite 300 South Jordan, UT 84095 ------------------------------------------- (Address of principal executive offices) (Zip Code) (801) 984-9400 ---------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable ------------------------------------------------------------- (Former name or former address, if changed since last report) This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Forward-looking statements include Headwaters' expectations as to the managing and marketing of coal combustion products, operations of facilities utilizing alternative fuel technologies, the marketing of synthetic fuels, the availability of tax credits, the availability of feed stocks, the receipt of licensing fees, royalties, and product sales revenues, the development, commercialization, and financing of new technologies and other strategic business opportunities and acquisitions, including without limitation, other information about Headwaters. Actual results may vary materially from such expectations. Words such as "expects," "anticipates," "targets," "goals," "projects," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking. For a discussion of the factors that could cause actual results to differ from expectations, please see the captions entitled "Forward-looking Statements" and "Risk Factors" in Item 7 of our Form 10-K for the year ended September 30, 2003 and the Risk Factors described in Item 5 of our Form 8-K dated May 25, 2004. There can be no assurance that our results of operations will not be adversely affected by such factors. Unless legally required, we undertake no obligation to revise or update any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the applicable report. Item 5: Other Events and Regulation FD Disclosure - Completed Acquisition of Southwest Concrete Products, LP. As described in Exhibit 99 attached hereto, on July 7, 2004 Headwaters announced that the acquisition of certain assets of Southwest Concrete Products, LP had been completed and the transaction was closed. Item 7: Financial Statements and Exhibits. (c) The following exhibits are included herewith: 10.84.2 Amendment No. 1, dated as of June 23, 2004, to Credit Agreement among Headwaters and various lenders dated as of March 31, 2004 10.87 Indenture dated as of June 1, 2004 between Headwaters and Wells Fargo Bank, as Trustee, relating to 2-7/8% Convertible Senior Subordinated Notes due 2016 10.88 Asset Purchase Agreement between Headwaters and Southwest Concrete Products, LP 99 Press release announcing acquisition of Southwest Concrete Products, LP 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HEADWATERS INCORPORATED Registrant Date: July 8, 2004 /s/ Kirk A. Benson ----------------------------- Kirk A. Benson Chief Executive Officer (Principal Executive Officer) 3 EX-10.84.2 2 ex10842form8k070704.txt AMENDMENT NO. 1 CREDIT AGREEMENT Exhibit 10.84.2 EXECUTION COPY AMENDMENT NO. 1 Dated as of June 23, 2004 to CREDIT AGREEMENT Dated as of March 31, 2004 THIS AMENDMENT NO. 1 ("Amendment") is made as of June 23, 2004 by and among Headwaters Incorporated (the "Borrower"), the financial institutions listed on the signature pages hereof (the "Lenders") and Bank One, NA (Main Office Chicago), as Administrative Agent (the "Agent"), under that certain Credit Agreement dated as of March 31, 2004 by and among the Borrower, the Lenders and the Agent (the "Credit Agreement"). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrower has requested that the Aggregate Revolving Loan Commitment be increased from $50,000,000 to $75,000,000; WHEREAS, Bank of America, N.A. (the "New Lender") has agreed to provide, subject to the terms and conditions hereof, a new Revolving Loan Commitment in the aggregate amount of $25,000,000; WHEREAS, the Borrower, the Lenders party hereto, the New Lender and the Agent have agreed to amend the Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders party hereto, the New Lender and the Agent have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of June 23, 2004 (the "Effective Date") but subject to the satisfaction of the conditions precedent set forth in Section 2 below, (a) the Credit Agreement is amended to increase the Aggregate Revolving Loan Commitment to $75,000,000, (b) the New Lender is deemed to be a Lender for all purposes under the Credit Agreement and (c) the Commitment Schedule is amended and restated in its entirety to read as set forth on Annex A hereto. The Borrower hereby agrees to compensate each Lender for all losses, expenses and liabilities incurred by such Lender in connection with the sale and assignment of any Eurodollar Loans and the reallocation described in Section 2(a) below, in each case on the terms and in the manner set forth in Section 3.4 of the Credit Agreement. 2. Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that (a) the Agent shall have administered the reallocation of the Aggregate Outstanding Revolving Credit Exposure on the Effective Date ratably among the Lenders after giving effect to the increase in the Aggregate Revolving Loan Commitment pursuant hereto and (b) the Agent shall have received (i) counterparts of this Amendment duly executed by the Borrower, the Required Lenders, the New Lender and the Agent and the Consent and Reaffirmation attached hereto duly executed by the Guarantors, (ii) copies of resolutions or actions of any other body authorizing the execution of this Amendment by each Credit Party, (iii) favorable written opinions of counsels to the Credit Parties, in form and substance reasonably acceptable to the Agent and its counsel and (iv) such other instruments and documents as are reasonably requested by the Agent. 3. Representations and Warranties of the Borrower. The Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by (i) bankruptcy, insolvency, fraudulent conveyances, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally; (ii) general equitable principles (whether considered in a proceeding in equity or at law); and (iii) requirements of reasonableness, good faith and fair dealing. (b) As of the date hereof and giving effect to the terms of this Amendment, (i) there exists no Default or Unmatured Default and (ii) the representations and warranties contained in Article V of the Credit Agreement, as amended hereby, are true and correct, except for representations and warranties made with reference solely to an earlier date. 4. Reference to and Effect on the Credit Agreement. (a) Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York, but giving effect to federal laws applicable to national banks. 6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 2 7. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. [Signature Pages Follow] 3 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. HEADWATERS INCORPORATED, as the Borrower By: /s/ Steven G. Stewart --------------------------------- Name: Steven G. Stewart Title: CFO BANK ONE, NA (MAIN OFFICE CHICAGO), as Administrative Agent, as Swing Line Lender, as LC Issuer and as a Lender By: /s/ Tony C. Nielsen --------------------------------- Name: Tony C. Nielsen Title: First V.P. WELLS FARGO BANK, NA, as a Lender By: /s/ Troy S. Akagi --------------------------------- Name: Troy S. Akagi Title: Vice President ZIONS FIRST NATIONAL BANK, as a Lender By: /s/ Tracy Groll --------------------------------- Name: Tracy Groll Title: Vice President GUARANTY BANK, as a Lender By: /s/ Scott L. Brewer --------------------------------- Name: Scott L. Brewer Title: Senior V. P. 4 BANK OF AMERICA, N.A., as the New Lender By: /s/ David R. Barney --------------------------------- Name: David R. Barney Title: Senior Vice President 5 EX-10.87 3 ex1087form8k070704.txt INDENTURE Exhibit 10.87 EXECUTION COPY - -------------------------------------------------------------------------------- HEADWATERS INCORPORATED, To WELLS FARGO BANK, NATIONAL ASSOCIATION as Trustee - -------------------------------------------------------------------------------- INDENTURE Dated as of June 1, 2004 - -------------------------------------------------------------------------------- 2-7/8% Convertible Senior Subordinated Notes due 2016 - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS Section 1.01. Definitions......................................................1 ARTICLE 2 ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES Section 2.01. Designation Amount and Issue of Notes............................9 Section 2.02. Form of Notes...................................................10 Section 2.03. Date and Denomination of Notes; Payments of Interest............11 Section 2.04. Execution of Notes..............................................12 Section 2.05. Exchange and Registration of Transfer of Notes; Restrictions on Transfer...................................................13 Section 2.06. Mutilated, Destroyed, Lost or Stolen Notes......................18 Section 2.07. Temporary Notes.................................................19 Section 2.08. Cancellation of Notes...........................................20 Section 2.09. CUSIP Numbers...................................................20 ARTICLE 3 REDEMPTION AND REPURCHASE OF NOTES Section 3.01. Redemption of Notes.............................................20 Section 3.02. Notice of Redemption; Selection of Notes........................23 Section 3.03. Payment of Notes Called for Redemption by the Company...........24 Section 3.04. Conversion Arrangement on Call for Redemption...................25 Section 3.05. Repurchase at Option of Holders upon a Designated Event.........25 Section 3.06. Repurchase of Notes by the Company at Option of the Holder......29 Section 3.07. Company Repurchase Notice.......................................30 Section 3.08. Effect of Repurchase Notice.....................................31 Section 3.09. Deposit of Repurchase Price.....................................32 Section 3.10. Notes Repurchased in Part.......................................32 Section 3.11. Repayment to the Company........................................32 ARTICLE 4 CONTINGENT INTEREST Section 4.01. Contingent Interest.............................................32 Section 4.02. Payment of Contingent Interest..................................33 i Section 4.03. Contingent Interest Notification................................33 ARTICLE 5 PARTICULAR COVENANTS OF THE COMPANY Section 5.01. Payment of Principal and Interest...............................33 Section 5.02. Maintenance of Office or Agency.................................33 Section 5.03. Appointments to Fill Vacancies in Trustee's Office..............34 Section 5.04. Provisions as to Paying Agent...................................34 Section 5.05. Existence.......................................................35 Section 5.06. Maintenance of Properties.......................................35 Section 5.07. Payment of Taxes and Other Claims...............................36 Section 5.08. Rule 144A Information Requirement...............................36 Section 5.09. Stay, Extension and Usury Laws..................................36 Section 5.10. Compliance Certificate..........................................37 Section 5.11. Additional Interest Notice......................................37 Section 5.12. Contingent Debt Tax Treatment...................................37 Section 5.13. Calculation of Original Issue Discount..........................37 ARTICLE 6 NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE Section 6.01. Noteholders' Lists..............................................38 Section 6.02. Preservation and Disclosure of Lists............................38 Section 6.03. Reports by Trustee..............................................39 Section 6.04. Reports by Company..............................................39 ARTICLE 7 REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT Section 7.01. Events of Default...............................................39 Section 7.02. Payments of Notes on Default; Suit Therefor.....................41 Section 7.03. Application of Monies Collected by Trustee......................43 Section 7.04. Proceedings by Noteholder.......................................43 Section 7.05. Proceedings by Trustee..........................................44 Section 7.06. Remedies Cumulative and Continuing..............................44 Section 7.07. Direction of Proceedings and Waiver of Defaults by Majority of Noteholders.......................................45 Section 7.08. Notice of Default...............................................45 Section 7.09. Undertaking to Pay Costs........................................45 ARTICLE 8 THE TRUSTEE Section 8.01. Duties and Responsibilities of Trustee..........................46 ii Section 8.02. Reliance on Documents, Opinions, Etc............................47 Section 8.03. No Responsibility for Recitals, Etc.............................49 Section 8.04. Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes.................................................49 Section 8.05. Monies to Be Held in Trust......................................49 Section 8.06. Compensation and Expenses of Trustee............................49 Section 8.07. Officer's Certificate as Evidence...............................50 Section 8.08. Conflicting Interests of Trustee................................50 Section 8.09. Eligibility of Trustee..........................................50 Section 8.10. Resignation or Removal of Trustee...............................50 Section 8.11. Acceptance by Successor Trustee.................................52 Section 8.12. Succession by Merger............................................52 Section 8.13. Preferential Collection of Claims...............................53 Section 8.14. Trustee's Application for Instructions from the Company.........53 ARTICLE 9 THE NOTEHOLDERS Section 9.01. Action by Noteholders...........................................53 Section 9.02. Proof of Execution by Noteholders...............................54 Section 9.03. Who Are Deemed Absolute Owners..................................54 Section 9.04. Company-owned Notes Disregarded.................................54 Section 9.05. Revocation of Consents; Future Holders Bound....................55 ARTICLE 10 MEETINGS OF NOTEHOLDERS Section 10.01. Purpose of Meetings............................................55 Section 10.02. Call of Meetings by Trustee....................................55 Section 10.03. Call of Meetings by Company or Noteholders.....................56 Section 10.04. Qualifications for Voting......................................56 Section 10.05. Regulations....................................................56 Section 10.06. Voting.........................................................57 Section 10.07. No Delay of Rights by Meeting..................................57 ARTICLE 11 SUPPLEMENTAL INDENTURES Section 11.01. Supplemental Indentures Without Consent of Noteholders.........58 Section 11.02. Supplemental Indenture with Consent of Noteholders.............59 Section 11.03. Effect of Supplemental Indenture...............................60 Section 11.04. Notation on Notes..............................................60 Section 11.05. Evidence of Compliance of Supplemental Indenture to Be Furnished to Trustee.........................................61 iii ARTICLE 12 CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE Section 12.01. Company May Consolidate on Certain Terms.......................61 Section 12.02. Successor to Be Substituted....................................61 Section 12.03. Opinion of Counsel to Be Given to Trustee......................62 ARTICLE 13 SATISFACTION AND DISCHARGE OF INDENTURE Section 13.01. Discharge of Indenture.........................................62 Section 13.02. Deposited Monies to Be Held in Trust by Trustee................63 Section 13.03. Paying Agent to Repay Monies Held..............................63 Section 13.04. Return of Unclaimed Monies.....................................63 Section 13.05. Reinstatement..................................................64 ARTICLE 14 IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS Section 14.01. Indenture and Notes Solely Corporate Obligations...............64 ARTICLE 15 CONVERSION OF NOTES Section 15.01. Right to Convert...............................................64 Section 15.02. Exercise of Conversion Privilege; Issuance of Common Stock on Conversion; No Adjustment for Interest or Dividends.................................................67 Section 15.03. Cash Payments in Lieu of Fractional Shares.....................69 Section 15.04. Conversion Rate................................................69 Section 15.05. Adjustment of Conversion Rate..................................69 Section 15.06. Effect of Reclassification, Consolidation, Merger or Sale......78 Section 15.07. Taxes on Shares Issued.........................................79 Section 15.08. Reservation of Shares; Shares to Be Fully Paid; Compliance with Governmental Requirements; Listing of Common Stock......79 Section 15.09. Responsibility of Trustee......................................80 Section 15.10. Notice to Holders Prior to Certain Actions.....................80 Section 15.11. Shareholder Rights Plans.......................................81 ARTICLE 16 SUBORDINATION Section 16.01. Agreement to Subordinate.......................................81 Section 16.02. Liquidation, Dissolution, Bankruptcy...........................82 iv Section 16.03. Default on Senior Indebtedness.................................82 Section 16.04. Acceleration of Payment of Notes...............................83 Section 16.05. When Distribution Must Be Paid Over............................83 Section 16.06. Subrogation....................................................83 Section 16.07. Relative Rights................................................84 Section 16.08. Subordination May Not Be Impaired by Company...................84 Section 16.09. Rights of Trustee and Paying Agent.............................84 Section 16.10. Distribution or Notice to Representative.......................85 Section 16.11. Article 16 Not to Prevent Events of Default or Limit Right to Accelerate..........................................85 Section 16.12. Trust Monies Not Subordinated..................................85 Section 16.13. Trustee Entitled to Rely.......................................85 Section 16.14. Trustee to Effectuate Subordination............................85 Section 16.15. Trustee Not Fiduciary for Holders of Senior Indebtedness.......85 Section 16.16. Reliance by Noteholders of Senior Indebtedness on Subordination Provisions.....................................86 ARTICLE 17 MISCELLANEOUS PROVISIONS Section 17.01. Provisions Binding on Company's Successors.....................86 Section 17.02. Official Acts by Successor Corporation.........................86 Section 17.03. Addresses for Notices, Etc.....................................86 Section 17.04. Governing Law..................................................87 Section 17.05. Evidence of Compliance with Conditions Precedent; Certificates to Trustee......................................87 Section 17.06. Legal Holidays.................................................87 Section 17.07. Trust Indenture Act............................................87 Section 17.08. No Security Interest Created...................................88 Section 17.09. Benefits of Indenture..........................................88 Section 17.10. Table of Contents, Headings, Etc...............................88 Section 17.11. Authenticating Agent...........................................88 Section 17.12. Execution in Counterparts......................................88 Section 17.13. Severability...................................................89 Exhibit A - FORM OF NOTE v INDENTURE INDENTURE dated as of June 1, 2004, between HEADWATERS INCORPORATED, a Delaware corporation (hereinafter called the "Company"), having its principal office at 10653 South Riverfront Parkway, Suite 300, South Jordan, UT 84095, and Wells Fargo Bank, National Association, a national banking association, as trustee hereunder (hereinafter called the "Trustee"). WITNESSETH: WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issue of its 2-7/8% Convertible Senior Subordinated Notes due 2016 (hereinafter called the "Notes"), in an aggregate principal amount not to exceed $172,500,000 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; and WHEREAS, the Notes, the certificate of authentication to be borne by the Notes, a form of assignment, a form of Designated Event Repurchase Notice, 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 5.12. "Adjustment Event" has the meaning specified in Section 15.05(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). "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "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 are authorized or obligated by law, regulation or executive order to close. "Calendar Quarter" means, with respect to the Company, the first, second, third and fourth quarter of any fiscal year ending on March 31, June 30, September 30 and December 31, respectively. "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 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 Stock Market or by the National Quotation Bureau Incorporated. In the absence of such quotations, the Company shall be entitled to determine the Closing Sale Price on the basis it considers appropriate. The Closing Sale Price shall be determined without reference to extended or after-hours trading. 2 "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 15.06, however, shares issuable on conversion of Notes shall include only shares of the class designated as common stock of the Company at the date of this Indenture (namely, the Common Stock, par value $0.01) 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 12 and Section 15.06, 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. "Conversion Date" has the meaning specified in Section 15.02. "Conversion Notice" has the meaning specified in Section 15.02. "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 15.04. "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 Sixth & Marquette; N9303-120 Minneapolis, MN 55479. "Credit Agreement" means the credit agreement dated March 31, 2004 among the Company, the Lenders, the Issuer (both, as defined therein) and Bank One, N.A. acting as administrative agent, as amended, restated, supplemental, waived, replaced, whether or not upon termination, and whether with the original 3 Lenders or otherwise, refinanced, restructured or refinancing thereof (including amendments that increase the principal amount thereof). "Current Market Price" has the meaning specified in Section 15.05(g). "Custodian" means Wells Fargo 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" shall mean any Fundamental Change or a Termination of Trading. "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 Senior Indebtedness" of the Company means (a) the Credit Agreement and (b) any other Senior Indebtedness of the Company that, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25,000,000 and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture. "Determination Date" has the meaning specified in Section 15.05(k). "Event of Default" means any event specified in Section 7.01 as an Event of Default. "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. "Ex-Dividend Time" has the meaning specified in Section 15.01(b). "Expiration Time" has the meaning specified in Section 15.05(f). "Fair Market Value" has the meaning specified in Section 15.05(g)(ii). 4 "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, depositary receipts, ordinary shares or other certificates representing common equity interests that are (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 on any date of determination, without duplication, the principal or face amount of (i) all obligations for borrowed money, (ii) all obligations evidenced by notes, bonds or other similar instruments, (iii) all obligations in respect of letters of credit or bankers' acceptances or similar instruments (or reimbursement obligations with respect thereto), (iv) all obligations to pay the deferred purchase price of property or services, except any such balance that constitutes an accrued expense or trade payable, (v) all obligations as lessee which are capitalized in accordance with generally accepted accounting principles, (vi) representing any amounts owing in respect to foreign exchange and interest rate, commodity or other hedging agreements, and (vii) all Indebtedness of others guaranteed by such Person or any of its Subsidiaries or for which such Person or any of its Subsidiaries is legally responsible or liable (whether by agreement to purchase indebtedness of, or to supply funds or to invest in, others). "Indenture" means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented. "Initial Purchasers" means each of Morgan Stanley & Co. Incorporated, J.P. Morgan Securities Inc., Adams, Harkness & Hill, Inc., RBC Capital Markets Corporation and Stephens Inc. (each an "Initial Purchaser"). "Interest" means, when used with reference to the Notes, any interest payable under the terms of the Notes, including Contingent Interest, if any, and Additional Interest, if any, payable under the terms of the Registration Rights Agreement. "Make Whole Payment" means, with respect to each $1,000 principal amount of Notes, a payment in cash, Common Stock or a combination thereof equal to the present value of all remaining scheduled payments of Interest on the Notes to be redeemed through June 1, 2011. Present value will be computed using a discount rate equal to the Treasury Yield. "Measurement Period" has the meaning specified in Section 15.01(a). "Non-electing share" has the meaning specified in Section 15.06. 5 "Note" or "Notes" means any Note or Notes, as the case may be, authenticated and delivered under this Indenture, including any Global Note. "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. "Note Register" has the meaning specified in Section 2.05. "Note Registrar" has the meaning specified in Section 2.05. "Notice Date" means the date of mailing of the notice of redemption pursuant to Section 3.02. "Officer" means, with respect to the Company, its Chairman of the Board, the Chief Executive Officer, the 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") and the Treasurer or any Assistant Treasurer, or the Secretary or Assistant Secretary of the Company. "Officer's Certificate", when used with respect to the Company, means a certificate signed by an Officer thereof. "Opinion of Counsel" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company. "Outstanding", when used with reference to Notes and subject to the provisions of Section 9.04, 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, or portions thereof, (i) for the redemption of which monies in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or (ii) which shall have been otherwise discharged in accordance with Article 13; (c) 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 (d) Notes converted into Common Stock pursuant to Article 15 and Notes deemed not outstanding pursuant to Article 3. "Permitted Junior Securities" means (i) equity interests in the Company or (ii) debt securities that are subordinated to all Senior Indebtedness and any debt securities issued in exchange for Senior Indebtedness to the same extent as, or to a greater extent than, the Notes are subordinated to Senior Indebtedness under this Indenture. 6 "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, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated lost, destroyed or stolen Note that it replaces. "Purchased Shares" has the meaning specified in Section 15.05(f)(i). "Record Date" has the meaning specified in Section 15.05(g)(iii). "Registration Rights Agreement" means the Registration Rights Agreement, dated as of June 1, 2004, between the Company and the Initial Purchasers, as amended from time to time in accordance with its terms. "Repurchase Date" has the meaning specified in Section 3.06. "Repurchase Notice" has the meaning specified in Section 3.06. "Responsible Officer" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee 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 or 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 15.05(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. "Senior Indebtedness" means (i) all Indebtedness of the Company outstanding under the Credit Agreement and all Hedging Obligations with respect to secured obligations thereunder, including interest, fees, expenses, amounts payable under reimbursement obligations in connection with letters of credit and interest accruing after, or which would accrue but for the filing of a petition initiating any proceeding pursuant to Bankruptcy Law at the rate specified in the Credit Agreement, whether or not a claim for such interest would be allowed), (ii) any other Indebtedness of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the Company (including all deferrals, renewals, extensions 7 or refundings of, or amendments, modifications or supplements to the foregoing) and (iii) all Obligations with respect to the items listed in the preceding clauses (i) and (ii); provided, however, that Senior Indebtedness does not include: (a) Indebtedness evidenced by the Notes; (b) Indebtedness of the Company to any Subsidiary of the Company, except to the extent such Indebtedness is pledged by such Subsidiary as security for any Senior Indebtedness of such Subsidiary; (c) any liability for federal, state, foreign, local or other taxes owed or owing by the Company; (d) accounts payable or other liabilities of the Company to trade creditors arising in the ordinary course of business, and (e) any Indebtedness in which the instrument creating or evidencing the same or the assumption or guarantee thereof expressly provides that such Indebtedness is pari passu with, or is subordinated to, the Notes. "Senior Subordinated Indebtedness" of the Company means the Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "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. "Subordinated Indebtedness" means any Indebtedness of the Company (whether outstanding on the date of this Indenture or thereafter Incurred) that is subordinate or junior in right of payment to the Notes pursuant to a written agreement. "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 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 of 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. "Termination of Trading" will be deemed to have occurred if the Common Stock (or other common stock, depositary receipts, ordinary shares or other certificates representing common equity interests into which the Notes are then convertible) is neither listed for trading on a United States national securities exchange nor approved for trading on the Nasdaq National Market. "Trading Day" has the meaning specified in Section 15.05(g). "Trading Price" means, on any date, the average of the secondary market bid quotations per $1,000 principal amount of Notes obtained by the Trustee for 8 $10,000,000 principal amount of Notes at approximately 3:30 p.m., New York City time, on such date from three independent nationally recognized securities dealers selected by the Company; provided that if at least three such bids cannot reasonably be obtained by the Trustee, but two bids are obtained, then the average of the two such bids shall be used, and if only one such bid can reasonably be obtained by the Trustee, that one bid shall be used ; provided further that if the Trustee cannot reasonably obtain at least one bid for $10,000,000 principal amount of Notes from a nationally recognized securities dealer, then the Trading Price per $1,000 principal amount of Notes on such date shall be deemed to be less than 98% of the product of (a) the number of shares of Common Stock issuable upon conversion of $1,000 principal amount of Notes and (b) the Closing Sale Price on such date. "Treasury Yield" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two business days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source for similar market data)) most nearly equal to the then remaining term to June 1, 2011; provided, however, that if the then remaining term to June 1, 2011 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Yield shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the then remaining term to June 1, 2011 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trigger Event" has the meaning specified in Section 15.05(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 11.03 and 15.06; 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 Well Fargo 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. 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 "2-7/8% Convertible Senior Subordinated Notes due 2016". Notes not to exceed the aggregate principal amount of $172,500,000 (except pursuant to Sections 2.05, 2.06, 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 9 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"), the Treasurer or any Assistant Treasurer or the Secretary or 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 or by the National Association of Securities Dealers, Inc. 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 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. 10 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 (unless the redemption date or the repurchase date, as the case may be, falls after a record date and on or 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). Notwithstanding the foregoing, if any Note (or portion thereof) is converted into Common Stock during the period after a record date for the payment of Interest to, but excluding, the next succeeding interest payment date and such Note (or portion thereof) has been called or tendered for redemption on a redemption date which occurs during such period, the Company shall not be required to pay interest on such interest payment date in respect of any such Note (or portion thereof). 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 wire transfer in immediately available funds, if such Person is entitled to Interest on aggregate principal in 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 May 15 or November 15 preceding the applicable June 1 or December 1 interest payment date, respectively. Any Interest on any Note which is payable, but is not punctually paid or duly provided for, on any June 1 or December 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: (a) 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 11 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 such holder's 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. (a) 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 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") and attested by the manual or facsimile signature of its Secretary or any of its Assistant Secretaries or its Treasurer or any of its Assistant Treasurers (which may be printed, engraved or otherwise reproduced thereon, by facsimile or otherwise). 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 17.12), 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 12 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 5.02 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 5.02. 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. 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 5.02. 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 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 3.02, (c) any Notes or portions thereof surrendered for conversion pursuant to Article 15, 13 (d) any Notes or portions thereof tendered for repurchase (and not withdrawn) pursuant to Section 3.05 or (e) any Notes or portions thereof tendered for repurchase (and not withdrawn) pursuant to Section 3.06. (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. (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 and a successor depositary has not been appointed by the Company within ninety days, (B) an Event of Default has occurred and the maturity of the Notes shall have been accelerated in accordance with Section 7.01 and any Noteholder shall have given written notice to the Company requesting the issuance of definitive Notes or (C) the Company, in its sole discretion, notifies the Trustee in writing that it no longer wishes to have all the Notes represented by Global Notes. 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. 14 (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 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 Section 2.05(d), 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 this Section 2.05(c), 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 Section 2.05(d), 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 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: 15 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) (OR ANY SUCCESSOR PROVISIONS); (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 HEADWATERS INCORPORATED 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 WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH 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 WELLS FARGO 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 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 16 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 HEADWATERS INCORPORATED 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 WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH 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 Equiserve Trust Company, N.A., 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 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 17 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 Company and 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 Noteholder 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. 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 18 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 which 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 surrendered 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 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 or payment or conversion or 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 or payment or conversion or 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 19 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 5.02 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 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 a 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. ARTICLE 3 REDEMPTION AND REPURCHASE OF NOTES Section 3.01. Redemption of Notes. (a) The Company may not redeem any Notes prior to June 1, 2007. On or after June 1, 2007 and prior to June 4, 2011 the Notes may be redeemed at the option of the Company, in whole or in part at any time and from time to time, subject to the conditions specified in paragraphs 7 and 8 of the Notes and 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 plus 20 the Make Whole Payment; 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. (b) The Make Whole Payment, if any, shall be paid on all Notes being redeemed by the Company on a Redemption Date on or after June 1, 2007 and prior to June 4, 2011, including any Notes that may have been converted after the date of the notice of redemption and prior to such Redemption Date. (c) The Company may elect to pay the Make Whole Payment or any portion thereof (A) in cash or, (B) subject to the fulfillment by the Company of the conditions set forth in Section 3.01 (e), by delivering the number of shares of Common Stock equal to (i) the Make Whole Payment (or any portion thereof that the Company elects to pay in shares of Common Stock) divided by (ii) 97.5% of the average of the Trading Price per share of Common Stock for the five consecutive Trading Days immediately preceding and including the third Trading Day prior to the Redemption Date. (d) Any issuance of shares of Common Stock in respect of the Make Whole Payment shall be deemed to have been effected immediately prior to the close of business on the Redemption Date and the Person or Persons in whose name or names any stock certificate or stock certificates representing shares of Common Stock shall be issuable upon such redemption shall be deemed to have become on the Redemption Date the holder or holders of record of the shares represented thereby; provided, however, that any surrender for redemption on a date when the stock transfer books of the Company shall be closed shall constitute the Person or Persons in whose name or names the stock certificate or stock certificates representing such shares are to be issued as the holder or holders of record of the shares represented thereby for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open. No payment or adjustment shall be made for dividends or distributions on any Common Stock declared prior to the Redemption Date. (e) No fractions of shares of Common Stock shall be issued upon payment of the Make Whole Payment. Instead of any fractional share of Common Stock that would otherwise be issued, the Company shall pay a cash adjustment in respect of such fraction (calculated to the nearest one-100th of a share) in an amount equal to the same fraction of the Trading Price of the Common Stock as of the Trading Day preceding the Redemption Date. (f) Any issuance and delivery of stock certificates representing shares of Common Stock on payment of the Make Whole Payment shall be made without charge to the Holder of Notes being redeemed or for any tax or duty in respect of the issuance or delivery of such stock certificates or the Notes represented thereby; provided, however, that the Company shall not be required to pay any tax or duty which may be payable in respect of (i) income of the Holder or (ii) any transfer involved in the issuance or delivery of stock certificates representing shares of Common Stock in a name other than that of the Holder of the Notes being redeemed, and no such issuance or delivery shall be made unless 21 the Persons requesting such issuance or delivery has paid to the Company the amount of any such tax or duty or has established, to the satisfaction of the Company, that such tax or duty has been paid. (g) Conditions to the Company's Election to Pay the Make Whole Payment in Common Stock. The Company may, at its option, pay the Make Whole Payment payable to Holders pursuant to Section 3.01(b) upon redemption of the Notes, in shares of Common Stock, if the following conditions are satisfied: (A) The shares of Common Stock to be so issued: (1) shall not require registration under any federal securities law before such shares may be freely transferable without being subject to any transfer restrictions under the Securities Act upon redemption or if such registration is required, such registration shall be completed and shall become effective prior to the Redemption Date; and (2) shall not require registration with, or approval of, any governmental authority under any state law or any other federal law before shares may be validly issued or delivered upon redemption or if such registration is required or such approval must be obtained, such registration shall be completed or such approval shall be obtained prior to the Redemption Date. (B) The shares of Common Stock to be listed upon redemption of Notes hereunder are, or shall have been, approved for listing on the Nasdaq National Market or the New York Stock Exchange or listed on another national securities exchange, in any case, prior to the Redemption Date. (C) All shares of Common Stock which may be issued upon redemption of Notes will be issued out of the Company's authorized but unissued Common Stock and will, upon issue, be duly and validly issued and fully paid and nonassessable and free of any preemptive or similar rights. (D) If any of the conditions set forth in clauses (a) through (c) of this Section 3.01(g) are not satisfied in accordance with the terms thereof, the Make Whole Payment shall be paid by the Company only in cash. (h) At any time on or after June 4, 2011 and prior to maturity, the Notes may be redeemed at the option of the Company, in whole or in part at any time and from time to time, 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. 22 Section 3.02. Notice of 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 notice of such redemption not fewer than twenty (20) nor more than sixty (60) days prior to the redemption date to each holder of Notes so 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 5.04) 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 10:00 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 23 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 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 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 convertible into Common Stock and, except as provided in Section 8.05 and Section 13.04, 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 24 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 15) surrendered by such purchasers for conversion, all as of immediately prior to the close of business on the date fixed for redemption (and the right to convert any 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 all of such holder's Notes, or any portion thereof that is an integral multiple of $1,000 principal amount, on the date (the "Designated Event Repurchase Date") specified by the 25 Company that is thirty (30) days after the date of the Designated Event Notice (as defined in Section 3.05(b)) of such Designated Event at a cash repurchase price equal to 100% of the principal amount thereof, together with accrued Interest, if any, to, but excluding, the Designated Event Repurchase Date; provided that if such Designated Event Repurchase 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 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 shall be made, at the option of the holder thereof, upon: (i) delivery to the Trustee (or other paying agent appointed by the Company) by a holder of a duly completed notice (the "Designated Event Repurchase Notice") in the form set forth on the reverse of the Note prior to the close of business on the Designated Event Expiration Time; and (ii) 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 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 as provided in Section 5.02, 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 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 Designated Event Repurchase Notice. The Company shall purchase from the holder thereof, pursuant to this Section 3.05, a portion of a Note, only if the principal amount of such portion is $1,000 or a whole 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 3.05 shall be consummated by the delivery of the consideration to be received by the holder promptly following the later of the Designated Event Repurchase Date and the time of the book-entry transfer or delivery of the Note. 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 shall have the right to withdraw such Designated Event Repurchase Notice at any time prior to the close of business on the Designated Event Expiration Time by delivery of a written notice of withdrawal to the Trustee (or other paying agent appointed by the Company) in accordance with Section 3.05(c) below. 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. 26 (b) On or before the fifteenth day after the occurrence of a Designated Event, 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 in the manner and with the effect set forth in the first paragraph of Section 3.02 (without regard for the time limits set forth therein). 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. 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 Business Day immediately preceding 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 Designated Event Expiration Time, 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 27 (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 5.04) 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 10:00 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 will be made promptly (but in no event more than five (5) Business Days) 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) 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 15.06 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 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 28 Section 3.05 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 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 the Holder. 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 thereof on June 1, 2011 (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 provisions of Section 3.07(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 5.02, 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, only if the principal amount of such portion is $1,000 or a whole 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. 29 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 Business Day immediately preceding 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: (a) state the repurchase price and the Repurchase Date to which the Company Repurchase Notice relates; (a) include a form of Repurchase Notice; (a) state the name and address of the Trustee (or other paying agent appointed by the Company); (a) state that Notes must be surrendered to the Trustee (or other paying agent appointed by the Company) to collect the repurchase price; 30 (a) 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 (a) state the CUSIP number of the Notes. The Company Repurchase Notice may be given by the Company or, at the Company's request, the Trustee shall give such Company Repurchase Notice in the Company's name and at the Company's expense. (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 Repurchase Notice. Upon receipt by the Trustee (or other paying agent appointed by the Company) of the Repurchase Notice specified in Section 3.06, 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 holder, 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) 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 3.06. Notes in respect of which a Repurchase Notice has been given by the holder thereof may not be converted pursuant to Article 15 hereof on or after the date of the delivery of such Repurchase Notice unless such Repurchase Notice has first been validly withdrawn. A 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 Repurchase Notice at any time prior to the close of business on the Business Day immediately preceding the Repurchase Date, specifying: (a) 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, (b) the principal amount of the Note with respect to which such notice of withdrawal is being submitted, and (c) the principal amount, if any, of such Note which remains subject to the original Repurchase Notice and which has been or will be delivered for repurchase by the Company. 31 Section 3.09. Deposit of Repurchase Price. (a) Prior to 10:00 a.m. (New York City Time) on the 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 5.04) 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 purchased as of the 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 the Repurchase Date, on or after the 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. Section 3.10. Notes Repurchased in Part. Upon presentation of any Note repurchased pursuant to Section 3.05 or 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 13.04, together with interest, if any, thereon, held by them for the payment of the repurchase price pursuant to Section 3.05 or 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 interest period commencing June 1, 2011, the Company will pay contingent interest ("Contingent Interest") to the 32 Noteholders for any six-month interest period if the Trading Price for each of the five Trading Days immediately preceding the first day of the applicable six-month interest period equals or exceeds 120% of the principal amount of the Notes. For any six-month interest period when Contingent Interest is payable, the Contingent Interest payable on each $1,000 principal amount of Note shall equal 0.40% 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 interest period used to determine whether Contingent Interest must be paid. The Trustee's sole responsibility pursuant to this Section 4.01 hereof 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 interest 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 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 interest 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 first Business Day of a six-month interest period for which Contingent Interest will be paid, the Company will disseminate a press release through Business Wire stating that Contingent Interest will be paid on the Notes and identifying such six-month interest period as the six-month interest period for which such Contingent Interest will be paid. ARTICLE 5 PARTICULAR COVENANTS OF THE COMPANY Section 5.01. Payment of Principal and Interest. The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of (including the redemption price upon redemption or the repurchase price upon repurchase, in each case pursuant to Article 3) 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 5.02. 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 or for presentation for payment or for conversion, redemption or repurchase and where notices and demands to or upon 33 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 or the corporate trust office of the Trustee in The Borough of Manhattan which office is located at Wells Fargo Corporate Trust, c/o The Depository Trust Company, 1st Floor, TADS Dept., 55 Water Street, New York, New York 10041. 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 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 each of the Corporate Trust Office and the office of agency of the Trustee in The Borough of Manhattan, 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 8.10(a) and the third paragraph of Section 8.11. 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 5.03. 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 8.10, a Trustee, so that there shall at all times be a Trustee hereunder. Section 5.04. 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 5.04: (a) 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; (a) 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 34 (a) 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, on or before each due date of the principal 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; provided that if such deposit is made on the due date, such deposit shall be received by the paying agent by 10:00 a.m. New York City time, on such date. (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 5.04 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 5.04, 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 5.04 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 5.04 is subject to Sections 13.03 and 13.04. 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 5.05. Existence. Subject to Article 12, 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 5.06. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business or the business of any Significant Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided that nothing in this Section shall prevent the Company from discontinuing the 35 operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any subsidiary and not disadvantageous in any material respect to the Noteholders. Section 5.07. Payment of Taxes and Other Claims. The Company will pay or discharge, or cause to be paid or discharged, before the same may become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon the Company or any Significant Subsidiary or upon the income, profits or property of the Company or any Significant Subsidiary, (ii) all claims for labor, materials and supplies which, if unpaid, might by law become a lien or charge upon the property of the Company or any Significant Subsidiary and (iii) all stamp taxes and other duties, if any, which may be imposed by the United States or any political subdivision thereof or therein in connection with the issuance, transfer, exchange, conversion, redemption or repurchase of any Notes or with respect to this Indenture; provided that, in the case of clauses (i) and (ii), the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim (A) if the failure to do so will not, in the aggregate, have a material adverse impact on the Company, or (B) if the amount, applicability or validity is being contested in good faith by appropriate proceedings. Section 5.08. 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 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 5.09. 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 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 36 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 5.10. 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, forthwith 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. Any notice required to be given under this Section 5.10 shall be delivered to a Responsible Officer of the Trustee at its Corporate Trust Office. Section 5.11. Limitation on Senior Subordinated Indebtedness. The Company will not incur any Indebtedness that is subordinate in right of payment to any Senior Indebtedness of the Company unless such Indebtedness is pari passu with, or subordinated in right of payment to, the Notes. Section 5.12. 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 ("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 the 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 5.13. 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 37 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: Headwaters Incorporated, 10653 South Riverfront Parkway, Suite 300, South Jordan, UT 84095, Attention: Harlan M. Hatfield, General Counsel. Section 5.14. 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 6 NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE Section 6.01. 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 January 1 and July 1 in each year beginning with July 1, 2004, and at such other times as the Trustee may request in 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 6.02. 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 6.01 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 6.01 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. 38 (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 6.03. Reports by Trustee. (a) Within sixty (60) days after August 1 of each year commencing with the year 2004, the Trustee shall transmit to holders of Notes such reports dated as of August 1 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 (if applicable) 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 6.04. Reports by Company. The Company shall file with the Trustee (and the Commission if at any time after the Indenture becomes qualified under 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 filed with 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 Certificates). ARTICLE 7 REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT Section 7.01. 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 any installment of Interest upon any of the Notes as and when the same shall become due and payable, 39 whether or not such payment shall be prohibited by Article 16, and continuance of such default for a period of thirty (30) days; or (b) 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, repurchase or otherwise, in each case pursuant to Article 3, by acceleration or otherwise, whether or not such payment shall be prohibited by Article 16; or (c) default in the Company's obligation to provide a Designated Event Notice upon a Designated Event as provided in Section 3.05; or (d) 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 7.01 specifically dealt 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 9.04; or (e) 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 (f) 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; then, and in each and every such case (other than an Event of Default specified in Section 7.01(e) or 7.01(f)), 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 9.04, by notice in writing to the Company (and to the Trustee if given by Noteholders), may declare the principal of all the Notes, the Interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Notes contained to the contrary notwithstanding. If an Event of Default specified in 40 Section 7.01(e) or 7.01(f) occurs, the principal of all the Notes and the Interest 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 (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 8.06, 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 7.07, 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 7.02. 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, by or 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 8.06. 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. 41 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 7.02, 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 8.06, 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 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. 42 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 7.03. Application of Monies Collected by Trustee. Any monies or property collected by the Trustee pursuant to this Article 7 shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such monies or property, upon presentation of the several Notes and either (i) stamping thereon the payment, if only partially paid, or (ii) upon surrender thereof, if fully paid. FIRST: To the payment of all amounts due the Trustee under Section 8.06; SECOND: To holders of Senior Indebtedness of the Company to the extent required by Article 16; THIRD: 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; FOURTH: 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 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 FIFTH: To the payment of the remainder, if any, to the Company. Section 7.04. Proceedings by Noteholder. No holder of any Note 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 43 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 7.07; 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 holders of Notes 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 holders of Notes (except as otherwise provided herein). For the protection and enforcement of this Section 7.04 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 holder of any Note to receive payment of the principal of (including the redemption price upon redemption pursuant to Article 7) 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 after such respective dates against the Company shall not be impaired or affected without the consent of such holder. Anything in this Indenture or the Notes to the contrary notwithstanding, the holder of any Note, without the consent of either the Trustee or the holder of any other Note, 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 7.05. 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 7.06. Remedies Cumulative and Continuing. Except as provided in Section 2.06, all powers and remedies given by this Article 7 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 holders of the Notes, 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 holder of any of the Notes 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 7.04, every power and remedy 44 given by this Article 7 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 7.07. 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 9.04 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 9.04 may, on behalf of the holders of all of the Notes, waive any past Default or Event of 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 pursuant to Article 3, (iv) a default in the payment of the repurchase price pursuant to Article 3 or (v) a default in respect of a covenant or provisions hereof which under Article 11 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 or other Default or Event of Default or impair any right consequent thereon. Whenever any Default or Event of Default hereunder shall have been waived as permitted by this Section 7.07, said 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 or other Default or Event of Default or impair any right consequent thereon. Section 7.08. Notice of Default. The Trustee shall, within ninety (90) days after a Responsible Officer of the Trustee has actual 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 7.09. Undertaking to Pay Costs. All parties to this Indenture agree, and each holder of any Note 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 45 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 7.09 (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 9.04, 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 15. ARTICLE 8 THE TRUSTEE Section 8.01. 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 such person's 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, duties 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 46 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 9.04 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; (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 Event of Default hereunder unless it shall have been notified in writing of such 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 8.02. Reliance on Documents, Opinions, Etc. Except as otherwise provided in Section 8.01: (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, debenture, 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; 47 (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; (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, debenture 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 expense of the Company, and shall incur no 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; and 48 (j) any permissive right or authority granted to the Trustee shall not be construed as a mandatory duty. Section 8.03. 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 8.04. 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 8.05. Monies to Be Held in Trust. Subject to the provisions of Section 13.04, 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 8.06. 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 shall be determined to have been caused by its own negligence or willful misconduct. The Company also covenants to indemnify the Trustee and any predecessor Trustee (or 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, bad faith or willful misconduct 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) of liability in the premises. The obligations of the Company under 49 this Section 8.06 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. When the Trustee and its agents and any authenticating agent incur expenses or render services after an Event of Default specified in Section 7.01(e) or (f) 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 8.07. Officer's Certificate as Evidence. Except as otherwise provided in Section 8.01, 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 8.08. 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 (i) eliminate such interest within 90 days, (ii) apply to the Commission for permission to continue as trustee or (iii) resign, in each case to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. Section 8.09. 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 8.09, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 8.10. 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 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 50 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, petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor trustee, or, 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 7.09, 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 8.08 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 8.09 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 7.09, 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 such Noteholder 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. (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 8.10(a) provided, may petition any court of competent jurisdiction for an appointment of a successor trustee. 51 (d) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 8.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 8.11. (e) Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 8.06 shall continue for the benefit of the retiring Trustee. Section 8.11. Acceptance by Successor Trustee. Any successor trustee appointed as provided in Section 8.10 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 8.06, 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 8.06. No successor trustee shall accept appointment as provided in this Section 8.11 unless, at the time of such acceptance, such successor trustee shall be qualified under the provisions of Section 8.08 and be eligible under the provisions of Section 8.09. Upon acceptance of appointment by a successor trustee as provided in this Section 8.11, 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 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 8.12. 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 8.08 and eligible under the provisions of Section 8.09. 52 In any case where 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 to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 8.13. 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). Section 8.14. Trustee's Application for Instructions from the Company. Any application by the Trustee for written instructions from the Company (other than with regard to any action proposed to be taken or omitted to be taken by the Trustee that affects the rights of the holders of the Notes under this Indenture) may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three (3) Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Trustee shall have received written instructions in response to such application specifying the action to be taken or omitted. ARTICLE 9 THE NOTEHOLDERS Section 9.01. 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 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 10, or (c) by a combination of such instrument or 53 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 9.02. Proof of Execution by Noteholders. Subject to the provisions of Sections 8.01, 8.02 and 10.05, 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 10.06. Section 9.03. 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 such holder's 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 9.04. 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 9.04 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Notes and that the 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, 54 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 8.01, 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 9.05. Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 9.01, 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 9.02, 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 10 MEETINGS OF NOTEHOLDERS Section 10.01. 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 10 for any of the following purposes: (a) 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 7; (b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article 8; (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 11.02; or (d) 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 10.02. Call of Meetings by Trustee. The Trustee may at any time call a meeting of Noteholders to take any action specified in Section 10.01, 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 55 proposed to be taken at such meeting and the establishment of any record date pursuant to Section 9.01, 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 twenty (20) 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 10.03. 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 10.01 by mailing notice thereof as provided in Section 10.02. Section 10.04. 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 10.05. 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, 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 10.03, 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. 56 Subject to the provisions of Section 9.04, 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 10.02 or 10.03 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 majority of the aggregate principal amount of Notes outstanding, the latter of which shall constitute a quorum, and the meeting may be held as so adjourned without further notice. Section 10.06. 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 10.02. 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. Section 10.07. No Delay of Rights by Meeting. Nothing contained in this Article 10 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. 57 ARTICLE 11 SUPPLEMENTAL INDENTURES Section 11.01. 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 15.06 and the repurchase obligations of the Company pursuant to the requirements of Section 3.05(e); (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 12; (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; (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 make such other provisions in regard to matters or questions arising under this Indenture that shall not materially 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; 58 (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; (i) to increase, from time to time, the per annum interest rate on the Notes for any period; or (j) to make any changes to Article 16 that would limit or terminate the benefits available to any holder of Senior Indebtedness of the Company. 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 11.01 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 11.02. Notwithstanding any other provision of the 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 11.02. Supplemental Indenture with Consent of Noteholders. With the consent (evidenced as provided in Article 9) 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 (i) extend the fixed maturity of any Note, (ii) reduce the rate or extend the time of payment of Interest 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 at the option of a Noteholder on a Repurchase Date in a manner adverse to the holders of Notes, (v) change the obligation of the Company to repurchase any Note upon the happening of a Designated Event in a manner adverse to the holders of Notes, (vi) impair the right of any Noteholder to institute suit for the payment thereof, (vii) make the principal thereof or Interest thereon payable in any coin or currency other than that provided in the Notes, (viii) impair the right to convert the Notes into Common Stock or reduce the number of shares of Common Stock or any other property receivable by a Noteholder upon conversion subject to the terms set forth herein, including Section 15.06, in each case, without the consent of 59 the holder of each Note so affected, (ix) modify any of the provisions of this Section 11.02 or Section 7.07, 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 5.02, (xi) reduce the quorum or voting requirements set forth in Article 10, (xii) make any change in Article 16 that adversely affects the rights of any Noteholder under Article 16 or (xiii) reduce the aforesaid percentage of Notes, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of all Notes then outstanding. 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 11.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Section 11.03. Effect of Supplemental Indenture. Any supplemental indenture executed pursuant to the provisions of this Article 11 shall comply with the Trust Indenture Act, as then in effect, provided that this Section 11.03 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 this Article 11, 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 11.04. Notation on Notes. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article 11 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 60 by the Company, authenticated by the Trustee (or an authenticating agent duly appointed by the Trustee pursuant to Section 17.11) and delivered in exchange for the Notes then outstanding, upon surrender of such Notes then outstanding. Section 11.05. 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 11 and is otherwise authorized or permitted by this Indenture. ARTICLE 12 CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE Section 12.01. Company May Consolidate on Certain Terms. Subject to the provisions of Section 12.02, 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 a corporation 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 and substance to the Trustee, executed and delivered to the Trustee by the Person (if other than the Company and other than a Person who is a successor to the Company's obligations hereunder and under the Note by operation of law) 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 15.06; 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 12.02. 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 61 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 Headwaters Incorporated 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, 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 12 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 12.03. 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 12. ARTICLE 13 SATISFACTION AND DISCHARGE OF INDENTURE Section 13.01. Discharge of Indenture. When (a) 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 (b) all the Notes not theretofore canceled or delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, funds sufficient to pay at maturity or upon redemption of 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 Interest due or to become due to such date of maturity or redemption date, as the case may be, accompanied by a verification report, as to the sufficiency of the deposited amount, from an independent certified 62 accountant or other financial professional satisfactory to the Trustee, 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) remaining rights of registration of transfer, substitution and exchange and conversion of Notes, (ii) 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 (iii) 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. The Trustee shall hold in trust money or Common Stock deposited with it pursuant to this Article 13. It shall apply the deposited money and Common Stock through the Paying Agent and in accordance with this Indenture to the payment of principal of and Interest on the Notes. Money and Common Stock so held in trust are not subject to Article 16. Section 13.02. Deposited Monies to Be Held in Trust by Trustee. Subject to Section 13.04, all monies deposited with the Trustee pursuant to Section 13.01 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 or redemption of which such monies have been deposited with the Trustee of all sums due and to become due thereon for principal and Interest. Section 13.03. 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 13.04. 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 or Interest on Notes and not applied but remaining unclaimed by the holders of Notes for two years (or such shorter period of time under applicable escheat law) 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. 63 Section 13.05. Reinstatement. If the Trustee or the paying agent is unable to apply any money in accordance with Section 13.02 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 13.01 until such time as the Trustee or the paying agent is permitted to apply all such money in accordance with Section 13.02; 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 14 IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS Section 14.01. 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, shareholder, 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 15 CONVERSION OF NOTES Section 15.01. Right to Convert. (a) Subject to and upon compliance with the provisions of this Indenture, prior to the close of business on June 1, 2016, the holder of any Note 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 15.01 and in the manner provided in Section 15.02. The Notes shall be convertible only upon the occurrence of one of the following events: (i) prior to June 1, 2011, during any Calendar Quarter commencing after June 30, 2004, if the Closing Sale Price of the Common Stock exceeds 130% 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 64 being understood for purposes of this Section 15.01(a)(i) that the Conversion Price in effect at the close of business on each of the 30 consecutive Trading Days should be used); (ii) at any time on or after June 1, 2011, if the Closing Sale Price of the Common Stock exceeds 130% of the then-effective Conversion Price on any Trading Day; (iii) during any period in which (1) the credit rating assigned to the Notes by either Standard & Poor's Rating Services ("S&P") or Moody's Investors Service, Inc. ("Moody's"), if either S&P or Moody's assigns a credit rating to the Notes, is three or more rating subcategories below the initial credit rating assigned by S&P or Moody's, as the case may be, or (2) if the Notes are previously assigned a credit rating by either S&P or Moody's, the Notes are no longer rated by at least one of, or ratings thereof are suspended by both, S&P and Moody's. (iv) during the five Business Day period immediately following any five consecutive Trading Day period (the "Measurement 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 (iv) may be made 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; (v) 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 Business Day immediately preceding the redemption date; or (vi) as provided in Section (b) of this Section 15.01. 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 specified in Sections 15.01(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 15.01, 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 15.01 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 65 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 15.01(a)(iv) 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 15.01(a)(iv) 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 15.01(a)(i), (ii) and (iv) 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 15.01; provided that nothing herein shall be construed to relieve the Trustee of its duties pursuant to Sections 15.01(a)(i), (ii) and Section 15.01(a)(iv) 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 the record date for the determination of the shareholders entitled to receive 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 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 15.01(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 66 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 Expiration Time. 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, 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 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 15. Section 15.02. Exercise of Conversion Privilege; Issuance of Common Stock on Conversion; No Adjustment for Interest or Dividends. 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 the form entitled "Conversion Notice" on the reverse thereof, duly completed and manually signed, together with such Notes duly endorsed for transfer, accompanied by the funds, if any, required by the penultimate paragraph of this Section 15.02. 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 15.07. 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 67 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 15.02 and any transfer taxes if required pursuant to Section 15.07. 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 5.02 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 15 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 provided in Section 15.03. 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 such holder, 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 15.02 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. 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 on or prior to the next interest payment date, (2) if the Company has specified a Designed Event Repurchase Date that is after a record date and on or prior to the next interest payment date or (3) to the extent of any overdue Interest, if any overdue Interest exists at the time of conversion with respect to such Note. Except as provided above in this Section 15.02, 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 15. 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 68 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. Upon the conversion of a Note, that portion of the accrued but unpaid Interest, including accrued Contingent Interest, if any, and Additional Interest, if any, to the Conversion Date, with respect to the converted Note shall not be canceled, 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 the Company's obligation to pay the principal amount of the converted Note, the accrued but unpaid Interest, including Contingent Interest, if any, and Additional 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 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. Section 15.03. 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 Closing Sale Price on the last Trading Day immediately preceding the Conversion Date thereof to the holder of Notes. . Section 15.04. Conversion Rate. Each $1,000 principal amount of the Notes shall be convertible into the number of shares of Common Stock specified in the form of Note (herein called the "Conversion Rate") attached as Exhibit A hereto, subject to adjustment as provided in this Article 15. Section 15.05. 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 69 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 shareholders 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 fixed for the determination of shareholders 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 paragraph (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 15.05(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 shareholders entitled to receive such rights or warrants) to subscribe for or purchase shares of Common Stock at a price per share less than the average of the Closing Sale Prices of the Common Stock for the 10 Trading Days immediately preceding the date such distribution is first publicly announced by the Company, 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 shareholders 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 shareholders 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 shareholders 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 a price equal to the average of the Closing Sale Prices of the Common Stock for the 10 Trading Days immediately preceding the date such distribution is first publicly announced by the Company, 70 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 shareholders 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 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 shareholders 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 a price less than the average of the Closing Sale Prices of the Common Stock for the 10 Trading Days immediately preceding the date such distribution is first publicly announced by the Company, 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 15.05(b), and excluding any dividend or distribution (x) paid exclusively in cash or (y) referred to in Section 15.05(a) (any of the foregoing hereinafter in this Section 15.05(d) called the "Securities")), then, in each such case (unless the Company elects to reserve such Securities for distribution to the Noteholders upon the conversion of the Notes so that any such holder converting Notes will receive upon such conversion, in addition to the shares of Common Stock to which such holder is entitled, the amount and kind of such Securities which such holder would have received if such holder had converted its Notes into Common Stock immediately prior to the Record Date for such distribution of the Securities) 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, 71 (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, 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 15.05(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. Notwithstanding the foregoing, if the Securities distributed by the Company to all holders of its Common Stock consist of capital stock of, or similar equity interests in, a Subsidiary or other business unit, 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 sum of (A) 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 Time plus (B) the Fair Market Value of the securities distributed in respect of each share of Common Stock for which this Section 15.05(d) applies and 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 (where such closing sale prices are available) for the ten (10) Trading Days commencing on and including the fifth Trading Day after the Ex-Dividend Time; and (ii) the denominator of which shall be 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 Time, such adjustment to become effective immediately prior to the opening of business on the day following such Record Date; provided that the Company may in lieu of the foregoing adjustment make adequate provision so that each Noteholder shall 72 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 with respect to such distribution. 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 15.05 (and no adjustment to the Conversion Rate under this Section 15.05 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 15.05(d). 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 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 15.05 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. No adjustment of the Conversion Rate shall be made pursuant to this Section 15.05(d) in respect of rights or warrants distributed or deemed distributed on any Trigger Event to the extent that such rights or warrants are actually distributed, or reserved by the Company for distribution to holders of Notes upon conversion by such holders of Notes to Common Stock. For purposes of this Section 15.05(d) and Sections 15.05(a) and (b), any dividend or distribution to which this Section 15.05(d) is applicable that also includes shares of Common Stock, or rights or warrants to subscribe for or purchase shares of Common Stock (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 15.05(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 73 15.05(a) and 15.05(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 shareholders entitled to receive such dividend or other distribution", "the date fixed for the determination of shareholders entitled to receive such rights or warrants" and "the date fixed for such determination" within the meaning of Sections 15.05(a) and 15.05(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 15.05(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), 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; 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. (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 shareholders 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 74 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 shareholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly 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 15.05, 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 paragraph, 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 15.05 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 75 the impact of such issuance, distribution, subdivision or combination on the Closing Sale Price of the Common Stock during such period. (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 shareholders 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 (x) if the applicable security is quoted on the Nasdaq National Market, a day on which trades may be made thereon, (y) if the applicable security is listed or admitted for trading on the American Stock Exchange, New York Stock Exchange or another national securities exchange, a day on which the American Stock Exchange, New York Stock Exchange or another national securities exchange is open for business, or (z) if the applicable security is not so listed, admitted for trading or quoted, any day other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (h) The Company may make such increases in the Conversion Rate, in addition to those required by Section 15.05(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 and Nasdaq Marketplace rules, 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 15.05(i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 15 shall be made 76 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 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 15.05 provides that an adjustment shall become effective immediately after (1) a record date or Record Date for an event, (2) the date fixed for the determination of shareholders entitled to receive a dividend or distribution pursuant to Section 15.05(a), (3) a date fixed for the determination of shareholders entitled to receive rights or warrants pursuant to Section 15.05(b), or (4) the Expiration Time for any tender or exchange offer pursuant to Section 15.05(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 15.03. For purposes of this Section 15.05(l), 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, 77 (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 15.05, 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 15.06. 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 (x) a subdivision or combination to which Section 15.05(c) applies) 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, (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 such holder's 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 ("Non-electing share"), then for the purposes of this Section 15.06 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 be the kind and amount so 78 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 15. 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 15.06 applies to any event or occurrence, Section 15.05 shall not apply. Section 15.07. 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 15.08. 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 by the Company and free from all taxes, liens and charges with respect to the issue thereof. The Company covenants that, 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. 79 The Company further covenants that, if at any time the Common Stock shall be listed on the Nasdaq National Market or any other national securities exchange or 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 15.09. 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 15. 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 15.06 relating either to the kind or amount of shares of stock or securities or property (including cash) receivable by Noteholders upon the conversion of their Notes after any event referred to in such Section 15.06 or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 8.01, 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 15.10. 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 15.05; 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 80 (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 shareholders 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 such holder's 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 15.11. Shareholder Rights Plans. Each share of Common Stock issued upon conversion of Notes pursuant to this Article 15 shall be entitled to 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 15.05(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 16 SUBORDINATION Section 16.01. Agreement to Subordinate. The Company agrees, and each Noteholder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article 16, to the prior payment in full of all Senior Indebtedness of the Company and that the subordination is for the benefit of and enforceable by the 81 holders of such Senior Indebtedness. The Notes shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company, senior in right of payment to all existing and future Subordinated Indebtedness, and only Indebtedness of the Company that is Senior Indebtedness of the Company shall rank senior to the Notes in accordance with the provisions set forth herein. For purposes of this Article 16, the Indebtedness evidenced by the Notes shall be deemed to include any Additional Interest. All provisions of this Article 16 shall be subject to Section 16.12. Section 16.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (i) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full of such Senior Indebtedness before Noteholders shall be entitled to receive any payment of principal of or interest (including Contingent Interest) on the Notes; and (ii) until the Senior Indebtedness of the Company is paid in full, any payment or distribution to which Noteholders would be entitled but for this Article 16 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Noteholders may receive any Permitted Junior Securities (in the case of clauses (i) or (ii). Section 16.03. Default on Senior Indebtedness. (a) The Company may not make any payment or distribution to the Trustee or any Noteholder in respect of the amounts owed in respect of the Notes and may not acquire from the Trustee or any Noteholder any Notes for cash or property (other than Permitted Junior Securities) until all principal and other amounts owing in respect of Designated Senior Indebtedness have been paid in full if: (i) a default in the payment of any principal or other amounts owed in respect of Designated Senior Indebtedness occurs; or (ii) a default, other than a payment default, on Designated Senior Indebtedness occurs and is continuing that then permits holders of the Designated Senior Indebtedness to accelerate its maturity, or in the case of a lease, 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 under the lease, and the Trustee receives a notice of the default (a "Payment Blockage Notice") from the holder or holders of the Designated Senior Indebtedness or the trustee, agent or Representative acting on behalf of such Designated Senior Indebtedness. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until (A) at least 365 days shall have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (B) all scheduled payments of principal, any premium and Additional 82 Interest, and interest (including Contingent Interest) on the Notes that have come due have been paid in full in cash. No nonpayment 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. (b) The Company may and shall resume payments on and distributions in respect of the Notes: (i) in the case of a default referred to in clause (i) of paragraph (a) above, the date upon which the default is cured or waived; (ii) in the case of a default referred to in clause (ii) of paragraph (a) above, upon the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Indebtedness has been accelerated, or in the case of a lease, 179 days after notice is received if the Company has 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 under the lease; and (iii) in either case, upon the earlier of the payment in full of the obligations outstanding under and the satisfaction and discharge or defeasance of Designated Senior Indebtedness, if this Article 15 otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. In the case of clause (b), upon the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. Section 16.04. Acceleration of Payment of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee (provided, that the Trustee shall have received written notice from the Company, on which notice the Trustee shall be entitled to conclusively rely) shall promptly notify the holders of the Designated Senior Indebtedness of the Company (or their Representative) of the acceleration. If any Designated Senior Indebtedness of the Company is outstanding, the Company may not pay the Notes (other than Permitted Junior Securities) until five Business Days after such holders or the Representative of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if this Article 16 otherwise permits payment at that time. Section 16.05. When Distribution Must Be Paid Over. If a distribution is made to the Trustee or to the Noteholders that because of this Article 16 should not have been made to them, the Trustee or the Noteholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. Section 16.06. Subrogation. After all Senior Indebtedness of the Company is paid in full and until the Notes are paid in full, Noteholders shall be subrogated to 83 the rights of holders of such Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article 16 to holders of such Senior Indebtedness which otherwise would have been made to Noteholders is not, as between the Company and Noteholders, a payment by the Company on such Senior Indebtedness. Section 16.07. Relative Rights. This Article 16 defines the relative rights of Noteholders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall: (i) impair, as between the Company and Noteholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and Interest on the Notes in accordance with their terms; or (ii) prevent the Trustee or any Noteholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to Noteholders. Section 16.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company, the Trustee or any Noteholders or by its or their failure to comply with this Indenture. Section 16.09. Rights of Trustee and Paying Agent. Notwithstanding Section 16.03, the Trustee or Paying Agent may continue to make payments on the Notes and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives written notice that payments may not be made under this Article 16. The Company, the Note Registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of the Company may give the notice; provided, however, that, if an issue of Senior Indebtedness of the Company has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Note Registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 16 with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 8 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 16 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 8.06 or any other Section of this Indenture. 84 Section 16.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any). Section 16.11. Article 16 Not to Prevent Events of Default or Limit Right to Accelerate. The failure to make a payment pursuant to the Notes by reason of any provision in this Article 16 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 16 shall have any effect on the right of the Noteholders or the Trustee to accelerate the maturity of the Notes. Section 16.12. Trust Monies Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money held in trust under Article 13 by the Trustee for the payment of principal of and Interest on the Notes shall not be subordinated to the prior payment of any Senior Indebtedness of the Company or subject to the restrictions set forth in this Article 16, and none of the Noteholders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company. Section 16.13. Trustee Entitled to Rely. Upon any payment or distribution pursuant to this Article 16, the Trustee and the Noteholders shall be entitled to conclusively rely (a) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 16.02 are pending, (b) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Noteholders or (c) upon the Representatives for the holders of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such 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 16. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article 16, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 16, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 8.01 and 8.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 16. Section 16.14. Trustee to Effectuate Subordination. Each Noteholder by accepting a Note authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Noteholders and the holders of Senior Indebtedness of the Company as provided in this Article 16 and appoints the Trustee as attorney-in-fact for any and all such purposes. Section 16.15. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and shall not be liable to any such holders if it 85 shall mistakenly pay over or distribute to Noteholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article 16 or otherwise. Section 16.16. Reliance by Noteholders of Senior Indebtedness on Subordination Provisions. Each Noteholder by accepting a Note acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. 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 Headwaters Incorporated, 10653 South Riverfront Parkway, Suite 300, South Jordan, Utah 84095, Attention: Harlan M. Hatfield, General Counsel, Telecopier No.: (801) 984-9430. 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: Wells Fargo Bank, N.A. Sixth & Marquette; N9303-120 Minneapolis, MN 55479 Attn: Corporate Trust Services Fax: (612) 667-9825. The Trustee, by notice to the Company, may designate additional or different addresses for subsequent notices or communications. 86 Any notice or communication mailed to a Noteholder shall be mailed to such holder by first-class mail, postage prepaid, at his address as it appears on the Note Register and shall be sufficiently given to such holder 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 governed by and 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 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 date, and no Interest shall accrue for the period from and after such date. Section 17.07. Company Responsible for Making Calculations. Except as specified in Section 4.01 and in relation to Section 15.01(a)(iv), the Company will be responsible for making all calculations required under the Notes. The company will make these calculations in good faith and absent manifest error, these calculations will be final and binding on the Noteholders. Promptly after the calculation thereof, the Company will provide to each of the Trustee and the Conversion Agent and Officer's Certificate setting forth a schedule of its calculations, and each of the Trustee and the Conversion 87 Agent is entitled to conclusively rely upon the accuracy of such calculations without independent verification. The Trustee will forward the Company's calculations any Holder upon the written request of such Holder. Section 17.08. 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 Act; provided that this Section 17.08 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 17.09. No Security Interest Created. Nothing in this Indenture or in the Notes, express 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 17.10. 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 17.11. 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 17.12. 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 15.02, 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 88 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 8.09. 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 17.12, 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 8.02, 8.03, 8.04 and 9.03 and this Section 17.12 shall be applicable to any authenticating agent. Section 17.13. 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 17.14. 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. 89 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed. HEADWATERS INCORPORATED By: /s/ Steven G. Stewart --------------------------------------- Name: Steven G. Stewart Title: CFO WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By: /s/ Timothy P. Mowdy --------------------------------------- Name: Timothy P. Mowdy Title: Assistant Vice President 90 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 HEADWATERS INCORPORATED 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 WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH 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 WELLS FARGO 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. HEADWATERS INCORPORATED 2-7/8% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2016 CUSIP: 42210PAA0 No. 1 $150,000,000 Headwaters Incorporated, a corporation duly organized and validly existing under the laws of the State of Delaware (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 as set forth on Schedule I hereto on June 1, 2016, 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, semi-annually on June 1 and December 1 of each year, commencing December 1, 2004, on said principal sum at said office or agency, in like coin or currency, at the rate per annum of 2-7/8%, from and including June 1, 2004 or from the most recent Interest Payment Date to which interest has been paid or duly provided for to, but excluding the following Interest Payment Date. Contingent Interest, if any, will accrue for any six month interest period and be payable to holders of this Note 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 the Note pursuant to the Indenture on any June 1 or December 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 May 15 or November 15 (whether or not a Business Day) next preceding such June 1 or December 1, as provided in the Indenture; provided that any such interest not punctually paid or duly provided for shall be payable as provided in the Indenture. 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, including Contingent Interest, if any, and Additional Interest, if any, 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. 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 governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof. A-2 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. A-3 IN WITNESS WHEREOF, the Company has caused this Note to be duly executed. HEADWATERS INCORPORATED By:_______________________________ Name: Title: Attest: By:_______________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes described in the within-named Indenture. WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By:_______________________________ Authorized Signatory or By:_______________________________ As Authenticating Agent (if different from Trustee) By:_______________________________ Authorized Signatory A-4 EX-10.88 4 ex1088form8k070704.txt ASSET PURCHASE AGREEMENT Exhibit 10.88 ================================================================================ ASSET PURCHASE AGREEMENT BY AND AMONG HEADWATERS INCORPORATED, ACM BLOCK & BRICK, LP, AND SOUTHWEST CONCRETE PRODUCTS, L.P., JUNE 17, 2004 ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE 1 SALE OF ASSETS........................................1 Section 1.1. Assets to be Sold................................1 Section 1.2. Excluded Assets..................................2 ARTICLE 2 ASSUMPTION OF LIABILITIES.............................3 Section 2.1. Liabilities Assumed by Buyer.....................3 Section 2.2. Liabilities Not Assumed by Buyer.................3 ARTICLE 3 PURCHASE PRICE AND PAYMENT............................4 Section 3.1. Purchase Price...................................4 Section 3.2. Earn-Out Consideration...........................4 Section 3.3. Payment of Purchase Price........................4 Section 3.4. EBITDA Calculations..............................5 Section 3.5. Purchase Price Allocation........................6 ARTICLE 4 CLOSING...............................................6 Section 4.1. Closing..........................................6 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER..............6 Section 5.1. Organization and Qualification...................6 Section 5.2. Authorization and Noncontravention...............7 Section 5.3. Certificate of Limited Partnership and Partnership Agreement..........................7 Section 5.4 Financial Statements.............................7 Section 5.5 Employees........................................8 Section 5.6 Absence of Certain Changes.......................9 Section 5.7 Contracts........................................9 Section 5.8 Government Contracts............................10 Section 5.9 Title and Related Matters.......................11 Section 5.10 Litigation......................................11 Section 5.11 Tax Matters.....................................11 Section 5.12 Compliance with Law and Certifications..........12 Section 5.13 ERISA and Related Matters.......................12 Section 5.14 Intellectual Property...........................14 Section 5.15 Customer Warranties.............................16 Section 5.16 Products Liability..............................16 Section 5.17 Environmental Matters...........................16 Section 5.18 Capital Expenditures and Investments............18 Section 5.19 Dealings with Affiliates........................18 -i- Section 5.20 Insurance.......................................18 Section 5.21 Accounts Receivable; Inventories................18 Section 5.22 Brokerage.......................................19 Section 5.23 Customers and Suppliers.........................19 Section 5.24 Permits.........................................19 Section 5.25 Utilities.......................................19 Section 5.26 Improper and Other Payments.....................19 Section 5.27 Projections.....................................20 Section 5.28 Entire Investment in the Business; No Other Business......................................20 Section 5.29 Operations of Sellers...........................20 Section 5.30 Tangible Property...............................20 Section 5.31 Real Property...................................21 Section 5.32 Bank Accounts; Lockboxes........................22 Section 5.33 Disclosure......................................22 Section 5.34 Disclaimer......................................22 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT...22 Section 6.1. Corporate and Partnership Organization, Etc.....23 Section 6.2 Authorization, Etc..............................23 Section 6.3 No Violation....................................23 ARTICLE 7 OTHER AGREEMENTS.....................................23 Section 7.1 Deliveries After Closing........................23 Section 7.2 Confidentiality.................................23 Section 7.3 Public Announcements............................24 Section 7.4 Tax Cooperation.................................24 Section 7.5 Liability for Taxes.............................25 Section 7.6 Name Change.....................................25 Section 7.7 Rights to Refunds...............................26 Section 7.8 Mail Received After Closing.....................26 Section 7.9 Prorations......................................26 Section 7.10 Post-Closing Operation of Business..............26 ARTICLE 8 INDEMNIFICATION......................................26 Section 8.1 Survival........................................26 Section 8.2 Limitations.....................................27 Section 8.3 Indemnification by Seller.......................27 Section 8.4 Indemnification by Buyer and Parent.............28 Section 8.5 Third-Party Claims..............................28 Section 8.6 Recourse for Certain Seller Indemnification Obligations; Purchase Price Adjustment........29 ARTICLE 9. MISCELLANEOUS PROVISIONS.............................30 Section 9.1 Amendment and Modification......................30 -ii- Section 9.2 Waiver of Compliance; Consents..................30 Section 9.3 Certain Definitions.............................30 Section 9.4 Notices.........................................37 Section 9.5 Assignment......................................38 Section 9.6 Governing Law...................................39 Section 9.7 Counterparts....................................39 Section 9.8 Headings........................................39 Section 9.9 Entire Agreement................................39 Section 9.10 Injunctive Relief...............................39 Section 9.11 Delays or Omissions.............................39 Section 9.12 Severability....................................39 Section 9.13 Expenses........................................40 Section 9.14 No Third Party Beneficiaries....................40 Section 9.15 Schedules.......................................40 Section 9.16 No Strict Construction..........................40 Section 9.17 Interpretation..................................40 Section 9.18 Waiver of Jury Trial............................40 Section 9.19 CONSENT TO JURISDICTION; SERVICE OF PROCESS.....41 Section 9.20 EXPRESS NEGLIGENCE..............................41 -iii- Schedules Schedule Responsibility - -------- --------------------- ("Seller" or "Buyer") 1.1(d) Contracts.................................... Seller 1.1(g) Motor Vehicles............................... Seller 1.1(i) Owned Real Property.......................... Seller 1.1(j) Bank Accounts; Lockboxes..................... Seller 1.2(a) Bosnia Assets................................ Seller 1.2(f) Notes Receivable............................. Seller 5.2(b) Authorization and Noncontravention........... Seller 5.4(a) Financial Statements......................... Seller 5.4(c) Indebtedness................................. Seller 5.4(d) Guarantees................................... Seller 5.5 Employees.................................... Seller 5.6 Absence of Certain Changes................... Seller 5.7(a) Other Contracts.............................. Seller 5.7(b) Breaches..................................... Seller 5.7(d) Outstanding Bids or Proposals................ Seller 5.7(d) Government Contracts......................... Seller 5.9(a) Title and Related Matters.................... Seller 5.9(c) Contracts of Sale or Lease................... Seller 5.10 Litigation................................... Seller 5.11(a) Tax Returns.................................. Seller 5.11(b) Tax Claims................................... Seller 5.12(a) Compliance with Laws......................... Seller 5.13(a) ERISA Matters................................ Seller 5.13(f) Employee Leasing Company Benefit Plans....... Seller 5.14(a) Intellectual Property........................ Seller 5.14(b) Licenses..................................... Seller 5.14(c) Liens on Intellectual Property............... Seller 5.14(d) Claims....................................... Seller 5.14(e) Infringement Matters......................... Seller 5.14(f) Other Claims................................. Seller 5.14(g) Contested Proceedings........................ Seller 5.15 Warranties................................... Seller 5.16 Products Liability........................... Seller 5.17 Environmental Matters........................ Seller 5.18 Capital Expenditures......................... Seller 5.19 Affiliated Transactions...................... Seller 5.20 Insurance and Claims......................... Seller 5.21 Accounts Receivable and Inventory............ Seller 5.22 Brokerage Fees............................... Seller 5.23 Customers and Suppliers...................... Seller 5.24 Permits...................................... Seller 5.25 Utilities.................................... Seller 5.26 Improper and Other Payments.................. Seller 5.29 Operations of Seller......................... Seller 5.30 Other Tangible Property...................... Seller -iv- 5.31(a) Owned Real Property.......................... Seller 5.31(b) Title to Owned Real Property................. Seller 5.31(c) Rights to Acquired Real Property............. Seller 5.31(d) Landlord Consents............................ Seller 5.31(g) Restricted Use............................... Seller -v- EXECUTION COPY This ASSET PURCHASE AGREEMENT, dated as of June 17, 2004 (this "Agreement"), is by and among HEADWATERS INCORPORATED, a Delaware corporation ("Parent"), ACM BLOCK & BRICK, LP, a Texas limited partnership and an indirect wholly-owned subsidiary of Parent ("Buyer"), and SOUTHWEST CONCRETE PRODUCTS, L.P., a Delaware limited partnership (the "Seller"). The following recitals are true and constitute the basis for this Agreement: A. Seller is in the business of manufacturing and/or distributing bagged concrete, mortar and concrete products in the State of Texas (collectively, the "Business"); B. Buyer wishes to purchase from Seller, for the consideration set forth herein, and Seller wishes to sell to Buyer for such consideration, substantially all of the assets, properties and rights of Seller used in the operation of the Business, upon the terms and conditions of this Agreement; and C. Unless otherwise defined in this Agreement, certain capitalized terms used in this Agreement shall have the meanings ascribed to such terms in Section 9.3 below. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE 1 SALE OF ASSETS Section 1.1 Assets to be Sold. Except as otherwise provided in Section 1.2 below, at the Closing provided for in Section 4.1 below, Seller shall sell, assign, transfer and deliver to Buyer all of the assets, properties and rights of Seller of every type and description owned, leased or otherwise licensed by Seller and used in the Business, including real, personal and mixed, tangible and intangible, wherever located and whether or not reflected on the books and records of Seller (all of such assets, properties and rights owned, leased or otherwise licensed by Seller and used in the Business being hereinafter sometimes collectively called the "Purchased Assets"), including, without limitation: (a) those assets, properties and rights reflected on the Unaudited Financial Statements, including, but not limited to all cash, accounts receivable, inventory, sales accessories, parts, machinery, equipment, tools, computer hardware, software and data, furniture, leasehold improvements, fixtures, supplies, trademarks, tradenames and service marks, telephone and facsimile numbers, customer files, websites and prepaids, but excluding any such items disposed of by Seller in the ordinary course of the Business since the Financial Statement Date; (b) Seller's list of customers and suppliers; (c) Seller's right to use the names "Southwest Concrete Products" and "Southwest Brick" and all variants thereof; -1- (d) all of Seller's interest in and Claims and rights under Contracts listed in Schedule 1.1(d), including, but not limited to those certain License Agreements with Flexlock, Novabrick and Versa-Lok, and all Permits held by Seller; (e) the books and records of Seller relating to the Purchased Assets and the Assumed Liabilities; (f) Seller's rights in all Seller's Intellectual Property; (g) the motor vehicles and transportation equipment of Seller listed on Schedule 1.1(g); (h) the goodwill of Seller; (i) the real property described in Schedule 1.1(i) (the "Owned Real Property") along with all estates, rights, titles and interests of Seller in and to all plants, storage facilities, buildings, structures, equipment, works, fixtures (including without limitation, all apparatus, buildings, appliances, machinery, equipment and other articles of a permanent nature), construction in progress, improvements, betterments, installations and additions constructed, erected or located on or attached or affixed to the Owned Real Property; (j) the bank and lockbox accounts of Seller described in Schedule 1.1(j) hereto; (k) all Claims for Tax refunds arising from Taxes (other than Income Taxes) paid by Seller for any period or portion thereof ending on or before the Closing Date; (l) all other assets, properties, rights, Claims, entitlements and business of every kind and nature owned or held by Seller or in which Seller has an interest and used in connection with its block plant and sales facilities located in Colorado County, Texas, Pasadena, Texas, San Antonio, Texas, and Houston, Texas, known or unknown, fixed or unfixed, inchoate, accrued, absolute, contingent or otherwise, whether or not specifically referred to in this Agreement. In confirmation of the foregoing sale, assignment and transfer, Seller shall execute and deliver to Buyer at the Closing a Bill of Sale, Assignment and Assumption Agreement and Special Warranty Deeds. Section 1.2 Excluded Assets. Notwithstanding the foregoing, the following assets shall not be included among the Purchased Assets and shall be excluded from the sale and transfer provided in this Agreement: (a) the assets, rights, Contracts and business of Seller's Bosnia operations described in Schedule 1.2(a) (the "Bosnia Assets"); (b) Seller's records relating to its partnership functions (including, but not limited to, certificate of limited partnership, taxpayer and other identification numbers, Income Tax records, seals and minute books), other than those related to the Purchased Assets or the Assumed Liabilities; (c) all rights of Seller under this Agreement and the instruments and documents executed in connection herewith; (d) all rights and interests of Seller in Sand Express, L.P.; (e) all powers of attorney, safety deposit boxes and Contracts relating to the engagement by Seller of investment bankers, accountants and legal counsel; -2- (f) those certain notes receivable listed in Schedule 1.2(f) hereto; (g) the Policies; (h) all Claims for Income Tax refunds arising from any Income Taxes paid by Seller or its partners for any period or portion thereof; and (i) all rights and obligations of Seller under the Supply and Noncompete Agreement, dated December 29, 2000, by and between Seller and Pavestone Company. The specific assets described in this Section 1.2 are hereinafter sometimes collectively referred to as the "Excluded Assets." ARTICLE 2 ASSUMPTION OF LIABILITIES Section 2.1 Liabilities Assumed by Buyer. In partial payment of the Purchase Price, Buyer shall, except as otherwise provided in Section 2.2 and subject to the rights of the Buyer Indemnified Parties and obligations of Seller under Article 8 of this Agreement, assume, as of the Closing Date, all of the liabilities and obligations of Seller, known or unknown, fixed or contingent, whenever and however asserted, but only to the extent arising in connection with the conduct of the Business or the ownership, use or operation of the Purchased Assets, including, without limitation: (a) all liabilities of Seller that are or should be reflected in the Unaudited Financial Statements, including Indebtedness to the holders of those certain Industrial Revenue Bonds (the "Industrial Revenue Bonds"); (b) all liabilities and obligations under Contracts (including Operating Leases, Real Property Leases and license agreements) to which Seller is a party or by or to which Seller or its assets, properties or rights are bound or subject including those that are reflected in Schedules 1.1(d), 1.1(j), 5.5, 5.7(a), 5.9(a), 5.9(c), 5.13(a), 5.14(b), 5.14(e), 5.15, 5.19, or 5.31(a); (c) all liabilities and obligations under all Permits of Seller, Seller's Intellectual Property and Seller's bank and lock box accounts; and (d) all Tax Liabilities of Seller other than Seller's or any of its present or former partner's liabilities for Income Taxes. The liabilities to be assumed by Buyer pursuant to this Agreement are hereinafter sometimes collectively referred to as the "Assumed Liabilities." Section 2.2 Liabilities Not Assumed by Buyer. Anything in this Agreement to the contrary notwithstanding, Buyer shall not assume, nor in any way be liable or responsible for, any of the following liabilities or obligations of Seller: -3- (a) any liability of Seller under any Contract for brokerage commissions, investment banking or finder's fees or expenses or similar compensation in connection with the transactions contemplated by this Agreement payable by Seller to Brown Brothers Harriman & Co. or any other Person; (b) Income Taxes payable by Seller or any of its present or former partners and fines and penalties with respect thereto; (c) other than as specifically described on Schedule 1.1(d), any liability or obligation of Seller to its partners or to their respective Affiliates; (d) Seller's liabilities and obligations under Article 8 of this Agreement; (e) any liability or obligation of Seller relating to any severance payment, change of control payment or other payment or obligation any employee of Seller becomes entitled to as a result of the transaction contemplated hereby; or (f) any liability or obligation of Seller arising out of, in connection with or relating to any Excluded Asset and specifically including, but not limited to, any liability or obligation related to the Bosnia Assets. The specific liabilities not being assumed by Buyer pursuant to this Agreement are hereinafter sometimes collectively referred to as the "Retained Liabilities." ARTICLE 3 PURCHASE PRICE AND PAYMENT Section 3.1 Purchase Price. The aggregate purchase price for the Purchased Assets (the "Purchase Price") shall be an amount equal to the difference between (a) $35,018,998 (as adjusted pursuant to Section 3.4 below) and (b) $9,977,776, the aggregate amount of all Indebtedness of Seller to Brown Brothers Harriman & Co. under the terms of that certain Credit Agreement, dated as of May 1, 2000, as amended on December 31, 2001, November 30, 2002 and November 1, 2003 (the "Closing Cash Amount"); and plus (c) the 2005 Earn-Out Consideration if the conditions set forth in Section 3.2 below are satisfied. Section 3.2 Earn-Out Consideration. As soon as practicable after December 31, 2005, but no later than April 15, 2006, Buyer or Parent shall cause Buyer's accountants to prepare and deliver to the Seller unaudited financial statements of Buyer for the 12 months ended December 31, 2005 and a calculation of the 2005 EBITDA (the "2005 EBITDA Calculations"). Seller shall have the right to dispute the 2005 EBITDA Calculations (and any items therein) and make any proposed adjustments thereto as provided in Section 3.4. If the Final 2005 EBITDA (as defined in Section 3.4) equals or exceeds $5,500,000, Buyer shall pay (and Parent shall cause Buyer to pay) to Seller a cash amount equal to the 2005 Earn-Out Consideration based on the Final 2005 EBITDA within 10 days after the Final 2005 EBITDA is determined, and interest thereon if payable pursuant to Section 3.4(b). Section 3.3 Payment of Purchase Price. Buyer shall pay (and Parent shall cause Buyer to pay) the Purchase Price by (a) payment to Seller in the amount of the Closing Payment (as defined below), (b) the assumption by Buyer of the Assumed Liabilities and (c) the payment of the 2005 Earn-Out Consideration as provided herein. The Closing Payment shall be paid by the Buyer as follows: -4- (a) at the Closing, Buyer shall pay (and Parent shall cause Buyer to pay) to Seller by wire transfer in immediately available funds to an account designated by Seller at least 2 Business Days prior to the due date of such payment, an amount equal to the Closing Cash Amount minus $5,200,000 (the "Escrow Amount"). As used herein, the term "Closing Payment" shall mean the Closing Cash Amount minus the Escrow Amount; (b) at the Closing, Buyer shall pay (and Parent shall cause Buyer to pay) to JP Morgan Chase Bank, a New York State Bank (the "Escrow Agent") by wire transfer in immediately available funds the Escrow Amount to an escrow account to be maintained and administered by the Escrow Agent pursuant to the terms and conditions of the escrow agreement being executed contemporaneously herewith (the "Escrow Agreement") as security for any Claims for indemnification by any Buyer Indemnified Party under Article 8 of this Agreement; (c) the 2005 Earn-Out Consideration shall be paid in accordance with Section 3.2; and (d) the Assumed Liabilities shall be assumed by Buyer at the Closing pursuant to the Bill of Sale, Assignment and Assumption Agreement referred to in Section 1.1. Section 3.4 EBITDA Calculations. (a) The 2005 EBITDA Calculations shall become final and binding on Seller, Buyer and Parent unless Seller notifies Buyer in writing within 15 days after delivery to Seller of the 2005 EBITDA Calculations, and specifies therein the basis and reason for the dispute and the amount which is in dispute (the "Disputed Matters"). During a period of 10 days following the delivery of such notice, Buyer and Seller shall attempt to resolve any Disputed Matters. If, at the end of such 10 day period, Buyer and Seller shall have failed to reach agreement with respect to the Disputed Matters, the unresolved Disputed Matters shall be referred to BDO Seidman LLP or if such firm declines to act in such capacity, any such other firm of independent nationally recognized accountants chosen and mutually accepted by Buyer and Seller (the "Independent Accountants") for resolution. Buyer and Seller shall provide the Independent Accountants with a written statement that includes their respective calculations of the 2005 EBITDA, and the Independent Accountant's decision as to the Final 2005 EBITDA shall be communicated to the parties in writing. The Independent Accountants shall be instructed to use every reasonable effort to make its determination with respect to the Disputed Matters (the "Independent Accountant's Final 2005 EBITDA Calculations") within 30 days of the submission to them of the Disputed Matters. Buyer and Parent shall give the Independent Accountants, during normal business hours and upon reasonable request, access to all work papers and procedures used to prepare Buyer's determination of the 2005 EBITDA and to Buyer's and Parent's financial employees and accountants. The final determination of the 2005 EBITDA (the "Final 2005 EBITDA") shall be the 2005 EBITDA Calculations as adjusted by any Disputed Matters resolved by the parties and by the Independent Accountant's Final 2005 EBITDA Calculations, if any. Each of the parties shall bear their own respective costs and expenses incurred in connection with such determination, and one-half of the fees of the Independent Accountants shall be paid by Buyer and one-half by Seller. This provision for the resolution of any Disputed Matters shall be the sole and exclusive remedy of the parties for resolving any Disputed Matter and shall be specifically enforceable by the parties and the decision of the Independent Accountants in accordance with the provisions hereof shall be final and binding and there shall be no right of appeal therefrom, absent fraud or clear error. (b) In the event that Buyer or Parent does not pay to Seller the entire amount of the 2005 Earn-Out Consideration when due hereunder, the unpaid balance payable to Seller shall bear interest at an annual rate equal to the lesser of (i) the "prime rate" of interest reported from time to time in the Wall Street Journal, Southwest Edition, in the "Money Rates" section or equivalent substitute section of such paper (the "Prime Rate") plus 6% or (ii) -5- the maximum non-usurious rate permitted by law, from the due date of such payment to the date of payment in full. Section 3.5 Purchase Price Allocation. For federal income tax purposes, the amount of the Purchase Price that shall be allocated to each item of tangible personal property acquired by Buyer from Seller on the Closing Date shall be the fair market value of each such item of tangible personal property. Upon request of Seller, Seller shall be provided with a copy of all appraisals of the fair market value of each item of tangible personal property. This allocation shall be binding upon Buyer, Parent, and Seller and Buyer and Seller and their Affiliates shall report, act and file Tax Returns (including, but not limited to Internal Revenue Service Form 8594) in all respects and for all purposes consistent with the allocation of the Purchase Price set forth in this Section 3.5. Neither Parent, Buyer nor Seller shall take any position (whether in audits, Tax returns or otherwise) which is inconsistent with such allocation unless required to do so by applicable law.. ARTICLE 4 CLOSING Section 4.1 Closing. Unless this Agreement shall have been terminated or abandoned pursuant to the terms of that certain Closing Letter Agreement, dated as of the date hereof, by and among Buyer, Seller and Parent (the "Closing Letter"), the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Buyer's counsel at a time agreed to by Buyer and Seller on the Business Day upon which all of the conditions set forth in the Closing Letter to each of Buyer's, Parent's and Seller's obligations thereunder have been satisfied or waived, but in any event no earlier than July 1, 2004 (the "Closing Date"). "Business Day" shall mean a day, other than a Saturday, Sunday or legal holiday on which banks are permitted to close in the Cities of Dallas and Houston, Texas. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER As of the date hereof, Seller (subject to the limitations on survival and liability contained in Article 8 below) represents and warrants to Parent and Buyer, subject to such exceptions as are specifically disclosed in the schedules attached hereto supplied by Seller to Parent and Buyer dated as of the date hereof and certified as complete and correct on the Closing Date by Murphy Lents in his capacity as a Manager of the General Partner of Seller, as follows; provided, however, that none of the following representations and warranties of Seller shall apply to or otherwise include the Excluded Assets or Retained Liabilities: Section 5.1 Organization and Qualification. Seller (a) is duly organized, validly existing and in good standing under the laws of the State of Delaware, (b) has all requisite power to carry on its business as it is now being conducted, and (c) is in good standing and duly qualified to do business in each jurisdiction in which the transaction of the Business makes such qualification necessary, except to the extent the failure to be in good standing or so qualified would not have a Material Adverse Effect. Except for Seller's investment in the Bosnia Assets, Seller does not own or lease property in any jurisdiction other than Texas. -6- Section 5.2 Authorization and Noncontravention. (a) Seller has full partnership power and authority to enter into this Agreement and the agreements contemplated hereby being executed and delivered by Seller on the date hereof and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and all other agreements and transactions contemplated hereby being executed and delivered by Seller on the date hereof have been duly authorized by the general and limited partners of Seller and no other partnership proceedings on either of their part are necessary to authorize this Agreement and the agreements contemplated hereby being executed and delivered by Seller on the date hereof and the transactions contemplated hereby and thereby. This Agreement and all other agreements contemplated hereby being executed and delivered by Seller on the date hereof each constitutes a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms, except where as enforceability may be limited by bankruptcy, reorganization, moratorium and similar laws at the time in effect affecting the rights of creditors generally. (b) Except as set forth in Schedule 5.2(b) hereto, the execution, delivery and performance by Seller of this Agreement, and all other agreements contemplated hereby to be executed and delivered by Seller on the date hereof, and the fulfillment of and compliance with the respective terms hereof and thereof by Seller, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default or event of default under (whether with or without due notice, the passage of time or both), (c) result in the creation of any Lien upon Seller's assets pursuant to, (d) give any third party the right to modify, terminate or accelerate any obligation under, (e) result in a violation of, or (f) require any authorization, consent, approval, exemption or other action by, notice to, or filing with any third party or Authority pursuant to, the Certificate of Limited Partnership or Partnership Agreement of Seller or any applicable Regulation (including, without limitation, approvals pursuant to the Hart-Scott-Rodino Act), Order or Contract to which Seller or its respective properties are subject, except for any of the same that would not result in a Material Adverse Effect. Seller has complied with all applicable Regulations and Orders in connection with the execution, delivery and performance of this Agreement and the agreements contemplated hereby to be executed by Seller on the date hereof. Section 5.3. Certificate of Limited Partnership and Partnership Agreement. The copies of the Certificate of Limited Partnership and Partnership Agreement of Seller, and all amendments to each through the date hereof, which have been delivered or made available to Buyer are true, correct and complete and in effect as of the date hereof. Section 5.4 Financial Statements. (a) Attached as Schedule 5.4(a) hereto are (i) audited year-end balance sheets of Seller as of December 31, 2001, 2002 and 2003 and the related audited statements of operations, partners' capital and cash flows of Seller for each of the fiscal years then ended (such financial statements, including the notes thereto, the "Audited Financial Statements") and (ii) an unaudited balance sheet of Seller as of April 30, 2004 and the related unaudited statements of operations, partners' capital and cash flows of Seller for the four months ended April 30, 2004 (such financial statements, including the notes thereto, the "Unaudited Financial Statements"). The items referred to in subsections (i) and (ii) are sometimes hereinafter referred to collectively as the "Financial Statements." The Audited Financial Statements present fairly, in all material respects, the financial position of Seller at December 31, 2001, 2002 and 2003, respectively, and the results of its operations and cash flows for the years then ended in conformity with GAAP applied on a consistent basis. -7- The Unaudited Financial Statements were prepared from the books and records of Seller and present fairly, in all material respects, Seller's financial position at April 30, 2004, and the results of its operations and cash flows for the four months then ended in conformity with GAAP applied on a consistent basis, subject to normal year-end adjustments, which are not material in amount. Seller does not utilize any percentage of completion or similar method of accounting for revenue, income or cost recognition purposes. Except as described in Schedule 5.4(a) hereto or reflected in the Financial Statements (including the notes thereto), Seller has not in the past 5 fiscal years written off any research and development costs, incurred any reorganization, restructuring or similar costs or changed the book value of any assets, liabilities or goodwill of any business acquired by Seller. Seller has no obligation to make any additional Investments in any other Person. All properties used in the Business during the period covered by the Financial Statements, including the Purchased Assets and all liabilities of the Business, are reflected in the Financial Statements in accordance with and to the extent required by GAAP. The date of April 30, 2004, is herein referred to as the "Financial Statement Date." (b) No general partner of Seller and no officer or management employee of Seller or its general partner has ever refused to execute any certification, of any nature whatsoever, required by law, or required by any accounting, banking, financial or legal counsel in connection with the Financial Statements. (c) Except as set forth in Schedule 5.4(c) hereto, in the other Schedules hereto or in the Unaudited Financial Statements, Seller has no Indebtedness, obligation or liability required to be reflected in the Unaudited Financial Statements in accordance with GAAP, other than Indebtedness, liabilities and obligations that have arisen after the Financial Statement Date in the ordinary course of the Business (none of which is a liability resulting from breach of a Contract, Regulation, Order or warranty, tort, infringement or Claim) and the Retained Liabilities. (d) Except as set forth in Schedule 5.4(d) hereto, there is no Person that has Guaranteed, or provided any financial accommodation of, any Indebtedness, obligation or liability of Seller or for the benefit of Seller for the periods covered by the Financial Statements. Section 5.5 Employees. Since January 1, 1999, Seller has not employed any Person. Schedule 5.5 sets forth the name and current base hourly rates for each of Seller's leased employees (including Seller's partners) and consultants, exclusive of the amount of the discretionary bonuses and the amount of commissions payable, other than the percentage of sales or other basis on which commissions are payable, and Seller's Contracts containing compensation terms for Seller's sales agents. To the Knowledge of Seller, Seller has conducted its business in compliance with all Regulations and Orders affecting employment and employment practices applicable to Seller, including the payment of wages and hours. Seller is not a party to any collective bargaining agreements and, since January 1, 1999, there have been no strikes, work stoppages nor any demands for collective bargaining by any union, labor organization or other Person representing Seller's employees or, to Seller's Knowledge, Seller's leased employees. To Seller's Knowledge, there is no dispute or controversy with any union or other organization of Seller's employees and no arbitration proceedings thereunder are pending or, to the Knowledge of Seller, threatened involving a dispute or controversy affecting Seller and its employees or leased employees. Except as set forth in Schedule 5.5, at the Closing, Seller will not have any liability or obligation to any of its current or former employees, leased employees, officers or directors (including unaccrued year end bonuses) other than for the payment of salaries and payments for leased employees to be paid in the ordinary course of the Business. Seller has not taken any action, or failed to take any action, that has resulted in or is expected by Seller to result in any Claim by an employee or leased employee against Seller that such Person has been constructively terminated by Seller or due severance payments from Seller. Upon the consummation of the transactions contemplated hereby, Seller will not have any "change in control," bonus or other similar obligations arising from a "change of control" to any of its employees, leased employees, consultants or other Persons performing services for Seller that are not Retained Liabilities. -8- Section 5.6 Absence of Certain Changes. Except as set forth on Schedule 5.6, since the Financial Statement Date, and as of the date hereof, there has not been any: (a) Material Adverse Change; (b) damage, destruction or loss, whether covered by insurance or not, having a cost of $10,000 or more, with regard to the Purchased Assets or the Business; (c) increase in the leased employee payments payable to each officer, general partner, employee, leased employee, consultant or agent of Seller or any increase by Seller in any benefits under any bonus, insurance, pension or other employee benefit plan, payment or arrangement made to, for or with any of its officers, partners, employees, leased employees or any Affiliate of Seller; (d) except as required by GAAP or applicable Tax laws, change by Seller in accounting methods or principles or any write-down, write-up or revaluation of any assets of Seller, except depreciation accounted for in the ordinary course of the Business and write downs of inventory which reflect the lower of cost or market and which are in the ordinary course of the Business and in accordance with GAAP applied on a consistent basis; (e) failure by Seller to pay and discharge current liabilities in accordance with past practice or agreement by Seller with any Person to extend the payment of any current liability; (f) sale, assignment, transfer, lease, license or other placement of a Lien on any of Seller's tangible assets, except in the ordinary course of the Business consistent with past practice and Permitted Liens, or cancellation or waiver by Seller of any material debts, rights or Claims; (g) sale, assignment, transfer, lease, license or other placement of a Lien on any Seller Intellectual Property or other intangible assets, disclosure by Seller of any material confidential information relating to the Business to any Person (other than to Buyer, Parent and their representatives and to the representatives of Seller and to the partners of Seller and their Affiliates and their respective representatives) or abandonment by Seller of any material Intellectual Property used in the Business; (h) charitable contributions or pledges or commitments to make or pledge by Seller exceeding in the aggregate $10,000; or (i) agreements by Seller, whether orally or in writing, to do any of the foregoing. Section 5.7 Contracts. (a) Except as set forth in Schedules 1.1(d), 1.1(j), 5.5, 5.7(a), 5.9(a), 5.9(c), 5.13(a), 5.14(b), 5.14(e), 5.15, 5.19, 5.20 or 5.31(a) hereto, Seller is not a party to any (i) Contract involving any Employee Benefit Plan, or any Contract with any employee leasing company, labor union or labor group; (ii) Contract relating to loans to officers or partners of Seller or any of their Affiliates; (iii) Contract relating to the borrowing of money or the mortgaging, pledging or otherwise placing a Lien on any asset of Seller; (iv) Guarantee of any obligation; (v) Contract under which Seller has advanced or loaned, or agreed to advance or loan, any Person amounts in the aggregate exceeding $10,000; (vi) Contract pursuant to which Seller permits any third party to hold or operate any property, real or personal, owned or controlled by Seller; (vii) warranty Contract with respect to the services rendered or the products sold or leased containing any material terms other than Seller's standard warranty terms described in Schedule 5.15; (viii) Contract or non-competition provision in any Contract prohibiting Seller from freely engaging in the Business or competing anywhere in the world; (ix) Contract for the purchase, acquisition or supply of inventory and other property and assets, whether for resale or otherwise in excess of $25,000; (x) Contract with an independent agent, broker, dealer or distributor which provides for annual payments in excess of $10,000; (xi) employment, consulting, sales, distributorship, depository, management, commissions, advertising or marketing Contract; (xii) Contract providing for "take or pay" or similar unconditional purchase or payment obligations; (xiii) Contract with Persons with which, directly or indirectly to the Knowledge of Seller, a partner of Seller also has a Contract; (xiv) Contract that requires the consent of any other Person, or contains any provision that would result in a modification of any rights or obligation of any other Person thereunder upon a change in control of Seller or which would provide any other Person any remedy (including rescission or liquidated damages), in connection with the execution, delivery or performance of this Agreement and the agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby; (xv) nondisclosure or confidentiality Contract; (xvi) power of attorney, agency or other similar Contract; (xvii) copyright license, royalty agreement or similar Contract; (xviii) Contract for the sale of any of Seller's assets or properties other than -9- in the ordinary course of the Business or for the grant to any Person of any preferential rights to purchase any of Seller's assets or properties; (xix) joint venture agreement relating to the Purchased Assets or the Business or by which any of the Purchased Assets are bound or subject; (xx) Contract under which Seller agrees to indemnify any Person or to share the Tax liability of any Person; (xxi) Contract providing Seller or any other Person with the exclusive right to be a provider of specified goods or services; (xxii) Contract containing any "most favored nation" type provision; (xxiii) to the Seller's Knowledge, any other Contract that is required to be listed, but not listed in either Schedule 1.1(d), 1.1(j), 5.5, 5.7(a), 5.9(a), 5.9(c), 5.13(a), 5.14(b), 5.14(e), 5.15, 5.19, 5.20 or 5.31(a) hereto or (xxiv) any other Contract requiring the receipt or expenditure by Seller of $10,000 or more in any 12-month period. (b) Except as set forth in Schedule 5.7(b), to the Knowledge of Seller, (i) Seller has performed in all material respects all obligations required to be performed by it and is not in default in any respect under or in breach of nor in receipt of any Claim of default or breach under any Contract to which Seller is subject (including without limitation all performance bonds, warranty obligations or otherwise); (ii) no event has occurred which with the passage of time or the giving of notice or both would result in a default, breach or event of non-compliance by Seller under any Contract to which Seller is subject (including without limitation all performance bonds, warranty obligations or otherwise); and (iii) there exists no breach or anticipated breach by the other party to any such Contract to which Seller is a party. (c) Seller has delivered or made available to Buyer true and complete copies of all the Contracts listed in the schedules to this Agreement. (d) Schedule 5.7(d) hereto sets forth a complete and accurate list of each outstanding bid or proposal for business submitted by Seller in excess of $100,000. Section 5.8 Government Contracts. (a) Except as set forth in Schedule 5.8, Seller is not a party to any Government Contract. (b) (i) Neither Seller nor any of its management employees, authorized representatives, or general or limited partners is (or during the last five (5) years has been) under administrative, civil or criminal investigation or indictment by any Governmental Entity with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract; and (ii) during the last five (5) years, Seller has not conducted or initiated any internal investigation or made a voluntary disclosure to any Governmental Entity related to the same. (c) To the Knowledge of Seller, there exist (i) no outstanding Claims against Seller, either by a Governmental Entity or by any prime contractor, subcontractor, vendor or other third party, arising under or relating to any Government Contract; and (ii) no disputes between Seller and the United States government under the Contract Disputes Act or any other federal Regulation or between Seller and any prime contractor, subcontractor or vendor arising under or relating to any Government Contract. (d) Neither Seller nor any of its officers, management employees general or limited partners is (or during the last five (5) years has been) suspended or debarred from doing business with the United States government or other Authority or is (or during such period was) the subject to a finding of nonresponsibility or ineligibility for United States government contracting. -10- Section 5.9 Title and Related Matters. (a) Except as set forth in Schedule 5.9(a) hereto and except for assets of Seller sold, used or disposed of in the ordinary course of the Business since the Financial Statement Date, (i) Seller has indefeasible title to all real and personal, tangible and intangible, property and other assets reflected in the Unaudited Financial Statements as owned by Seller or acquired by Seller after the Financial Statement Date, including the Purchased Assets, free and clear of all Liens, except Permitted Liens and (ii) all assets set forth on the Unaudited Financial Statements or acquired by Seller after the Financial Statement Date are free from obvious defects, have been maintained in accordance with Seller's customary practices, are in good operating condition and repair (subject to normal wear and tear), and suitable for the purposes for which they presently are used and presently are proposed to be used. Schedule 5.9(a) hereto sets forth a complete and accurate summary of all Operating Leases of tangible personal property to which Seller is a party that have annual rental payments in excess of $5,000, describing the expiration date of such lease, the name of the lessor, the annual rental payment and whether a consent is required from the lessor to consummate the transactions contemplated hereby. (b) All Operating Leases of Seller are in full force and effect, and valid and enforceable in accordance with their respective terms. Seller has not received any written notice of any event of default or event which constitutes or would constitute (with notice or lapse of time or both) a default by Seller or any other Person under any Operating Lease of Seller. All rent and other amounts due and payable on or prior to the date of this Agreement with respect to Seller's Operating Leases have been paid. Seller has not received any written notice that the landlord with respect to any Real Property Lease would refuse to renew such lease upon expiration of the period thereof upon substantially the same terms, except for rent increases consistent with past experience or market rentals. (c) None of the Purchased Assets is subject to any Contracts of sale or lease except as set forth in Schedule 5.9(c), or Contracts for the sale of inventory in the ordinary and regular course of the Business. (d) Except as set forth in Schedule 5.29, there has not been since the Financial Statement Date any sale, lease, or any other disposition or distribution by Seller of any of its assets or properties now owned by it, except transactions in the ordinary and regular course of the Business. Section 5.10 Litigation. Schedule 5.10 hereto sets forth a true and complete list of all Claims and Orders involving Seller since January 1, 1999 for which Seller has received written notice thereof. Except as set forth in Schedule 5.10 hereto, to the Seller's Knowledge, there is no Claim or Order threatened against Seller. Section 5.11 Tax Matters. (a) Except as set forth on Schedule 5.11(a), Seller has filed all Tax Returns required to be filed under applicable Regulations. Except as set forth in Schedule 5.11(a), Seller has not requested any extension of time within which to file or send any Tax Return not yet filed. All Taxes applicable for all periods prior to the date hereof have been paid or adequately reserved against on the Unaudited Financial Statements in accordance with GAAP. To the Seller's Knowledge, all Taxes which are required to be withheld or collected by Seller have been duly withheld or collected and, to the extent required, have been paid to the proper Taxing Authority or properly segregated or deposited as required by applicable law and all Forms W-2 and 1099 required with respect to such withholdings have been properly completed and timely filed. There are no Liens for Taxes upon any property or assets of Seller, except for Liens for Taxes not yet due and payable. Seller has not received any Claim by a Taxing Authority in -11- a jurisdiction where Seller does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. Seller has not been a member of an affiliated group filing consolidated or combined federal, state, local or foreign income tax returns or has any liability for the Taxes of any other Person under Treasury Regulation ss. 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise. To the Seller's Knowledge, the basis of any depreciable assets, and the methods used in determining allowable depreciation (including cost recovery), of Seller, are correct and in compliance with the Code. (b) Except as described in Schedule 5.11(b), (i) Seller has not received any written notice from any Taxing Authority that there is currently pending any issue by any Taxing Authority in connection with any Tax Returns filed by Seller, (ii) no material issues have been raised with Seller in any examination by any Taxing Authority with respect to Seller which, by application of similar principles, is reasonably expected by Seller to result in a proposed deficiency for any other period not so examined and (iii) to the Knowledge of Seller, there are no unresolved issues or unpaid deficiencies relating to such examinations. (c) Seller is not a party to any Tax sharing agreement. (d) Schedule 5.11(a) hereto lists all Tax Returns filed by Seller for any period ending on or after December 31, 1994, that have been audited and those that are the subject of audit. (e) Seller is taxed as a partnership for Income Tax purposes and Seller has not at any time made an election to be taxed as a corporation under the Code. Section 5.12 Compliance with Law and Certifications. (a) Except as set forth on Schedule 5.12(a) and except with respect to Environmental Laws and Environmental Permits, Seller has operated in compliance in all material respects with regard to its operations, practices, real property, plants, structures, machinery, equipment and other property, employees, leased employees, products and services and all other aspects of the Business, with all applicable Regulations and Orders. There are no Claims pending of which Seller has received notice, or to Seller's Knowledge threatened, nor has Seller received any written notice, regarding any violations of any Regulations or Orders enforced by any Authority claiming jurisdiction over Seller. (b) Except as set forth on Schedule 5.12(a) and except with respect to Environmental Laws and Environmental Permits, Seller holds all material registrations, accreditations and other certifications required for the conduct of the Business by any Authority or trade group and Seller has not received any notice alleging that it has failed to hold or operate in compliance with any such material registration, accreditation or other certification. Section 5.13 ERISA and Related Matters. (a) Plans. Except as set forth in Schedule 5.5 and Schedule 5.13(a), pursuant to Contracts, if any, listed on the other Schedules hereto, and any Employee Leasing Company Benefit Plan, Seller does not and has never maintained or sponsored any domestic and foreign Employee Benefit Plan. The term "Employee Benefit Plan," means, as to any Person, any of the following maintained or sponsored by such Person: (i) an "employee benefit plan" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder ("ERISA"); (ii) incentive, fringe benefit or "voluntary employees' beneficiary associations" ("VEBAs") under Section 501(c)(9) of the Code, profit-sharing, pension or -12- retirement, deferred compensation, medical, life insurance, disability, accident, salary continuation, severance, accrued leave, vacation, sick pay, sick leave, supplemental retirement and unemployment benefit plans, programs, arrangements, commitments and/or practices (whether or not insured); and (iii) employment, consulting, non-compete, termination, and severance contracts or agreements; in each case for active, retired or former employees, leased employees or partners of such Person, whether or not any such plans, programs, arrangements, commitments, contracts, agreements and/or practices (referred to in (i), (ii) or (iii) above) are in writing or are otherwise exempt from the provisions of ERISA, that have been established, maintained or contributed to (or with respect to which an obligation to contribute has been undertaken) or with respect to which any potential liability is borne by such Person (including, for this purpose and for the purpose of all of the representations in this Section 5.13, any predecessors to such Person and all employers (whether or not incorporated) that would be treated together with such Person and/or its general or limited partners as a single employer (1) within the meaning of Section 414 of the Code, or (2) as a result of such Person and/or its general or limited partners being or having been a general partner of any such employer), since September 2, 1974. Each Employee Benefit Plan that has been offered or provided by either Administaff, Advantech or any other Person through which Seller currently leases or has leased employees (collectively, an "Employee Leasing Company") and is applicable to such leased employees is referred to herein as an "Employee Leasing Company Benefit Plan." (b) Status of Employee Leasing Company Benefit Plans. To Seller's Knowledge: (i) each Employee Leasing Company Benefit Plan (including any related trusts) complies in all material respects in form, and has been maintained and operated in substantial compliance with, the requirements of all applicable laws, including, without limitation, ERISA and the Code and with such plans' terms; (ii) no Employee Leasing Company Benefit Plan is or has ever been offered or provided to any employee leased by Seller which is an "employee pension benefit plan" (within the meaning of Section 3(2) of ERISA) subject to Section 412 of the Code or Section 302 or Title IV of ERISA or which is a "multi-employer plan" (as defined in Section 4001(a)(3) of ERISA); (iii) each Employee Leasing Company Benefit Plan intended to be qualified under Section 401(a) of the Code has, as currently in effect, been determined to be so qualified by the Internal Revenue Service and each trust established in connection with any Employee Leasing Company Benefit Plan that is intended to be exempt from Federal income taxation under Section 501(a) of the Code has, as currently in effect, been determined to be so exempt by the Internal Revenue Service and no event has occurred and no condition or circumstance has existed that resulted or is likely to result in the revocation of any such determination or that could adversely affect the qualified status of any such Employee Leasing Company Benefit Plan; (iv) there are no Claims pending or threatened against Seller, or anticipated or expected to be asserted against Seller with respect to any Employee Leasing Company Benefit Plan or the assets of any such plan (other than routine claims for benefits and appeals of denied routine claims); (v) full payment has been timely made of all amounts which any Employee Leasing Company is required, under applicable law or under any Employee Leasing Company Benefit Plan or any agreement relating to any Employee Leasing Company Benefit Plan to which any Employee Leasing Company is a party, to have paid as contributions or premiums thereto as of the last day of the most recent fiscal year of such Employee Leasing Company Benefit Plan ended prior to the date hereof; (vi) no Employee Leasing Company Benefit Plan provides post-employment or retiree health, life insurance and/or other welfare benefits having unfunded liabilities or has any obligation to provide any such benefits to any retired or former employees, leased employees or active employees following such employees' retirement or termination of service; and (vii) no Employee Leasing Company has any commitment, intention or understanding to create, modify or terminate any of its Employee Leasing Company Benefit Plans that are or have ever been offered or provided to any employee leased by Seller. (c) Liabilities. Except pursuant to Seller's Contracts with the Employee Leasing Companies, Seller has no liability for contributions, withholding or otherwise to any Employee Leasing Company for any liability or obligation under any Employee Leasing Company Benefit Plan. -13- (d) Triggering Events. To Seller's Knowledge, the execution of this Agreement and the consummation of the transactions contemplated hereby, do not constitute a triggering event under any Employee Benefit Plan, policy, arrangement, statement, commitment or agreement of any Employee Leasing Company, whether or not legally enforceable, which (either alone or upon the occurrence of any additional or subsequent event) will or may result in any payment (whether of severance pay or otherwise), "parachute payment" (as such term is defined in Section 280G of the Code), acceleration, vesting or increase in benefits to any current or former employee, or leased employee or director or partner of Seller. To Seller's Knowledge, no Employee Leasing Company Benefit Plan provides for the payment by Seller of severance, termination, change in control or similar-type payments or benefits. (e) Classification. To Seller's Knowledge, Seller and any Employee Leasing Company have classified all individuals who perform services for them correctly under each Employee Leasing Company Benefit Plan, ERISA, the Code and other applicable law as common law employees, independent contractors or leased employees. (f) Documents. Seller has requested each Employee Leasing Company deliver to Buyer true and complete copies of all Employee Leasing Company Benefit Plans listed in Schedule 5.13(f) hereto, including, without limitation (where applicable): (i) all Employee Leasing Company Benefit Plans as in effect on the date hereof, together with all amendments thereto, including, in the case of any Employee Leasing Company Benefit Plan not set forth in writing, a written description thereof; (ii) all current summary plan descriptions, summaries of material modifications, and material communications; (iii) all current trust agreements, declarations of trust and other documents establishing other funding arrangements (and all amendments thereto and the latest financial statements thereof); (iv) the most recent Internal Revenue Service determination letter obtained with respect to each Employee Leasing Company Benefit Plan intended to be qualified under Section 401(a) of the Code or exempt under Section 501(a) or 501(c)(9) of the Code; (v) the annual report on Internal Revenue Service Form 5500-series or 990 for each of the last three years for each Employee Leasing Company Benefit Plan required to file such form; and (vi) the most recently prepared financial statements for each Employee Leasing Company Benefit Plan for which such statements are required. Section 5.14 Intellectual Property. (a) Seller owns no domestic or foreign patents, patent applications, trademarks, service marks and other indicia of origin, trademark or service mark registrations or applications for registrations thereof, registered copyrights or applications for registration thereof. Schedule 5.14(a) sets forth a list of the Internet domain names and URLs, corporate and business names, trade names, brand names and material computer software programs owned by Seller or used or held by Seller for use in the Business. Except as set forth in Schedule 5.14(a), none of Seller's Intellectual Property listed in Schedule 5.14(a) has been registered in, filed in or issued by the United States Patent and Trademark Office, United States Copyright Office, a duly accredited and appropriate domain name registrar, any office in the various states of the United States or any offices of other jurisdictions (foreign or domestic). The registrations and filings set forth in Schedule 5.14(a) remain in full force and effect as of the date hereof. Copies of all items of Seller's Intellectual Property material to the Business which have been reduced to writing or other tangible form have been delivered by Seller to Buyer (including, without limitation true and complete copies of all related licenses, and amendments and modifications thereto). (b) Except as set forth in Schedule 5.14(b), Seller is not a party to any license or Contract, whether as licensor, licensee, or otherwise with respect to any Intellectual Property material to the Business. Schedule 5.14(b) hereto sets forth a complete and accurate summary of all Intellectual -14- Property that is licensed by Seller that has annual royalty payments in excess of $5,000, describing the expiration date of such license, the name of the licensor, the annual royalty payments and whether a consent is required from the licensor to consummate the transactions contemplated hereby. Except as set forth in Schedule 5.14(b), to the extent any Intellectual Property is used by Seller under license in the Business, no notice of a material default has been sent or received by Seller under any such license which remains uncured and other than for the consent of any licensor to transfer any such license set forth in Schedule 5.14(b) to Buyer, to the Knowledge of Seller, the execution, delivery or performance of Seller's obligations hereunder will not result in such a default. Each such license agreement is a legal, valid and binding obligation of Seller and, to Seller's Knowledge, each of the other parties thereto, enforceable in accordance with the terms thereof. (c) Except as set forth in Schedule 5.14(c), Seller owns all of the Seller's Intellectual property or is permitted to use under a license agreement set forth in Schedule 5.14(b) all of the Intellectual Property that is material to the Business as presently conducted by Seller, free and clear of any Liens, (other than Permitted Liens), without obligation to pay any royalty or any other fees with respect thereto, except in each case as otherwise set forth in the applicable license or Contract. To Seller's Knowledge, Seller's use of Seller's Intellectual Property and any other Intellectual Property used in the Business and owned by any third party (including, without limitation, the manufacturing, marketing, licensing, sale or distribution of products and the general conduct and operations of the Business) does not violate, infringe, misappropriate or misuse any intellectual property rights of any third party. None of the Seller's Intellectual Property set forth in Schedule 5.14(a) or any Intellectual Property set forth in Schedule 5.14(b) has been cancelled, abandoned or otherwise terminated. To the Knowledge of Seller, there are no actions that must be taken or payments that must be made by Seller within 180 days following the Closing Date that, if not taken, will adversely affect either Seller's Intellectual Property or any other Intellectual Property licensed by Seller and used in the Business, other than performance and payments required under the applicable license or contract. If applicable, to the Knowledge of Seller, Seller has the exclusive right to file, prosecute and maintain all applications and registrations with respect to the Seller's Intellectual Property. (d) Except as set forth in Schedule 5.14(d), Seller has not received any notice or Claim from any third party challenging the right of Seller to use any of Seller's Intellectual Property or any other Intellectual Property used in the Business and owned by any third party. Seller's Intellectual Property and the Intellectual Property set forth in Schedule 5.14(b) constitutes all the Intellectual Property necessary to operate the Business as of the Closing Date, in the manner in which it is presently operated. (e) Except as set forth in Schedule 5.14(e), Seller has not made any Claim of a violation, infringement, misuse or misappropriation by any third party (including, without limitation, any employee, leased employee or former employee or leased employee of Seller) of its rights to, or in connection with any Seller's Intellectual Property or any other Intellectual Property used in the Business and owned by any third party, which Claim is still pending. Except as set forth in Schedule 5.14(e), Seller has not entered into any Contract to indemnify any other Person against any charge of infringement of any Intellectual Property, other than indemnification provisions contained in purchase orders or license agreements arising in the ordinary course of the Business. (f) Except as set forth in Schedule 5.14(f), to the Knowledge of Seller, there is no pending or threatened Claim by any Person or Authority of a violation, infringement, misuse or misappropriation by Seller of any Intellectual Property owned by any third party, or of the invalidity of any domain name, or trade name included in Seller's Intellectual Property. To the Knowledge of Seller, there is no valid basis for any such Claims. -15- (g) Except as set forth in Schedule 5.14(g), there are no interferences or other contested proceedings, either pending or, to the Knowledge of Seller, threatened, in the United States Copyright Office, the United States Patent and Trademark Office, or any governmental Authority (foreign or domestic) relating to any pending application with respect to Seller's Intellectual Property. Section 5.15 Customer Warranties. Except as disclosed in Schedule 5.15, there are no pending Claims against Seller of which Seller has received notice, nor to the Knowledge of Seller, threatened Claims against Seller under or pursuant to any warranty, whether expressed or implied, on products or services sold by Seller that are not disclosed or referred to in the unaudited Financial Statements and that are not adequately reserved against in accordance with GAAP. Set forth hereto on Schedule 5.15 are Seller's standard product and service warranty terms and the aggregate amount of warranty Claims incurred by Seller in fulfillment of its obligations under its product and service warranties for the past three years. Section 5.16 Products Liability. Except as set forth in Schedule 5.15 or Schedule 5.16 hereto: (a) Seller has not received any written notice of any Claim by or before any Authority against or involving Seller or concerning any product manufactured, shipped, sold, installed or delivered by or on behalf of Seller relating to or resulting from an alleged defect in design, manufacture, materials or workmanship of any product manufactured, shipped, sold, installed or delivered by or on behalf of Seller or any alleged failure to warn, or any alleged breach of implied warranties or representations, and, to the Knowledge of Seller, none has been threatened; (b) there have not been any Recalls by Seller conducted with respect to any product manufactured (or to be manufactured), shipped, sold, installed or delivered by or on behalf of Seller, or to the Seller's Knowledge any investigation or consideration of or decision made by any Person or Authority concerning whether to undertake or not undertake, any Recalls and (c) there have been no material defects in design, manufacturing, materials or workmanship including, without limitation, any failure to warn, or any breach of express or implied warranties or representations, which involve any product manufactured by Seller; (d) to the Seller's Knowledge, there have been no material defects in design, manufacturing, materials or workmanship including, without limitation, any failure to warn, or any breach of express or implied warranties or representations, which involve any product manufactured by any Person other than Seller that have been shipped, sold or delivered by or on behalf of Seller. All manufacturing standards applied, testing procedures used, and product specifications disclosed to customers by Seller have complied in all material respects with all requirements established by any applicable Regulation or Order of any Authority. Section 5.17 Environmental Matters. Except as disclosed in Schedule 5.17 hereto: (a) neither Seller nor the conduct of the Business has violated any applicable Environmental Law; (b) Seller has possessed all material Environmental Permits required under any applicable Environmental Law for the conduct or operation of the Business (or any part thereof), and Seller has operated in compliance with all of the material requirements and limitations included in such Environmental Permits, except as such noncompliance would not have a Material Adverse Effect; (c) Seller has not generated, used, treated or stored, transported to or from, or released or disposed of any Hazardous Substances on or at any of its property or facilities except in accordance with all applicable Environmental Permits and Environmental Laws); (d) Seller has not received any written notice from any Authority or any private Person that the Business or the operation of any of Seller's facilities is in violation of any Environmental Law or any Environmental Permit or that it is responsible (or potentially responsible) for -16- the cleanup of any Hazardous Substances at, on or beneath any of Seller's property, or at, on or beneath any land adjacent thereto or in connection with any waste or contamination site; (e) Seller has not been the subject of any Federal, state, local, or private Claim involving a demand for damages or other potential liability with respect to a violation of Environmental Laws or under any common law theories relating to operations or the condition of any facilities or property (including underlying groundwater) owned, leased, or operated by Seller; (f) Seller has not buried, dumped, disposed, spilled or released any Hazardous Substances, except in accordance with all applicable Environmental Laws and Environmental Permits; (g) no by-products of any manufacturing process employed in the operation of the Business which may constitute Hazardous Substances under any Environmental Law have been stored (except in compliance with any applicable Environmental Law) or otherwise located on any of Seller's property; (h) to the Knowledge of Seller, no property now or previously owned, leased or operated by Seller, is listed or, to Seller's Knowledge, proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any other federal or state list of sites requiring investigation or clean-up; (i) to the Knowledge of Seller, there are currently no Underground Storage Tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned, leased or operated by Seller; (j) to the Knowledge of Seller, Seller has not transported or arranged for the transportation of any Hazardous Substances to any location that is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any federal or state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to material Claims against Seller for any remedial work, damage to natural resources or personal injury, including Claims under CERCLA; (k) to the Knowledge of Seller, there are no polychlorinated biphenyls, radioactive materials or friable asbestos present at any property now or previously owned or leased by Seller; (l) to the Knowledge of Seller, there are no facts or circumstances, conditions or occurrences that could reasonably be anticipated: (i) to form the basis of a Claim related to Environmental Laws or Environmental Permits against Seller or any of the Owned Real Property or any property subject to any Real Property Lease for which Seller could be reasonably expected to be liable; and (ii) to cause such properties to be subject to any restrictions on its ownership, occupancy, use or transferability under any Environmental Law; and (m) Seller has timely filed all reports required to be filed with respect to all of its property and facilities and has generated and maintained all required data, documentation and records under all applicable Environmental Laws. Seller has delivered to Buyer true, correct and complete copies and results of the reports, audits, assessments, reviews, studies, analyses, tests and monitoring listed in Schedule 5.17 pertaining to Hazardous Substances or related to activities involving Hazardous Substances in, on or under any of the Purchased Assets or concerning compliance by Seller with Environmental Laws. To Seller's Knowledge, there are no Liens arising under or -17- pursuant to any Environmental Law or Environmental Permit on any Purchased Assets and there are no facts, circumstances or conditions that could reasonably be expected to restrict, encumber or result in the imposition of special conditions under any Environmental Law with respect to the ownership, occupancy, development, use or transferability of any of the Purchased Assets. Section 5.18 Capital Expenditures and Investments. Seller has outstanding Contracts and a budget for capital expenditures and investments as set forth in Schedule 5.18 hereto which includes a schedule of all monies disbursed on account of capital expenditures and investments made by Seller since the Financial Statement Date and through the date shown thereon. Other than as set forth in Schedule 5.18 hereto, Seller does not have any agreement or commitment to make any loan, advance or capital contributions to, or investment in, any other Person. Section 5.19 Dealings with Affiliates. Schedule 5.19 hereto sets forth a complete and accurate list and description of the economic terms, including the parties, of all Contracts to which Seller is or has been a party, at any time from December 31, 2000, to the Closing Date, and which any one or more of (a) the partners of Seller, (b) Seller's Affiliates, (c) to Seller's Knowledge, an Affiliate of any partner of Seller, or (d) to Seller's Knowledge, any Person in which a partner of Seller, an Affiliate of Seller or a partner of Seller has, directly or indirectly, made an Investment, is also a party. Except as set forth on Schedule 5.19, since December 31, 2000, Seller has not made any payments, loaned or borrowed any funds or property or made any credit arrangement or accommodation with any partner of Seller, Affiliate of Seller or employee of Seller, except for the payment of employee salaries, employee loans and distributions to partners of Seller in the ordinary course of the Business and pursuant to Seller's Partnership Agreement. With respect to the Indebtedness of Seller described in Schedules 5.4(c) and 5.19, the proceeds of that Indebtedness were used by Seller for working capital and general corporate purposes of the Business and were not specifically used to acquire any of the Excluded Assets. Section 5.20 Insurance. Schedule 5.20 hereto sets forth a complete and accurate summary of all Policies, including name of insurer, the types, dates and amounts of coverage, any material coverage exclusion and a statement of the Claims paid out, and Claims pending, as to each Policy for each of the last three (3) full fiscal years and any interim period. Section 5.21 Accounts Receivable; Inventories. The accounts receivable of Seller reflected in the Unaudited Financial Statements and the accounts receivable aging report set forth in Schedule 5.21, as well as such additional accounts receivable as are reflected on the books of Seller on the date hereof, are (except to the extent reserved in accordance with GAAP) valid, genuine and subsisting, arise out of bona fide sales and deliveries of goods, performance of services or other business transactions and to Seller's Knowledge, are not subject to defenses, deductions, set-offs or counterclaims. The inventories reflected on the Unaudited Financial Statements and held by Seller on the date hereof, net of reserves therefor in accordance with GAAP, are usable or saleable in the ordinary course of Business. Such inventories have been reflected on the Unaudited Financial Statements at the lower of cost or market value (taking into account the usability or salability thereof) in accordance with GAAP. None of such inventories have been written up in value or repurchased by, or returned to, Seller at an increased value. All such inventories are owned free and clear and are not subject to any Lien except to the extent reserved against or reflected in the Financial Statements. Since the Financial Statement Date, inventories of raw materials, supplies and products have been purchased by Seller in the ordinary course of the Business, consistent with anticipated seasonal requirements, and the volumes of purchases thereof and orders therefor have not been reduced or otherwise changed in anticipation of the transactions contemplated by this Agreement. Except as set forth in Schedule 5.21 hereto, Seller does not have any Knowledge of any conditions affecting the supply of materials or products available to Seller and, to the Knowledge of Seller, the consummation of the transactions contemplated hereby will not adversely affect any such supply. -18- Section 5.22 Brokerage; Other Negotiations. Except as set forth in Schedule 5.22 and the Retained Liabilities, there are no Claims for brokerage commissions, investment banking or finders' fees or expenses or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or Contract binding upon Seller. Neither Seller nor any of its general or limited partners (or their respective Affiliates) have entered into any agreement with any third party regarding any transaction involving Seller which could result in Buyer, Parent or any officer, director, employee, agent or Affiliate of either of them, being subject to any Claim for liability to said third party as a result of entering into this Agreement or consummating the transactions contemplated hereby or thereby. Section 5.23 Customers and Suppliers. Schedule 5.23 hereto sets forth a complete and accurate list of (a) the ten (10) largest customers of Seller on the basis of revenues for goods sold or services provided for the twelve-month period ending December 31, 2003 and the amount of revenues accounted for by such customer during each such period, (b) the ten (10) largest suppliers of Seller on the basis of cost of goods sold or services purchased during the twelve-month period ending December 31, 2003 and the amount of payments made to each supplier during such period and (c) each supplier that is the sole supplier of any significant product or component to Seller. To the Knowledge of Seller, no customer or supplier listed in Schedule 5.23 has made or is the subject of any voluntary or involuntary filing or petition for bankruptcy. Except as set forth in Schedule 5.23, no material customer of Seller has advised Seller in writing within the past year that it will stop, or decrease the rate of, buying materials, products or services from Seller. To Seller's Knowledge, no unfilled customer order or commitment obligating Seller to process, manufacture or deliver products or perform services will result in a sales price of less than the cost of goods sold upon completion of performance. Except as set forth in Schedule 5.23, no material supplier of Seller has advised Seller in writing within the past year that it will stop, or decrease the rate of, supplying materials, products, or services to Seller. No purchase order or commitment of Seller is in excess of normal requirements, nor are prices provided therein in excess of current market prices for the products or services to be provided thereunder. To Seller's Knowledge, the consummation of the transactions contemplated hereby will not have a Material Adverse Effect on Seller's relationship with any customer or supplier listed on Schedule 5.23. Section 5.24 Permits. Except as set forth in Schedule 5.24, the Permits listed in Schedule 5.24 hereto are the only Permits, other than Environmental Permits, that have been required for Seller to conduct the Business in accordance with applicable Regulations and Orders of any Authority. Except as set forth in Schedule 5.24, Seller has duly and validly held all such Permits, and each such Permit has been in full force and effect and, to the Knowledge of Seller, no suspension or cancellation of any such Permit is threatened and there is no basis for believing that such Permit will not be renewable upon expiration. Section 5.25 Utilities. Seller has sufficient power, fuel oil, natural gas and water supplies and adequate sewerage and waste disposal systems for the operation of the Business as presently conducted, and, to the Knowledge of Seller, all such supplies and systems will be available after the Closing. To the Knowledge of Seller, except as disclosed in Schedule 5.25 hereto, all such systems are in compliance with all Regulations. Section 5.26 Improper and Other Payments. Except as set forth in Schedule 5.26 hereto: (a) Seller, any of its general or limited partners, officers, key employees thereof, and, to Seller's Knowledge, any agent or representative of Seller and any Person acting on behalf of any of them, has not made, paid or received any unlawful bribes, kickbacks or other similar payments to or from any Person or Authority; (b) no contributions have been made by Seller, directly or indirectly, to a domestic or foreign political party or candidate in violation of applicable law; (c) no improper foreign payment (as defined in the Foreign Corrupt Practices Act) has been made by Seller; and (d) -19- the internal accounting controls of Seller are believed by Seller's management to be adequate to detect any of the foregoing under current circumstances. Section 5.27 Projections. The projections relating to operations of Seller during the fiscal year ending December 31, 2004 (the "Projections"), heretofore delivered by Seller to Buyer and dated March 2004, have been prepared in good faith by management based on assumptions which management believes are reasonable, although such assumptions may not be adequate, correct or complete and the Projections are not a guarantee of performance or the achievement of actual results. Section 5.28 Entire Investment in the Business; No Other Businesses. The Purchased Assets constitute all of the rights, interests and other assets necessary to conduct the Business in substantially the same manner as it has been heretofore conducted. Seller has never been involved in any other business other than the Business. Seller has no Subsidiaries. Section 5.29 Operations of Seller. Except as set forth on Schedule 5.29, from the Financial Statement Date, through the date hereof, Seller has not: (a) declared or made any distributions of any kind or any other payments to any general or limited partner of Seller; (b) reduced its cash or short-term investments or their equivalent, other than to meet cash needs arising in the ordinary course of the Business, consistent with past practices; (c) materially changed the Business or any of its policies, including, without limitation, advertising, marketing, pricing, purchasing, personnel, sales, returns, budget or product acquisition policies; (d) other than in the ordinary course of the Business and consistent with past practice, made any wage or salary increase or bonus, or increase in any other direct or indirect compensation, for or to any officer, director, employee, partner, consultant or agent of Seller, or any accrual for or commitment or agreement to make or pay the same; (e) made any payment or commitment to pay any severance or termination pay to any of its officers, partners, leased employees, consultants or agents, other than in the ordinary course of the Business; (f) except for inventory, raw materials, equipment and tangible personal property acquired in the ordinary course of the Business, made any acquisition of all or any part of the assets, properties, capital stock or business of any other Person; or (g) made any payments to Brown Brothers Harriman & Co. or prepaid any other Indebtedness of Seller. Section 5.30 Tangible Property. Schedule 5.30 sets forth all interests owned or claimed by Seller (including, without limitation, options) in or to the plant, machinery, equipment, furniture, leasehold improvements, fixtures, structures, any related capitalized items and other tangible property, including, without limitation, all computer and telecommunications equipment, material to the Business and which is treated by Seller as depreciable or amortizable property reflected on the Unaudited Financial Statements and not sold or disposed of in the ordinary course of the Business since the Financial Statement Date ("Tangible Property"). -20- Section 5.31 Real Property. (a) Schedule 5.31(a) sets forth a true and complete list of (i) the Owned Real Property), identifying the address and legal description of each parcel of Owned Real Property, (ii) all real property and interests in real property which are leased, directly or indirectly, by or to Seller or in respect of which Seller has an option to enter a lease (individually, a "Real Property Lease"), identifying, for each Real Property Lease, the parties thereto and the address of the property subject thereto, and (iii) all Liens of which Seller has Knowledge relating to or affecting any parcel of Owned Real Property or Real Property Lease other than Permitted Liens. Seller has delivered to the Buyer a true, correct and complete copy of each Real Property Lease, including all amendments, modifications, supplements, side letters and consents affecting the obligations of any party thereunder. (b) Except as disclosed in Schedule 5.31(b), Seller has indefeasible title to, and actual and exclusive possession of, the Owned Real Property and the leasehold estates in all Real Property Leases (any real property of which Seller is a fee owner or which Seller has a leasehold interest in and is specified as a Real Property Lease, the "Acquired Real Property") in each case free and clear of all Liens of any nature created by, through or under Seller except Permitted Liens. (c) Except as disclosed on Schedule 5.31(c), no Acquired Real Property is subject to any lease, sublease, license, concession or other agreement (written or oral) granted by, through or under Seller granting to any other Person any right to the use, occupancy or enjoyment of any Acquired Real Property or any part thereof. (d) To Seller's Knowledge, each Real Property Lease is in full force and effect and is valid and enforceable in accordance with its terms. There is no default under any Real Property Lease either by Seller or, to the Knowledge of Seller, by any other party thereto, and to Seller's Knowledge, no event has occurred that, with the lapse of time or the giving of notice or both, would constitute a default thereunder. To Seller's Knowledge, each Real Property Lease covers the entire estate it purports to cover and, upon the consummation of the transactions contemplated hereby (including delivery of the landlord consents listed in Schedule 5.31(d)), will entitle the Buyer to the exclusive use, occupancy and possession of the real property specified in such Real Property Lease and for the purposes such property is now being used by Seller. No previous or current party to any such Real Property Lease has given notice to Seller of a Claim against Seller with respect to any breach or default thereunder. (e) To the Knowledge of Seller, (i) there does not exist any pending imposition of any assessments for public improvements with respect to any Acquired Real Property, and (ii) no such improvements have been constructed or planned that would be paid for by means of assessments upon any Acquired Real Property. (f) To the Knowledge of Seller, the buildings and improvements located on the Owned Real Property are located within the boundary lines of the Owned Real Property, and no improvements constituting a part of any Owned Real Property encroach on real property not leased or owned by Seller, to the extent that removal of such encroachment would materially impair the manner and extent of the current use, occupancy and operation of such improvements or cost in excess of U.S.$5,000 in the aggregate. (g) Except as set forth in Schedule 5.31(g), to the Knowledge of Seller, (i) no part of any Acquired Real Property is subject to any building or use restriction that would restrict or prevent the present use and operation of such Acquired Real Property, (ii) each parcel of Acquired Real Property is properly and duly zoned for its current use by Seller and the continuation of such use by the Buyer following the Closing, and (iii) such current use is in all respects a conforming use by Seller. No Authority having jurisdiction over any Owned Real Property has issued to Seller or, to the Knowledge of Seller, threatened to issue any notice or Order that may materially adversely affects -21- the use or operation of such Owned Real Property, or requires, as of the Closing or a specified date in the future, any material repairs or alterations or additions or improvements thereto, or the payment or deduction of any money, fee, exaction or property. (h) To the Knowledge of Seller, there are no physical, mechanical or structural defects in or concerning the buildings and other permanent improvements constituting part of the Acquired Real Property that are occupied, operated or owned by Seller materially and adversely affecting their current use, occupancy, or value. (i) Seller has not received any written notice from any insurance company that has issued a Policy with respect to any Acquired Real Property requesting performance of any structural or other repairs or alterations to such Acquired Real Property. During the period that Seller has owned any Owned Real Property, Seller has not granted any encroachment, easement, encumbrance or other adverse interest in, to or upon the Owned Real Property except for Permitted Liens. (j) There are no outstanding options or rights of first refusal to purchase the Owned Real Property, any portion thereof, or any interest therein, granted by Seller. (k) To the Seller's Knowledge, except for common areas of office buildings, no Acquired Real Property is dependent for its access, operation or utility on any land, building or other improvement not part of each parcel of Acquired Real Property or is dependent for ingress or egress on third-party interests. Section 5.32 Bank Accounts; Lockboxes. Schedule 1.1(j) hereto sets forth a complete list of all bank accounts and lockboxes where Seller has deposited all of its cash and where all customer and other receipts are deposited. Section 5.33 Disclosure. The Schedules to this Agreement referred to in Article 5, taken as a whole, contain all material information required by this Article 5 to be disclosed, set forth or listed in such Schedules and are true, complete and accurate in all material respects. Seller has not willfully or intentionally failed to disclose to Buyer or Parent any fact of which Seller has Knowledge relating specifically to the Business (and not generally to businesses of the same or similar type as the Business) which would reasonably be expected to have a Material Adverse Effect. Section 5.34 Disclaimer. EXCEPT FOR SUCH REPRESENTATIONS AND WARRANTIES AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT, NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS MADE REGARDING THE CONDITION, FITNESS OR SERVICEABILITY OF ANY OF THE PURCHASED ASSETS, INCLUDING, WITHOUT LIMITATION, (A) ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR (B) ANY EXPRESS OR IMPLIED WARRANTY REGARDING THE DESIGN, ENGINEERING, CONSTRUCTION OR CONDITION OF ANY PROPERTY, INCLUDING WITHOUT LIMITATION IMPROVEMENTS LOCATED ON ANY REAL PROPERTY, ANY FIXTURES OR ANY PERSONAL PROPERTY. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT Buyer and Parent jointly and severally represent and warrant to Seller, as follows: -22- Section 6.1 Corporate and Partnership Organization, Etc. Parent is a corporation duly organized, validly existing and in good standing under the laws of Delaware with full corporate power and authority to carry on its business as it is now being conducted and to own, operate and lease its properties and assets. Buyer is a limited partnership duly organized, validly existing and in good standing under the laws of Texas with full partnership power and authority to carry on its business as it is now being conducted and to own, operate and lease its properties and assets. Buyer and Parent are each duly qualified or licensed to do business and are in corporate and Tax good standing in every jurisdiction in which the conduct of their business, the ownership or lease of their properties, require each to be so qualified or licensed. Section 6.2 Authorization, Etc. Buyer and Parent each have full power and authority to enter into this Agreement and the agreements contemplated hereby to which each is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and all other agreements and transactions contemplated hereby have been duly authorized by the Board of Directors and General Partner of Buyer and Parent, as the case may be, and no other corporate or partnership proceedings on their part are necessary to authorize this Agreement and the agreements contemplated hereby and the transactions contemplated hereby and thereby. This Agreement and all other agreements contemplated hereby to be entered into by Buyer and Parent each constitutes a legal, valid and binding obligation of each of Buyer and Parent enforceable against Buyer and Parent in accordance with its terms. Section 6.3 No Violation. The execution, delivery and performance by Buyer and Parent of this Agreement, and all other agreements contemplated hereby, and the fulfillment of and compliance with the respective terms hereof and thereof by Buyer and Parent, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default or event of default under (whether with or without due notice, the passage of time or both), (c) result in a violation of, or (d) require any authorization, consent, approval, exemption or other action by, or notice to, or filing with any third party or Authority pursuant to, the charter, bylaws or partnership agreement of either Buyer or Parent or any applicable Regulation (including, without limitation, approvals pursuant to the Hart-Scott-Rodino Act), Order or Contract to which Buyer or Parent or either of their properties are subject. Buyer and Parent have complied with all applicable Regulations and Orders in connection with its execution, delivery and performance of this Agreement, the agreements contemplated hereby and the transactions contemplated hereby and thereby. ARTICLE 7 OTHER AGREEMENTS The parties further agree as follows: Section 7.1 Deliveries After Closing. From time to time after the Closing, at Buyer's or Parent's request and without expense to Seller and without further consideration from Buyer or Parent, Seller, shall execute and deliver such other instruments of conveyance and transfer and take such other action as Buyer or Parent reasonably may require to convey, transfer to and vest in Buyer and to put Buyer in possession of any rights or property to be sold, conveyed, transferred and delivered hereunder; provided that Seller incurs no additional liability or obligation in connection therewith. Section 7.2 Confidentiality. Except as may be required by lawful order of an Authority of competent jurisdiction, Seller agrees to keep secret and confidential, after the Closing, all non-public information concerning the Business, the Purchased Assets and the Assumed Liabilities, except any of the -23- same which: (a) was, is now, or becomes generally available to the public (but not as a result of a breach of any duty of confidentiality by which Seller and its Affiliates are bound); or (b) was disclosed to Seller by a third party not subject to any duty of confidentiality to Seller. Notwithstanding anything contained in this Agreement or in any other document, agreement or understanding relating to the transactions contemplated by this Agreement, each party (and each employee, representative, or other agent of such party) is authorized to disclose, to the extent required by law, to any and all Persons, beginning immediately upon commencement of discussions regarding the transactions contemplated by this Agreement, and without limitation of any kind, the U.S. federal, state or local tax treatment and tax structure of the transactions contemplated by this Agreement, and all materials of any kind (including opinions or other tax analyses) that are provided to such party (or any employee, representative, or other agent of such party) relating to such tax treatment and tax structure. For purposes of this authorization, the "tax treatment" of a transaction means the purported or claimed tax treatment of the transaction, and the "tax structure" of a transaction means any fact that may be relevant to understanding the purported or claimed tax treatment of the transaction. None of the parties to the transactions contemplated by this Agreement provides U.S. tax advice, and each party shall consult its own advisors regarding its participation in the transactions contemplated by this Agreement. Section 7.3 Public Announcements. The form, content and timing of all press releases, public announcements or publicity statements with respect to this Agreement and transactions contemplated hereby shall be subject to the prior approval of Seller and Parent, which approval shall not be unreasonably withheld. No press releases, public announcements or publicity statements shall be released by either party without such prior mutual agreement, except to the extent any such disclosure is required by any Regulation or Authority. Section 7.4 Tax Cooperation. (a) Closing of the Books. For the Tax year of Seller prior to and ending on the Closing Date, the items of income, gain, loss, deduction, and credit allocable to Seller for such Tax year shall be based on a closing of the books as of the Closing Date pursuant to Section 706 of the Code and the regulations thereunder. (b) Cooperation on Tax Matters. (i) Buyer, Parent and Seller shall cooperate fully, as and to the extent reasonably requested by any of them, in connection with any audit, litigation or other proceeding with respect to Taxes for any period ending on or prior to the Closing Date. Such cooperation shall include the retention and (upon another party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees (to the extent such employees were responsible for the preparation, maintenance or interpretation of information and documents relevant to Tax matters or to the extent required as witnesses in any Tax proceedings), available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The parties agree (A) to retain all books and records with respect to Tax matters pertinent to the Business relating to any taxable period beginning before the Closing Date until six months after the expiration of the statute of limitations (and, to the extent notified by Buyer or Seller, any extensions thereof) of the respective taxable periods, and to abide by all record retention obligations imposed by law or pursuant to agreements entered into with any taxing authority, and (B) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if another party so requests, Buyer, Parent or Seller, as the case may be, shall allow the other to take possession of or copy such books and records. -24- (c) Contests. (i) Seller on the one hand, and Buyer or Parent on the other, shall notify the other in writing within 30 days or such shorter period as may be required thereby of receipt of written notice of any pending or threatened Tax examination, audit or other administrative or judicial proceeding (a "Tax Contest") that could reasonably be expected to result in a liability for Taxes of another party. If the recipient of such notice of a Tax Contest fails to provide such notice to such other party, and the recipient is entitled to indemnification for Taxes under this Agreement, it shall be entitled to indemnification for any Taxes arising in connection with such Tax Contest, but only to the extent, if any, that such failure or delay shall not have adversely affected the indemnifying party's ability to defend against, settle, or satisfy any action, suit or proceeding against it, or any damage, loss, claim, or demand for which the indemnified party is entitled to indemnification hereunder. (ii) If a Tax Contest relates to any Taxes for which Seller is liable in full hereunder, Seller shall at its expense control the defense and settlement of such Tax Contest. If such Tax Contest relates to any Taxes for which Buyer or Parent is liable in full hereunder, Buyer or Parent shall at its own expense, control the defense and settlement of such Tax Contest. A party not in control of the defense shall have the right to observe the conduct of any Tax Contest at its expense, including through its own counsel and other professional experts. If a Tax Contest relates to Taxes for which Seller and either Buyer or Parent or both may be liable hereunder, the parties that may have such liability shall jointly control the defense and settlement of such Tax Contest. (iii) To the extent that an issue raised in any Tax Contest controlled by one party or jointly controlled could materially affect the liability for Taxes of another party, the controlling party shall not, and no party in the case of joint control shall, enter into a final settlement without the written consent of the other party or parties, which consent shall not be unreasonably withheld. Where a party withholds its consent to any final settlement, that party may continue or initiate further proceedings, at its own expense, and the liability of the party or parties that wished to settle (as between the consenting and the non consenting parties) shall not exceed the liability that would have resulted from the proposed final settlement including interest, additions to Tax, and penalties that have accrued at that time, and the non consenting party or parties shall indemnify the consenting party or parties for such Taxes. Section 7.5 Liability for Taxes. All Taxes resulting from or payable in connection with the sale of the Purchased Assets and the assumption of the Assumed Liabilities in accordance with this Agreement shall be timely paid by the party on whom the Taxes are imposed by the applicable Taxing Authorities. All obligations under this Section 7.5 shall survive the Closing Date hereunder and continue until 30 days following the expiration of the statute of limitations on assessment of the relevant Tax. Section 7.6 Name Change. Seller shall execute and deliver an amendment to its Certificate of Limited Partnership to change its name to a name other than Southwest Concrete Products, L.P., or any variant thereof in acceptable form to be filed with the Delaware Secretary of State's office and any other jurisdiction where Seller is qualified to do business within 30 days following the Closing. Further, Seller shall cause its general partner, Southwest Concrete Management Company, LLC, to change its name to a name other than Southwest Concrete Management, L.P., or any variant thereof in acceptable form to be filed with the Delaware Secretary of State's office and any other jurisdiction where the general partner is qualified to do business within 30 days following the Closing. -25- Section 7.7 Rights to Refunds. If Seller, on the one hand, or Buyer, Parent or any of their Affiliates on the other hand, receives a refund of any Taxes for which the other has paid such Taxes, then the party receiving such refund shall, within 30 days after its receipt, remit it to the party who paid such Taxes; provided, however, that this section shall not affect the liability of the parties for Taxes as set forth elsewhere herein. Section 7.8 Mail Received After Closing. Following the Closing, Buyer may receive and open all mail addressed to Seller at any of the locations of Seller acquired hereunder, other than mail that is labeled personal and/or confidential, and to the extent that such mail and the contents thereof relate to the Business, the Purchased Assets or the Assumed Liabilities, deal with the contents thereof in its good faith discretion, subject, however, to Article 8 . Buyer shall promptly notify Seller of (and provide Seller copies of the relevant portions of) any mail that obliges Seller to take any action or indicates that action may be taken against Seller. To the extent that such mail and the contents thereof do not relate to the Business, the Purchased Assets or the Assumed Liabilities, such mail and the contents thereof shall be promptly forwarded to Seller at the address set forth in Section 9.4 below, or such other address as Buyer is advised of in writing by Seller. Section 7.9 Prorations. Unearned insurance premiums, prepaid utility charges, prepaid rentals, property Taxes and other prepaid expenses with respect to the Purchased Assets applicable to periods both prior to and after Closing shall be prorated as of the Closing and amounts owing by Buyer to Seller, or by Seller to Buyer, resulting from such proration shall be settled within 30 days after the amounts thereof have been determined and agreed to by Seller and Buyer. Representatives of Seller and Buyer may take readings or other measurements of gas, water, electricity and other utilities. Such readings and measurements, if taken, shall be binding, conclusive and used for purpose of the apportionment provided herein. Section 7.10 Post-Closing Operation of Business. Parent and Buyer jointly and severally agree that neither of them nor any of their Affiliates shall intentionally take or omit to take any action that has the effect of manipulating revenues, net income or expenses of the Business or other components of EBITDA in any manner, the effect of which decreases the 2005 EBITDA or the 2005 Earn-Out Consideration, by either the diversion of business or business opportunities, unreasonable increases in expenses, payments to Affiliates, failure to make necessary capital or maintenance expenditures, reduction of work force or capacity, reduction of sales and marketing efforts, dispositions of assets or otherwise actions taken that are not in the ordinary course of the Business as operated by Seller prior to Closing. It is the intention of the parties that the Business shall be operated by Buyer from the date hereof through the twelve months ending December 31, 2005 on a stand-alone basis and in a manner consistent with the operation of the Business by Seller. ARTICLE 8 INDEMNIFICATION Section 8.1 Survival. The representations and warranties in this Agreement (including the Schedules hereto) and in any other agreement, instrument or certificate being executed and delivered by a party hereto on the date hereof pursuant to or in connection with this Agreement, including, without limitation the Closing Letter (the "Other Closing Documents") shall terminate on the 18 month anniversary of the Closing Date; provided that the representations, warranties and indemnities for breach thereof for which an indemnification Claim shall be pending as of the 18 month anniversary of the Closing Date, shall survive with respect to such Claim until the final disposition thereof. The covenants of the parties contained herein and the Other Closing Documents to be performed after the Closing Date shall survive the execution of this Agreement and the Closing Date. The representations and warranties in this Agreement and -26- the Other Closing Documents shall in no event be affected by any investigation, inquiry or examination made for or on behalf of any party or be affected by the Knowledge of any officer, director, stockholder, employee, partner or agent of any party seeking indemnification hereunder or by the acceptance of any certificate or opinion from any third party. Notwithstanding the foregoing, the indemnification covenants of the parties in Article 8 with respect to the Assumed Liabilities and the Retained Liabilities shall survive until all such Assumed Liabilities and Retained Liabilities and indemnification Claims under Article 8 with respect thereto are paid in full by the party responsible therefor pursuant to the terms of this Agreement. Section 8.2 Limitations. (a) Absent fraud, Seller shall not be required to indemnify the Buyer Indemnified Parties under Section 8.3(a) (other than with respect to the representations and warranties made by Seller in Section 5.17) and Buyer and Parent shall not be required to indemnify the Seller Indemnified Parties under Section 8.4(a) until the Indemnifiable Damages incurred thereunder, individually or in the aggregate, exceed $100,000 (the "Hurdle Amount"), at which point such indemnifying party or parties shall, subject to Section 8.2(c), and in the case of Seller, Section 8.6, be responsible for all such Indemnifiable Damages that may arise in excess of the Hurdle Amount; and provided that such Indemnifiable Damages shall accumulate until such time as they exceed the Hurdle Amount, whereupon the party or parties to be indemnified shall be entitled, subject to Section 8.2(b), and in the case of Seller, Section 8.6, to seek indemnification for the full amount of such Indemnifiable Damages in excess of the Hurdle Amount. (b) With respect to the representations and warranties made by Seller in Section 5.17, absent fraud, Seller shall not be required to indemnify the Buyer Indemnified Parties under Section 8.3(a) until the Indemnifiable Damages incurred thereunder, individually or in the aggregate, exceed $100,000 (the "Environmental Hurdle Amount"), at which point Seller shall, subject to Section 8.2(c) and Section 8.6, be responsible for all such Indemnifiable Damages that may arise in excess of the Environmental Hurdle Amount; and provided that such Indemnifiable Damages shall accumulate until such time as they exceed the Environmental Hurdle Amount, whereupon the Buyer Indemnified Parties shall be entitled, subject to Section 8.2(b) and Section 8.6, to seek indemnification for the full amount of such Indemnifiable Damages in excess of the Environmental Hurdle Amount. (c) Absent fraud, Seller shall not be required to indemnify the Buyer Indemnified Parties under Section 8.3(a) and Buyer and Parent shall not be required to indemnify the Seller Indemnified Parties under Section 8.4(a) for any amount of Indemnifiable Damages incurred thereunder in excess of $5,200,000. Section 8.3 Indemnification by Seller. Subject to Sections 8.1, 8.2 and 8.6, Seller agrees to, and shall indemnify Buyer and Parent and their respective Affiliates and the officers, directors, employees, stockholders, representatives and agents of each of them (the "Buyer Indemnified Parties") and hold each of them harmless against and in respect of any and all Indemnifiable Damages resulting from, or in respect of, any of the following: (a) Any misrepresentation, breach of warranty, or non-fulfillment of any covenant on the part of Seller under this Agreement or any of the Other Closing Documents executed and delivered by Seller, other than the covenants in Sections 7.2, 7.4, 7.7 and 7.8; (b) Any breach of the covenants in Sections 7.2, 7.4, 7.7 and 7.8 on the part of Seller; and -27- (c) The Retained Liabilities. Section 8.4 Indemnification by Buyer and Parent. Subject to Sections 8.1 and 8.2, Buyer and Parent agree to, and shall, jointly and severally, indemnify Seller, its Affiliates and the partners, officers, directors, employees, representatives, trustees and agents of each of them (the "Seller Indemnified Parties") and hold each of them harmless, against and in respect of any and all Indemnifiable Damages resulting from, or in respect of, any of the following: (a) Any misrepresentation, breach of warranty or non-fulfillment of any obligation or covenant on the part of Buyer or Parent under this Agreement or any of the Other Closing Documents executed and delivered by Buyer or Parent, other than the covenants in Sections 3.2, 3.4(b), 7.4, 7.7, 7.8 and 7.10; (b) Any breach of the covenants in Sections 3.2, 3.4(b), 7.4, 7.7, 7.8 and 7.10 on the part of Buyer or Parent; and (c) The Assumed Liabilities. Section 8.5 Third-Party Claims. (a) The following procedures shall be applicable with respect to indemnification for third-party Claims. Promptly after receipt by the party seeking indemnification hereunder (hereinafter referred to as the "Indemnitee") of notice of the commencement of any (i) Tax audit or proceeding for the assessment of Tax by any Taxing Authority or any other proceeding likely to result in the imposition of a Tax liability or obligation or (ii) any action or the assertion of any Claim, liability or obligation by a third party (whether by legal process or otherwise), against which Claim, liability or obligation any other party to this Agreement (hereinafter the "Indemnitor") is, or may be, required under this Agreement to indemnify such Indemnitee, the Indemnitee shall, if the Indemnitee desires to make a claim for indemnification against the Indemnitor with respect to such third-party Claim, notify the Indemnitor in writing of the commencement or assertion of such third-party Claim and give the Indemnitor a copy of such Claim, process and all legal pleadings in the possession of the Indemnitee. The Indemnitor shall have the right to (i) participate in the defense of such action at its expense with counsel of reputable standing and (ii) assume the defense of such action by agreeing to assume such defense within 10 days of transmittal of the notice of the Claim by the Indemnitee, in writing unless such Claim (A) may result in criminal proceedings, injunctions or other equitable remedies in respect of the Indemnitee or its business; (B) may result in liabilities which, taken with other then existing Claims under this Article 8, would not be fully indemnified hereunder; (C) may have a material adverse effect on the business or financial condition of the Indemnitee after the Closing Date (including an effect on the Tax liabilities, earnings or ongoing business relationships of the Indemnitee); (D) is for an alleged amount of less than $25,000; or (E) upon petition by the Indemnitee, if an appropriate court rules that the Indemnitor failed or is failing to vigorously prosecute or defend such Claim, in which events the Indemnitee shall assume the defense. (b) The Indemnitor and the Indemnitee shall cooperate in the defense of any third party Claims. In the event that the Indemnitor assumes or participates in the defense of such third party Claim as provided herein, the Indemnitee shall make available to the Indemnitor all relevant records and take such other action and sign such documents as are reasonable necessary to defend such third party Claim in a timely manner. If the Indemnitee shall be required by judgment or a settlement agreement to pay any amount in respect of any obligation or liability against which the Indemnitor has agreed to indemnify the Indemnitee under this Agreement, the Indemnitor shall promptly reimburse the Indemnitee in an amount equal to the amount of such payment plus all expenses (including reasonable legal fees and expenses) incurred by such Indemnitee in -28- connection with such obligation or liability subject to this Article 8. No Indemnitor, in the defense of any such Claim, shall, except with the consent of the Indemnitee, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee of a release from all liability with respect to such Claim. In the event that the Indemnitor does not assume the defense of any matter for which it is entitled to assume as provided above, or is not entitled to assume such defense, the Indemnitee shall have the full right to defend such Claim (and, in the cases specified in clauses (A) through (E) of Section 8.5(a), shall defend such Claim), but shall not settle such Claim without the prior written consent of the Indemnitor, which consent shall not be unreasonably withheld. (c) Except as provided in Section 8.5(e), prior to paying or settling any Claim against which an Indemnitor is, or may be, obligated under this Agreement to indemnify an Indemnitee, the Indemnitee must first supply the Indemnitor with a copy of a final court judgment or decree holding the Indemnitee liable on such Claim or failing such judgment or decree, must first receive the written approval of the terms and conditions of such settlement from the Indemnitor, which shall not be unreasonably withheld; provided however, that no written approval is required from the Indemnitor as to any third party Claim (i) that results solely in injunctions or other equitable remedies in respect of the Indemnitee or its business; (ii) that settles liabilities, or portions thereof, that are not subject to indemnification hereunder; or (iii) is for an amount of less than $25,000. (d) An Indemnitee shall have the right to employ its own counsel in any case and the fees and expenses of such counsel shall be at the expense of the Indemnitee unless (i) the employment of such counsel shall have been authorized in writing by the Indemnitor in connection with the defense of such Claim; (ii) the Indemnitor shall not have employed counsel in the defense of such Claim after 10 days notice; or (iii) such Indemnitee shall have reasonably concluded that there may be defenses available to it which are contrary to, or inconsistent with, those available to the Indemnitor; in any of the foregoing events such fees and expenses shall be borne by the Indemnitor. (e) Each Indemnitor shall pay the indemnification amount claimed by the Indemnitee in immediately available funds promptly within 10 days after the Indemnitee provides the Indemnitor with written notice of a Claim hereunder unless the Indemnitor in good faith disputes such Claim. If the Indemnitor disputes such Claim in good faith, then after the resolution of such dispute, the amount finally determined to be due shall be paid by the Indemnitor to the Indemnitee in immediately available funds within 10 days of such dispute resolution. In the event the Indemnitor fails to pay the Indemnitee the amount of such indemnification Claim within such 10 day period the Indemnitor shall pay the Indemnitee interest on the amount of such indemnification Claim at a rate of 10% per annum, compounded monthly from the date of the original written notice of such indemnification Claim until the indemnification Claim is paid in full. If any Indemnitor fails to comply with its obligations to make cash payments to an Indemnitee in an aggregate amount sufficient to reimburse the Indemnitee for all the Indemnifiable Damages resulting from an indemnified Claim, the Indemnitee may pursue any and all rights and remedies against the Indemnitor available in law or in equity, subject only to the limitations set forth in Section 8.2 above and Section 8.6 below. Section 8.6 Recourse for Certain Seller Indemnification Obligations; Purchase Price Adjustment; Exclusive Remedy. (a) Absent fraud, any Claims for indemnification by any of the Buyer Indemnified Parties against Seller under Section 8.3(a) shall be satisfied by Buyer, on behalf of any of the Buyer Indemnified Parties, solely by recourse against the Escrow Amount, all in accordance with the terms of the Escrow -29- Agreement, and no Buyer Indemnified Party shall have any other recourse against Seller, its partners, or its or their successors or assigns or any of their respective assets (including the 2005 Earn-Out Consideration) for any Indemnifiable Damages under Section 8.3(a). (b) All payments for Indemnifiable Damages made pursuant to Sections 8.3(a) or 8.4(a) shall be treated as adjustments to the Purchase Price. (c) Absent fraud, no Buyer Indemnified Party shall have any recourse against Seller for any breach of this Agreement or any Other Closing Document by Seller or otherwise in connection with the transactions contemplated hereby except pursuant to, and subject to the limitations in, this Article 8. Absent fraud, no Seller Indemnified Party shall have any recourse against Buyer or Parent for any breach of this Agreement or any Other Closing Document by Buyer or Parent or otherwise in connection with the transactions contemplated hereby except pursuant to, and subject to the limitations in, this Article 8. ARTICLE 9 MISCELLANEOUS PROVISIONS Section 9.1 Amendment and Modification. This Agreement may be amended, modified and/or supplemented only by written agreement of all the parties hereto with respect to any of the terms contained herein. No course of dealing between or among the parties shall be deemed effective to modify, amend, waive or discharge any part of this Agreement or any rights or obligations of any party under or by reason of this Agreement. Section 9.2 Waiver of Compliance; Consents. Any failure of any party hereto to comply with any obligation, covenant, agreement or condition herein may be waived in writing by the other parties hereto, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing to be effective. Section 9.3 Certain Definitions. "24/7" shall have the meaning set forth in Section 5.14(h). "2005 EBITDA" shall mean the EBITDA of Buyer for the twelve months ending December 31, 2005. "2005 EBITDA Calculations" shall have the meaning set forth in Section 3.2. "2005 Earn-Out Consideration" shall mean a cash amount equal to the product of (a) 5.7 and (b) the difference, if a positive number, between the 2005 EBITDA and $5,500,000. "Acquired Real Property" shall have the meaning set forth in Section 5.31(b). "Affiliate" means, with regard to any specified Person, (a) any other Person, directly or indirectly, Controlled by, under common Control with, or Controlling such specified Person; (b) any Person, directly or indirectly, in which such specified Person holds, of record or beneficially, fifty percent (50%) or more of the equity or voting securities; (c) any Person that holds, of record or beneficially, fifty percent (50%) or more of the equity or voting securities of such specified Person; (d) any Person that, through contract, relationship or otherwise, exerts a substantial influence on the management of such specified Person's affairs; (e) any Person that, through -30- contract, relationship or otherwise, is influenced substantially in the management of its affairs by such specified Person; (f) any director, officer, manager or individual holding a similar position in respect of such Person; or (g) as to any natural Person, any Person related by blood, marriage or adoption, including without limitation, any spouse, parent, grandparent, aunt, uncle, child, grandchild, sibling, cousin or in-law of such natural Person. "Assumed Liabilities" shall have the meaning set forth in Section 2.1. "Audited Financial Statements" shall have the meaning set forth in Section 5.4. "Authority" means any governmental, regulatory or administrative body, agency, commission, board, arbitrator or authority, any court or judicial authority, any public, private or industry regulatory authority, whether international, national, federal, state or local. "Bosnia Assets" shall have the meaning set forth in Section 1.2(a). "Business" shall have the meaning set forth in the recitals. "Business Day" shall have the meaning set forth in Section 4.1. "Buyer" shall have the meaning set forth in the preamble. "Buyer Indemnified Parties" shall have the meaning set forth in Section 8.3. "CERCLA" means Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, and the Regulations thereunder. "CERCLIS" means Comprehensive Environmental Response, Compensation, and Liability Information System. "Claim" means any action, suit, claim, lawsuit, demand, suit, inquiry, hearing, investigation, notice of a violation or noncompliance, litigation, proceeding, arbitration, appeal or other dispute, whether civil, criminal, administrative or otherwise. "Closing" shall have the meaning set forth in Section 4.1. "Closing Cash Amount" shall have the meaning set forth in Section 3.1. "Closing Date" shall have the meaning set forth in Section 4.1. "Closing Letter" shall have the meaning set forth in Section 4.1. "Closing Payment" shall have the meaning set forth in Section 3.3(a). "Code" shall mean the Internal Revenue Code of 1986, as amended, and the Regulations thereunder. "Contract" means any agreement, contract, commitment, instrument, document, certificate or other arrangement or understanding, whether written or oral, legally binding on Seller. -31- "Control" means (including, with correlative meanings, the terms "Controlling," "Controlled By," and "Under Common Control With") shall mean, with respect to any specified Person, the possession by another Person, directly or indirectly, of the power to direct or cause the direction of management of such specified Person, whether through ownership of voting interests, by agreement or otherwise. "Discharge" means any manner of spilling, leaking, dumping, discharging, releasing, migrating or emitting, as any of such terms may further be defined in any Environmental Law, into or through any medium including, without limitation, ground water, surface water, land, soil or air. "Disputed Matters" shall have the meaning set forth in Section 3.4(b). "EBITDA" shall mean the consolidated net income of the Business for the twelve months ending December 31, 2005, plus (a) provision for Taxes based on income or profits of the Business for such period, to the extent that such provision for Taxes was included in computing such net income, plus (b) interest expense of the Business for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with capital lease obligations, commissions, discounts and other fees and charges incurred in respect of letters of credit or bankers' acceptance financings, and net payments (if any) pursuant to hedging obligations), to the extent that any such expense was deducted in computing such net income, plus (c) depreciation, amortization (including amortization of goodwill and other intangibles) and other non-cash expenses for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such net income, plus (d) except for any selling, general or administrative expenses of the Business that are paid or assumed by Parent or any of its Affiliates (other than Buyer) after the Closing that do not exceed the amounts that would have been paid by Seller prior to Closing on a stand-alone basis and to the extent any such expense is included as an expense for purposes of computing such net income, any management or consulting or other expenses or payments of any kind paid pursuant to any management, consulting or other agreement or arrangement of any kind with Parent or any of its Affiliates or any of the stockholders, officers, directors of Parent or any of its Affiliates or any of their Affiliates to the extent any such fees, expenses or payments were deducted in computing such net income, plus (e) any expenses or costs incurred for the preparation of the 2005 EBITDA Calculations, to the extent any such expenses or costs were deducted in computing such net income, plus (f) the compensation paid to Murphy Lents and Bobby Lee Whisnant in excess of $390,000 for the twelve months ending December 31, 2005, less (g) any selling, general or administrative expenses of the Business that are paid or assumed by Parent or any of its Affiliates (other than Buyer) after the Closing that do not exceed the amounts that would have been paid by Seller prior to closing on a stand-alone basis to the extent any such expenses are not included as an expense for purposes of computing such net income, in each case determined in accordance with GAAP on a basis consistent with (except as otherwise provided in this definition) Seller's Statement of Cash Flows for the year ended December 31, 2003. "Employee Benefit Plan" shall have the meaning set forth in Section 5.13(a). "Employee Leasing Company" shall have the meaning set forth in Section 5.13(a). "Employee Leasing Company Benefit Plans" shall have the meaning set forth in Section 5.13(a). "Environmental Hurdle Amount" shall have the meaning set forth in Section 8.2(b). -32- "Environmental Law" shall mean any applicable Regulation, Order, settlement agreement or Authority requirement, which relates to or otherwise imposes liability or standards of conduct concerning the environment, health, safety or Hazardous Substances, including without limitation, discharges, emissions, releases or threatened releases of noises, odors or any Hazardous Substances, whether as matter or energy, into ambient air, water, or land, or otherwise relating to the manufacture, processing, generation, distribution, use, treatment, storage, disposal, cleanup, transport or handling of Hazardous Substances, including but not limited to CERCLA, the Superfund Amendments and Reauthorization Act of 1986, the Hazardous Material Transportation Act, the Resource Conservation and Recovery Act of 1976, the Toxic Substances Control Act, the Federal Water Pollution Control Act, the Clean Water Act, the Clean Air Act, the Occupational Safety and Health Act, any so-called "Superlien" law, all as now or hereafter amended or supplemented, and the Regulations promulgated thereunder, and any other similar Federal, state or local Regulations. "Environmental Permit" shall mean Permits required by any Environmental Law and necessary for the Business. "ERISA" shall have the meaning set forth in Section 5.13. "Escrow Amount" shall have the meaning set forth in Section 3.3(a). "Excluded Assets" shall have the meaning as set forth in Section 1.2. "Final EBITDA 2005 Calculations" shall have the meaning set forth in Section 3.4(b). "Financial Statements" shall have the meaning as set forth in Section 5.4. "Financial Statement Date" shall have the meaning as set forth in Section 5.4. "GAAP" means accounting principles generally accepted in the United States of America. "Government Contract" means any Contract of Seller that is with any Authority or Government Entity, including, without limitation, all Contracts and work authorizations directly with any Authority or Government Entity to supply goods and services to such Authority or Government Entity, but does not include any Contract with any Person that is not itself an Authority or Government Entity. "Government Entity" shall mean a federal, state, provincial, local, county or municipal government, governmental, regulatory or administrative agency, department, commission, board, bureau, or other Authority or instrumentality, domestic or foreign. "Guarantee" means any guarantee or other contingent liability (other than any endorsement for collection or deposit in the ordinary course of business and any product or service warranty), direct or indirect with respect to any obligations of another Person, through a Contract or otherwise, including, without limitation, (a) any endorsement or discount with recourse or undertaking substantially equivalent to or having economic effect similar to a guarantee in respect of any such obligations and (b) any Contract (i) to purchase, or to advance or supply funds for the payment or purchase of, any such obligations, (ii) to purchase, sell or lease property, products, materials or supplies, or transportation or services, in respect of enabling such other Person to pay any such obligation or to assure the owner thereof against loss regardless of the delivery or nondelivery of the property, products, materials or supplies or transportation or services or (iii) to make any loan, advance or capital contribution to or other Investment in, or to otherwise provide funds to -33- or for, such other Person in respect of enabling such Person to satisfy an obligation (including any liability for a dividend, stock liquidation payment or expense) or to assure a minimum equity, working capital or other balance sheet condition in respect of any such obligation. "Hazardous Substances" shall include any toxic or hazardous substance, material, or waste, any petroleum or petroleum products, radioactive materials, asbestos in any form that has become friable, ura formaldehyde foam insulation, dielectric fluid containing levels of polychlorinated biphenyls, and radon gas, any chemicals, materials or substances defined or included in the definition of "hazardous substances," "restricted hazardous wastes," "toxic substances," "toxic pollutants," or words of similar import, under any applicable Environmental Law, any other chemical, material or substance, exposure to which is prohibited, limited, or regulated by any governmental Authority and any other contaminant, pollutant or constituent thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including without limitation, chemicals, compounds, by-products, pesticides, asbestos containing materials, petroleum or petroleum products or by-products, and polychlorinated biphenyls, the presence of which requires investigation or remediation under any Environmental Law. "Hurdle Amount" shall have the meaning set forth in Section 8.2(a). "Income Taxes" means United States federal income taxes. "Indebtedness" with respect to any Person means (a) any obligation of such Person for borrowed money, but in any event shall include: (i) any obligation or liabilities for which such Person has liability or which is secured by a Lien on any property of such Person incurred for all or any part of the purchase price of property or other assets or for the cost of property or other assets constructed or of improvements thereto, other than accounts payable included in current liabilities and incurred in the ordinary course of business; (ii) the face amount of all letters of credit issued for the account of such Person and all drafts drawn thereunder; (iii) capitalized lease obligations; and (iv) all Guarantees of such Person; (b) accounts payable of such Person that have not been paid within 60 days of their due date and are not being contested; (c) annual employee bonus obligations that are not accrued on the Financial Statements; and (d) retroactive insurance premium obligations. "Indemnifiable Damages" means any and all loss, liability, claim, damage, expense (including out-of-pocket costs of investigation and defense and reasonable attorneys' fees and expenses), whether or not involving a third-party claim under Section 8.5, that an indemnified Person may suffer or incur; provided, however (a) the amount of any Indemnifiable Damages shall be reduced for any insurance actually received by an indemnified Person in respect of such loss, liability, claim, damage, expense (including out-of-pocket costs of investigation and defense and reasonable attorneys' fees and expenses) and (b) the amount of any Indemnifiable Damages shall be reduced for indemnities from third parties or in the case of third-party Claims, by any amount actually recovered by an indemnified Person pursuant to counterclaims directly relating to the facts giving rise to such third-party Claims. "Indemnitee" shall have the meaning set forth in Section 8.5. "Indemnitor" shall have the meaning set forth in Section 8.5. "Independent Accountants" shall have the meaning set forth in Section 3.4(b). "Independent Accountants' Final 2005 EBITDA Calculations" shall have the meaning set forth in Section 3.4(b). "Industrial Revenue Bonds" shall have the meaning set forth in Section 2.1(a). -34- "Intellectual Property" means all domestic and foreign patents, patent applications, trademarks, service marks and other indicia of origin, trademark and service mark registrations and applications for registrations thereof, copyrights, copyright registrations and applications for registration thereof, Internet domain names and universal resource locators ("URLs"), trade secrets, inventions (whether or not patentable), invention disclosures, moral and economic rights of authors and inventors (however denominated), technical data, customer lists, corporate and business names, trade names, trade dress, brand names, know-how, show-how, maskworks, formulae, methods (whether or not patentable), designs, processes, procedures, technology, source codes, object codes, computer software programs, databases, data collectors and other proprietary information or material of any type, whether written or unwritten (and all good will associated with, and all derivatives, improvements and refinements of, any of the foregoing). "Investment" shall mean (a) any direct or indirect ownership, purchase or other acquisition by a Person of any notes, obligations, instruments, capital stock, options, securities or ownership interests (including partnership interests and joint venture interests) of any other Person; and (b) any capital contribution or similar obligation by a Person to any other Person. "Knowledge" means (a) with respect to Seller, the actual knowledge of Bobby Lee Whisnant, Murphy Lents, John Lents or Jim Pouns with respect to a particular fact or matter in question and all knowledge which would have been obtained by reasonable inquiry by either Messrs. Whisnant, John Lents or Murphy Lents and (b) with respect to Buyer or Parent, the actual knowledge of any officer, director, partner or management employee of either Buyer or Parent. "Lien" means any (a) security interest, lien, mortgage, pledge, hypothecation, encumbrance, Claim, easement, charge, restriction on transfer or otherwise, or interest of another Person of any kind or nature, including any conditional sale or other title retention Contract or lease in the nature thereof; (b) any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute; and (c) any subordination arrangement in favor of another Person. "Material Adverse Change" means any developments or changes which would have a Material Adverse Effect. "Material Adverse Effect" means any circumstance, state of facts or matters, changes, developments or effects that has or is reasonably expected by Seller to have a material adverse effect in respect of the Business or Seller's properties, assets, results of operations, plans, strategies or condition (financial or otherwise) of Seller, taken as a whole. "Occurrence" means any accident, happening or event which occurs or has occurred at any time prior to the Closing Date that is caused or allegedly caused by any hazard or defect in manufacture, design, materials or workmanship including, without limitation, any failure or alleged failure to warn or any breach or alleged breach of express or implied warranties or representations with respect to a product manufactured, shipped, sold or delivered by or on behalf of Seller which results or is alleged to have resulted in injury or death to any Person or damage to or destruction of property (including damage to or destruction of the product itself) or other consequential damages, at any time. "Operating Lease" means a lease of tangible property to which Seller is a party as lessee that is not a capitalized lease under GAAP. "Order" means any writ, decree, order, judgment, injunction, rule, ruling, Lien, voting right, consent of or by an Authority. -35- "Other Closing Documents" shall have the meaning set forth in Section 8.1. "Owned Real Property" shall have the meaning set forth in Section 1.1(i). "Parent" shall have the meaning set forth in the preamble. "Permits" means all permits, licenses, registrations, certificates, Orders, qualifications or approvals required by any Authority. "Permitted Liens" means (a) statutory Liens not yet delinquent and immaterial in amount; (b) such imperfections or irregularities of title or Liens as do not materially detract from or interfere with the present use of the properties or assets subject thereto or affected thereby, otherwise impair present business operations at such properties, or do not materially detract from the value of such properties and assets; (c) Liens reflected in the Financial Statements or the notes thereto; (d) the rights of customers of Seller with respect to inventory or work in progress under purchase orders or Contracts entered into by Seller in the ordinary course of business; (e) mechanics', carriers', workers', repairmen's, warehousemen's, or other similar Liens arising in the ordinary course of business in respect of obligations not overdue and immaterial in amount or which are being contested in good faith and covered by a bond in an amount at least equal to the amount of the Lien; (f) deposits or pledges to secure workmen's compensation, unemployment insurance, old age benefits or other social security obligations in connection with, or to secure the performance of, bids, tenders, trade Contracts not for the payment of money or leases, or to secure statutory obligations or surety or appeal bonds or other pledges or deposits for purposes of like nature in the ordinary course of business and immaterial in amount; and (g) Liens evidenced by the Real Property Leases, the Operating Leases, the contracts and the Seller's licenses of Intellectual Property; (h) Liens and encroachments described in any title insurance policy, survey or title commitment provided to or obtained by Buyer or Parent; and (i) Liens not created by, through or under Seller. "Person" means any corporation, partnership, joint venture, limited liability company, organization, entity, Authority or natural person. "Policies" means all Contracts that insure (a) Seller's, properties, plant and equipment for loss or damage; and (b) Seller or its officers, directors, employees or agents against any liabilities, losses or damages (or lost profits) for any reason or purpose. "Prime Rate" shall have the meaning set forth in Section 3.4(c). "Projections" shall have the meaning set forth in Section 5.27. "Purchased Assets" shall have the meaning set forth in Section 1.1. "Purchase Price" shall have the meaning set forth in Section 3.1. "Real Property Lease" shall have the meaning set forth in Section 5.31(a). "Recalls" means product recall, rework or post-sale warning or similar action. "Regulation" means any rule, law, code, statute, regulation, ordinance, requirement, announcement, policy, rule of common law or other binding action of or by an Authority and any judicial interpretation thereof. -36- "Retained Liabilities" shall have the meaning set forth in Section 2.2. "Seller" shall have the meaning set forth in the preamble. "Seller Indemnified Parties" shall have the meaning set forth in Section 8.4. "Seller's Intellectual Property" shall mean all Intellectual Property owned by Seller and used in connection with the Business. "Subsidiary" means, as to Seller, any other Person, a majority of the outstanding equity or other ownership interests are beneficially owned, directly or indirectly, by Seller. "Tangible Property" shall have the meaning set forth in Section 5.30. "Tax Contest" shall have the meaning set forth in Section 7.7(c). "Tax Returns" means federal, state, foreign and local Tax reports, returns, information returns and other similar documents, but does not include Income Tax reports, returns, information returns or other similar documents. "Taxes" means all taxes, however denominated, including ad valorem, value added, turnover, sales, use, property, personal property (tangible and intangible), stamp, leasing, lease, user, excise, duty, franchise, transfer, license, withholding, payroll, employment, foreign, fuel, occupational and interest equalization, windfall profits, severance, and other similar charges (including interest and penalties), but shall not include Income Taxes. "Taxing Authority" means the Internal Revenue Service and any other federal, state, or local authority which has the right to impose Taxes or Income Taxes on Seller or its partners. "Unaudited Financial Statements" shall have the meaning set forth in Section 5.4. "Underground Storage Tank" shall have the meaning ascribed to such term in Section 6901 et seq., as amended, of RCRA, or any applicable Regulation, Order governing underground storage tanks. "VEBAs" shall have the meaning set forth in Section 5.13(a). Section 9.4 Notices. All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given (a) 1 calendar day after being delivered by hand, (b) 5 calendar days after being mailed first class or certified with postage paid or (c) upon receipt if couriered by overnight receipted courier service or (d) when the party receiving a telecopy shall have confirmed receipt of the communication: (a) If to Seller, to: Southwest Concrete Products, L.P. 2088 FM 949 Alleyton, Texas 78930 Attention: Mr. Murphy Lents Telephone: (979) 732-3040 Facsimile: (979) 732-3013 Email: mlents@swconcrete.com -37- with a copy to: (which shall not constitute notice to Seller) Bracewell & Patterson, L.L.P. 711 Louisiana Street, Suite 2900 Houston, Texas 77002-2781 Attention: John L. Bland Telephone: (713) 221-1310 Facsimile: (713) 221-2163 Email: john.bland@bracepatt.com or to such other Person or address as Seller shall furnish by notice to Buyer and Parent in writing. (b) If to Buyer or Parent, to: Headwaters Incorporated 10653 South River Front Parkway Suite 300 South Jordan, UT 84095 Attention: Brett A. Hickman Telephone: (801) 984-9400 Facsimile: (801) 984-9430 Email: bhickman@hdwtrs.com with a copy to: (which shall not constitute notice to Buyer or Parent) Sayles, Lidji & Werbner 4400 Renaissance Tower 1201 Elm Street Dallas, Texas 75270 Attention: Michael R. Dorey Telephone: (214) 939-8707 Facsimile: (214) 939-8787 Email: mdorey@slw.com or to such other Person or address as Buyer or Parent shall furnish by notice to Sellers and the Partners in writing. After any notice is made hereunder, the party taking such action will use its commercially reasonable efforts to deliver a copy of such notice to the e-mail address of the intended recipients as soon as practical but in no event later than twelve (12) hours after such action has been taken Section 9.5 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties, -38- except that Buyer or Parent may, without the prior approval of Seller, grant Liens in respect of its rights and interests hereunder to its lenders (and any agent for the lenders), and the parties hereto consent to any exercise by such lenders (and such agent) of their rights and remedies with respect to such collateral. Section 9.6 Governing Law. The Agreement shall be governed by the internal laws of the State of Texas as to all matters, including but not limited to matters of validity, construction, effect and performance. Section 9.7 Counterparts. This Agreement may be executed in two or more counterparts (including by means of telecopied signature pages), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterpart signatures need not be on the same page and shall be deemed effective upon receipt. If this Agreement is executed by Buyer, Parent, and Seller, it shall be deemed to be a valid Contract as between and among such signatories notwithstanding that other parties may be named herein. Section 9.8 Headings. The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 9.9 Entire Agreement. This Agreement, including the schedules and exhibits hereto and the Contracts, documents, certificates and instruments referred to herein, embodies the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement and supersedes all prior Contracts, representations, warranties, promises, covenants, arrangements, communications and understandings, oral or written, express or implied, between the parties with respect to such transactions. There are no Contracts, representations, warranties, promises, covenants, arrangements or understandings between the parties with respect to the transactions contemplated hereby, other than those expressly set forth or referred to herein. Section 9.10 Injunctive Relief. The parties hereto agree that in the event of a breach of any provision of this Agreement or a failure by a party to perform in accordance with the specific terms herein, the aggrieved party or parties may be damaged irreparably and without an adequate remedy at law. The parties therefore agree that in the event of a breach of any provision of this Agreement, the aggrieved party or parties may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach of such provision without the requirement of a posting of a bond, as well as to obtain damages for breach of this Agreement. By seeking or obtaining any such relief, the aggrieved party shall not be precluded from seeking or obtaining any other relief to which it may be entitled. Section 9.11 Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party hereto, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party hereto of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative. Section 9.12 Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under -39- applicable Regulations, but if any provision of this Agreement or the application of any such provision to any Person or circumstance shall be held to be prohibited by, illegal or unenforceable under applicable law in any respect by a court of competent jurisdiction, such provision shall be ineffective only to the extent of such prohibition or illegality or unenforceability, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Section 9.13 Expenses. Buyer and Parent shall bear their own expenses, including without limitation, brokerage or investment banking, accounting, legal fees and expenses, with respect to this Agreement and the transactions contemplated hereby. Except as provided below, Seller shall bear its own expenses, including without limitation, brokerage or investment banking, accounting and legal fees and expenses, with respect to this Agreement and the transactions contemplated hereby. If any legal action or other proceeding relating to this Agreement, the agreements contemplated hereby, the transactions contemplated hereby or thereby or the enforcement of any provision of this Agreement or the agreements contemplated hereby is brought against any party, the prevailing party in such action or proceeding shall be entitled to recover all reasonable expenses relating thereto (including attorney's fees and expenses) from the party against which such action or proceeding is brought in addition to any other relief to which such prevailing party may be entitled. Notwithstanding the foregoing provisions of this Section 9.13, (a) Parent and Buyer jointly and severally agree to pay up to $10,000 in consideration to the holders of the Industrial Revenue Bonds to obtain their consent to transactions contemplated by this Agreement and up to $25,000 of Seller's reasonable legal fees incurred in obtaining and documenting such consent and (b) Seller and Parent each agree to pay one-half of all amounts payable to the title insurer and surveyors, as the case may be, in respect of the title commitments, copies of survey exceptions, survey charges and the title policies (including premiums and endorsements). Section 9.14 No Third Party Beneficiaries. Except as provided in Article 8, this Agreement is for the sole benefit of the parties hereto and their permitted successors and assigns and nothing herein express or implied shall be construed to give any Person, other than the parties and such permitted successors and assigns, any legal or equitable rights hereunder. Section 9.15 Schedules. All schedules and exhibits attached hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Section 9.16 No Strict Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Section 9.17 Interpretation. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 9.18 Waiver of Jury Trial. EACH OF THE PARTIES HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY SCHEDULE OR EXHIBIT HERETO, OR ANY COURSE OF CONDUCT, COURSE OF DEALING OR STATEMENTS (WHETHER VERBAL OR WRITTEN) RELATING TO THE FOREGOING. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT. -40- Section 9.19 CONSENT TO JURISDICTION; SERVICE OF PROCESS. BUYER, PARENT AND SELLER HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF TEXAS, COUNTY OF HARRIS IN CONNECTION WITH ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, AND HEREBY AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED BY SUCH COURTS. Section 9.20 EXPRESS NEGLIGENCE. THE INDEMNIFICATION RIGHTS OF A PERSON ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT EXPRESSLY SHALL APPLY REGARDLESS OF WHETHER THE DAMAGES TO BE INDEMNIFIED AGAINST ARISE, OR ARE ALLEGED TO ARISE, FROM SUCH INDEMNIFIED PERSON'S OWN NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), GROSS NEGLIGENCE, NEGLIGENCE PER SE AND/OR STRICT LIABILITY. ***Remainder Intentionally Left Blank*** -41- IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized, as of the date first written above. HEADWATERS INCORPORATED By: /s/ Brett A. Hickman -------------------------------------------- Brett A. Hickman, Vice President, Corporate Development and Administration ACM BLOCK & BRICK, LP By: ACM Block & Brick General, Inc., its general partner By: /s/ Brett A. Hickman -------------------------------------------- Brett A. Hickman, President SOUTHWEST CONCRETE PRODUCTS, L.P. By: Southwest Concrete Management Company, LLC, its general partner By: /s/ Murphy K. Lents -------------------------------------------- Murphy K. Lents, Manager [Signature page to Asset Purchase Agreement] EX-99 5 ex99form8k070704.txt PRESS RELEASE DATED JULY 7, 2004 Exhibit 99 HEADWATERS INCORPORATED CLOSES SOUTHWEST CONCRETE PRODUCTS ACQUISITION o Expands "Green" Building Products in Texas o Expands Manufacturing and Sales Capabilities in Texas o Estimated to be Accretive to FY 2004 and FY 2005 EPS o Further Diversifies Headwaters' Operations SOUTH JORDAN, UTAH, JULY 7, 2004 - HEADWATERS INCORPORATED (NASDAQ: HDWR) today announced that it has closed the acquisition of certain assets of Southwest Concrete Products, LP, ("SCP") a leading manufacturer of concrete blocks in South Texas. The acquisition also provides Headwaters with the opportunity to use fly ash in the manufacturing process and expand the usage of environmentally friendly coal combustion materials in branded building products, including concrete block, brick and foundation blocks. The purchase price for SCP's assets was approximately $36 million, consisting of cash and the assumption of approximately $10 million in industrial revenue bonds. Headwaters also agreed to pay an earn out to the sellers if the EBITDA of the acquired operations exceeds the current EBITDA for the twelve months ending December 31, 2005. The acquisition of Southwest Concrete Products is expected to be accretive to Headwaters' EPS in FY 2004 and FY 2005, without anticipating potential synergies. SCP had revenues of $31 million and EBITDA (earnings before net interest, income taxes, depreciation and amortization) margins of approximately 16% for the calendar year 2003. SCP has operations in Alleyton, San Antonio and Houston which complement Headwaters' similar operations in Dallas and in East Texas. There is little overlap in market coverage between the two operations. The combined block operations provide Eldorado Stone, Headwaters' manufactured stone company, a strategic partner for expansion of sales into the Texas market, increasing consumers' choice of environmentally friendly building products. "Southwest Concrete Products brings to Headwaters modern concrete manufacturing facilities and an experienced management team. The President of SCP will assume responsibility for all of our manufactured products activities in Texas and he brings a new perspective and energy to our activities," said Kirk A. Benson, Chairman and CEO of Headwaters. "One of our goals has been to add value to our coal-based manufactured products, and the addition of SCP certainly helps to achieve our goal. The addition of these assets will add critical mass to our 'green' coal-based construction materials division, and strengthen brand identification with environmentally friendly products," Mr. Benson further stated. About Headwaters Incorporated Headwaters Incorporated is a world leader in creating value through innovative advancements in the utilization of natural resources. The Company is focused on providing services to energy companies, conversion of fossil fuels into alternative energy products, and adding value to energy. Headwaters generates revenue from managing coal combustion products (CCPs) and from licensing its innovative chemical technology to produce an alternative fuel. Through its CCP business, fly ash building products business, and its solid alternative fuels business, the Company earns a growing revenue stream that provides the capital needed to expand and acquire synergistic new business opportunities. Forward Looking Statements Certain statements contained in this report are forward-looking statements within the meaning of federal securities laws and Headwaters intends that such forward-looking statements be subject to the safe-harbor created thereby. Forward-looking statements include Headwaters' expectations as to the managing and marketing of coal combustion products and building products, operation of facilities utilizing alternative fuel technologies, the marketing of synthetic fuels, the receipt of licensing fees, royalties, and product sales revenues, the development, commercialization, and financing of new technologies and other strategic business opportunities and acquisitions, and other information about Headwaters. Such statements that are not purely historical by nature, including those statements regarding Headwaters' future business plans, the operation of facilities, the availability of tax credits, the availability of feed stocks, and the marketability of the coal combustion products, building products, and synthetic fuel, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Actual results may vary materially from such expectations. Words such as "expects," "anticipates," "targets," "goals," "projects," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking. In addition to matters affecting the coal combustion products, synthetic fuel and building products industries or the economy generally, factors which could cause actual results to differ from expectations stated in forward-looking statements include, among others, the factors described in the captions entitled "Forward-looking Statements" and "Risk Factors" in Item 7 in Headwaters' Annual Report on Form 10-K for the fiscal year ended September 30, 2003, Quarterly Reports on Form 10-Q, and other periodic filings and prospectuses. Although Headwaters believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that our results of operations will not be adversely affected by such factors. Unless legally required, we undertake no obligation to revise or update any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the report. Our internet address is www.hdwtrs.com. There we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our reports can be accessed through the investor relations section of our web site. -----END PRIVACY-ENHANCED MESSAGE-----