10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ___________ TO ___________ .

COMMISSION FILE NUMBER: 001-14429

SKECHERS U.S.A., INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE	95-4376145
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

228 MANHATTAN BEACH BLVD.
MANHATTAN BEACH, CALIFORNIA 90266
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 318-3100

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

	Name of each exchange on
Title of each class	Which registered
Class A Common Stock $0.001 par value	New York Stock Exchange

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]    No [    ]

     THE NUMBER OF SHARES OF CLASS A COMMON STOCK OUTSTANDING AS OF AUGUST 9, 2002: 18,190,029

     THE NUMBER OF SHARES OF CLASS B COMMON STOCK OUTSTANDING AS OF AUGUST 9, 2002: 19,346,777

TABLE OF CONTENTS

		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
		STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II. OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS —
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS —
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
Exhibit 4.1
Exhibit 4.2
Exhibit 4.3
Exhibit 4.4
Exhibit 99.1

SKECHERS U.S.A., INC. AND SUBSIDIARIES
FORM 10-Q

INDEX

		PAGE
PART I	FINANCIAL INFORMATION
ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
	Condensed Consolidated Balance Sheets June 30, 2002 and December 31, 2001		3
	Condensed Consolidated Statements of Earnings Three-month periods ended June 30, 2002 and 2001		4
	Condensed Consolidated Statements of Earnings Six-month periods ended June 30, 2002 and 2001		5
	Condensed Consolidated Statements of Cash Flows Six-month periods ended June 30, 2002 and 2001		6
	Notes to Condensed Consolidated Financial Statements		7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		10
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		22
PART II	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS		24
ITEM 2.	CHANGES IN SECURITIES AND USE OF PROCEEDS		24
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		24
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		24
ITEM 5.	OTHER INFORMATION		24
ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K		24

2

SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
(In thousands)

ASSETS

			June 30,		December, 31
			2002		2001
Current Assets:
	Cash		$	74,590	$	15,554
	Trade accounts receivable, less allowance for bad debts and returns of $9,367 in 2002 and $7,113 in 2001			185,124		120,285
	Due from officers and employees			899		1,013
	Other receivables			3,687		1,816
	Inventories			138,982		157,659
	Prepaid expenses and other current assets			11,689		17,695
	Deferred tax assets			4,804		4,804
		Total current assets		419,775		318,826
Property and equipment, at cost, less accumulated depreciation and amortization				81,446		85,739
Intangible assets, at cost, less applicable amortization				407		458
Deferred charges and other long term assets				6,029		2,463
			$	507,657	$	407,486
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Short-term borrowings		$	—	$	84,175
	Current installments of long-term borrowings			2,289		2,140
	Accounts payable			120,758		77,498
	Accrued expenses			14,981		15,041
		Total current liabilities		138,028		178,854
4.5% Convertible subordinated notes				90,000		—
Long-term borrowings, excluding current installments				28,222		29,616
		Total long term debt		118,222		29,616
Commitments and contingencies
Stockholders’ equity:
	Preferred Stock, $.001 par value; 10,000 authorized; none issued and outstanding			—		—
	Class A Common Stock, $.001 par value; 100,000 shares authorized; 17,939 and 15,329 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively			18		15
	Class B Common Stock, $.001 par value; 60,000 shares authorized; 19,547 and 21,482 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively			19		21
	Additional paid-in capital			100,377		91,909
	Accumulated other comprehensive income			2,419		33
	Retained earnings			148,574		107,038
		Total stockholders’ equity		251,407		199,016
			$	507,657	$	407,486

See accompanying notes to unaudited condensed consolidated financial statements.

3

SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)
(In thousands, except per share data)

			Three-Months Ended June 30,
			2002			2001
Net sales			$	256,652		$	230,899
Cost of sales				150,866			131,724
		Gross profit		105,786			99,175
Royalty income (loss), net				317			(13	)
				106,103			99,162
Operating expenses:
	Selling			21,371			24,191
	General and administrative			48,853			45,554
				70,224			69,745
		Earnings from operations		35,879			29,417
Other income (expense):
	Interest, net			(2,565	)		(3,417	)
	Other, net			483			660
				(2,082	)		(2,757	)
		Earnings before income taxes		33,797			26,660
Income taxes				12,539			9,838
		Net earnings	$	21,258		$	16,822
Net earnings per share:
	Basic		$	0.57		$	0.46
	Diluted		$	0.52		$	0.44
Weighted average shares:
	Basic			37,119			36,330
	Diluted			41,909			38,653

See accompanying notes to unaudited condensed consolidated financial statements.

4

SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)
(In thousands, except per share data)

			Six-Months Ended June 30,
			2002			2001
Net sales			$	501,601		$	458,393
Cost of sales				293,291			259,904
		Gross profit		208,310			198,489
Royalty income, net				425			204
				208,735			198,693
Operating expenses:
	Selling			40,062			45,033
	General and administrative			98,485			92,943
				138,547			137,976
		Earnings from operations		70,188			60,717
Other income (expense):
	Interest, net			(4,628	)		(7,176	)
	Other, net			526			1,151
				(4,102	)		(6,025	)
		Earnings before income taxes		66,086			54,692
Income taxes				24,550			20,770
		Net earnings	$	41,536		$	33,922
Net earnings per share:
	Basic		$	1.12		$	0.94
	Diluted		$	1.05		$	0.88
Weighted average shares:
	Basic			36,988			36,102
	Diluted			40,187			38,357

See accompanying notes to unaudited condensed consolidated financial statements.

5

SKECHERS U.S.A., INC. AND SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS

(Unaudited)
(In thousands)

					Six-Months Ended June 30,
					2002			2001
Cash flows from operating activities:
	Net earnings				$	41,536		$	33,922
	Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
			Depreciation and amortization of property and equipment			8,569			5,779
			Amortization of intangible assets			51			51
			Provision for bad debts and returns			1,191			1,655
			Amortization of convertible subordinated notes offering costs			159			—
			Loss on disposal of equipment			6			341
			Tax benefit of non-qualified stock options			2,540			8,003
			(Increase) decrease in assets:
				Receivables		(67,787	)		(59,388	)
				Inventories		18,677			(41,278	)
				Prepaid expenses and other current assets		6,006			(12,115	)
				Other assets		100			327
			Increase in liabilities:
				Accounts payable		43,260			52,658
				Accrued expenses		643			1,392
				Net cash provided by (used in) operating activities		54,951			(8,653	)
Cash flows used in investing activities — capital expenditures						(4,212	)		(17,676	)
Cash flows from financing activities:
	Proceeds from the issuance of convertible subordinated notes, net of offering costs					86,175			—
	Proceeds from issuance of common stock					5,226			7,992
	Net proceeds (repayments) of short-term borrowings					(84,175	)		24,499
	Repayments on long-term borrowings					(1,315	)		(1,172	)
				Net cash provided by financing activities		5,911			31,319
Effects of exchange rate changes						2,386			5
Net increase in cash						59,036			4,995
Cash at beginning of period						15,554			8,781
Cash at end of period					$	74,590		$	13,776
Supplemental disclosures of cash flow information:
		Cash paid during the period for:
				Interest	$	3,579		$	3,443
				Income taxes		18,628			17,083

During the six months ended June 30, 2002, the Company issued 48,072 shares of Class A common stock to the Company’s 401k plan with a value of approximately $702,000. In addition, the Company acquired equipment aggregating $70,000 under capital lease obligations.

See accompanying notes to unaudited condensed consolidated financial statements.

6

SKECHERS U.S.A., INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) GENERAL

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation for each of the periods presented. The results of operations for interim periods are not necessarily indicative of results to be achieved for full fiscal years.

As contemplated by the Securities and Exchange Commission (SEC) under Rule 10-01 of Regulation S-X, the accompanying condensed consolidated financial statements and related footnotes have been condensed and do not contain certain information that is included in the Company’s annual consolidated financial statements and footnotes thereto. For further information, refer to the consolidated financial statements and related footnotes for the year ended December 31, 2001 included in the Company’s Annual Report on Form 10-K.

(2)  FOREIGN CURRENCY TRANSLATION

The Company operates internationally through the following foreign subsidiaries; Skechers S.a.r.l located in Switzerland, with a functional currency of the U.S. dollar; Skechers Ltd., located in the United Kingdom, with a functional currency of the British Pound; Skechers Iberia located in Spain, Skechers GmbH located in Germany and Skechers SAS located in France with a functional currency of the Euro.

The results of operations for the Company’s non U.S. dollar functional currency foreign subsidiaries are translated from their functional currency into U.S. dollars using the average exchange rates during each period; assets and liabilities are translated using exchange rates at the end of the each period. Adjustments resulting from the translation process are reported in a separate component of stockholders’ equity, and are not included in net earnings.

(3)  OTHER COMPREHENSIVE INCOME

Other comprehensive income at June 30, 2002 and December 31, 2001, consist of foreign currency translation gains of $2,419,000 and $33,000, respectively. The change in other comprehensive income consists of foreign currency translation gains of $2,821,000 and $5,000 for the three months ended June 30, 2002 and 2001, respectively. For the six months ended June 30, 2002 and 2001, the change in other comprehensive income consists of foreign currency translation gains of $2,386,000 and $364,000, respectively.

(4)  EARNINGS PER SHARE

Basic earnings per share represents net earnings divided by the weighted average number of common shares outstanding for the period. Diluted earnings per share, in addition to the weighted average determined for basic earnings per share, includes common stock equivalents which would arise from the exercise of stock options using the treasury stock method, and assumes the conversion of the Company’s 4.5% Convertible Subordinated Notes for the period outstanding since their issuance in April 2002.

The following is a reconciliation of net income and weighted average common shares outstanding for purposes of calculating basic earnings per share (in thousands):

	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
Basic earnings per share	2002		2001		2002		2001
Net earnings	$	21,258	$	16,822	$	41,536	$	33,922
Weighted average common shares outstanding		37,119		36,330		36,988		36,102
Basic earnings per share	$	0.57	$	0.46	$	1.12	$	0.94

7

The following is a reconciliation of net income and weighted average common shares outstanding for purposes of calculating diluted earnings per share (in thousands):

	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
Diluted earnings per share	2002		2001		2002		2001
Net earnings	$	21,258	$	16,822	$	41,536	$	33,922
After-tax equivalent of interest expense on 4.5% convertible subordinated notes	$	554	$	—	$	554	$	—
Earnings for purposes of computing diluted earnings per share	$	21,812	$	16,822	$	42,090	$	33,922
Weighted average common shares outstanding		37,119		36,330		36,988		36,102
Dilutive stock options		1,785		2,323		1,648		2,255
Weighted average assumed conversion of 4.5% convertible subordinated notes		3,005		—		1,551		—
Weighted average common shares outstanding		41,909		38,653		40,187		38,357
Diluted earnings per share	$	0.52	$	0.44	$	1.05	$	0.88

There were 301,500 and 0 options outstanding that were not included in the computation of diluted earnings per share for the three-month period ended June 30, 2002 and 2001, respectively. There were 310,000 and 0 options outstanding that were not included in the computation of diluted earnings per share for the six-month period ended June 30, 2002 and 2001, respectively. The options outstanding that were not included in the computation of diluted earnings per share were excluded because their effect would have been anti-dilutive.

(5)  INCOME TAXES

Income taxes for the interim periods were computed using the effective tax rate estimated to be applicable for the full fiscal year, which is subject to ongoing review and evaluation by management.

(6)  SHORT-TERM BORROWINGS

The Company has available a secured line of credit, as amended on June 12, 2002, permitting borrowings up to $200.0 million based upon eligible accounts receivable and inventories. Borrowings bear interest at the prime rate (4.75% at June 30, 2002) minus 0.50%, and the agreement expires on December 31, 2003. The agreement provides for the issuance of letters of credit up to a maximum of $30.0 million of which 50% decreases the amount available for borrowings under the agreement. Outstanding letters of credit at June 30, 2002 were $11.5 million. Available borrowings under the line of credit at June 30, 2002 were $158.3 million. The Company pays an unused line of credit fee of .25% annually. The agreement provides that stockholders’ equity shall not decrease by more than 20% in any given calendar quarter, contains a tangible net worth requirement, as defined in the agreement, and limits the payment of dividends if in default of any provision of the agreement. The Company was in compliance with these covenants at June 30, 2002.

(7)  LONG TERM DEBT

In April 2002, the Company issued $90.0 million aggregate principal amount of 4.5% Convertible Subordinated Notes (the “Notes”) due April 15, 2007. The Notes are convertible into shares of Class A common stock. Interest on the Notes is paid semi-annually on April 15 and October 15 of each year, commencing October 15, 2002. The Notes are convertible at the option of the holder into shares of Class A common stock at a conversion rate of 38.5089 shares of Class A common stock per $1,000 principal amount of Notes, which is equivalent to a conversion price of approximately $25.968 per share. The conversion rate is subject to adjustment. The Notes may be converted at any time on or before the close of business on the maturity date, unless the Notes have been previously redeemed

8

or repurchased; provided, however, that if a Note is called for redemption or repurchase, the holder will be entitled to convert the Notes at any time before the close of business on the date immediately preceding the date fixed for redemption or repurchase, as the case may be. The Notes are unsecured and subordinated to our present and future Senior Debt, as defined in the indenture. The Notes are also structurally subordinated in right of payment to all indebtedness and other liabilities of the Company’s subsidiaries. The indenture under which the Notes were issued does not restrict our incurrence of indebtedness, including Senior Debt, or our subsidiaries’ incurrence of indebtedness. Net proceeds from the issuance of the Notes were $86.2 million, of which $65.0 million was used to repay amounts owing under the Company’s line of credit and the remaining proceeds will be used for working capital. The costs associated with the issuance of the Notes, approximately $3.8 million, will be amortized over the life of the Notes and are included in interest expense on the income statement as amortized.

(8)  LITIGATION

On March 6, 2002, Skechers filed a complaint captioned SKECHERS U.S.A., INC. V. HEELING SPORTS LIMITED, HEELING MANAGEMENT CORPORATION, ROGER ADAMS AND CHARLIE BEERY. The complaint was filed in the United States District Court Central District of California (Case No. 02-1906NM). Skechers’ complaint alleges federal, California and common law unfair competition, intentional interference with economic relations and intentional interference with contract with respect to Skechers’ shoes called “3 Wheelers.” Skechers seeks relief that includes enjoining defendants from certain actions, certain trebled money damages, punitive damages, restitution and attorney fees and costs. On April 10, 2002, Skechers was served with a complaint captioned HEELING SPORTS LIMITED AND HEELING MANAGEMENT CORP., V. SKECHERS U.S.A., INC. that was filed on April 4, 2002 in the United States District Court, Eastern District of Texas, Sherman Division (Civil Action No. 4:02cv101). The lawsuit alleges breach of confidential agreement and misappropriation of trade secrets and is with respect to Skechers’ 3 Wheelers. The complaint seeks relief that includes a permanent injunction enjoining Skechers from selling the 3 Wheeler shoes, using any alleged confidential information and assignment of any intellectual property based on the plaintiff’s alleged confidential information, and damages that include those sustained by the plaintiff as a result of Skechers’ actions, profits and exemplary and punitive damages. Skechers’ 3 Wheelers is a new product that is currently a very small part of our product line. On June 18, 2002, a second complaint was filed against Skechers by Heeling Sports Limited in the United States District Court for the Eastern District of Texas, Sherman Division (Civil Action No. 4:02cv169), and the complaint was amended on June 21, 2002. The lawsuit is generally based upon the same facts as the earlier suit filed against Skechers by Heeling Sports Limited and Heeling Management Corp., alleging that Skechers’ sales of its 3 Wheeler shoes violates the plaintiff’s proprietary rights. However, the second complaint, as amended, alleges that Skechers’ 3 Wheelers infringe Heeling’s new patent that was issued on June 18, 2002, unfair competition and interference with prospective business relations. The second complaint, as amended, seeks relief that includes an injunction, declaratory relief that Skechers is infringing and will induce infringement of Heeling’s patent, compensatory, trebled and exemplary damages, and attorney’s fees. Skechers believes that it has meritorious defenses to the claims made by Heeling Sports Limited and Heeling Management Corp. and intends to defend these claims vigorously. Litigation is uncertain, and Skechers may not prevail in the lawsuits and expresses no opinion as to their ultimate outcome.

     On May 31, 2002, a complaint captioned RAYMOND MEIER V. SKECHERS USA, INC. was filed against Skechers in the United States District Court, Southern District of New York (Case No. 02 CV 4139). The lawsuit alleges copyright infringement for the use of certain drawings by Skechers in its Skechers by Michelle K advertisements. The complaint seeks damages that include actual damages and profits attributable to the alleged infringement, compensatory damages, punitive damages and an injunction preventing further use of the drawings by Skechers. For reasons unrelated to the complaint, Skechers had discontinued using the subject drawings. Skechers believes that it has meritorious defenses to the issues raised in the complaint and intends to defend these claims vigorously. Nonetheless, litigation is uncertain, and Skechers may not prevail in the lawsuit and expresses no opinion as to its ultimate outcome.

     On September 29, 2000, a complaint captioned MADISON TRADING LIMITED CORPORATION AND MERCURY INTERNATIONAL TRADING CORPORATION V. SKECHERS USA, INC., LOVITT FILMS, INC. AND BERT LOVITT was filed against Skechers in the United States District Court in Massachusetts, Civil Case No. CV-12016JLT. The lawsuit alleges quantum meruit; intentional interference with contract, intentional interference with advantageous relationship, unfair practices and declaratory relief arising out of a business arrangement between Skechers and inventor Bert Lovitt. The complaint seeks an injunction preventing Skechers from using certain technology, compensatory damages, exemplary damages and treble damages. The court denied the plaintiffs’ motion for a preliminary injunction. In February 2002, all parties agreed to settlement in principle and, as of the date of this filing, the matter is now settled and written documentation has been finalized and signed by the parties. The terms of the settlement are confidential. Notwithstanding, the terms did not have a material impact on the financial position or results of operations of Skechers.

     We occasionally become involved in litigation arising from the normal course of business. Other than the foregoing, we believe that any liability with respect to pending legal actions, individually or in the aggregate, will not have a material adverse effect on our business, financial condition and results of operations.

(8)  STOCKHOLDERS’ EQUITY

During the three-month and six-month periods ended June 30, 2002, certain Class B stockholders converted 1,700,000 and 1,935,374 shares of Class B common stock to Class A common stock, respectively.

9

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and Notes thereto appearing elsewhere in this document.

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements with regards to the Company’s revenues, earnings, spending, margins, cash flow, orders, inventory, products, actions, plans, strategies and objectives. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or simply state future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will result,” “could,” “may,” “might,” or any variations of such words with similar meanings. Any such statements are subject to risks and uncertainties that could cause the Company’s actual results to differ materially from those which are management’s current expectations or forecasts. Such information is subject to the risk that such expectations or forecasts, or the assumptions underlying such exceptions or forecasts, become inaccurate.

Risks and uncertainties that could affect the Company’s actual results and could cause such results to differ materially from those forward-looking statements made by or on behalf of the Company are set forth in “Risk Factors” and elsewhere in this report.

OVERVIEW

We design, market and sell contemporary footwear for men, women and children under the Skechers brand. Our footwear is sold through a wide range of department stores and leading specialty retail stores, a growing network of our own retail stores and our e-commerce website. Our objective is to continue to profitably grow our domestic operations, while leveraging our brand name to expand internationally.

We generate revenues from three principal sources:

WHOLESALE. We sell footwear directly to department stores and specialty retail stores both domestically and internationally.

RETAIL. We own and operate our own retail stores both domestically and, on a smaller scale, internationally through three retail formats. Our retail formats are as follows:

• Concept Stores. Our concept stores are located in marquee street locations and high performing regional malls, promote awareness of the Skechers brand and showcase a broad assortment of our in-season footwear styles.

• Factory Outlet Stores. Our factory outlet stores are generally located in manufacturers’ outlet centers and provide opportunities to sell an assortment of in-season, discontinued and excess merchandise at lower price points.

• Warehouse Outlet Stores. Our freestanding warehouse outlet stores appeal to our most value conscious customers and enable us to liquidate excess merchandise, discontinued lines and odd-size inventory in a cost-efficient manner.

DISTRIBUTORS. Internationally, we sell our footwear to our foreign distributors who distribute such footwear to department stores and specialty retail stores in Europe, Asia, Latin America, South America and numerous other countries and territories.

The substantial portion of our revenues are derived from domestic wholesale sales. Typically, retail sales achieve higher gross margins as a percentage of net sales than wholesale sales. Sales through foreign distributors result in lower gross margins as a percentage of net sales than retail or wholesale sales. None of our domestic retail sales formats, international wholesale sales, international retail sales, or international distributor sales individually comprised more than 10% of our consolidated net sales for the three and six months ended June 30, 2002 and 2001.

10

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated, selected information from the Company’s results of operations as a percentage of net sales:

		Three-Months Ended June 30,										Six-Months Ended June 30,
		2002					2001					2002					2001
Net sales		$	256,652		100.0	%	$	230,899		100.0	%	$	501,601		100.0	%	$	458,393		100.0	%
Cost of sales			150,866		58.8			131,724		57.0			293,291		58.5			259,904		56.7
	Gross profit		105,786		41.2			99,175		43.0			208,310		41.5			198,489		43.3
Royalty income, net			317		0.1			(13	)	0.0			425		0.1			204		0.0
			106,103		41.3			99,162		42.9			208,735		41.6			198,693		43.3
Operating expenses:
	Selling		21,371		8.3			24,191		10.5			40,062		8.0			45,033		9.8
	General and administrative		48,853		19.0			45,554		19.7			98,485		19.6			92,943		20.3
			70,224		27.4			69,745		30.2			138,547		27.6			137,976		30.1
Earnings from operations			35,879		14.0			29,417		12.7			70,188		14.0			60,717		13.2
	Interest expense, net		(2,565	)	(1.0	)		(3,417	)	(1.5	)		(4,628	)	(0.9	)		(7,176	)	(1.6	)
	Other, net		483		0.2			660		0.3			526		0.1			1,151		0.3
Earnings before income taxes			33,797		13.2			26,660		11.5			66,086		13.2			54,692		11.9
Income taxes			12,539		4.9			9,838		4.3			24,550		4.9			20,770		4.5
	Net earnings	$	21,258		8.3	%	$	16,822		7.3	%	$	41,536		8.3	%	$	33,922		7.4	%

THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001

Net Sales

Net sales for the three months ended June 30, 2002 were $256.7 million, an increase of 11.2% or $25.8 million over net sales of $230.9 million for the three months ended June 30 2001. Domestic wholesale sales increased during the three month ended June 30, 2002 compared the three months ended June 30, 2001 due to (i) increases in the Kids’, Men’s USA and Women’s Active product lines, in addition to sales from the 4 Wheelers skate line which commenced in the third quarter of 2001, and (ii) customer requests for the early shipments of merchandise totaling approximately $20.0 million. These early delivery requests were originally scheduled to ship during our third quarter ended September 30, 2002. International wholesale sales increased significantly as demand for our products increased as a result of our direct selling efforts in the United Kingdom, France, and Germany, which began in the first quarter of 2001. International distributor sales increased slightly during the three months ended June 30, 2002, when compared to the three months ended June 30, 2001. Although we realized an increase in international distributor sales, the increase was offset in regions where we now sell direct to department stores and specialty retailers. Our international retail sales increased during the three months ended June 30, 2002 compared to the same period in 2001 due primarily to all three retail stores being opened the entire three month period ended June 30, 2002. Our domestic retail stores sales increased substantially due to the addition of 22 stores added since July 1, 2001, most of which were warehouse and factory outlet stores which generate higher per store sales than our concept stores.

We continually evaluate our direct selling efforts and the various international regions in which it could be beneficial to commence selling direct to department stores and specialty retailers. In addition, through June 30, 2002, we have opened five company owned domestic retail stores and currently plan to open approximately 10 to 15 stores during the current fiscal year ended December 31, 2002, compared to the 26 stores opened during the fiscal year ended December 31, 2001.

Net sales during the three months ended June 30, 2002 benefited from customers requests for the early shipment of products, which totaled approximately $20.0 million, originally scheduled to ship during the third quarter ended September 30, 2002, as a result, we anticipate sales during the third quarter to be flat to a 3% increase when compared to sales of $287.9 million during the three months ended September 30, 2001.

Gross Profit

Gross profit was $105.8 million for the three months ended June 30, 2002, an increase of $6.6 million or 6.7% over gross profit of $99.2 million for the three months ended June 30, 2001. Gross profit as a percentage of sales was 41.2% for the three months ended June 30, 2002, compared to 43.0% for the three months ended June 30, 2001. The decrease in gross profit as a percent of sales was primarily due to continued customer support through discounts and allowances provided to our wholesale accounts to stimulate retail sales and to reduced margins at our company owned retail stores due to sales from warehouse and factory outlet stores, which have lower gross margins than our concept stores, becoming an increasing percent of retail store sales.

11

Selling Expenses

Selling expenses for the three months ended June 30, 2002 were $21.4 million, a decrease of $2.8 million or 11.7%, from $24.2 million for three months ended June 30, 2001. Selling expenses for the three months ended June 30, 2002 decreased as a percent of net sales to 8.3% from 10.5% during the three months ended June 30, 2001. The decrease in selling expenses was due to reduced advertising and trade show expenses and the elimination of catalog costs associated with our mail order operations, which were discontinued during the fourth quarter ended December 31, 2001.

We are committed to an overall marketing strategy that is largely responsible for the increase in our market presence, product visibility and product demand. We adjust our advertising budget consistent with projected sales, and includes such avenues as magazine, television, trade shows, and billboards. Our efforts provide for the marketing of Skechers footwear through advertising, promotions, public relations, trade shows and other marketing efforts. Marketing expense as a percentage of net sales may vary from quarter to quarter. In the three-months ended June 30, 2002, total advertising costs were $17.0 million or 6.7% of net sales compared to $19.0 million or 8.2% of net sales for the three-months ended June 30, 2001.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2002 were $48.9 million, compared to $45.6 million for the three months ended June 30, 2001. However, general and administrative expenses decreased as a percentage of net sales to 19.0% from 19.7% during the three months ended June 30, 2001. The increase in absolute dollars was primarily due to (i) increased rent and depreciation charges associated with the 22 domestic retail stores added since July 1, 2001,and (ii) additional rent for facilities for our international administrative and sales operations.

Interest Expense

Interest expense for the three months ended June 30, 2002 was $2.6 million, compared to $3.4 million during the three months ended June 30, 2001. The decrease was primarily due to reduced interest charges on our line of credit facility whose interest rate is tied to the prime-lending rate, which has decreased over the last year, and, payoff of our term loan in the fourth quarter ended December 31, 2001.

Other Income, Net

Other income, net consists primarily of rental income from the leasing of office space at our corporate facilities and legal settlements.

Income Taxes

Income taxes were computed using the effective tax rate estimated to be applicable for the full fiscal year. The effective tax rate for the three months ended June 30, 2002 was 37.1% compared to 36.9% for the three months ended June 30, 2001.

SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001

Net Sales

Net sales for the six months ended June 30, 2002 were $501.6 million, an increase of $43.2 million or 9.4% over net sales of $458.4 million during the six months ended June 30, 2001. Domestic wholesale sales during the six months ended June 30, 2002 increased over the six months ended June 30, 2001 due to increases in the Kids’, Men’s Collection, and Somethin’ Else From Skechers product lines, in addition to sales from the 4 Wheelers line added in the third quarter of 2001. International wholesale sales for the six months ended June 30, 2002 increased significantly compared to the same six month period in 2001, due to increased brand awareness and customer acceptance of our product offerings derived from our direct selling efforts initiated in the first quarter of 2001. International retail revenues also increased during the six months ended June 30, 2002, compared to the same six month period in 2001, the increase was due to our three retail stores being opened during the entire six month period ended June 30, 2002 compared to a shorter period in the six months ended June 30, 2001. Domestic retail sales for the six months ended June 30, 2002 increased over the six months ended June 30, 2001, due to the addition of 22 retail stores added since July 1, 2001.

12

Gross Profit

Gross profit for the six months ended June 30, 2002 was $208.3 million, an increase of $9.8 million when compared to $198.5 million for the six months ended June 30, 2001. Gross profit as a percent of net sales was 41.5% for the six months ended June 30, 2002, a decrease from 43.3% during the six months ended June 30, 2001. The decrease in gross profit as a percent of net sales during the six months ended June 30, 2002 was due to a higher levels of discounts and allowances provided to our wholesale accounts to stimulate retail sales when compared to the six months ended June 30, 2001.

Selling Expenses

Selling expenses for the six months ended June 30, 2002 were $40.1 million compared to $45.0 million during the six months ended June 30, 2001. As a percent of net sales, selling expenses decreased to 8.0% during the six months ended June 30, 2002, from 9.8% during the six months ended June 30, 2001. The decrease in selling expenses during the six months ended June 30, 2002, when compared to the same six month period in 2001, was primarily due to decreased advertising and trade shows expenses, and catalog costs related to our mail order operations which were discontinued in the fourth quarter 2001. Advertising costs as a percent of sales during the six months ended June 30, 2002 were 6.1% compared to 7.6% in the six months ended June 30, 2001. We continually adjust our advertising expenditures based on projected sales levels.

General and Administrative Expenses

General and administrative expenses for the six months ended June 30, 2002 were $98.5 million, compared to $92.9 million during the six months ended June 30, 2001. However, general and administrative expenses as a percent of sales for the six months ended June 30, 2002 was 19.6% a decrease from 20.3% during the six months ended June 30, 2001. The increase in spending levels was primarily due to increased depreciation and rent charges related to new store openings and facility costs to support our international operations.

Interest Expense

Interest expense for the six months ended June 30, 2002 was $4.6 million, a decrease of $2.6 million from $7.2 million for the six months ended June 30, 2001. The decrease in interest expense was due to decreased interest charges (i) on our line of credit facility, whose interest rate is tied to the prime rate, which has decreased over the last year, (ii) from the payoff of our term loan in the forth quarter of 2001, and (iii) reduced interest rates charged on our open purchase arrangements with our foreign manufacturers.

Other Income, Net

Other income, net for the six months ended June 30, 2002 was $526,000 compared to $1.2 million for the six months ended June 30, 2001. The decrease was due to reduced rent revenue from the leasing of office space and reduced litigation settlements.

Income Taxes

Income taxes were computed using the effective tax rate estimated to be applicable for the full fiscal year. The effective tax rate for the six-months ended June 30, 2002 was 37.1% compared to 37.9% for the six-months ended June 30, 2001. The decrease in the effective tax rate is due changes in our projections of income in differing tax jurisdictions as a result of our international expansion.

LIQUIDITY AND CAPITAL RESOURCES

Our working capital at June 30, 2002 was $281.7 million, an increase of $141.7 million from $140.0 million at December 31, 2001. The increase in working capital was primarily due to increased accounts receivable, the elimination of our short-term borrowings with a portion of the proceeds from the issuance of long term convertible subordinated notes in April 2002, offset by increased accounts payable.

Net cash provided by operating activities for the six-months ended June 30, 2002 was approximately $55.0 million, compared to cash used in operating activities of $8.7 million for the six-months ended June 30, 2001. The increase in cash provided by operating activities was due to reduced inventory levels, increased accounts payables, and increased net earnings, offset by increased receivables.

13

Net cash used in investing activities was $4.2 million for the six months ended June 30, 2002, compared to $17.7 million for the six months ended June 30, 2001. The decrease was due to reduced capital expenditures requirements for new retail stores and prior year investing activities including the acquisition of real properties in Manhattan Beach, California.

Net cash provided by financing activities for the six-months ended June 30, 2002 was $5.9 million, compared to $31.3 million for the six months ended June 30, 2001. The decrease in cash provided by financing activities was due the reduction of net financing from our short-term borrowings offset by the proceeds from the issuance of the convertible subordinated notes.

In April 2002, we issued $90.0 million aggregate principal amount of 4.5% Convertible Subordinated Notes due April 15, 2007. The notes are convertible into shares of our Class A common stock. Interest on the notes is paid semi-annually on April 15 and October 15 of each year, commencing October 15, 2002. The notes are convertible at the option of the holder into shares of Class A common stock at a conversion rate of 38.5089 shares of Class A common stock per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $25.968 per share. The conversion rate is subject to adjustment. The notes may be converted at any time on or before the close of business on the maturity date, unless the notes have been previously redeemed or repurchased; provided, however, that if a note is called for redemption or repurchase, the holder will be entitled to convert the notes at any time before the close of business on the date immediately preceding the date fixed for redemption or repurchase, as the case may be. The notes are unsecured and subordinated to our present and future Senior Debt, as defined in the indenture. The notes are also structurally subordinated in right of payment to all indebtedness and other liabilities of our subsidiaries. The indenture does not restrict our incurrence of indebtedness, including Senior Debt, or our subsidiaries’ incurrence of indebtedness. Net proceeds from the sale of the notes were $86.2 million.

In July 2002, we renegotiated our line of credit facility, which now provides for borrowings of up to $200.0 million, with actual borrowings limited to available collateral and certain limitations on total indebtedness (approximately $158.3 million of availability as of June 30, 2002) with the CIT Group, as agents for the lenders. At June 30, 2002, no amounts were outstanding under the revolving line of credit. The revolving line of credit bears interest at prime rate (4.75% at June 30, 2002) minus .5%. Interest on the line of credit is payable monthly in arrears. The revolving line of credit expires on December 31, 2003. The revolving line of credit provides a sub-limit for letters of credit of up to $30.0 million to finance our foreign purchases of merchandise inventory. As of June 30, 2002, we had approximately $11.5 million of letters of credit under the revolving line of credit. The credit facility provides that stockholders’ equity shall not decrease by more than 20% in any calendar quarter, contains a tangible net worth requirement, as defined in the agreement, and limits the payment of dividends if we are in default of any provision of the agreement. We were in compliance with these covenants as of June 30, 2002.

We believe that anticipated cash flows from operations, available borrowings under our revolving line of credit, cash on hand, proceeds from the issuance of the notes and our financing arrangements will be sufficient to provide us with the liquidity necessary to fund our anticipated working capital and capital requirements through fiscal 2002. However, in connection with our growth strategy, we will incur significant working capital requirements and capital expenditures. Our future capital requirements will depend on many factors, including, but not limited to, the levels at which we maintain inventory, the market acceptance of our footwear, the success of our international expansion, the levels of promotion and advertising required to promote our footwear, the extent to which we invest in new product design and improvements to our existing product design and the number and timing of new store openings. To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing. We cannot assure you that additional financing will be available or that, if available, it can be obtained on terms favorable to us and our stockholders. Failure to obtain such financing could delay or prevent our planned expansion, which could adversely affect our business, financial condition and results of operations. In addition, if additional capital is raised through the sale of additional equity or convertible securities, dilution to our stockholders could occur.

CRITICAL ACCOUNTING POLICIES

     Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Specifically, management must make estimates in the following areas:

     Allowance for bad debts, returns, and customer chargebacks. We insure selected customer account balances that are both greater than $200,000 and accepted by the insurance company should our customer not pay. We also provide a reserve against our receivables for estimated losses that may result from our customers’ inability to pay, and disputed and returned items. We determine the amount of the reserve by analyzing known uncollectible accounts, aged receivables, economic conditions in the customers’ country or industry, historical losses and our customers’ credit-worthiness. Amounts later determined and specifically identified to be

14

uncollectible are charged or written off against this reserve. To minimize the likelihood of uncollectibility, customers’ credit-worthiness is reviewed periodically based on external credit reporting services and our experience with the account and adjusted accordingly. Should a customer’s account become past due, we generally place a hold on the account and discontinue further shipments to that customer, minimizing further risk of loss. The likelihood of a material loss on an uncollectible account would be mainly dependent on deterioration in the overall economic conditions in a particular country or environment. Reserves are fully provided for all probable losses of this nature. Gross trade accounts receivable balance was $194.5 million and total allowances were $9.4 million June 30, 2002.

     Inventory adjustments. Inventories are stated at lower of cost or market. We review our inventory on a regular basis for excess and slow moving inventory based on prior sales and net realizable value. The likelihood of any material inventory write-down is dependent primarily on consumer demand and competitor product offerings. Inventories were stated at $139.0 million at June 30, 2002.

     Valuation of intangible and other long-lived assets. When circumstances warrant, we assess the impairment of intangible and other long-lived assets that require us to make assumptions and judgments regarding the carrying value of these assets. The assets are considered to be impaired if we determine that the carrying value may not be recoverable based upon our assessment of the following events or changes in circumstances:

• the asset’s ability to continue to generate income;

• loss of legal ownership or title to the asset;

• significant changes in our strategic business objectives and utilization of the asset(s); or

• the impact of significant negative industry or economic trends.

     If the assets are considered to be impaired, the impairment we recognize is the amount by which the carrying value of the assets exceeds the fair value of the assets. In addition, we base the useful lives and related amortization or depreciation expense on our estimate of the period that the assets will generate revenues or otherwise be used by us. If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase.

     Litigation reserves. Estimated amounts for claims that are probable and can be reasonably estimated are recorded as liabilities in the consolidated balance sheets. The likelihood of a material change in these estimated reserves would be dependent on new claims as they may arise and the favorable or unfavorable outcome of the particular litigation. Both the amount and range of loss on the remaining pending litigation is uncertain. As such, we are unable to make a reasonable estimate of the liability that could result from unfavorable outcomes in litigation. As additional information becomes available, we will assess the potential liability related to our pending litigation and revise our estimates. Such revisions in our estimates of the potential liability could materially impact our results of operation and financial position.

     Valuation of deferred income taxes. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The likelihood of a material change in our expected realization of these assets depends on future taxable income, and the effectiveness of our tax planning and strategies among the various tax jurisdictions in which we operate.

QUARTERLY RESULTS AND SEASONALITY

While sales of footwear products have historically been somewhat seasonal in nature with the strongest sales generally occurring in the third and fourth quarters, we believe that changes in our product offerings have somewhat mitigated the effect of this seasonality and, consequently, our sales are not necessarily as subjected to seasonal trends as that of our past or our competitors in the footwear industry.

We have experienced, and expect to continue to experience, variability in our net sales and operating results on a quarterly basis. Our domestic customers generally assume responsibility for scheduling pickup and delivery of purchased products. Any delay in scheduling or pickup which is beyond our control could materially negatively impact our net sales and results of operations for any given quarter. We believe the factors which influence this variability include (i) the timing of our introduction of new footwear

15

products, (ii) the level of consumer acceptance of new and existing products, (iii) general economic and industry conditions that affect consumer spending and retail purchasing, (iv) the timing of the placement, cancellation or pickup of customer orders, (v) increases in the number of employees and overhead to support growth, (vi) the timing of expenditures in anticipation of increased sales and customer delivery requirements, (vii) the number and timing of our new retail store openings and (viii) actions by competitors. Due to these and other factors, the operating results for any particular quarter are not necessarily indicative of the results for the full year.

INFLATION

We do not believe that the relatively moderate rates of inflation experienced in the United States of America over the last three years has had a significant effect on our net sales or profitability. However, we cannot accurately predict the effect of inflation on future operating results. Although higher rates of inflation have been experienced in a number of foreign countries in which our products are manufactured, we do not believe that inflation has had a material effect on our net sales or profitability. In the past, we have been able to offset our foreign product cost increases by increasing prices or changing suppliers, although no assurance can be given that we will be able to continue to make such increases or changes in the future.

EXCHANGE RATES

We receive U.S. dollars for substantially all of our product sales and our royalty income. Inventory purchases from offshore contract manufacturers are primarily denominated in U.S. dollars; however, purchase prices for our products may be impacted by fluctuations in the exchange rate between the U.S. dollar and the local currencies of the contract manufacturers, which may have the effect of increasing our cost of goods in the future. During the six months ending June 30, 2002, exchange rate fluctuations did not have a material impact on our inventory costs. We do not engage in hedging activities with respect to such exchange rate risk.

RISK FACTORS

In addition to other information in this Form 10-Q, the following factors should be considered in evaluating us and our business.

Our future success depends on our ability to respond to changing consumer demands, identify and interpret fashion trends and successfully market new products.

     The footwear industry is subject to rapidly changing consumer demands and fashion trends. Accordingly, we must identify and interpret fashion trends and respond in a timely manner. Demand for and market acceptance of new products are uncertain and achieving market acceptance for new products generally requires substantial product development and marketing efforts and expenditures. If we do not continue to meet changing consumer demands and develop successful styles in the future, our growth and profitability will be negatively impacted. We frequently make decisions about product designs and marketing expenditures several months in advance of the time when consumer acceptance can be determined. If we fail to anticipate, identify or react appropriately to changes in styles and trends or are not successful in marketing new products, we could experience excess inventories, higher than normal markdowns or an inability to profitably sell our products. Because of these risks, a number of companies in the footwear industry specifically, and the fashion and apparel industry in general, have experienced periods of rapid growth in revenues and earnings and thereafter periods of declining sales and losses, which in some cases have resulted in companies in these industries ceasing to do business. Similarly, these risks could have a severe negative effect on our results of operations or financial condition.

Our business and the success of our products could be harmed if we are unable to maintain our brand image.

     Our success to date has been due in large part to the strength of our brand. If we are unable to timely and appropriately respond to changing consumer demand, our brand name and brand image may be impaired. Even if we react appropriately to changes in consumer preferences, consumers may consider our brand image to be outmoded or associate our brand with styles of footwear that are no longer popular. In the past, several footwear companies have experienced periods of rapid growth in revenues and earnings followed by periods of declining sales and losses. Our business may be similarly affected in the future.

Our business could be harmed if we fail to maintain proper inventory levels.

     We place orders with our manufacturers for some of our products prior to the time we receive all of our customers’ orders. We do this to minimize purchasing costs, the time necessary to fill customer orders and the risk of non-delivery. We also maintain an inventory of certain products that we anticipate will be in greater demand. However, we may be unable to sell the products we have ordered in advance from manufacturers or that we have in our inventory. Inventory levels in excess of customer demand may result in inventory write-downs, and the sale of excess inventory at discounted prices could significantly impair our brand image and have a material adverse effect on our operating results and financial condition. Conversely, if we underestimate consumer demand for our

16

products or if our manufacturers fail to supply the quality products that we require at the time we need them, we may experience inventory shortages. Inventory shortages might delay shipments to customers, negatively impact retailer and distributor relationships, and diminish brand loyalty.

We may be unable to successfully execute our growth strategy or manage or sustain our growth.

     We have grown quickly since we started our business. Our ability to grow in the future depends upon, among other things, the continued success of our efforts to expand our footwear offerings and distribution channels. However, our rate of growth may decline or we may not be profitable in future quarters or fiscal years. Furthermore, as our business becomes larger, we may not be able to maintain our historical growth rate or effectively manage our growth. We anticipate that as our business grows, we will have to improve and enhance our overall financial and managerial controls, reporting systems and procedures. We may be unable to successfully implement our current growth strategy or other growth strategies or effectively manage our growth, any of which would negatively impair our net sales and earnings.

Our business may be negatively impacted as a result of changes in the economy.

     Our business depends on the general economic environment and levels of consumer spending that affect not only the ultimate consumer, but also retailers, our primary direct customers. Purchases of footwear tend to decline in periods of recession or uncertainty regarding future economic prospects, when consumer spending, particularly on discretionary items, declines. During periods of recession or economic uncertainty, we may not be able to maintain or increase our sales to existing customers, make sales to new customers, open and operate new retail stores, maintain sales levels at our existing stores, maintain or increase our international operations on a profitable basis, or maintain or improve our earnings from operations as a percentage of net sales. As a result, our operating results may be adversely and materially affected by downward trends in the economy or the occurrence of events that adversely affect the economy in general. Furthermore, in anticipation of continued increases in net sales, we have significantly expanded our infrastructure and workforce to achieve economies of scale. Because these expenses are fixed in the short term, our operating results and margins will be adversely impacted if we do not continue to grow as anticipated. For example, due in large part to the slowdown in the global economy, our net sales for 2001 were lower than anticipated. This lower level of sales adversely affected our operating results for 2001 and could continue to do so in 2002 and beyond.

Economic, political, military or other events in a country where we make significant sales or have significant operations could interfere with our success or operations there and harm our business.

     We market and sell our products and services throughout the world. The September 11, 2001 attacks disrupted commerce throughout the United States and other parts of the world. The continued threat of similar attacks throughout the world and the military action taken by the United States and other nations may cause significant disruption to commerce throughout the world. To the extent that such disruptions further slow the global economy or, more particularly, result in delays or cancellations of purchase orders for our products, our business and results of operations could be materially adversely affected. We are unable to predict whether the threat of new attacks or the responses thereto will result in any long-term commercial disruptions or if such activities or responses will have a long-term material adverse effect on our business, results of operations or financial condition.

We depend upon a relatively small group of customers for a large portion of our sales.

     For the year ended December 31, 2001 net sales to our five largest customers accounted for approximately 25.7% of total net sales. No one customer accounted for 10.0% or more of our net sales during 2001. As of December 31, 2001, one customer accounted for 10.2% of our net trade accounts receivable. Although we have long-term relationships with many of our customers, our customers do not have a contractual obligation to purchase our products and we cannot be certain that we will be able to retain our existing major customers. Furthermore, the retail industry regularly experiences consolidation, contractions and closings. If there are further consolidations, contractions or closings in the future, we may lose customers or be unable to collect accounts receivables of major customers in excess of amounts that we have insured. If we lose a major customer, experience a significant decrease in sales to a major customer, or are unable to collect the accounts receivable of a major customer in excess of amounts insured, our business could be harmed.

Our operating results could be negatively impacted if our sales are concentrated in any one style or group of styles.

     If any one style or group of similar styles of our footwear were to represent a substantial portion of our net sales, we could be exposed to risk should consumer demand for such style or group of styles decrease in subsequent periods. We attempt to hedge this risk by offering a broad range of products, and no style comprised over 5.0% of our gross wholesale sales for the years ended either

17

December 31, 2000 or 2001. However, this may change in the future and fluctuations in sales of any given style that represents a significant portion of our future net sales could have a negative impact on our operating results.

We rely on independent contract manufacturers and, as a result, are exposed to potential disruptions in product supply.

     Our footwear products are currently manufactured by independent contract manufacturers. For the year ended December 31, 2001, the top four manufacturers of our manufactured products produced approximately 51.9% of our total purchases but none individually accounted for more than 20.0%. We do not have long-term contracts with manufacturers and we compete with other footwear companies for production facilities. We could experience difficulties with these manufacturers, including reductions in the availability of production capacity, failure to meet our quality control standards, failure to meet production deadlines or increased manufacturing costs. This could result in our customers canceling orders, refusing to accept deliveries or demanding reductions in purchase prices, any of which could have a negative impact on our cash flow and harm our business.

     If our current manufacturers cease doing business with us, we could experience an interruption in the manufacture of our products. Although we believe that we could find alternative manufacturers, we may be unable to establish relationships with alternative manufacturers that will be as favorable as the relationships we have now. For example, new manufacturers may have higher prices, less favorable payment terms, lower manufacturing capacity, lower quality standards or higher lead times for delivery. If we are unable to provide products consistent with our standards or the manufacture of our footwear is delayed or becomes more expensive, our business would be harmed.

Our international sales and vendor manufacturing operations are subject to the risks of doing business abroad, which could affect our ability to sell or manufacture our products in international markets, obtain products from foreign suppliers or control the costs of our products.

     Substantially all of our net sales for the year ended December 31, 2001 were derived from sales of footwear manufactured in foreign countries, with most manufactured in China and, to a lesser extent, in Italy, the Philippines and Brazil. We also sell our footwear in several foreign countries and plan to increase our international sales efforts as part of our growth strategy. Foreign manufacturing and sales are subject to a number of risks, including:

• political and social unrest;

• changing economic conditions;

• international political tension and terrorism;

• work stoppages;

• transportation delays;

• loss or damage to products in transit;

• expropriation;

• nationalization;

• the imposition of tariffs and trade duties both international and domestically;

• import and export controls and other nontariff barriers;

• exposure to different legal standards (particularly with respect to intellectual property);

• compliance with foreign laws; and

• changes in domestic and foreign governmental policies.

18

     In particular, because substantially all of our products are manufactured in China, adverse change in trade or political relations with China or political instability in China would severely interfere with the manufacture of our products and would materially adversely affect our operations.

     In addition, if we, or our foreign manufacturers, violate United States or foreign laws or regulations, we may be subjected to extra duties, significant monetary penalties, the seizure and the forfeiture of the products we are attempting to import or the loss of our import privileges. Possible violations of United States or foreign laws or regulations could include inadequate record keeping of our imported product, misstatements or errors as to the origin, quota category, classification, marketing or valuation of our imported products, fraudulent visas, or labor violations. The effects of these factors could render our conduct of business in a particular country undesirable or impractical and have a negative impact on our operating results.

Our business could be harmed if our contract manufacturers, suppliers or licensees violate labor or other laws.

     We require our independent contract manufacturers, suppliers and licensees to operate in compliance with applicable United States and foreign laws and regulations. Manufacturers are required to certify that neither convicted, forced or indentured labor (as defined under United States law) nor child labor (as defined by the manufacturer’s country) is used in the production process, that compensation is paid in accordance with local law and that their factories are in compliance with local safety regulations. Although we promote ethical business practices and our sourcing personnel periodically visit and monitor the operations of our independent contract manufacturers, suppliers and licensees, we do not control them or their labor practices. If one of our independent contract manufacturers, suppliers or licensees violates labor or other laws or diverges from those labor practices generally accepted as ethical in the United States, it could result in adverse publicity for us, damage our reputation in the United States, or render our conduct of business in a particular foreign country undesirable or impractical, any of which could harm our business.

Our planned expansion involves a number of risks that could prevent or delay the successful opening of new stores as well as impact the performance of our existing stores.

     Our ability to open and operate new stores successfully depends on many factors, including, among others, our ability to:

• identify suitable store locations, the availability of which is outside of our control;

• negotiate acceptable lease terms, including desired tenant improvement allowances;

• source sufficient levels of inventory to meet the needs of new stores;

• hire, train and retain store personnel;

• successfully integrate new stores into our existing operations; and

• satisfy the fashion preferences in new geographic areas.

     In addition, many of our new stores will be opened in regions of the United States in which we currently have few or no stores. The expansion into new markets may present competitive, merchandising and distribution challenges that are different from those currently encountered in our existing markets. Any of these challenges could adversely affect our business and results of operations. In addition, to the extent our new store openings are in existing markets, we may experience reduced net sales volumes in existing stores in those markets.

Many of our retail stores depend heavily on the customer traffic generated by shopping and factory outlet malls or by tourism.

     Many of our concept stores are located in shopping malls and some of our factory outlet stores are located in manufacturers’ outlet malls where we depend on obtaining prominent locations in the malls and the overall success of the malls to generate customer traffic. We cannot control the development of new malls, the availability or cost of appropriate locations within existing or new malls or the success of individual malls. Some of our concept stores occupy street locations which are heavily dependent on customer traffic generated by tourism. Any substantial decrease in tourism resulting from the September 11, 2001 attacks, a downturn in the economy or otherwise, is likely to adversely affect sales in our existing stores, particularly those with street locations. The effects of these factors could hinder our ability to open retail stores in new markets or reduce sales of particular existing stores, which could negatively affect our operating results.

19

Our quarterly revenues and operating results fluctuate as a result of a variety of factors, including seasonal fluctuations in demand for footwear and delivery date delays, which may result in volatility of our stock price.

     Our quarterly revenues and operating results have varied significantly in the past and can be expected to fluctuate in the future due to a number of factors, many of which are beyond our control. For example, sales of footwear products have historically been somewhat seasonal in nature with the strongest sales generally occurring in the third and fourth quarters. Also, delays in scheduling or pickup of purchased products by our domestic customers could negatively impact our net sales and results of operations for any given quarter. As a result of these specific and other general factors, our operating results will likely vary from quarter to quarter and the results for any particular quarter may not be necessarily indicative of results for the full year. Any shortfall in revenues or net income from levels expected by securities analysts and investors could cause a decrease in the trading price of our Class A common stock.

We face intense competition, including competition from companies with significantly greater resources than ours, and if we are unable to compete effectively with these companies, our market share may decline and our business could be harmed.

     We face intense competition in the footwear industry from other established companies. A number of our competitors have significantly greater financial, technological, engineering, manufacturing, marketing and distribution resources than we do. Their greater capabilities in these areas may enable them to better withstand periodic downturns in the footwear industry, compete more effectively on the basis of price and production and more quickly develop new products. In addition, new companies may enter the markets in which we compete, further increasing competition in the footwear industry.

     We believe that our ability to compete successfully depends on a number of factors, including the style and quality of our products and the strength of our brand name, as well as many factors beyond our control. We may not be able to compete successfully in the future, and increased competition may result in price reductions, reduced profit margins, loss of market share, and inability to generate cash flows that are sufficient to maintain or expand our development and marketing of new products, which would adversely impact the trading price of our Class A common stock.

Obtaining additional capital to fund our operations and finance our growth could make it difficult for us to service our debt obligations.

     If our working capital needs exceed our current expectations, we may need to raise additional capital through public or private equity offerings or debt financings. If we cannot raise needed funds on acceptable terms, we may not be able to successfully execute our growth strategy, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements. To the extent we raise additional capital by issuing debt, it may become difficult for us to meet debt service obligations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. Also, any new equity securities may have greater rights, preferences or privileges than our existing Class A common stock.

We depend on key personnel to manage our business effectively in a rapidly changing market, and if we are unable to retain existing personnel, our business could be harmed.

     Our future success depends upon the continued services of Robert Greenberg, Chairman of the Board and Chief Executive Officer, Michael Greenberg, President, and David Weinberg, Executive Vice President and Chief Financial Officer. The loss of the services of any of these individuals or any other key employee could harm us. Our future success also depends on our ability to identify, attract and retain additional qualified personnel. Competition for employees in our industry is intense and we may not be successful in attracting and retaining such personnel.

Our trademarks, design patents and other intellectual property rights may not be adequately protected outside the United States.

     We believe that our trademarks, design patents and other proprietary rights are important to our success and our competitive position. We devote substantial resources to the establishment and protection of our trademarks and design patents on a worldwide basis. In the course of our international expansion, we have, however, experienced conflicts with various third parties that have acquired or claimed ownership rights in certain trademarks similar to ours or have otherwise contested our rights to our trademarks. We have in the past successfully resolved these conflicts through both legal action and negotiated settlements, none of which we believe has had a material impact on our financial condition and results of operations. Nevertheless, we cannot assure you that the actions we have taken to establish and protect our trademarks and other proprietary rights outside the United States will be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as a violation of the trademarks and proprietary rights of others. Also, we cannot assure you that others will not assert rights in, or ownership of, trademarks, designs and other proprietary rights of ours or that we will be able to successfully resolve these types of conflicts to our

20

satisfaction. In addition, the laws of certain foreign countries may not protect proprietary rights to the same extent as do the laws of the United States. We may face significant expenses and liability in connection with the protection of our intellectual property rights outside the United States and if we are unable to successfully protect our rights or resolve intellectual property conflicts with others, our business or financial condition may be adversely affected.

Our ability to compete could be jeopardized if we are unable to protect our intellectual property rights or if we are sued for intellectual property infringement.

     We use trademarks on nearly all of our products and believe that having distinctive marks that are readily identifiable is an important factor in creating a market for our goods, in identifying us, and in distinguishing our goods from the goods of others. We consider our Skechers® and S Design® trademarks to be among our most valuable assets and we have registered these trademarks in many countries. In addition, we own many other trademarks, which we utilize in marketing our products. We continue to vigorously protect our trademarks against infringement. We also have a number of design patents covering components and features used in various shoes. We believe that our success depends primarily upon skills in design, research and development, production and marketing rather than upon our patent position. However, we have followed a policy of filing applications for United States and foreign patents on designs that we deem valuable.

     We believe that our patents and trademarks are generally sufficient to permit us to carry on our business as presently conducted. We cannot, however, know whether we will be able to secure patents or trademark protection for our intellectual property in the future or that protection will be adequate for future products. Further, we face the risk of ineffective protection of intellectual property rights in the countries where we source and distribute our products. We have been sued for patent and trademark infringement and cannot be sure that our activities do not and will not infringe on the proprietary rights of others. If we are compelled to prosecute infringing parties, defend our intellectual property, or defend ourselves from intellectual property claims made by others, we may face significant expenses and liability which could negatively impact our business or financial condition.

Energy shortages, natural disasters or a decline in economic conditions in California could increase our operating expenses or adversely affect our sales revenue.

     A substantial portion of our operations are located in California, including 39 of our retail stores, our headquarters in Manhattan Beach and our domestic distribution center in Ontario. Because California has and may in the future experience energy and electricity shortages, we may be subject to increased operating costs as a result of higher electricity and energy rates and may be subject to rolling blackouts which could interrupt our business. Any such impact could be material and adversely affect our profitability. In addition, because a significant portion of our net sales is derived from sales in California, a decline in the economic conditions in California, whether or not such decline spreads beyond California, could materially adversely affect our business. Furthermore, a natural disaster or other catastrophic event, such as an earthquake affecting California, could significantly disrupt our business. We may be more susceptible to these issues than our competitors whose operations are not as concentrated in California.

One principal stockholder is able to control substantially all matters requiring a vote of our stockholders and his interests may differ from the interests of our other stockholders.

     As of August 12, 2002, Robert Greenberg, Chairman of the Board and Chief Executive Officer, beneficially owned 77.1% of the outstanding shares of our Class B common stock and members of Mr. Greenberg’s immediate family beneficially owned the remainder of the outstanding shares of our Class B common stock. The holders of shares of our Class A common stock and Class B common stock have identical rights except that holders of Class A common stock are entitled to one vote per share while holders of Class B common stock are entitled to ten votes per share on all matters submitted to a vote of our stockholders. As a result, as of August 12, 2002, Mr. Greenberg held approximately 70.5% of the aggregate number of votes eligible to be cast by our stockholders and together with shares held by other members of his immediate family held approximately 91.4% of the aggregate number of votes eligible to be cast by our stockholders. Therefore, Mr. Greenberg is able to control substantially all matters requiring approval by our stockholders. Matters that require the approval of our stockholders include the election of directors and the approval of mergers or other business combination transactions. Mr. Greenberg also has control over our management and affairs. As a result of such control, certain transactions are not possible without the approval of Mr. Greenberg, including, proxy contests, tender offers, open market purchase programs, or other transactions that can give our stockholders the opportunity to realize a premium over the then-prevailing market prices for their shares of our Class A common stock. The differential in the voting rights may adversely affect the value of our Class A common stock to the extent that investors or any potential future purchaser view the superior voting rights of our Class B common stock to have value.

21

Our charter documents and Delaware law may inhibit a takeover, which may cause a decline in the value of our stock.

     Provisions of Delaware law, our certificate of incorporation, or our bylaws could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders. Mr. Greenberg’s substantial beneficial ownership position, together with the authorization of preferred stock, the disparate voting rights between Class A common stock and Class B common stock, the classification of the Board of Directors and the lack of cumulative voting in our certificate of incorporation and bylaws, may have the effect of delaying, deferring or preventing a change in control, may discourage bids for our Class A common stock at a premium over the market price of the Class A common stock and may adversely affect the market price of the Class A common stock.

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS AND REPORTS PREPARED

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements with regards to our revenues, earning, spending, margins, cash flow, orders, inventory, products, actions, plans, strategies and objectives. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or simply state future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will,” “result,” “could,” “may,” “might,” or any variations of such words with similar meanings. Any such statements are subject to risks and uncertainties that would cause our actual results to differ materially from those which are management’s current expectations or forecasts. Such information is subject to the risk that such expectations or forecasts, or the assumptions underlying such exceptions or forecasts, become inaccurate. In addition, the risks included here are not exhaustive. Other sections of this report may include additional factors which could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and we cannot predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also be aware that while we do, from time to time, communicate with securities analysts, we do not disclose any material non-public information or other confidential commercial information to them. Accordingly, individuals should not assume that we agree with any statement or report issued by any analyst, regardless of the content of the report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential loss arising from the adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. Changes in interest rates and, in the future, changes in foreign currency exchange rates have and will have an impact on our results of operations.

Interest rate fluctuations. At June 30, 2002, no amounts were outstanding that were subject to changes in interest rates, however, the interest rate charged on our line of credit facility is based on the prime rate of interest and changes in the prime rate of interest will have an effect on the interest charged on outstanding balances.

Foreign exchange rate fluctuations. We face market risk to the extent that changes in foreign currency exchange rates affect our non-U.S. dollar functional currency subsidiary’s assets and liabilities. In addition, changes in foreign exchange rates may affect the value of our inventory commitments. Also, inventory purchases of our products may be impacted by fluctuations in the exchange rates between the U.S. dollar and the local currencies of the contract manufacturers, which could have the effect of increasing cost of goods sold in the future. The company manages these risks by primarily denominating these purchases and commitments in U.S. dollars. The company does not engage in hedging activities with respect to such exchange rate risks.

New Accounting Pronouncements

During July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the purchase method be used for all business combinations initiated after June 30, 2001. SFAS No. 142 requires that goodwill no longer be amortized to earnings, but instead reviewed for impairment. The amortization of goodwill ceases upon adoption of SFAS

22

No. 142. SFAS No. 142 is effective for fiscal years starting after December 15, 2001. The adoption of SFAS 141 and 142 did not have a material impact on our financial position or results of operations.

In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which addresses financial accounting and reporting for the impairment or disposal of long lived assets. While SFAS 144 supersedes SFAS 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,” it retains many of the fundamental provisions of that statement. The standard is effective for fiscal years beginning after December 15, 2001. The adoption of the provisions of SFAS 144 did not have a material impact on our financial position or results of operations.

In December 2001, the EITF issued EITF No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).” This EITF prescribes guidance regarding the timing of recognition and income classification of costs incurred for certain sales incentive programs to retailers and end consumers. The adoption of EITF No. 01-09 did not have a material impact on our financial position or results of operations.

On July 30, 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 146, Accounting for Costs Associated with Exit or Disposal Activities.” SFAS 146 nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” It requires that a liability be recognized for those costs only when the liability is incurred, that is, when it meets the definition of a liability in the FASB’s conceptual framework. SFAS No. 146 also establishes fair value as the objective for initial measurement of liabilities related to exit or disposal activities. SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with earlier adoption encouraged. The Company does not expect that the adoption of SFAS 146 will have a material impact on its financial position or results from operations.

23

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The following is an update of the report (previously included in a Form 8-K dated April 25, 2002) of recent developments in previously reported legal proceedings that should be read in conjunction with Item 3, Legal Proceedings, in the Company’s annual report on Form 10-K for the fiscal year ending December 31, 2001.

On March 6, 2002, Skechers filed a complaint captioned SKECHERS U.S.A., INC. V. HEELING SPORTS LIMITED, HEELING MANAGEMENT CORPORATION, ROGER ADAMS AND CHARLIE BEERY. The complaint was filed in the United States District Court Central District of California (Case No. 02-1906NM). Skechers’ complaint alleges federal, California and common law unfair competition, intentional interference with economic relations and intentional interference with contract with respect to Skechers’ shoes called “3 Wheelers.” Skechers seeks relief that includes enjoining defendants from certain actions, certain trebled money damages, punitive damages, restitution and attorney fees and costs. On April 10, 2002, Skechers was served with a complaint captioned HEELING SPORTS LIMITED AND HEELING MANAGEMENT CORP., V. SKECHERS U.S.A., INC. that was filed on April 4, 2002 in the United States District Court, Eastern District of Texas, Sherman Division (Civil Action No. 4:02cv101). The lawsuit alleges breach of confidential agreement and misappropriation of trade secrets and is with respect to Skechers’ 3 Wheelers. The complaint seeks relief that includes a permanent injunction enjoining Skechers from selling the 3 Wheeler shoes, using any alleged confidential information and assignment of any intellectual property based on the plaintiff’s alleged confidential information, and damages that include those sustained by the plaintiff as a result of Skechers’ actions, profits and exemplary and punitive damages. Skechers’ 3 Wheelers is a new product that is currently a very small part of our product line. On June 18, 2002, a second complaint was filed against Skechers by Heeling Sports Limited in the United States District Court for the Eastern District of Texas, Sherman Division (Civil Action No. 4:02cv169), and the complaint was amended on June 21, 2002. The lawsuit is generally based upon the same facts as the earlier suit filed against Skechers by Heeling Sports Limited and Heeling Management Corp., alleging that Skechers’ sales of its 3 Wheeler shoes violates the plaintiff’s proprietary rights. However, the second complaint, as amended, alleges that Skechers’ 3 Wheelers infringe Heeling’s new patent that was issued on June 18, 2002, unfair competition and interference with prospective business relations. The second complaint, as amended, seeks relief that includes an injunction, declaratory relief that Skechers is infringing and will induce infringement of Heeling’s patent, compensatory, trebled and exemplary damages, and attorney’s fees. Skechers believes that it has meritorious defenses to the claims made by Heeling Sports Limited and Heeling Management Corp. and intends to defend these claims vigorously. Litigation is uncertain, and Skechers may not prevail in the lawsuits and expresses no opinion as to their ultimate outcome.

On May 31, 2002, a complaint captioned RAYMOND MEIER V. SKECHERS USA, INC. was filed against Skechers in the United States District Court, Southern District of New York (Case No. 02 CV 4139). The lawsuit alleges copyright infringement for the use of certain drawings by Skechers in its Skechers by Michelle K advertisements. The complaint seeks damages that include actual damages and profits attributable to the alleged infringement, compensatory damages, punitive damages and an injunction preventing further use of the drawings by Skechers. For reasons unrelated to the complaint, Skechers had discontinued using the subject drawings. Skechers believes that it has meritorious defenses to the issues raised in the complaint and intends to defend these claims vigorously. Nonetheless, litigation is uncertain, and Skechers may not prevail in the lawsuit and expresses no opinion as to its ultimate outcome.

On September 29, 2000, a complaint captioned MADISON TRADING LIMITED CORPORATION AND MERCURY INTERNATIONAL TRADING CORPORATION V. SKECHERS USA, INC., LOVITT FILMS, INC. AND BERT LOVITT was filed against Skechers in the United States District Court in Massachusetts, Civil Case No. CV-12016JLT. The lawsuit alleges quantum meruit, intentional interference with contract, intentional interference with advantageous relationship, unfair practices and declaratory relief arising out of a business arrangement between Skechers and inventor Bert Lovitt. The complaint seeks an injunction preventing Skechers from using certain technology, compensatory damages, exemplary damages and treble damages. The court denied the plaintiffs’ motion for a preliminary injunction. In February 2002, all parties agreed to settlement in principle and, as of the date of this filing, the matter is now settled and all written documentation has been finalized and signed by the parties. The terms of the settlement are confidential. Notwithstanding, the terms did not have a material impact on the financial position or results of operations of Skechers.

We occasionally become involved in litigation arising from the normal course of business. Other than the foregoing, we believe that any liability with respect to pending legal actions, individually or in the aggregate, will not have a material adverse effect on our business, financial condition and results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS —

(a)	Not applicable
(b)	Not applicable
(c)	In April 2002, the Company sold $90,000,000 principal amount of 4.50 percent convertible subordinated notes due April 15, 2007 (the “Notes”) in a 144A private placement to a qualified institutional investor (the “Initial Purchaser”) at 100% of their principal amount, less a selling discount to the Initial Purchaser of 4.25 percent of the principal amount.
	Exemption from registration requirements is claimed under the Securities Act of 1933 (the “Securities Act”) in reliance on Section 4(2) of the Securities Act or Rule 506 of Regulation D promulgated thereunder. The Initial Purchaser had adequate access to information about the Company and represented to the Company that it was a qualified institutional investors within the meaning of Rule 144A under the Securities Act and that it offered the Notes, and will offer and sell the Notes, inside the United States only to persons whom it reasonably believes are “qualified institutional buyers” in accordance with Rule 144A. Appropriate legends were affixed to the certificates evidencing the Notes in such transaction.
	The notes have a five-year term and are not callable for the first three years. At any time prior to maturity or redemption, the Notes are convertible into Class A common stock of the Company at a conversion price of $25.9680 per share (equivalent to a conversion rate of approximately 38.5089 shares per $1,000 principal amount of Notes), representing an initial conversion premium of 20 percent, for a total of 3,465,804 shares of Class A common stock of the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES — Not Applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS — None

ITEM 5. OTHER INFORMATION — Not Applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K —

(a) Exhibits -

  4.1 — Purchase Agreement, dated April 14, 2002, between the Registrant and CIBC World Markets Corp., relating to the 4.5% Convertible Subordinated Notes.

  4.2 — Indenture, dated April 9, 2002, between the Registrant and Wells Fargo Bank, National Association, as Trustee, relating to the 4.5% Convertible Subordinated Notes.

  4.3 — Form of Specimen Restricted Global Security.

  4.4 — Registration Rights Agreement, dated April 9, 2002, between the Registrant and CIBC World Markets Corp., relating to the 4.5% Convertible Subordinated Notes.

99.1 — Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002

(b) Reports on Form 8-K — The Company did not file any reports on Form 8-K during the quarterly period ended June 30, 2002.

24

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, thereunto duly authorized.

	SKECHERS U.S.A, INC.
Dated: August 13, 2002	/s/ David Weinberg
	David Weinberg Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

25 EX-4.1 3 v83779exv4w1.txt EXHIBIT 4.1 Exhibit 4.1 SKECHERS U.S.A., INC. $75,000,000 PRINCIPAL AMOUNT 4.50% CONVERTIBLE SUBORDINATED NOTES DUE 2007 PURCHASE AGREEMENT APRIL 4, 2002 CIBC WORLD MARKETS CORP. 4.50% CONVERTIBLE SUBORDINATED NOTES DUE 2007 OF SKECHERS U.S.A., INC. CIBC WORLD MARKETS CORP. April 4, 2002 CIBC World Markets Corp. 417 5th Avenue, 2nd Floor New York, New York 10016 Dear Sirs and Madams: Skechers U.S.A., Inc., a Delaware corporation (the "COMPANY"), proposes to issue and sell to CIBC World Markets Corp. ("CIBC" or the "INITIAL PURCHASER"), an aggregate of $75,000,000 in principal amount of its 4.50% Convertible Subordinated Notes due April 15, 2007 (the "FIRM NOTES"), subject to the terms and conditions set forth herein. The Company also proposes to issue and sell to the Initial Purchaser not more than an additional $15,000,000 aggregate principal amount of its 4.50% Convertible Subordinated Notes due April 4, 2007 (the "ADDITIONAL NOTES"), if requested by the Initial Purchaser as provided in Section 2 hereof. The Firm Notes and the Additional Notes are herein collectively referred to as the "NOTES." The Notes are to be issued pursuant to the provisions of an indenture (the "INDENTURE"), to be dated as of the Closing Date (as hereinafter defined), between the Company, and Wells Fargo Bank, National Association., as trustee (the "TRUSTEE"), pursuant to which the Notes, as provided therein, will be convertible at the option of the holders thereof into shares of the Company's Class A common stock, $0.001 par value per share (the "CLASS A COMMON STOCK"). The Notes and the Class A Common Stock issuable upon conversion thereof are herein collectively referred to as the "SECURITIES." The Securities and the Indenture are more fully described in the Offering Circular (as hereinafter defined). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture. 1. OFFERING CIRCULAR. The Notes will be offered and sold to the Initial Purchaser pursuant to one or more exemptions from the registration requirements under the Securities Act of 1933, as amended (the "ACT"). The Company has prepared an offering circular, dated April 4, 2002 (the "OFFERING CIRCULAR"), relating to the Notes. All references to this Offering Circular shall include the information incorporated by reference therein (the "INCORPORATED DOCUMENTS") Upon original issuance thereof, and until such time as the same is no longer required pursuant to the Indenture, the Notes (and all securities issued in exchange therefor, in substitution thereof or upon conversion thereof) shall bear the following legend: "THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON THE CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON THAT THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT THAT PRIOR TO SUCH TRANSFER PROVIDES TO THE TRUSTEE FOR THE NOTES A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF THE LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THE NOTES), (4) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO SKECHERS U.S.A., INC.) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. THIS NOTE, ANY CLASS A COMMON SHARES ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS NOTE AND SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF 2 THIS NOTE AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT." 2. AGREEMENTS TO SELL AND PURCHASE. (a) On the basis of the representations, warranties and covenants contained in this Purchase Agreement (this "AGREEMENT"), and subject to the terms and conditions contained herein, the Company agrees to issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from the Company, all of the Firm Notes at a purchase price equal to 100% of the principal amount thereof (the "PURCHASE PRICE"). (b) On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, (i) the Company agrees to issue and sell the Additional Notes and (ii) the Initial Purchaser shall have a right, but not the obligation, to purchase the Additional Notes, from the Company at the Purchase Price. Additional Notes may be purchased solely for the purpose of covering over-allotments made in connection with the offering of the Firm Notes. The Initial Purchaser may exercise its right to purchase Additional Notes in whole or in part from time to time by giving written notice thereof to the Company at any time within 30 days after the date of this Agreement. Such notice shall specify the aggregate principal amount of Additional Notes to be purchased pursuant to such exercise and the date for payment and delivery thereof. The date specified in any such notice shall be a business day (i) no earlier than the Closing Date, (ii) no later than ten business days after such notice has been given and (iii) no earlier than two business days after such notice has been given. 3. TERMS OF OFFERING. The Initial Purchaser has advised the Company that the Initial Purchaser will make offers (the "EXEMPT RESALES") of the Notes purchased hereunder on the terms set forth in the Offering Circular, as amended or supplemented, solely to persons whom the Initial Purchaser reasonably believes to be "qualified institutional buyers" as defined in Rule 144A under the Act ("QIB'S"). The Initial Purchaser will offer the Notes to QIB's initially at a price equal to 100% of the principal amount thereof. Such price may be changed at any time without notice. Holders (including subsequent transferees) of the Securities will have the registration rights set forth in the registration rights agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in substantially the form of Exhibit A hereto, for so long as such Securities constitute "RESTRICTED SECURITIES" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company will agree to file with the Securities and Exchange Commission (the "COMMISSION"), under the circumstances set forth therein, a shelf registration statement pursuant to Rule 415 under the Act (the "REGISTRATION STATEMENT") relating to the resale by certain holders of the Securities and to use all reasonable best efforts to cause such Registration Statements to be declared and remain effective and usable for the periods specified in the Registration Rights Agreement. This Agreement, the Indenture, the Notes, and the Registration Rights Agreement are hereinafter sometimes referred to collectively as the "OPERATIVE DOCUMENTS." 4. DELIVERY AND PAYMENT. 3 (a) Delivery of, and payment of the Purchase Price for, the Firm Notes shall be made at the offices of Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, California 90071, or such other location as may be mutually acceptable. Such delivery and payment shall be made at 10:00 a.m., New York City time, on April 9, 2002 or at such other time on the same date or such other date as the Initial Purchaser and the Company shall agree in writing. The time and date of such delivery and the payment for the Firm Notes are herein called the "CLOSING DATE." (b) Delivery of, and payment for, any Additional Notes to be purchased by the Initial Purchaser shall be made at the offices of Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, California 90071 at 10:00 a.m., New York City time, on the date specified in the exercise notice given by CIBC pursuant to Section 2(b) or such other time on the same or such other date as the Initial Purchaser and the Company shall agree in writing. The time and date of delivery and payment for any Additional Notes are hereinafter referred to as an "OPTION CLOSING DATE." (c) One or more of the Notes in definitive global form, registered in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), having an aggregate principal amount corresponding to the aggregate principal amount of the Notes (collectively, the "GLOBAL NOTE"), shall be delivered by the Company to the Initial Purchaser (or as the Initial Purchaser directs) in each case with any transfer taxes thereon duly paid by the Company against payment by the Initial Purchaser of the Purchase Price thereof by wire transfer in same day funds to the order of the Company. The Global Note shall be made available to the Initial Purchaser for inspection not later than 9:30 a.m., New York City time, on the business day immediately preceding the Closing Date. 5. AGREEMENTS OF THE COMPANY. The Company hereby agrees with the Initial Purchaser as follows: (a) To advise the Initial Purchaser promptly and, if requested by the Initial Purchaser, to confirm such advice in writing of (i) the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of any Securities for offering or sale in any jurisdiction designated by the Initial Purchaser pursuant to Section 5(e) below, or the initiation of any proceeding by any state securities commission or any other federal or state regulatory authority for such purpose and (ii) the happening of any event during the period referred to in Section 5(c) below that makes any statement of a material fact made in the Offering Circular untrue or that requires any additions to or changes in the Offering Circular in order to make the statements therein not misleading. The Company shall use its reasonable best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption of any Securities under any state securities or Blue Sky laws and, if at any time any state securities commission or other federal or state regulatory authority shall issue an order suspending the qualification or exemption of any Securities under any state securities or Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time. (b) To furnish the Initial Purchaser and those persons identified by the Initial Purchaser to the Company as many copies of the Offering Circular, any documents incorporated 4 by reference therein, and any amendments or supplements thereto, as the Initial Purchaser may reasonably request for the time period specified in Section 5(c). Subject to the Initial Purchaser's compliance with its representations and warranties and agreements set forth in Section 7 hereof, the Company consents to the use of the Offering Circular, any documents incorporated by reference therein, and any amendments and supplements thereto required pursuant hereto, by the Initial Purchaser in connection with Exempt Resales. (c) During such period as in the reasonable opinion of counsel for the Initial Purchaser an Offering Circular is required by law to be delivered in connection with Exempt Resales by the Initial Purchaser, (i) not to make any amendment or supplement to the Offering Circular of which the Initial Purchaser shall not previously have been advised or to which the Initial Purchaser shall reasonably object after being so advised and (ii) to prepare promptly upon the Initial Purchaser's reasonable request any amendment or supplement to the Offering Circular that may be necessary or advisable in connection with such Exempt Resales. (d) If, during the period referred to in Section 5(c) above, any event shall occur or condition shall exist as a result of which, in the opinion of counsel to the Initial Purchaser, it becomes necessary to amend or supplement the Offering Circular in order to make the statements therein, in the light of the circumstances when the Offering Circular is delivered to a QIB, not misleading, or if, in the opinion of counsel to the Initial Purchaser, it is necessary to amend or supplement the Offering Circular to comply with any applicable law, forthwith to prepare an appropriate amendment or supplement to the Offering Circular so that the statements therein, as so amended or supplemented, will not, in the light of the circumstances when it is so delivered, be misleading, or so that the Offering Circular will comply with applicable law, and to furnish to the Initial Purchaser and such other persons as the Initial Purchaser may designate such number of copies thereof as the Initial Purchaser may reasonably request. (e) Prior to the sale of all Notes pursuant to Exempt Resales as contemplated hereby, to cooperate with the Initial Purchaser and counsel to the Initial Purchaser in connection with the registration or qualification of the Notes for offer and sale to the Initial Purchaser and pursuant to Exempt Resales under the securities or Blue Sky laws of such jurisdictions as the Initial Purchaser may request and to continue such registration or qualification in effect so long as required for Exempt Resales and to file such consents to service of process or other documents as may be necessary in order to effect such registration or qualification; provided, however, that the Company shall not be required in connection therewith to qualify as a foreign corporation in any jurisdiction in which it is not now so qualified or to take any action that would subject it to general consent to service of process or taxation, other than as to matters and transactions relating to the Offering Circular or Exempt Resales, in any jurisdiction in which it is not now so subject. (f) So long as the Notes are outstanding, (i) to mail and make generally available as soon as practicable after the end of each fiscal year to the record holders of the Notes a financial report of the Company and its subsidiaries on a consolidated basis (and a similar financial report of all unconsolidated subsidiaries, if any), it being agreed that all such financial reports will include a consolidated balance sheet, a consolidated statement of operations, a consolidated statement of cash flows and a consolidated statement of stockholders' equity as of the end of and for such fiscal year, together with comparable information as of the end of and for 5 the preceding year, certified by the Company's independent public accountants and (ii) to mail and make generally available as soon as practicable after the end of each quarterly period (except for the last quarterly period of each fiscal year) to such holders, a consolidated balance sheet, a consolidated statement of operations and a consolidated statement of cash flows (and similar financial reports of all unconsolidated subsidiaries, if any) as of the end of and for such period, and for the period from the beginning of such year to the close of such quarterly period, together with comparable information for the corresponding periods of the preceding year. (g) So long as the Notes are outstanding, to furnish to the Initial Purchaser as soon as available copies of all reports or other communications furnished by the Company to its security holders or furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed and such other publicly available information concerning the Company and/or its subsidiaries as the Initial Purchaser may reasonably request. (h) So long as any of the Notes remain outstanding and during any period in which the Company is not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make available to any holder of Securities in connection with any sale thereof and any prospective purchaser of such Securities from such holder the information ("RULE 144A INFORMATION") required by Rule 144A(d)(4) under the Act or the information ("RULE 144 INFORMATION") required by Rule 144(c)(2) under the Act, as applicable. (i) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of the obligations of the Company under this Agreement, including: (i) the fees, disbursements and expenses of counsel to the Company and accountants of the Company in connection with the sale and delivery of the Notes to the Initial Purchaser and pursuant to Exempt Resales, and all other fees and expenses in connection with the preparation, printing, filing and distribution of the Offering Circular, any documents incorporated by reference and all amendments and supplements to any of the foregoing (including financial statements), including the mailing and delivering of copies thereof to the Initial Purchaser and persons designated by it in the quantities specified herein, (ii) all costs and expenses related to the transfer and delivery of the Notes to the Initial Purchaser and pursuant to Exempt Resales, including any transfer or other taxes payable thereon, (iii) all costs of printing or producing this Agreement, the other Operative Documents and any other agreements or documents in connection with the offering, purchase, sale or delivery of the Securities, (iv) all expenses in connection with the registration or qualification of the Securities for offer and sale under the securities or Blue Sky laws of the several states and all costs of printing or producing any preliminary and supplemental Blue Sky memoranda in connection therewith (including the filing fees and fees and disbursements of counsel for the Initial Purchaser in connection with such registration or qualification and memoranda relating thereto), (v) the cost of printing certificates representing the Securities, (vi) all expenses and listing fees in connection with the application for quotation of the Notes in The PORTAL Market of the National Association of Securities Dealers, Inc. ("PORTAL"), (vii) the fees and expenses of the Trustee and the Trustee's counsel in connection with the Indenture and the Notes, (viii) the costs and charges of any transfer agent, registrar and/or depositary (including DTC), (ix) any fees charged by rating agencies for the rating of the Notes, (x) all costs and 6 expenses of the Registration Statement, as set forth in the Registration Rights Agreement, (xi) all expenses and listing fees in connection with the application for listing the Class A Common Stock issuable upon conversion of the Notes on the New York Stock Exchange (the "NYSE") and (xii) and all other costs and expenses incident to the performance of the obligations of the Company hereunder for which a provision is not otherwise made in this Section. (j) To use its best efforts to effect the inclusion of the Notes in PORTAL and to maintain the listing of the Notes on PORTAL for so long as the Notes are outstanding. (k) To obtain the approval of DTC for "book-entry" transfer of the Notes, and to comply with all of its agreements set forth in the representation letters of the Company to DTC relating to the approval of the Notes by DTC for "book-entry" transfer. (l) To cause the Class A Common Stock issuable upon conversion of the Notes to be duly included for quotation on the NYSE prior to the Closing Date, subject to notice of official issuance. The Company will ensure that such Class A Common Stock remain included for quotation on the NYSE or any other national securities exchange following the Closing Date for so long as any shares of Class A Common Stock remain registered under the Exchange Act. (m) The Company will reserve and keep available at all times, free of preemptive rights, the shares of Class A Common Stock for the purpose of enabling the Company to satisfy its obligations to issue the Class A Common Stock upon conversion of the Notes. (n) The Company shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Class A Common Stock (other than the issuance of Class A Common Stock upon conversion of the Notes and issuance of Class A Common Stock under the Company's equity line), the Company's Class B common stock, $0.001 par value per share ("CLASS B COMMON STOCK" and together with the Class A Common Stock, the "COMMON STOCK") or any securities convertible into or exercisable or exchangeable for Class A Common Stock or Class B Common Stock, for a period of 90 days after the date hereof without the prior written consent of CIBC. Notwithstanding the foregoing, during such period (i) the Company may grant securities convertible into or exercisable or exchangeable for Class A Common Stock or Class B Common Stock pursuant to the Company's existing stock option, stock purchase or 401(k) plans, (ii) the Company may issue shares of Common Stock upon the conversion or exchange of a convertible or exchangeable security outstanding on the date hereof, and (iii) the Company may create and issue up to $35,000,000 aggregate principal amount of further Notes as further described under the section of the Offering Circular entitled "Description of the Notes -- Further Issuances." The Company shall, prior to or concurrently with the execution of this Agreement, deliver an agreement executed by each of the directors and executive officers of the Company to the effect that such person will not, during the period commencing on the date such person signs such agreement and ending 30 days after the date hereof, without the prior written consent of CIBC, (i) engage in any of the transactions described in the first sentence of this paragraph (whether such shares or any such securities are now owned by such individual or are hereafter acquired) or (ii) enter into any swap 7 or other arrangement that transfers to another, in whole or in part, any of the economic consequences associated with the ownership of any Common Stock (whether any such transactions described in clause (i) or (ii) is to be settled by the delivery of Class A Common Stock or Class B Common Stock or such other securities, in cash or otherwise). In addition, in such agreement each of the directors and executive officers of the Company will have agreed not to make any demand for or exercise any registration rights for a period of 30 days after the date hereof without the prior written consent of CIBC. (o) Not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) that would be integrated with the sale of the Notes to the Initial Purchaser or pursuant to Exempt Resales in a manner that would require the registration of any such sale of the Notes under the Act. (p) During the period of two years after the Closing Date, the Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Securities that have been reacquired by any of them. (q) In connection with the offering, until CIBC shall have notified the Company of the completion of the resale of the Securities, neither the Company nor any of its subsidiaries or affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its subsidiaries or affiliates has a beneficial interest any Securities or attempt to induce any person to purchase any Securities; and neither it nor any of its subsidiaries or affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Securities. (r) Not to voluntarily claim, and to actively resist any attempts to claim, the benefit of any usury laws against the holders of any Notes. (s) To comply with all of its agreements set forth in the Registration Rights Agreement. (t) To use the net proceeds received by it from the sale of the Securities in the manner specified in the Offering Circular under the caption "Use of Proceeds." (u) To use its best efforts to do and perform all things required or necessary to be done and performed under this Agreement by it prior to the Closing Date and to satisfy all conditions precedent to the delivery of the Notes. 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. As of the date hereof, the Company represents and warrants to, and agrees with, the Initial Purchaser that: (a) The Offering Circular (including the Incorporated Documents) does not, and any supplement or amendment to it will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties contained in this paragraph (a) shall not apply to statements in or omissions from the Offering Circular (or any supplement or amendment thereto) based upon 8 information relating to the Initial Purchaser furnished to the Company in writing by the Initial Purchaser expressly for use therein. None of the Incorporated Documents as of the time they were filed or as of the date hereof contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. No stop order preventing the use of the Offering Circular, or any amendment or supplement thereto, or any order asserting that any of the transactions contemplated by this Agreement are subject to the registration requirements of the Act, has been issued. The Incorporated Documents, at the time they were or hereafter are filed or last amended, as the case may be, with the Commission, complied and will comply in all material respects with the requirements of the Exchange Act. (b) Each of the Company and its subsidiaries has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to carry on its business as described in the Offering Circular and to own, lease and operate its properties, and each is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT"). (c) All outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive or similar rights, and there are no restrictions upon the voting or transfer of the Common Stock pursuant to the Company's charter or by-laws or other governing documents or, except as set forth herein, any agreement or other instrument to which the Company is a party or by which it may be bound. The Company has the authorized and outstanding capital stock as set forth in the Offering Circular, and there have been no changes in the outstanding capital stock of the Company since the date set forth under the heading "Capitalization" in the Offering Circular, except to the extent that certain outstanding options and warrants set forth in the Offering Circular may have been exercised. (d) The entities listed on Schedule A hereto are the only subsidiaries, direct or indirect, of the Company. All of the outstanding shares of capital stock of each of the Company's subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable, and are owned by the Company, directly or indirectly through one or more subsidiaries, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature (each, a "LIEN"). (e) This Agreement has been duly authorized, executed and delivered by the Company. (f) The Indenture has been duly authorized by the Company and, when duly executed and delivered by the Company and duly authorized, executed and delivered by the Trustee, will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of 9 general applicability. On the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act of 1939, as amended (the "TIA" or "TRUST INDENTURE ACT"), and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. (g) The Notes have been duly authorized and, when duly executed, delivered and authenticated in accordance with the provisions of the Indenture and when delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, the Notes will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Company, enforceable in accordance with their terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. On the Closing Date, the Notes will conform as to legal matters to the description thereof contained in the Offering Circular. (h) The Notes are convertible into Class A Common Stock in accordance with the terms of the Indenture; the shares of Class A Common Stock initially issuable upon conversion of the Notes have been duly authorized and reserved for issuance upon such conversion and, when issued upon such conversion, will be validly issued, fully paid and nonassessable, will conform to the description thereof contained in the Offering Circular and will be duly authorized for listing on the NYSE, subject to notice of official issuance. The stockholders of the Company or other holders of the Company's securities have no pre-emptive or similar rights with respect to the Notes or the Class A Common Stock issuable upon conversion of the Notes. The certificates evidencing the Class A Common Stock issuable upon conversion of the Notes will be in due and proper legal form. (i) The Registration Rights Agreement has been duly authorized by the Company and, when duly executed and delivered by the Company, and assuming the due execution and delivery by the Initial Purchaser, will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. On the Closing Date, the Registration Rights Agreement will conform as to legal matters to the description thereof contained in the Offering Circular. (j) Neither the Company nor any of its subsidiaries is (i) in violation of its respective charter or by-laws (ii) in default in the performance of any obligation, agreement, covenant or condition contained in any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound or (iii) in violation of any franchise, license, permit, judgment, decree, order, statute, rule or regulation where the consequences of such violation would have a Material Adverse Effect. (k) No statute, rule, regulation or order that has been enacted, adopted or issued by any governmental agency, and no injunction, restraining order or order of any nature 10 by a Federal or state court of competent jurisdiction, to which either the Company or any of its subsidiaries is subject, that has been issued or is pending, (i) could interfere with or adversely affect the issuance of the Securities, or (ii) could in any manner draw into question the validity of any of the Operative Documents. (l) The execution, delivery and performance of this Agreement and the other Operative Documents by the Company, compliance by the Company with all provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not (i) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or governmental agency (except such as may be required under the securities or Blue Sky laws of the various states), (ii) conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Company or any of its subsidiaries or any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, (iii) violate or conflict with any applicable law or any rule, regulation, judgment, order or decree of any court or any governmental body or agency having jurisdiction over the Company, any of its subsidiaries or their respective property, (iv) result in the imposition or creation of (or the obligation to create or impose) a Lien under, any agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound, or (v) result in the termination, suspension or revocation of any Authorization (as defined below) of the Company or any of its subsidiaries or result in any other impairment of the rights of the holder of any such Authorization. (m) Except as disclosed in the Offering Circular, there are no legal or governmental proceedings pending or, to the Company's knowledge, threatened to which the Company or any of its subsidiaries is or could be a party or to which any of their respective property is or could be subject that might result, singly or in the aggregate, in a Material Adverse Effect or could materially and adversely affect the ability of the Company to perform its obligations under any of the Operative Documents, or which are otherwise material in the context of the sale of the Securities. (n) Each of the Company and its subsidiaries is in compliance in all material respects with all rules, laws and regulations relating to the use, treatment, storage and disposal of toxic substances and the protection of health or the environment ("ENVIRONMENTAL LAW") which are applicable to its business; (ii) neither the Company nor any of its subsidiaries has received any written notice from any governmental authority or third party of an asserted claim under Environmental Laws; (iii) each of the Company and its subsidiaries has received all permits, licenses and other approvals required of it under applicable Environmental Laws to conduct its business and is in compliance with all terms and conditions of any such permit, license or approval; (iv) to the Company's knowledge, no facts currently exist that will require the Company or its subsidiaries to make future material capital expenditures to comply with Environmental Laws; and (v) no property which is or has been owned, leased or occupied by the Company or its subsidiaries has been designated as a Superfund site pursuant to the Comprehensive Environmental Response, Compensation of Liability Act of 1980 ("CERCLA"), as amended (42 U.S.C. Section 9601, et seq.) or otherwise designated as a contaminated site under applicable state or local law. Neither the Company nor any of its subsidiaries has been 11 named as a "potentially responsible party" under the CERCLA. In the ordinary course of its business, the Company periodically reviews the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which the Company identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws, or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, have a Material Adverse Effect. (o) The Company is not, nor will it be, as a result of or after giving effect to the issuance of the Securities and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated thereby, (i) insolvent, (ii) left with an unreasonably small capital with which to engage in its existing and anticipated businesses or (iii) incurring debts beyond its ability to pay such debts as they mature. The Company is not issuing the Securities in anticipation of insolvency. (p) Neither the Company nor any of its subsidiaries has violated any provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any provisions of the Foreign Corrupt Practices Act or the rules and regulations promulgated thereunder, except for such violations which, singly or in the aggregate, would not have a Material Adverse Effect. None of the Company, its subsidiaries or any director, officer or employee of the Company or its subsidiaries has, in the course of such person's actions for, or on behalf of, the Company or its subsidiaries, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity or made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; and none of the Company, its subsidiaries, or to the Company's knowledge, any director, officer, employee, agent or other person acting on behalf of the Company or its subsidiaries, has, in the course of such person's actions for, or on behalf of, the Company or its subsidiaries made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (q) Each of the Company and its subsidiaries has such permits, licenses, consents, exemptions, franchises, authorizations and other approvals (each, an "AUTHORIZATION") of, and has made all filings with and given all notices to, all governmental or regulatory authorities and self-regulatory organizations and all courts and other tribunals, including without limitation under any applicable Environmental Laws, as are necessary to own, lease, license and operate its respective properties and to conduct its business, except where the failure to have any such Authorization or to make any such filing or notice would not, singly or in the aggregate, have a Material Adverse Effect. Each such Authorization is valid and in full force and effect and each of the Company and its subsidiaries is in compliance with all the terms and conditions thereof and with the rules and regulations of the authorities and governing bodies having jurisdiction with respect thereto; and no event has occurred (including without limitation the receipt of any notice from any authority or governing body) that allows or, after notice or lapse of time or both, would allow, revocation, suspension or termination of any such Authorization or results or, after notice or lapse of time or both, would result in any other impairment of the rights 12 of the holder of any such Authorization; and such Authorizations contain no restrictions that are burdensome to the Company or any of its subsidiaries; except where such failure to be valid and in full force and effect or to be in compliance, the occurrence of any such event or the presence of any such restriction would not, singly or in the aggregate, have a Material Adverse Effect. (r) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them that is material to the business of the Company and its subsidiaries, in each case free and clear of all Liens and defects, except such as are described in the Offering Circular or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in the Offering Circular. (s) The Company and its subsidiaries own or license, free and clear of all liens or encumbrances, or can acquire or license, free and clear of all liens and encumbrances, on reasonable terms, all patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets, designs and other unpatented and/or unpatentable designs, technologies, inventions and innovations and proprietary or confidential information, systems or procedures), rights to use names and likenesses, trademarks, service marks, domain names and trade names ("INTELLECTUAL PROPERTY") currently employed by them in connection with the business now operated by them or currently used in any products, advertising or other materials distributed by them, except where the failure to own or license or otherwise to be able to acquire or license, free and clear of all liens and encumbrances, such Intellectual Property would not, singly or in the aggregate, have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property or rights of privacy that, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect, in each case except as described in the Offering Circular. (t) Each agreement described in the Offering Circular or the Incorporated Documents is in full force and effect and is valid and enforceable by the Company or its subsidiary, as applicable, in accordance with its terms, assuming the due authorization, execution and delivery thereof by each of the other parties thereto except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) to the extent that rights to indemnity or contribution thereunder may be limited by federal and state securities laws or the public policy underlying such laws. None of the Company, any of its subsidiaries, or to the Company's knowledge, any other party is in default in the observance or performance of any term or obligation to be performed by it under such agreement, and no event has occurred that with notice or lapse of time or both would constitute such a default, in any such case where such default or event would have Material Adverse Effect. No default exists, and no event has occurred that with notice or lapse of time or both would constitute a default, in the due performance and observance of any term, covenant or condition, by the Company or any of its subsidiaries of any other agreement or instrument to which the 13 Company or any of its subsidiaries is a party or by which any of them or their respective properties or business may be bound or affected where such default or event would have a Material Adverse Effect. (u) Except as disclosed in the Offering Circular, no relationship, direct or indirect, exists between or among the Company or any of its subsidiaries on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its subsidiaries on the other hand, that would be required by the Act to be described in the Offering Circular if the Offering Circular were a prospectus included in a registration statement on Form S-1 filed with the Commission. (v) There is no (i) significant labor practice complaint, grievance or arbitration proceeding pending or, to the Company's knowledge, threatened against the Company or any of its subsidiaries before the National Labor Relations Board or any state or local labor relations board, (ii) strike, labor dispute, slowdown or stoppage pending or threatened against the Company or any of its subsidiaries or (iii) union representation question existing with respect to the employees of the Company or any of its subsidiaries, except in the case of clauses (i), (ii) and (iii) for such actions that singly or in the aggregate, would not have a Material Adverse Effect. To the knowledge of the Company, no collective bargaining organizing activities are taking place with respect to the Company or any of its subsidiaries. (w) All material tax returns required to be filed by the Company and each of its subsidiaries in any jurisdiction have been filed, other than those filings being contested in good faith, and all material taxes, including withholding taxes, penalties and interest, assessments, fees and other charges due pursuant to such returns or pursuant to any assessment received by the Company or any of its subsidiaries have been paid, other than those being contested in good faith and for which adequate reserves have been provided. (x) The accountants, KPMG LLP, that have certified the financial statements and supporting schedules included in the Offering Circular are independent public accountants with respect to the Company, as required by the Act and the Exchange Act. The historical financial statements, together with related schedules and notes, set forth in the Offering Circular comply as to form in all material respects with the requirements applicable to registration statements on Form S-1 under the Act. (y) The historical financial statements, together with related schedules and notes forming part of the Offering Circular (and any amendment or supplement thereto), present fairly the consolidated financial position, results of operations and changes in financial position of the Company and its subsidiaries on the basis stated or incorporated by reference in the Offering Circular at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data set forth or incorporated by reference in the Offering Circular (and any amendment or supplement thereto) are, in all material respects, accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company. 14 (z) The Company is not and, after giving effect to the offering and sale of the Notes and the application of the net proceeds thereof as described in the Offering Circular, will not be, an "investment company," as such term is defined in the Investment Company Act of 1940, as amended. (aa) Except as disclosed in the Offering Circular or other than has been waived, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company or to require the Company to include such securities with the Notes registered pursuant to any registration statement. (bb) Neither the Company nor any of its subsidiaries nor any agent thereof acting on the behalf of any of them has taken, and none of them will take, any action that might cause this Agreement or the issuance or sale of the Notes to violate Section 7 of the Exchange Act, or any regulation promulgated thereunder, including without limitation, Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. (cc) No "nationally recognized statistical rating organization" as such term is defined for the purpose of Rule 436(g)(2) under the Act (i) has imposed (or has informed the Company that it is considering imposing) any condition (financial or otherwise) on the Company's retaining any rating assigned to the Company or any securities of the Company or (ii) has indicated to the Company that it is considering (A) the downgrading, suspension, or withdrawal of, or any review for a possible change that does not indicate the direction of the possible change in, any rating so assigned or (B) any change in the outlook for any rating of the Company or any securities of the Company. (dd) Since the respective dates as of which information is given in the Offering Circular, other than as set forth in the Offering Circular (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), (i) there has not occurred any material adverse change in the condition, financial or otherwise, or the earnings, business, management or operations of the Company and its subsidiaries, taken as a whole, (ii) there has not been any material adverse change in the capital stock or in the long-term debt of the Company or any of its subsidiaries, (iii) neither the Company nor any of its subsidiaries has incurred any material liability or obligation, direct or contingent except in the ordinary course of business, (iv) neither the Company nor any of its subsidiaries has sustained any material loss or interference with their respective assets, businesses or properties (whether owned or leased) from fire, explosion, earthquake, flood or other calamity, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree that would have a Material Adverse Effect; and (v) since the date of the latest consolidated balance sheet included in the Offering Circular, except as reflected therein, neither the Company nor any of its subsidiaries has (A) issued any securities other than the issuance of securities pursuant to the exercise of options granted under stock option plans or agreements existing prior to the date of the latest consolidated balance sheet included in the Offering Circular, (B) entered into any material transaction not in the ordinary course of business or (C) declared or paid any dividend or made any distribution on any shares of its capital stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares of its capital stock. 15 (ee) The books, records and accounts of each of the Company and each of its subsidiaries accurately and fairly reflect, in reasonable detail, the transactions in, and dispositions of, the assets of, and the results of operations of, the Company and its subsidiaries, as applicable. Each of the Company and each of its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorization, (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principals and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (ff) The Offering Circular, as of its date, contains all the information specified in, and meets the requirements of, Rule 144A(d)(4) under the Act. (gg) When the Notes are issued and delivered pursuant to this Agreement, the Notes will not be of the same class (within the meaning of Rule 144A under the Act) as any security of the Company that is listed on a national securities exchange registered under Section 6 of the Exchange Act or that is quoted in a United States automated inter-dealer quotation system. (hh) No form of general solicitation or general advertising (as defined in Regulation D under the Act) was used by the Company, or any of its representatives (other than the Initial Purchaser, as to whom the Company makes no representation) in connection with the offer and sale of the Notes contemplated hereby, including without limitation articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. No securities of the same class as the Notes have been issued and sold by the Company within the six-month period immediately prior to the date hereof. (ii) Except as permitted by the Securities Act, neither the Company nor any of its subsidiaries has distributed and, prior to the completion of the initial distribution of the Notes (which includes the sale by the Initial Purchaser), neither will distribute, any offering materials in connection with the offering and sale of the Notes other than the Offering Circular. (jj) The Company has not taken, nor will it take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in, or that has constituted or that might reasonably be expect to constitute, the stabilization or manipulation of the price of the Common Stock or the Notes. (kk) Prior to the effectiveness of any Registration Statement, the Indenture is not required to be qualified under the TIA. (ll) No registration under the Act of the Securities is required for the sale of the Securities to the Initial Purchaser as contemplated hereby or for the Exempt Resales 16 assuming the accuracy of the Initial Purchaser's representations and warranties and agreements set forth in Section 7 hereof. (mm) Each certificate signed by any officer of the Company and delivered to the Initial Purchaser or counsel for the Initial Purchaser shall be deemed to be a representation and warranty by the Company to the Initial Purchaser as to the matters covered thereby. (nn) The Company is subject to Section 13 or 15(d) the Exchange Act. (oo) Except as disclosed in the Offering Circular, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Initial Purchaser for a brokerage commission, finder's fee or other like payment in connection with the sale of the Securities. The Company acknowledges that the Initial Purchaser and, for purposes of the opinions to be delivered to the Initial Purchaser pursuant to Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser will rely upon the accuracy and truth of the foregoing representations and hereby consents to such reliance. 7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial Purchaser represents and warrants to, and agrees with, the Company: (a) The Initial Purchaser is a QIB, with such knowledge and experience in financial and business matters as is necessary in order to evaluate the merits and risks of an investment in the Notes. (b) The Initial Purchaser (A) is not acquiring the Securities with a view to any distribution thereof or with any present intention of offering or selling any of the Securities in a transaction that would violate the Act or the securities laws of any state of the United States or any other applicable jurisdiction and (B) will be reoffering and reselling the Securities only to QIB's in reliance on the exemption from the registration requirements of the Act provided by Rule 144A. (c) The Initial Purchaser agrees that no form of general solicitation or general advertising (within the meaning of Regulation D under the Act) has been or will be used by such Initial Purchaser or any of its representatives in connection with the offer and sale of the Securities pursuant hereto, including without limitation articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. (d) The Initial Purchaser agrees that, in connection with Exempt Resales, such Initial Purchaser will solicit offers to buy the Securities only from, and will offer to sell the Securities only to, QIB's. The Initial Purchaser further agrees that it will offer to sell the Securities only to, and will solicit offers to buy the Securities only from persons whom the Initial Purchaser reasonably believes are QIB's and that agree that (A) the Securities purchased by them may be offered, resold, pledged or otherwise transferred within the time period referred to under Rule 144(k) (taking into account the provisions of Rule 144(d) under the Act, if applicable) 17 under the Act, as in effect on the date of the transfer of such Securities, only (1) to a person whom the seller reasonably believes is a QIB acquiring for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A under the Act, (2) pursuant to an exemption from registration under the Act provided by Rule 144 thereunder (if available), (3) to an Institutional Accredited Investor that prior to such transfer, furnishes the Trustee a signed letter containing certain representations and agreements relating to the registration and transfer of such Securities and, if requested by the Company, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Act, (4) in accordance with another exemption from the registration requirements under the Act (and based upon an opinion of counsel acceptable to the Company) or (5) pursuant to an effective registration statement and, in each case, in accordance with the applicable securities laws of the United States or other jurisdictions and (B) such QIB's will deliver to each person to whom such Securities or an interest therein is transferred a notice substantially to the effect of the foregoing. (e) The Initial Purchaser acknowledges that the Company, for purposes of the opinions to be delivered to the Initial Purchaser pursuant to Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser will rely upon the accuracy and truth of the foregoing representations and the Initial Purchaser hereby consents to such reliance. 8. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless the Initial Purchaser, its directors, its officers and each person, if any, who controls the Initial Purchaser (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities and judgments (including without limitation any legal or other expenses incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in the Offering Circular (or any amendment or supplement thereto) or any Rule 144 Information or Rule 144A Information provided by the Company to any holder or prospective purchaser of Securities pursuant to Section 5(h) or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Initial Purchaser furnished in writing to the Company by the Initial Purchaser. (b) The Initial Purchaser agrees to indemnify and hold harmless the Company and its directors and officers and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company to the same extent as the foregoing indemnity from the Company to the Initial Purchaser but only with reference to information relating to the Initial Purchaser furnished in writing to the Company by the Initial Purchaser expressly for use in the Offering Circular. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party shall assume the defense of 18 such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as they are incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall not be required to assume the defense of such action pursuant to this Section 8(c) but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Initial Purchaser). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it that are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties, and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by CIBC, in the case of the parties indemnified pursuant to Section 8(a), and by the Company, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with its written consent or (ii) effected without its written consent if the settlement is entered into more than twenty business days after the indemnifying party shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of the indemnified party. (d) To the extent the indemnification provided for in this Section 8 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the 19 Initial Purchaser, on the other hand, from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Initial Purchaser, on the other hand, in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Initial Purchaser, on the other hand, shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities (after Initial Purchaser's discounts or commissions, but before deducting expenses) received by the Company, and the total discounts and commissions received by the Initial Purchaser bear to the total price to investors of the Securities, in each case as set forth on the cover page of the Offering Circular. The relative fault of the Company, on the one hand, and the Initial Purchaser, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or the Initial Purchaser, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Initial Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such indemnified party in connection with investigating or defending any matter, including any action, that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, the Initial Purchaser shall not be required to contribute any amount in excess of the amount by which the total discounts and commissions received by the Initial Purchaser exceeds the amount of any damages that the Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any indemnified party at law or in equity. 9. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The obligations of the Initial Purchaser to purchase the Firm Notes under this Agreement on the Closing Date and the Additional Notes, if any, on any Option Closing Date are subject to the satisfaction of each of the following conditions. (a) All the representations and warranties of the Company contained in this Agreement shall be true and correct on the Closing Date, or on each Option Closing Date, if any, with the same force and effect as if made on and as of the Closing Date or on each Option Closing Date, if any. 20 (b) On or after the date hereof, (i) there shall not have occurred any downgrading, suspension or withdrawal of, nor shall any notice have been given of any potential or intended downgrading, suspension or withdrawal of, or of any review (or of any potential or intended review) for a possible change that does not indicate the direction of the possible change in, any rating of the Company or any securities of the Company (including without limitation the placing of any of the foregoing ratings on credit watch with negative or developing implications or under review with an uncertain direction) by any "nationally recognized statistical rating organization" as such term is defined for the purpose of Rule 436(g)(2) under the Act, (ii) there shall not have occurred any change, nor shall any notice have been given of any potential or intended change, in the outlook for any rating of the Company or any securities of the Company by any such rating organization and (iii) no such rating organization shall have given notice that it has assigned (or is considering assigning) a lower rating to the Notes than that on which the Notes were marketed. (c) Since the respective dates as of which information is given in the Offering Circular, other than as set forth in the Offering Circular (exclusive of any amendments or supplements thereto after the date of this Agreement), (i) there shall not have occurred any change or any development involving a prospective change in the condition, financial or otherwise, or the earnings, business, management or operations of the Company and its subsidiaries, taken as a whole, (ii) there shall not have been any change or any development involving a prospective change in the capital stock or in the long-term debt of the Company or any of its subsidiaries except in the ordinary course of business, (iii) neither the Company nor any of its subsidiaries shall have incurred any liability or obligation, direct or contingent except in the ordinary course of business, and (iv) neither the Company nor any of its subsidiaries shall have sustained any loss or interference with their respective assets, businesses or properties (whether owned or leased) from fire, explosion, earthquake, flood or other calamity, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree, the effect of which, in case of any event described in the foregoing clause (i), (ii), (iii) or (iv), in the judgment of the Initial Purchaser, is material and adverse and makes it impracticable to market the Securities on the terms and in the manner contemplated in the Offering Circular. (d) You shall have received on the Closing Date a certificate, dated the Closing Date, and on an Option Closing Date, if any, dated such Option Closing Date, signed by the President and the Chief Financial Officer of the Company, confirming the matters set forth in Sections 6(dd), 9(a) and 9(b) and stating that the Company has complied with all the agreements and satisfied all of the conditions herein contained and required to be complied with or satisfied on or prior to the Closing Date or Option Closing Date, as the case may be. (e) You shall have received on the Closing Date and each Option Closing Date, if any, an opinion (subject to customary qualifications, limitations and exceptions and satisfactory to you and counsel for the Initial Purchaser), dated the Closing Date or such Option Closing Date, as the case may be, of Kirkpatrick & Lockhart LLP, counsel for the Company, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation under the laws of the State of Delaware. The Company is duly qualified to transact 21 business and in good standing as a foreign corporation in the States of California and New York. In rendering this opinion regarding good standing, we have relied solely on good standing certificates of the Company as of a recent date issued by each of the Delaware Secretary of State, California Secretary of State and the New York Secretary of State, and in each case have made no independent investigation or verification. (ii) The Company has the requisite corporate power to enter into, deliver and perform its obligations under the Purchase Agreement and to issue and sell the Securities, other than those required under state and foreign Blue Sky laws as to which such counsel need not render an opinion. (iii) The Notes have been duly authorized by the Company and, when executed and authenticated in accordance with the provisions of the Indenture, assuming due authentication thereof by the Trustee, and delivered to and paid for by the Initial Purchaser in accordance with the terms of the Purchase Agreement, will be valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles, and will be entitled to the benefits of the Indenture. (iv) The Incorporated Documents, on the respective dates they were filed, appeared on their face to comply in all material respects with the requirements as to form for reports on Form 10-K and Form 8-A, as the case may be, under the Exchange Act and the related rules and regulations in effect at the respective dates of their filing. (v) The Class A Common Stock to be issued upon conversion of the Notes have been duly authorized and reserved and, when issued upon conversion of the Notes in accordance with the terms of the Notes and the Indenture, will be validly issued, fully paid and non-assessable, and the issuance of the Class A Common Stock will not be subject to any preemptive rights arising by operation of law or under the Company's Certificate of Incorporation or Bylaws or, to such counsel's knowledge, similar rights under the documents listed in the exhibits to the Incorporated Documents. (vi) All necessary corporate action has been duly and validly taken by the Company to authorize the execution, delivery and performance of the Purchase Agreement and the issuance and sale of the Notes and, upon conversion thereof, the Class A Common Stock. The Purchase Agreement has been duly and validly authorized, executed and delivered by the Company and the Purchase Agreement constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. (vii) Neither the execution and delivery by the Company of, and the performance by the Company of its obligations under the Purchase Agreement, the Indenture, the Registration Rights Agreement and the Securities (including, without limitation, the issuance and sale by the Company of the Notes and, upon conversion thereof, the Class A Common Stock) 22 will (a) give rise to a right to terminate or accelerate the due date of any payment due under, or result in the breach of any express term or provision of, or constitute a default (or any event which with notice or lapse of time, or both, would constitute a default) under, or require consent or waiver under, or result in the execution or imposition of any lien, charge, claim, security interest or encumbrance upon any properties or assets of the Company pursuant to the express terms of any indenture, mortgage, deed trust, note or other agreement or instrument to which the Company is a party or by which the Company or any of its assets or properties or businesses is bound and which is listed as an exhibit to the Incorporated Documents, (b) to such counsel's knowledge, violate any existing obligations of the Company under the express terms of any judgment, decree, or order of any court or arbitrator or governmental agency or body, which names the Company and is specifically directed to it or its properties, (c) violate any applicable statute, rule or regulation of the Federal laws of the United States of America and the laws of the States of Delaware, New York and California or (d) violate any provision of the charter or by-laws of the Company, except for such consents, waivers, approvals and authorizations which have been obtained prior to the Closing Date. (viii) No consent, approval, authorization, license, registration, or qualification or order of any federal, Delaware, New York or California court or governmental agency or regulatory body is required for the due authorization, execution, delivery or performance by the Company of its obligations under the Purchase Agreement, the Indenture, the Registration Rights Agreement or the Securities except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Securities (except, other than as set forth in paragraph (xv) below, we give no opinion as to registration of the Securities under the Act and the qualification of the Indenture under the Trust Indenture Act of 1939, as amended). (ix) To such counsel's knowledge, without investigation except where we have been engaged by the Company to give substantive attention to such action, suit or proceeding, there is no litigation or governmental proceeding or investigation, before any court or before or by any public body or board pending or threatened in writing against, or involving the assets, properties or businesses of, the Company which would have a Material Adverse Effect. (x) Each of the Indenture and the Registration Rights Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company, enforceable against the Company in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. (xi) The Company is not an "investment company" or an entity controlled by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. (xii) The statements in the Offering Circular under the caption "Description of the Notes" insofar as such statement constitutes a summary of documents referred to therein fairly summarize in all material respects such documents and matters. 23 (xiii) The capital stock of the Company conforms in all material respects to the description thereof contained in the Offering Circular under the caption "Description of Share Capital." (xiv) The statements in the Offering Circular under the caption "Certain United States Federal Income Tax Consequences," insofar as such statements constitute a summary of the United States federal tax laws referred to therein, fairly summarize the matters referred to therein in all material respects. (xv) Assuming (i) each Initial Purchaser is a "qualified institutional buyer" within the meaning of Rule 144A of the Act and (ii) the accuracy of the representations and warranties and compliance with the agreements of the Company in Section 6(ff) of the Purchase Agreement and of the Initial Purchaser in Section 7 of the Purchase Agreement, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchaser under the Purchase Agreement or in connection with the initial resale of the Securities by the Initial Purchaser in accordance with Section 7 of the Purchase Agreement and the Offering Circular to register the Securities under the Act, or to qualify the Indenture under the Trust Indenture Act of 1939, as amended, it being understood that no opinion is expressed as to any subsequent resale of any of the Notes or the Class A Common Stock issuable upon conversion of any of the Notes. Such counsel is not called upon to opine as to factual matters, and the character of determinations involved in the process is such that it is not passing upon and does not need to assume any responsibility for the accuracy, completeness or fairness of the information included in the Offering Circular. Such counsel may assume the correctness and completeness of the information included in the Offering Circular, and such counsel may make no independent investigation or verification of that information. Such counsel can advise, however, that in and on the basis of its review of the Offering Circular and its participation in its preparation, nothing has come to such counsel's attention that causes it to believe that the Offering Circular (including the Incorporated Documents), as of its date or as of the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Such counsel is not called upon to express an opinion with respect to, and the preceding paragraph does not address, the financial statements and related notes and schedules, and other financial, accounting, and statistical information, included in, incorporated by reference in, or omitted from the Offering Circular, or any further amendment or supplement thereto. Such counsel is also not called upon to express any opinion with respect to any mater relating to compliance with financial covenants or financial requirements. (f) The Initial Purchaser shall have received on the Closing Date and on each Option Closing Date, an opinion, dated the Closing Date, of Latham & Watkins, counsel for the Initial Purchaser, in form and substance reasonably satisfactory to the Initial Purchaser. (g) The Initial Purchaser shall have received, at the time this Agreement is executed and at the Closing Date and each Option Closing Date, if any, letters dated the date hereof or the Closing Date or an Option Closing Date, as the case may be, from KPMG LLP, independent public accountants, in form and substance satisfactory to the Initial Purchaser 24 containing the information and statements of the type ordinarily included in accountants' "comfort letters" with respect to the financial statements and certain financial information contained in the Offering Circular. (h) The Notes shall have been approved by the National Association of Securities Dealers, Inc. for trading and duly listed in PORTAL. (i) The Initial Purchaser shall have received a counterpart, conformed as executed, of the Indenture which shall have been entered into by the Company and the Trustee. (j) The Company shall have executed the Registration Rights Agreement, and the Initial Purchaser shall have received an original copy thereof, duly executed by the Company. (k) The Company shall not have failed at or prior to the Closing Date or each Option Closing Date, if any, as the case may be, to perform or comply with all of the agreements contained herein and required to be performed or complied with by the Company at or prior to the Closing Date or Option Closing Date, as the case may be. 10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement may be terminated at any time on or prior to the Closing Date by the Initial Purchaser by written notice to the Company if any of the following has occurred: (i) any significant attack on or significant acts of terrorism involving the United States, outbreak or escalation of hostilities excluding current hostilities in Afghanistan, declaration by the United States of a national emergency or war or other calamity or crisis or any change or development involving a prospective change in United States or international, political, financial or economic conditions which has a material adverse effect on financial markets so as to make it, in your sole judgment, impracticable or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Offering Circular, (ii) the suspension or material limitation of trading in securities or other instruments on the New York Stock Exchange, the American Stock Exchange, the Chicago Board of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the Nasdaq National Market or limitation on prices for securities or other instruments on any such exchange or the Nasdaq National Market, (iii) the suspension of trading of any securities of the Company on any exchange or in the over-the-counter market, (iv) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other governmental authority that in your judgment has had, or will have, a Material Adverse Effect, (v) the declaration of a banking moratorium by either federal or New York state authorities, (vi) any major disruption of settlements of securities or (vii) the taking of any action by any federal, state or local government or agency in respect of its monetary or fiscal affairs that in your judgment has a material adverse effect on the financial markets in the United States. 11. MISCELLANEOUS. (a) Notices given pursuant to any provision of this Agreement shall be addressed as follows: (i) if to the Company to Skechers U.S.A., Inc., 228 Manhattan Beach Blvd., Manhattan Beach, California 90266, Attention Philip Paccione, with a copy to Thomas J. Poletti, Kirkpatrick & Lockhart LLP, 10100 Santa Monica Blvd., 7th Floor, Los Angeles, California 90067 and (ii) if to the Initial Purchaser, c/o CIBC World Markets Corp., 417 5th 25 Avenue, 2nd Floor, New York, New York 10016 Attention: __________, with a copy to J. Scott Hodgkins, Latham & Watkins, Suite 4000, Los Angeles, California 90071, in any case to such other address as the person to be notified may have requested in writing. (b) The respective indemnities, contribution agreements, representations, warranties and other statements of the Company and the Initial Purchaser set forth in or made pursuant to this Agreement shall remain operative and in full force and effect and will survive delivery of and payment for the Securities regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of the Initial Purchaser, the officers or directors of the Initial Purchaser, any person controlling the Initial Purchaser, the Company, the officers or directors of the Company, or any person controlling the Company, (ii) acceptance of the Securities and payment for them hereunder and (iii) termination of the Agreement. (c) If for any reason the Notes are not delivered by or on behalf of the Company as provided herein (other than as a result of any termination of this Agreement pursuant to Section 10), the Company agrees to reimburse the Initial Purchaser for all out-of-pocket expenses (including the fees and disbursements of counsel) incurred by it. Notwithstanding any termination of this Agreement, the Company shall be liable for all expenses which it has agreed to pay pursuant to Section 5(i). The Company also agrees to reimburse the Initial Purchaser and the officers, directors and each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act for any and all fees and expenses (including without limitation the fees and expenses of counsel) incurred by them in connection with enforcing their rights under this Agreement (including without limitation its rights under Section 8). (d) Except as otherwise provided, this Agreement has been and is made solely for the benefit of and shall be binding upon the Company, the Initial Purchaser, the Initial Purchaser's directors and officers, any controlling persons referred to herein, the directors of the Company and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include a purchaser of any of the Securities from the Initial Purchaser merely because of such purchase. (e) This Agreement shall be governed and construed in accordance with the laws of the State of New York, including without limitation, Section 5-1401 of the New York General Obligations Law. (f) This Agreement may be signed in various counterparts, which together shall constitute one and the same instrument. [Signature Page Follows] 26 Please confirm that the foregoing correctly sets forth the agreement between the Company and the Initial Purchaser by signing in the space provided below. Very truly yours, SKECHERS U.S.A., INC. By: /s/ DAVID WEINBERG -------------------------------- Name: David Weinberg Title: Chief Financial Officer CIBC WORLD MARKETS CORP. By: /s/ WILLIAM S. SCHREIER ------------------------------ Name: William S. Schreier Title: Managing Director SCHEDULE A SUBSIDIARIES SKECHERS ENTITIES I. DOMESTIC

CORPORATE ENTITY OPERATIONS EMPLOYEES - ------------------------------------------------------------------------------------------------- SKECHERS USA, INC., parent company of all other Skechers 1857 a Delaware corporation entities, both international & 228 Manhattan Beach Blvd. domestic Manhattan Beach, CA 90266 - ------------------------------------------------------------------------------------------------- SKECHERS USA, INC., II Subsidiary that develops & maintains 88 a Delaware corporation U.S. intellectual property of Skechers; 228 Manhattan Beach Blvd. includes design, production, Manhattan Beach, CA 90266 advertising, marketing, display merchandising and licensing operations - ------------------------------------------------------------------------------------------------- SKECHERS By Mail, Inc. Subsidiary that operates skechers.com none a Delaware corporation internet store 228 Manhattan Beach Blvd. Manhattan Beach, CA 90266 - ------------------------------------------------------------------------------------------------- Yale Investments, LLC, Single-asset real estate entity; owns none a Delaware limited liability distribution center located at 1670 S. corporation Champagne Ave., Ontario, CA 228 Manhattan Beach Blvd. Manhattan Beach, CA 90266 - ------------------------------------------------------------------------------------------------- Duncan Investments, LLC, Real estate entity that owns property none a California limited located at: 324, 340 & 356 Sepulveda Blvd., liability company Manhattan Beach, CA 228 Manhattan Beach Blvd. Manhattan Beach, CA 90266 - -------------------------------------------------------------------------------------------------

II. INTERNATIONAL

COUNTRY CORPORATE ADDITIONAL OPERATIONS EMPLOYEES NAME/ADDRESS LOCATIONS - ------------------------------------------------------------------------------------------------- Switzerland SKECHERS SARL None holding company 4 12 Rue de la Mercerie for Skechers 1003 Lausanne International Switzerland companies

- ----------------------------------------------------------------------------------------------- CORPORATE ADDITIONAL COUNTRY NAME/ADDRESS LOCATIONS OPERATIONS EMPLOYEES - ----------------------------------------------------------------------------------------------- England SKECHERS USA, Ltd. RETAIL: (1) wholesale and 34 Katherine House retail operations 9-11 Wyllyotts Place 291a-291c Oxford St. Darkes Lane London W1 R1LB. Potters Bar, England Hertfordshire United Kingdom EN62JD - ----------------------------------------------------------------------------------------------- Germany SKECHERS USA RETAIL: (1) wholesale & retail 19 Deutschland GmbH operations Waldstrasse 74 CentrO Mall 63128 Diezenbach, Space B018 Germany Neue Mitte Oberhausen 46047, Germany - ----------------------------------------------------------------------------------------------- France SKECHERS USA RETAIL: (1) wholesale & retail 18 France SAS operations 20 rue des Capucines 16-18 Rue De Berger 75002 Paris, France 75001 Paris, France - -----------------------------------------------------------------------------------------------

EXHIBIT A FORM OF REGISTRATION RIGHTS AGREEMENT EX-4.2 4 v83779exv4w2.txt EXHIBIT 4.2 Exhibit 4.2 SKECHERS U.S.A., INC., AS ISSUER WELLS FARGO BANK, NATIONAL ASSOCIATION, AS TRUSTEE INDENTURE DATED AS OF APRIL 9, 2002 4.50% CONVERTIBLE SUBORDINATED NOTES DUE 2007 TABLE OF CONTENTS

PAGE ---- ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION........................1 SECTION 1.1 Definitions.........................................................1 SECTION 1.2 Compliance Certificates and Opinions...............................12 SECTION 1.3 Form of Documents Delivered to the Trustee.........................12 SECTION 1.4 Acts of Holders of Securities......................................13 SECTION 1.5 Notices, Etc., to Trustee and Company..............................15 SECTION 1.6 Notice to Holders of Securities; Waiver............................15 SECTION 1.7 Effect of Headings and Table of Contents...........................16 SECTION 1.8 Successors and Assigns.............................................16 SECTION 1.9 Separability Clause................................................16 SECTION 1.10 Benefits of Indenture..............................................16 SECTION 1.11 Governing Law......................................................16 SECTION 1.12 Legal Holidays.....................................................16 SECTION 1.13 Conflict with Trust Indenture Act..................................17 SECTION 1.14 Counterparts.......................................................17 ARTICLE TWO THE SECURITIES................................................................17 SECTION 2.1 Form Generally.....................................................17 SECTION 2.2 Title and Terms....................................................18 SECTION 2.3 Denominations......................................................18 SECTION 2.4 Execution, Authentication, Delivery and Dating.....................19 SECTION 2.5 Global Securities; Temporary Securities............................19 SECTION 2.6 Registration, Registration of Transfer and Exchange; Restrictions on Transfer...........................................21 SECTION 2.7 Mutilated, Destroyed, Lost or Stolen Securities....................23 SECTION 2.8 Payment of Interest; Interest Rights Preserved.....................24 SECTION 2.9 Persons Deemed Owners..............................................25 SECTION 2.10 Cancellation.......................................................25 SECTION 2.11 Computation of Interest............................................25

SECTION 2.12 CUSIP Numbers......................................................26 ARTICLE THREE SATISFACTION AND DISCHARGE..................................................26 SECTION 3.1 Satisfaction and Discharge of Indenture............................26 SECTION 3.2 Application of Trust Money.........................................27 ARTICLE FOUR REMEDIES ....................................................................28 SECTION 4.1 Events of Default..................................................28 SECTION 4.2 Acceleration of Maturity; Rescission and Annulment.................29 SECTION 4.3 Collection of Indebtedness and Suits for Enforcement by Trustee............................................................30 SECTION 4.4 Trustee May File Proofs of Claim...................................31 SECTION 4.5 Trustee May Enforce Claims without Possession of Securities........32 SECTION 4.6 Application of Money Collected.....................................32 SECTION 4.7 Limitation on Suits................................................32 SECTION 4.8 Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert........................................33 SECTION 4.9 Restoration of Rights and Remedies.................................33 SECTION 4.10 Rights and Remedies Cumulative.....................................33 SECTION 4.11 Delay or Omission Not Waiver.......................................34 SECTION 4.12 Control by Holders of Securities...................................34 SECTION 4.13 Waiver of Past Defaults............................................34 SECTION 4.14 Undertaking for Costs..............................................34 SECTION 4.15 Waiver of Stay, Usury or Extension Laws............................35 ARTICLE FIVE THE TRUSTEE..................................................................35 SECTION 5.1 Certain Duties and Responsibilities................................35 SECTION 5.2 Notice of Defaults.................................................36 SECTION 5.3 Certain Rights of Trustee..........................................36 SECTION 5.4 Not Responsible for Recitals or Issuance of Securities.............37 SECTION 5.5 May Hold Securities, Act as Trustee under Other Indentures.........37 SECTION 5.6 Money Held in Trust................................................38 SECTION 5.7 Compensation and Reimbursement.....................................38 SECTION 5.8 Corporate Trustee Required; Eligibility............................39 -ii- SECTION 5.9 Resignation and Removal; Appointment of Successor..................39 SECTION 5.10 Acceptance of Appointment by Successor.............................40 SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business........40 SECTION 5.12 Authenticating Agents..............................................41 SECTION 5.13 Disqualification; Conflicting Interests............................42 SECTION 5.14 Preferential Collection of Claims Against Company..................42 ARTICLE SIX CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE..........................42 SECTION 6.1 Company May Consolidate, Etc., Only on Certain Terms...............42 SECTION 6.2 Successor Substituted..............................................43 ARTICLE SEVEN SUPPLEMENTAL INDENTURES.....................................................43 SECTION 7.1 Supplemental Indentures without Consent of Holders of Securities.........................................................43 SECTION 7.2 Supplemental Indentures with Consent of Holders of Securities......44 SECTION 7.3 Execution of Supplemental Indentures...............................46 SECTION 7.4 Effect of Supplemental Indentures..................................46 SECTION 7.5 Reference in Securities to Supplemental Indentures.................46 SECTION 7.6 Notice of Supplemental Indentures..................................46 ARTICLE EIGHT COVENANTS...................................................................46 SECTION 8.1 Payment of Principal, Premium and Interest.........................46 SECTION 8.2 Maintenance of Offices or Agencies.................................47 SECTION 8.3 Money for Security Payments to Be Held in Trust....................47 SECTION 8.4 Existence..........................................................48 SECTION 8.5 Statement by Officers as to Default................................49 SECTION 8.6 Delivery of Certain Information....................................49 ARTICLE NINE REDEMPTION OF SECURITIES.....................................................49 SECTION 9.1 Right of Redemption................................................49 SECTION 9.2 Applicability of Article...........................................50 SECTION 9.3 Election to Redeem; Notice to Trustee..............................50 SECTION 9.4 Selection by Trustee of Securities to Be Redeemed..................50 -iii- SECTION 9.5 Notice of Redemption...............................................50 SECTION 9.6 Deposit of Redemption Price........................................51 SECTION 9.7 Securities Payable on Redemption Date..............................51 SECTION 9.8 Securities Redeemed in Part........................................52 SECTION 9.9 Conversion Arrangement on Call for Redemption......................52 ARTICLE TEN CONVERSION OF SECURITIES......................................................53 SECTION 10.1 Conversion Privilege and Conversion Rate...........................53 SECTION 10.2 Exercise of Conversion Privilege...................................53 SECTION 10.3 Fractions of Shares................................................55 SECTION 10.4 Adjustment of Conversion Rate......................................55 SECTION 10.5 Notice of Adjustments of Conversion Rate...........................60 SECTION 10.6 Notice of Certain Corporate Action.................................60 SECTION 10.7 Company to Reserve Common Stock....................................61 SECTION 10.8 Taxes on Conversions...............................................61 SECTION 10.9 Covenant as to Common Stock........................................62 SECTION 10.10 Cancellation of Converted Securities...............................62 SECTION 10.11 Provision in Case of Consolidation, Merger or Sale of Assets.......62 SECTION 10.12 Responsibility of Trustee for Conversion Provisions................63 ARTICLE ELEVEN SUBORDINATION OF SECURITIES................................................63 SECTION 11.1 Securities Subordinate to Senior Debt..............................63 SECTION 11.2 No Payments in Certain Circumstances; Payment Over of Proceeds Upon Dissolution, Etc..............................................64 SECTION 11.3 Trustee to Effectuate Subordination................................65 SECTION 11.4 No Waiver of Subordination Provisions..............................66 SECTION 11.5 Notice to Trustee..................................................66 SECTION 11.6 Reliance on Judicial Order or Certificate of Liquidating Agent.....67 SECTION 11.7 Trustee Not Fiduciary for Holders of Senior Debt...................67 SECTION 11.8 Reliance by Holders of Senior Debt on Subordination Provisions.....67 SECTION 11.9 Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights...................................................68 -iv-

SECTION 11.10 Article Applicable to Paying Agents................................68 SECTION 11.11 Certain Conversions and Repurchases Deemed Payment.................68 ARTICLE TWELVE REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER UPON A CHANGE IN CONTROL..................................................................69 SECTION 12.1 Right to Require Repurchase........................................69 SECTION 12.2 Conditions to the Company's Election to Pay the Repurchase Price in Common Stock..............................................70 SECTION 12.3 Notices; Method of Exercising Repurchase Right, Etc................70 ARTICLE THIRTEEN HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE...........73 SECTION 13.1 Company to Furnish Trustee Names and Addresses of Holders..........73 SECTION 13.2 Preservation of Information........................................73 SECTION 13.3 No Recourse Against Others.........................................74 SECTION 13.4 Reports by Trustee.................................................74 SECTION 13.5 Reports by Company.................................................74

-v- INDENTURE, dated as of April 9, 2002, between Skechers U.S.A., Inc., a corporation duly organized and existing under the laws of the State of Delaware, having its principal office at 228 Manhattan Beach Boulevard, Manhattan Beach, California 90266 (herein called the "COMPANY"), and Wells Fargo Bank, National Association, as Trustee hereunder (herein called the "TRUSTEE"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of its 4.50% Convertible Subordinated Notes due 2007 (herein called the "SECURITIES"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Securities, when the Securities are executed by the Company and authenticated and delivered hereunder, the valid obligations of the Company and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done. Further, all things necessary to duly authorize the issuance of shares of common stock of the Company issuable upon the conversion of the Securities, and to duly reserve for issuance the number of shares of Common Stock issuable upon such conversion, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1 DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States; and (c) the words "HEREIN," "HEREOF" and "HEREUNDER" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "ACT," when used with respect to any Holder of a Security, has the meaning specified in Section 1.4. "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 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. "AGGREGATE CURRENT MARKET PRICE" has the meaning specified in Section 10.4(e). "APPLICABLE PROCEDURES" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, to the extent applicable to such transaction and as in effect from time to time. "AUTHENTICATING AGENT" means any Person authorized pursuant to Section 5.12 to act on behalf of the Trustee to authenticate Securities. "AVERAGE SALES PRICE PER SHARE" means, with respect to the Common Stock of the Company, for any day, (1) the average of the high and low sales price per share regular way on a national securities exchange or, (2) if the Common Stock is not listed on a national securities exchange, the average of the high and low sales price per share regular way on The Nasdaq Stock Market, or (3) if the Common Stock is not quoted on The Nasdaq Stock Market or listed or admitted to trading on any national securities exchange, the average of the high and low sales prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. "BOARD OF DIRECTORS" means either the board of directors of the Company or any duly authorized committee of that board. "BOARD RESOLUTION" means a resolution duly adopted by the Board of Directors, a copy of which, certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, shall have been delivered to the Trustee. "BUSINESS DAY," when used with respect to any Place of Payment, Place of Conversion or any other place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in such Place of Payment, Place of Conversion or other place, as the case may be, are authorized or obligated by law or executive order to close; provided, however, that a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close shall not be a Business Day for purposes of Section 9.6 or Section 10.4. "CASH EQUIVALENTS" means (1) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities -2- of not more than six months from the date of acquisition, (2) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (3) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any financial institution meeting the qualifications specified in clause (2) above, (4) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings Services and in each case maturing within six months after the date of acquisition and (5) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1)-(4) of this definition. "CHANGE IN CONTROL" means the occurrence at any time, after the original issuance of the Securities, of any of the following events: (1) the acquisition by any Person (including any syndicated group that would be deemed to be a "person" under Section 13(d)(3) of the Exchange Act) of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of capital stock of the Company entitling such Person to exercise more than 50% of the total voting power of all shares of capital stock of the Company entitled to vote generally in the elections of directors, other than any such acquisition by the Company, any Subsidiary, or any employee benefit plan of the Company, Robert Greenberg or a Related Party; or (2) any Person shall succeed in having sufficient of its nominees (who are not supported by a majority of the then current Board of Directors of the Company) elected to the Board of Directors of the Company such that such nominees, when added to any existing directors remaining on the Board of Directors of the Company after such election who are Affiliates of or acting in concert with any such Person, shall constitute a majority of the Board of Directors of the Company; or (3) any consolidation or merger of the Company with or into any other Person, or any merger of another Person with or into the Company (other than (A) a merger (i) that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of the Company's capital stock and (ii) pursuant to which holders of Common Stock immediately prior to such transaction have, directly or indirectly, 50% or more of the total voting power of all shares of capital stock or other ownership interests entitled to vote generally in the election of directors of the continuing or surviving Person immediately after such transaction and (B) any merger that is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of common stock of the Company or another Person); or (4) any conveyance, transfer, sale, lease or other disposition of all or substantially all of the Company's assets to another Person; -3- provided, however, that a Change in Control shall not be deemed to have occurred if the Average Sales Price Per Share on any five Trading Days within (A) the period of 10 consecutive Trading Days ending immediately after the later of the date of the Change in Control or the date of the public announcement of the Change in Control (in the case of a Change in Control under clause (1) above but not clause (2) or (3) above) or (B) the period of 10 consecutive Trading Days ending immediately prior to the date of the Change in Control (in the case of a Change in Control under clause (2) or (3) above) shall, in either case, equal or exceed 105% of the Conversion Price of the Securities in effect on each such Trading Day. For the purposes of this definition, "beneficial owner," has the meaning attributed to it in Rules 13d-3 under the Exchange Act, whether or not applicable. For the purposes of this definition, "Related Party" means (1) any parent, spouse, sibling or descendent of (a) Robert Greenberg, (b) M. Susan Greenberg or (c) any of Robert Greenberg's children or grandchildren (collectively, "Immediate Family") or (2) any trust, corporation, partnership, estate or other entity of which the beneficiaries, stockholders, partners or owners holding a 75% or greater interest consist of Robert Greenberg and/or members of his Immediate Family; provided that, in the case of clause (2), any interest holder other than Robert Greenberg or any member of his Immediate Family shall not be deemed a Related Party. "CODE" has the meaning specified in Section 2.1. "COMBINED CASH AND TENDER AMOUNT" has the meaning specified in Section 10.4(e). "COMBINED TENDER AND CASH AMOUNT" has the meaning specified in Section 10.4(f). "COMMISSION" means the United States 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 instrument 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 the shares of the class designated as Class A common stock, par value $0.001 per share, of the Company at the date of this Indenture or as such stock may be reconstituted from time to time. Subject to the provisions of Section 10.11, shares issuable on conversion or repurchase of Securities shall include only shares of Common Stock or shares of any class or classes of common stock resulting from any reclassification or reclassifications thereof; provided, however, that if at any time there shall be more than one such resulting class, the shares so issuable on conversion of Securities shall include shares of all such classes, and the shares of each such class then so issuable shall be substantially in the proportion that 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 Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "COMPANY NOTICE" has the meaning specified in Section 12.3(a). -4- "COMPANY REQUEST" or "COMPANY ORDER" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its President or a Vice President, and by its principal financial officer, Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "COMPLETION DATE" has the meaning specified in Section 10.4(f). "CONSTITUENT PERSON" has the meaning specified in Section 10.11. "CONVERSION AGENT" means any Person authorized by the Company to convert Securities in accordance with Article Ten. The Company has initially appointed the Trustee as its Conversion Agent. "CONVERSION PRICE" means the amount equal to U.S. $1,000 divided by the Conversion Rate. "CONVERSION RATE" has the meaning specified in Section 10.1. "CONVERSION SHARES" has the meaning specified in Section 10.4(m). "CORPORATE TRUST OFFICE" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered (which at the date of this Indenture is located at Wells Fargo Corporate Trust Services, E2818-176 MAC, 707 Wilshire Blvd., 17th Floor, Los Angeles, California 90017, Attn: Robert Schneider (Skechers U.S.A., Inc.)). "CORPORATION" means a corporation, company, association, joint-stock company or business trust. "CREDIT FACILITY" means that certain Amended and Restated Loan and Security Agreement, dated as of September 4, 1998, as amended, supplemented or restated from time to time, between the Company and The CIT Group/Commercial Services, Inc., as successor agent and lender. "DEFAULTED INTEREST" has the meaning specified in Section 2.8. "DEPOSITARY" means, with respect to any Registered Securities, a clearing agency that is registered as such under the Exchange Act and is designated by the Company to act as Depositary for such Registered Securities (or any successor securities clearing agency so registered). "DESIGNATED SENIOR DEBT" means (i) any indebtedness outstanding under the Credit Facility, and (2) the Company's obligations under any particular Senior Debt in which the instrument creating or evidencing the same, or the assumption or guarantee thereof, or related agreements or documents to which the Company is a party, expressly provides that such indebtedness shall be "Designated Senior Debt" for purposes of this Indenture (provided that -5- such instrument, agreement or other document may place limitations and conditions on the right of such Senior Debt to exercise the rights of Designated Senior Debt). "DISTRIBUTION DATE" has the meaning specified in Section 10.4(m). "DOLLAR" or "U.S.$" means a dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debts. "DTC" means The Depository Trust Company, a New York corporation. "EVENT OF DEFAULT" has the meaning specified in Section 4.1. "EXCHANGE ACT" means the United States Securities Exchange Act of 1934 (or any successor statute), as amended from time to time. "GLOBAL SECURITY" means a Registered Security that is registered in the Security Register in the name of a Depositary or a nominee thereof. "HOLDER" means the Person in whose name the Security is registered in the Security Register. "INDENTURE" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. "INITIAL PURCHASER" means CIBC World Markets Corp. "INTEREST PAYMENT DATE" means the Stated Maturity of an installment of interest on the Securities. "LIQUIDATED DAMAGES" has the meaning specified in the Registration Rights Agreement. "MATURITY," when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption, exercise of the repurchase right set forth in Article Twelve or otherwise. "MEMBER" means any member of, or participant in, the Depositary. "NON-ELECTING SHARE" has the meaning specified in Section 10.11. "NOTICE OF DEFAULT" has the meaning specified in Section 4.1. "OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the President or a Vice President and -6- by the principal financial officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel for or employed by the Company and who shall be acceptable to the Trustee. "OUTSTANDING," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (1) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (2) Securities for the payment or redemption of which money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (if other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities (provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made); and (3) Securities that have been paid pursuant to Section 2.7 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities are present at a meeting of Holders of Securities for quorum purposes or have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such determination as to the presence of a quorum or upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. "PAYING AGENT" means any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company and, except as otherwise specifically set forth herein, such term shall include the Company if it shall act as its own Paying Agent. The Company has initially appointed the Trustee as its Paying Agent. "PERSON" means any individual, corporation, limited liability company, partnership, joint venture, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. -7- "PLACE OF CONVERSION" has the meaning specified in Section 2.2. "PLACE OF PAYMENT" has the meaning specified in Section 2.2. "PREDECESSOR SECURITY" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 2.7 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "PURCHASE AGREEMENT" means the Purchase Agreement, dated as of April 4, 2002, between the Company and the Initial Purchaser, as such agreement may be amended from time to time. "PURCHASED SHARES" has the meaning specified in Section 10.4(f). "PURCHASERS" has the meaning specified in Section 9.9. "RECORD DATE" means any Regular Record Date or Special Record Date. "RECORD DATE PERIOD" means the period from the close of business of any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date. "REDEMPTION DATE," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "REDEMPTION PRICE," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "REGISTERED SECURITIES" has the meaning specified in Section 2.1. "REGISTRABLE SECURITIES" has the meaning specified in the Registration Rights Agreement. "REGISTRATION DEFAULT" has the meaning specified in the Registration Rights Agreement. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated the date hereof, by and among the Company and the Initial Purchaser. "REGULAR RECORD DATE" for interest payable in respect of any Registered Security on any Interest Payment Date means the April 1 and the October 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "REPRESENTATIVE" means (1) the indenture trustee or other trustee, agent or representative for any Designated Senior Debt or (2) with respect to Designated Senior Debt that does not have any such trustee, agent or other representative, (A) in the case of such Designated -8- Senior Debt issued pursuant to an agreement providing for voting arrangements as among the holders or owners of such Designated Senior Debt, any holder or owner of such Designated Senior Debt acting with the consent of the required Persons necessary to bind such holders or owners of such Designated Senior Debt and (B) in the case of all other such Designated Senior Debt, the holder or owner of such Designated Senior Debt. "REPURCHASE DATE" has the meaning specified in Section 12.1. "REPURCHASE PRICE" has the meaning specified in Section 12.1. "RESPONSIBLE OFFICER," when used with respect to the Trustee, means any officer within the Corporate Trust Office, including without limitation any vice president, assistant vice president, assistant treasurer, corporate trust officer or other employee of the Trustee customarily performing functions similar to those performed by any of the above designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge and familiarity with the particular subject. "RESTRICTED GLOBAL SECURITY" has the meaning specified in Section 2.1. "RESTRICTED SECURITIES LEGEND" means, collectively, the legends substantially in the forms of the legends required in the form of Security attached hereto as Exhibit A to be placed upon each Security. "RIGHTS PLAN" has the meaning specified in Section 10.4(d). "RULE 144A" means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time. "RULE 144A INFORMATION" has the meaning specified in Section 8.6. "SECURITIES" has the meaning ascribed to it in the first paragraph under the caption "Recitals of the Company." "SECURITIES ACT" means the United States Securities Act of 1933 (or any successor statute), as amended from time to time. "SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective meanings specified in Section 2.6. "SENIOR DEBT" means the principal of (and premium, if any) and interest (including all interest accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowable as a claim in any such proceeding) on, and rent payable on or in connection with, and all fees, costs, claims, expenses and other amounts payable in connection with, the following, whether absolute or contingent, secured or unsecured, due or to become due, outstanding on the date of this Indenture or thereafter created, incurred or assumed: (1) all the Company's indebtedness evidenced by a credit or loan agreement, note, bond, debenture, or other similar instrument whether or not the recourse of the lender is to all of the Company's assets or only to a portion, (2) all of the -9- Company's indebtedness, obligations and other liabilities, contingent or otherwise, for borrowed money, including, without limitation, overdrafts, foreign exchange contracts, currency exchange agreements, interest rate protection agreements and any loans or advances from banks, whether or not evidenced by notes or similar instruments, or bonds, debentures, notes or similar instruments, whether or not the recourse of the lender is to all of the Company's assets or only to a portion thereof, (3) all of the Company's obligations as lessee under leases required to be capitalized on the balance sheet of the lessee under generally accepted accounting principles, (4) all of the Company's obligations as lessee under leases for facilities, equipment or other assets entered into for financing purposes, whether or not capitalized, (5) all of the Company's obligations and other liabilities, contingent or otherwise, under any lease or related document, including a purchase agreement, in connection with the lease of real property or improvements, or any personal property included as part of any such lease, which provides that the Company is contractually obligated to purchase or cause a third party to purchase the leased property and thereby guarantee a residual value of leased property to the lessor and all of the Company's obligations under such lease or related document to purchase or cause a third party to purchase the leased property, whether or not such lease transaction is characterized as an operating lease or capitalized lease in accordance with generally accepted accounting principles, (6) all of the Company's obligations under interest rate and currency swaps, caps, floors, collars, hedge agreements, forward contracts, or similar agreements or arrangements, (7) all of the Company's obligations with respect to letters of credit, bank guarantees, bankers' acceptances and similar facilities, including related reimbursement obligations, (8) all of the Company's obligations issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable and accrued liabilities arising in the ordinary course of business), (9) all of the Company's obligations of the type referred to in clauses (1) through (8) above of another Person and all dividends of another Person, the payment of which, in either case, the Company has assumed or guaranteed or for which the Company is responsible or liable, directly or indirectly, jointly or severally, as obligor, guarantor or otherwise or which is secured by a lien on the Company's property and (10) renewals, extensions, modifications, replacements, restatements and refundings of, or any indebtedness or obligation issued in exchange for, any such indebtedness or obligation described in clauses (1) through (9) of this definition; provided, however, that Senior Debt shall not include the Securities, any liability for federal, state, local or other taxes owed or owing by the Company or any indebtedness or obligation if the terms of such indebtedness or obligation (or the terms of the instrument under which such indebtedness or obligation is issued) expressly provides that such indebtedness or obligation is not superior in right of payment to the Securities; and provided, further, that Senior Debt shall not include accounts payable or other accrued liabilities or obligations incurred in the ordinary course of business in connection with the obtaining of materials or services and any indebtedness or obligation that the Company may owe to any direct or indirect Subsidiary. "SHELF REGISTRATION STATEMENT" has the meaning specified in the Registration Rights Agreement. "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the date hereof. -10- "SPECIAL RECORD DATE" for the payment of any Defaulted Interest means a date fixed by the Company pursuant to Section 2.8. "STATED MATURITY," when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable. "SUBSIDIARY" means a corporation, or limited liability company, more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock or other similar interests in the corporation that ordinarily has or have voting power for the election of directors or Persons performing similar functions, whether at all times or only so long as no senior class of stock or other interests has or have such voting power by reason of any contingency. "SUCCESSOR SECURITY" of any particular Security means every Security issued after, and evidencing all or a portion of the same debt as that evidenced by, such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 2.7 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "TRADING DAYS" means (1) if the Common Stock is listed or admitted for trading on any national securities exchange, days on which such national securities exchange is open for business; (2) if the Common Stock is quoted on The Nasdaq Stock Market or any other system of automated dissemination of quotations of securities prices, days on which trades may be effected through such system; or (3) if the Common Stock is not listed or admitted for trading on any national securities exchange or quoted on The Nasdaq Stock Market or any other system of automated dissemination of quotation of securities prices, days on which the Common Stock is traded regular way in the over-the-counter market and for which a closing bid and a closing asked price for the Common Stock are available. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "TRUSTEE" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "UNITED STATES" means the United States of America (including the several States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (its "possessions" including Puerto Rico, the United States Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands). "VICE PRESIDENT," when used with respect to the Company, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." -11- SECTION 1.2 COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and, if required by the Trust Indenture Act, an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such individual, 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 (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with; provided, however, with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 1.3 FORM OF DOCUMENTS DELIVERED TO THE TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or any other Person stating that the information with respect to such factual matters is in the possession of the Company or such other Person, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. -12- Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 1.4 ACTS OF HOLDERS OF SECURITIES. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given or taken by Holders of Securities may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent or proxy duly appointed in writing by such Holders. Such action shall become effective when such instrument or instruments is delivered to the Trustee and, where it is hereby expressly required, to the Company. The Trustee shall promptly deliver to the Company copies of all such instruments delivered to the Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders of Securities signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to Section 5.1) conclusive in favor of the Trustee and the Company if made in the manner provided in this Section 1.4. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. (c) The principal amount and serial number of any Registered Security held by any Person, and the date of his holding the same, shall be proved by the Security Register. (d) The fact and date of execution of any such instrument or writing and the authority of the Person executing the same may also be proved in any other manner that the Trustee deems sufficient; and the Trustee may in any instance require further proof with respect to any of the matters referred to in this Section 1.4. (e) The Company may set any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted by this Indenture to be given or taken by Holders. Promptly and in any case not later than ten days after setting a record date, the Company shall notify the Trustee and the Holders of such record date. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the thirtieth day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 13.1) prior to such first solicitation or vote, as the case may be. With regard to any record date, the Holders on such date (or their duly appointed agents or proxies), and only such Persons, shall be entitled to give or take, or vote on, the relevant action, whether or not such Holders remain Holders after such record date. -13- Notwithstanding the foregoing, the Company shall not set a record date for, and the provisions of this paragraph shall not apply with respect to, any notice, declaration or direction referred to in the next paragraph. Upon receipt by the Trustee from any Holder of (1) any notice of default or breach referred to in Section 4.1(d), if such default or breach has occurred and is continuing and the Trustee shall not have given such a notice to the Company, (2) any declaration of acceleration referred to in Section 4.2, if an Event of Default has occurred and is continuing and the Trustee shall not have given such a declaration to the Company, or (3) any direction referred to in Section 4.12, if the Trustee shall not have taken the action specified in such direction, then, with respect to clauses (2) and (3), a record date shall automatically and without any action by the Company or the Trustee be set for determining the Holders entitled to join in such declaration or direction, which record date shall be the close of business on the tenth day (or, if such day is not a Business Day, the next succeeding Business Day) following the day on which the Trustee receives such declaration or direction, and, with respect to clause (1), the Trustee may set any day as a record date for the purpose of determining the Holders entitled to join in such notice of default. Promptly after such receipt by the Trustee of any such declaration or direction referred to in clause (2) or (3), and promptly after setting any record date with respect to clause (1), and as soon as practicable thereafter, the Trustee shall notify the Company and the Holders of any such record date so fixed. The Holders on such record date (or their duly appointed agents or proxies), and only such Persons, shall be entitled to join in such notice, declaration or direction, whether or not such Holders remain Holders after such record date; provided, however, that, unless such notice, declaration or direction shall have become effective by virtue of Holders of the requisite principal amount of Securities on such record date (or their duly appointed agents or proxies) having joined therein on or prior to the ninetieth day after such record date, such notice, declaration or direction shall automatically and without any action by any Person be cancelled and of no further effect. Nothing in this paragraph shall be construed to prevent a Holder (or a duly appointed agent or proxy thereof) from giving, before or after the expiration of such 90-day period, a notice, declaration or direction contrary to or different from, or, after the expiration of such period, identical to, the notice, declaration or direction to which such record date relates, in which event a new record date in respect thereof shall be set pursuant to this paragraph. In addition, nothing in this paragraph shall be construed to render ineffective any notice, declaration or direction of the type referred to in this paragraph given at any time to the Trustee and the Company by Holders (or their duly appointed agents or proxies) of the requisite principal amount of Securities on the date such notice, declaration or direction is so given. (f) Except as provided in Sections 4.2 and 4.13, any request, demand, authorization, direction, notice, consent, election, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. -14- SECTION 1.5 NOTICES, ETC., TO TRUSTEE AND COMPANY. Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of Holders of Securities or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder of Securities or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee and received at the Corporate Trust Office, Attention: Corporate Trust Department, and shall be deemed given when received, (b) the Company by the Trustee or by any Holder of Securities shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing, mailed, first-class postage prepaid, or telecopied and confirmed by mail, first-class postage prepaid, or delivered by hand or overnight courier, addressed to the Company at 228 Manhattan Beach Boulevard, Manhattan Beach, California 90266, Attention: Philip Paccione (telecopy no.: (310) 798-7961) or at any other address previously furnished in writing to the Trustee by the Company, and shall be deemed given when received. Any request, demand, authorization, direction, notice, consent, election or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication. SECTION 1.6 NOTICE TO HOLDERS OF SECURITIES; WAIVER. Except as otherwise expressly provided herein, where this Indenture provides for notice to Holders of Securities of any event, such notice shall be sufficiently given to Holders if in writing and mailed, first-class postage prepaid, to each Holder of a Security affected by such event, at the address of such Holder as it appears in the Security Register, not earlier than the earliest date and not later than the latest date prescribed for the giving of such notice. Neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder of a Registered Security shall affect the sufficiency of such notice with respect to other Holders of Registered Securities. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification to Holders of Registered Securities as shall be made with the approval of the Trustee, which approval shall not be unreasonably withheld or delayed, shall constitute a sufficient notification to such Holders for every purpose hereunder. Such notice shall be deemed to have been given when such notice is mailed. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders of Securities shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. -15- SECTION 1.7 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.8 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the Company and by the Trustee shall bind its successors and assigns, whether so expressed or not. SECTION 1.9 SEPARABILITY CLAUSE. In case any provision in this Indenture or the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1.10 BENEFITS OF INDENTURE. Except as provided in the next sentence, nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns hereunder and the Holders of Securities, any benefit or legal or equitable right, remedy or claim under this Indenture. The provisions of Article Eleven are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Debt. SECTION 1.11 GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE UNITED STATES OF AMERICA, INCLUDING, WITHOUT LIMITATION, THE NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401. SECTION 1.12 LEGAL HOLIDAYS. In any case where any Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity of any Security or the last day on which a Holder of a Security has a right to convert his Security shall not be a Business Day at a Place of Payment or Place of Conversion, as the case may be, then (notwithstanding any other provision of this Indenture or of the Securities) payment of principal of, premium, if any, or interest on, or the payment of the Repurchase Price (whether the same is payable in cash or in shares of Common Stock) with respect to, or delivery for conversion of, such Security need not be made at such Place of Payment or Place of Conversion, as the case may be, on or by such day, but may be made on or by the next succeeding Business Day at such Place of Payment or Place of Conversion, as the case may be, with the same force and effect as if made on the Interest Payment Date, Redemption Date or Repurchase Date, or at the Stated Maturity or by such last day for conversion; provided, however, that in the case that payment is made on such succeeding Business Day, no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date, Repurchase Date, Stated Maturity or last day for conversion, as the case may be. -16- SECTION 1.13 CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Until such time as this Indenture shall be qualified under the Trust Indenture Act, this Indenture, the Company and the Trustee shall be deemed for all purposes hereof to be subject to and governed by the Trust Indenture Act to the same extent as would be the case if this Indenture were so qualified on the date hereof. SECTION 1.14 COUNTERPARTS. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. ARTICLE TWO THE SECURITIES SECTION 2.1 FORM GENERALLY. The Securities and the Trustee's Certificate of Authentication shall be in substantially the form set forth in Exhibit A hereto, which Exhibit is a part of this Indenture, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or the Internal Revenue Code of l986, as amended, and regulations thereunder (the "CODE"), or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution thereof. All Securities shall be issued in registered form, as opposed to bearer form, and shall sometimes be referred to as the "REGISTERED SECURITIES." The Securities shall be printed, lithographed, typewritten or engraved or produced by any combination of these methods on steel engraved borders, if so required by any securities exchange upon which the Securities may be listed, or may be produced in any other manner permitted by the rules of any such securities exchange, or, if the Securities are not listed on a securities exchange, in any other manner approved by the Company, all as determined by the officers executing such Securities, as evidenced by their execution thereof. Upon their original issuance, Securities shall be issued in the form of one or more Global Securities without interest coupons and shall be registered in the name of DTC, as Depositary, or its nominee and deposited with the Trustee, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Such Global Security, together with its Successor -17- Securities that are Global Securities, are collectively herein called the "RESTRICTED GLOBAL SECURITY." SECTION 2.2 TITLE AND TERMS. The aggregate principal amount of Securities that may be authenticated and delivered from time to time under this Indenture is limited to U.S. $110,000,000 (or such greater amount necessary to reflect exercise of the Initial Purchaser's over-allotment option in compliance with the Purchase Agreement, but not in excess of U.S. $125,000,000), except for Securities authenticated and delivered in exchange for, or in lieu of, other Securities pursuant to Section 2.5, 2.6, 2.7, 7.5, 9.8, 10.2 or 12.3(e). The Securities shall be known and designated as the "4.50% Convertible Subordinated Notes due 2007" of the Company. Their Stated Maturity shall be April 15, 2007 and they shall bear interest on their principal amount from April 9, 2002, payable semiannually in arrears on April 15 and October 15 in each year, commencing October 15, 2002, at the rate of 4.50% per annum until the principal thereof is due and at the rate then in effect on any overdue principal and, to the extent permitted by law, on any overdue interest; provided, however, that payments shall only be made on Business Days as provided in Section 1.12. The principal of, premium, if any, and interest on the Securities shall be payable as provided in the form of Securities attached hereto as Exhibit A, and the Repurchase Price, whether payable in cash or in shares of Common Stock, shall be payable at such places as are identified in the Company Notice given pursuant to Section 12.3 (any city in which any Paying Agent is located being herein called a "PLACE OF PAYMENT"). The Registrable Securities are entitled to the benefits of a Registration Rights Agreement as provided by the form of Securities attached hereto as Exhibit A. The Securities are entitled to the payment of Liquidated Damages as provided in the Registration Rights Agreement. The Securities shall be redeemable at the option of the Company, as provided in Article Nine and in the form of Securities attached hereto as Exhibit A. The Securities shall be convertible as provided in Article Ten (any city in which any Conversion Agent is located being herein called a "PLACE OF CONVERSION"). The Securities shall be subordinated in right of payment to Senior Debt of the Company as provided in Article Eleven. The Securities shall be subject to repurchase by the Company at the option of the Holders as provided in Article Twelve. SECTION 2.3 DENOMINATIONS. The Securities shall be issuable only in registered form, without coupons, in denominations of U.S.$1,000 and integral multiples thereof. -18- SECTION 2.4 EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its President, one of its Vice Presidents, its Chief Financial Officer, its Treasurer or its Controller and attested by its Secretary or one of its Assistant Secretaries. Any such signature may be manual or facsimile. Securities bearing the manual or facsimile signature of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee or to its order for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with such Company Order shall authenticate and make available for delivery such Securities as provided in this Indenture and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. SECTION 2.5 GLOBAL SECURITIES; TEMPORARY SECURITIES. (a) GLOBAL SECURITIES (1) Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. (2) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (A) such Depositary (i) has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or (ii) has ceased to be a clearing agency registered as such under the Exchange Act or announces an intention permanently to cease business or does in fact do so or (B) there shall have occurred and be continuing an Event of Default with respect to such Global Security. (3) If any Global Security is to be exchanged for other Securities or cancelled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the -19- Trustee, as Security Registrar, for exchange or cancellation, as provided in this Article Two. If any Global Security is to be exchanged for other Securities or cancelled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, in each case, as provided in Section 2.6, then either (A) such Global Security shall be so surrendered for exchange or cancellation, as provided in this Article Two, or (B) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or cancelled or equal to the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Trustee, as Security Registrar, whereupon the Trustee, in accordance with the Applicable Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security, the Trustee shall, subject to Section 2.6(c) and as otherwise provided in this Article Two, authenticate and make available for delivery any Securities issuable in exchange for such Global Security (or any portion thereof) to or upon the order of, and registered in such names as may be directed by, the Depositary or its authorized representative. Upon the request of the Trustee in connection with the occurrence of any of the events specified in the preceding paragraph, the Company shall promptly make available to the Trustee a reasonable supply of Securities that are not in the form of Global Securities. The Trustee shall be entitled to rely upon any order, direction or request of the Depositary or its authorized representative which is given or made pursuant to this Article Two. (4) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Article Two or otherwise, shall be authenticated and delivered in the form of, and shall be, a registered Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof, in which case such Registered Security shall be authenticated and delivered in definitive, fully registered form, without interest coupons. (5) The Depositary or its nominee, as registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under the Indenture and the Registered Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Procedures. Accordingly, any such owner's beneficial interest in a Global Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Agent Members, and such owners of beneficial interests in a Global Security shall not be considered the owners or holders thereof. (b) TEMPORARY SECURITIES Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and make available for delivery, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Registered Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and -20- other variations as the officers executing such Registered Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Company shall cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Company designated pursuant to Section 8.2, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE; 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 8.2 being herein sometimes collectively referred to as the "SECURITY REGISTER") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities. The Trustee is hereby appointed "SECURITY REGISTRAR" for the purpose of registering Registered Securities and transfers and exchanges of Registered Securities as herein provided. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 8.2 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture. At the option of the Holder, and subject to the other provisions of this Section 2.6, Securities may be exchanged for other Securities of any authorized denomination and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at any such office or agency. Whenever any Securities are so surrendered for exchange, and subject to the other provisions of this Section 2.6, the Company shall execute, and the Trustee shall authenticate and make available for delivery, the Securities the Holder making the exchange is entitled to receive. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, subject to the other provisions of this Section 2.6, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. -21- No service charge shall be made for any registration of transfer or exchange of Securities except as provided in Section 2.7, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 2.5, 7.5, 9.8, 10.2 or 12.3(e) (other than where the shares of Common Stock are to be issued or delivered in a name other than that of the Holder of the Security) not involving any transfer and other than any stamp and other duties, if any, that may be imposed in connection with any such transfer or exchange by the United States or any political subdivision thereof or therein, which shall be paid by the Company. In the event of a redemption of the Securities, the Company shall not be required (1) to register the transfer of or exchange Securities for a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities called for such redemption or (2) to register the transfer of or exchange any Security, or portion thereof, called for redemption. (b) RESTRICTED SECURITIES LEGENDS. All Securities shall bear the applicable Restricted Securities Legend subject to the following: (1) subject to the following clauses of this Section 2.6(b), a Security or any portion thereof that is exchanged, upon transfer or otherwise, for a Global Security or any portion thereof shall bear the Restricted Securities Legend borne by such Global Security while represented thereby; (2) subject to the following clauses of this Section 2.6(b), a new Security that is not a Global Security and is issued in exchange for another Security (including a Global Security) or any portion thereof, upon transfer or otherwise, shall bear the Restricted Securities Legend borne by such other Security; (3) any Securities that are sold or otherwise disposed of pursuant to an effective registration statement under the Securities Act (including the Shelf Registration Statement), together with their Successor Securities, shall not bear a Restricted Securities Legend; the Company shall inform the Trustee in writing of the effective date of any such registration statement registering the Securities under the Securities Act and shall notify the Trustee at any time when prospectuses may not be delivered with respect to Securities to be sold pursuant to such registration statement. The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned registration statement; (4) at any time after the Securities may be freely transferred without registration under the Securities Act or without being subject to transfer restrictions pursuant to the Securities Act, a new Security that does not bear a Restricted Securities Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof that bears such a legend if the Trustee has received a certificate regarding the unrestricted nature of the Securities, satisfactory to the Trustee and duly executed by the Holder of such legended Security or his attorney duly authorized in writing, and after such date and receipt of such certificate, the Trustee shall -22- authenticate and make available for delivery such a new Security in exchange for or in lieu of such other Security as provided in this Article Two; (5) a new Security that does not bear a Restricted Securities Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof that bears such a legend if, in the Company's judgment, placing such a legend upon such new Security is not necessary to ensure compliance with the registration requirements of the Securities Act, and the Trustee, at the direction of the Company, shall authenticate and make available for delivery such a new Security as provided in this Article Two; and (6) notwithstanding the foregoing provisions of this Section 2.6(b), a Successor Security of a Security that does not bear a particular form of Restricted Securities Legend shall not bear such form of legend unless the Company has reasonable cause to believe that such Successor Security is a "restricted security" within the meaning of Rule 144, in which case the Trustee, at the direction of the Company, shall authenticate and make available for delivery a new Security bearing a Restricted Securities Legend in exchange for such Successor Security as provided in this Article Two. (c) Neither the Trustee, the Paying Agent nor any of their agents shall (1) have any duty to monitor compliance with or with respect to any federal or state or other securities or tax laws or (2) have any duty to obtain documentation on any transfers or exchanges other than as specifically required hereunder. SECTION 2.7 MUTILATED, DESTROYED, LOST OR STOLEN SECURITIES. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there be delivered to the Company and to the Trustee: (a) evidence to their satisfaction of the destruction, loss or theft of any Security, and (b) such security or indemnity as may be satisfactory to the Company and the Trustee to save each of them and any agent of either of them harmless, then, in the absence of actual notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and make available for delivery, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion, but subject to any conversion -23- rights, may, instead of issuing a new Security, pay such Security, upon satisfaction of the conditions set forth in the preceding paragraph. Upon the issuance of any new Security under this Section 2.7, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto (other than any stamp and other duties, if any, that may be imposed in connection therewith by the United States or any political subdivision thereof or therein, which shall be paid by the Company) and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section 2.7 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and such new Security shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section 2.7 are exclusive and shall preclude (to the extent lawful) all other rights and remedies of any Holder with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.8 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date ("DEFAULTED INTEREST") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) 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 Security, the date of the proposed payment and the Special Record Date, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit 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 provided in this clause. The Special Record Date for the payment of such Defaulted Interest shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 15 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee, in the name and at the expense of the Company, shall cause notice of the proposed payment of such -24- 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 Security Register, not less than 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 Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, 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. Subject to the foregoing provisions of this Section 2.8 and Section 2.6, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security. Interest on any Security that is converted in accordance with Section 10.2 during a Record Date Period shall be payable in accordance with the provisions of Section 10.2. SECTION 2.9 PERSONS DEEMED OWNERS. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of, premium, if any, and (subject to Section 2.8) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 2.10 CANCELLATION. All Securities surrendered for payment, redemption, repurchase, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All Securities so delivered to the Trustee shall be cancelled promptly by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section 2.10. The Trustee shall dispose of all cancelled Securities in accordance with applicable law and its customary practices in effect from time to time. SECTION 2.11 COMPUTATION OF INTEREST. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. -25- SECTION 2.12 CUSIP NUMBERS. The Company in issuing Securities may use "CUSIP" numbers (if then generally in use) in addition to serial numbers; the Trustee shall use such CUSIP numbers in addition to serial numbers in notices of redemption and repurchase as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such CUSIP numbers either as printed on the Securities or as contained in any notice of a redemption or repurchase and that reliance may be placed only on the serial or other identification numbers printed on the Securities, and any such redemption or repurchase shall not be affected by any defect in or omission of such CUSIP numbers. The Company shall promptly notify the Trustee in writing of any change in any such CUSIP number. ARTICLE THREE SATISFACTION AND DISCHARGE SECTION 3.1 SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of conversion, or registration of transfer or exchange, or replacement of Securities herein expressly provided for and any right to receive Liquidated Damages as provided in the form of Securities attached hereto as Exhibit A and the Company's obligations to the Trustee pursuant to Section 5.7), and the Trustee, at the expense of the Company, shall execute proper instruments in form and substance satisfactory to the Trustee acknowledging satisfaction and discharge of this Indenture, when (a) either (1) all Securities theretofore authenticated and delivered (other than (A) Securities that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.7 and (B) Securities for whose payment money has theretofore been irrevocably deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 8.3) have been delivered to the Trustee for cancellation; or (2) all such Securities not theretofore delivered to the Trustee or its agent for cancellation (other than Securities referred to in clauses (A) and (B) of clause (a)(1) above) (i) have become due and payable, or (ii) will have become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, -26- and the Company, in the case of clause (i), (ii) or (iii) above, has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds (immediately available to the Holders in the case of clause (i) above) an amount sufficient to pay and discharge the entire principal, premium, if any, interest and Liquidated Damages, if any, on such Securities not theretofore delivered to the Trustee for cancellation, to the date of such deposit (in the case of Securities that have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 5.7, the obligations of the Company to any Authenticating Agent under Section 5.12, the obligation of the Company to pay Liquidated Damages, if money shall have been deposited with the Trustee pursuant to clause (a)(2) of this Section 3.1, the obligations of the Trustee under Section 3.2 and the last paragraph of Section 8.3, and the obligations of the Company and the Trustee under Section 2.6 and Article Ten shall survive. Funds held in trust pursuant to this Section 3.1 are not subject to the provisions of Article Eleven. In the event that the Company is required to pay Liquidated Damages to the Holders pursuant to the Registration Rights Agreement, the Company will provide written notice ("Liquidated Damages Notice") to the Trustee of its obligation to pay Liquidated Damages no later than 15 days prior to the proposed payment date for the Liquidated Damages, and the Liquidated Damages Notice shall set forth the amount of Liquidated Damages 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 to determine the Liquidated Damages or with respect to the nature, extent or calculation of the amount of Liquidated Damages when made, or with respect to the method employed in such calculation of the Liquidated Damages. Unless the Trustee receives a Liquidated Damages Notice from the Company within the time period specified above or otherwise from a Holder of the Securities, the Trustee is entitled to assume that no Liquidated Damages are due and payable. SECTION 3.2 APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of Section 8.3, all money deposited with the Trustee pursuant to Section 3.1 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent), to the Persons entitled thereto, of the principal, premium, if any, Liquidated Damages, if any, and interest for whose payment such money has been deposited with the Trustee. -27- All moneys deposited with the Trustee pursuant to Section 3.1 (and held by it or any Paying Agent) for the payment of Securities subsequently converted shall be returned to the Company upon Company Request. ARTICLE FOUR REMEDIES SECTION 4.1 EVENTS OF DEFAULT. "EVENT OF DEFAULT," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Eleven or 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): (a) default in the payment of the principal of or premium, if any, on any Security at its Maturity, whether or not the such payment is prohibited by the subordination provisions of this Indenture; or (b) default in the payment of any interest if any (including Liquidated Damages, if any), upon any Security when it becomes due and payable, and continuance of such default for a period of 30 days, whether or not such payment is prohibited by the subordination provisions of this Indenture; or (c) failure by the Company to give the Company Notice in accordance with Section 12.3, whether or not such notice is prohibited by the subordination provisions of this Indenture; or (d) default in the performance, or breach, of any covenant of the Company in this Indenture (other than a covenant a default in the performance or breach of which is specifically dealt with elsewhere in this Section 4.1), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "NOTICE OF DEFAULT" hereunder; or (e) default in the payment by the end of any applicable grace period, if any, after maturity of the principal of any indebtedness under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or any Significant Subsidiary with a principal amount then outstanding in excess of U.S. $10,000,000, whether such indebtedness now exists or shall hereafter be created, if the indebtedness is not discharged, or if such indebtedness has been accelerated, such acceleration is not rescinded or annulled, within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default and -28- requiring the Company to cause such indebtedness to be discharged or such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (f) the entry by a court having jurisdiction in the premises of (1) a decree or order for relief in respect of the Company or any Significant Subsidiary in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (2) a decree or order adjudging the Company or any Significant Subsidiary a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any Significant Subsidiary under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Significant Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (g) the commencement by the Company or any Significant Subsidiary of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company or any Significant Subsidiary in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or similar relief under any applicable federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Significant Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company or any Significant Subsidiary in furtherance of any such action; or (h) failure by the Company to deliver Conversion Shares, together with cash in lieu of fractional shares, when such Conversion Shares or cash in lieu of fractional shares are required to be delivered upon conversion of a security, and such failure continues for 10 days after such required delivery date. SECTION 4.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default (other than an Event of Default specified in Section 4.1(f) or 4.1(g)) occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal of all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any such declaration, such principal and all accrued interest thereon shall become immediately due and payable. If an Event of Default specified in Section 4.1(f) or 4.1(g) occurs, the principal of, and accrued interest on, all the Securities shall ipso facto become immediately due and payable without any declaration or other Act of the Holder or any act on the part of the Trustee. -29- At any time after such declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article Four provided, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (a) the Company has paid or irrevocably deposited with the Trustee a sum sufficient to pay (1) all overdue interest and Liquidated Damages, if any, on all Securities, (2) the principal of and premium, if any, on any Securities that have become due otherwise than by such declaration of acceleration and any interest thereon at the rate borne by the Securities, (3) to the extent permitted by applicable law, interest upon overdue interest at the rate then in effect, and (4) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel; and (b) all Events of Default, other than the non-payment of the principal of, and any premium and interest on, Securities that have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 4.13. No rescission or annulment referred to above shall affect any subsequent default or impair any right consequent thereon. SECTION 4.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company covenants that if: (a) default is made in the payment of any interest or Liquidated Damages on any Security when it becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of or premium, if any, on any Security at the Maturity thereof, the Company will upon demand of the Trustee pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal, premium, if any, Liquidated Damages, if any, and interest on any overdue principal, premium, if any, Liquidated Damages, if any, and, to the extent permitted by applicable law, on any overdue interest at the rate then in effect, and in addition thereto, such further amount as shall be sufficient to cover the reasonable costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel. -30- If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 4.4 TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relating to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or the creditors of either, the Trustee (whether or not the principal of, and any interest on, the Securities shall then be due and payable as therein expressed or by declaration or otherwise and whether or not the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal, premium, if any, Liquidated Damages, if any, and interest owing and unpaid in respect of the Securities and take such other actions, including participating as a member, voting or otherwise, of any official committee of creditors appointed in such matter, and to file such other papers or documents, in each of the foregoing cases, as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel) and of the Holders of Securities allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claim and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder of Securities 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 Holders of Securities, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel and any other amounts due the Trustee under Section 5.7. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder -31- thereof or to authorize the Trustee to vote in respect of the claim of any Holder of a Security in any such proceeding; provided, however, that the Trustee may, on behalf of such Holders, vote for the election of a trustee in bankruptcy or similar official. SECTION 4.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such 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 its counsel, be for the ratable benefit of the Holders of the Securities in respect of which judgment has been recovered. SECTION 4.6 APPLICATION OF MONEY COLLECTED. Subject to Article Eleven, any money collected by the Trustee pursuant to this Article Four shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, premium, if any, or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 5.7; SECOND: To the payment of the amounts then due and unpaid for principal of, premium, if any, Liquidated Damages, if any, or interest on, the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal, premium, if any, Liquidated Damages, if any, and interest, respectively; and THIRD: Any remaining amounts shall be repaid to the Company. SECTION 4.7 LIMITATION ON SUITS. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; -32- (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) the Trustee has not received any direction inconsistent with such written request from the Holders of a majority of the aggregate principal amount of the Outstanding Securities during the 60 day period referred to in (d) above; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 4.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST AND TO CONVERT. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of, premium, if any, and (subject to Section 2.8) interest (and Liquidated Damages, if any) on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption or repurchase, on the Redemption Date or Repurchase Date, as the case may be), and to convert such Security in accordance with Article Ten, and to institute suit for the enforcement of any such payment and right to convert, and such rights shall not be impaired without the consent of such Holder. SECTION 4.9 RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder of a Security has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders of Securities shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and such Holders shall continue as though no such proceeding had been instituted. SECTION 4.10 RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 2.7, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Securities is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. -33- SECTION 4.11 DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein. Every right and remedy given by this Article Four or by law to the Trustee or to the Holders of Securities may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or (subject to the limitations contained in this Indenture) by the Holders of Securities, as the case may be. SECTION 4.12 CONTROL BY HOLDERS OF SECURITIES. The Holders of a majority in principal amount of the Outstanding Securities 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, and (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. SECTION 4.13 WAIVER OF PAST DEFAULTS. The Holders, either (a) through the written consent of not less than a majority in principal amount of the Outstanding Securities or (b) by the adoption of a resolution, at a meeting of Holders of the Outstanding Securities at which a quorum is present, by the Holders of at least a majority in principal amount of the Outstanding Securities represented at such meeting, may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (1) in the payment of the principal of, premium, if any, interest, the Repurchase Price or Liquidated Damages, if any, on any Security or (2) in respect of a covenant or provision hereof that under Article Seven cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 4.14 UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Security 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, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 4.14 shall not apply to -34- any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder of any Security for the enforcement of the payment of the principal of, premium, if any, Liquidated Damages, if any, or interest on any Security on or after the respective Stated Maturity or Maturities expressed in such Security (or, in the case of redemption or repurchase, on or after the Redemption Date or Repurchase Date, as the case may be) or for the enforcement of the right to convert any Security in accordance with Article Ten. SECTION 4.15 WAIVER OF STAY, USURY OR EXTENSION LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, usury or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede by reason of such law 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. ARTICLE FIVE THE TRUSTEE SECTION 5.1 CERTAIN DUTIES AND RESPONSIBILITIES. (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee pursuant to the requirements of this Indenture; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the procedural requirements of this Indenture but not to verify the contents thereof. (b) In case an Event of Default has occurred and is continuing, 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 man would exercise or use under the circumstances in the conduct of his own affairs. (c) 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 -35- (1) this paragraph (c) shall not be construed to limit the effect of paragraph (a) of this Section 5.1; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) 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 direction of the Holders of a majority in principal amount of the Outstanding Securities 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; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so 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 5.1. SECTION 5.2 NOTICE OF DEFAULTS. Within 90 days after the occurrence of any default hereunder as to which a Responsible Officer of the Trustee has actually received written notice, the Trustee shall give to all Holders of Securities, in the manner provided in Section 1.6, notice of such default, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of, premium, if any, or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders. For the purpose of this Section 5.2, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default. SECTION 5.3 CERTAIN RIGHTS OF TRUSTEE. (a) Subject to the provisions of Section 5.1: (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate, other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; -36- (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (4) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; (6) 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, note, coupon, other evidence of indebtedness 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; and (b) 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 with due care by it hereunder. SECTION 5.4 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained herein and in the Securities (except the Trustee's certificates of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture, of the Securities or of the Common Stock issuable upon the conversion of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 5.5 MAY HOLD SECURITIES, ACT AS TRUSTEE UNDER OTHER INDENTURES. The Trustee, any Authenticating Agent, any Paying Agent, any Conversion Agent or any other agent of the Company or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company with the -37- same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Conversion Agent or such other agent. The Trustee may become and act as trustee under other indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding in the same manner as if it were not Trustee hereunder. SECTION 5.6 MONEY HELD IN TRUST. 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 otherwise agreed in writing with the Company. SECTION 5.7 COMPENSATION AND REIMBURSEMENT. The Company agrees (a) to pay to the Trustee from time to time such reasonable compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) Except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee (and its directors, officers, employees and agents) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense, including taxes (other than taxes based on the income of the Trustee), incurred without negligence, bad faith or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs, expenses and reasonable attorneys' fees of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 4.1(f) or Section 4.1(g) with respect to the Company, the expenses (including the reasonable charges of its counsel) and the compensation for the services are intended to constitute expenses of the administration under any applicable federal or state bankruptcy, insolvency or other similar law. The Trustee shall have a lien prior to the Securities as to all property and funds held by it hereunder for any amount owing it or any predecessor Trustee pursuant to this Section 5.7, except with respect to funds held in trust for the benefit of the Holders of particular Securities. -38- The provisions of this Section 5.7 shall survive the termination of this Indenture or the earlier resignation or removal of the Trustee. SECTION 5.8 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. 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, having a combined capital and surplus (or for such purposes, the combined capital and surplus of any parent holding company) of at least U.S. $25,000,000, subject to supervision or examination by federal or state authority, in good standing and having an established place of business or agency in the Borough of Manhattan, The City of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section 5.8, the combined capital and surplus of such corporation 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 5.8, it shall resign immediately in the manner and with the effect hereinafter specified in this Article and a successor shall be appointed pursuant to Section 5.9. SECTION 5.9 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 5.10. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 5.10 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee or the Company may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and the Company. If the instrument of acceptance by a successor Trustee required by Section 5.10 shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the removed Trustee or the Company may petition any court of competent jurisdiction for the appointment of a successor Trustee. (d) If at any time: (1) the Trustee shall cease to be eligible under Section 5.8 and shall fail to resign after written request therefor by the Company or by any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or (2) 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, -39- then, (i) in any such case the Company may remove the Trustee, or (ii) in the case of clause (d)(1) above only and subject to Section 4.14, any Holder of a Security who has been a bona fide Holder of a Security for at least six 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. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company shall promptly appoint a successor Trustee and shall comply with the applicable requirements of this Section 5.9 and Section 5.10. If, within one year after such resignation, removal or incapability, or occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 5.10, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders of Securities and accepted appointment in the manner required by this Section 5.9 and Section 5.10, any Holder of a Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The successor Trustee shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders of Securities in the manner provided in Section 1.6. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 5.10 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee. Such retiring Trustee shall, upon payment of its charges, promptly execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be eligible under this Article. SECTION 5.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation or association into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation or association resulting from -40- any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation or association succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder (provided such corporation or association shall be otherwise eligible under this Article), without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 5.12 AUTHENTICATING AGENTS. The Trustee may, with the consent of the Company, appoint an Authenticating Agent or Agents acceptable to the Company with respect to the Securities, which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon exchange or substitution pursuant to this Indenture. Securities authenticated by an Authenticating Agent shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder, and every reference in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be subject to acceptance by the Company and shall at all times be a corporation or association organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent and subject to supervision or examination by government or other fiscal authority. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 5.12, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section 5.12. Any corporation or association into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation or association resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation or association succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent (provided such corporation or association shall be otherwise eligible under this Section 5.12), without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof 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 such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 5.12, the Trustee may appoint a successor Authenticating Agent, which shall be subject to acceptance by the Company. Any successor Authenticating Agent, upon acceptance -41- of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 5.12. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 5.12. If an Authenticating Agent is appointed with respect to the Securities pursuant to this Section 5.12, the Securities may have endorsed thereon, in addition to or in lieu of the Trustee's certification of authentication, an alternative certificate of authentication in the following form: This is one of the Securities referred to in the within-mentioned Indenture. By: Wells Fargo Bank, National Association, as Authenticating Agent By _____________________________ Authorized Signature SECTION 5.13 DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign as Trustee hereunder, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. SECTION 5.14 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). ARTICLE SIX CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 6.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Company shall not consolidate with or merge into any other Person or convey, transfer, sell or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into it or convey, transfer, sell or lease such Person's properties and assets substantially as an entirety to it, unless: -42- (a) the Person formed by such consolidation or into or with which the Company is merged, or the Person to which the Company's properties and assets are conveyed, transferred, sold or leased, shall be (1) a corporation, limited liability company, partnership or trust organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia or (2) organized under the laws of a jurisdiction outside the United States of America and have common stock or American Depositary Shares representing such common stock traded on a national securities exchange in the United States, including The Nasdaq Stock Market, Inc., and, in each case, if other than the Company, shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of, premium, if any, Liquidated Damages, if any, and interest on all of the Securities as applicable, and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed; (b) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with, together with any documents required under Section 7.3. SECTION 6.2 SUCCESSOR SUBSTITUTED. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of all or substantially all the properties and assets of the Company in accordance with Section 6.1, the successor Person formed by such consolidation or into or with which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE SEVEN SUPPLEMENTAL INDENTURES SECTION 7.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS OF SECURITIES. Without the consent of any Holders of Securities, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto for any of the following purposes: -43- (a) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants and obligations of the Company herein and in the Securities as permitted by this Indenture; or (b) to add to the covenants of the Company for the benefit of the Holders of Securities or to surrender any right or power herein conferred upon the Company; or (c) to secure the Securities; or (d) to make provision with respect to the conversion rights of Holders of Securities pursuant to Section 10.11; or (e) to make any changes or modifications to this Indenture necessary in connection with the registration of any Registrable Securities under the Securities Act as contemplated by the Registration Rights Agreement (provided such action pursuant to this clause (e) shall not adversely affect the interests of the Holders of Securities in any material respect); or (f) to comply with the requirements of the Trust Indenture Act or the rules and regulations of the Commission thereunder in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, as contemplated by this Indenture or otherwise; or (g) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee; or (h) to cure any ambiguity, to correct or supplement any provision herein that may be inconsistent with any other provision herein or that is otherwise defective, or to make any other provisions with respect to matters or questions arising under this Indenture as the Company and the Trustee may deem necessary or desirable (provided such action pursuant to this clause (h) shall not adversely affect the interests of the Holders of Securities in any material respect). Upon Company Request accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and subject to and upon receipt by the Trustee of the documents described in Section 7.3 hereof, the Trustee shall join with the Company in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained. SECTION 7.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS OF SECURITIES. With either (a) the written consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by the Act of said Holders delivered to the Company and the Trustee, or (b) by the adoption of a resolution, at a meeting of Holders of the Outstanding Securities at which a quorum is present, by the Holders of a majority in principal amount of the Outstanding Securities represented at such meeting, the Company, when authorized by a Board Resolution, and the Trustee may 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 of modifying in any manner the rights of the Holders of Securities under this Indenture; provided, however, that no such supplemental -44- indenture shall, without the consent or affirmative vote of the Holder of each Outstanding Security affected thereby, (l) change the Stated Maturity of the principal of, or any installment of interest on, any Security, or reduce the principal amount, any premium or the rate of interest payable thereon, or change the place at which or the coin or currency in which any Security or the interest or any premium thereon or any other amount in respect thereof is payable; or (2) reduce the amount payable on any Security upon redemption at the Company's option; or (3) impair the right to institute suit for the enforcement of any payment or conversion in respect of any Security on or after the Stated Maturity thereof (or, in the case of redemption or any repurchase, on or after the Redemption Date or Repurchase Date, as the case may be); or (4) except as permitted by Section 10.11, adversely affect the right to convert any Security as provided in Article Ten; or (5) modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders of any Securities; or (6) reduce the percentage in principal amount of the Outstanding Securities the consent of whose Holders is required for any supplemental indenture to modify or amend any provision of this Indenture or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or (7) modify any of the provisions of this Section 7.2 except to increase any percentage contained herein or therein or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; or (8) amend or modify the provisions of Article Twelve in a manner adverse to the Holders after the Holder's right to require the Company to repurchase the Securities upon a Change in Control arises. It shall not be necessary for any Act of Holders of Securities under this Section 7.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. The quorum at any meeting called to adopt a resolution shall be Holders representing a majority in aggregate principal amount of Securities at the time Outstanding. -45- SECTION 7.3 EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Sections 5.1 and 5.3) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and that such supplemental indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 7.4 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder appertaining thereto shall be bound thereby. SECTION 7.5 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company and the Trustee, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. SECTION 7.6 NOTICE OF SUPPLEMENTAL INDENTURES. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 7.2, the Company shall give notice to all Holders of Securities of such fact, setting forth in general terms the substance of such supplemental indenture, in the manner provided in Section 1.6. Any failure of the Company to give such notice, or any defect therein, shall not in any way impair or affect the validity of any such supplemental indenture. ARTICLE EIGHT COVENANTS SECTION 8.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company covenants and agrees that it will duly and punctually pay the principal of and premium, if any, and interest on the Securities in accordance with the terms of the Securities and this Indenture. The Company shall deposit or cause to be deposited with the -46- Trustee, no later than 12:00 noon Eastern time on the date of the Stated Maturity of any Security or no later than 12:00 noon Eastern time on the due date for any installment of interest, all payments so due, which payments shall be in immediately available funds on the date of such Stated Maturity or due date, as the case may be. SECTION 8.2 MAINTENANCE OF OFFICES OR AGENCIES. The Company hereby appoints the Corporate Trust Office or such other office or agency of the Trustee as its agent in the Borough of Manhattan, The City of New York, where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange, where Securities may be surrendered for conversion, and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company may at any time and from time to time vary or terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes; provided, however, that until all of the Securities have been delivered to the Trustee for cancellation, or moneys sufficient to pay the principal of, premium, if any, and interest on the Securities have been made available for payment and either paid or returned to the Company pursuant to the provisions of Section 8.3, the Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency where Securities may be presented or surrendered for payment and conversion, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company shall give prompt written notice to the Trustee, and notice to the Holders in accordance with Section 1.6, of the appointment or termination of any such agents and of the location and any change in the location of any such office or agency. 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, presentations and surrenders may be made and notices and demands may be served on the Corporate Trust Office. SECTION 8.3 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST. If the Company will act as its own Paying Agent, it shall, on or before each due date of the principal of, premium, if any, or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and the Company will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will, no later than 12:00 noon Eastern time on each due date of the principal of, premium, if any, or interest on any Securities, deposit with the Trustee a sum sufficient to pay the principal, premium, if any, or interest so becoming due, such sum to be held for the benefit of the Persons entitled to such principal, premium, if any, or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of any failure so to act. -47- The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 8.3, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of, premium, if any, or interest on Securities for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal, premium, if any, or interest; and (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Anything contained herein to the contrary notwithstanding, any money held by the Trustee or any Paying Agent in trust for the payment and discharge of the principal of, premium, if any, Liquidated Damages, if any, or interest on any Security that remains unclaimed for two years after the date when each payment of such principal, premium, Liquidated Damages, if any, or interest has become payable shall, upon the request of the Company, be repaid by the Trustee to the Company as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Holders shall look only to the Company for the payment of the principal, premium or interest on such Security. The Trustee shall not be liable to the Company or any Holder for interest on funds held by it for the payment and discharge of the principal, premium or interest on any of the Securities to any Holder. The Company shall not be liable for any interest on the sums paid to it pursuant to this paragraph and shall not be regarded as a trustee of such money. SECTION 8.4 EXISTENCE. Subject to Article Six, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors 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 Holders. -48- SECTION 8.5 STATEMENT BY OFFICERS AS TO DEFAULT. The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate (one of the signers of which shall be the Company's principal executive, principal financial or principal accounting officer), stating whether or not to the best knowledge of the signers 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 status thereof of which they have knowledge. The Company will deliver to the Trustee, forthwith upon becoming aware of any default in the performance or observance of any covenant, agreement or condition contained in this Indenture, or any Event of Default, an Officers' 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 8.5 shall be delivered to the Trustee at the Corporate Trust Office. SECTION 8.6 DELIVERY OF CERTAIN INFORMATION. At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder of a Security or the holder of shares of Common Stock issued upon conversion thereof, the Company will promptly furnish or cause to be furnished Rule 144A Information to such Holder of Securities or such holder of shares of Common Stock issued upon conversion of Securities, or to a prospective purchaser of any such security designated by any such Holder or holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the Securities Act (or any successor provision thereto) in connection with the resale of any such security; provided, however, that the Company shall not be required to furnish such information in connection with any request made on or after the date that is two years from the later of (a) the date such a security (or any such predecessor security) was last acquired from the Company or (b) the date such a security (or any such predecessor security) was last acquired from an "affiliate" of the Company within the meaning of Rule 144 under the Securities Act (or any successor provision thereto). "RULE 144A INFORMATION" shall be such information as is specified pursuant to Rule 144A(d) (4) under the Securities Act (or any successor provision thereto). ARTICLE NINE REDEMPTION OF SECURITIES SECTION 9.1 RIGHT OF REDEMPTION. The Securities may be redeemed in accordance with the provisions of the form of Securities attached hereto as Exhibit A. -49- SECTION 9.2 APPLICABILITY OF ARTICLE. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of the Securities or this Indenture, shall be made in accordance with such provision and this Article Nine. SECTION 9.3 ELECTION TO REDEEM; NOTICE TO TRUSTEE. In case of any redemption at the election of the Company of any of the Securities, the Company shall, at least 40 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date. SECTION 9.4 SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected by the Trustee at least three Business Days prior to the date that the notice described in Section 9.5 is given from the Outstanding Securities not previously called for redemption by lot or such method as the Trustee may deem fair and appropriate. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall promptly notify the Company and each Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount and certificate numbers thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities that has been or is to be redeemed. SECTION 9.5 NOTICE OF REDEMPTION. Notice of redemption shall be given in the manner provided in Section 1.6 to the Holders of Securities to be redeemed not less than 30 nor more than 60 days prior to the Redemption Date, and such notice shall be irrevocable. All notices of redemption shall identify the Securities to be redeemed (including CUSIP numbers) and shall state: (a) the Redemption Date, (b) the Redemption Price, and accrued interest and Liquidated Damages, if any, -50- (c) if less than all Outstanding Securities are to be redeemed, the aggregate principal amount of Securities to be redeemed, (d) that on the Redemption Date the Redemption Price, and accrued interest and Liquidated Damages, if any, will become due and payable upon each such Security to be redeemed, and that interest thereon shall cease to accrue on and after said date, (e) the Conversion Rate, the date on which the right to convert the Securities to be redeemed will terminate and the places where such Securities may be surrendered for conversion, and (f) the place or places where such Securities are to be surrendered for payment of the Redemption Price and accrued interest, if any. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's written request, by the Trustee in the name of and at the expense of the Company. Notice of redemption of Securities to be redeemed at the election of the Company received by the Trustee shall be given by the Trustee to each Paying Agent in the name of and at the expense of the Company. SECTION 9.6 DEPOSIT OF REDEMPTION PRICE. Not less than one Business Day prior to any Redemption Date, the Company shall irrevocably deposit with the Trustee (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 8.3) an amount of money (which shall be in immediately available funds on such Redemption Date) sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities that are to be redeemed on that date other than any Securities called for redemption on that date that have been converted prior to the date of such deposit. If any Security called for redemption is converted, any money deposited with the Trustee or so segregated and held in trust for the redemption of such Security shall (subject to any right of the Holder or such Security or any Predecessor Security to receive interest as provided in the last paragraph of Section 2.8) be paid to the Company on Company Request or, if then held by the Company, shall be discharged from such trust. SECTION 9.7 SECURITIES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, the Securities to be so redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price, including accrued interest) such Securities shall cease to bear interest. Upon surrender of any Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price together with accrued and unpaid interest, and Liquidated Damages, if any, to the Redemption Date; provided, however, that installments of interest on Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Record Date according to their terms and the provisions of Section 2.8. -51- If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal amount of, premium, if any, and, to the extent permitted by applicable law, accrued interest on such Security shall, until paid, bear interest from the Redemption Date at the rate then in effect, and such Security shall remain convertible until the principal of such Security (or portion thereof, as the case may be) shall have been paid or duly provided for. SECTION 9.8 SECURITIES REDEEMED IN PART. Any Security that is to be redeemed only in part shall be surrendered at an office or agency of the Company designated for that purpose pursuant to Section 8.2 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Registered Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. SECTION 9.9 CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. In connection with any redemption of the Securities, the Company may arrange for the purchase and conversion of any Securities by an agreement with one or more investment bankers or other purchasers (the "PURCHASERS") to purchase such Securities by irrevocably paying to the Trustee in trust for the Holders, on or before the Redemption Date, an amount not less than the applicable Redemption Price, together with interest accrued and unpaid, and Liquidated Damages, if any, to the Redemption Date, of such Securities. Notwithstanding anything to the contrary contained in this Article Nine, the obligation of the Company to pay the Redemption Price, together with interest accrued and unpaid to the Redemption Date, 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 shall be filed with the Trustee prior to the close of business on the second Business Day immediately prior to the Redemption Date), any Securities called for redemption that are 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, and consistent with any agreement or agreements with such Purchasers, to be acquired by such Purchasers from such Holders and (notwithstanding anything to the contrary contained in this Article Nine) surrendered by such Purchasers for conversion, all as of immediately prior to the close of business on the Redemption Date (and the right to convert any such Securities 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 by the Purchasers to the Holders in the same manner as it would monies deposited with it by the Company for the redemption of Securities. Without the Trustee's prior written consent, no arrangement between the Company and such Purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Trustee as set forth in this Indenture, and the Company agrees to indemnify the Trustee from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Securities -52- between the Company and such Purchasers, including the costs and expenses, including reasonable legal fees, incurred by the Trustee in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture. ARTICLE TEN CONVERSION OF SECURITIES SECTION 10.1 CONVERSION PRIVILEGE AND CONVERSION RATE. Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any Security or any portion of the principal amount thereof that is U.S.$l,000 or an integral multiple of U.S.$1,000 may be converted into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock of the Company at the Conversion Rate, determined as hereinafter provided, in effect at the time of conversion. Such conversion right shall commence upon the original issuance of the Securities and expire at the close of business on April 15, 2007, unless the Security has been previously redeemed or repurchased, subject, in the case of conversion of any Global Security, to any Applicable Procedures. In case a Security or portion thereof is called for redemption at the election of the Company or the Holder thereof exercises his right to require the Company to repurchase the Security, such conversion right in respect of the Security, or portion thereof so called, shall expire at the close of business on the Business Day immediately preceding the Redemption Date or the Repurchase Date, as the case may be, unless the Company defaults in making the payment due upon redemption or repurchase, as the case may be (in each case subject, as aforesaid, to any Applicable Procedures with respect to any Global Security). The rate at which shares of Common Stock shall be delivered upon conversion (herein called the "CONVERSION RATE") shall be initially 25.9680 shares of Common Stock for each U.S.$l,000 principal amount of Securities. The Conversion Rate shall be adjusted in certain instances as provided in this Article Ten. SECTION 10.2 EXERCISE OF CONVERSION PRIVILEGE. In order to exercise the conversion privilege, the Holder of any Security to be converted shall surrender such Security, duly endorsed or assigned to the Company or in blank, at any office or agency of the Company maintained for that purpose pursuant to Section 8.2, accompanied by a duly signed and completed conversion notice substantially in the form attached hereto as Exhibit C stating that the Holder elects to convert such Security or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted. Each Security surrendered for conversion (in whole or in part) during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date shall (except in the case of any Security or portion thereof that has been called for redemption on a Redemption Date, or is to be repurchased on a Repurchase Date, with the consequence that the conversion right of such Security would terminate between such Regular Record Date and the close of business on such Interest Payment Date) be accompanied by payment in New York Clearing House funds or other funds acceptable -53- to the Company of an amount equal to the interest and Liquidated Damages, if any, payable on such Interest Payment Date on the principal amount of such Security (or part thereof, as the case may be) being surrendered for conversion. The interest and Liquidated Damages, if any, so payable on such Interest Payment Date, with respect to any Security (or portion thereof, if applicable) that is surrendered for conversion during the period from the close of business on any Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date, shall be paid to the Holder of such Security as of such Regular Record Date. Interest and Liquidated Damages, if any, payable in respect of any Security surrendered for conversion on or after an Interest Payment Date shall be paid to the Holder of such Security as of the next preceding Regular Record Date, notwithstanding the exercise of the right of conversion. Except as provided in this paragraph and subject to the last paragraph of Section 2.8, no cash payment or adjustment shall be made upon any conversion on account of any interest accrued from the Interest Payment Date next preceding the conversion date, in respect of any Security (or part thereof, as the case may be) surrendered for conversion, or on account of any dividends on the Common Stock issued upon conversion. The Company's delivery to the Holder of the number of shares of Common Stock (and cash in lieu of fractions thereof, as provided in this Indenture) into which a Security is convertible and any rights and warrants pursuant to Section 10.4(m) will be deemed to satisfy the Company's obligation to pay the principal amount of the Security. Securities shall be deemed to have been converted on the day of surrender of such Securities for conversion in accordance with the foregoing provisions, and at such time the rights of the Holders of such Securities as Holders shall cease, and the Person or Persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Company shall issue and deliver to the Trustee, for delivery to the Holder, a certificate or certificates for the number of full shares of Common Stock issuable upon conversion, together with payment in lieu of any fraction of a share, as provided in Section 10.3. All shares of Common Stock delivered upon such conversion of Securities shall bear restrictive legends substantially in the form of the legends required to be set forth on the Securities pursuant to Section 2.6 and shall be subject to the restrictions on transfer provided in such legends. Neither the Trustee nor any agent maintained for the purpose of such conversion shall have any responsibility for the inclusion or content of any such restrictive legends on such Common Stock; provided, however, that the Trustee or any agent maintained for the purpose of such conversion shall have provided to the Company or to the Company's transfer agent for such Common Stock, prior to or concurrently with a request to the Company to deliver such Common Stock, written notice that the Securities delivered for conversion are Securities. In the case of any Security that is converted in part only, upon such conversion 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 Registered Security or Securities of authorized denominations in an aggregate principal amount equal to the unconverted portion of the principal amount of such Security. A Security may be converted in part, but only if the principal amount of such Security to be converted is any integral multiple of U.S.$1,000 and the principal amount of such security to remain Outstanding after such conversion is equal to U.S.$l,000 or any integral multiple of U.S.$l,000 in excess thereof. -54- SECTION 10.3 FRACTIONS OF SHARES. No fractional shares of Common Stock shall be issued upon conversion of any Security or Securities. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares that shall be issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Securities (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock that would otherwise be issuable upon conversion of any Security or Securities (or specified portions thereof), the Company shall calculate and pay a cash adjustment in respect of such fraction (calculated to the nearest 1/100th of a share) in an amount equal to the same fraction of the closing sales price of our Common Stock on the New York Stock Exchange (or, if not listed on the New York Stock Exchange, such other national securities exchange or otherwise in the over-the-counter market, as applicable) at the close of business on the day of conversion. SECTION 10.4 ADJUSTMENT OF CONVERSION RATE. The Conversion Rate shall be subject to adjustments from time to time as follows: (a) In case the Company shall pay or make a dividend or other distribution on any class of capital stock of the Company payable in shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be increased by dividing such Conversion Rate by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such increase to become effective (subject to paragraph (l) of this Section 10.4) immediately after the opening of business on the day following the date fixed for such determination. For the purposes 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 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. (b) In case the Company shall issue rights, options or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (h) of this Section 10.4) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights, options or warrants (other than any rights, options or warrants (1) that by their terms will also be issued to any Holder upon conversion of a Security into shares of Common Stock without any action required by the Company or any other Person or (2) that are only exercisable upon the occurrence of specified triggering event and such triggering event has not occurred), the Conversion Rate in effect at the opening of business on the day following the date fixed for such determination shall be increased by dividing such Conversion Rate by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such -55- current market price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such increase to become effective (subject to paragraph (l) of this Section 10.4) immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this paragraph (b), 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 issue any rights, options or warrants in respect of shares of Common Stock held in the treasury of the Company. (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 each 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 evidences of its indebtedness, shares of any class of capital stock, or other property (including cash or assets or securities, but excluding (1) any rights, options or warrants referred to in paragraph (b) of this Section 10.4 and the distribution of rights to all holders of Common Stock pursuant to the adoption of a stockholders' rights plan or the detachment of such rights under the terms of such stockholders' rights plan, (2) any dividend or distribution paid in cash, except as set forth in paragraphs (e) and (f) of this Section 10.4, (3) any dividend or distribution referred to in paragraph (a) of this Section 10.4 and (4) any merger or consolidation to which Section 10.11 applies), the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (h) of this Section 10.4) of the Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) of the portion of the assets, shares or evidences of indebtedness so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective (subject to paragraph (l) of this Section 10.4) immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. In addition, if the Company implements a rights plan ("RIGHTS PLAN"), the Company will provide under such Rights Plan that the Holders of the Securities will receive, in addition to the Common Stock, the rights under the Rights Plan (whether or not the rights under the Rights Plan have separated from the Common Stock at the time of conversion), subject to any limitations set forth in the Rights Plan. -56- (e) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding cash portions of distribution referred to in Section 10.4(d) and any cash that is distributed upon a merger or consolidation to which Section 10.11 applies) in an aggregate amount that, combined together with (1) the aggregate amount of any other cash distributions to all holders of its Common Stock made exclusively in cash within the 365-day period preceding the date of payment of such distribution and in respect of which no adjustment pursuant to this paragraph (e) has been made and (2) the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) of consideration payable in respect of any tender offer by the Company or any Subsidiary for all or any portion of the Common Stock concluded within the 365-day period preceding the date of payment of such distribution and in respect of which no adjustment pursuant to paragraph (f) of this Section 10.4 has been made (the "COMBINED CASH AND TENDER AMOUNT") exceeds 10% of the product of the current market price per share (determined as provided in paragraph (h) of this Section 10.4) of the Common Stock on the date for the determination of holders of shares of Common Stock entitled to receive such distribution times the number of shares of Common Stock outstanding on such date (the "AGGREGATE CURRENT MARKET PRICE"), then, and in each such case, immediately after the close of business on such date for determination, subject to paragraph (l) of Section 10.4, the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate in effect immediately prior to the close of business on the date fixed for determination of the stockholders entitled to receive such distribution by a fraction (A) the numerator of which shall be equal to the current market price per share (determined as provided in paragraph (h) of this Section 10.4) of the Common Stock on the date fixed for such determination less an amount equal to the quotient of (i) the excess of such combined cash and tender amount over 10% of such aggregate current market price divided by (ii) the number of shares of Common Stock outstanding on such date fixed for determination and (B) the denominator of which shall be equal to the current market price per share (determined as provided in paragraph (h) of this Section 10.4) of the Common Stock on such date fixed for determination. (f) In case a tender offer made by the Company or any Subsidiary for all or any portion of the Common Stock shall be completed for an aggregate consideration consisting of cash and/or property having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) that combined together with (1) the aggregate of the cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution), of consideration payable in respect of any other tender offer by the Company or any Subsidiary for all or any portion of the Common Stock concluded within the 365-day period preceding the completion of such tender offer and in respect of which no adjustment pursuant to this paragraph (f) has been made and (2) the aggregate amount of any distributions to all holders of the Company's Common Stock made exclusively in cash within the 365-day period preceding the completion of such tender offer and in respect of which no adjustment pursuant to paragraph (e) of this Section 10.4 has been made (the "COMBINED TENDER AND CASH AMOUNT") exceeds 10% of the product of the current market price per share of the Common Stock (determined as provided in paragraph (h) of this Section 10.4) as of the completion of such tender offer (the "COMPLETION DATE") times the number of shares of Common Stock outstanding (including any tendered shares) as of the Completion Date, then, and in each such case, immediately prior to the opening -57- of business on the day after the date of the Completion Date, the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate immediately prior to close of business on the Completion Date by a fraction (A) the numerator of which shall be equal to (i) the product of (x) the current market price per share of the Common Stock (determined as provided in paragraph (h) of this Section 10.4) on the Completion Date multiplied by (y) the number of shares of Common Stock outstanding (including any tendered shares) on the Completion Date less (ii) the combined tender and cash amount, and (B) the denominator of which shall be equal to the product of (x) the current market price per share of the Common Stock (determined as provided in paragraph (h) of this Section 10.4) as of the Completion Date multiplied by (y) the number of shares of Common Stock outstanding (including any tendered shares) as of the Completion Date less the number of all shares validly tendered and not withdrawn as of the Completion Date (the shares deemed so accepted up to any such maximum, being referred to as the "PURCHASED SHARES"). (g) The reclassification of Common Stock into securities including other than Common Stock (other than any reclassification upon a consolidation or merger to which Section 10.11 applies) shall be deemed to involve (1) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and "the date fixed for such determination" within the meaning of paragraph (d) of this Section 10.4), and (2) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective" or "the day upon which such combination becomes effective", as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of paragraph (c) of this Section 10.4). (h) For the purpose of any computation under paragraphs (b), (d), (e) or (f) of this Section 10.4, the current market price per share of Common Stock on any date shall be calculated by the Company and be deemed to be the average of the daily Average Sales Prices Per Share for the five consecutive Trading Days selected by the Company commencing not more than 10 Trading Days before, and ending not later than, the earlier of the day in question and the day before the "ex date" with respect to the issuance or distribution requiring such computation. For purposes of this paragraph, the term "ex date," when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way in the applicable securities market or on the applicable securities exchange without the right to receive such issuance or distribution. (i) No adjustment in the Conversion Rate shall be required unless such adjustment (plus any adjustments not previously made by reason of this paragraph (i)) would require an increase or decrease of at least one percent in such rate; provided, however, that any adjustments which by reason of this paragraph (i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. -58- (j) The Company may make such increases in the Conversion Rate, for the remaining term of the Securities or any shorter term, in addition to those required by paragraphs (a), (b), (c), (d), (e) and (f) of this Section 10.4, as it considers to be advisable in order to avoid or diminish any income tax liability to any holders of shares of Common Stock resulting from any dividend or distribution of Common Stock or issuance of rights or warrants to purchase or subscribe for Common Stock or from any event treated as such for income tax purposes. To the extent permitted by applicable law, the Company from time to time may increase the Conversion Rate by any amount for any period of time if the period is at least twenty (20) days 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; provided, however, that such increase shall not be taken into account for purposes of determining whether the Average Sales Price Per Share of the Common Stock exceeds the Conversion Price by 105% in connection with an event which would otherwise be a Change in Control. Whenever the Conversion Rate is increased pursuant to the preceding sentence, the Company shall give notice of the increase to the Holders of Securities in the manner provided in Section 1.6 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. (k) Notwithstanding the foregoing provisions of this Section 10.4, no adjustment of the Conversion Rate shall be required to be made (1) upon the issuance of shares of Common Stock pursuant to any present or future plan for the reinvestment of dividends, (2) because of a tender or exchange offer of the character described in Rule 13e-4(h) (5) under the Exchange Act or any successor rule thereto or (3) as a result of a rights plan or poison pill implemented by the Company. (l) In any case in which this Section 10.4 shall require that an adjustment be made immediately following a record date, the Company may elect to defer the effectiveness of such adjustment (but in no event until a date later than the effective time of the event giving rise to such adjustment), in which case the Company shall, with respect to any Security converted after such record date and on and before such adjustment shall have become effective (1) defer paying any cash payment pursuant to Section 10.3 hereof or issuing to the Holder of such Security the number of shares of Common Stock issuable upon such conversion in excess of the number of shares of Common Stock issuable thereupon only on the basis of the Conversion Rate prior to adjustment, and (2) not later than five Business Days after such adjustment shall have become effective, pay to such Holder the appropriate cash payment pursuant to Section 10.3 hereof and issue to such Holder the additional shares of Common Stock issuable on such conversion. Notwithstanding the foregoing, no adjustment of the Conversion Rate shall be made if the event giving rise to such adjustment does not occur. (m) In the event that the Company distributes rights or warrants (other than those referred to in paragraph (b) above) pro rata to holders of Common Stock, so long as any such rights or warrants have not expired or been redeemed by the Company, the Company shall make proper provision so that the Holder of any Security surrendered for conversion will be entitled to receive upon such conversion, in addition to the Common Stock issuable upon conversion of the Securities (the "CONVERSION SHARES"), a number of rights and warrants to be determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to -59- the holders of rights or warrants of separate certificates evidencing such rights or warrants (the "DISTRIBUTION DATE"), the same number of rights or warrants to which a holder of a number of shares of Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions of and applicable to the rights or warrants, and (ii) if such conversion occurs after such Distribution Date, the same number of rights or warrants to which a holder of the number of shares of Common Stock into which the principal amount of such Security so converted was convertible immediately prior to such Distribution Date would have been entitled on such Distribution Date in accordance with the terms and provisions of and applicable to the rights or warrants. SECTION 10.5 NOTICE OF ADJUSTMENTS OF CONVERSION RATE. Whenever the Conversion Rate is adjusted as herein provided: (a) the Company shall compute the adjusted Conversion Rate in accordance with Section 10.4 and shall prepare a certificate signed by the Chief Financial Officer of the Company setting forth the adjusted Conversion Rate and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall promptly be filed with the Trustee and with the Conversion Agent; and (b) upon each such adjustment, a notice stating that the Conversion Rate has been adjusted and setting forth the adjusted Conversion Rate shall be required, and as soon as practicable after it is required, such notice shall be provided by the Company to all Holders in accordance with Section 1.6. Neither the Trustee nor the Conversion Agent shall be under any duty or responsibility with respect to any such certificate or the information and calculations contained therein, except to exhibit the same to any Holder of Securities desiring inspection thereof at its office during normal business hours. Unless and until a Responsible Officer of the Trustee and Conversion Agent receive notice of an adjusted Conversion Rate, the Trustee and the Conversion Agent may rely without inquiry on the Conversion Rate most recently in effect. SECTION 10.6 NOTICE OF CERTAIN CORPORATE ACTION. In case: (a) the Company shall declare a dividend (or any other distribution) on its Common Stock payable (i) otherwise than exclusively in cash or (ii) exclusively in cash in an amount that would require any adjustment pursuant to Section 10.4; or (b) the Company shall authorize the granting to the holders of its Common Stock of rights, options or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (c) of any reclassification of the Common Stock of the Company, or of any consolidation, merger or share exchange to which the Company is a party and for which approval of any stockholders of the Company is required, or of the conveyance, sale, transfer or lease of all or substantially all of the assets of the Company; or -60- (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Securities pursuant to Section 8.2, and shall cause to be provided to all Holders in accordance with Section 1.6, at least 20 days (or 10 days in any case specified in clause (a) or (b) above) prior to the applicable record or effective date hereinafter specified, a notice stating (1) the date on which a record is to be taken for the purpose of such dividend, distribution, rights, options 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, rights, options or warrants are to be determined or (2) the date on which such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up. Neither the failure to give such notice or the notice referred to in the following paragraph nor any defect therein shall affect the legality or validity of the proceedings described in clauses (a) through (d) of this Section 10.6. If at the time the Trustee shall not be the Conversion Agent, a copy of such notice shall also forthwith be filed by the Company with the Trustee. The Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Securities pursuant to Section 8.2, and shall cause to be provided to all Holders in accordance with Section 1.6, notice of any tender offer by the Company or any Subsidiary for all or any portion of the Common Stock at or about the time that such notice of tender offer is provided to the public generally. SECTION 10.7 COMPANY TO RESERVE COMMON STOCK. The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of Securities, the full number of shares of Common Stock then issuable upon the conversion of all Outstanding Securities. SECTION 10.8 TAXES ON CONVERSIONS. Except as provided in the next sentence, the Company will pay any and all transfer, stamp, documentary and other similar taxes and duties that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Securities pursuant hereto. The Company shall not, however, be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Security or Securities to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue 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. -61- SECTION 10.9 COVENANT AS TO COMMON STOCK. The Company agrees that all shares of Common Stock that may be delivered upon conversion of Securities, upon such delivery, will be newly issued shares and will have been duly authorized and validly issued and will be fully paid and nonassessable and, except as provided in Section 10.8, the Company will pay all taxes, liens and charges with respect to the issue thereof. SECTION 10.10 CANCELLATION OF CONVERTED SECURITIES. All Securities delivered for conversion shall be delivered to the Trustee or its agent to be cancelled by or at the direction of the Trustee, which shall dispose of the same as provided in Section 2.10. SECTION 10.11 PROVISION IN CASE OF CONSOLIDATION, MERGER OR SALE OF ASSETS. In case of any consolidation or merger of the Company with or into any other Person, any merger of another Person with or into the Company (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company) or any conveyance, sale, transfer or lease of all or substantially all of the assets of the Company, the Person formed by such consolidation or resulting from such merger or that acquires such assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then Outstanding shall have the right thereafter, during the period such Security shall be convertible as specified in Section 11.1, to convert such Security only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease by a holder of the number of shares of Common Stock of the Company into which such Security might have been converted immediately prior to such consolidation, merger, conveyance, sale, transfer or lease, assuming such holder of Common Stock of the Company (a) is not a Person with which the Company consolidated or merged with or into or that merged into or with the Company or to which such conveyance, sale, transfer or lease was made, as the case may be (a "CONSTITUENT PERSON"), or an Affiliate of a Constituent Person and (b) failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer, or lease is not the same for each share of Common Stock of the Company held immediately prior to such consolidation, merger, conveyance, sale, transfer or lease by others than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("NON-ELECTING SHARE"), then for the purpose of this Section 10.11 the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease by the holders of each Non-electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-electing Shares). Such supplemental indenture shall provide for adjustments that, for events subsequent to the effective date of such supplemental indenture, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article. The above provisions of this Section 10.11 shall similarly apply to successive consolidations, mergers, conveyances, sales, transfers or leases. Notice of the execution of such a supplemental indenture -62- shall be given by the Company to the Holder of each Security as provided in Section 1.6 promptly upon such execution. Neither the Trustee nor the Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any such supplemental indenture relating either to the kind or amount of shares of stock or other securities or property or cash receivable by Holders of Securities upon the conversion of their Securities after any such consolidation, merger, conveyance, transfer, sale or lease or to any such adjustment but may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, an Officers Certificate or an Opinion of Counsel with respect thereto, which the Company shall cause to be furnished to the Trustee upon request. SECTION 10.12 RESPONSIBILITY OF TRUSTEE FOR CONVERSION PROVISIONS. The Trustee, subject to the provisions of Section 5.1, and any Conversion Agent shall not at any time be under any duty or responsibility to any Holder of Securities to determine whether any facts exist that may require any adjustment of the Conversion Rate, or with respect to the nature or extent 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, or whether a supplemental indenture need be entered into. Neither the Trustee, subject to the provisions of Section 5.1, nor any Conversion Agent shall be accountable with respect to the validity or value (or the kind or amount) of any Common Stock, or of any other securities or property or cash, that may at any time be issued or delivered upon the conversion of any Security; and it or they do not make any representation with respect thereto. Neither the Trustee, subject to the provisions of Section 5.1, nor any Conversion Agent shall be responsible for any failure of the Company to make or calculate any cash payment or to issue, transfer or deliver any shares of Common Stock or share certificates or other securities or property or cash upon the surrender of any Security for the purpose of conversion; and the Trustee, subject to the provisions of Section 5.1, and any Conversion Agent shall not be responsible for any failure of the Company to comply with any of the covenants of the Company contained in this Article. ARTICLE ELEVEN SUBORDINATION OF SECURITIES SECTION 11.1 SECURITIES SUBORDINATE TO SENIOR DEBT. The Company covenants and agrees, and each Holder of a Security by his acceptance thereof likewise covenants and agrees, that to the extent and in the manner hereinafter set forth in this Article (subject to the provisions of Article Three) the indebtedness represented by the Securities and the payment of the principal of (and premium, if any) and interest on, and any payment of the Repurchase Price with respect to, each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full in cash or Cash Equivalents of all Senior Debt. -63- SECTION 11.2 NO PAYMENTS IN CERTAIN CIRCUMSTANCES; PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. No payment on account of principal of, premium, if any, or interest (and Liquidated Damages, if any) on, or redemption or repurchase of, the Securities shall be made if, at the time of such payment: (a) a default in the payment of principal, premium, if any, or interest or other amounts due on or in connection with any Senior Debt, including any default under any redemption or repurchase obligation, occurs and is continuing (or, in the case of Senior Debt for which there is a period of grace, in the event of such a default that continues beyond the period of grace, if any, specified in the instrument or lease evidencing such Senior Debt), unless and until such default shall have been cured or waived or shall have ceased to exist; or (b) a default, other than a payment default, on Designated Senior Debt occurs and is continuing that then permits holders of such Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of the default (a "PAYMENT BLOCKAGE NOTICE") from the Company, a holder of Designated Senior Debt or a Representative. Notwithstanding the foregoing, the Company may make, and the Trustee may receive and shall apply, any payment in respect of the Securities (for principal, premium, if any, or interest (and Liquidated Damages, if any) or repurchase) if such payment was made prior to the occurrence of any of the contingencies specified in clauses (a) and (b) above. If the Trustee receives any Payment Blockage Notice pursuant to clause (b) above, no subsequent Payment Blockage Notice shall be effective for purposes of this Section 11.2 unless and until (1) at least 365 days shall have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (2) all scheduled payments of principal, premium, if any, interest and Liquidated Damages, if any, on the Securities 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 unless such existing nonpayment default has been cured for a period of at least 90 days. The Company may and shall resume payments on and distributions in respect of the Securities (including missed payments, if any) upon the earlier of: (A) the date upon which the default is cured or waived, or (B) in the case of a default referred to in clause (b) of the second preceding paragraph, 179 days after notice is received if the maturity of such Designated Senior Debt has not been accelerated such that such debt is then presently payable, unless this Indenture otherwise prohibits the payment or distribution at the time of such payment or distribution. Upon (i) any acceleration of the principal amount due on the Securities or (ii) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution, winding up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all principal of, premium, if any, sinking fund and interest or other amounts due, or to become due, upon or in connection with all Senior Debt shall first be paid in full in cash or Cash Equivalents, or payment thereof provided for in cash or Cash Equivalents in accordance with its terms, before any payment is made on account of the principal of, premium, if any, or interest (and Liquidated Damages, if any) on, or repurchase of, the -64- indebtedness evidenced by the Securities, and upon any such dissolution or winding up or liquidation or reorganization any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them or it, as the case may be, directly to the holders of Senior Debt (pro rata to each such holder on the basis of the respective amounts of Senior Debt held by such holder) or their representatives, to the extent necessary to pay all Senior Debt in full, in cash or Cash Equivalents, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt, before any payment or distribution is made to the Holders of the Securities or to the Trustee under this Indenture. In the event that, contrary to the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than junior securities, as defined in Section 11.11), shall be received by the Trustee or the Holders of the Securities before all Senior Debt is paid in full in cash or Cash Equivalents or provision made for such payment in accordance with its terms, such payment or distribution shall be paid over or delivered to the holders of such Senior Debt or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Debt have been issued, as their respective interests may appear, for application to the payment of all Senior Debt remaining unpaid to the extent necessary to pay all such Senior Debt in full in cash or Cash Equivalents in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Debt. Subject to the payment in full in cash or Cash Equivalents of all Senior Debt, the Holders of the Securities (together with the holders of any other indebtedness of the Company that is subordinated in right of payment to the payment in full of all Senior Debt that is not subordinated in right of payment to the Securities and that by its terms grants such right of subrogation to the holders thereof) shall be subrogated to the rights of the holders of Senior Debt to receive payments or distribution of assets of the Company made on the Senior Debt until the principal of, premium, if any, and interest on, or amounts payable upon repurchase of, the Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of Senior Debt of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payment over pursuant to the provisions of this Article to the holders of Senior Debt by the Holders of the Securities or the Trustee, shall, as between the Company, its creditors other than the holders of Senior Debt, and the Holders of Securities, be deemed to be a payment by the Company to the holders of or on account of Senior Debt, it being understood that the provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of Senior Debt, on the other hand. SECTION 11.3 TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the -65- subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. SECTION 11.4 NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder of any Senior Debt or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Debt, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt or otherwise amend or supplement in any manner Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (c) release any Person liable in any manner for the collection of Senior Debt; and (d) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 11.5 NOTICE TO TRUSTEE. The Company shall give prompt written notice to the Trustee of any fact known to the Company that would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder of Senior Debt or from any trustee, agent or representative therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 5.1, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 11.5 prior to the date upon which by the terms hereof any money may become payable for any purpose (including without limitation the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. Subject to the provisions of Section 5.1, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Debt (or a trustee, agent or representative therefor) to establish that such notice has been given by a -66- holder of Senior Debt (or a trustee, agent or representative therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article Eleven, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Eleven, 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. SECTION 11.6 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 5.1, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt 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. SECTION 11.7 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article or otherwise. With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article Eleven, and no implied covenants or obligations with respect to holders of Senior Debt shall be read into this Indenture against the Trustee. SECTION 11.8 RELIANCE BY HOLDERS OF SENIOR DEBT ON SUBORDINATION PROVISIONS. Each Holder by accepting a Security 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 Debt, whether such Senior Debt was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Debt, and such holder of Senior Debt shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Debt. Such holders of the Company's Senior Debt are intended by the parties to the Indenture to be third party creditor beneficiaries under this Indenture for the purposes of enforcing the provisions of this Article Eleven. -67- SECTION 11.9 RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION OF TRUSTEE'S RIGHTS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article Eleven with respect to any Senior Debt that may at any time be held by it, to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article Eleven shall apply to claims of, or payments to, the Trustee under or pursuant to Section 5.7. SECTION 11.10 ARTICLE APPLICABLE TO PAYING AGENTS. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article Eleven in addition to or in place of the Trustee; provided, however, that Section 11.9 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. SECTION 11.11 CERTAIN CONVERSIONS AND REPURCHASES DEEMED PAYMENT. For the purposes of this Article Eleven only, (a) the issuance and delivery of junior securities upon conversion of Securities in accordance with Article Ten or upon the repurchase of Securities in accordance with Article Twelve shall not be deemed to constitute a payment or distribution on account of the principal of or premium or interest or Liquidated Damages on Securities or on account of the purchase or other acquisition of Securities, and (b) the payment, issuance or delivery of cash, property or securities (other than junior securities) upon conversion of a Security shall be deemed to constitute payment on account of the principal of such Security. For the purposes of this Section 11.11, the term "junior securities" means (1) shares of any stock of any class of the Company and any cash, property or securities into which the Securities are convertible pursuant to Article Ten and (2) securities of the Company that are subordinated in right of payment to all Senior Debt that may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article Eleven. Nothing contained in this Article Eleven or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than holders of Senior Debt and the Holders of the Securities, the right, which is absolute and unconditional, of the Holder of any Security to convert such Security in accordance with Article Ten or to exchange such Security for Common Stock in accordance with Article Twelve if the Company elects to satisfy the obligations under Article Twelve by the delivery of Common Stock. -68- ARTICLE TWELVE REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER UPON A CHANGE IN CONTROL SECTION 12.1 RIGHT TO REQUIRE REPURCHASE. In the event that a Change in Control shall occur, then each Holder shall have the right, at the Holder's option, but subject to the provisions of Section 12.2, to require the Company to repurchase, and upon the exercise of such right the Company shall repurchase, all of such Holder's Securities not theretofore called for redemption, or any portion of the principal amount thereof that is equal to U.S.$1,000 or any greater integral multiple of U.S.$1,000, on the date (the "REPURCHASE DATE") that is fixed by the Company at a cash purchase price equal to 100% of the principal amount of the Securities to be repurchased plus interest accrued to the Repurchase Date (the "REPURCHASE PRICE"); provided, however, that installments of interest and Liquidated Damages, if any, on Securities whose Stated Maturity is on or prior to the Repurchase Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Record Date according to their terms and the provisions of Section 2.8. The Repurchase Date will be determined by the Company in the following manner: (i) the Company will give notice of the Change in Control as contemplated in Section 12.3(a); (ii) each Holder electing to exercise the repurchase right must deliver, on or before the thirtieth (30th) day (or such greater period as may be required by applicable law) after the date of the Company's notice provided in provision (i) above: (A) irrevocable written notice to the trustee of such Holder's exercise of its repurchase right, and (B) the Securities with respect to which such repurchase right is being exercised; and (iii) the Company will make the repurchase on a date that is no later than 45 days after the Holder has delivered the notice provided in proviso (ii) above. Such right to require the repurchase of the Securities shall not continue after a discharge of the Company from its obligations with respect to the Securities in accordance with Article Three unless a Change in Control shall have occurred prior to such discharge. At the option of the Company, the Repurchase Price may be paid in cash or, subject to the fulfillment by the Company of the conditions set forth Section 12.2, by delivery of shares of Common Stock or in a combination of cash and Common Stock having a fair market value equal to the Repurchase Price. Whenever in this Indenture (including Sections 2.2, 4.1(a) and 4.8) there is a reference, in any context, to the principal of any Security as of any time, such reference shall be deemed to include reference to the Repurchase Price that has become and remains payable in respect of such Security to the extent that such Repurchase Price is, was or would be so payable at such time, and express mention of the Repurchase Price in any provision of this Indenture shall not be construed as excluding the Repurchase Price in those provisions of this Indenture when such express mention is not made; provided, however, that for the purposes of Article Eleven such reference shall be deemed to include reference to the Repurchase Price only to the extent the Repurchase Price is payable in cash. For purposes of this Section 12.1, the fair market value of shares of Common Stock shall be determined by the Company and shall be equal to 95% of the average of the high and low sales price per share of the Common Stock on the New York Stock Exchange (or, if not listed on the New York Stock Exchange, such other national securities exchange or otherwise in -69- the over-the-counter market, as applicable) for each of the five consecutive Trading Days immediately preceding and including the third Trading Day prior to the Repurchase Date. SECTION 12.2 CONDITIONS TO THE COMPANY'S ELECTION TO PAY THE REPURCHASE PRICE IN COMMON STOCK. The Company may elect to pay the Repurchase Price by delivery of shares of Common Stock pursuant to Section 12.1 if and only if the following conditions shall have been satisfied: (a) As to each Holder, the Repurchase Price shall be paid only in cash in the event any shares of Common Stock to be issued to such Holder upon repurchase of Securities hereunder (1) 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 repurchase and if such registration is not completed or does not become effective prior to the Repurchase Date or (2) require registration with or approval of any governmental authority under any state law or any other federal law before such shares may be validly issued or delivered upon repurchase and if such registration is not completed or does not become effective or such approval is not obtained prior to the Repurchase Date; (b) Payment of the Repurchase Price may not be made in Common Stock unless such stock is, or shall have been, approved for quotation on The Nasdaq Stock Market or listed or quoted on a national securities exchange or other quotation system, in either case, prior to the Repurchase Date; and (c) All shares of Common Stock that may be issued upon repurchase of Securities will be issued out of the Company's authorized but unissued Common Stock will and, upon issue, be duly and validly issued and fully paid and non-assessable and free of any preemptive rights. If all of the conditions set forth in this Section 12.2 are not satisfied in accordance with the terms thereof, the Repurchase Price shall be paid by the Company only in cash. SECTION 12.3 NOTICES; METHOD OF EXERCISING REPURCHASE RIGHT, ETC. (a) Unless the Company shall have theretofore called for redemption all of the Outstanding Securities, on or before the thirtieth day after the occurrence of a Change in Control, the Company or, at the request and expense of the Company on or before the thirtieth day after such occurrence, the Trustee, shall give to all Holders of Securities, in the manner provided in Section 1.6, notice (the "COMPANY NOTICE") of the occurrence of the Change in Control and of the repurchase right set forth herein arising as a result thereof. The Company shall also deliver a copy of such notice of a repurchase right to the Trustee. Each notice of a repurchase right shall state: (1) the Repurchase Date, (2) the date by which the repurchase right must be exercised, -70- (3) the Repurchase Price, and whether the Repurchase Price shall be paid by the Company in cash or by delivery of shares of Common Stock, (4) a description of the procedure that a Holder must follow to exercise a repurchase right, and the place or places where such Securities are to be surrendered for payment of the Repurchase Price and accrued interest and Liquidated Damages, if any, (5) that on the Repurchase Date, the Repurchase Price, and accrued interest and Liquidated Damages, if any, will become due and payable upon each such Security designated by the Holder to be repurchased and that interest thereon shall cease to accrue on and after said date, (6) the Conversion Rate then in effect, the date on which the right to convert the principal amount of the Securities to be repurchased will terminate and the place or places where such Securities may be surrendered for conversion, (7) the place or places that the Notice of Election of Holder to Require Repurchase attached hereto as Exhibit B, shall be delivered, and the form of such notice, and (8) the CUSIP number or numbers of such Securities. No failure of the Company to give the foregoing notices or defect therein shall limit any Holder's right to exercise a repurchase right or affect the validity of the proceedings for the repurchase of Securities. If any of the foregoing provisions or other provisions of this Article Twelve are inconsistent with applicable law, such law shall govern. (b) To exercise a repurchase right, a Holder shall deliver to the Trustee on or before the thirtieth day (or such greater period as may be required by applicable law) after the date of the Company Notice (1) written notice of the Holder's exercise of such right, which notice shall set forth the name of the Holder, the principal amount of the Securities to be repurchased (and, if any Security is to repurchased in part, the serial number thereof, the portion of the principal amount thereof to be repurchased and the name of the Person in which the portion thereof to remain Outstanding after such repurchase is to be registered) and a statement that an election to exercise the repurchase right is being made thereby, and, in the event that the Repurchase Price shall be paid in shares of Common Stock, the name or names (with addresses) in which the certificate or certificates for shares of Common Stock shall be issued, and (2) the Securities with respect to which the repurchase right is being exercised. Such written notice shall be irrevocable, except that the right of the Holder to convert the Securities with respect to which the repurchase right is being exercised shall continue until the close of business on the Business Day immediately preceding the Repurchase Date. (c) In the event a repurchase right shall be exercised in accordance with the terms hereof, the Company shall pay or cause to be paid to the Trustee the Repurchase Price in cash or shares of Common Stock, as provided above, for payment to the Holder on the Repurchase Date or, if shares of Common Stock are to be paid, as promptly after the Repurchase -71- Date as practicable, together with accrued and unpaid interest and Liquidated Damages, if any, to the Repurchase Date payable with respect to the Securities as to which the purchase right has been exercised; provided, however, that installments of interest that mature on or prior to the Repurchase Date shall be payable in cash to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Regular Record Date. (d) If any Security (or portion thereof) surrendered for repurchase shall not be so paid on the Repurchase Date, the principal amount of such Security (or portion thereof, as the case may be) shall, until paid, bear interest to the extent permitted by applicable law from the Repurchase Date at the rate then in effect per annum, and each Security shall remain convertible into Common Stock until the principal of such Security (or portion thereof, as the case may be) shall have been paid or duly provided for. (e) Any Security that is to be repurchased only in part shall be surrendered to the Trustee (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Security or Securities, containing identical terms and conditions, each in an authorized denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Security so surrendered. (f) Any issuance of shares of Common Stock in respect of the Repurchase Price shall be deemed to have been effected immediately prior to the close of business on the Repurchase Date and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such repurchase shall be deemed to have become on the Repurchase Date the holder or holders of record of the shares represented thereby; provided, however, that any surrender for repurchase 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 certificate or certificates for such shares are to be issued as the record holder or holders thereof 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 issued upon repurchase of any Security declared prior to the Repurchase Date. (g) No fractions of shares shall be issued upon repurchase of Securities. If more than one Security shall be repurchased from the same Holder and the Repurchase Price shall be payable in shares of Common Stock, the number of full shares that shall be issuable upon such repurchase shall be computed on the basis of the aggregate principal amount of the Securities so repurchased. Instead of any fractional share of Common Stock that would otherwise be issuable on the repurchase of any Security or Securities, the Company will deliver to the applicable Holder its check for the current market value of such fractional share. The current market value of a fraction of a share is determined by multiplying the current market price of a full share by the fraction and rounding the result to the nearest cent. For purposes of this Section 12.3, the current market price of a share of Common Stock is the average of the high -72- and low sales price per Share of the Common Stock on the Trading Day immediately preceding the Repurchase Date. (h) Any issuance and delivery of certificates for shares of Common Stock on repurchase of Securities shall be made without charge to the Holder of Securities being repurchased for such certificates or for any tax or duty in respect of the issuance or delivery of such certificates or the securities represented thereby; provided, however, that the Company shall not be required to pay any tax or duty that may be payable in respect of (1) income of the Holder or (2) any transfer involved in the issuance or delivery of certificates for shares of Common Stock in a name other than that of the Holder of the Securities being repurchased, and no such issuance or delivery shall be made unless and until the Person 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. (i) All Securities delivered for repurchase shall be delivered to the Trustee to be canceled at the direction of the Trustee, which shall dispose of the same as provided in Section 2.10. ARTICLE THIRTEEN HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE SECTION 13.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS. The Company will furnish or cause to be furnished to the Trustee: (a) semi-annually, not more than 15 days after the Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Securities as of such Regular Record Date, and (b) at such other times as the Trustee may reasonably request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that no such list need be furnished so long as the Trustee is acting as Security Registrar. SECTION 13.2 PRESERVATION OF INFORMATION. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 13.1 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 13.1 upon receipt of a new list so furnished. (b) After this Indenture has been qualified under the Trust Indenture Act, the rights of Holders to communicate with other Holders with respect to their rights under this -73- Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, 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 made pursuant to the Trust Indenture Act. SECTION 13.3 NO RECOURSE AGAINST OTHERS. An incorporator or any past, present or future director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder shall waive and release all such liability. Such waiver and release shall be part of the consideration for the issue of the Securities. SECTION 13.4 REPORTS BY TRUSTEE. (a) After this Indenture has been qualified under the Trust Indenture Act, the Trustee shall transmit to Holders such reports 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 therein. If required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within 60 days after each ________ following the date of this Indenture, deliver to Holders a brief report, dated as of such ________, that complies with the provisions of such Section 313(a). (b) After this Indenture has been qualified under the Trust Indenture Act, a copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company will promptly notify the Trustee when the Securities are listed on any stock exchange. SECTION 13.5 REPORTS BY COMPANY. After this Indenture has been qualified under the Trust Indenture Act, the Company shall file with the Trustee and the Commission, and transmit to Holders, 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 therein; provided, however, 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 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 thereof 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 Officers' Certificates). -74- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. Skechers U.S.A., Inc. By /s/ DAVID WEINBERG ------------------------- Name: David Weinberg Title: Chief Financial Officer Wells Fargo Bank, National Association, as Trustee By /s/ JEANIE MAR ------------------------- Name: Jeanie Mar Title: Vice President EXHIBIT A [FORM OF FACE] [THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH RESTRICTED SECURITY OTHER THAN ANY RESTRICTED GLOBAL SECURITY: THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT THAT PRIOR TO SUCH TRANSFER PROVIDES TO THE TRUSTEE FOR THE NOTES A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF THE LETTER CAN BE OBTAINED FROM THE TRUSTEE OF THE NOTES), (4) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO SKECHERS U.S.A., INC.) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. THIS NOTE, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS NOTE AND SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.] [THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH RESTRICTED GLOBAL SECURITY: THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON THE CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON THAT THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT THAT PRIOR TO SUCH TRANSFER PROVIDES TO THE TRUSTEE FOR THE NOTES A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF THE LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THE NOTES), (4) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO SKECHERS U.S.A., INC.) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. THIS NOTE, ANY CLASS A COMMON SHARES ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS A-2 NOTE AND SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.] [THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR ALL PURPOSES.] [THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY FOR WHICH THE DEPOSITORY TRUST COMPANY IS TO BE THE DEPOSITARY: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER 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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), 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.] A-3 SKECHERS U.S.A., INC. ____% CONVERTIBLE SUBORDINATED NOTE DUE __________, 2007 NO. ____________ U.S.$_____ CUSIP NO. ___________ Skechers U.S.A., Inc., a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company," which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of _____________ United States Dollars (U.S.$ _____) [IF THIS SECURITY IS A GLOBAL SECURITY, THEN INSERT -- (WHICH PRINCIPAL AMOUNT MAY FROM TIME TO TIME BE INCREASED OR DECREASED TO SUCH OTHER PRINCIPAL AMOUNTS (WHICH, TAKEN TOGETHER WITH THE PRINCIPAL AMOUNTS OF ALL OTHER OUTSTANDING SECURITIES, SHALL NOT EXCEED $___,000,000 IN THE AGGREGATE AT ANY TIME, UNLESS THE INITIAL PURCHASER EXERCISES AS OVER-ALLOTMENT RIGHTS, IN WHICH CASE THE PRINCIPAL AMOUNT OF THE OUTSTANDING SECURITIES SHALL NOT EXCEED U.S. $___,000,000) BY ADJUSTMENTS MADE ON THE RECORDS OF THE TRUSTEE HEREINAFTER REFERRED TO IN ACCORDANCE WITH THE INDENTURE)] on _________, 2007, unless redeemed or repurchased on an earlier date, and to pay interest thereon, from _________, 2002, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, semiannually in arrears on _________ and __________ in each year (each, an "Interest Payment Date"), commencing ____________, 2002, at the rate of ____% per annum, until the principal hereof is due, and at the rate then in effect on any overdue principal and premium, if any, and, to the extent permitted by law, on any overdue interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the __________ and _________ (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Except as otherwise provided in the Indenture, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of Registered Securities not less than ten days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payments of principal shall be made upon the surrender of this Security at the option of the Holder at the Corporate Trust Office or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, 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, or at such other offices or agencies as the Company may designate, by United States Dollar check drawn on, or wire transfer to, a United States Dollar account (such a wire transfer to be made only to a Holder of an aggregate principal amount of Registered Securities in excess of U.S.$2,000,000 and only if such Holder shall have furnished wire instructions in writing to the Trustee no later than 15 days prior A-4 to the relevant payment date) maintained by the payee. Payment of interest on this Security may be made by United States Dollar check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or, upon written application by the Holder to the Security Registrar setting forth wire instructions not later than the relevant Record Date, by wire transfer to a United States dollar account (such a wire transfer to be made only to a Holder of an aggregate principal amount of Registered Securities in excess of U.S.$2,000,000 and only if such Holder shall have furnished wire instructions in writing to the Trustee no later than 15 days prior to the relevant payment date) maintained by the payee. Except as specifically provided herein and in the Indenture, the Company shall not be required to make any payment with respect to any tax, assessment or other governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof or an Authenticating Agent by the manual signature of one of their respective authorized signatories, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this Security to be duly executed. A-5 SKECHERS U.S.A., INC. By:______________________________ Name: Title: Attest: - ------------------------------ Name: Dated: April 9, 2002 This is one of the Securities referred to in the within-mentioned Indenture. WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By: ______________________________ Authorized Signatory A-6 [FORM OF REVERSE] This Security is one of a duly authorized issue of securities of the Company designated as its "____% Convertible Subordinated Notes due _______, 2007" (herein called the "Securities"), limited in aggregate principal amount to U.S.$___,000,000 (U.S.$___,000,000 if the over-allotment is fully exercised), issued and to be issued under an Indenture, dated as of _________, 2002 (herein called the "Indenture"), between the Company and Wells Fargo Bank, National Association, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Debt and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. As provided in the Indenture and subject to certain limitations set forth therein, Registered Securities are exchangeable for a like aggregate principal amount of Registered Securities of any authorized denominations as requested by the Holder surrendering the same upon surrender of the Registered Security or Registered Securities to be exchanged at the Corporate Trust Office. The Trustee upon such surrender by the Holder will issue the new Registered Securities in the requested denominations. No sinking fund is provided for the Securities. The Securities are subject to redemption at the option of the Company at any time on or after ________, 2005, in whole or in part, upon not less than 30 nor more than 60 days' notice to the Holders prior to the Redemption Date at the following Redemption Prices (expressed as percentages of the principal amount) for the twelve-month period beginning on _________ of the following years (__________ through __________ in the case of the first of such periods):

YEAR REDEMPTION PRICE - ---- ---------------- 2005.............................................................. _______% 2006.............................................................. _______%

and thereafter at a Redemption Price equal to 100% of the principal amount, together, in each case, with accrued interest to, but excluding the Redemption Date; provided, however, that interest installments on Securities whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture. The Securities are subject to redemption at the option of the Company at any time before _________, 2005 ("Provisional Redemption"), in whole or in part, upon not less than 30 nor more than 60 days' notice to the Holders prior to the Redemption Date at a Redemption Price equal to 100% of the principal amount, together, in each case, with accrued interest and Liquidated Damages, if any, to, but excluding, the Redemption Date, if (a) the closing price of A-7 the Company's Common Stock has exceeded 150% of the Conversion Price then in effect for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day immediately before the date of mailing of the notice of the Provisional Redemption, and (b) the Shelf Registration Statement is effective and available for use and is expected to remain effective and available for use for the 30 days following the Redemption Date, unless registration is no longer required. Upon any Provisional Redemption, the Company will pay to the Holders cash or Common Stock, or in a combination of cash and Common Stock, with respect to the Securities called for Provisional Redemption, and previously converted after the notice of Provisional Redemption and before to the date of the Provisional Redemption, in an amount equal to $______ per $1,000 principal amount of the Securities, less the amount of any interest paid on the Securities before the date of the Provisional Redemption. For purposes of any such payment in Common Stock, the value of such Common Stock will be at 95% of the average of the closing sales prices of the Company's Common Stock for each of the five trading days ending with the third trading day immediately prior to the Redemption Date. In the event of a redemption of the Securities, the Company will not be required (a) to register the transfer or exchange of Registered Securities for a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities called for such redemption (it being understood that the Company will not be required to identify the serial numbers of Outstanding Securities if all such Securities are called for redemption) or (b) to register the transfer or exchange of any Registered Security, or portion thereof, called for redemption. Notice to the Holders will be given not less than 30 nor more than 60 days prior to the Redemption Date as provided in the Indenture. In any case where the due date for the payment of the principal of, premium, if any, Liquidated Damages, if any, or interest on any Security or the last day on which a Holder of a Security has a right to convert his Security shall be, at any Place of Payment or Place of Conversion, as the case may be, a day on which banking institutions at such Place of Payment or Place of Conversion are authorized or obligated by law or executive order to close, then payment of principal, premium, if any, Liquidated Damages, if any, or interest or delivery for conversion of such Security need not be made on or by such date at such place but may be made on or by the next succeeding day at such place which is not a day on which banking institutions are authorized or obligated by law or executive order to close, with the same force and effect as if made on the date for such payment or the date fixed for redemption or repurchase, or by such last day for conversion, and no interest shall accrue on the amount so payable for the period from and after such due date. Subject to and upon compliance with the provisions of the Indenture, the Holder of this Security is entitled, at his option, at any time following the original issue date of the Securities and on or before the close of business on _________, 2007, or in case this Security or a portion hereof is called for redemption or the Holder hereof has exercised his right to require the Company to repurchase this Security or such portion hereof, then in respect of this Security until A-8 and including, but (unless the Company defaults in making the payment due upon redemption or repurchase, as the case may be) not after, the close of business on the Business Day immediately preceding the Redemption Date or the Repurchase Date, as the case may be, to convert this Security or any portion of the principal amount hereof that is an integral multiple of U.S.$1,000 (provided that the unconverted portion of such principal amount is U.S.$1,000 or any integral multiple of U.S.$1,000 in excess thereof) into fully paid and nonassessable shares of Common Stock of the Company at an initial Conversion Rate of _________ (or at the current adjusted Conversion Rate if an adjustment has been made as provided in the Indenture) by surrender of this Security, duly endorsed or assigned to the Company or in blank and, in case such surrender shall be made during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date (except if this Security has been called for redemption on a Redemption Date or is repurchasable on a Repurchase Date, with the consequence that the conversion right of such Security would terminate between such Regular Record Date and the close of business on such Interest Payment Date), also accompanied by payment in New York Clearing House or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of this Security then being converted, and also the conversion notice hereon duly executed, to the Company at the Corporate Trust Office, or at such other office or agency of the Company, subject to any laws or regulations applicable thereto and subject to the right of the Company to terminate the appointment of any Conversion Agent (as defined below) as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, or at such other offices or agencies as the Company may designate (each a "Conversion Agent"), provided, further, that in case surrender of this Security for conversion shall be made during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date and if this Security or portion hereof has been called for redemption on a Redemption Date or is repurchasable on a Repurchase Date, with the consequence that the conversion right of such Security would terminate between such Regular Record Date and the close of business on such Interest Payment Date, then the Holder of this Security will be entitled to receive the interest accruing hereon from the Interest Payment Date next preceding the date of such conversion to such succeeding Interest Payment Date and shall not be required to pay such interest upon surrender of this Security for conversion. Subject to the provisions of the preceding sentence and, in the case of a conversion after the close of business on the Regular Record Date next preceding any Interest Payment Date and on or before the close of business on such Interest Payment Date, to the right of the Holder of this Security (or any Predecessor Security of record as of such Regular Record Date) to receive the related installment of interest to the extent and under the circumstances provided in the Indenture, no cash payment or adjustment is to be made on conversion for interest accrued hereon from the Interest Payment Date next preceding the day of conversion, or for dividends on the Common Stock issued on conversion hereof. The Company shall thereafter deliver to the Holder the fixed number of shares of Common Stock (together with any cash adjustment or rights or warrants, as provided in the Indenture) into which this Security is convertible and such delivery will be deemed to satisfy the Company's obligation to pay the principal amount of this Security. No fractions of shares or scrip representing fractions of shares will be issued on A-9 conversion, but instead of any fractional interest (calculated to the nearest 1/100th of a share) the Company shall pay a cash adjustment as provided in the Indenture. The Conversion Rate is subject to adjustment as provided in the Indenture. In addition, the Indenture provides that in case of certain consolidations or mergers to which the Company is a party or the conveyance, transfer, sale or lease of all or substantially all of the property and assets of the Company, the Indenture shall be amended, without the consent of any Holders of Securities, so that this Security, if then Outstanding, will be convertible thereafter, during the period this Security shall be convertible as specified above, only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, transfer, sale or lease by a holder of the number of shares of Common Stock of the Company into which this Security could have been converted immediately prior to such consolidation, merger, conveyance, transfer, sale or lease (assuming such holder of Common Stock is not a Constituent Person, failed to exercise any rights of election and received per share the kind and amount received per share by a plurality of Non-electing Shares). No adjustment in the Conversion Rate will be made until such adjustment would require an increase or decrease of at least one percent of such rate, provided that any adjustment that would otherwise be made will be carried forward and taken into account in the computation of any subsequent adjustment. Subject to certain limitations in the Indenture, at any time when the Company is not subject to Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as amended, upon the request of a Holder of a Security or the holder of shares of Common Stock issued upon conversion thereof, the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder of Securities or such holder of shares of Common Stock issued upon conversion of Securities, or to a prospective purchaser of any such security designated by any such Holder or holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), in connection with the resale of any such security. "Rule 144A Information" shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto). The Holder of this Security [IF THIS SECURITY IS A GLOBAL SECURITY, THEN INSERT--(INCLUDING ANY PERSON THAT HAS A BENEFICIAL INTEREST IN THIS SECURITY)] and the Common Stock issuable upon conversion hereof is entitled to the benefits of a Registration Rights Agreement, dated as of ________, 2002 (the "Registration Rights Agreement"), executed by the Company. Pursuant to the Registration Rights Agreement, the Company has agreed for the benefit of the Holders from time to time of Registered Securities and the Common Stock issuable upon conversion thereof, in each case, that are Registrable Securities, at the Company's expense, (a) to file on or before 90 days after the first date of original issuance of the Securities, a shelf registration statement (the "Shelf Registration Statement") with the Commission with respect to resales of the Registrable Securities, (b) thereafter to use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before 180 days after the first date of original issuance of the Securities, subject to the Company's right to postpone having the Shelf Registration Statement declared effective for an additional 60 days in limited A-10 circumstances described in the Registration Rights Agreement, and (c) to use its reasonable best efforts to maintain such Shelf Registration Statement continuously effective under the Securities Act until the earlier of (1) the sale under the Shelf Registration Statement of all the Registrable Securities registered thereunder and (2) the expiration of the holding period applicable to such Registrable Securities held by persons that are not affiliates of the Company under Rule 144(k) under the Securities Act or any successor previously subject to specific permitted exceptions. The Company is required to pay Liquidated Damages to holders of Registrable Securities for failure to comply with the foregoing registration obligations, all as more fully set forth in the Registration Rights Agreement. Whenever in this Security there is a reference, in any context, to the payment of the principal of, premium, if any, or interest on, or in respect of, any Security such mention shall be deemed to include mention of the payment of Liquidated Damages payable as described in the Registration Rights Agreement to the extent that, in such context, Liquidated Damages are, were or would be payable in respect of this Security pursuant to the Registration Rights Agreement, and an express mention of the payment of Liquidated Damages (if applicable) in any provisions of this Security shall not be construed as excluding Liquidated Damages in those provisions of this Security where such express mention is not made. If the Holder of this Security [IF THIS SECURITY IS A GLOBAL SECURITY, THEN INSERT--(INCLUDING ANY PERSON THAT HAS A BENEFICIAL INTEREST IN THIS SECURITY)] elects to sell this Security pursuant to the Shelf Registration Statement then, by its acceptance hereof, such Holder of this Security agrees to be bound by the terms of the Registration Rights Agreement relating to the Registrable Securities which are the subject of such election. If a Change in Control occurs, the Holder of this Security, at the Holder's option, shall have the right, in accordance with the provisions of the Indenture, to require the Company to repurchase this Security (or any portion of the principal amount hereof that is equal to U.S.$1,000 or any greater integral multiple of U.S.$1,000) for cash at a Repurchase Price equal to 100% of the principal amount thereof plus interest accrued to, but excluding, the Repurchase Date. At the option of the Company, the Repurchase Price may be paid in cash or, subject to the conditions provided in the Indenture, by delivery of shares of Common Stock or in a combination of cash and Common Stock, having a fair market value equal to the Repurchase Price. For purposes of this paragraph, the fair market value of shares of Common Stock shall be determined by the Company and shall be equal to 95% of the average of the high and low sales price per share for the five consecutive Trading Days immediately preceding and including the third Trading Day prior to the Repurchase Date. Whenever in this Security there is a reference, in any context, to the principal of any Security as of any time, such reference shall be deemed to include reference to the Repurchase Price payable in respect of such Security to the extent that such Repurchase Price is, was or would be so payable at such time, and express mention of the Repurchase Price in any provision of this Security shall not be construed as excluding the Repurchase Price so payable in those provisions of this Security when such express mention is not made; provided, however, that, for the purposes of the paragraph below concerning the A-11 consequences of an Event of Default, such reference shall be deemed to include reference to the Repurchase Price only to the extent the Repurchase Price is payable in cash. [THE FOLLOWING PARAGRAPH SHALL APPEAR IN EACH REGISTERED SECURITY THAT IS NOT A GLOBAL SECURITY: IN THE EVENT OF REDEMPTION, REPURCHASE OR CONVERSION OF THIS SECURITY IN PART ONLY, A NEW REGISTERED SECURITY OR REGISTERED SECURITIES FOR THE UNREDEEMED, UNREPURCHASED OR UNCONVERTED PORTION HEREOF WILL BE ISSUED IN THE NAME OF THE HOLDER HEREOF.] [THE FOLLOWING PARAGRAPH SHALL APPEAR IN EACH GLOBAL SECURITY: IN THE EVENT OF A DEPOSIT OR WITHDRAWAL OF AN INTEREST IN THIS SECURITY, INCLUDING AN EXCHANGE, TRANSFER, REDEMPTION, REPURCHASE OR CONVERSION OF THIS SECURITY IN PART ONLY, THE TRUSTEE, AS CUSTODIAN OF THE DEPOSITARY, SHALL MAKE AN ADJUSTMENT ON ITS RECORDS TO REFLECT SUCH DEPOSIT OR WITHDRAWAL IN ACCORDANCE WITH THE APPLICABLE PROCEDURES.] The indebtedness evidenced by this Security is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full in cash or Cash Equivalents of all Senior Debt of the Company, and this Security is issued subject to such provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. If an Event of Default shall occur and be continuing, the principal of all the Securities, together with accrued interest to the date of declaration, may be declared due and payable in the manner and with the effect provided in the Indenture. Upon payment (i) of the amount of principal so declared due and payable, together with accrued interest to the date of declaration, and (ii) of interest on any overdue principal and, to the extent permitted by applicable law, overdue interest, all of the Company's obligations in respect of the payment of the principal of and interest on the Securities shall terminate. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities under the Indenture at any time by the Company and the Trustee with the written consent of the Holders of a majority in principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities at the time Outstanding, on behalf of the A-12 Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security or such other Security. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default, the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, the Trustee shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of indemnity, and the Trustee has not received any direction inconsistent with such written request from the Holders of a majority of the aggregate principal amount of the Outstanding Securities during such 60 day period. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof, premium, if any, Liquidated Damages, if any, or interest hereon on or after the respective due dates expressed herein or for the enforcement of the right to convert this Security as provided in the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, Liquidated Damages, if any, and interest on this Security at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Security as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of Registered Securities is registrable on the Security Register upon surrender of a Registered Security for registration of transfer at the Corporate Trust Office of the Trustee or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, or at such other offices or agencies as the Company may designate, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing, and thereupon one or more new Registered Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees by the Registrar. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to recover any tax or other governmental charge payable in connection therewith. Prior to due presentation of a Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in A-13 whose name such Registered Security is registered as the owner thereof for all purposes, whether or not such Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York, United States of America, including, without limitation, Section 5-1401 of the New York General Obligations Law. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. A-14 EXHIBIT B ELECTION OF HOLDER TO REQUIRE REPURCHASE 1. Pursuant to Section 12.1 of the Indenture, the undersigned hereby elects to have this Security repurchased by the Company. 2. The undersigned hereby directs the Trustee or the Company to pay it or ___________________ an amount in cash equal to 100% of the principal amount to be repurchased (as set forth below), plus interest accrued to the Repurchase Date or, at the Company's election, Common Stock, valued as set forth in the Indenture. DATED: ____________________________________ ___________________________________________ SIGNATURE SIGNATURE GUARANTEED ___________________________________________ PRINCIPAL AMOUNT TO BE REPURCHASED: ___________________________________________ (must be equal to U.S.$1,000 or any greater integral multiple of U.S.$1,000): REMAINING PRINCIPAL AMOUNT FOLLOWING SUCH REPURCHASE: NOTICE: The signature to the foregoing election must correspond to the name as written upon the face of this Security in every particular, without alteration or any change whatsoever. EXHIBIT C CONVERSION NOTICE The undersigned Holder of this Security hereby irrevocably exercises the option to convert this Security, or any portion of the principal amount hereof (which is an integral multiple of U.S.$1,000) below designated, into shares of Common Stock in accordance with the terms of the Indenture referred to in this Security and directs that such shares, together with a check in payment for any fractional share and any Securities representing any unconverted principal amount hereof, be delivered to and be registered in the name of the undersigned unless a different name has been indicated below. If shares of Common Stock or Securities are to be registered in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid by the undersigned on account of interest accompanies this Security. DATED: _________________ _____________________________________ Signature If shares or Registered Securities are to be If only a portion of the Securities is to be registered in the name of a Person other than converted, please indicate: the Holder, please print such Person's name and address: 1. Principal amount to be converted: _____________________________________________ U.S.$_______________________ (any integral multiple of U.S. $1,000) _____________________________________________ Address 2. Principal amount and denomination of Registered Securities representing unconverted principal amount to be _____________________________________________ issued: Social Security or other Taxpayer Identification Number, if any Amount: U.S.$__________________ _____________________________________________ [Signature Guaranteed] EX-4.3 5 v83779exv4w3.txt EXHIBIT 4.3 Exhibit 4.3 THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON THE CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON THAT THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT THAT PRIOR TO SUCH TRANSFER PROVIDES TO THE TRUSTEE FOR THE NOTES A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF THE LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THE NOTES), (4) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO SKECHERS U.S.A., INC.) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. THIS NOTE, ANY CLASS A COMMON SHARES ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS NOTE AND SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT. THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE 1 NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR ALL PURPOSES. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER 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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), 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. 2 SKECHERS U.S.A., INC. 4.50% CONVERTIBLE SUBORDINATED NOTE DUE APRIL 15, 2007 NO. 1 U.S. $75,000,000 CUSIP NO. 830566AA3 Skechers U.S.A., Inc., a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company," which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of seventy five million United States Dollars (U.S. $75,000,000) (which principal amount may from time to time be increased or decreased to such other principal amounts (which, taken together with the principal amounts of all other Outstanding Securities, shall not exceed $110,000,000 in the aggregate at any time, unless the Initial Purchaser exercises its over-allotment rights, in which case the principal amount of the Outstanding Securities shall not exceed U.S. $125,000,000) by adjustments made on the records of the Trustee hereinafter referred to in accordance with the Indenture) on April 15, 2007, unless redeemed or repurchased on an earlier date, and to pay interest thereon, from April 9, 2002, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, semiannually in arrears on April 15 and October 15 in each year (each, an "Interest Payment Date"), commencing October 15, 2002, at the rate of 4.50% per annum, until the principal hereof is due, and at the rate then in effect on any overdue principal and premium, if any, and, to the extent permitted by law, on any overdue interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the April 1 and October 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Except as otherwise provided in the Indenture, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of Registered Securities not less than ten days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payments of principal shall be made upon the surrender of this Security at the option of the Holder at the Corporate Trust Office or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, 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, or at such other offices or agencies as the Company may designate, by United States Dollar check drawn on, or wire transfer to, a United States Dollar account (such a wire transfer to be made only to a Holder of an aggregate principal amount of Registered Securities in excess of U.S.$2,000,000 and only if such Holder shall have furnished wire instructions in writing to the Trustee no later than 15 days prior to the relevant payment date) maintained by the payee. Payment of interest on this Security may 3 be made by United States Dollar check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or, upon written application by the Holder to the Security Registrar setting forth wire instructions not later than the relevant Record Date, by wire transfer to a United States dollar account (such a wire transfer to be made only to a Holder of an aggregate principal amount of Registered Securities in excess of U.S.$2,000,000 and only if such Holder shall have furnished wire instructions in writing to the Trustee no later than 15 days prior to the relevant payment date) maintained by the payee. Except as specifically provided herein and in the Indenture, the Company shall not be required to make any payment with respect to any tax, assessment or other governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof or an Authenticating Agent by the manual signature of one of their respective authorized signatories, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 4 IN WITNESS WHEREOF, the Company has caused this Security to be duly executed. SKECHERS U.S.A., INC. By: /s/ MICHAEL GREENBERG ----------------------------- Name: Michael Greenberg Title: President Attest: /s/ PHILIP PACCIONE - ------------------------------ Name: Philip Paccione Dated: April 9, 2002 This is one of the Securities referred to in the within-mentioned Indenture. WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By: /s/ JEANIE MAR ------------------------------ Authorized Signatory 5 [REVERSE OF NOTE] This Security is one of a duly authorized issue of securities of the Company designated as its "4.50% Convertible Subordinated Notes due April 15, 2007" (herein called the "Securities"), limited in aggregate principal amount to U.S. $75,000,000 (U.S. $90,000,000 if the over-allotment is fully exercised), issued and to be issued under an Indenture, dated as of April 9, 2002 (herein called the "Indenture"), between the Company and Wells Fargo Bank, National Association, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Debt and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. As provided in the Indenture and subject to certain limitations set forth therein, Registered Securities are exchangeable for a like aggregate principal amount of Registered Securities of any authorized denominations as requested by the Holder surrendering the same upon surrender of the Registered Security or Registered Securities to be exchanged at the Corporate Trust Office. The Trustee upon such surrender by the Holder will issue the new Registered Securities in the requested denominations. No sinking fund is provided for the Securities. The Securities are subject to redemption at the option of the Company at any time on or after April 15, 2005, in whole or in part, upon not less than 30 nor more than 60 days' notice to the Holders prior to the Redemption Date at the following Redemption Prices (expressed as percentages of the principal amount) for the twelve-month period beginning on April 15 of the following years (April 15, 2005 through April 15, 2006 in the case of the first of such periods):

YEAR REDEMPTION PRICE - ---- ---------------- 2005.............................................................. 101.80% 2006.............................................................. 100.90%

and thereafter at a Redemption Price equal to 100% of the principal amount, together, in each case, with accrued interest to, but excluding the Redemption Date; provided, however, that interest installments on Securities whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture. The Securities are subject to redemption at the option of the Company at any time before April 15, 2005 ("Provisional Redemption"), in whole or in part, upon not less than 30 nor more than 60 days' notice to the Holders prior to the Redemption Date at a Redemption Price equal to 100% of the principal amount, together, in each case, with accrued interest and Liquidated Damages, if any, to, but excluding, the Redemption Date, if (a) the closing price of the Company's Common Stock has exceeded 150% of the Conversion Price then in effect for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day 6 immediately before the date of mailing of the notice of the Provisional Redemption, and (b) the Shelf Registration Statement is effective and available for use and is expected to remain effective and available for use for the 30 days following the Redemption Date, unless registration is no longer required. Upon any Provisional Redemption, the Company will pay to the Holders cash or Common Stock, or in a combination of cash and Common Stock, with respect to the Securities called for Provisional Redemption, and previously converted after the notice of Provisional Redemption and before to the date of the Provisional Redemption, in an amount equal to $135.00 per $1,000 principal amount of the Securities, less the amount of any interest paid on the Securities before the date of the Provisional Redemption. For purposes of any such payment in Common Stock, the value of such Common Stock will be at 95% of the average of the closing sales prices of the Company's Common Stock for each of the five trading days ending with the third trading day immediately prior to the Redemption Date. In the event of a redemption of the Securities, the Company will not be required (a) to register the transfer or exchange of Registered Securities for a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities called for such redemption (it being understood that the Company will not be required to identify the serial numbers of Outstanding Securities if all such Securities are called for redemption) or (b) to register the transfer or exchange of any Registered Security, or portion thereof, called for redemption. Notice to the Holders will be given not less than 30 nor more than 60 days prior to the Redemption Date as provided in the Indenture. In any case where the due date for the payment of the principal of, premium, if any, Liquidated Damages, if any, or interest on any Security or the last day on which a Holder of a Security has a right to convert his Security shall be, at any Place of Payment or Place of Conversion, as the case may be, a day on which banking institutions at such Place of Payment or Place of Conversion are authorized or obligated by law or executive order to close, then payment of principal, premium, if any, Liquidated Damages, if any, or interest or delivery for conversion of such Security need not be made on or by such date at such place but may be made on or by the next succeeding day at such place which is not a day on which banking institutions are authorized or obligated by law or executive order to close, with the same force and effect as if made on the date for such payment or the date fixed for redemption or repurchase, or by such last day for conversion, and no interest shall accrue on the amount so payable for the period from and after such due date. Subject to and upon compliance with the provisions of the Indenture, the Holder of this Security is entitled, at his option, at any time following the original issue date of the Securities and on or before the close of business on April 15, 2007, or in case this Security or a portion hereof is called for redemption or the Holder hereof has exercised his right to require the Company to repurchase this Security or such portion hereof, then in respect of this Security until and including, but (unless the Company defaults in making the payment due upon redemption or repurchase, as the case may be) not after, the close of business on the Business Day immediately preceding the Redemption Date or the Repurchase Date, as the case may be, to convert this Security or any portion of the principal amount hereof that is an integral multiple of U.S.$1,000 (provided that the unconverted portion of such principal amount is U.S.$1,000 or any integral 7 multiple of U.S.$1,000 in excess thereof) into fully paid and nonassessable shares of Common Stock of the Company at an initial Conversion Rate of 38.5089 (or at the current adjusted Conversion Rate if an adjustment has been made as provided in the Indenture) by surrender of this Security, duly endorsed or assigned to the Company or in blank and, in case such surrender shall be made during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date (except if this Security has been called for redemption on a Redemption Date or is repurchasable on a Repurchase Date, with the consequence that the conversion right of such Security would terminate between such Regular Record Date and the close of business on such Interest Payment Date), also accompanied by payment in New York Clearing House or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of this Security then being converted, and also the conversion notice hereon duly executed, to the Company at the Corporate Trust Office, or at such other office or agency of the Company, subject to any laws or regulations applicable thereto and subject to the right of the Company to terminate the appointment of any Conversion Agent (as defined below) as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, or at such other offices or agencies as the Company may designate (each a "Conversion Agent"), provided, further, that in case surrender of this Security for conversion shall be made during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date and if this Security or portion hereof has been called for redemption on a Redemption Date or is repurchasable on a Repurchase Date, with the consequence that the conversion right of such Security would terminate between such Regular Record Date and the close of business on such Interest Payment Date, then the Holder of this Security will be entitled to receive the interest accruing hereon from the Interest Payment Date next preceding the date of such conversion to such succeeding Interest Payment Date and shall not be required to pay such interest upon surrender of this Security for conversion. Subject to the provisions of the preceding sentence and, in the case of a conversion after the close of business on the Regular Record Date next preceding any Interest Payment Date and on or before the close of business on such Interest Payment Date, to the right of the Holder of this Security (or any Predecessor Security of record as of such Regular Record Date) to receive the related installment of interest to the extent and under the circumstances provided in the Indenture, no cash payment or adjustment is to be made on conversion for interest accrued hereon from the Interest Payment Date next preceding the day of conversion, or for dividends on the Common Stock issued on conversion hereof. The Company shall thereafter deliver to the Holder the fixed number of shares of Common Stock (together with any cash adjustment or rights or warrants, as provided in the Indenture) into which this Security is convertible and such delivery will be deemed to satisfy the Company's obligation to pay the principal amount of this Security. No fractions of shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest (calculated to the nearest 1/100th of a share) the Company shall pay a cash adjustment as provided in the Indenture. The Conversion Rate is subject to adjustment as provided in the Indenture. In addition, the Indenture provides that in case of certain consolidations or mergers to which the Company is a party or the conveyance, transfer, sale or lease of all or substantially all of the property and assets of the Company, the Indenture shall be amended, without the consent of any Holders of Securities, so that this Security, if then Outstanding, will be convertible thereafter, during the period this Security shall be convertible as specified above, only into the kind and amount of securities, cash and other 8 property receivable upon such consolidation, merger, conveyance, transfer, sale or lease by a holder of the number of shares of Common Stock of the Company into which this Security could have been converted immediately prior to such consolidation, merger, conveyance, transfer, sale or lease (assuming such holder of Common Stock is not a Constituent Person, failed to exercise any rights of election and received per share the kind and amount received per share by a plurality of Non-electing Shares). No adjustment in the Conversion Rate will be made until such adjustment would require an increase or decrease of at least one percent of such rate, provided that any adjustment that would otherwise be made will be carried forward and taken into account in the computation of any subsequent adjustment. Subject to certain limitations in the Indenture, at any time when the Company is not subject to Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as amended, upon the request of a Holder of a Security or the holder of shares of Common Stock issued upon conversion thereof, the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder of Securities or such holder of shares of Common Stock issued upon conversion of Securities, or to a prospective purchaser of any such security designated by any such Holder or holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), in connection with the resale of any such security. "Rule 144A Information" shall be such information as is specified pursuant to Rule 144A(d) (4) under the Securities Act (or any successor provision thereto). The Holder of this Security (including any Person that has a beneficial interest in this Security) and the Common Stock issuable upon conversion hereof is entitled to the benefits of a Registration Rights Agreement, dated as of April 9, 2002 (the "Registration Rights Agreement"), executed by the Company. Pursuant to the Registration Rights Agreement, the Company has agreed for the benefit of the Holders from time to time of Registered Securities and the Common Stock issuable upon conversion thereof, in each case, that are Registrable Securities, at the Company's expense, (a) to file on or before 90 days after the first date of original issuance of the Securities, a shelf registration statement (the "Shelf Registration Statement") with the Commission with respect to resales of the Registrable Securities, (b) thereafter to use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before 180 days after the first date of original issuance of the Securities, subject to the Company's right to postpone having the Shelf Registration Statement declared effective for an additional 60 days in limited circumstances described in the Registration Rights Agreement, and (c) to use its reasonable best efforts to maintain such Shelf Registration Statement continuously effective under the Securities Act until the earlier of (1) the sale under the Shelf Registration Statement of all the Registrable Securities registered thereunder and (2) the expiration of the holding period applicable to such Registrable Securities held by persons that are not affiliates of the Company under Rule 144(k) under the Securities Act or any successor previously subject to specific permitted exceptions. The Company is required to pay Liquidated Damages to holders of Registrable Securities for failure to comply with the foregoing registration obligations, all as more fully set forth in the Registration Rights Agreement. Whenever in this Security there is a reference, in any context, to the payment of the principal of, premium, if any, or interest on, or in respect of, any Security such mention shall 9 be deemed to include mention of the payment of Liquidated Damages payable as described in the Registration Rights Agreement to the extent that, in such context, Liquidated Damages are, were or would be payable in respect of this Security pursuant to the Registration Rights Agreement, and an express mention of the payment of Liquidated Damages (if applicable) in any provisions of this Security shall not be construed as excluding Liquidated Damages in those provisions of this Security where such express mention is not made. If the Holder of this Security (including any Person that has a beneficial interest in this Security) elects to sell this Security pursuant to the Shelf Registration Statement then, by its acceptance hereof, such Holder of this Security agrees to be bound by the terms of the Registration Rights Agreement relating to the Registrable Securities which are the subject of such election. If a Change in Control occurs, the Holder of this Security, at the Holder's option, shall have the right, in accordance with the provisions of the Indenture, to require the Company to repurchase this Security (or any portion of the principal amount hereof that is equal to U.S.$1,000 or any greater integral multiple of U.S.$1,000) for cash at a Repurchase Price equal to 100% of the principal amount thereof plus interest accrued to, but excluding, the Repurchase Date. At the option of the Company, the Repurchase Price may be paid in cash or, subject to the conditions provided in the Indenture, by delivery of shares of Common Stock or in a combination of cash and Common Stock, having a fair market value equal to the Repurchase Price. For purposes of this paragraph, the fair market value of shares of Common Stock shall be determined by the Company and shall be equal to 95% of the average of the high and low sales price per share for the five consecutive Trading Days immediately preceding and including the third Trading Day prior to the Repurchase Date. Whenever in this Security there is a reference, in any context, to the principal of any Security as of any time, such reference shall be deemed to include reference to the Repurchase Price payable in respect of such Security to the extent that such Repurchase Price is, was or would be so payable at such time, and express mention of the Repurchase Price in any provision of this Security shall not be construed as excluding the Repurchase Price so payable in those provisions of this Security when such express mention is not made; provided, however, that, for the purposes of the paragraph below concerning the consequences of an Event of Default, such reference shall be deemed to include reference to the Repurchase Price only to the extent the Repurchase Price is payable in cash. In the event of a deposit or withdrawal of an interest in this Security, including an exchange, transfer, redemption, repurchase or conversion of this Security in part only, the Trustee, as custodian of the Depositary, shall make an adjustment on its records to reflect such deposit or withdrawal in accordance with the Applicable Procedures. The indebtedness evidenced by this Security is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full in cash or Cash Equivalents of all Senior Debt of the Company, and this Security is issued subject to such provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and 10 (c) appoints the Trustee his attorney-in-fact for any and all such purposes. If an Event of Default shall occur and be continuing, the principal of all the Securities, together with accrued interest to the date of declaration, may be declared due and payable in the manner and with the effect provided in the Indenture. Upon payment (i) of the amount of principal so declared due and payable, together with accrued interest to the date of declaration, and (ii) of interest on any overdue principal and, to the extent permitted by applicable law, overdue interest, all of the Company's obligations in respect of the payment of the principal of and interest on the Securities shall terminate. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities under the Indenture at any time by the Company and the Trustee with the written consent of the Holders of a majority in principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security or such other Security. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default, the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, the Trustee shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of indemnity, and the Trustee has not received any direction inconsistent with such written request from the Holders of a majority of the aggregate principal amount of the Outstanding Securities during such 60 day period. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof, premium, if any, Liquidated Damages, if any, or interest hereon on or after the respective due dates expressed herein or for the enforcement of the right to convert this Security as provided in the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, Liquidated Damages, if any, and interest on this Security at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Security as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of Registered Securities is registrable on the Security Register upon surrender of a Registered Security for registration of transfer at the Corporate Trust Office of the Trustee or at 11 such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, or at such other offices or agencies as the Company may designate, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing, and thereupon one or more new Registered Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees by the Registrar. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to recover any tax or other governmental charge payable in connection therewith. Prior to due presentation of a Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Registered Security is registered as the owner thereof for all purposes, whether or not such Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York, United States of America, including, without limitation, Section 5-1401 of the New York General Obligations Law. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. 12 EX-4.4 6 v83779exv4w4.txt EXHIBIT 4.4 EXHIBIT 4.4 SKECHERS U.S.A., INC. 4.50% CONVERTIBLE SUBORDINATED NOTES DUE 2007 REGISTRATION RIGHTS AGREEMENT April 9, 2002 CIBC World Markets Corp. One World Financial Center New York, New York 10281 Ladies and Gentlemen: Skechers U.S.A., Inc., a Delaware corporation (the "Company"), proposes to issue and sell to the Purchaser (as defined herein) upon the terms set forth in the Purchase Agreement (as defined herein) its 4.50% Convertible Subordinated Notes due 2007 (the "Securities"). As an inducement to the Purchaser to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Purchaser thereunder, the Company agrees with the Purchaser for the benefit of holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows: 1. Definitions. (a) Capitalized terms used herein without definition shall have the meanings ascribed thereto in the Purchase Agreement. As used in this Registration Rights Agreement (the "Agreement"), the following defined terms shall have the following meanings: "Affiliate" of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. "Commission" means the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose. 1 "Class A Common Stock" means the Company's Class A common stock, $0.001 par value per share. "DTC" means The Depository Trust Company. "Effectiveness Period" has the meaning assigned thereto in Section 2(b)(i) hereof. "Effective Time" means the date on which the Commission declares the Shelf Registration Statement effective or on which the Shelf Registration Statement otherwise becomes effective. "Electing Holder" has the meaning assigned thereto in Section 3(a)(iii) hereof. "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. The term "holder" means, when used with respect to any Security, the Holder (as defined in the Indenture) and, with respect to any Class A Common Stock, the record holder of such Class A Common Stock. "Indenture" means the Indenture, dated as of April 9, 2002, between the Company and Wells Fargo Bank Minnesota, N.A., as Amended and supplemented from time to time in accordance with its terms. "Managing Underwriters" means the investment banker or investment bankers and manager or managers that shall administer an underwritten offering, if any, conducted pursuant to Section 7 hereof. "NASD Rules" means the rules of the National Association of Securities Dealers, Inc., as amended from time to time. "Notice and Questionnaire" means a Notice of Registration Statement and Selling Securityholder Questionnaire, substantially in the form of Exhibit A attached hereto, relating to the Securities. The term "person" means an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" means the prospectus (including, without limitation, any preliminary prospectus, any final prospectus and any prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Securities Act) included in the Shelf Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by the Shelf Registration Statement and by all other amendments and supplements to such prospectus, including all material incorporated by 2 reference in such prospectus and all documents filed after the date of such prospectus by the Company under the Exchange Act and incorporated by reference therein. "Purchase Agreement" means the Purchase Agreement, dated as of April 4, 2002, between the Company and the Purchaser. "Purchaser" means the CIBC World Markets Corp. "Registrable Securities" means all or any portion of the Securities issued from time to time under the Indenture and the shares of Class A Common Stock issuable upon conversion of such Securities; provided, however, that a security ceases to be a Registrable Security when it is no longer a Restricted Security. "Restricted Security" means any Security or share of Class A Common Stock issuable upon conversion thereof except any such Security or share of Class A Common Stock that (i) has been registered pursuant to an effective registration statement under the Securities Act and sold in a manner contemplated by the Shelf Registration Statement, (ii) has been transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any successor provision thereto) or (iii) has otherwise been transferred and a new Security or share of Class A Common Stock not subject to transfer restrictions under the Securities Act has been delivered by or on behalf of the Company in accordance with Section 2.6 of the Indenture. "Rules and Regulations" means the published rules and regulations of the Commission promulgated under the Securities Act or the Exchange Act, as in effect at any relevant time. "Securities Act" means the United States Securities Act of 1933, as amended. "Shelf Registration" means a registration effected pursuant to Section 2 hereof. "Shelf Registration Statement" means a "shelf" registration statement filed under the Securities Act providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Registrable Securities pursuant to Rule 415 under the Securities Act and/or any similar rule that may be adopted by the Commission, filed by the Company pursuant to the provisions of Section 2 of this Agreement, including the Prospectus contained therein, any amendments and supplements to such registration statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement. "Trust Indenture Act" means the Trust Indenture Act of 1939, or any successor thereto, and the rules, regulations and forms promulgated thereunder, as the same shall be amended from time to time. The term "underwriter" means any underwriter of Registrable Securities in connection with an offering thereof under a Shelf Registration Statement. 3 (b) Wherever there is a reference in this Agreement to a percentage of the "principal amount" of Registrable Securities or to a percentage of Registrable Securities, Class A Common Stock shall be treated as representing the principal amount of Securities which was surrendered for conversion or exchange in order to receive such number of shares of Class A Common Stock. 2. Shelf Registration. (a) The Company shall, on or prior to 90 calendar days after the Closing Date (as defined in the Purchase Agreement), file with the Commission a Shelf Registration Statement relating to the offer and sale of the Registrable Securities and, thereafter, shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective under the Securities Act on or prior to 180 calendar days after the Closing Date; provided, however, that no holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement or to use the Prospectus for resales of Registrable Securities unless such holder is an Electing Holder (as defined herein). (b) The Company shall use its reasonable best efforts: (i) to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus to be usable by holders for resales of Registrable Securities until the earlier of (A) the date on which there are no outstanding Registrable Securities and (B) the expiration of the holding period applicable to such Registrable Securities held by persons that are not affiliates of the Company under Rule 144(k) of the Securities Act or any successor previously subject to specific permitted exceptions (such period being referred to herein as the "Effectiveness Period"); (ii) after the Effective Time, promptly upon the request of any holder of Registrable Securities that is not then an Electing Holder, to take any action reasonably necessary to enable such holder to use the Prospectus for resales of Registrable Securities, including without limitation any action necessary to identify such holder as a selling securityholder in the Shelf Registration Statement; provided, however, that nothing in this subparagraph shall relieve such holder of the obligation to return a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(a) (ii) hereof; and (iii) if at any time the Securities are convertible into securities other than Class A Common Stock pursuant to Article Ten of the Indenture, the Company shall, or shall cause any successor under the Indenture to, cause such securities to be included in the Shelf Registration Statement no later than the date on which the Securities may then be convertible into such securities. 3. Registration Procedures. (a) In connection with the Shelf Registration Statement, the following provisions shall apply: (i) Not less than 30 calendar days prior to the Effective Time, as 4 determined by the Company in good faith, the Company shall mail the Notice and Questionnaire to the holders of Registrable Securities. No holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement as of the Effective Time, and no holder shall be entitled to use the Prospectus for offers of Registrable Securities at any time unless such holder has returned a completed and signed Notice and Questionnaire to the Company by the deadline for response set forth therein; provided, however, holders of Registrable Securities shall have at least 20 calendar days from the date on which the Notice and Questionnaire is first mailed to such holders to return a completed and signed Notice and Questionnaire to the Company. (ii) After the Effective Time, the Company shall, upon the request of any holder of Registrable Securities that is not then an Electing Holder, promptly send a Notice and Questionnaire to such holder. The Company shall not be required to take any action to name such holder as a selling securityholder in the Shelf Registration Statement or to enable such holder to use the Prospectus for resales of Registrable Securities until such holder has returned a completed and signed Notice and Questionnaire to the Company. (iii) The term "Electing Holder" shall mean any holder of Registrable Securities that has returned a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(a)(i) or 3(a)(ii) hereof. (b) The Company shall furnish to each Electing Holder, counsel to the Electing Holders, and the Managing Underwriters, if any, no fewer than five Business Days prior to the initial filing of the Shelf Registration Statement, a copy of such Shelf Registration Statement, and shall furnish to such holders, counsel to such holders, and the Managing Underwriters, if any, no fewer than two Business Days prior to the filing of any amendment or supplement to the Prospectus, a copy of such amendment or supplement and shall use all reasonable efforts to reflect in each such document when so filed with the Commission such comments as such holders and their respective counsel reasonably may propose; provided, however, that the Company shall make the final decision as to the form and content of each such document. If any such Shelf Registration Statement refers to any Electing Holder by name or otherwise as the holder of any securities of the Company, then such Electing Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Electing Holder, to the effect that the holding by such Electing Holder of such securities is not to be construed as a recommendation by such Electing Holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such Electing Holder will assist in meeting any future financial requirements of the Company or (ii) in the event that such reference to such Electing Holder by name or otherwise is not required by the Securities Act or any similar Federal statute then in force, the deletion of the reference to such Electing Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. (c) From the date hereof until the end of the Effective Period, the Company shall (subject to paragraph (j) below) promptly take such action as may be necessary so that (i) each of the Shelf Registration Statement and any amendment thereto and the Prospectus and any amendment or supplement thereto (and each report or other document incorporated by reference 5 therein in each case) complies in all material respects with the Securities Act and the Exchange Act and the respective rules and regulations thereunder, (ii) each of the Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (iii) each of the Prospectus and any amendment or supplement to the Prospectus does not at any time during the Effectiveness Period include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) The Company shall promptly advise each Electing Holder, and shall confirm such advice in writing if so requested by any such holder (which notice pursuant to clauses (ii) through (iv) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made): (i) when the Shelf Registration Statement and any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective; (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for such purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included in the Shelf Registration Statement for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (iv) if changes in the Shelf Registration Statement or the Prospectus are required in order that the Shelf Registration Statement and Prospectus do not contain an untrue statement of a material fact and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading. (e) The Company shall use all reasonable efforts to prevent the issuance, and if issued to obtain the withdrawal, of any order suspending the effectiveness of the Shelf Registration Statement at the earliest possible time. (f) The Company shall furnish to each requesting Electing Holder, without charge, at least one copy of the Shelf Registration Statement and all post-effective amendments thereto, including financial statements and schedules, and, if such holder so requests in writing, all reports, other documents and exhibits that are filed with or incorporated by reference in the Shelf Registration Statement. (g) The Company shall, during the Effectiveness Period, deliver to each Electing Holder, without charge, as many copies of the Prospectus (including each preliminary Prospectus) and any amendment or supplement thereto as such Electing Holder may reasonably request; and the Company consents (except during the continuance of any event described in 6 Section 3(d)(iv) above) to the use of the Prospectus and any amendment or supplement thereto by each of the Electing Holders in connection with the offering and sale of the Registrable Securities covered by the Prospectus and any amendment or supplement thereto during the Effectiveness Period. (h) Prior to any offering of Registrable Securities pursuant to the Shelf Registration Statement, the Company shall (i) register or qualify or cooperate with the Electing Holders and a single counsel for the Electing Holders in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or "blue sky" laws of such jurisdictions within the United States as any Electing Holder may reasonably request, (ii) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers and sales in such jurisdictions for so long as may be necessary to enable any Electing Holder or underwriter, if any, to complete its distribution of Registrable Securities pursuant to the Shelf Registration Statement, and (iii) take any and all other actions necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities; provided, however, that in no event shall the Company be obligated to (A) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify but for this Section 3(h) or (B) file any general consent to service of process in any jurisdiction where it is not as of the date hereof so subject. (i) The Company shall cooperate with the Electing Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to the Shelf Registration Statement, which certificates shall not bear any restrictive legends and, if so required by any securities exchange upon which any Registrable Securities are listed, shall be penned, lithographed or engraved, or produced by any combination of such methods, on steel engraved borders, and which certificates shall be free of any restrictive legends and in such permitted denominations and registered in such names as Electing Holders may request in connection with the sale of Registrable Securities pursuant to the Shelf Registration Statement. (j) Upon the occurrence of any fact or event contemplated by paragraph 3(d)(iv) above, the Company shall (subject to the next sentence) promptly prepare a post-effective amendment or supplement to the Shelf Registration Statement or the Prospectus, or any document incorporated therein by reference, or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. If the Company notifies the Electing Holders in accordance with clauses (ii) through (iv) of paragraph 3(d) above to suspend the use of the Prospectus until the requisite changes to the Prospectus have been made, then each Electing Holder shall suspend the use of the Prospectus and keep the notification provided pursuant to paragraph 3(d) above confidential until (i) such Electing Holder has received copies of the supplemented or amended Prospectus contemplated by the preceding sentence or (ii) such Electing Holder is advised in writing by the Company that the use of the Prospectus may be resumed and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. Notwithstanding the foregoing, but subject to Section 7 hereof, the Company shall not be required to amend or supplement the Shelf Registration Statement, any related Prospectus or any 7 document incorporated by reference for a period not to exceed 60 consecutive days if the Company is in possession of material non-public information the disclosure of which would have a material adverse effect on the business, operations, prospects, condition (financial or otherwise) of the Company and its subsidiaries, taken as a whole. (k) Not later than the Effective Time, the Company shall provide a CUSIP number for the Registrable Securities that are debt securities. (l) The Company shall use all reasonable efforts to comply with all applicable Rules and Regulations, and to make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after (i) the effective date (as defined in Rule 158(c) under the Securities Act) of the Shelf Registration Statement, (ii) the effective date of each post-effective amendment to the Shelf Registration Statement, and (iii) the date of each filing by the Company with the Commission of an Annual Report on Form 10-K that is incorporated by reference in the Shelf Registration Statement, an earnings statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act and the Rules and Regulations of the Commission thereunder (including, at the option of the Company, Rule 158). (m) Not later than the Effective Time, the Company shall cause the Indenture to be qualified under the Trust Indenture Act; in connection with such qualification, the Company shall cooperate with the Trustee under the Indenture and the Holders (as defined in the Indenture) to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and the Company shall execute, and shall use all reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner. In the event that any such amendment or modification referred to in this Section 3(m) involves the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (n) In the event of an underwritten offering conducted pursuant to Section 7 hereof, the Company shall (subject to paragraph 3(j) above), if requested, promptly include or incorporate in a Prospectus supplement or post-effective amendment to the Shelf Registration Statement such information as the Managing Underwriters reasonably agree should be included therein and to which the Company does not reasonably object and shall (subject to paragraph 3(j) above) make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after it is notified of the matters to be included or incorporated in such Prospectus supplement or post-effective amendment. (o) The Company shall enter into such customary agreements (including an underwriting agreement in customary form in the event of an underwritten offering conducted pursuant to Section 7 hereof) and take all other appropriate action in order to expedite and facilitate the registration and disposition of the Registrable Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures substantially identical to those set forth in Section 5 hereof with respect to all parties to be indemnified pursuant to Section 5 hereof; provided, 8 however, the Company shall not be required to facilitate an underwritten offering pursuant to the Shelf Registration Statement by any holders unless the offering relates to at least $15,000,000 principal amount of Securities or the equivalent number of shares of Class A Common Stock in which such Securities are convertible. (p) The Company shall: (i) (A) make reasonably available for inspection by requesting Electing Holders, any underwriter participating in any disposition pursuant to the Shelf Registration Statement, and any attorney selected in accordance with Section 4(b) hereof, one accountant and any other agent retained by such holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (B) cause the Company's officers, directors and employees to supply all information reasonably requested by such holders or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as is customary for similar due diligence examinations; provided, however, that all records, information and documents that are designated in writing by the Company, in good faith, as confidential shall be kept confidential by such holders and any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such records, information or documents become available to the public generally or through a third party without an accompanying obligation of confidentiality; and provided further that, if the foregoing inspection and information gathering would otherwise disrupt the Company's conduct of its business, such inspection and information gathering shall, to the greatest extent possible, be coordinated on behalf of the requesting Electing Holders and the other parties entitled thereto by one counsel designated by and on behalf of Electing Holders and other parties; (ii) in connection with any underwritten offering conducted pursuant to Section 7 hereof, make such representations and warranties to the Electing Holders participating in such underwritten offering and to the Managing Underwriters, in form, substance and scope as are customarily made by the Company to underwriters in primary underwritten offerings of equity and convertible debt securities; (iii) in connection with any underwritten offering conducted pursuant to Section 7 hereof, obtain opinions of counsel to the Company (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters) addressed to each requesting Electing Holder, covering such matters as are customarily covered in opinions requested in primary underwritten offerings of equity and convertible debt securities and such other matters as may be reasonably requested by such Electing Holders and underwriters (it being agreed that the matters to be covered by such opinions shall include, without limitation, as of the date of the opinion and as of the Effective Time or the date of the most recent post-effective amendment thereto, as the case may be, the absence from the Shelf Registration Statement and the Prospectus, including the documents incorporated by reference therein, of an untrue statement of a material fact or the omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances 9 under which they were made) not misleading); (iv) in connection with any underwritten offering conducted pursuant to Section 7 hereof, obtain "cold comfort" letters and updates thereof from the independent public accountants of the Company (and, if necessary, from the independent public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Shelf Registration Statement), addressed to each requesting Electing Holder (if such Electing Holder has provided such letter, representations or documentation, if any, required for such cold comfort letter to be so addressed) and the underwriters, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; (v) in connection with any underwritten offering conducted pursuant to Section 7 hereof, deliver such documents and certificates as may be reasonably requested by any Electing Holders and the Managing Underwriters, if any, including without limitation certificates to evidence compliance with Section 3(j) hereof and with any conditions contained in the underwriting agreement or other agreements entered into by the Company. (q) The Company will use all reasonable efforts to cause the Class A Common Stock issuable upon conversion of the Securities to be listed for quotation on the New York Stock Exchange or other stock exchange or trading system, if any, on which the Class A Common Stock primarily trades on or prior to the Effective Time. (r) The Company shall use all reasonable efforts to take all other steps necessary to effect the registration, offering and sale of the Registrable Securities covered by the Shelf Registration Statement contemplated hereby. 4. Registration Expenses. (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by it whether or not any Shelf Registration Statement is filed or becomes effective and whether or not any securities are issued or sold pursuant to any Shelf Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including without limitation fees and expenses (A) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and (B) in compliance with securities or Blue Sky laws (including without limitation and in addition to that provided for in (b) below, reasonable fees and disbursements of counsel for the underwriters or counsel for the holders of Registrable Securities in connection with Blue Sky qualifications of the Registrable Securities )), (ii) printing expenses (including without limitation expenses of printing certificates for Registrable Securities in a form eligible for deposit with DTC and of printing Prospectuses if the printing of Prospectuses is requested by the Managing Underwriters, if any), (iii) messenger, telephone and delivery expenses, (iv) in the event of an underwritten offering of Registrable Securities conducted pursuant to Section 7 hereof, or if in any other event the Company requires that inspection and information gathering be coordinated by counsel for the Electing Holders as 10 provided in Section 3(p)(i) hereof, the Company shall pay the fees and disbursements of counsel for the Company and one counsel for the holders of Registrable Securities, in accordance with the provisions of Section 4(b) hereof, (v) fees and disbursements of all independent certified public accountants referred to in Section 3(p)(iv) hereof (including without limitation the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) Securities Act liability insurance, if the Company desires such insurance, and (vii) fees and expenses of all other persons retained by the Company. In addition, the Company shall pay its internal expenses (including without limitation all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, and the fees and expenses incurred in connection with the listing of the securities on the New York Stock Exchange. Notwithstanding the foregoing or anything in this Agreement to the contrary, each holder of the Registrable Securities being registered shall pay all commissions, placement agent fees and underwriting discounts and commissions with respect to any Registrable Securities sold by it and the fees and disbursements of any counsel or other advisors or experts retained by such holders (severally or jointly), other than counsel and local counsel referred to in clause (iv) above. (b) In connection with any registration hereunder, the Company shall reimburse the holders of the Registrable Securities being registered in such registration for the reasonable fees and disbursements of not more than one counsel chosen by the holders of a majority in amount of the Registrable Securities (determined on a fully converted basis) for whose benefit the applicable Shelf Registration Statement is being prepared. 5. Indemnification and Contribution. (a) Indemnification by the Company. Upon the registration of the Registrable Securities pursuant to Section 2 hereof, the Company shall indemnify and hold harmless each Electing Holder and each underwriter, selling agent or other securities professional, if any, which facilitates the disposition of Registrable Securities, and each of their respective officers and directors and each person who controls such Electing Holder, underwriter, selling agent or other securities professional within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each such person being sometimes referred to as an "Indemnified Person") against any losses, claims, damages or liabilities, joint or several, to which such Indemnified Person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Shelf Registration Statement or any Prospectus contained therein or furnished by the Company to any Indemnified Person, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and the Company hereby agrees to reimburse such Indemnified Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable to any such Indemnified Person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Shelf Registration Statement or Prospectus, or amendment or supplement thereto, in reliance upon and in conformity with 11 written information furnished to the Company by or on behalf of such Indemnified Person expressly for use therein; provided, further, however, that the foregoing indemnity agreement with respect to any preliminary Prospectus shall not inure to the benefit of any Indemnified Person who failed to deliver a final Prospectus (as then amended or supplemented, provided by the Company to the several Indemnified Persons in the requisite quantity and on a timely basis to permit proper delivery on or prior to the relevant transaction date) to the person asserting any losses, claims, damages and liabilities and judgments caused by any untrue statement or alleged untrue statement of a material fact contained in any preliminary Prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, if such material misstatement or omission or alleged material misstatement or omission was cured in the final Prospectus. (b) Indemnification by the Holders and any Agents and Underwriters. Each Electing Holder agrees, as a consequence of the inclusion of any of such holder's Registrable Securities in any Shelf Registration Statement, and each underwriter, selling agent or other securities professional, if any, which facilitates the disposition of Registrable Securities shall agree, as a consequence of facilitating such disposition of Registrable Securities, severally and not jointly, to (i) indemnify and hold harmless the Company, its directors and executive officers who sign such Shelf Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities to which the Company or such other persons may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such Shelf Registration Statement or Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such holder, underwriter, selling agent or other securities professional expressly for use therein and (ii) reimburse the Company and its directors and officers who sign such Shelf Registration Statement for any legal or other expenses reasonably incurred by the Company and such directors and officers in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection (a) or (b) of this Section 5 of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under this Section 5, notify such indemnifying party in writing of the commencement thereof; but the omission to so notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 5. In the case that any such action is brought against any indemnified party it shall notify the indemnifying party of the commencement thereof and such indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, 12 after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, such indemnifying party shall not be liable to such indemnified party under this Section 5 for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, which consent will not be unreasonably withheld, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) Contribution. If the indemnification provided for in this Section 5 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) of this Section 5 in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation (even if the Electing Holders or any underwriters, selling agents or other securities professionals or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 5(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Electing Holders and any underwriters, selling agents or other securities professionals in this Section 5(d) to contribute shall be several in proportion to the percentage of principal amount of Registrable Securities registered or underwritten, as the case may be, by them and not joint. (e) Notwithstanding any other provision of this Section 5, in no event will any (i) Electing Holder be required to undertake liability to any person under this Section 5 for any amounts in excess of the dollar amount of the proceeds to be received by such holder from the sale of such holder's Registrable Securities (after deducting any fees, discounts and commissions 13 applicable thereto) pursuant to any Shelf Registration Statement and (ii) underwriter, selling agent or other securities professional be required to undertake liability to any person hereunder for any amounts in excess of the discount, commission or other compensation payable to such underwriter, selling agent or other securities professional with respect to the Registrable Securities underwritten by it and distributed to the public. (f) The obligations of the Company under this Section 5 shall be in addition to any liability that the Company may otherwise have to any Indemnified Person and the obligations of any Indemnified Person under this Section 5 shall be in addition to any liability that such Indemnified Person may otherwise have to the Company. The remedies provided in this Section 5 are not exclusive and shall not limit any rights or remedies that may otherwise be available to an indemnified party at law or in equity. 6. Liquidated Damages. If (i) on or prior to 90 days after the Closing Date, a Shelf Registration Statement has not been filed with the Commission, (ii) on or prior to 180 days after the Closing Date, such Shelf Registration Statement is not declared effective or, (iii) the Shelf Registration Statement ceases to be effective or the Company otherwise prevents or restricts the Electing Holders from making sales of Registrable Securities under such Shelf Registration Statement during the Effectiveness Period for a period in excess of 60 consecutive days (each, a "Registration Default"), liquidated damages ("Liquidated Damages") will accrue on the Registrable Securities at a rate equal to 0.5% of the principal amount of Registrable Securities per annum from and including the day following such Registration Default to, but excluding, the day on which such Registration Default is cured. The Company shall notify the Trustee as promptly as possible, but in no event more than three Business Days after each and every date on which a Registration Default occurs. Liquidated Damages will be paid semi-annually in arrears, with the first semi-annual payment due on the first Interest Payment Date in respect of the Registrable Securities following the date on which such Liquidated Damages begin to accrue. 7. Underwritten Offering. Any holder of Registrable Securities who desires to do so may sell Registrable Securities (in whole or in part) in an underwritten offering; provided, however, the Company shall not be required to facilitate an underwritten offering pursuant to the Shelf Registration Statement by any holders unless the offering relates to at least $20,000,000 principal amount of Securities or the equivalent number of shares of Class A Common Stock in which such Securities are convertible. In any such underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by, and the underwriting arrangements with respect thereto (including the size of the offering) will be approved by, the holders of a majority of the Registrable Securities to be included in such offering; provided, however, that such investment bankers and managers and underwriting arrangements must be reasonably satisfactory to the Company. No holder may participate in any underwritten offering contemplated hereby unless (a) such holder agrees to sell such holder's Registrable Securities to be included in the underwritten offering in accordance with any approved underwriting arrangements, (b) such holder completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such approved underwriting arrangements and (c) if such holder is not then an Electing Holder, such holder returns a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(a)(ii) hereof within a reasonable amount of time before such underwritten offering. The holders participating in any underwritten 14 offering shall be responsible for any underwriting discounts and commissions and fees and, subject to Section 4 hereof, expenses of their own counsel. The Company shall pay all expenses customarily borne by issuers, including but not limited to filing fees, the fees and disbursements of its counsel and independent public accountants and any printing expenses incurred in connection with such underwritten offering. Notwithstanding the foregoing or the provisions of Section 3(n) hereof, upon receipt of a request from the Managing Underwriter or a representative of holders of a majority of the Registrable Securities to be included in an underwritten offering to prepare and file an amendment or supplement to the Shelf Registration Statement and Prospectus in connection with an underwritten offering, the Company may delay the filing of any such amendment or supplement for up to 60 days if the Company is in possession of material non-public information the disclosure of which would have a material adverse effect on the business, operations, prospects, condition (financial or otherwise) of the Company and its subsidiaries, taken as a whole. 8. Rules 144 and 144A. The Company agrees, for so long as any Registrable Securities remain outstanding and during any period in which the Company (a) is not subject to Section 13 of 15(d) of the Exchange Act, to make available, upon request of any holder of Registrable Securities, to such holder or beneficial owner of Registrable Securities in connection with any sale thereof and any prospective purchaser of such Registrable Securities designated by such holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Registrable Securities pursuant to Rule 144A of the Securities Act, and (b) is subject to Section 13 of 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Registrable Securities pursuant to Rule 144 of the Securities Act. 9. Miscellaneous. (a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations under this Agreement may result in material irreparable injury to the Purchaser or the holders of Registrable Securities for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Purchaser or any holder of Registrable Securities may obtain such relief as may be required to specifically enforce the Company's obligations hereunder. The Company further agrees to waive the defense in any action for specific performance where a remedy at law would be adequate. (b) Other Registration Rights. The Company will not, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The Company shall not permit any securities other than the Registrable Securities to be included in any Shelf Registration Statement. Except as set forth in the Registration Rights Agreement, dated June 9, 1999 entered into by and among the Company, the Greenberg Family Trust and Michael Greenberg (where such conflict has already been waived), the rights granted to the holders of Registrable Securities hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's 15 securities under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 2 hereof and this Section 9(c)(i), the Company has obtained the written consent of holders of all outstanding Registrable Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of holders of a majority of the outstanding principal amount of Registrable Securities (determined on a fully converted basis) (excluding Registrable Securities held by the Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of holders whose Registrable Securities are being sold pursuant to a Shelf Registration Statement and that does not affect directly or indirectly the rights of other holders of Registrable Securities may be given by the holders of a majority of the outstanding principal amount of Registrable Securities (determined on a fully converted basis) being sold by such holders pursuant to such Shelf Registration Statement. (d) Third Party Beneficiary. The holders of Registrable Securities shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Purchaser, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of holders of Registrable Securities hereunder. (e) Notices. All notices and other communications provided for or permitted hereunder shall be given as provided in the Indenture. (f) Parties in Interest. The parties to this Agreement intend that all holders of Registrable Securities shall be entitled to receive the benefits of this Agreement and that any Electing Holder shall be bound by the terms and provisions of this Agreement by reason of such election with respect to the Registrable Securities that are included in a Shelf Registration Statement. All the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective successors and assigns of the parties hereto and any holder from time to time of the Registrable Securities to the aforesaid extent. In the event that any transferee of any holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be entitled to receive the benefits of and, if an Electing Holder, be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement to the aforesaid extent. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this agreement are for convenience of reference only and shall not limit or otherwise affect the meaning, construction or interpretation hereof. 16 (i) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, including without limitation New York General Obligations Law Section 5-1401. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. (k) Survival. The respective indemnities, agreements, representations, warranties and other provisions set forth in this Agreement or made pursuant hereto shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Electing Holder, any director, officer or partner of such holder, any agent or underwriter, any director, officer or partner of such agent or underwriter, or any controlling person of any of the foregoing, and shall survive the transfer and registration of the Registrable Securities of such holder. (l) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter hereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted with respect to the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 17 Please confirm by signing in the space provided below that the foregoing correctly sets forth the agreement between the Company and you. Very truly yours, SKECHERS U.S.A., INC. By: /s/ DAVID WEINBERG ----------------------------- Name: David Weinberg Title: Chief Financial Officer CIBC WORLD MARKETS CORP. By: /s/ STEVEN H. REINER ----------------------------- Name: Steven H. Reiner Title: Executive Director 18 EXHIBIT A SKECHERS U.S.A., INC. Notice of Registration Statement and Selling Securityholder Questionnaire (Date) Reference is hereby made to the Registration Rights Agreement (the "Registration Rights Agreement") between Skechers U.S.A., Inc. (the "Company") and the Purchaser named therein. Pursuant to the Registration Rights Agreement, the Company has filed with the United States Securities and Exchange Commission (the "Commission") a registration statement on Form S-_ (the "Shelf Registration Statement") for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of the Company's 4.50% Convertible Subordinated Notes due 2007 (the "Securities") and the shares of Class A common stock, $0.001 par value per share (the "Class A Common Stock"), issuable upon conversion thereof. A copy of the Registration Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement. Each beneficial owner of Registrable Securities (as defined below) is entitled to have the Registrable Securities beneficially owned by it included in the Shelf Registration Statement. In order to have Registrable Securities included in the Shelf Registration Statement, this Notice of Registration Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire") must be completed, executed and delivered to the Company's counsel at the address set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. Beneficial owners of Registrable Securities who do not complete, execute and return this Notice and Questionnaire by such date (i) will not be named as selling securityholders in the Shelf Registration Statement and (ii) may not use the Prospectus forming a part thereof for resales of Registrable Securities. Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. The term "Registrable Securities" is defined in the Registration Rights Agreement to mean all or any portion of the Securities issued from time to time under the Indenture and the shares of Class A Common Stock issuable upon conversion of such Securities; provided, however, that a security ceases to be a Registrable Security when it is no longer a Restricted Security. The term "Restricted Security" is defined in the Registration Rights Agreement to mean any Security or share of Class A Common Stock issuable upon conversion thereof except any such Security or share of Class A Common Stock that (i) has been registered pursuant to an A-1 effective registration statement under the Securities Act and sold in a manner contemplated by the Shelf Registration Statement, (ii) has been transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any successor provision thereto), or (iii) has otherwise been transferred and a new Security or share of Class A Common Stock not subject to transfer restrictions under the Securities Act has been delivered by or on behalf of the Company in accordance with Section 2.6 of the Indenture. ELECTION The undersigned holder (the "Selling Securityholder") of Registrable Securities hereby elects to include in the Shelf Registration Statement the Registrable Securities beneficially owned by it and the Registrable Securities listed below in Item (3). The undersigned, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement, including without limitation Section 5 of the Registration Rights Agreement as if the undersigned Selling Securityholder were an original party thereto. The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete: QUESTIONNAIRE Certain capitalized terms used in this Questionnaire are defined in Appendix l attached hereto. Capitalized terms used in this Questionnaire but not defined in Appendix 1 have the meanings given to them in the accompanying letter. (1) (a) Full legal name of Selling Securityholder: --------------------------------------------------------------- (i) Is such Selling Securityholder a: [ ] Corporation [ ] General Partnership [ ] Individual [ ] Limited Partnership [ ] Other (please specify:____________________) (ii) In what state is such Selling Securityholder organized or domiciled? ----------------------------- (b) Full legal name of Registered Holder (if not the same as in (a) above) of Registrable Securities listed in Item (4) below: --------------------------------------------------------------- A-2 (c) Full legal name of DTC participant (if applicable and if not the same as (b) above) through which Registrable Securities listed in Item (4) below are held: ---------------------------------------------------------------- (2) Address for Notices to Selling Securityholder: ____________________________ ____________________________ Telephone: ____________________________ Fax: ____________________________ Contact Person: ____________________________ (3) Beneficial Ownership of Securities by Another Entity or Individual: (a) Is another entity or individual the Beneficial Owner of any Securities or shares of Class A Common Stock issued upon conversion of any Securities? [ ] No (skip questions (b)-(e) below) [ ] Yes (answer questions (b)-(e) below) (b) What is the full legal name of such Beneficial Owner? ----------------------------------------------------- (c) Is such Beneficial Owner a: [ ] Corporation [ ] General Partnership [ ] Individual [ ] Limited Partnership [ ] Other (please specify:____________________) (d) In what state is such Beneficial Owner organized or domiciled? --------------------------------------------------- (e) Please provide the name, address and telephone number of a contact person for such Beneficial Owner. --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- A-3 ------------------------------------------------------------------------ (4) Beneficial Ownership of Securities: Except as set forth below in this Item (4), the undersigned is not a Beneficial Owner of any Securities or shares of Class A Common Stock issued upon conversion of any Securities. (a) Principal amount of Registrable Securities (as defined in the Registration Rights Agreement) Beneficially Owned: ___________________________ CUSIP No(s). of such Registrable Securities: ____________________ Number of shares of Class A Common Stock (if any) issued upon conversion of such Registrable Securities: _______________________________________ (b) Principal amount of Securities other than Registrable Securities Beneficially Owned: ----------------------------------------------------------------- CUSIP No(s). of such other Securities: ____________________________________ Number of shares of Class A Common Stock (if any) issued upon conversion of such other Securities: ----------------------------------------------------------- (c) Principal amount of Registrable Securities that the undersigned wishes to be included in the Shelf Registration Statement: ________________________________ CUSIP No(s). of such Registrable Securities to be included in the Shelf Registration Statement: ----------------------------------------------------------- Number of shares of Class A Common Stock (if any) issued upon conversion of Registrable Securities that are to be included in the Shelf Registration Statement:__________ (5) Beneficial Ownership of Other Securities of the Company: Except as set forth below in this Item (5), the undersigned Selling Securityholder is not a Beneficial Owner of any shares of Class A Common Stock or any other securities of the Company, other than the Securities and shares of Class A Common Stock listed above in Item (4). State any exceptions here: A-4 (6) Relationships with the Company: Except as set forth below, neither the Selling Securityholder nor any of its Affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other Material Relationship with the Company (or its predecessors or Affiliates) during the past three years. State any exceptions here: (7) Plan of Distribution: Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item (4) only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned Selling Securityholder or, alternatively, through underwriters, broker-dealers or agents who may receive discounts, concessions or commissions from the Selling Stockholder or the purchaser. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at prices relating to the prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registered Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, (iv) through the writing of options, whether such options are listed on an option exchange or otherwise, or (iv) through the settlement of short sales. In connection with sales of the Registrable Securities or otherwise, the Selling Securityholder may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Registrable Securities in the course of hedging the positions they assume. The Selling Securityholder may also sell Registrable Securities short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities. State any exceptions here: (8) Are you a Member, an affiliate of a Member, or a person associated with a Member, of the National Association of Securities Dealers, Inc. (the "NASD")? Yes _____ No _____ A-5 If the answer to Question 8 is "yes", state (a) the name of any such NASD Member, (b) the nature of your affiliation or association with such NASD Member, (c) information as to such NASD Member's participation in any capacity in the Offering or the original placement of the Securities, (d) the number of shares of equity securities or face value of debt securities of the Company owned by you, (e) the date such securities were acquired and (f) the price paid for such securities. ------------------------------------------------------------------------ ------------------------------------------------------------------------ --------------------------------------------. (9) If you answered "yes" to Question 8 above, please fill out the following table with respect to any purchases from the Company or any of its Affiliates in a private placement within twelve months prior to the date hereof (excluding your purchase of the Shares).

====================================================================== Amount and Name Price or Other Date of Purchase Seller of Securities Consideration ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ======================================================================

Note: In no event may such method(s) of distribution take the form of an underwritten offering of the Registrable Securities without the prior agreement of the Company. By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M. The Selling Securityholder also acknowledges that it understands that the answers to this Questionnaire are furnished for use in connection with the Registration Statement and any amendments or supplements thereto filed with the SEC pursuant to the Securities Act of 1933, as amended. In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement. By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (9) above and the inclusion of such information in the Shelf Registration Statement and related Prospectus. The Selling A-6 Securityholder understands that such information will be relied upon by the Company in connection with the preparation of the Shelf Registration Statement and related Prospectus. The Selling Securityholder acknowledges that material misstatements and omissions of material facts in the Registration Statement and any amendments or supplement thereto may give rise to civil and criminal liabilities to the Company and to each officer and director of the Company signing the Registration Statement and to other persons signing such document. As a result, in accordance with the Selling Securityholder's obligation under Section 3(a) of the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein which may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains in effect. All notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows: (i) to the Company: Skechers U.S.A., Inc. 228 Manhattan Beach Blvd. Manhattan Beach, California 90266 Attention:_________________ (ii) with a copy to: Kirkpatrick & Lockhart LLP 10100 Santa Monica Blvd. 7th Floor Los Angeles, California 90067 Attention: Ted Weitzman, Esq. Once this Notice and Questionnaire is executed by the Selling Securityholder and received by the Company's counsel, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the Selling Securityholder (with respect to the Registrable Securities Beneficially Owned by such Selling Securityholder and the Registrable Securities listed in Item (3) above). This Agreement shall be governed in all respects by the laws of the State of New York. I confirm that, to the best of my knowledge and belief, the foregoing statements (including without limitation the answers to this Questionnaire) are correct. IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent. A-7 Dated: __________________ ------------------------------------ Selling Securityholder (Print/type full legal name of beneficial owner of Registrable Securities) By: ________________________________ Name: Title: PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT: Kirkpatrick & Lockhart LLP 10100 Santa Monica Blvd. 7th Floor Los Angeles, California 90067 Attention: Ted Weitzman, Esq. A-8 APPENDIX 1 DEFINITIONS For the purpose of this Questionnaire, the following definitions apply: 1. Affiliate. As used in Questions 1 - 7 and Question 9, a person is an "Affiliate" of a person if such person controls, is controlled by, or is under common control with, another person. Please assume that an "Affiliate" of the Company includes without limitation, any 5% stockholder of the Company (including any person who owns, controls, or holds or holds an option to acquire, and has the power to vote, 5% or more of the Company's outstanding voting securities). "Control" is the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise. As used in Question 8 of this Questionnaire, an "affiliate" of an NASD member has the following meaning: (1) a company which controls, is controlled by or is under common control with a member; (2) the term affiliate is presumed to include, but is not limited to, the following: (a) a company will be presumed to control a member if the company beneficially owns 10% or more of the outstanding voting securities of a member which is a corporation, or beneficially owns a partnership interest in 10% or more of the distributable profits or losses of a member which is a partnership; (b) a member will be presumed to control a company if the member and persons associated with the member beneficially own (i) 10% or more of the outstanding subordinated debt of a company, (ii) 10% or more of the outstanding voting securities of a company which is a corporation or (iii) a partnership interest in 10% or more of the distributable profits or losses of a company which is a partnership; (c) a company will be presumed to be under common control with a member if: (i) the same natural person or company controls both the member and company by beneficially owning 10% or more of the outstanding voting securities of a member or company which is a corporation, or by beneficially owning a partnership interest in 10% or more of the distributable profits or losses of a member or company which is a partnership; or A-9 (ii) a person having the power to direct or cause the direction of the management or policies of the member or the company also has the power to direct or cause the direction of the management or policies of the other entity in question. 2. Beneficial Owner. A "Beneficial Owner" of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power and/or investment power with respect to such security. Voting power includes "the power to vote, or to direct the voting, of such security" and investment power includes "the power to dispose, or to direct the disposition, of such security." A person is also a Beneficial Owner of a security if he has the right to acquire beneficial ownership of such security, at any time within sixty days, including but not limited to, any right to acquire through: (a) the exercise of an option, warrant or right, (b) the conversion of a convertible security, (c) the power to revoke a trust, discretionary account or similar arrangement, or (d) the automatic termination of a trust, discretionary account or similar arrangement; provided, however, that if the acquisition of an option, warrant, right, convertible security or power described in (a), (b) or (c) is for the purpose of maintaining or obtaining control over the issuer of the security, the holder of the option, warrant, right, convertible security or power shall, immediately upon such acquisition and regardless of when it is exercisable, be deemed a beneficial owner of the underlying securities. The possession of the legal power to vote and/or direct the disposition of securities, absent unusual circumstances, will be sufficient to confer beneficial ownership. Such power may be held directly, or indirectly, through one or more controlled entities. 3. Material Relationship. The term "material relationship" has not been defined by the Securities and Exchange Commission (the "SEC"). The SEC, however, is likely to construe as material any relationship which tends to impact arm's length bargaining in dealings with a company, whether arising from a close business connection, family relationship, a relationship of control or otherwise. For example, you should conclude that you have such a relationship with any organization of which you own, directly or indirectly, 10% more of the outstanding voting stock, or in which you have some other substantial interest, and with any person or organization with whom you have, or with whom any relative (or any other person or organization as to which you have any of the foregoing other relationships) has, a contractual relationship. 4. Member. Rule 0120 of the NASD's Rules of Fair Practice defines the term "member" to mean any individual, partnership, corporation or other legal entity admitted to membership in the NASD, and Article l of the NASD's By-Laws defines the term "person associated with a member" to mean every sole proprietor, partner, officer, director, or branch manager of any member, or any natural person occupying a similar status or performing similar functions, or any natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by such member (for example, any employee), whether or not such person is registered or exempt from registration with the NASD. A-10 EX-99.1 7 v83779exv99w1.htm EXHIBIT 99.1

Exhibit 99.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Skechers U.S.A, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the date indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert Greenberg
Robert Greenberg
Chief Executive Officer
(Principal Executive Officer)
August 13, 2002

/s/ David Weinberg
David Weinberg
Chief Financial Officer
(Principal Financial and Accounting Officer)
August 13, 2002

26 -----END PRIVACY-ENHANCED MESSAGE-----

EX-4.1

                                                                     Exhibit 4.1

                              SKECHERS U.S.A., INC.



                                   $75,000,000

                                PRINCIPAL AMOUNT

                  4.50% CONVERTIBLE SUBORDINATED NOTES DUE 2007

                               PURCHASE AGREEMENT

                                  APRIL 4, 2002








                            CIBC WORLD MARKETS CORP.








                  4.50% CONVERTIBLE SUBORDINATED NOTES DUE 2007

                            OF SKECHERS U.S.A., INC.

                            CIBC WORLD MARKETS CORP.



                                  April 4, 2002



CIBC World Markets Corp.
417 5th Avenue, 2nd Floor
New York, New York 10016

Dear Sirs and Madams:

            Skechers U.S.A., Inc., a Delaware corporation (the "COMPANY"),
proposes to issue and sell to CIBC World Markets Corp. ("CIBC" or the "INITIAL
PURCHASER"), an aggregate of $75,000,000 in principal amount of its 4.50%
Convertible Subordinated Notes due April 15, 2007 (the "FIRM NOTES"), subject to
the terms and conditions set forth herein. The Company also proposes to issue
and sell to the Initial Purchaser not more than an additional $15,000,000
aggregate principal amount of its 4.50% Convertible Subordinated Notes due April
4, 2007 (the "ADDITIONAL NOTES"), if requested by the Initial Purchaser as
provided in Section 2 hereof. The Firm Notes and the Additional Notes are herein
collectively referred to as the "NOTES." The Notes are to be issued pursuant to
the provisions of an indenture (the "INDENTURE"), to be dated as of the Closing
Date (as hereinafter defined), between the Company, and Wells Fargo Bank,
National Association., as trustee (the "TRUSTEE"), pursuant to which the Notes,
as provided therein, will be convertible at the option of the holders thereof
into shares of the Company's Class A common stock, $0.001 par value per share
(the "CLASS A COMMON STOCK"). The Notes and the Class A Common Stock issuable
upon conversion thereof are herein collectively referred to as the "SECURITIES."
The Securities and the Indenture are more fully described in the Offering
Circular (as hereinafter defined). Capitalized terms used but not defined herein
shall have the meanings given to such terms in the Indenture.

        1. OFFERING CIRCULAR. The Notes will be offered and sold to the Initial
Purchaser pursuant to one or more exemptions from the registration requirements
under the Securities Act of 1933, as amended (the "ACT"). The Company has
prepared an offering circular, dated April 4, 2002 (the "OFFERING CIRCULAR"),
relating to the Notes. All references to this Offering Circular shall include
the information incorporated by reference therein (the "INCORPORATED DOCUMENTS")

        Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Notes (and all securities issued
in exchange therefor, in substitution thereof or upon conversion thereof) shall
bear the following legend:




        "THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON THE CONVERSION OF
        THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
        AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE
        TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
        EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT
        THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE
        PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
        THEREUNDER.

        THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
        NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
        (A)(1) TO A PERSON THAT THE TRANSFEROR REASONABLY BELIEVES IS A
        QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
        SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A
        QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS
        OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
        SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN
        INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING
        OF RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
        ACT THAT PRIOR TO SUCH TRANSFER PROVIDES TO THE TRUSTEE FOR THE NOTES A
        SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING
        TO THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF THE LETTER CAN
        BE OBTAINED FROM THE TRUSTEE FOR THE NOTES), (4) PURSUANT TO ANOTHER
        EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) (AND
        BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO SKECHERS U.S.A., INC.) OR
        (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
        ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
        STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

        THIS NOTE, ANY CLASS A COMMON SHARES ISSUABLE UPON ITS CONVERSION AND
        ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO
        TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS
        NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR
        REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO
        THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF
        THIS NOTE AND SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF


                                       2


        THIS NOTE AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR
        SUPPLEMENT."

        2. AGREEMENTS TO SELL AND PURCHASE.

            (a) On the basis of the representations, warranties and covenants
contained in this Purchase Agreement (this "AGREEMENT"), and subject to the
terms and conditions contained herein, the Company agrees to issue and sell to
the Initial Purchaser, and the Initial Purchaser agrees to purchase from the
Company, all of the Firm Notes at a purchase price equal to 100% of the
principal amount thereof (the "PURCHASE PRICE").

            (b) On the basis of the representations and warranties contained in
this Agreement, and subject to its terms and conditions, (i) the Company agrees
to issue and sell the Additional Notes and (ii) the Initial Purchaser shall have
a right, but not the obligation, to purchase the Additional Notes, from the
Company at the Purchase Price. Additional Notes may be purchased solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Notes. The Initial Purchaser may exercise its right to purchase Additional
Notes in whole or in part from time to time by giving written notice thereof to
the Company at any time within 30 days after the date of this Agreement. Such
notice shall specify the aggregate principal amount of Additional Notes to be
purchased pursuant to such exercise and the date for payment and delivery
thereof. The date specified in any such notice shall be a business day (i) no
earlier than the Closing Date, (ii) no later than ten business days after such
notice has been given and (iii) no earlier than two business days after such
notice has been given.

        3. TERMS OF OFFERING. The Initial Purchaser has advised the Company that
the Initial Purchaser will make offers (the "EXEMPT RESALES") of the Notes
purchased hereunder on the terms set forth in the Offering Circular, as amended
or supplemented, solely to persons whom the Initial Purchaser reasonably
believes to be "qualified institutional buyers" as defined in Rule 144A under
the Act ("QIB'S"). The Initial Purchaser will offer the Notes to QIB's initially
at a price equal to 100% of the principal amount thereof. Such price may be
changed at any time without notice.

            Holders (including subsequent transferees) of the Securities will
have the registration rights set forth in the registration rights agreement (the
"REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such Securities constitute
"RESTRICTED SECURITIES" (as defined in the Registration Rights Agreement).
Pursuant to the Registration Rights Agreement, the Company will agree to file
with the Securities and Exchange Commission (the "COMMISSION"), under the
circumstances set forth therein, a shelf registration statement pursuant to Rule
415 under the Act (the "REGISTRATION STATEMENT") relating to the resale by
certain holders of the Securities and to use all reasonable best efforts to
cause such Registration Statements to be declared and remain effective and
usable for the periods specified in the Registration Rights Agreement. This
Agreement, the Indenture, the Notes, and the Registration Rights Agreement are
hereinafter sometimes referred to collectively as the "OPERATIVE DOCUMENTS."

        4. DELIVERY AND PAYMENT.


                                       3



            (a) Delivery of, and payment of the Purchase Price for, the Firm
Notes shall be made at the offices of Latham & Watkins, 633 West Fifth Street,
Suite 4000, Los Angeles, California 90071, or such other location as may be
mutually acceptable. Such delivery and payment shall be made at 10:00 a.m., New
York City time, on April 9, 2002 or at such other time on the same date or such
other date as the Initial Purchaser and the Company shall agree in writing. The
time and date of such delivery and the payment for the Firm Notes are herein
called the "CLOSING DATE."

            (b) Delivery of, and payment for, any Additional Notes to be
purchased by the Initial Purchaser shall be made at the offices of Latham &
Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, California 90071 at
10:00 a.m., New York City time, on the date specified in the exercise notice
given by CIBC pursuant to Section 2(b) or such other time on the same or such
other date as the Initial Purchaser and the Company shall agree in writing. The
time and date of delivery and payment for any Additional Notes are hereinafter
referred to as an "OPTION CLOSING DATE."

            (c) One or more of the Notes in definitive global form, registered
in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"),
having an aggregate principal amount corresponding to the aggregate principal
amount of the Notes (collectively, the "GLOBAL NOTE"), shall be delivered by the
Company to the Initial Purchaser (or as the Initial Purchaser directs) in each
case with any transfer taxes thereon duly paid by the Company against payment by
the Initial Purchaser of the Purchase Price thereof by wire transfer in same day
funds to the order of the Company. The Global Note shall be made available to
the Initial Purchaser for inspection not later than 9:30 a.m., New York City
time, on the business day immediately preceding the Closing Date.

        5. AGREEMENTS OF THE COMPANY. The Company hereby agrees with the Initial
Purchaser as follows:

            (a) To advise the Initial Purchaser promptly and, if requested by
the Initial Purchaser, to confirm such advice in writing of (i) the issuance by
any state securities commission of any stop order suspending the qualification
or exemption from qualification of any Securities for offering or sale in any
jurisdiction designated by the Initial Purchaser pursuant to Section 5(e) below,
or the initiation of any proceeding by any state securities commission or any
other federal or state regulatory authority for such purpose and (ii) the
happening of any event during the period referred to in Section 5(c) below that
makes any statement of a material fact made in the Offering Circular untrue or
that requires any additions to or changes in the Offering Circular in order to
make the statements therein not misleading. The Company shall use its reasonable
best efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption of any Securities under any state securities or Blue
Sky laws and, if at any time any state securities commission or other federal or
state regulatory authority shall issue an order suspending the qualification or
exemption of any Securities under any state securities or Blue Sky laws, the
Company shall use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.

            (b) To furnish the Initial Purchaser and those persons identified by
the Initial Purchaser to the Company as many copies of the Offering Circular,
any documents incorporated


                                       4


by reference therein, and any amendments or supplements thereto, as the Initial
Purchaser may reasonably request for the time period specified in Section 5(c).
Subject to the Initial Purchaser's compliance with its representations and
warranties and agreements set forth in Section 7 hereof, the Company consents to
the use of the Offering Circular, any documents incorporated by reference
therein, and any amendments and supplements thereto required pursuant hereto, by
the Initial Purchaser in connection with Exempt Resales.

            (c) During such period as in the reasonable opinion of counsel for
the Initial Purchaser an Offering Circular is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser, (i) not to make any
amendment or supplement to the Offering Circular of which the Initial Purchaser
shall not previously have been advised or to which the Initial Purchaser shall
reasonably object after being so advised and (ii) to prepare promptly upon the
Initial Purchaser's reasonable request any amendment or supplement to the
Offering Circular that may be necessary or advisable in connection with such
Exempt Resales.

            (d) If, during the period referred to in Section 5(c) above, any
event shall occur or condition shall exist as a result of which, in the opinion
of counsel to the Initial Purchaser, it becomes necessary to amend or supplement
the Offering Circular in order to make the statements therein, in the light of
the circumstances when the Offering Circular is delivered to a QIB, not
misleading, or if, in the opinion of counsel to the Initial Purchaser, it is
necessary to amend or supplement the Offering Circular to comply with any
applicable law, forthwith to prepare an appropriate amendment or supplement to
the Offering Circular so that the statements therein, as so amended or
supplemented, will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Offering Circular will comply with
applicable law, and to furnish to the Initial Purchaser and such other persons
as the Initial Purchaser may designate such number of copies thereof as the
Initial Purchaser may reasonably request.

            (e) Prior to the sale of all Notes pursuant to Exempt Resales as
contemplated hereby, to cooperate with the Initial Purchaser and counsel to the
Initial Purchaser in connection with the registration or qualification of the
Notes for offer and sale to the Initial Purchaser and pursuant to Exempt Resales
under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchaser may request and to continue such registration or qualification in
effect so long as required for Exempt Resales and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation, other
than as to matters and transactions relating to the Offering Circular or Exempt
Resales, in any jurisdiction in which it is not now so subject.

            (f) So long as the Notes are outstanding, (i) to mail and make
generally available as soon as practicable after the end of each fiscal year to
the record holders of the Notes a financial report of the Company and its
subsidiaries on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), it being agreed that all such financial
reports will include a consolidated balance sheet, a consolidated statement of
operations, a consolidated statement of cash flows and a consolidated statement
of stockholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for


                                       5


the preceding year, certified by the Company's independent public accountants
and (ii) to mail and make generally available as soon as practicable after the
end of each quarterly period (except for the last quarterly period of each
fiscal year) to such holders, a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows (and similar
financial reports of all unconsolidated subsidiaries, if any) as of the end of
and for such period, and for the period from the beginning of such year to the
close of such quarterly period, together with comparable information for the
corresponding periods of the preceding year.

            (g) So long as the Notes are outstanding, to furnish to the Initial
Purchaser as soon as available copies of all reports or other communications
furnished by the Company to its security holders or furnished to or filed with
the Commission or any national securities exchange on which any class of
securities of the Company is listed and such other publicly available
information concerning the Company and/or its subsidiaries as the Initial
Purchaser may reasonably request.

            (h) So long as any of the Notes remain outstanding and during any
period in which the Company is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make
available to any holder of Securities in connection with any sale thereof and
any prospective purchaser of such Securities from such holder the information
("RULE 144A INFORMATION") required by Rule 144A(d)(4) under the Act or the
information ("RULE 144 INFORMATION") required by Rule 144(c)(2) under the Act,
as applicable.

            (i) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company under
this Agreement, including: (i) the fees, disbursements and expenses of counsel
to the Company and accountants of the Company in connection with the sale and
delivery of the Notes to the Initial Purchaser and pursuant to Exempt Resales,
and all other fees and expenses in connection with the preparation, printing,
filing and distribution of the Offering Circular, any documents incorporated by
reference and all amendments and supplements to any of the foregoing (including
financial statements), including the mailing and delivering of copies thereof to
the Initial Purchaser and persons designated by it in the quantities specified
herein, (ii) all costs and expenses related to the transfer and delivery of the
Notes to the Initial Purchaser and pursuant to Exempt Resales, including any
transfer or other taxes payable thereon, (iii) all costs of printing or
producing this Agreement, the other Operative Documents and any other agreements
or documents in connection with the offering, purchase, sale or delivery of the
Securities, (iv) all expenses in connection with the registration or
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of the several states and all costs of printing or producing any
preliminary and supplemental Blue Sky memoranda in connection therewith
(including the filing fees and fees and disbursements of counsel for the Initial
Purchaser in connection with such registration or qualification and memoranda
relating thereto), (v) the cost of printing certificates representing the
Securities, (vi) all expenses and listing fees in connection with the
application for quotation of the Notes in The PORTAL Market of the National
Association of Securities Dealers, Inc. ("PORTAL"), (vii) the fees and expenses
of the Trustee and the Trustee's counsel in connection with the Indenture and
the Notes, (viii) the costs and charges of any transfer agent, registrar and/or
depositary (including DTC), (ix) any fees charged by rating agencies for the
rating of the Notes, (x) all costs and


                                       6



expenses of the Registration Statement, as set forth in the Registration Rights
Agreement, (xi) all expenses and listing fees in connection with the application
for listing the Class A Common Stock issuable upon conversion of the Notes on
the New York Stock Exchange (the "NYSE") and (xii) and all other costs and
expenses incident to the performance of the obligations of the Company hereunder
for which a provision is not otherwise made in this Section.

            (j) To use its best efforts to effect the inclusion of the Notes in
PORTAL and to maintain the listing of the Notes on PORTAL for so long as the
Notes are outstanding.

            (k) To obtain the approval of DTC for "book-entry" transfer of the
Notes, and to comply with all of its agreements set forth in the representation
letters of the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.

            (l) To cause the Class A Common Stock issuable upon conversion of
the Notes to be duly included for quotation on the NYSE prior to the Closing
Date, subject to notice of official issuance. The Company will ensure that such
Class A Common Stock remain included for quotation on the NYSE or any other
national securities exchange following the Closing Date for so long as any
shares of Class A Common Stock remain registered under the Exchange Act.

            (m) The Company will reserve and keep available at all times, free
of preemptive rights, the shares of Class A Common Stock for the purpose of
enabling the Company to satisfy its obligations to issue the Class A Common
Stock upon conversion of the Notes.

            (n) The Company shall not offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Class A Common Stock (other
than the issuance of Class A Common Stock upon conversion of the Notes and
issuance of Class A Common Stock under the Company's equity line), the Company's
Class B common stock, $0.001 par value per share ("CLASS B COMMON STOCK" and
together with the Class A Common Stock, the "COMMON STOCK") or any securities
convertible into or exercisable or exchangeable for Class A Common Stock or
Class B Common Stock, for a period of 90 days after the date hereof without the
prior written consent of CIBC. Notwithstanding the foregoing, during such period
(i) the Company may grant securities convertible into or exercisable or
exchangeable for Class A Common Stock or Class B Common Stock pursuant to the
Company's existing stock option, stock purchase or 401(k) plans, (ii) the
Company may issue shares of Common Stock upon the conversion or exchange of a
convertible or exchangeable security outstanding on the date hereof, and (iii)
the Company may create and issue up to $35,000,000 aggregate principal amount of
further Notes as further described under the section of the Offering Circular
entitled "Description of the Notes -- Further Issuances." The Company shall,
prior to or concurrently with the execution of this Agreement, deliver an
agreement executed by each of the directors and executive officers of the
Company to the effect that such person will not, during the period commencing on
the date such person signs such agreement and ending 30 days after the date
hereof, without the prior written consent of CIBC, (i) engage in any of the
transactions described in the first sentence of this paragraph (whether such
shares or any such securities are now owned by such individual or are hereafter
acquired) or (ii) enter into any swap


                                       7


or other arrangement that transfers to another, in whole or in part, any of the
economic consequences associated with the ownership of any Common Stock (whether
any such transactions described in clause (i) or (ii) is to be settled by the
delivery of Class A Common Stock or Class B Common Stock or such other
securities, in cash or otherwise). In addition, in such agreement each of the
directors and executive officers of the Company will have agreed not to make any
demand for or exercise any registration rights for a period of 30 days after the
date hereof without the prior written consent of CIBC.

            (o) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Notes to the Initial Purchaser or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Notes under the Act.

            (p) During the period of two years after the Closing Date, the
Company will not, and will not permit any of its affiliates (as defined in Rule
144 under the Securities Act) to, resell any of the Securities that have been
reacquired by any of them.

            (q) In connection with the offering, until CIBC shall have notified
the Company of the completion of the resale of the Securities, neither the
Company nor any of its subsidiaries or affiliates has or will, either alone or
with one or more other persons, bid for or purchase for any account in which it
or any of its subsidiaries or affiliates has a beneficial interest any
Securities or attempt to induce any person to purchase any Securities; and
neither it nor any of its subsidiaries or affiliates will make bids or purchases
for the purpose of creating actual, or apparent, active trading in, or of
raising the price of, the Securities.

            (r) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes.

            (s) To comply with all of its agreements set forth in the
Registration Rights Agreement.

            (t) To use the net proceeds received by it from the sale of the
Securities in the manner specified in the Offering Circular under the caption
"Use of Proceeds."

            (u) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Notes.

        6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. As of the
date hereof, the Company represents and warrants to, and agrees with, the
Initial Purchaser that:

            (a) The Offering Circular (including the Incorporated Documents)
does not, and any supplement or amendment to it will not, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Offering Circular (or any supplement or
amendment thereto) based upon


                                       8


information relating to the Initial Purchaser furnished to the Company in
writing by the Initial Purchaser expressly for use therein. None of the
Incorporated Documents as of the time they were filed or as of the date hereof
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. No stop order preventing the use of the Offering Circular, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued. The Incorporated Documents, at the
time they were or hereafter are filed or last amended, as the case may be, with
the Commission, complied and will comply in all material respects with the
requirements of the Exchange Act.

            (b) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Offering Circular and to
own, lease and operate its properties, and each is duly qualified and is in good
standing as a foreign corporation authorized to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified would
not have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole (a "MATERIAL ADVERSE EFFECT").

            (c) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights, and there are no restrictions upon
the voting or transfer of the Common Stock pursuant to the Company's charter or
by-laws or other governing documents or, except as set forth herein, any
agreement or other instrument to which the Company is a party or by which it may
be bound. The Company has the authorized and outstanding capital stock as set
forth in the Offering Circular, and there have been no changes in the
outstanding capital stock of the Company since the date set forth under the
heading "Capitalization" in the Offering Circular, except to the extent that
certain outstanding options and warrants set forth in the Offering Circular may
have been exercised.

            (d) The entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of the Company. All of the outstanding shares
of capital stock of each of the Company's subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly through one or more subsidiaries, free and clear
of any security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "LIEN").

            (e) This Agreement has been duly authorized, executed and delivered
by the Company.

            (f) The Indenture has been duly authorized by the Company and, when
duly executed and delivered by the Company and duly authorized, executed and
delivered by the Trustee, will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of


                                       9



general applicability. On the Closing Date, the Indenture will conform in all
material respects to the requirements of the Trust Indenture Act of 1939, as
amended (the "TIA" or "TRUST INDENTURE ACT"), and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder.

            (g) The Notes have been duly authorized and, when duly executed,
delivered and authenticated in accordance with the provisions of the Indenture
and when delivered to and paid for by the Initial Purchaser in accordance with
the terms of this Agreement, the Notes will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the Company, enforceable
in accordance with their terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On the
Closing Date, the Notes will conform as to legal matters to the description
thereof contained in the Offering Circular.

            (h) The Notes are convertible into Class A Common Stock in
accordance with the terms of the Indenture; the shares of Class A Common Stock
initially issuable upon conversion of the Notes have been duly authorized and
reserved for issuance upon such conversion and, when issued upon such
conversion, will be validly issued, fully paid and nonassessable, will conform
to the description thereof contained in the Offering Circular and will be duly
authorized for listing on the NYSE, subject to notice of official issuance. The
stockholders of the Company or other holders of the Company's securities have no
pre-emptive or similar rights with respect to the Notes or the Class A Common
Stock issuable upon conversion of the Notes. The certificates evidencing the
Class A Common Stock issuable upon conversion of the Notes will be in due and
proper legal form.

            (i) The Registration Rights Agreement has been duly authorized by
the Company and, when duly executed and delivered by the Company, and assuming
the due execution and delivery by the Initial Purchaser, will be a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability. On the Closing Date,
the Registration Rights Agreement will conform as to legal matters to the
description thereof contained in the Offering Circular.

            (j) Neither the Company nor any of its subsidiaries is (i) in
violation of its respective charter or by-laws (ii) in default in the
performance of any obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or instrument that
is material to the Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound or (iii) in violation of
any franchise, license, permit, judgment, decree, order, statute, rule or
regulation where the consequences of such violation would have a Material
Adverse Effect.

            (k) No statute, rule, regulation or order that has been enacted,
adopted or issued by any governmental agency, and no injunction, restraining
order or order of any nature


                                       10


by a Federal or state court of competent jurisdiction, to which either the
Company or any of its subsidiaries is subject, that has been issued or is
pending, (i) could interfere with or adversely affect the issuance of the
Securities, or (ii) could in any manner draw into question the validity of any
of the Operative Documents.

            (l) The execution, delivery and performance of this Agreement and
the other Operative Documents by the Company, compliance by the Company with all
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or governmental agency (except such as may be required under
the securities or Blue Sky laws of the various states), (ii) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or by-laws of the Company or any of its subsidiaries or any
indenture, loan agreement, mortgage, lease or other agreement or instrument that
is material to the Company and its subsidiaries, taken as a whole, (iii) violate
or conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property, (iv) result
in the imposition or creation of (or the obligation to create or impose) a Lien
under, any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound, or (v) result in the termination, suspension
or revocation of any Authorization (as defined below) of the Company or any of
its subsidiaries or result in any other impairment of the rights of the holder
of any such Authorization.

            (m) Except as disclosed in the Offering Circular, there are no legal
or governmental proceedings pending or, to the Company's knowledge, threatened
to which the Company or any of its subsidiaries is or could be a party or to
which any of their respective property is or could be subject that might result,
singly or in the aggregate, in a Material Adverse Effect or could materially and
adversely affect the ability of the Company to perform its obligations under any
of the Operative Documents, or which are otherwise material in the context of
the sale of the Securities.

            (n) Each of the Company and its subsidiaries is in compliance in all
material respects with all rules, laws and regulations relating to the use,
treatment, storage and disposal of toxic substances and the protection of health
or the environment ("ENVIRONMENTAL LAW") which are applicable to its business;
(ii) neither the Company nor any of its subsidiaries has received any written
notice from any governmental authority or third party of an asserted claim under
Environmental Laws; (iii) each of the Company and its subsidiaries has received
all permits, licenses and other approvals required of it under applicable
Environmental Laws to conduct its business and is in compliance with all terms
and conditions of any such permit, license or approval; (iv) to the Company's
knowledge, no facts currently exist that will require the Company or its
subsidiaries to make future material capital expenditures to comply with
Environmental Laws; and (v) no property which is or has been owned, leased or
occupied by the Company or its subsidiaries has been designated as a Superfund
site pursuant to the Comprehensive Environmental Response, Compensation of
Liability Act of 1980 ("CERCLA"), as amended (42 U.S.C. Section 9601, et seq.)
or otherwise designated as a contaminated site under applicable state or local
law. Neither the Company nor any of its subsidiaries has been


                                       11


named as a "potentially responsible party" under the CERCLA. In the ordinary
course of its business, the Company periodically reviews the effect of
Environmental Laws on the business, operations and properties of the Company and
its subsidiaries, in the course of which the Company identifies and evaluates
associated costs and liabilities (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws, or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties). On the basis of such review, the Company has reasonably
concluded that such associated costs and liabilities would not, singly or in the
aggregate, have a Material Adverse Effect.

            (o) The Company is not, nor will it be, as a result of or after
giving effect to the issuance of the Securities and the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated thereby, (i) insolvent, (ii) left with an unreasonably small
capital with which to engage in its existing and anticipated businesses or (iii)
incurring debts beyond its ability to pay such debts as they mature. The Company
is not issuing the Securities in anticipation of insolvency.

            (p) Neither the Company nor any of its subsidiaries has violated any
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any provisions of the Foreign Corrupt Practices Act or the rules
and regulations promulgated thereunder, except for such violations which, singly
or in the aggregate, would not have a Material Adverse Effect. None of the
Company, its subsidiaries or any director, officer or employee of the Company or
its subsidiaries has, in the course of such person's actions for, or on behalf
of, the Company or its subsidiaries, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity or made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; and
none of the Company, its subsidiaries, or to the Company's knowledge, any
director, officer, employee, agent or other person acting on behalf of the
Company or its subsidiaries, has, in the course of such person's actions for, or
on behalf of, the Company or its subsidiaries made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.

            (q) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "AUTHORIZATION") of, and has made all filings with and given all
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without limitation
under any applicable Environmental Laws, as are necessary to own, lease, license
and operate its respective properties and to conduct its business, except where
the failure to have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the Company and
its subsidiaries is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including without
limitation the receipt of any notice from any authority or governing body) that
allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights


                                       12


of the holder of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company or any of its subsidiaries;
except where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a Material Adverse
Effect.

            (r) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them that is material to the business of the Company and its
subsidiaries, in each case free and clear of all Liens and defects, except such
as are described in the Offering Circular or such as do not materially affect
the value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its subsidiaries are
held by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries, in each
case except as described in the Offering Circular.

            (s) The Company and its subsidiaries own or license, free and clear
of all liens or encumbrances, or can acquire or license, free and clear of all
liens and encumbrances, on reasonable terms, all patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets, designs and
other unpatented and/or unpatentable designs, technologies, inventions and
innovations and proprietary or confidential information, systems or procedures),
rights to use names and likenesses, trademarks, service marks, domain names and
trade names ("INTELLECTUAL PROPERTY") currently employed by them in connection
with the business now operated by them or currently used in any products,
advertising or other materials distributed by them, except where the failure to
own or license or otherwise to be able to acquire or license, free and clear of
all liens and encumbrances, such Intellectual Property would not, singly or in
the aggregate, have a Material Adverse Effect; and neither the Company nor any
of its subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or rights of
privacy that, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse Effect, in each case
except as described in the Offering Circular.

            (t) Each agreement described in the Offering Circular or the
Incorporated Documents is in full force and effect and is valid and enforceable
by the Company or its subsidiary, as applicable, in accordance with its terms,
assuming the due authorization, execution and delivery thereof by each of the
other parties thereto except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) to the extent that rights to indemnity or contribution thereunder may be
limited by federal and state securities laws or the public policy underlying
such laws. None of the Company, any of its subsidiaries, or to the Company's
knowledge, any other party is in default in the observance or performance of any
term or obligation to be performed by it under such agreement, and no event has
occurred that with notice or lapse of time or both would constitute such a
default, in any such case where such default or event would have Material
Adverse Effect. No default exists, and no event has occurred that with notice or
lapse of time or both would constitute a default, in the due performance and
observance of any term, covenant or condition, by the Company or any of its
subsidiaries of any other agreement or instrument to which the


                                       13



Company or any of its subsidiaries is a party or by which any of them or their
respective properties or business may be bound or affected where such default or
event would have a Material Adverse Effect.

            (u) Except as disclosed in the Offering Circular, no relationship,
direct or indirect, exists between or among the Company or any of its
subsidiaries on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company or any of its subsidiaries on the other
hand, that would be required by the Act to be described in the Offering Circular
if the Offering Circular were a prospectus included in a registration statement
on Form S-1 filed with the Commission.

            (v) There is no (i) significant labor practice complaint, grievance
or arbitration proceeding pending or, to the Company's knowledge, threatened
against the Company or any of its subsidiaries before the National Labor
Relations Board or any state or local labor relations board, (ii) strike, labor
dispute, slowdown or stoppage pending or threatened against the Company or any
of its subsidiaries or (iii) union representation question existing with respect
to the employees of the Company or any of its subsidiaries, except in the case
of clauses (i), (ii) and (iii) for such actions that singly or in the aggregate,
would not have a Material Adverse Effect. To the knowledge of the Company, no
collective bargaining organizing activities are taking place with respect to the
Company or any of its subsidiaries.

            (w) All material tax returns required to be filed by the Company and
each of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.

            (x) The accountants, KPMG LLP, that have certified the financial
statements and supporting schedules included in the Offering Circular are
independent public accountants with respect to the Company, as required by the
Act and the Exchange Act. The historical financial statements, together with
related schedules and notes, set forth in the Offering Circular comply as to
form in all material respects with the requirements applicable to registration
statements on Form S-1 under the Act.

            (y) The historical financial statements, together with related
schedules and notes forming part of the Offering Circular (and any amendment or
supplement thereto), present fairly the consolidated financial position, results
of operations and changes in financial position of the Company and its
subsidiaries on the basis stated or incorporated by reference in the Offering
Circular at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data set forth or incorporated by
reference in the Offering Circular (and any amendment or supplement thereto)
are, in all material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of the
Company.


                                       14



            (z) The Company is not and, after giving effect to the offering and
sale of the Notes and the application of the net proceeds thereof as described
in the Offering Circular, will not be, an "investment company," as such term is
defined in the Investment Company Act of 1940, as amended.

            (aa) Except as disclosed in the Offering Circular or other than has
been waived, there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with the Notes
registered pursuant to any registration statement.

            (bb) Neither the Company nor any of its subsidiaries nor any agent
thereof acting on the behalf of any of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
Notes to violate Section 7 of the Exchange Act, or any regulation promulgated
thereunder, including without limitation, Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the
Board of Governors of the Federal Reserve System.

            (cc) No "nationally recognized statistical rating organization" as
such term is defined for the purpose of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Company that it is considering imposing) any
condition (financial or otherwise) on the Company's retaining any rating
assigned to the Company or any securities of the Company or (ii) has indicated
to the Company that it is considering (A) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (B) any change in
the outlook for any rating of the Company or any securities of the Company.

            (dd) Since the respective dates as of which information is given in
the Offering Circular, other than as set forth in the Offering Circular
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change in the
condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries, taken as a whole, (ii) there has
not been any material adverse change in the capital stock or in the long-term
debt of the Company or any of its subsidiaries, (iii) neither the Company nor
any of its subsidiaries has incurred any material liability or obligation,
direct or contingent except in the ordinary course of business, (iv) neither the
Company nor any of its subsidiaries has sustained any material loss or
interference with their respective assets, businesses or properties (whether
owned or leased) from fire, explosion, earthquake, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree that would have a
Material Adverse Effect; and (v) since the date of the latest consolidated
balance sheet included in the Offering Circular, except as reflected therein,
neither the Company nor any of its subsidiaries has (A) issued any securities
other than the issuance of securities pursuant to the exercise of options
granted under stock option plans or agreements existing prior to the date of the
latest consolidated balance sheet included in the Offering Circular, (B) entered
into any material transaction not in the ordinary course of business or (C)
declared or paid any dividend or made any distribution on any shares of its
capital stock or redeemed, purchased or otherwise acquired or agreed to redeem,
purchase or otherwise acquire any shares of its capital stock.


                                       15


            (ee) The books, records and accounts of each of the Company and each
of its subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the results of
operations of, the Company and its subsidiaries, as applicable. Each of the
Company and each of its subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principals and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

            (ff) The Offering Circular, as of its date, contains all the
information specified in, and meets the requirements of, Rule 144A(d)(4) under
the Act.

            (gg) When the Notes are issued and delivered pursuant to this
Agreement, the Notes will not be of the same class (within the meaning of Rule
144A under the Act) as any security of the Company that is listed on a national
securities exchange registered under Section 6 of the Exchange Act or that is
quoted in a United States automated inter-dealer quotation system.

            (hh) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by the Company, or any of its
representatives (other than the Initial Purchaser, as to whom the Company makes
no representation) in connection with the offer and sale of the Notes
contemplated hereby, including without limitation articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Notes have been issued and sold by the
Company within the six-month period immediately prior to the date hereof.

            (ii) Except as permitted by the Securities Act, neither the Company
nor any of its subsidiaries has distributed and, prior to the completion of the
initial distribution of the Notes (which includes the sale by the Initial
Purchaser), neither will distribute, any offering materials in connection with
the offering and sale of the Notes other than the Offering Circular.

            (jj) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in, or that has constituted or that might reasonably be expect to
constitute, the stabilization or manipulation of the price of the Common Stock
or the Notes.

            (kk) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.

            (ll) No registration under the Act of the Securities is required for
the sale of the Securities to the Initial Purchaser as contemplated hereby or
for the Exempt Resales


                                       16


assuming the accuracy of the Initial Purchaser's representations and warranties
and agreements set forth in Section 7 hereof.

            (mm) Each certificate signed by any officer of the Company and
delivered to the Initial Purchaser or counsel for the Initial Purchaser shall be
deemed to be a representation and warranty by the Company to the Initial
Purchaser as to the matters covered thereby.

            (nn) The Company is subject to Section 13 or 15(d) the Exchange Act.

            (oo) Except as disclosed in the Offering Circular, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or any Initial Purchaser
for a brokerage commission, finder's fee or other like payment in connection
with the sale of the Securities.

            The Company acknowledges that the Initial Purchaser and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.

        7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial
Purchaser represents and warrants to, and agrees with, the Company:

            (a) The Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Notes.

            (b) The Initial Purchaser (A) is not acquiring the Securities with a
view to any distribution thereof or with any present intention of offering or
selling any of the Securities in a transaction that would violate the Act or the
securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Securities only to
QIB's in reliance on the exemption from the registration requirements of the Act
provided by Rule 144A.

            (c) The Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D under
the Act) has been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of the Securities pursuant
hereto, including without limitation articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.

            (d) The Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Securities only
from, and will offer to sell the Securities only to, QIB's. The Initial
Purchaser further agrees that it will offer to sell the Securities only to, and
will solicit offers to buy the Securities only from persons whom the Initial
Purchaser reasonably believes are QIB's and that agree that (A) the Securities
purchased by them may be offered, resold, pledged or otherwise transferred
within the time period referred to under Rule 144(k) (taking into account the
provisions of Rule 144(d) under the Act, if applicable)


                                       17


under the Act, as in effect on the date of the transfer of such Securities, only
(1) to a person whom the seller reasonably believes is a QIB acquiring for its
own account or for the account of a QIB in a transaction meeting the
requirements of Rule 144A under the Act, (2) pursuant to an exemption from
registration under the Act provided by Rule 144 thereunder (if available), (3)
to an Institutional Accredited Investor that prior to such transfer, furnishes
the Trustee a signed letter containing certain representations and agreements
relating to the registration and transfer of such Securities and, if requested
by the Company, an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Act, (4) in accordance with another exemption
from the registration requirements under the Act (and based upon an opinion of
counsel acceptable to the Company) or (5) pursuant to an effective registration
statement and, in each case, in accordance with the applicable securities laws
of the United States or other jurisdictions and (B) such QIB's will deliver to
each person to whom such Securities or an interest therein is transferred a
notice substantially to the effect of the foregoing.

            (e) The Initial Purchaser acknowledges that the Company, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser
will rely upon the accuracy and truth of the foregoing representations and the
Initial Purchaser hereby consents to such reliance.

        8. INDEMNIFICATION.

            (a) The Company agrees to indemnify and hold harmless the Initial
Purchaser, its directors, its officers and each person, if any, who controls the
Initial Purchaser (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act), from and against any and all losses, claims, damages,
liabilities and judgments (including without limitation any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Offering Circular (or any
amendment or supplement thereto) or any Rule 144 Information or Rule 144A
Information provided by the Company to any holder or prospective purchaser of
Securities pursuant to Section 5(h) or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to the Initial Purchaser furnished in writing to the
Company by the Initial Purchaser.

            (b) The Initial Purchaser agrees to indemnify and hold harmless the
Company and its directors and officers and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company to the same extent as the foregoing indemnity from the Company to
the Initial Purchaser but only with reference to information relating to the
Initial Purchaser furnished in writing to the Company by the Initial Purchaser
expressly for use in the Offering Circular.

            (c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party shall assume the defense of

                                       18



such action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel, as
they are incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 8(a) and 8(b), the Initial
Purchaser shall not be required to assume the defense of such action pursuant to
this Section 8(c) but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided below,
shall be at the expense of the Initial Purchaser). Any indemnified party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel shall
have been specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it that are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified
parties, and all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by CIBC, in the case of the
parties indemnified pursuant to Section 8(a), and by the Company, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the indemnified
party for reimbursement for the fees and expenses of counsel (in any case where
such fees and expenses are at the expense of the indemnifying party) and, prior
to the date of such settlement, the indemnifying party shall have failed to
comply with such reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of the indemnified party.

            (d) To the extent the indemnification provided for in this Section 8
is unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the


                                       19


Initial Purchaser, on the other hand, from the offering of the Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, on the one hand, and the Initial Purchaser, on the other hand, in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand, and the Initial Purchaser, on the other hand, shall be deemed to be in
the same proportion as the total net proceeds from the offering of the
Securities (after Initial Purchaser's discounts or commissions, but before
deducting expenses) received by the Company, and the total discounts and
commissions received by the Initial Purchaser bear to the total price to
investors of the Securities, in each case as set forth on the cover page of the
Offering Circular. The relative fault of the Company, on the one hand, and the
Initial Purchaser, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or the Initial Purchaser,
on the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

            The Company and the Initial Purchaser agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, the Initial
Purchaser shall not be required to contribute any amount in excess of the amount
by which the total discounts and commissions received by the Initial Purchaser
exceeds the amount of any damages that the Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.

            (e) The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies that may otherwise be available to
any indemnified party at law or in equity.

        9. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The obligations of
the Initial Purchaser to purchase the Firm Notes under this Agreement on the
Closing Date and the Additional Notes, if any, on any Option Closing Date are
subject to the satisfaction of each of the following conditions.

            (a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the Closing Date, or on each
Option Closing Date, if any, with the same force and effect as if made on and as
of the Closing Date or on each Option Closing Date, if any.


                                       20



            (b) On or after the date hereof, (i) there shall not have occurred
any downgrading, suspension or withdrawal of, nor shall any notice have been
given of any potential or intended downgrading, suspension or withdrawal of, or
of any review (or of any potential or intended review) for a possible change
that does not indicate the direction of the possible change in, any rating of
the Company or any securities of the Company (including without limitation the
placing of any of the foregoing ratings on credit watch with negative or
developing implications or under review with an uncertain direction) by any
"nationally recognized statistical rating organization" as such term is defined
for the purpose of Rule 436(g)(2) under the Act, (ii) there shall not have
occurred any change, nor shall any notice have been given of any potential or
intended change, in the outlook for any rating of the Company or any securities
of the Company by any such rating organization and (iii) no such rating
organization shall have given notice that it has assigned (or is considering
assigning) a lower rating to the Notes than that on which the Notes were
marketed.

            (c) Since the respective dates as of which information is given in
the Offering Circular, other than as set forth in the Offering Circular
(exclusive of any amendments or supplements thereto after the date of this
Agreement), (i) there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or the
earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there shall not have been any change or any
development involving a prospective change in the capital stock or in the
long-term debt of the Company or any of its subsidiaries except in the ordinary
course of business, (iii) neither the Company nor any of its subsidiaries shall
have incurred any liability or obligation, direct or contingent except in the
ordinary course of business, and (iv) neither the Company nor any of its
subsidiaries shall have sustained any loss or interference with their respective
assets, businesses or properties (whether owned or leased) from fire, explosion,
earthquake, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other governmental action,
order or decree, the effect of which, in case of any event described in the
foregoing clause (i), (ii), (iii) or (iv), in the judgment of the Initial
Purchaser, is material and adverse and makes it impracticable to market the
Securities on the terms and in the manner contemplated in the Offering Circular.

            (d) You shall have received on the Closing Date a certificate, dated
the Closing Date, and on an Option Closing Date, if any, dated such Option
Closing Date, signed by the President and the Chief Financial Officer of the
Company, confirming the matters set forth in Sections 6(dd), 9(a) and 9(b) and
stating that the Company has complied with all the agreements and satisfied all
of the conditions herein contained and required to be complied with or satisfied
on or prior to the Closing Date or Option Closing Date, as the case may be.

            (e) You shall have received on the Closing Date and each Option
Closing Date, if any, an opinion (subject to customary qualifications,
limitations and exceptions and satisfactory to you and counsel for the Initial
Purchaser), dated the Closing Date or such Option Closing Date, as the case may
be, of Kirkpatrick & Lockhart LLP, counsel for the Company, to the effect that:

                (i) The Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of Delaware. The Company
is duly qualified to transact



                                       21


business and in good standing as a foreign corporation in the States of
California and New York. In rendering this opinion regarding good standing, we
have relied solely on good standing certificates of the Company as of a recent
date issued by each of the Delaware Secretary of State, California Secretary of
State and the New York Secretary of State, and in each case have made no
independent investigation or verification.

                (ii) The Company has the requisite corporate power to enter
into, deliver and perform its obligations under the Purchase Agreement and to
issue and sell the Securities, other than those required under state and foreign
Blue Sky laws as to which such counsel need not render an opinion.

                (iii) The Notes have been duly authorized by the Company and,
when executed and authenticated in accordance with the provisions of the
Indenture, assuming due authentication thereof by the Trustee, and delivered to
and paid for by the Initial Purchaser in accordance with the terms of the
Purchase Agreement, will be valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles,
and will be entitled to the benefits of the Indenture.

                (iv) The Incorporated Documents, on the respective dates they
were filed, appeared on their face to comply in all material respects with the
requirements as to form for reports on Form 10-K and Form 8-A, as the case may
be, under the Exchange Act and the related rules and regulations in effect at
the respective dates of their filing.

                (v) The Class A Common Stock to be issued upon conversion of the
Notes have been duly authorized and reserved and, when issued upon conversion of
the Notes in accordance with the terms of the Notes and the Indenture, will be
validly issued, fully paid and non-assessable, and the issuance of the Class A
Common Stock will not be subject to any preemptive rights arising by operation
of law or under the Company's Certificate of Incorporation or Bylaws or, to such
counsel's knowledge, similar rights under the documents listed in the exhibits
to the Incorporated Documents.

                (vi) All necessary corporate action has been duly and validly
taken by the Company to authorize the execution, delivery and performance of the
Purchase Agreement and the issuance and sale of the Notes and, upon conversion
thereof, the Class A Common Stock. The Purchase Agreement has been duly and
validly authorized, executed and delivered by the Company and the Purchase
Agreement constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.

                (vii) Neither the execution and delivery by the Company of, and
the performance by the Company of its obligations under the Purchase Agreement,
the Indenture, the Registration Rights Agreement and the Securities (including,
without limitation, the issuance and sale by the Company of the Notes and, upon
conversion thereof, the Class A Common Stock)


                                       22


will (a) give rise to a right to terminate or accelerate the due date of any
payment due under, or result in the breach of any express term or provision of,
or constitute a default (or any event which with notice or lapse of time, or
both, would constitute a default) under, or require consent or waiver under, or
result in the execution or imposition of any lien, charge, claim, security
interest or encumbrance upon any properties or assets of the Company pursuant to
the express terms of any indenture, mortgage, deed trust, note or other
agreement or instrument to which the Company is a party or by which the Company
or any of its assets or properties or businesses is bound and which is listed as
an exhibit to the Incorporated Documents, (b) to such counsel's knowledge,
violate any existing obligations of the Company under the express terms of any
judgment, decree, or order of any court or arbitrator or governmental agency or
body, which names the Company and is specifically directed to it or its
properties, (c) violate any applicable statute, rule or regulation of the
Federal laws of the United States of America and the laws of the States of
Delaware, New York and California or (d) violate any provision of the charter or
by-laws of the Company, except for such consents, waivers, approvals and
authorizations which have been obtained prior to the Closing Date.

                (viii) No consent, approval, authorization, license,
registration, or qualification or order of any federal, Delaware, New York or
California court or governmental agency or regulatory body is required for the
due authorization, execution, delivery or performance by the Company of its
obligations under the Purchase Agreement, the Indenture, the Registration Rights
Agreement or the Securities except such as may be required by the securities or
Blue Sky laws of the various states in connection with the offer and sale of the
Securities (except, other than as set forth in paragraph (xv) below, we give no
opinion as to registration of the Securities under the Act and the qualification
of the Indenture under the Trust Indenture Act of 1939, as amended).

                (ix) To such counsel's knowledge, without investigation except
where we have been engaged by the Company to give substantive attention to such
action, suit or proceeding, there is no litigation or governmental proceeding or
investigation, before any court or before or by any public body or board pending
or threatened in writing against, or involving the assets, properties or
businesses of, the Company which would have a Material Adverse Effect.

                (x) Each of the Indenture and the Registration Rights Agreement
has been duly authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable against the Company in accordance with
its terms except as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles.

                (xi) The Company is not an "investment company" or an entity
controlled by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.

                (xii) The statements in the Offering Circular under the caption
"Description of the Notes" insofar as such statement constitutes a summary of
documents referred to therein fairly summarize in all material respects such
documents and matters.


                                       23



                (xiii) The capital stock of the Company conforms in all material
respects to the description thereof contained in the Offering Circular under the
caption "Description of Share Capital."

                (xiv) The statements in the Offering Circular under the caption
"Certain United States Federal Income Tax Consequences," insofar as such
statements constitute a summary of the United States federal tax laws referred
to therein, fairly summarize the matters referred to therein in all material
respects.

                (xv) Assuming (i) each Initial Purchaser is a "qualified
institutional buyer" within the meaning of Rule 144A of the Act and (ii) the
accuracy of the representations and warranties and compliance with the
agreements of the Company in Section 6(ff) of the Purchase Agreement and of the
Initial Purchaser in Section 7 of the Purchase Agreement, it is not necessary in
connection with the offer, sale and delivery of the Securities to the Initial
Purchaser under the Purchase Agreement or in connection with the initial resale
of the Securities by the Initial Purchaser in accordance with Section 7 of the
Purchase Agreement and the Offering Circular to register the Securities under
the Act, or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended, it being understood that no opinion is expressed as to any subsequent
resale of any of the Notes or the Class A Common Stock issuable upon conversion
of any of the Notes.

            Such counsel is not called upon to opine as to factual matters, and
the character of determinations involved in the process is such that it is not
passing upon and does not need to assume any responsibility for the accuracy,
completeness or fairness of the information included in the Offering Circular.
Such counsel may assume the correctness and completeness of the information
included in the Offering Circular, and such counsel may make no independent
investigation or verification of that information. Such counsel can advise,
however, that in and on the basis of its review of the Offering Circular and its
participation in its preparation, nothing has come to such counsel's attention
that causes it to believe that the Offering Circular (including the Incorporated
Documents), as of its date or as of the date hereof, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Such counsel is not called upon to
express an opinion with respect to, and the preceding paragraph does not
address, the financial statements and related notes and schedules, and other
financial, accounting, and statistical information, included in, incorporated by
reference in, or omitted from the Offering Circular, or any further amendment or
supplement thereto. Such counsel is also not called upon to express any opinion
with respect to any mater relating to compliance with financial covenants or
financial requirements.

            (f) The Initial Purchaser shall have received on the Closing Date
and on each Option Closing Date, an opinion, dated the Closing Date, of Latham &
Watkins, counsel for the Initial Purchaser, in form and substance reasonably
satisfactory to the Initial Purchaser.

            (g) The Initial Purchaser shall have received, at the time this
Agreement is executed and at the Closing Date and each Option Closing Date, if
any, letters dated the date hereof or the Closing Date or an Option Closing
Date, as the case may be, from KPMG LLP, independent public accountants, in form
and substance satisfactory to the Initial Purchaser


                                       24



containing the information and statements of the type ordinarily included in
accountants' "comfort letters" with respect to the financial statements and
certain financial information contained in the Offering Circular.

            (h) The Notes shall have been approved by the National Association
of Securities Dealers, Inc. for trading and duly listed in PORTAL.

            (i) The Initial Purchaser shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into by
the Company and the Trustee.

            (j) The Company shall have executed the Registration Rights
Agreement, and the Initial Purchaser shall have received an original copy
thereof, duly executed by the Company.

            (k) The Company shall not have failed at or prior to the Closing
Date or each Option Closing Date, if any, as the case may be, to perform or
comply with all of the agreements contained herein and required to be performed
or complied with by the Company at or prior to the Closing Date or Option
Closing Date, as the case may be.

        10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement may be
terminated at any time on or prior to the Closing Date by the Initial Purchaser
by written notice to the Company if any of the following has occurred: (i) any
significant attack on or significant acts of terrorism involving the United
States, outbreak or escalation of hostilities excluding current hostilities in
Afghanistan, declaration by the United States of a national emergency or war or
other calamity or crisis or any change or development involving a prospective
change in United States or international, political, financial or economic
conditions which has a material adverse effect on financial markets so as to
make it, in your sole judgment, impracticable or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Offering Circular,
(ii) the suspension or material limitation of trading in securities or other
instruments on the New York Stock Exchange, the American Stock Exchange, the
Chicago Board of Options Exchange, the Chicago Mercantile Exchange, the Chicago
Board of Trade or the Nasdaq National Market or limitation on prices for
securities or other instruments on any such exchange or the Nasdaq National
Market, (iii) the suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority that in your judgment has
had, or will have, a Material Adverse Effect, (v) the declaration of a banking
moratorium by either federal or New York state authorities, (vi) any major
disruption of settlements of securities or (vii) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs that in your judgment has a material adverse effect on the
financial markets in the United States.

        11. MISCELLANEOUS.

            (a) Notices given pursuant to any provision of this Agreement shall
be addressed as follows: (i) if to the Company to Skechers U.S.A., Inc., 228
Manhattan Beach Blvd., Manhattan Beach, California 90266, Attention Philip
Paccione, with a copy to Thomas J. Poletti, Kirkpatrick & Lockhart LLP, 10100
Santa Monica Blvd., 7th Floor, Los Angeles, California 90067 and (ii) if to the
Initial Purchaser, c/o CIBC World Markets Corp., 417 5th


                                       25


Avenue, 2nd Floor, New York, New York 10016 Attention: __________, with a copy
to J. Scott Hodgkins, Latham & Watkins, Suite 4000, Los Angeles, California
90071, in any case to such other address as the person to be notified may have
requested in writing.

            (b) The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company and the Initial
Purchaser set forth in or made pursuant to this Agreement shall remain operative
and in full force and effect and will survive delivery of and payment for the
Securities regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchaser, any person controlling the Initial
Purchaser, the Company, the officers or directors of the Company, or any person
controlling the Company, (ii) acceptance of the Securities and payment for them
hereunder and (iii) termination of the Agreement.

            (c) If for any reason the Notes are not delivered by or on behalf of
the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company agrees to reimburse the
Initial Purchaser for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by it. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i). The Company also agrees to reimburse the
Initial Purchaser and the officers, directors and each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act for any and all fees and expenses (including
without limitation the fees and expenses of counsel) incurred by them in
connection with enforcing their rights under this Agreement (including without
limitation its rights under Section 8).

            (d) Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Initial Purchaser, the Initial Purchaser's directors and officers, any
controlling persons referred to herein, the directors of the Company and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Securities from the Initial Purchaser merely because of
such purchase.

            (e) This Agreement shall be governed and construed in accordance
with the laws of the State of New York, including without limitation, Section
5-1401 of the New York General Obligations Law.

            (f) This Agreement may be signed in various counterparts, which
together shall constitute one and the same instrument.

                            [Signature Page Follows]


                                       26


        Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Initial Purchaser by signing in the space provided
below.

                                            Very truly yours,

                                            SKECHERS U.S.A., INC.


                                            By: /s/ DAVID WEINBERG
                                                --------------------------------
                                                Name:  David Weinberg
                                                Title: Chief Financial Officer

CIBC WORLD MARKETS CORP.


By: /s/ WILLIAM S. SCHREIER
    ------------------------------
    Name:  William S. Schreier
    Title: Managing Director







                                   SCHEDULE A
                                  SUBSIDIARIES




                               SKECHERS ENTITIES


I. DOMESTIC




CORPORATE ENTITY                        OPERATIONS                               EMPLOYEES
- -------------------------------------------------------------------------------------------------
                                                                          

SKECHERS USA, INC.,             parent company of all other Skechers               1857
a Delaware corporation          entities, both international &
228 Manhattan Beach Blvd.       domestic
Manhattan Beach, CA 90266
- -------------------------------------------------------------------------------------------------
SKECHERS USA, INC., II          Subsidiary that develops & maintains                88
a Delaware corporation          U.S. intellectual property of Skechers;
228 Manhattan Beach Blvd.       includes design, production,
Manhattan Beach, CA 90266       advertising, marketing, display
                                merchandising and licensing
                                operations
- -------------------------------------------------------------------------------------------------
SKECHERS By Mail, Inc.          Subsidiary that operates skechers.com               none
a Delaware corporation          internet store
228 Manhattan Beach Blvd.
Manhattan Beach, CA 90266
- -------------------------------------------------------------------------------------------------
Yale Investments, LLC,          Single-asset real estate entity; owns               none
a Delaware limited liability    distribution center located at 1670 S.
corporation                     Champagne Ave., Ontario, CA
228 Manhattan Beach Blvd.
Manhattan Beach, CA 90266
- -------------------------------------------------------------------------------------------------
Duncan Investments, LLC,        Real estate entity that owns property               none
a California limited            located at: 324, 340 & 356 Sepulveda Blvd.,
liability company               Manhattan Beach, CA
228 Manhattan Beach Blvd.
Manhattan Beach, CA 90266
- -------------------------------------------------------------------------------------------------


II. INTERNATIONAL




COUNTRY               CORPORATE                 ADDITIONAL      OPERATIONS           EMPLOYEES
                      NAME/ADDRESS              LOCATIONS
- -------------------------------------------------------------------------------------------------
                                                                         

Switzerland           SKECHERS SARL             None            holding company         4
                      12 Rue de la Mercerie                     for Skechers
                      1003 Lausanne                             International
                      Switzerland                               companies






- -----------------------------------------------------------------------------------------------
               CORPORATE                ADDITIONAL
COUNTRY        NAME/ADDRESS             LOCATIONS                OPERATIONS          EMPLOYEES
- -----------------------------------------------------------------------------------------------
                                                                         
England        SKECHERS USA, Ltd.       RETAIL: (1)              wholesale and        34
               Katherine House                                   retail operations
               9-11 Wyllyotts Place     291a-291c Oxford St.
               Darkes Lane              London W1 R1LB.
               Potters Bar,             England
               Hertfordshire
               United Kingdom
               EN62JD
- -----------------------------------------------------------------------------------------------
Germany        SKECHERS USA             RETAIL: (1)              wholesale & retail   19
               Deutschland GmbH                                  operations
               Waldstrasse 74           CentrO Mall
               63128 Diezenbach,        Space B018
               Germany                  Neue Mitte
                                        Oberhausen 46047,
                                        Germany
- -----------------------------------------------------------------------------------------------
France         SKECHERS USA             RETAIL: (1)              wholesale & retail   18
               France SAS                                        operations
               20 rue des Capucines     16-18 Rue De Berger
               75002 Paris, France      75001 Paris, France
- -----------------------------------------------------------------------------------------------







                                    EXHIBIT A
                      FORM OF REGISTRATION RIGHTS AGREEMENT

EX-4.2

                                                                     Exhibit 4.2

                             SKECHERS U.S.A., INC.,
                                    AS ISSUER


                     WELLS FARGO BANK, NATIONAL ASSOCIATION,
                                   AS TRUSTEE







                                    INDENTURE


                            DATED AS OF APRIL 9, 2002








                  4.50% CONVERTIBLE SUBORDINATED NOTES DUE 2007





                                TABLE OF CONTENTS


                                                                                          PAGE
                                                                                          ----
                                                                                        
ARTICLE ONE  DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION........................1

        SECTION 1.1     Definitions.........................................................1

        SECTION 1.2     Compliance Certificates and Opinions...............................12

        SECTION 1.3     Form of Documents Delivered to the Trustee.........................12

        SECTION 1.4     Acts of Holders of Securities......................................13

        SECTION 1.5     Notices, Etc., to Trustee and Company..............................15

        SECTION 1.6     Notice to Holders of Securities; Waiver............................15

        SECTION 1.7     Effect of Headings and Table of Contents...........................16

        SECTION 1.8     Successors and Assigns.............................................16

        SECTION 1.9     Separability Clause................................................16

        SECTION 1.10    Benefits of Indenture..............................................16

        SECTION 1.11    Governing Law......................................................16

        SECTION 1.12    Legal Holidays.....................................................16

        SECTION 1.13    Conflict with Trust Indenture Act..................................17

        SECTION 1.14    Counterparts.......................................................17

ARTICLE TWO  THE SECURITIES................................................................17

        SECTION 2.1     Form Generally.....................................................17

        SECTION 2.2     Title and Terms....................................................18

        SECTION 2.3     Denominations......................................................18

        SECTION 2.4     Execution, Authentication, Delivery and Dating.....................19

        SECTION 2.5     Global Securities; Temporary Securities............................19

        SECTION 2.6     Registration, Registration of Transfer and Exchange;
                        Restrictions on Transfer...........................................21

        SECTION 2.7     Mutilated, Destroyed, Lost or Stolen Securities....................23

        SECTION 2.8     Payment of Interest; Interest Rights Preserved.....................24

        SECTION 2.9     Persons Deemed Owners..............................................25

        SECTION 2.10    Cancellation.......................................................25

        SECTION 2.11    Computation of Interest............................................25




                                                                                        
        SECTION 2.12    CUSIP Numbers......................................................26

ARTICLE THREE  SATISFACTION AND DISCHARGE..................................................26

        SECTION 3.1     Satisfaction and Discharge of Indenture............................26

        SECTION 3.2     Application of Trust Money.........................................27

ARTICLE FOUR  REMEDIES ....................................................................28

        SECTION 4.1     Events of Default..................................................28

        SECTION 4.2     Acceleration of Maturity; Rescission and Annulment.................29

        SECTION 4.3     Collection of Indebtedness and Suits for Enforcement by
                        Trustee............................................................30

        SECTION 4.4     Trustee May File Proofs of Claim...................................31

        SECTION 4.5     Trustee May Enforce Claims without Possession of Securities........32

        SECTION 4.6     Application of Money Collected.....................................32

        SECTION 4.7     Limitation on Suits................................................32

        SECTION 4.8     Unconditional Right of Holders to Receive Principal, Premium
                        and Interest and to Convert........................................33

        SECTION 4.9     Restoration of Rights and Remedies.................................33

        SECTION 4.10    Rights and Remedies Cumulative.....................................33

        SECTION 4.11    Delay or Omission Not Waiver.......................................34

        SECTION 4.12    Control by Holders of Securities...................................34

        SECTION 4.13    Waiver of Past Defaults............................................34

        SECTION 4.14    Undertaking for Costs..............................................34

        SECTION 4.15    Waiver of Stay, Usury or Extension Laws............................35

ARTICLE FIVE  THE TRUSTEE..................................................................35

        SECTION 5.1     Certain Duties and Responsibilities................................35

        SECTION 5.2     Notice of Defaults.................................................36

        SECTION 5.3     Certain Rights of Trustee..........................................36

        SECTION 5.4     Not Responsible for Recitals or Issuance of Securities.............37

        SECTION 5.5     May Hold Securities, Act as Trustee under Other Indentures.........37

        SECTION 5.6     Money Held in Trust................................................38

        SECTION 5.7     Compensation and Reimbursement.....................................38

        SECTION 5.8     Corporate Trustee Required; Eligibility............................39



                                      -ii-



                                                                                        
        SECTION 5.9     Resignation and Removal; Appointment of Successor..................39

        SECTION 5.10    Acceptance of Appointment by Successor.............................40

        SECTION 5.11    Merger, Conversion, Consolidation or Succession to Business........40

        SECTION 5.12    Authenticating Agents..............................................41

        SECTION 5.13    Disqualification; Conflicting Interests............................42

        SECTION 5.14    Preferential Collection of Claims Against Company..................42

ARTICLE SIX  CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE..........................42

        SECTION 6.1     Company May Consolidate, Etc., Only on Certain Terms...............42

        SECTION 6.2     Successor Substituted..............................................43

ARTICLE SEVEN  SUPPLEMENTAL INDENTURES.....................................................43

        SECTION 7.1     Supplemental Indentures without Consent of Holders of
                        Securities.........................................................43

        SECTION 7.2     Supplemental Indentures with Consent of Holders of Securities......44

        SECTION 7.3     Execution of Supplemental Indentures...............................46

        SECTION 7.4     Effect of Supplemental Indentures..................................46

        SECTION 7.5     Reference in Securities to Supplemental Indentures.................46

        SECTION 7.6     Notice of Supplemental Indentures..................................46

ARTICLE EIGHT  COVENANTS...................................................................46

        SECTION 8.1     Payment of Principal, Premium and Interest.........................46

        SECTION 8.2     Maintenance of Offices or Agencies.................................47

        SECTION 8.3     Money for Security Payments to Be Held in Trust....................47

        SECTION 8.4     Existence..........................................................48

        SECTION 8.5     Statement by Officers as to Default................................49

        SECTION 8.6     Delivery of Certain Information....................................49

ARTICLE NINE  REDEMPTION OF SECURITIES.....................................................49

        SECTION 9.1     Right of Redemption................................................49

        SECTION 9.2     Applicability of Article...........................................50

        SECTION 9.3     Election to Redeem; Notice to Trustee..............................50

        SECTION 9.4     Selection by Trustee of Securities to Be Redeemed..................50


                                     -iii-




                                                                                        
        SECTION 9.5     Notice of Redemption...............................................50

        SECTION 9.6     Deposit of Redemption Price........................................51

        SECTION 9.7     Securities Payable on Redemption Date..............................51

        SECTION 9.8     Securities Redeemed in Part........................................52

        SECTION 9.9     Conversion Arrangement on Call for Redemption......................52

ARTICLE TEN  CONVERSION OF SECURITIES......................................................53

        SECTION 10.1    Conversion Privilege and Conversion Rate...........................53

        SECTION 10.2    Exercise of Conversion Privilege...................................53

        SECTION 10.3    Fractions of Shares................................................55

        SECTION 10.4    Adjustment of Conversion Rate......................................55

        SECTION 10.5    Notice of Adjustments of Conversion Rate...........................60

        SECTION 10.6    Notice of Certain Corporate Action.................................60

        SECTION 10.7    Company to Reserve Common Stock....................................61

        SECTION 10.8    Taxes on Conversions...............................................61

        SECTION 10.9    Covenant as to Common Stock........................................62

        SECTION 10.10   Cancellation of Converted Securities...............................62

        SECTION 10.11   Provision in Case of Consolidation, Merger or Sale of Assets.......62

        SECTION 10.12   Responsibility of Trustee for Conversion Provisions................63

ARTICLE ELEVEN  SUBORDINATION OF SECURITIES................................................63

        SECTION 11.1    Securities Subordinate to Senior Debt..............................63

        SECTION 11.2    No Payments in Certain Circumstances; Payment Over of Proceeds
                        Upon Dissolution, Etc..............................................64

        SECTION 11.3    Trustee to Effectuate Subordination................................65

        SECTION 11.4    No Waiver of Subordination Provisions..............................66

        SECTION 11.5    Notice to Trustee..................................................66

        SECTION 11.6    Reliance on Judicial Order or Certificate of Liquidating Agent.....67

        SECTION 11.7    Trustee Not Fiduciary for Holders of Senior Debt...................67

        SECTION 11.8    Reliance by Holders of Senior Debt on Subordination Provisions.....67

        SECTION 11.9    Rights of Trustee as Holder of Senior Debt; Preservation of
                        Trustee's Rights...................................................68



                                      -iv-





                                                                                        
        SECTION 11.10   Article Applicable to Paying Agents................................68

        SECTION 11.11   Certain Conversions and Repurchases Deemed Payment.................68

ARTICLE TWELVE REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER UPON A
        CHANGE IN CONTROL..................................................................69

        SECTION 12.1    Right to Require Repurchase........................................69

        SECTION 12.2    Conditions to the Company's Election to Pay the Repurchase
                        Price in Common Stock..............................................70

        SECTION 12.3    Notices; Method of Exercising Repurchase Right, Etc................70

ARTICLE THIRTEEN  HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE...........73

        SECTION 13.1    Company to Furnish Trustee Names and Addresses of Holders..........73

        SECTION 13.2    Preservation of Information........................................73

        SECTION 13.3    No Recourse Against Others.........................................74

        SECTION 13.4    Reports by Trustee.................................................74

        SECTION 13.5    Reports by Company.................................................74


                                       -v-




        INDENTURE, dated as of April 9, 2002, between Skechers U.S.A., Inc., a
corporation duly organized and existing under the laws of the State of Delaware,
having its principal office at 228 Manhattan Beach Boulevard, Manhattan Beach,
California 90266 (herein called the "COMPANY"), and Wells Fargo Bank, National
Association, as Trustee hereunder (herein called the "TRUSTEE").

                             RECITALS OF THE COMPANY

        The Company has duly authorized the creation of an issue of its 4.50%
Convertible Subordinated Notes due 2007 (herein called the "SECURITIES"), of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.

        All things necessary to make the Securities, when the Securities are
executed by the Company and authenticated and delivered hereunder, the valid
obligations of the Company and to make this Indenture a valid agreement of the
Company, in accordance with their and its terms, have been done. Further, all
things necessary to duly authorize the issuance of shares of common stock of the
Company issuable upon the conversion of the Securities, and to duly reserve for
issuance the number of shares of Common Stock issuable upon such conversion,
have been done.

                   NOW, THEREFORE, THIS INDENTURE WITNESSETH:

        For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:

                                   ARTICLE ONE

                        DEFINITIONS AND OTHER PROVISIONS
                             OF GENERAL APPLICATION

SECTION 1.1 DEFINITIONS.

        For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:

            (a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;

            (b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States; and

            (c) the words "HEREIN," "HEREOF" and "HEREUNDER" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.





            "ACT," when used with respect to any Holder of a Security, has the
meaning specified in Section 1.4.

            "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 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.

            "AGGREGATE CURRENT MARKET PRICE" has the meaning specified in
Section 10.4(e).

            "APPLICABLE PROCEDURES" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security, to the extent
applicable to such transaction and as in effect from time to time.

            "AUTHENTICATING AGENT" means any Person authorized pursuant to
Section 5.12 to act on behalf of the Trustee to authenticate Securities.

            "AVERAGE SALES PRICE PER SHARE" means, with respect to the Common
Stock of the Company, for any day, (1) the average of the high and low sales
price per share regular way on a national securities exchange or, (2) if the
Common Stock is not listed on a national securities exchange, the average of the
high and low sales price per share regular way on The Nasdaq Stock Market, or
(3) if the Common Stock is not quoted on The Nasdaq Stock Market or listed or
admitted to trading on any national securities exchange, the average of the high
and low sales prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected from time to time by the Company for that
purpose.

            "BOARD OF DIRECTORS" means either the board of directors of the
Company or any duly authorized committee of that board.

            "BOARD RESOLUTION" means a resolution duly adopted by the Board of
Directors, a copy of which, certified by the Secretary or an Assistant Secretary
of the Company to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification, shall have been
delivered to the Trustee.

            "BUSINESS DAY," when used with respect to any Place of Payment,
Place of Conversion or any other place, as the case may be, means each Monday,
Tuesday, Wednesday, Thursday and Friday that is not a day on which banking
institutions in such Place of Payment, Place of Conversion or other place, as
the case may be, are authorized or obligated by law or executive order to close;
provided, however, that a day on which banking institutions in New York, New
York are authorized or obligated by law or executive order to close shall not be
a Business Day for purposes of Section 9.6 or Section 10.4.

            "CASH EQUIVALENTS" means (1) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities


                                      -2-


of not more than six months from the date of acquisition, (2) certificates of
deposit and eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any domestic commercial
bank having capital and surplus in excess of $500 million and a Thompson Bank
Watch Rating of "B" or better, (3) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clause
(1) above entered into with any financial institution meeting the qualifications
specified in clause (2) above, (4) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings
Services and in each case maturing within six months after the date of
acquisition and (5) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (1)-(4) of this
definition.

            "CHANGE IN CONTROL" means the occurrence at any time, after the
original issuance of the Securities, of any of the following events:

            (1) the acquisition by any Person (including any syndicated group
        that would be deemed to be a "person" under Section 13(d)(3) of the
        Exchange Act) of beneficial ownership, directly or indirectly, through a
        purchase, merger or other acquisition transaction or series of
        transactions, of shares of capital stock of the Company entitling such
        Person to exercise more than 50% of the total voting power of all shares
        of capital stock of the Company entitled to vote generally in the
        elections of directors, other than any such acquisition by the Company,
        any Subsidiary, or any employee benefit plan of the Company, Robert
        Greenberg or a Related Party; or

            (2) any Person shall succeed in having sufficient of its nominees
        (who are not supported by a majority of the then current Board of
        Directors of the Company) elected to the Board of Directors of the
        Company such that such nominees, when added to any existing directors
        remaining on the Board of Directors of the Company after such election
        who are Affiliates of or acting in concert with any such Person, shall
        constitute a majority of the Board of Directors of the Company; or

            (3) any consolidation or merger of the Company with or into any
        other Person, or any merger of another Person with or into the Company
        (other than (A) a merger (i) that does not result in any
        reclassification, conversion, exchange or cancellation of outstanding
        shares of the Company's capital stock and (ii) pursuant to which holders
        of Common Stock immediately prior to such transaction have, directly or
        indirectly, 50% or more of the total voting power of all shares of
        capital stock or other ownership interests entitled to vote generally in
        the election of directors of the continuing or surviving Person
        immediately after such transaction and (B) any merger that is effected
        solely to change the jurisdiction of incorporation of the Company and
        results in a reclassification, conversion or exchange of outstanding
        shares of Common Stock solely into shares of common stock of the Company
        or another Person); or

            (4) any conveyance, transfer, sale, lease or other disposition of
        all or substantially all of the Company's assets to another Person;


                                      -3-



provided, however, that a Change in Control shall not be deemed to have occurred
if the Average Sales Price Per Share on any five Trading Days within (A) the
period of 10 consecutive Trading Days ending immediately after the later of the
date of the Change in Control or the date of the public announcement of the
Change in Control (in the case of a Change in Control under clause (1) above but
not clause (2) or (3) above) or (B) the period of 10 consecutive Trading Days
ending immediately prior to the date of the Change in Control (in the case of a
Change in Control under clause (2) or (3) above) shall, in either case, equal or
exceed 105% of the Conversion Price of the Securities in effect on each such
Trading Day. For the purposes of this definition, "beneficial owner," has the
meaning attributed to it in Rules 13d-3 under the Exchange Act, whether or not
applicable.

            For the purposes of this definition, "Related Party" means (1) any
parent, spouse, sibling or descendent of (a) Robert Greenberg, (b) M. Susan
Greenberg or (c) any of Robert Greenberg's children or grandchildren
(collectively, "Immediate Family") or (2) any trust, corporation, partnership,
estate or other entity of which the beneficiaries, stockholders, partners or
owners holding a 75% or greater interest consist of Robert Greenberg and/or
members of his Immediate Family; provided that, in the case of clause (2), any
interest holder other than Robert Greenberg or any member of his Immediate
Family shall not be deemed a Related Party.

            "CODE" has the meaning specified in Section 2.1.

            "COMBINED CASH AND TENDER AMOUNT" has the meaning specified in
Section 10.4(e).

            "COMBINED TENDER AND CASH AMOUNT" has the meaning specified in
Section 10.4(f).

            "COMMISSION" means the United States 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 instrument 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 the shares of the class designated as Class A
common stock, par value $0.001 per share, of the Company at the date of this
Indenture or as such stock may be reconstituted from time to time. Subject to
the provisions of Section 10.11, shares issuable on conversion or repurchase of
Securities shall include only shares of Common Stock or shares of any class or
classes of common stock resulting from any reclassification or reclassifications
thereof; provided, however, that if at any time there shall be more than one
such resulting class, the shares so issuable on conversion of Securities shall
include shares of all such classes, and the shares of each such class then so
issuable shall be substantially in the proportion that 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 Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.

            "COMPANY NOTICE" has the meaning specified in Section 12.3(a).


                                      -4-


            "COMPANY REQUEST" or "COMPANY ORDER" means a written request or
order signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its Chief Executive Officer, its President or a Vice
President, and by its principal financial officer, Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.

            "COMPLETION DATE" has the meaning specified in Section 10.4(f).

            "CONSTITUENT PERSON" has the meaning specified in Section 10.11.

            "CONVERSION AGENT" means any Person authorized by the Company to
convert Securities in accordance with Article Ten. The Company has initially
appointed the Trustee as its Conversion Agent.

            "CONVERSION PRICE" means the amount equal to U.S. $1,000 divided by
the Conversion Rate.

            "CONVERSION RATE" has the meaning specified in Section 10.1.

            "CONVERSION SHARES" has the meaning specified in Section 10.4(m).

            "CORPORATE TRUST OFFICE" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered (which at the date of this Indenture is located at Wells Fargo
Corporate Trust Services, E2818-176 MAC, 707 Wilshire Blvd., 17th Floor, Los
Angeles, California 90017, Attn: Robert Schneider (Skechers U.S.A., Inc.)).

            "CORPORATION" means a corporation, company, association, joint-stock
company or business trust.

            "CREDIT FACILITY" means that certain Amended and Restated Loan and
Security Agreement, dated as of September 4, 1998, as amended, supplemented or
restated from time to time, between the Company and The CIT Group/Commercial
Services, Inc., as successor agent and lender.

            "DEFAULTED INTEREST" has the meaning specified in Section 2.8.

            "DEPOSITARY" means, with respect to any Registered Securities, a
clearing agency that is registered as such under the Exchange Act and is
designated by the Company to act as Depositary for such Registered Securities
(or any successor securities clearing agency so registered).

            "DESIGNATED SENIOR DEBT" means (i) any indebtedness outstanding
under the Credit Facility, and (2) the Company's obligations under any
particular Senior Debt in which the instrument creating or evidencing the same,
or the assumption or guarantee thereof, or related agreements or documents to
which the Company is a party, expressly provides that such indebtedness shall be
"Designated Senior Debt" for purposes of this Indenture (provided that


                                      -5-


such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Debt to exercise the rights of Designated
Senior Debt).

            "DISTRIBUTION DATE" has the meaning specified in Section 10.4(m).

            "DOLLAR" or "U.S.$" means a dollar or other equivalent unit in such
coin or currency of the United States as at the time shall be legal tender for
the payment of public and private debts.

            "DTC" means The Depository Trust Company, a New York corporation.

            "EVENT OF DEFAULT" has the meaning specified in Section 4.1.

            "EXCHANGE ACT" means the United States Securities Exchange Act of
1934 (or any successor statute), as amended from time to time.

            "GLOBAL SECURITY" means a Registered Security that is registered in
the Security Register in the name of a Depositary or a nominee thereof.

            "HOLDER" means the Person in whose name the Security is registered
in the Security Register.

            "INDENTURE" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.

            "INITIAL PURCHASER" means CIBC World Markets Corp.

            "INTEREST PAYMENT DATE" means the Stated Maturity of an installment
of interest on the Securities.

            "LIQUIDATED DAMAGES" has the meaning specified in the Registration
Rights Agreement.

            "MATURITY," when used with respect to any Security, means the date
on which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, exercise of the repurchase right set forth in
Article Twelve or otherwise.

            "MEMBER" means any member of, or participant in, the Depositary.

            "NON-ELECTING SHARE" has the meaning specified in Section 10.11.

            "NOTICE OF DEFAULT" has the meaning specified in Section 4.1.

            "OFFICERS' CERTIFICATE" means a certificate signed by the Chairman
of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the
President or a Vice President and


                                      -6-



by the principal financial officer, the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.

            "OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for or employed by the Company and who shall be acceptable to the
Trustee.

            "OUTSTANDING," when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:

            (1) Securities theretofore cancelled by the Trustee or delivered to
        the Trustee for cancellation;

            (2) Securities for the payment or redemption of which money in the
        necessary amount has been theretofore deposited with the Trustee or any
        Paying Agent (if other than the Company) in trust or set aside and
        segregated in trust by the Company (if the Company shall act as its own
        Paying Agent) for the Holders of such Securities (provided that, if such
        Securities are to be redeemed, notice of such redemption has been duly
        given pursuant to this Indenture or provision therefor satisfactory to
        the Trustee has been made); and

            (3) Securities that have been paid pursuant to Section 2.7 or in
        exchange for or in lieu of which other Securities have been
        authenticated and delivered pursuant to this Indenture, other than any
        such Securities in respect of which there shall have been presented to
        the Trustee proof satisfactory to it that such Securities are held by a
        bona fide purchaser in whose hands such Securities are valid obligations
        of the Company;

provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities are present at a meeting of Holders
of Securities for quorum purposes or have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such determination as to the presence of a quorum or upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Securities that a Responsible Officer of the Trustee actually knows to be
so owned shall be so disregarded. Securities so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor.

            "PAYING AGENT" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company and, except
as otherwise specifically set forth herein, such term shall include the Company
if it shall act as its own Paying Agent. The Company has initially appointed the
Trustee as its Paying Agent.

            "PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, trust, estate, unincorporated organization
or government or any agency or political subdivision thereof.


                                      -7-



            "PLACE OF CONVERSION" has the meaning specified in Section 2.2.

            "PLACE OF PAYMENT" has the meaning specified in Section 2.2.

            "PREDECESSOR SECURITY" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 2.7 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.

            "PURCHASE AGREEMENT" means the Purchase Agreement, dated as of April
4, 2002, between the Company and the Initial Purchaser, as such agreement may be
amended from time to time.

            "PURCHASED SHARES" has the meaning specified in Section 10.4(f).

            "PURCHASERS" has the meaning specified in Section 9.9.

            "RECORD DATE" means any Regular Record Date or Special Record Date.

            "RECORD DATE PERIOD" means the period from the close of business of
any Regular Record Date next preceding any Interest Payment Date to the opening
of business on such Interest Payment Date.

            "REDEMPTION DATE," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.

            "REDEMPTION PRICE," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.

            "REGISTERED SECURITIES" has the meaning specified in Section 2.1.

            "REGISTRABLE SECURITIES" has the meaning specified in the
Registration Rights Agreement.

            "REGISTRATION DEFAULT" has the meaning specified in the Registration
Rights Agreement.

            "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated the date hereof, by and among the Company and the Initial
Purchaser.

            "REGULAR RECORD DATE" for interest payable in respect of any
Registered Security on any Interest Payment Date means the April 1 and the
October 1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date.

            "REPRESENTATIVE" means (1) the indenture trustee or other trustee,
agent or representative for any Designated Senior Debt or (2) with respect to
Designated Senior Debt that does not have any such trustee, agent or other
representative, (A) in the case of such Designated


                                      -8-


Senior Debt issued pursuant to an agreement providing for voting arrangements as
among the holders or owners of such Designated Senior Debt, any holder or owner
of such Designated Senior Debt acting with the consent of the required Persons
necessary to bind such holders or owners of such Designated Senior Debt and (B)
in the case of all other such Designated Senior Debt, the holder or owner of
such Designated Senior Debt.

            "REPURCHASE DATE" has the meaning specified in Section 12.1.

            "REPURCHASE PRICE" has the meaning specified in Section 12.1.

            "RESPONSIBLE OFFICER," when used with respect to the Trustee, means
any officer within the Corporate Trust Office, including without limitation any
vice president, assistant vice president, assistant treasurer, corporate trust
officer or other employee of the Trustee customarily performing functions
similar to those performed by any of the above designated officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge and familiarity with the
particular subject.

            "RESTRICTED GLOBAL SECURITY" has the meaning specified in Section
2.1.

            "RESTRICTED SECURITIES LEGEND" means, collectively, the legends
substantially in the forms of the legends required in the form of Security
attached hereto as Exhibit A to be placed upon each Security.

            "RIGHTS PLAN" has the meaning specified in Section 10.4(d).

            "RULE 144A" means Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.

            "RULE 144A INFORMATION" has the meaning specified in Section 8.6.

            "SECURITIES" has the meaning ascribed to it in the first paragraph
under the caption "Recitals of the Company."

            "SECURITIES ACT" means the United States Securities Act of 1933 (or
any successor statute), as amended from time to time.

            "SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective
meanings specified in Section 2.6.

            "SENIOR DEBT" means the principal of (and premium, if any) and
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) on, and rent payable on
or in connection with, and all fees, costs, claims, expenses and other amounts
payable in connection with, the following, whether absolute or contingent,
secured or unsecured, due or to become due, outstanding on the date of this
Indenture or thereafter created, incurred or assumed: (1) all the Company's
indebtedness evidenced by a credit or loan agreement, note, bond, debenture, or
other similar instrument whether or not the recourse of the lender is to all of
the Company's assets or only to a portion, (2) all of the


                                      -9-


Company's indebtedness, obligations and other liabilities, contingent or
otherwise, for borrowed money, including, without limitation, overdrafts,
foreign exchange contracts, currency exchange agreements, interest rate
protection agreements and any loans or advances from banks, whether or not
evidenced by notes or similar instruments, or bonds, debentures, notes or
similar instruments, whether or not the recourse of the lender is to all of the
Company's assets or only to a portion thereof, (3) all of the Company's
obligations as lessee under leases required to be capitalized on the balance
sheet of the lessee under generally accepted accounting principles, (4) all of
the Company's obligations as lessee under leases for facilities, equipment or
other assets entered into for financing purposes, whether or not capitalized,
(5) all of the Company's obligations and other liabilities, contingent or
otherwise, under any lease or related document, including a purchase agreement,
in connection with the lease of real property or improvements, or any personal
property included as part of any such lease, which provides that the Company is
contractually obligated to purchase or cause a third party to purchase the
leased property and thereby guarantee a residual value of leased property to the
lessor and all of the Company's obligations under such lease or related document
to purchase or cause a third party to purchase the leased property, whether or
not such lease transaction is characterized as an operating lease or capitalized
lease in accordance with generally accepted accounting principles, (6) all of
the Company's obligations under interest rate and currency swaps, caps, floors,
collars, hedge agreements, forward contracts, or similar agreements or
arrangements, (7) all of the Company's obligations with respect to letters of
credit, bank guarantees, bankers' acceptances and similar facilities, including
related reimbursement obligations, (8) all of the Company's obligations issued
or assumed as the deferred purchase price of property or services (but excluding
trade accounts payable and accrued liabilities arising in the ordinary course of
business), (9) all of the Company's obligations of the type referred to in
clauses (1) through (8) above of another Person and all dividends of another
Person, the payment of which, in either case, the Company has assumed or
guaranteed or for which the Company is responsible or liable, directly or
indirectly, jointly or severally, as obligor, guarantor or otherwise or which is
secured by a lien on the Company's property and (10) renewals, extensions,
modifications, replacements, restatements and refundings of, or any indebtedness
or obligation issued in exchange for, any such indebtedness or obligation
described in clauses (1) through (9) of this definition; provided, however, that
Senior Debt shall not include the Securities, any liability for federal, state,
local or other taxes owed or owing by the Company or any indebtedness or
obligation if the terms of such indebtedness or obligation (or the terms of the
instrument under which such indebtedness or obligation is issued) expressly
provides that such indebtedness or obligation is not superior in right of
payment to the Securities; and provided, further, that Senior Debt shall not
include accounts payable or other accrued liabilities or obligations incurred in
the ordinary course of business in connection with the obtaining of materials or
services and any indebtedness or obligation that the Company may owe to any
direct or indirect Subsidiary.

            "SHELF REGISTRATION STATEMENT" has the meaning specified in the
Registration Rights Agreement.

            "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such regulation is in effect on
the date hereof.


                                      -10-



            "SPECIAL RECORD DATE" for the payment of any Defaulted Interest
means a date fixed by the Company pursuant to Section 2.8.

            "STATED MATURITY," when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.

            "SUBSIDIARY" means a corporation, or limited liability company, more
than 50% of the outstanding voting stock of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this definition,
"voting stock" means stock or other similar interests in the corporation that
ordinarily has or have voting power for the election of directors or Persons
performing similar functions, whether at all times or only so long as no senior
class of stock or other interests has or have such voting power by reason of any
contingency.

            "SUCCESSOR SECURITY" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 2.7 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.

            "TRADING DAYS" means (1) if the Common Stock is listed or admitted
for trading on any national securities exchange, days on which such national
securities exchange is open for business; (2) if the Common Stock is quoted on
The Nasdaq Stock Market or any other system of automated dissemination of
quotations of securities prices, days on which trades may be effected through
such system; or (3) if the Common Stock is not listed or admitted for trading on
any national securities exchange or quoted on The Nasdaq Stock Market or any
other system of automated dissemination of quotation of securities prices, days
on which the Common Stock is traded regular way in the over-the-counter market
and for which a closing bid and a closing asked price for the Common Stock are
available.

            "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.

            "TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.

            "UNITED STATES" means the United States of America (including the
several States and the District of Columbia), its territories, its possessions
and other areas subject to its jurisdiction (its "possessions" including Puerto
Rico, the United States Virgin Islands, Guam, American Samoa, Wake Island and
the Northern Mariana Islands).

            "VICE PRESIDENT," when used with respect to the Company, means any
vice president, whether or not designated by a number or a word or words added
before or after the title "vice president."


                                      -11-



SECTION 1.2 COMPLIANCE CERTIFICATES AND OPINIONS.

            Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall furnish
to the Trustee an Officers' Certificate stating that all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have been
complied with and, if required by the Trust Indenture Act, an Opinion of Counsel
stating that in the opinion of such counsel all such conditions precedent, if
any, have been complied with, except that in the case of any such application or
request as to which the furnishing of such documents is specifically required by
any provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished. Every
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:

            (a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;

            (b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;

            (c) a statement that, in the opinion of such individual, 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

            (d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with; provided,
however, with respect to matters of fact, an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.

SECTION 1.3 FORM OF DOCUMENTS DELIVERED TO THE TRUSTEE.

            In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.

            Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company or any other Person
stating that the information with respect to such factual matters is in the
possession of the Company or such other Person, unless such counsel knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.


                                      -12-


            Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

SECTION 1.4 ACTS OF HOLDERS OF SECURITIES.

            (a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Indenture to be given or
taken by Holders of Securities may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent or proxy duly appointed in writing by such Holders. Such action
shall become effective when such instrument or instruments is delivered to the
Trustee and, where it is hereby expressly required, to the Company. The Trustee
shall promptly deliver to the Company copies of all such instruments delivered
to the Trustee. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "ACT" of the
Holders of Securities signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent or proxy, or of
the holding by any Person of a Security, shall be sufficient for any purpose of
this Indenture and (subject to Section 5.1) conclusive in favor of the Trustee
and the Company if made in the manner provided in this Section 1.4.

            (b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority.

            (c) The principal amount and serial number of any Registered
Security held by any Person, and the date of his holding the same, shall be
proved by the Security Register.

            (d) The fact and date of execution of any such instrument or writing
and the authority of the Person executing the same may also be proved in any
other manner that the Trustee deems sufficient; and the Trustee may in any
instance require further proof with respect to any of the matters referred to in
this Section 1.4.

            (e) The Company may set any day as the record date for the purpose
of determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted by this Indenture to be given or taken by
Holders. Promptly and in any case not later than ten days after setting a record
date, the Company shall notify the Trustee and the Holders of such record date.
If not set by the Company prior to the first solicitation of a Holder made by
any Person in respect of any such action, or, in the case of any such vote,
prior to such vote, the record date for any such action or vote shall be the
thirtieth day (or, if later, the date of the most recent list of Holders
required to be provided pursuant to Section 13.1) prior to such first
solicitation or vote, as the case may be. With regard to any record date, the
Holders on such date (or their duly appointed agents or proxies), and only such
Persons, shall be entitled to give or take, or vote on, the relevant action,
whether or not such Holders remain Holders after such record date.


                                      -13-


Notwithstanding the foregoing, the Company shall not set a record date for, and
the provisions of this paragraph shall not apply with respect to, any notice,
declaration or direction referred to in the next paragraph.

            Upon receipt by the Trustee from any Holder of (1) any notice of
default or breach referred to in Section 4.1(d), if such default or breach has
occurred and is continuing and the Trustee shall not have given such a notice to
the Company, (2) any declaration of acceleration referred to in Section 4.2, if
an Event of Default has occurred and is continuing and the Trustee shall not
have given such a declaration to the Company, or (3) any direction referred to
in Section 4.12, if the Trustee shall not have taken the action specified in
such direction, then, with respect to clauses (2) and (3), a record date shall
automatically and without any action by the Company or the Trustee be set for
determining the Holders entitled to join in such declaration or direction, which
record date shall be the close of business on the tenth day (or, if such day is
not a Business Day, the next succeeding Business Day) following the day on which
the Trustee receives such declaration or direction, and, with respect to clause
(1), the Trustee may set any day as a record date for the purpose of determining
the Holders entitled to join in such notice of default. Promptly after such
receipt by the Trustee of any such declaration or direction referred to in
clause (2) or (3), and promptly after setting any record date with respect to
clause (1), and as soon as practicable thereafter, the Trustee shall notify the
Company and the Holders of any such record date so fixed. The Holders on such
record date (or their duly appointed agents or proxies), and only such Persons,
shall be entitled to join in such notice, declaration or direction, whether or
not such Holders remain Holders after such record date; provided, however, that,
unless such notice, declaration or direction shall have become effective by
virtue of Holders of the requisite principal amount of Securities on such record
date (or their duly appointed agents or proxies) having joined therein on or
prior to the ninetieth day after such record date, such notice, declaration or
direction shall automatically and without any action by any Person be cancelled
and of no further effect. Nothing in this paragraph shall be construed to
prevent a Holder (or a duly appointed agent or proxy thereof) from giving,
before or after the expiration of such 90-day period, a notice, declaration or
direction contrary to or different from, or, after the expiration of such
period, identical to, the notice, declaration or direction to which such record
date relates, in which event a new record date in respect thereof shall be set
pursuant to this paragraph. In addition, nothing in this paragraph shall be
construed to render ineffective any notice, declaration or direction of the type
referred to in this paragraph given at any time to the Trustee and the Company
by Holders (or their duly appointed agents or proxies) of the requisite
principal amount of Securities on the date such notice, declaration or direction
is so given.

            (f) Except as provided in Sections 4.2 and 4.13, any request,
demand, authorization, direction, notice, consent, election, waiver or other Act
of the Holder of any Security shall bind every future Holder of the same
Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.


                                      -14-



SECTION 1.5 NOTICES, ETC., TO TRUSTEE AND COMPANY.

            Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of Holders of Securities or other document
provided or permitted by this Indenture to be made upon, given or furnished to,
or filed with,

            (a) the Trustee by any Holder of Securities or by the Company shall
be sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee and received at the Corporate Trust Office,
Attention: Corporate Trust Department, and shall be deemed given when received,

            (b) the Company by the Trustee or by any Holder of Securities shall
be sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing, mailed, first-class postage prepaid, or telecopied and
confirmed by mail, first-class postage prepaid, or delivered by hand or
overnight courier, addressed to the Company at 228 Manhattan Beach Boulevard,
Manhattan Beach, California 90266, Attention: Philip Paccione (telecopy no.:
(310) 798-7961) or at any other address previously furnished in writing to the
Trustee by the Company, and shall be deemed given when received.

            Any request, demand, authorization, direction, notice, consent,
election or waiver required or permitted under this Indenture shall be in the
English language, except that any published notice may be in an official
language of the country of publication.

SECTION 1.6 NOTICE TO HOLDERS OF SECURITIES; WAIVER.

            Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of Securities of any event, such notice shall be
sufficiently given to Holders if in writing and mailed, first-class postage
prepaid, to each Holder of a Security affected by such event, at the address of
such Holder as it appears in the Security Register, not earlier than the
earliest date and not later than the latest date prescribed for the giving of
such notice.

            Neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder of a Registered Security shall affect
the sufficiency of such notice with respect to other Holders of Registered
Securities. In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification to Holders of Registered Securities as shall be made with
the approval of the Trustee, which approval shall not be unreasonably withheld
or delayed, shall constitute a sufficient notification to such Holders for every
purpose hereunder.

            Such notice shall be deemed to have been given when such notice is
mailed.

            Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders of Securities shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.


                                      -15-



SECTION 1.7 EFFECT OF HEADINGS AND TABLE OF CONTENTS.

            The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.

SECTION 1.8 SUCCESSORS AND ASSIGNS.

            All covenants and agreements in this Indenture by the Company and by
the Trustee shall bind its successors and assigns, whether so expressed or not.

SECTION 1.9 SEPARABILITY CLAUSE.

            In case any provision in this Indenture or the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 1.10 BENEFITS OF INDENTURE.

            Except as provided in the next sentence, nothing in this Indenture
or in the Securities, express or implied, shall give to any Person, other than
the parties hereto and their successors and assigns hereunder and the Holders of
Securities, any benefit or legal or equitable right, remedy or claim under this
Indenture. The provisions of Article Eleven are intended to be for the benefit
of, and shall be enforceable directly by, the holders of Senior Debt.

SECTION 1.11 GOVERNING LAW.

            THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE UNITED STATES OF
AMERICA, INCLUDING, WITHOUT LIMITATION, THE NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1401.

SECTION 1.12 LEGAL HOLIDAYS.

            In any case where any Interest Payment Date, Redemption Date,
Repurchase Date or Stated Maturity of any Security or the last day on which a
Holder of a Security has a right to convert his Security shall not be a Business
Day at a Place of Payment or Place of Conversion, as the case may be, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal of, premium, if any, or interest on, or the payment of the
Repurchase Price (whether the same is payable in cash or in shares of Common
Stock) with respect to, or delivery for conversion of, such Security need not be
made at such Place of Payment or Place of Conversion, as the case may be, on or
by such day, but may be made on or by the next succeeding Business Day at such
Place of Payment or Place of Conversion, as the case may be, with the same force
and effect as if made on the Interest Payment Date, Redemption Date or
Repurchase Date, or at the Stated Maturity or by such last day for conversion;
provided, however, that in the case that payment is made on such succeeding
Business Day, no interest shall accrue on the amount so payable for the period
from and after such Interest Payment Date, Redemption Date, Repurchase Date,
Stated Maturity or last day for conversion, as the case may be.


                                      -16-



SECTION 1.13 CONFLICT WITH TRUST INDENTURE ACT.

            If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be. Until such time as this Indenture shall be qualified under the Trust
Indenture Act, this Indenture, the Company and the Trustee shall be deemed for
all purposes hereof to be subject to and governed by the Trust Indenture Act to
the same extent as would be the case if this Indenture were so qualified on the
date hereof.

SECTION 1.14 COUNTERPARTS.

            This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.

                                   ARTICLE TWO

                                 THE SECURITIES

SECTION 2.1 FORM GENERALLY.

            The Securities and the Trustee's Certificate of Authentication shall
be in substantially the form set forth in Exhibit A hereto, which Exhibit is a
part of this Indenture, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or the Internal Revenue Code of l986,
as amended, and regulations thereunder (the "CODE"), or as may, consistently
herewith, be determined by the officers executing such Securities, as evidenced
by their execution thereof. All Securities shall be issued in registered form,
as opposed to bearer form, and shall sometimes be referred to as the "REGISTERED
SECURITIES."

            The Securities shall be printed, lithographed, typewritten or
engraved or produced by any combination of these methods on steel engraved
borders, if so required by any securities exchange upon which the Securities may
be listed, or may be produced in any other manner permitted by the rules of any
such securities exchange, or, if the Securities are not listed on a securities
exchange, in any other manner approved by the Company, all as determined by the
officers executing such Securities, as evidenced by their execution thereof.

            Upon their original issuance, Securities shall be issued in the form
of one or more Global Securities without interest coupons and shall be
registered in the name of DTC, as Depositary, or its nominee and deposited with
the Trustee, as custodian for DTC, for credit by DTC to the respective accounts
of beneficial owners of the Securities represented thereby (or such other
accounts as they may direct). Such Global Security, together with its Successor



                                      -17-


Securities that are Global Securities, are collectively herein called the
"RESTRICTED GLOBAL SECURITY."

SECTION 2.2 TITLE AND TERMS.

            The aggregate principal amount of Securities that may be
authenticated and delivered from time to time under this Indenture is limited to
U.S. $110,000,000 (or such greater amount necessary to reflect exercise of the
Initial Purchaser's over-allotment option in compliance with the Purchase
Agreement, but not in excess of U.S. $125,000,000), except for Securities
authenticated and delivered in exchange for, or in lieu of, other Securities
pursuant to Section 2.5, 2.6, 2.7, 7.5, 9.8, 10.2 or 12.3(e).

            The Securities shall be known and designated as the "4.50%
Convertible Subordinated Notes due 2007" of the Company. Their Stated Maturity
shall be April 15, 2007 and they shall bear interest on their principal amount
from April 9, 2002, payable semiannually in arrears on April 15 and October 15
in each year, commencing October 15, 2002, at the rate of 4.50% per annum until
the principal thereof is due and at the rate then in effect on any overdue
principal and, to the extent permitted by law, on any overdue interest;
provided, however, that payments shall only be made on Business Days as provided
in Section 1.12.

            The principal of, premium, if any, and interest on the Securities
shall be payable as provided in the form of Securities attached hereto as
Exhibit A, and the Repurchase Price, whether payable in cash or in shares of
Common Stock, shall be payable at such places as are identified in the Company
Notice given pursuant to Section 12.3 (any city in which any Paying Agent is
located being herein called a "PLACE OF PAYMENT").

            The Registrable Securities are entitled to the benefits of a
Registration Rights Agreement as provided by the form of Securities attached
hereto as Exhibit A. The Securities are entitled to the payment of Liquidated
Damages as provided in the Registration Rights Agreement.

            The Securities shall be redeemable at the option of the Company, as
provided in Article Nine and in the form of Securities attached hereto as
Exhibit A.

            The Securities shall be convertible as provided in Article Ten (any
city in which any Conversion Agent is located being herein called a "PLACE OF
CONVERSION").

            The Securities shall be subordinated in right of payment to Senior
Debt of the Company as provided in Article Eleven.

            The Securities shall be subject to repurchase by the Company at the
option of the Holders as provided in Article Twelve.

SECTION 2.3 DENOMINATIONS.

            The Securities shall be issuable only in registered form, without
coupons, in denominations of U.S.$1,000 and integral multiples thereof.


                                      -18-


SECTION 2.4 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

            The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its Chief Executive
Officer, its President, one of its Vice Presidents, its Chief Financial Officer,
its Treasurer or its Controller and attested by its Secretary or one of its
Assistant Secretaries. Any such signature may be manual or facsimile.

            Securities bearing the manual or facsimile signature of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.

            At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities executed by the Company to
the Trustee or to its order for authentication, together with a Company Order
for the authentication and delivery of such Securities, and the Trustee in
accordance with such Company Order shall authenticate and make available for
delivery such Securities as provided in this Indenture and not otherwise.

            Each Security shall be dated the date of its authentication.

            No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.

SECTION 2.5 GLOBAL SECURITIES; TEMPORARY SECURITIES.

            (a) GLOBAL SECURITIES

            (1) Each Global Security authenticated under this Indenture shall be
        registered in the name of the Depositary designated by the Company for
        such Global Security or a nominee thereof and delivered to such
        Depositary or a nominee thereof or custodian therefor, and each such
        Global Security shall constitute a single Security for all purposes of
        this Indenture.

            (2) Notwithstanding any other provision in this Indenture, no Global
        Security may be exchanged in whole or in part for Securities registered,
        and no transfer of a Global Security in whole or in part may be
        registered, in the name of any Person other than the Depositary for such
        Global Security or a nominee thereof unless (A) such Depositary (i) has
        notified the Company that it is unwilling or unable to continue as
        Depositary for such Global Security or (ii) has ceased to be a clearing
        agency registered as such under the Exchange Act or announces an
        intention permanently to cease business or does in fact do so or (B)
        there shall have occurred and be continuing an Event of Default with
        respect to such Global Security.

            (3) If any Global Security is to be exchanged for other Securities
        or cancelled in whole, it shall be surrendered by or on behalf of the
        Depositary or its nominee to the


                                      -19-



        Trustee, as Security Registrar, for exchange or cancellation, as
        provided in this Article Two. If any Global Security is to be exchanged
        for other Securities or cancelled in part, or if another Security is to
        be exchanged in whole or in part for a beneficial interest in any Global
        Security, in each case, as provided in Section 2.6, then either (A) such
        Global Security shall be so surrendered for exchange or cancellation, as
        provided in this Article Two, or (B) the principal amount thereof shall
        be reduced or increased by an amount equal to the portion thereof to be
        so exchanged or cancelled or equal to the principal amount of such other
        Security to be so exchanged for a beneficial interest therein, as the
        case may be, by means of an appropriate adjustment made on the records
        of the Trustee, as Security Registrar, whereupon the Trustee, in
        accordance with the Applicable Procedures, shall instruct the Depositary
        or its authorized representative to make a corresponding adjustment to
        its records. Upon any such surrender or adjustment of a Global Security,
        the Trustee shall, subject to Section 2.6(c) and as otherwise provided
        in this Article Two, authenticate and make available for delivery any
        Securities issuable in exchange for such Global Security (or any portion
        thereof) to or upon the order of, and registered in such names as may be
        directed by, the Depositary or its authorized representative. Upon the
        request of the Trustee in connection with the occurrence of any of the
        events specified in the preceding paragraph, the Company shall promptly
        make available to the Trustee a reasonable supply of Securities that are
        not in the form of Global Securities. The Trustee shall be entitled to
        rely upon any order, direction or request of the Depositary or its
        authorized representative which is given or made pursuant to this
        Article Two.

            (4) Every Security authenticated and delivered upon registration of
        transfer of, or in exchange for or in lieu of, a Global Security or any
        portion thereof, whether pursuant to this Article Two or otherwise,
        shall be authenticated and delivered in the form of, and shall be, a
        registered Global Security, unless such Security is registered in the
        name of a Person other than the Depositary for such Global Security or a
        nominee thereof, in which case such Registered Security shall be
        authenticated and delivered in definitive, fully registered form,
        without interest coupons.

            (5) The Depositary or its nominee, as registered owner of a Global
        Security, shall be the Holder of such Global Security for all purposes
        under the Indenture and the Registered Securities, and owners of
        beneficial interests in a Global Security shall hold such interests
        pursuant to the Applicable Procedures. Accordingly, any such owner's
        beneficial interest in a Global Security shall be shown only on, and the
        transfer of such interest shall be effected only through, records
        maintained by the Depositary or its nominee or its Agent Members, and
        such owners of beneficial interests in a Global Security shall not be
        considered the owners or holders thereof.

            (b) TEMPORARY SECURITIES

            Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Registered Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and


                                      -20-


other variations as the officers executing such Registered Securities may
determine, as evidenced by their execution of such Securities.

            If temporary Securities are issued, the Company shall cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
8.2, without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute and the Trustee shall
authenticate and make available for delivery in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.

SECTION 2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE; 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 8.2 being herein sometimes
collectively referred to as the "SECURITY REGISTER") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Registered Securities and of transfers of Registered Securities.
The Trustee is hereby appointed "SECURITY REGISTRAR" for the purpose of
registering Registered Securities and transfers and exchanges of Registered
Securities as herein provided.

            Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 8.2 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount and bearing such restrictive legends as may be required by this
Indenture.

            At the option of the Holder, and subject to the other provisions of
this Section 2.6, Securities may be exchanged for other Securities of any
authorized denomination and of a like aggregate principal amount, upon surrender
of the Securities to be exchanged at any such office or agency. Whenever any
Securities are so surrendered for exchange, and subject to the other provisions
of this Section 2.6, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, the Securities the Holder making
the exchange is entitled to receive. Every Security presented or surrendered for
registration of transfer or for exchange shall (if so required by the Company or
the Security Registrar) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing.

            All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the same
debt, subject to the other provisions of this Section 2.6, and entitled to the
same benefits under this Indenture, as the Securities surrendered upon such
registration of transfer or exchange.


                                      -21-


            No service charge shall be made for any registration of transfer or
exchange of Securities except as provided in Section 2.7, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Securities, other than exchanges pursuant to Section 2.5, 7.5, 9.8,
10.2 or 12.3(e) (other than where the shares of Common Stock are to be issued or
delivered in a name other than that of the Holder of the Security) not involving
any transfer and other than any stamp and other duties, if any, that may be
imposed in connection with any such transfer or exchange by the United States or
any political subdivision thereof or therein, which shall be paid by the
Company.

            In the event of a redemption of the Securities, the Company shall
not be required (1) to register the transfer of or exchange Securities for a
period of 15 days immediately preceding the date notice is given identifying the
serial numbers of the Securities called for such redemption or (2) to register
the transfer of or exchange any Security, or portion thereof, called for
redemption.

            (b) RESTRICTED SECURITIES LEGENDS. All Securities shall bear the
applicable Restricted Securities Legend subject to the following:

            (1) subject to the following clauses of this Section 2.6(b), a
        Security or any portion thereof that is exchanged, upon transfer or
        otherwise, for a Global Security or any portion thereof shall bear the
        Restricted Securities Legend borne by such Global Security while
        represented thereby;

            (2) subject to the following clauses of this Section 2.6(b), a new
        Security that is not a Global Security and is issued in exchange for
        another Security (including a Global Security) or any portion thereof,
        upon transfer or otherwise, shall bear the Restricted Securities Legend
        borne by such other Security;

            (3) any Securities that are sold or otherwise disposed of pursuant
        to an effective registration statement under the Securities Act
        (including the Shelf Registration Statement), together with their
        Successor Securities, shall not bear a Restricted Securities Legend; the
        Company shall inform the Trustee in writing of the effective date of any
        such registration statement registering the Securities under the
        Securities Act and shall notify the Trustee at any time when
        prospectuses may not be delivered with respect to Securities to be sold
        pursuant to such registration statement. The Trustee shall not be liable
        for any action taken or omitted to be taken by it in good faith in
        accordance with the aforementioned registration statement;

            (4) at any time after the Securities may be freely transferred
        without registration under the Securities Act or without being subject
        to transfer restrictions pursuant to the Securities Act, a new Security
        that does not bear a Restricted Securities Legend may be issued in
        exchange for or in lieu of a Security (other than a Global Security) or
        any portion thereof that bears such a legend if the Trustee has received
        a certificate regarding the unrestricted nature of the Securities,
        satisfactory to the Trustee and duly executed by the Holder of such
        legended Security or his attorney duly authorized in writing, and after
        such date and receipt of such certificate, the Trustee shall


                                      -22-



        authenticate and make available for delivery such a new Security in
        exchange for or in lieu of such other Security as provided in this
        Article Two;

            (5) a new Security that does not bear a Restricted Securities Legend
        may be issued in exchange for or in lieu of a Security (other than a
        Global Security) or any portion thereof that bears such a legend if, in
        the Company's judgment, placing such a legend upon such new Security is
        not necessary to ensure compliance with the registration requirements of
        the Securities Act, and the Trustee, at the direction of the Company,
        shall authenticate and make available for delivery such a new Security
        as provided in this Article Two; and

            (6) notwithstanding the foregoing provisions of this Section 2.6(b),
        a Successor Security of a Security that does not bear a particular form
        of Restricted Securities Legend shall not bear such form of legend
        unless the Company has reasonable cause to believe that such Successor
        Security is a "restricted security" within the meaning of Rule 144, in
        which case the Trustee, at the direction of the Company, shall
        authenticate and make available for delivery a new Security bearing a
        Restricted Securities Legend in exchange for such Successor Security as
        provided in this Article Two.

            (c) Neither the Trustee, the Paying Agent nor any of their agents
shall (1) have any duty to monitor compliance with or with respect to any
federal or state or other securities or tax laws or (2) have any duty to obtain
documentation on any transfers or exchanges other than as specifically required
hereunder.

SECTION 2.7 MUTILATED, DESTROYED, LOST OR STOLEN SECURITIES.

            If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and make available for delivery
in exchange therefor a new Security of like tenor and principal amount and
bearing a number not contemporaneously outstanding.

            If there be delivered to the Company and to the Trustee:

            (a) evidence to their satisfaction of the destruction, loss or theft
of any Security, and

            (b) such security or indemnity as may be satisfactory to the Company
and the Trustee to save each of them and any agent of either of them harmless,

then, in the absence of actual notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and the Trustee shall authenticate and make available for delivery, in lieu of
any such destroyed, lost or stolen Security, a new Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding.

            In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion, but
subject to any conversion


                                      -23-


rights, may, instead of issuing a new Security, pay such Security, upon
satisfaction of the conditions set forth in the preceding paragraph.

            Upon the issuance of any new Security under this Section 2.7, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto (other than any
stamp and other duties, if any, that may be imposed in connection therewith by
the United States or any political subdivision thereof or therein, which shall
be paid by the Company) and any other expenses (including the fees and expenses
of the Trustee) connected therewith.

            Every new Security issued pursuant to this Section 2.7 in lieu of
any mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and such new Security shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Securities duly issued
hereunder.

            The provisions of this Section 2.7 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies of any Holder with respect
to the replacement or payment of mutilated, destroyed, lost or stolen
Securities.

SECTION 2.8 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.

            Interest on any Security that is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.

            Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date ("DEFAULTED INTEREST")
shall forthwith cease to be payable to the Holder on the relevant Regular Record
Date by virtue of having been such Holder, and such Defaulted Interest may be
paid by the Company, at its election in each case, as provided in clause (a) or
(b) below:

            (a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective Predecessor
Securities) 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 Security, the date of the
proposed payment and the Special Record Date, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit 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 provided in this
clause. The Special Record Date for the payment of such Defaulted Interest shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 15 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such


                                      -24-


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 Security Register, not less than 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 Securities (or their respective
Predecessor Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following clause (b).

            (b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, 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.

            Subject to the foregoing provisions of this Section 2.8 and Section
2.6, each Security delivered under this Indenture upon registration of transfer
of or in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, that were carried by such other
Security.

            Interest on any Security that is converted in accordance with
Section 10.2 during a Record Date Period shall be payable in accordance with the
provisions of Section 10.2.

SECTION 2.9 PERSONS DEEMED OWNERS.

            Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of, premium, if any,
and (subject to Section 2.8) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

SECTION 2.10 CANCELLATION.

            All Securities surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee. All Securities so
delivered to the Trustee shall be cancelled promptly by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section 2.10. The Trustee shall dispose of all
cancelled Securities in accordance with applicable law and its customary
practices in effect from time to time.

SECTION 2.11 COMPUTATION OF INTEREST.

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


                                      -25-


SECTION 2.12 CUSIP NUMBERS.

            The Company in issuing Securities may use "CUSIP" numbers (if then
generally in use) in addition to serial numbers; the Trustee shall use such
CUSIP numbers in addition to serial numbers in notices of redemption and
repurchase as a convenience to Holders; provided, however, that any such notice
may state that no representation is made as to the correctness of such CUSIP
numbers either as printed on the Securities or as contained in any notice of a
redemption or repurchase and that reliance may be placed only on the serial or
other identification numbers printed on the Securities, and any such redemption
or repurchase shall not be affected by any defect in or omission of such CUSIP
numbers. The Company shall promptly notify the Trustee in writing of any change
in any such CUSIP number.

                                  ARTICLE THREE

                           SATISFACTION AND DISCHARGE

SECTION 3.1 SATISFACTION AND DISCHARGE OF INDENTURE.

            This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of conversion, or registration of
transfer or exchange, or replacement of Securities herein expressly provided for
and any right to receive Liquidated Damages as provided in the form of
Securities attached hereto as Exhibit A and the Company's obligations to the
Trustee pursuant to Section 5.7), and the Trustee, at the expense of the
Company, shall execute proper instruments in form and substance satisfactory to
the Trustee acknowledging satisfaction and discharge of this Indenture, when

            (a) either

            (1) all Securities theretofore authenticated and delivered (other
        than (A) Securities that have been destroyed, lost or stolen and that
        have been replaced or paid as provided in Section 2.7 and (B) Securities
        for whose payment money has theretofore been irrevocably deposited in
        trust or segregated and held in trust by the Company and thereafter
        repaid to the Company or discharged from such trust, as provided in
        Section 8.3) have been delivered to the Trustee for cancellation; or

            (2) all such Securities not theretofore delivered to the Trustee or
        its agent for cancellation (other than Securities referred to in clauses
        (A) and (B) of clause (a)(1) above)

               (i) have become due and payable, or

               (ii) will have become due and payable at their Stated Maturity
        within one year, or

               (iii) are to be called for redemption within one year under
        arrangements satisfactory to the Trustee for the giving of notice of
        redemption by the Trustee in the name, and at the expense, of the
        Company,


                                      -26-


        and the Company, in the case of clause (i), (ii) or (iii) above, has
        irrevocably deposited or caused to be irrevocably deposited with the
        Trustee as trust funds (immediately available to the Holders in the case
        of clause (i) above) an amount sufficient to pay and discharge the
        entire principal, premium, if any, interest and Liquidated Damages, if
        any, on such Securities not theretofore delivered to the Trustee for
        cancellation, to the date of such deposit (in the case of Securities
        that have become due and payable) or to the Stated Maturity or
        Redemption Date, as the case may be;

            (b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and

            (c) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent herein provided for relating
to the satisfaction and discharge of this Indenture have been complied with.

            Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 5.7, the obligations
of the Company to any Authenticating Agent under Section 5.12, the obligation of
the Company to pay Liquidated Damages, if money shall have been deposited with
the Trustee pursuant to clause (a)(2) of this Section 3.1, the obligations of
the Trustee under Section 3.2 and the last paragraph of Section 8.3, and the
obligations of the Company and the Trustee under Section 2.6 and Article Ten
shall survive. Funds held in trust pursuant to this Section 3.1 are not subject
to the provisions of Article Eleven.

            In the event that the Company is required to pay Liquidated Damages
to the Holders pursuant to the Registration Rights Agreement, the Company will
provide written notice ("Liquidated Damages Notice") to the Trustee of its
obligation to pay Liquidated Damages no later than 15 days prior to the proposed
payment date for the Liquidated Damages, and the Liquidated Damages Notice shall
set forth the amount of Liquidated Damages 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 to determine the Liquidated Damages or with respect
to the nature, extent or calculation of the amount of Liquidated Damages when
made, or with respect to the method employed in such calculation of the
Liquidated Damages. Unless the Trustee receives a Liquidated Damages Notice from
the Company within the time period specified above or otherwise from a Holder of
the Securities, the Trustee is entitled to assume that no Liquidated Damages are
due and payable.

SECTION 3.2 APPLICATION OF TRUST MONEY.

            Subject to the provisions of the last paragraph of Section 8.3, all
money deposited with the Trustee pursuant to Section 3.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent), to the Persons entitled
thereto, of the principal, premium, if any, Liquidated Damages, if any, and
interest for whose payment such money has been deposited with the Trustee.


                                      -27-



            All moneys deposited with the Trustee pursuant to Section 3.1 (and
held by it or any Paying Agent) for the payment of Securities subsequently
converted shall be returned to the Company upon Company Request.

                                  ARTICLE FOUR

                                    REMEDIES

SECTION 4.1 EVENTS OF DEFAULT.

            "EVENT OF DEFAULT," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Eleven or 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):

            (a) default in the payment of the principal of or premium, if any,
on any Security at its Maturity, whether or not the such payment is prohibited
by the subordination provisions of this Indenture; or

            (b) default in the payment of any interest if any (including
Liquidated Damages, if any), upon any Security when it becomes due and payable,
and continuance of such default for a period of 30 days, whether or not such
payment is prohibited by the subordination provisions of this Indenture; or

            (c) failure by the Company to give the Company Notice in accordance
with Section 12.3, whether or not such notice is prohibited by the subordination
provisions of this Indenture; or

            (d) default in the performance, or breach, of any covenant of the
Company in this Indenture (other than a covenant a default in the performance or
breach of which is specifically dealt with elsewhere in this Section 4.1), and
continuance of such default or breach for a period of 60 days after there has
been given, by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities, a written notice specifying such
default or breach and requiring it to be remedied and stating that such notice
is a "NOTICE OF DEFAULT" hereunder; or

            (e) default in the payment by the end of any applicable grace
period, if any, after maturity of the principal of any indebtedness under any
bond, debenture, note or other evidence of indebtedness for money borrowed by
the Company or any Significant Subsidiary with a principal amount then
outstanding in excess of U.S. $10,000,000, whether such indebtedness now exists
or shall hereafter be created, if the indebtedness is not discharged, or if such
indebtedness has been accelerated, such acceleration is not rescinded or
annulled, within a period of 30 days after there shall have been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities a written notice specifying such default and


                                      -28-



requiring the Company to cause such indebtedness to be discharged or such
acceleration to be rescinded or annulled and stating that such notice is a
"Notice of Default" hereunder; or

            (f) the entry by a court having jurisdiction in the premises of (1)
a decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law or (2) a
decree or order adjudging the Company or any Significant Subsidiary a bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or any
Significant Subsidiary under any applicable federal or state law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Significant Subsidiary or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60 consecutive
days; or

            (g) the commencement by the Company or any Significant Subsidiary of
a voluntary case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree or order for relief in respect of the Company or any
Significant Subsidiary in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or similar relief under any applicable federal or state law, or
the consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Significant
Subsidiary or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Company or any Significant Subsidiary in furtherance of
any such action; or

            (h) failure by the Company to deliver Conversion Shares, together
with cash in lieu of fractional shares, when such Conversion Shares or cash in
lieu of fractional shares are required to be delivered upon conversion of a
security, and such failure continues for 10 days after such required delivery
date.

SECTION 4.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

            If an Event of Default (other than an Event of Default specified in
Section 4.1(f) or 4.1(g)) occurs and is continuing, then in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the Holders), and upon any such declaration, such principal
and all accrued interest thereon shall become immediately due and payable. If an
Event of Default specified in Section 4.1(f) or 4.1(g) occurs, the principal of,
and accrued interest on, all the Securities shall ipso facto become immediately
due and payable without any declaration or other Act of the Holder or any act on
the part of the Trustee.


                                      -29-




            At any time after such declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article Four provided, the Holders of a
majority in principal amount of the Outstanding Securities, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if:

            (a) the Company has paid or irrevocably deposited with the Trustee a
sum sufficient to pay

               (1) all overdue interest and Liquidated Damages, if any, on all
        Securities,

               (2) the principal of and premium, if any, on any Securities that
        have become due otherwise than by such declaration of acceleration and
        any interest thereon at the rate borne by the Securities,

               (3) to the extent permitted by applicable law, interest upon
        overdue interest at the rate then in effect, and

               (4) all sums paid or advanced by the Trustee hereunder and the
        reasonable compensation, expenses, disbursements and advances of the
        Trustee, its agents and its counsel; and

            (b) all Events of Default, other than the non-payment of the
principal of, and any premium and interest on, Securities that have become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 4.13.

            No rescission or annulment referred to above shall affect any
subsequent default or impair any right consequent thereon.

SECTION 4.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.

            The Company covenants that if:

            (a) default is made in the payment of any interest or Liquidated
Damages on any Security when it becomes due and payable and such default
continues for a period of 30 days, or

            (b) default is made in the payment of the principal of or premium,
if any, on any Security at the Maturity thereof,

the Company will upon demand of the Trustee pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal, premium, if any, Liquidated Damages, if any, and
interest on any overdue principal, premium, if any, Liquidated Damages, if any,
and, to the extent permitted by applicable law, on any overdue interest at the
rate then in effect, and in addition thereto, such further amount as shall be
sufficient to cover the reasonable costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and its counsel.


                                      -30-



            If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.

            If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders of Securities by such appropriate judicial proceedings as the Trustee
shall deem most effective to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other proper
remedy.

SECTION 4.4 TRUSTEE MAY FILE PROOFS OF CLAIM.

            In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relating to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or the
creditors of either, the Trustee (whether or not the principal of, and any
interest on, the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and whether or not the Trustee shall have made
any demand on the Company for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,

            (a) to file and prove a claim for the whole amount of principal,
premium, if any, Liquidated Damages, if any, and interest owing and unpaid in
respect of the Securities and take such other actions, including participating
as a member, voting or otherwise, of any official committee of creditors
appointed in such matter, and to file such other papers or documents, in each of
the foregoing cases, as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and its counsel)
and of the Holders of Securities allowed in such judicial proceeding, and

            (b) to collect and receive any moneys or other property payable or
deliverable on any such claim and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder of
Securities 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 Holders of
Securities, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel and any other amounts due the Trustee under Section 5.7.

            Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder



                                      -31-


thereof or to authorize the Trustee to vote in respect of the claim of any
Holder of a Security in any such proceeding; provided, however, that the Trustee
may, on behalf of such Holders, vote for the election of a trustee in bankruptcy
or similar official.

SECTION 4.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.

            All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such 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 its counsel, be for
the ratable benefit of the Holders of the Securities in respect of which
judgment has been recovered.

SECTION 4.6 APPLICATION OF MONEY COLLECTED.

            Subject to Article Eleven, any money collected by the Trustee
pursuant to this Article Four shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal, premium, if any, or interest, upon presentation
of the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:

            FIRST: To the payment of all amounts due the Trustee under Section
5.7;

            SECOND: To the payment of the amounts then due and unpaid for
principal of, premium, if any, Liquidated Damages, if any, or interest on, the
Securities in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium, if any,
Liquidated Damages, if any, and interest, respectively; and

            THIRD: Any remaining amounts shall be repaid to the Company.

SECTION 4.7 LIMITATION ON SUITS.

            No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:

            (a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;

            (b) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;

            (c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;


                                      -32-


            (d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and

            (e) the Trustee has not received any direction inconsistent with
such written request from the Holders of a majority of the aggregate principal
amount of the Outstanding Securities during the 60 day period referred to in (d)
above;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.

SECTION 4.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
            INTEREST AND TO CONVERT.

            Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, premium, if any, and (subject to Section
2.8) interest (and Liquidated Damages, if any) on such Security on the
respective Stated Maturities expressed in such Security (or, in the case of
redemption or repurchase, on the Redemption Date or Repurchase Date, as the case
may be), and to convert such Security in accordance with Article Ten, and to
institute suit for the enforcement of any such payment and right to convert, and
such rights shall not be impaired without the consent of such Holder.

SECTION 4.9 RESTORATION OF RIGHTS AND REMEDIES.

            If the Trustee or any Holder of a Security has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, the Trustee
and the Holders of Securities shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and such Holders shall continue as though no such proceeding had been
instituted.

SECTION 4.10 RIGHTS AND REMEDIES CUMULATIVE.

            Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 2.7, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders of Securities is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.


                                      -33-



SECTION 4.11 DELAY OR OMISSION NOT WAIVER.

            No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
any acquiescence therein. Every right and remedy given by this Article Four or
by law to the Trustee or to the Holders of Securities may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or (subject to
the limitations contained in this Indenture) by the Holders of Securities, as
the case may be.

SECTION 4.12 CONTROL BY HOLDERS OF SECURITIES.

            The Holders of a majority in principal amount of the Outstanding
Securities 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, and

            (b) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction.

SECTION 4.13 WAIVER OF PAST DEFAULTS.

            The Holders, either (a) through the written consent of not less than
a majority in principal amount of the Outstanding Securities or (b) by the
adoption of a resolution, at a meeting of Holders of the Outstanding Securities
at which a quorum is present, by the Holders of at least a majority in principal
amount of the Outstanding Securities represented at such meeting, may on behalf
of the Holders of all the Securities waive any past default hereunder and its
consequences, except a default (1) in the payment of the principal of, premium,
if any, interest, the Repurchase Price or Liquidated Damages, if any, on any
Security or (2) in respect of a covenant or provision hereof that under Article
Seven cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.

            Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.

SECTION 4.14 UNDERTAKING FOR COSTS.

            All parties to this Indenture agree, and each Holder of any Security
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,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section 4.14 shall not apply to


                                      -34-


any suit instituted by the Company, to any suit instituted by the Trustee, to
any suit instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in principal amount of the Outstanding Securities, or to any suit
instituted by any Holder of any Security for the enforcement of the payment of
the principal of, premium, if any, Liquidated Damages, if any, or interest on
any Security on or after the respective Stated Maturity or Maturities expressed
in such Security (or, in the case of redemption or repurchase, on or after the
Redemption Date or Repurchase Date, as the case may be) or for the enforcement
of the right to convert any Security in accordance with Article Ten.

SECTION 4.15 WAIVER OF STAY, USURY OR EXTENSION LAWS.

            The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, usury or extension law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede by reason of
such law 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.

                                  ARTICLE FIVE

                                   THE TRUSTEE

SECTION 5.1 CERTAIN DUTIES AND RESPONSIBILITIES.

            (a) Except during the continuance of an Event of Default,

            (1) the Trustee undertakes to perform such duties and only such
        duties as are specifically set forth in this Indenture, and no implied
        covenants or obligations shall be read into this Indenture against the
        Trustee; and

            (2) in the absence of bad faith on its part, the Trustee may
        conclusively rely, as to the truth of the statements and the correctness
        of the opinions expressed therein, upon certificates or opinions
        furnished to the Trustee pursuant to the requirements of this Indenture;
        but in the case of any such certificates or opinions that by any
        provision hereof are specifically required to be furnished to the
        Trustee, the Trustee shall be under a duty to examine the same to
        determine whether or not they conform to the procedural requirements of
        this Indenture but not to verify the contents thereof.

            (b) In case an Event of Default has occurred and is continuing, 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 man would exercise or use under the circumstances in the conduct of his
own affairs.

            (c) 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


                                      -35-



            (1) this paragraph (c) shall not be construed to limit the effect of
        paragraph (a) of this Section 5.1;

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

            (3) 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
        direction of the Holders of a majority in principal amount of the
        Outstanding Securities 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; and

            (4) no provision of this Indenture shall require the Trustee to
        expend or risk its own funds or otherwise incur any financial liability
        in the performance of any of its duties hereunder, or in the exercise of
        any of its rights or powers, if it shall have reasonable grounds for
        believing that repayment of such funds or adequate indemnity against
        such risk or liability is not reasonably assured to it.

            (d) Whether or not therein expressly so 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 5.1.

SECTION 5.2 NOTICE OF DEFAULTS.

            Within 90 days after the occurrence of any default hereunder as to
which a Responsible Officer of the Trustee has actually received written notice,
the Trustee shall give to all Holders of Securities, in the manner provided in
Section 1.6, notice of such default, unless such default shall have been cured
or waived; provided, however, that, except in the case of a default in the
payment of the principal of, premium, if any, or interest on any Security, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors or
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interest of the Holders. For the purpose of this
Section 5.2, the term "default" means any event that is, or after notice or
lapse of time or both would become, an Event of Default.

SECTION 5.3 CERTAIN RIGHTS OF TRUSTEE.

            (a) Subject to the provisions of Section 5.1:

            (1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, other
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, coupon, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;



                                      -36-


            (2) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors shall be sufficiently evidenced by a Board
Resolution;

            (3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;

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

            (5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders of Securities pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in compliance with
such request or direction;

            (6) 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, note, coupon, other evidence of indebtedness 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;
and

            (b) 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 with due care by it
hereunder.

SECTION 5.4 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.

            The recitals contained herein and in the Securities (except the
Trustee's certificates of authentication) shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture, of the Securities or of the Common Stock issuable upon the conversion
of the Securities. The Trustee shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.

SECTION 5.5 MAY HOLD SECURITIES, ACT AS TRUSTEE UNDER OTHER INDENTURES.

            The Trustee, any Authenticating Agent, any Paying Agent, any
Conversion Agent or any other agent of the Company or the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company with the


                                      -37-


same rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent, Conversion Agent or such other agent.

            The Trustee may become and act as trustee under other indentures
under which other securities, or certificates of interest or participation in
other securities, of the Company are outstanding in the same manner as if it
were not Trustee hereunder.

SECTION 5.6 MONEY HELD IN TRUST.

            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
otherwise agreed in writing with the Company.

SECTION 5.7 COMPENSATION AND REIMBURSEMENT.

            The Company agrees

            (a) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree in
writing for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust);

            (b) Except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and

            (c) to indemnify the Trustee (and its directors, officers, employees
and agents) for, and to hold it harmless against, any and all loss, damage,
claim, liability or expense, including taxes (other than taxes based on the
income of the Trustee), incurred without negligence, bad faith or willful
misconduct on its part, arising out of or in connection with the acceptance or
administration of this trust, including the reasonable costs, expenses and
reasonable attorneys' fees of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder.

            When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 4.1(f) or Section 4.1(g) with
respect to the Company, the expenses (including the reasonable charges of its
counsel) and the compensation for the services are intended to constitute
expenses of the administration under any applicable federal or state bankruptcy,
insolvency or other similar law.

            The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 5.7, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.


                                      -38-



            The provisions of this Section 5.7 shall survive the termination of
this Indenture or the earlier resignation or removal of the Trustee.

SECTION 5.8 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

            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,
having a combined capital and surplus (or for such purposes, the combined
capital and surplus of any parent holding company) of at least U.S. $25,000,000,
subject to supervision or examination by federal or state authority, in good
standing and having an established place of business or agency in the Borough of
Manhattan, The City of New York. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section 5.8,
the combined capital and surplus of such corporation 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 5.8, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article and a
successor shall be appointed pursuant to Section 5.9.

SECTION 5.9 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

            (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 5.10.

            (b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 5.10 shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee or
the Company may petition any court of competent jurisdiction for the appointment
of a successor Trustee.

            (c) The Trustee may be removed at any time by Act of the Holders of
a majority in principal amount of the Outstanding Securities, delivered to the
Trustee and the Company. If the instrument of acceptance by a successor Trustee
required by Section 5.10 shall not have been delivered to the Trustee within 30
days after the giving of such notice of removal, the removed Trustee or the
Company may petition any court of competent jurisdiction for the appointment of
a successor Trustee.

            (d) If at any time:

            (1) the Trustee shall cease to be eligible under Section 5.8 and
        shall fail to resign after written request therefor by the Company or by
        any Holder of a Security who has been a bona fide Holder of a Security
        for at least six months, or

            (2) 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,


                                      -39-



then, (i) in any such case the Company may remove the Trustee, or (ii) in the
case of clause (d)(1) above only and subject to Section 4.14, any Holder of a
Security who has been a bona fide Holder of a Security for at least six 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.

            (e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company shall promptly appoint a successor Trustee and shall comply with the
applicable requirements of this Section 5.9 and Section 5.10. If, within one
year after such resignation, removal or incapability, or occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 5.10, become the successor Trustee and
supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders of Securities
and accepted appointment in the manner required by this Section 5.9 and Section
5.10, any Holder of a Security who has been a bona fide Holder of a Security for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.

            (f) The successor Trustee shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to all
Holders of Securities in the manner provided in Section 1.6. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.

SECTION 5.10 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

            Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee. Such retiring Trustee shall,
upon payment of its charges, promptly execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder. Upon
request of any such successor Trustee, the Company shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.

            No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be eligible under this Article.

SECTION 5.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

            Any corporation or association into which the Trustee may be merged
or converted or with which it may be consolidated, or any corporation or
association resulting from


                                      -40-


any merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation or association succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder (provided such corporation or association shall be otherwise eligible
under this Article), without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities.

SECTION 5.12 AUTHENTICATING AGENTS.

            The Trustee may, with the consent of the Company, appoint an
Authenticating Agent or Agents acceptable to the Company with respect to the
Securities, which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon exchange or substitution pursuant to this
Indenture.

            Securities authenticated by an Authenticating Agent shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder, and every reference
in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
subject to acceptance by the Company and shall at all times be a corporation or
association organized and doing business under the laws of the United States of
America, any state thereof or the District of Columbia, authorized under such
laws to act as Authenticating Agent and subject to supervision or examination by
government or other fiscal authority. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section
5.12, such Authenticating Agent shall resign immediately in the manner and with
the effect specified in this Section 5.12.

            Any corporation or association into which an Authenticating Agent
may be merged or converted or with which it may be consolidated, or any
corporation or association resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a party, or any
corporation or association succeeding to the corporate agency or corporate trust
business of an Authenticating Agent, shall continue to be an Authenticating
Agent (provided such corporation or association shall be otherwise eligible
under this Section 5.12), without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.

            An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
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 such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 5.12, the Trustee may appoint a successor
Authenticating Agent, which shall be subject to acceptance by the Company. Any
successor Authenticating Agent, upon acceptance


                                      -41-



of its appointment hereunder, shall become vested with all the rights, powers
and duties of its predecessor hereunder, with like effect as if originally named
as an Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section 5.12.

            The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section 5.12.

            If an Authenticating Agent is appointed with respect to the
Securities pursuant to this Section 5.12, the Securities may have endorsed
thereon, in addition to or in lieu of the Trustee's certification of
authentication, an alternative certificate of authentication in the following
form:

            This is one of the Securities referred to in the within-mentioned
Indenture.

        By:  Wells Fargo Bank, National Association,
        as Authenticating Agent



        By _____________________________
               Authorized Signature

SECTION 5.13 DISQUALIFICATION; CONFLICTING INTERESTS.

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

SECTION 5.14 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

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

                                   ARTICLE SIX

              CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 6.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.

            The Company shall not consolidate with or merge into any other
Person or convey, transfer, sell or lease its properties and assets
substantially as an entirety to any Person, and the Company shall not permit any
Person to consolidate with or merge into it or convey, transfer, sell or lease
such Person's properties and assets substantially as an entirety to it, unless:


                                      -42-



            (a) the Person formed by such consolidation or into or with which
the Company is merged, or the Person to which the Company's properties and
assets are conveyed, transferred, sold or leased, shall be (1) a corporation,
limited liability company, partnership or trust organized and validly existing
under the laws of the United States of America, any state thereof or the
District of Columbia or (2) organized under the laws of a jurisdiction outside
the United States of America and have common stock or American Depositary Shares
representing such common stock traded on a national securities exchange in the
United States, including The Nasdaq Stock Market, Inc., and, in each case, if
other than the Company, shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to the
Trustee, the due and punctual payment of the principal of, premium, if any,
Liquidated Damages, if any, and interest on all of the Securities as applicable,
and the performance or observance of every covenant of this Indenture on the
part of the Company to be performed or observed;

            (b) immediately after giving effect to such transaction, no Event of
Default, and no event that, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing; and

            (c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with, together with any
documents required under Section 7.3.

SECTION 6.2 SUCCESSOR SUBSTITUTED.

            Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of all or
substantially all the properties and assets of the Company in accordance with
Section 6.1, the successor Person formed by such consolidation or into or with
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor Person shall be relieved of all obligations
and covenants under this Indenture and the Securities.

                                  ARTICLE SEVEN

                             SUPPLEMENTAL INDENTURES

SECTION 7.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS OF SECURITIES.

            Without the consent of any Holders of Securities, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto for any of the
following purposes:


                                      -43-


            (a) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants and obligations of the
Company herein and in the Securities as permitted by this Indenture; or

            (b) to add to the covenants of the Company for the benefit of the
Holders of Securities or to surrender any right or power herein conferred upon
the Company; or

            (c) to secure the Securities; or

            (d) to make provision with respect to the conversion rights of
Holders of Securities pursuant to Section 10.11; or

            (e) to make any changes or modifications to this Indenture necessary
in connection with the registration of any Registrable Securities under the
Securities Act as contemplated by the Registration Rights Agreement (provided
such action pursuant to this clause (e) shall not adversely affect the interests
of the Holders of Securities in any material respect); or

            (f) to comply with the requirements of the Trust Indenture Act or
the rules and regulations of the Commission thereunder in order to effect or
maintain the qualification of this Indenture under the Trust Indenture Act, as
contemplated by this Indenture or otherwise; or

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

            (h) to cure any ambiguity, to correct or supplement any provision
herein that may be inconsistent with any other provision herein or that is
otherwise defective, or to make any other provisions with respect to matters or
questions arising under this Indenture as the Company and the Trustee may deem
necessary or desirable (provided such action pursuant to this clause (h) shall
not adversely affect the interests of the Holders of Securities in any material
respect).

            Upon Company Request accompanied by a Board Resolution authorizing
the execution of any such supplemental indenture, and subject to and upon
receipt by the Trustee of the documents described in Section 7.3 hereof, the
Trustee shall join with the Company in the execution of any supplemental
indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained.

SECTION 7.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS OF SECURITIES.

            With either (a) the written consent of the Holders of not less than
a majority in principal amount of the Outstanding Securities, by the Act of said
Holders delivered to the Company and the Trustee, or (b) by the adoption of a
resolution, at a meeting of Holders of the Outstanding Securities at which a
quorum is present, by the Holders of a majority in principal amount of the
Outstanding Securities represented at such meeting, the Company, when authorized
by a Board Resolution, and the Trustee may 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 of
modifying in any manner the rights of the Holders of Securities under this
Indenture; provided, however, that no such supplemental


                                      -44-


indenture shall, without the consent or affirmative vote of the Holder of each
Outstanding Security affected thereby,

            (l) change the Stated Maturity of the principal of, or any
        installment of interest on, any Security, or reduce the principal
        amount, any premium or the rate of interest payable thereon, or change
        the place at which or the coin or currency in which any Security or the
        interest or any premium thereon or any other amount in respect thereof
        is payable; or

            (2) reduce the amount payable on any Security upon redemption at the
        Company's option; or

            (3) impair the right to institute suit for the enforcement of any
        payment or conversion in respect of any Security on or after the Stated
        Maturity thereof (or, in the case of redemption or any repurchase, on or
        after the Redemption Date or Repurchase Date, as the case may be); or

            (4) except as permitted by Section 10.11, adversely affect the right
        to convert any Security as provided in Article Ten; or

            (5) modify the provisions of this Indenture with respect to the
        subordination of the Securities in a manner adverse to the Holders of
        any Securities; or

            (6) reduce the percentage in principal amount of the Outstanding
        Securities the consent of whose Holders is required for any supplemental
        indenture to modify or amend any provision of this Indenture or the
        consent of whose Holders is required for any waiver (of compliance with
        certain provisions of this Indenture or certain defaults hereunder and
        their consequences) provided for in this Indenture; or

            (7) modify any of the provisions of this Section 7.2 except to
        increase any percentage contained herein or therein or to provide that
        certain other provisions of this Indenture cannot be modified or waived
        without the consent of the Holder of each Outstanding Security affected
        thereby; or

            (8) amend or modify the provisions of Article Twelve in a manner
        adverse to the Holders after the Holder's right to require the Company
        to repurchase the Securities upon a Change in Control arises.

            It shall not be necessary for any Act of Holders of Securities under
this Section 7.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.

            The quorum at any meeting called to adopt a resolution shall be
Holders representing a majority in aggregate principal amount of Securities at
the time Outstanding.


                                      -45-


SECTION 7.3 EXECUTION OF SUPPLEMENTAL INDENTURES.

            In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Sections 5.1 and 5.3) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture and that such supplemental
indenture has been duly authorized, executed and delivered by the Company and
constitutes a valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture that affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.

SECTION 7.4 EFFECT OF SUPPLEMENTAL INDENTURES.

            Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
appertaining thereto shall be bound thereby.

SECTION 7.5 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.

            Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Company and the
Trustee, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.

SECTION 7.6 NOTICE OF SUPPLEMENTAL INDENTURES.

            Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 7.2, the Company
shall give notice to all Holders of Securities of such fact, setting forth in
general terms the substance of such supplemental indenture, in the manner
provided in Section 1.6. Any failure of the Company to give such notice, or any
defect therein, shall not in any way impair or affect the validity of any such
supplemental indenture.

                                  ARTICLE EIGHT

                                    COVENANTS

SECTION 8.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.

            The Company covenants and agrees that it will duly and punctually
pay the principal of and premium, if any, and interest on the Securities in
accordance with the terms of the Securities and this Indenture. The Company
shall deposit or cause to be deposited with the


                                      -46-



Trustee, no later than 12:00 noon Eastern time on the date of the Stated
Maturity of any Security or no later than 12:00 noon Eastern time on the due
date for any installment of interest, all payments so due, which payments shall
be in immediately available funds on the date of such Stated Maturity or due
date, as the case may be.

SECTION 8.2 MAINTENANCE OF OFFICES OR AGENCIES.

            The Company hereby appoints the Corporate Trust Office or such other
office or agency of the Trustee as its agent in the Borough of Manhattan, The
City of New York, where Securities may be presented or surrendered for payment,
where Securities may be surrendered for registration of transfer or exchange,
where Securities may be surrendered for conversion, and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served.

            The Company may at any time and from time to time vary or terminate
the appointment of any such agent or appoint any additional agents for any or
all of such purposes; provided, however, that until all of the Securities have
been delivered to the Trustee for cancellation, or moneys sufficient to pay the
principal of, premium, if any, and interest on the Securities have been made
available for payment and either paid or returned to the Company pursuant to the
provisions of Section 8.3, the Company shall maintain in the Borough of
Manhattan, The City of New York, an office or agency where Securities may be
presented or surrendered for payment and conversion, where Securities may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company shall give prompt written notice to the Trustee, and
notice to the Holders in accordance with Section 1.6, of the appointment or
termination of any such agents and of the location and any change in the
location of any such office or agency.

            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,
presentations and surrenders may be made and notices and demands may be served
on the Corporate Trust Office.

SECTION 8.3 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.

            If the Company will act as its own Paying Agent, it shall, on or
before each due date of the principal of, premium, if any, or interest on any of
the Securities, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal, premium, if any, or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and the Company will promptly notify
the Trustee of its action or failure so to act.

            Whenever the Company shall have one or more Paying Agents, it will,
no later than 12:00 noon Eastern time on each due date of the principal of,
premium, if any, or interest on any Securities, deposit with the Trustee a sum
sufficient to pay the principal, premium, if any, or interest so becoming due,
such sum to be held for the benefit of the Persons entitled to such principal,
premium, if any, or interest, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of any failure so to act.


                                      -47-



            The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 8.3,
that such Paying Agent will:

            (a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided;

            (b) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal,
premium, if any, or interest; and

            (c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held by
such Paying Agent.

            The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.

            Anything contained herein to the contrary notwithstanding, any money
held by the Trustee or any Paying Agent in trust for the payment and discharge
of the principal of, premium, if any, Liquidated Damages, if any, or interest on
any Security that remains unclaimed for two years after the date when each
payment of such principal, premium, Liquidated Damages, if any, or interest has
become payable shall, upon the request of the Company, be repaid by the Trustee
to the Company as its absolute property free from trust, and the Trustee shall
thereupon be released and discharged with respect thereto and the Holders shall
look only to the Company for the payment of the principal, premium or interest
on such Security. The Trustee shall not be liable to the Company or any Holder
for interest on funds held by it for the payment and discharge of the principal,
premium or interest on any of the Securities to any Holder. The Company shall
not be liable for any interest on the sums paid to it pursuant to this paragraph
and shall not be regarded as a trustee of such money.

SECTION 8.4 EXISTENCE.

            Subject to Article Six, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors 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 Holders.


                                      -48-



SECTION 8.5 STATEMENT BY OFFICERS AS TO DEFAULT.

            The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate (one of the signers of which shall be the Company's
principal executive, principal financial or principal accounting officer),
stating whether or not to the best knowledge of the signers 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 status thereof of which
they have knowledge.

            The Company will deliver to the Trustee, forthwith upon becoming
aware of any default in the performance or observance of any covenant, agreement
or condition contained in this Indenture, or any Event of Default, an Officers'
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 8.5 shall be
delivered to the Trustee at the Corporate Trust Office.

SECTION 8.6 DELIVERY OF CERTAIN INFORMATION.

            At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act, upon the request of a Holder of a Security or the holder of
shares of Common Stock issued upon conversion thereof, the Company will promptly
furnish or cause to be furnished Rule 144A Information to such Holder of
Securities or such holder of shares of Common Stock issued upon conversion of
Securities, or to a prospective purchaser of any such security designated by any
such Holder or holder, as the case may be, to the extent required to permit
compliance by such Holder or holder with Rule 144A under the Securities Act (or
any successor provision thereto) in connection with the resale of any such
security; provided, however, that the Company shall not be required to furnish
such information in connection with any request made on or after the date that
is two years from the later of (a) the date such a security (or any such
predecessor security) was last acquired from the Company or (b) the date such a
security (or any such predecessor security) was last acquired from an
"affiliate" of the Company within the meaning of Rule 144 under the Securities
Act (or any successor provision thereto). "RULE 144A INFORMATION" shall be such
information as is specified pursuant to Rule 144A(d) (4) under the Securities
Act (or any successor provision thereto).

                                  ARTICLE NINE

                            REDEMPTION OF SECURITIES

SECTION 9.1 RIGHT OF REDEMPTION.

            The Securities may be redeemed in accordance with the provisions of
the form of Securities attached hereto as Exhibit A.


                                      -49-



SECTION 9.2 APPLICABILITY OF ARTICLE.

            Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of the Securities or this
Indenture, shall be made in accordance with such provision and this Article
Nine.

SECTION 9.3 ELECTION TO REDEEM; NOTICE TO TRUSTEE.

            In case of any redemption at the election of the Company of any of
the Securities, the Company shall, at least 40 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee in writing of such Redemption Date.

SECTION 9.4 SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.

            If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected by the Trustee at least three
Business Days prior to the date that the notice described in Section 9.5 is
given from the Outstanding Securities not previously called for redemption by
lot or such method as the Trustee may deem fair and appropriate.

            The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.

            The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount and
certificate numbers thereof to be redeemed.

            For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities that has been or is to be
redeemed.

SECTION 9.5 NOTICE OF REDEMPTION.

            Notice of redemption shall be given in the manner provided in
Section 1.6 to the Holders of Securities to be redeemed not less than 30 nor
more than 60 days prior to the Redemption Date, and such notice shall be
irrevocable.

            All notices of redemption shall identify the Securities to be
redeemed (including CUSIP numbers) and shall state:

            (a) the Redemption Date,

            (b) the Redemption Price, and accrued interest and Liquidated
Damages, if any,


                                      -50-


            (c) if less than all Outstanding Securities are to be redeemed, the
aggregate principal amount of Securities to be redeemed,

            (d) that on the Redemption Date the Redemption Price, and accrued
interest and Liquidated Damages, if any, will become due and payable upon each
such Security to be redeemed, and that interest thereon shall cease to accrue on
and after said date,

            (e) the Conversion Rate, the date on which the right to convert the
Securities to be redeemed will terminate and the places where such Securities
may be surrendered for conversion, and

            (f) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and accrued interest, if any.

            Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's written request,
by the Trustee in the name of and at the expense of the Company. Notice of
redemption of Securities to be redeemed at the election of the Company received
by the Trustee shall be given by the Trustee to each Paying Agent in the name of
and at the expense of the Company.

SECTION 9.6 DEPOSIT OF REDEMPTION PRICE.

            Not less than one Business Day prior to any Redemption Date, the
Company shall irrevocably deposit with the Trustee (or, if the Company is acting
as its own Paying Agent, segregate and hold in trust as provided in Section 8.3)
an amount of money (which shall be in immediately available funds on such
Redemption Date) sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on, all the
Securities that are to be redeemed on that date other than any Securities called
for redemption on that date that have been converted prior to the date of such
deposit.

            If any Security called for redemption is converted, any money
deposited with the Trustee or so segregated and held in trust for the redemption
of such Security shall (subject to any right of the Holder or such Security or
any Predecessor Security to receive interest as provided in the last paragraph
of Section 2.8) be paid to the Company on Company Request or, if then held by
the Company, shall be discharged from such trust.

SECTION 9.7 SECURITIES PAYABLE ON REDEMPTION DATE.

            Notice of redemption having been given as aforesaid, the Securities
to be so redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price, including accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
Security for redemption in accordance with said notice, such Security shall be
paid by the Company at the Redemption Price together with accrued and unpaid
interest, and Liquidated Damages, if any, to the Redemption Date; provided,
however, that installments of interest on Securities whose Stated Maturity is on
or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such on the
relevant Record Date according to their terms and the provisions of Section 2.8.


                                      -51-



            If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal amount of, premium, if any, and,
to the extent permitted by applicable law, accrued interest on such Security
shall, until paid, bear interest from the Redemption Date at the rate then in
effect, and such Security shall remain convertible until the principal of such
Security (or portion thereof, as the case may be) shall have been paid or duly
provided for.

SECTION 9.8 SECURITIES REDEEMED IN PART.

            Any Security that is to be redeemed only in part shall be
surrendered at an office or agency of the Company designated for that purpose
pursuant to Section 8.2 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such
Security without service charge, a new Registered Security or Securities, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.

SECTION 9.9 CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION.

            In connection with any redemption of the Securities, the Company may
arrange for the purchase and conversion of any Securities by an agreement with
one or more investment bankers or other purchasers (the "PURCHASERS") to
purchase such Securities by irrevocably paying to the Trustee in trust for the
Holders, on or before the Redemption Date, an amount not less than the
applicable Redemption Price, together with interest accrued and unpaid, and
Liquidated Damages, if any, to the Redemption Date, of such Securities.
Notwithstanding anything to the contrary contained in this Article Nine, the
obligation of the Company to pay the Redemption Price, together with interest
accrued and unpaid to the Redemption Date, 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 shall be filed with the Trustee prior
to the close of business on the second Business Day immediately prior to the
Redemption Date), any Securities called for redemption that are 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, and consistent with
any agreement or agreements with such Purchasers, to be acquired by such
Purchasers from such Holders and (notwithstanding anything to the contrary
contained in this Article Nine) surrendered by such Purchasers for conversion,
all as of immediately prior to the close of business on the Redemption Date (and
the right to convert any such Securities 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 by the
Purchasers to the Holders in the same manner as it would monies deposited with
it by the Company for the redemption of Securities. Without the Trustee's prior
written consent, no arrangement between the Company and such Purchasers for the
purchase and conversion of any Securities shall increase or otherwise affect any
of the powers, duties, responsibilities or obligations of the Trustee as set
forth in this Indenture, and the Company agrees to indemnify the Trustee from,
and hold it harmless against, any loss, liability or expense arising out of or
in connection with any such arrangement for the purchase and conversion of any
Securities


                                      -52-



between the Company and such Purchasers, including the costs and expenses,
including reasonable legal fees, incurred by the Trustee in the defense of any
claim or liability arising out of or in connection with the exercise or
performance of any of its powers, duties, responsibilities or obligations under
this Indenture.

                                   ARTICLE TEN

                            CONVERSION OF SECURITIES

SECTION 10.1 CONVERSION PRIVILEGE AND CONVERSION RATE.

            Subject to and upon compliance with the provisions of this Article,
at the option of the Holder thereof, any Security or any portion of the
principal amount thereof that is U.S.$l,000 or an integral multiple of
U.S.$1,000 may be converted into fully paid and nonassessable shares (calculated
as to each conversion to the nearest 1/100th of a share) of Common Stock of the
Company at the Conversion Rate, determined as hereinafter provided, in effect at
the time of conversion. Such conversion right shall commence upon the original
issuance of the Securities and expire at the close of business on April 15,
2007, unless the Security has been previously redeemed or repurchased, subject,
in the case of conversion of any Global Security, to any Applicable Procedures.
In case a Security or portion thereof is called for redemption at the election
of the Company or the Holder thereof exercises his right to require the Company
to repurchase the Security, such conversion right in respect of the Security, or
portion thereof so called, shall expire at the close of business on the Business
Day immediately preceding the Redemption Date or the Repurchase Date, as the
case may be, unless the Company defaults in making the payment due upon
redemption or repurchase, as the case may be (in each case subject, as
aforesaid, to any Applicable Procedures with respect to any Global Security).

            The rate at which shares of Common Stock shall be delivered upon
conversion (herein called the "CONVERSION RATE") shall be initially 25.9680
shares of Common Stock for each U.S.$l,000 principal amount of Securities. The
Conversion Rate shall be adjusted in certain instances as provided in this
Article Ten.

SECTION 10.2 EXERCISE OF CONVERSION PRIVILEGE.

            In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security, duly endorsed or
assigned to the Company or in blank, at any office or agency of the Company
maintained for that purpose pursuant to Section 8.2, accompanied by a duly
signed and completed conversion notice substantially in the form attached hereto
as Exhibit C stating that the Holder elects to convert such Security or, if less
than the entire principal amount thereof is to be converted, the portion thereof
to be converted. Each Security surrendered for conversion (in whole or in part)
during the period from the close of business on any Regular Record Date next
preceding any Interest Payment Date to the opening of business on such Interest
Payment Date shall (except in the case of any Security or portion thereof that
has been called for redemption on a Redemption Date, or is to be repurchased on
a Repurchase Date, with the consequence that the conversion right of such
Security would terminate between such Regular Record Date and the close of
business on such Interest Payment Date) be accompanied by payment in New York
Clearing House funds or other funds acceptable


                                      -53-


to the Company of an amount equal to the interest and Liquidated Damages, if
any, payable on such Interest Payment Date on the principal amount of such
Security (or part thereof, as the case may be) being surrendered for conversion.
The interest and Liquidated Damages, if any, so payable on such Interest Payment
Date, with respect to any Security (or portion thereof, if applicable) that is
surrendered for conversion during the period from the close of business on any
Record Date next preceding any Interest Payment Date to the opening of business
on such Interest Payment Date, shall be paid to the Holder of such Security as
of such Regular Record Date. Interest and Liquidated Damages, if any, payable in
respect of any Security surrendered for conversion on or after an Interest
Payment Date shall be paid to the Holder of such Security as of the next
preceding Regular Record Date, notwithstanding the exercise of the right of
conversion. Except as provided in this paragraph and subject to the last
paragraph of Section 2.8, no cash payment or adjustment shall be made upon any
conversion on account of any interest accrued from the Interest Payment Date
next preceding the conversion date, in respect of any Security (or part thereof,
as the case may be) surrendered for conversion, or on account of any dividends
on the Common Stock issued upon conversion. The Company's delivery to the Holder
of the number of shares of Common Stock (and cash in lieu of fractions thereof,
as provided in this Indenture) into which a Security is convertible and any
rights and warrants pursuant to Section 10.4(m) will be deemed to satisfy the
Company's obligation to pay the principal amount of the Security.

            Securities shall be deemed to have been converted on the day of
surrender of such Securities for conversion in accordance with the foregoing
provisions, and at such time the rights of the Holders of such Securities as
Holders shall cease, and the Person or Persons entitled to receive the Common
Stock issuable upon conversion shall be treated for all purposes as the record
holder or holders of such Common Stock at such time. As promptly as practicable
on or after the conversion date, the Company shall issue and deliver to the
Trustee, for delivery to the Holder, a certificate or certificates for the
number of full shares of Common Stock issuable upon conversion, together with
payment in lieu of any fraction of a share, as provided in Section 10.3.

            All shares of Common Stock delivered upon such conversion of
Securities shall bear restrictive legends substantially in the form of the
legends required to be set forth on the Securities pursuant to Section 2.6 and
shall be subject to the restrictions on transfer provided in such legends.
Neither the Trustee nor any agent maintained for the purpose of such conversion
shall have any responsibility for the inclusion or content of any such
restrictive legends on such Common Stock; provided, however, that the Trustee or
any agent maintained for the purpose of such conversion shall have provided to
the Company or to the Company's transfer agent for such Common Stock, prior to
or concurrently with a request to the Company to deliver such Common Stock,
written notice that the Securities delivered for conversion are Securities.

            In the case of any Security that is converted in part only, upon
such conversion 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 Registered Security or Securities of authorized denominations in
an aggregate principal amount equal to the unconverted portion of the principal
amount of such Security. A Security may be converted in part, but only if the
principal amount of such Security to be converted is any integral multiple of
U.S.$1,000 and the principal amount of such security to remain Outstanding after
such conversion is equal to U.S.$l,000 or any integral multiple of U.S.$l,000 in
excess thereof.


                                      -54-


SECTION 10.3 FRACTIONS OF SHARES.

            No fractional shares of Common Stock shall be issued upon conversion
of any Security or Securities. If more than one Security shall be surrendered
for conversion at one time by the same Holder, the number of full shares that
shall be issuable upon conversion thereof shall be computed on the basis of the
aggregate principal amount of the Securities (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock that would
otherwise be issuable upon conversion of any Security or Securities (or
specified portions thereof), the Company shall calculate and pay a cash
adjustment in respect of such fraction (calculated to the nearest 1/100th of a
share) in an amount equal to the same fraction of the closing sales price of our
Common Stock on the New York Stock Exchange (or, if not listed on the New York
Stock Exchange, such other national securities exchange or otherwise in the
over-the-counter market, as applicable) at the close of business on the day of
conversion.

SECTION 10.4 ADJUSTMENT OF CONVERSION RATE.

            The Conversion Rate shall be subject to adjustments from time to
time as follows:

            (a) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company payable in shares of
Common Stock, the Conversion Rate in effect at the opening of business on the
day following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be increased by dividing such
Conversion Rate by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such increase to become effective (subject to paragraph (l) of
this Section 10.4) immediately after the opening of business on the day
following the date fixed for such determination. For the purposes 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 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.

            (b) In case the Company shall issue rights, options or warrants to
all holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the current market price
per share (determined as provided in paragraph (h) of this Section 10.4) of the
Common Stock on the date fixed for the determination of stockholders entitled to
receive such rights, options or warrants (other than any rights, options or
warrants (1) that by their terms will also be issued to any Holder upon
conversion of a Security into shares of Common Stock without any action required
by the Company or any other Person or (2) that are only exercisable upon the
occurrence of specified triggering event and such triggering event has not
occurred), the Conversion Rate in effect at the opening of business on the day
following the date fixed for such determination shall be increased by dividing
such Conversion Rate by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such


                                      -55-



current market price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such increase to become effective (subject to
paragraph (l) of this Section 10.4) immediately after the opening of business on
the day following the date fixed for such determination. For the purposes of
this paragraph (b), 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 issue any rights, options or
warrants in respect of shares of Common Stock held in the treasury of the
Company.

            (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 each 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 evidences of its indebtedness, shares of any
class of capital stock, or other property (including cash or assets or
securities, but excluding (1) any rights, options or warrants referred to in
paragraph (b) of this Section 10.4 and the distribution of rights to all holders
of Common Stock pursuant to the adoption of a stockholders' rights plan or the
detachment of such rights under the terms of such stockholders' rights plan, (2)
any dividend or distribution paid in cash, except as set forth in paragraphs (e)
and (f) of this Section 10.4, (3) any dividend or distribution referred to in
paragraph (a) of this Section 10.4 and (4) any merger or consolidation to which
Section 10.11 applies), the Conversion Rate shall be adjusted so that the same
shall equal the rate determined by dividing the Conversion Rate in effect
immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the current market price per share
(determined as provided in paragraph (h) of this Section 10.4) of the Common
Stock on the date fixed for such determination less the then fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) of the portion of the assets,
shares or evidences of indebtedness so distributed applicable to one share of
Common Stock and the denominator shall be such current market price per share of
the Common Stock, such adjustment to become effective (subject to paragraph (l)
of this Section 10.4) immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such distribution.

            In addition, if the Company implements a rights plan ("RIGHTS
PLAN"), the Company will provide under such Rights Plan that the Holders of the
Securities will receive, in addition to the Common Stock, the rights under the
Rights Plan (whether or not the rights under the Rights Plan have separated from
the Common Stock at the time of conversion), subject to any limitations set
forth in the Rights Plan.


                                      -56-



            (e) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock cash (excluding cash portions of distribution
referred to in Section 10.4(d) and any cash that is distributed upon a merger or
consolidation to which Section 10.11 applies) in an aggregate amount that,
combined together with (1) the aggregate amount of any other cash distributions
to all holders of its Common Stock made exclusively in cash within the 365-day
period preceding the date of payment of such distribution and in respect of
which no adjustment pursuant to this paragraph (e) has been made and (2) the
aggregate of any cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) of consideration payable in respect of any tender offer by the
Company or any Subsidiary for all or any portion of the Common Stock concluded
within the 365-day period preceding the date of payment of such distribution and
in respect of which no adjustment pursuant to paragraph (f) of this Section 10.4
has been made (the "COMBINED CASH AND TENDER AMOUNT") exceeds 10% of the product
of the current market price per share (determined as provided in paragraph (h)
of this Section 10.4) of the Common Stock on the date for the determination of
holders of shares of Common Stock entitled to receive such distribution times
the number of shares of Common Stock outstanding on such date (the "AGGREGATE
CURRENT MARKET PRICE"), then, and in each such case, immediately after the close
of business on such date for determination, subject to paragraph (l) of Section
10.4, the Conversion Rate shall be adjusted so that the same shall equal the
rate determined by dividing the Conversion Rate in effect immediately prior to
the close of business on the date fixed for determination of the stockholders
entitled to receive such distribution by a fraction (A) the numerator of which
shall be equal to the current market price per share (determined as provided in
paragraph (h) of this Section 10.4) of the Common Stock on the date fixed for
such determination less an amount equal to the quotient of (i) the excess of
such combined cash and tender amount over 10% of such aggregate current market
price divided by (ii) the number of shares of Common Stock outstanding on such
date fixed for determination and (B) the denominator of which shall be equal to
the current market price per share (determined as provided in paragraph (h) of
this Section 10.4) of the Common Stock on such date fixed for determination.

            (f) In case a tender offer made by the Company or any Subsidiary for
all or any portion of the Common Stock shall be completed for an aggregate
consideration consisting of cash and/or property having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) that combined together with (1) the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution), of consideration payable in respect of any other tender offer by
the Company or any Subsidiary for all or any portion of the Common Stock
concluded within the 365-day period preceding the completion of such tender
offer and in respect of which no adjustment pursuant to this paragraph (f) has
been made and (2) the aggregate amount of any distributions to all holders of
the Company's Common Stock made exclusively in cash within the 365-day period
preceding the completion of such tender offer and in respect of which no
adjustment pursuant to paragraph (e) of this Section 10.4 has been made (the
"COMBINED TENDER AND CASH AMOUNT") exceeds 10% of the product of the current
market price per share of the Common Stock (determined as provided in paragraph
(h) of this Section 10.4) as of the completion of such tender offer (the
"COMPLETION DATE") times the number of shares of Common Stock outstanding
(including any tendered shares) as of the Completion Date, then, and in each
such case, immediately prior to the opening


                                      -57-



of business on the day after the date of the Completion Date, the Conversion
Rate shall be adjusted so that the same shall equal the rate determined by
dividing the Conversion Rate immediately prior to close of business on the
Completion Date by a fraction (A) the numerator of which shall be equal to (i)
the product of (x) the current market price per share of the Common Stock
(determined as provided in paragraph (h) of this Section 10.4) on the Completion
Date multiplied by (y) the number of shares of Common Stock outstanding
(including any tendered shares) on the Completion Date less (ii) the combined
tender and cash amount, and (B) the denominator of which shall be equal to the
product of (x) the current market price per share of the Common Stock
(determined as provided in paragraph (h) of this Section 10.4) as of the
Completion Date multiplied by (y) the number of shares of Common Stock
outstanding (including any tendered shares) as of the Completion Date less the
number of all shares validly tendered and not withdrawn as of the Completion
Date (the shares deemed so accepted up to any such maximum, being referred to as
the "PURCHASED SHARES").

            (g) The reclassification of Common Stock into securities including
other than Common Stock (other than any reclassification upon a consolidation or
merger to which Section 10.11 applies) shall be deemed to involve (1) a
distribution of such securities other than Common Stock to all holders of Common
Stock (and the effective date of such reclassification shall be deemed to be
"the date fixed for the determination of stockholders entitled to receive such
distribution" and "the date fixed for such determination" within the meaning of
paragraph (d) of this Section 10.4), and (2) a subdivision or combination, as
the case may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (c) of this Section 10.4).

            (h) For the purpose of any computation under paragraphs (b), (d),
(e) or (f) of this Section 10.4, the current market price per share of Common
Stock on any date shall be calculated by the Company and be deemed to be the
average of the daily Average Sales Prices Per Share for the five consecutive
Trading Days selected by the Company commencing not more than 10 Trading Days
before, and ending not later than, the earlier of the day in question and the
day before the "ex date" with respect to the issuance or distribution requiring
such computation. For purposes of this paragraph, the term "ex date," when used
with respect to any issuance or distribution, means the first date on which the
Common Stock trades regular way in the applicable securities market or on the
applicable securities exchange without the right to receive such issuance or
distribution.

            (i) No adjustment in the Conversion Rate shall be required unless
such adjustment (plus any adjustments not previously made by reason of this
paragraph (i)) would require an increase or decrease of at least one percent in
such rate; provided, however, that any adjustments which by reason of this
paragraph (i) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Article
shall be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be.


                                      -58-



            (j) The Company may make such increases in the Conversion Rate, for
the remaining term of the Securities or any shorter term, in addition to those
required by paragraphs (a), (b), (c), (d), (e) and (f) of this Section 10.4, as
it considers to be advisable in order to avoid or diminish any income tax
liability to any holders of shares of Common Stock resulting from any dividend
or distribution of Common Stock or issuance of rights or warrants to purchase or
subscribe for Common Stock or from any event treated as such for income tax
purposes.

            To the extent permitted by applicable law, the Company from time to
time may increase the Conversion Rate by any amount for any period of time if
the period is at least twenty (20) days 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; provided, however, that such
increase shall not be taken into account for purposes of determining whether the
Average Sales Price Per Share of the Common Stock exceeds the Conversion Price
by 105% in connection with an event which would otherwise be a Change in
Control. Whenever the Conversion Rate is increased pursuant to the preceding
sentence, the Company shall give notice of the increase to the Holders of
Securities in the manner provided in Section 1.6 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.

            (k) Notwithstanding the foregoing provisions of this Section 10.4,
no adjustment of the Conversion Rate shall be required to be made (1) upon the
issuance of shares of Common Stock pursuant to any present or future plan for
the reinvestment of dividends, (2) because of a tender or exchange offer of the
character described in Rule 13e-4(h) (5) under the Exchange Act or any successor
rule thereto or (3) as a result of a rights plan or poison pill implemented by
the Company.

            (l) In any case in which this Section 10.4 shall require that an
adjustment be made immediately following a record date, the Company may elect to
defer the effectiveness of such adjustment (but in no event until a date later
than the effective time of the event giving rise to such adjustment), in which
case the Company shall, with respect to any Security converted after such record
date and on and before such adjustment shall have become effective (1) defer
paying any cash payment pursuant to Section 10.3 hereof or issuing to the Holder
of such Security the number of shares of Common Stock issuable upon such
conversion in excess of the number of shares of Common Stock issuable thereupon
only on the basis of the Conversion Rate prior to adjustment, and (2) not later
than five Business Days after such adjustment shall have become effective, pay
to such Holder the appropriate cash payment pursuant to Section 10.3 hereof and
issue to such Holder the additional shares of Common Stock issuable on such
conversion. Notwithstanding the foregoing, no adjustment of the Conversion Rate
shall be made if the event giving rise to such adjustment does not occur.

            (m) In the event that the Company distributes rights or warrants
(other than those referred to in paragraph (b) above) pro rata to holders of
Common Stock, so long as any such rights or warrants have not expired or been
redeemed by the Company, the Company shall make proper provision so that the
Holder of any Security surrendered for conversion will be entitled to receive
upon such conversion, in addition to the Common Stock issuable upon conversion
of the Securities (the "CONVERSION SHARES"), a number of rights and warrants to
be determined as follows: (i) if such conversion occurs on or prior to the date
for the distribution to


                                      -59-



the holders of rights or warrants of separate certificates evidencing such
rights or warrants (the "DISTRIBUTION DATE"), the same number of rights or
warrants to which a holder of a number of shares of Common Stock equal to the
number of Conversion Shares is entitled at the time of such conversion in
accordance with the terms and provisions of and applicable to the rights or
warrants, and (ii) if such conversion occurs after such Distribution Date, the
same number of rights or warrants to which a holder of the number of shares of
Common Stock into which the principal amount of such Security so converted was
convertible immediately prior to such Distribution Date would have been entitled
on such Distribution Date in accordance with the terms and provisions of and
applicable to the rights or warrants.

SECTION 10.5 NOTICE OF ADJUSTMENTS OF CONVERSION RATE.

            Whenever the Conversion Rate is adjusted as herein provided:

            (a) the Company shall compute the adjusted Conversion Rate in
accordance with Section 10.4 and shall prepare a certificate signed by the Chief
Financial Officer of the Company setting forth the adjusted Conversion Rate and
showing in reasonable detail the facts upon which such adjustment is based, and
such certificate shall promptly be filed with the Trustee and with the
Conversion Agent; and

            (b) upon each such adjustment, a notice stating that the Conversion
Rate has been adjusted and setting forth the adjusted Conversion Rate shall be
required, and as soon as practicable after it is required, such notice shall be
provided by the Company to all Holders in accordance with Section 1.6.

Neither the Trustee nor the Conversion Agent shall be under any duty or
responsibility with respect to any such certificate or the information and
calculations contained therein, except to exhibit the same to any Holder of
Securities desiring inspection thereof at its office during normal business
hours. Unless and until a Responsible Officer of the Trustee and Conversion
Agent receive notice of an adjusted Conversion Rate, the Trustee and the
Conversion Agent may rely without inquiry on the Conversion Rate most recently
in effect.

SECTION 10.6 NOTICE OF CERTAIN CORPORATE ACTION.

            In case:

            (a) the Company shall declare a dividend (or any other distribution)
on its Common Stock payable (i) otherwise than exclusively in cash or (ii)
exclusively in cash in an amount that would require any adjustment pursuant to
Section 10.4; or

            (b) the Company shall authorize the granting to the holders of its
Common Stock of rights, options or warrants to subscribe for or purchase any
shares of capital stock of any class or of any other rights; or

            (c) of any reclassification of the Common Stock of the Company, or
of any consolidation, merger or share exchange to which the Company is a party
and for which approval of any stockholders of the Company is required, or of the
conveyance, sale, transfer or lease of all or substantially all of the assets of
the Company; or


                                      -60-



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

then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 8.2, and shall cause
to be provided to all Holders in accordance with Section 1.6, at least 20 days
(or 10 days in any case specified in clause (a) or (b) above) prior to the
applicable record or effective date hereinafter specified, a notice stating (1)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights, options 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, rights, options or warrants are to be determined or
(2) the date on which such reclassification, consolidation, merger, conveyance,
transfer, sale, lease, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, sale, lease, dissolution,
liquidation or winding up. Neither the failure to give such notice or the notice
referred to in the following paragraph nor any defect therein shall affect the
legality or validity of the proceedings described in clauses (a) through (d) of
this Section 10.6. If at the time the Trustee shall not be the Conversion Agent,
a copy of such notice shall also forthwith be filed by the Company with the
Trustee.

            The Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of Securities pursuant to Section 8.2,
and shall cause to be provided to all Holders in accordance with Section 1.6,
notice of any tender offer by the Company or any Subsidiary for all or any
portion of the Common Stock at or about the time that such notice of tender
offer is provided to the public generally.

SECTION 10.7 COMPANY TO RESERVE COMMON STOCK.

            The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of Securities, the full number of shares of
Common Stock then issuable upon the conversion of all Outstanding Securities.

SECTION 10.8 TAXES ON CONVERSIONS.

            Except as provided in the next sentence, the Company will pay any
and all transfer, stamp, documentary and other similar taxes and duties that may
be payable in respect of the issue or delivery of shares of Common Stock on
conversion of Securities pursuant hereto. The Company shall not, however, be
required to pay any tax or duty which may be payable in respect of any transfer
involved in the issue and delivery of shares of Common Stock in a name other
than that of the Holder of the Security or Securities to be converted, and no
such issue or delivery shall be made unless and until the Person requesting such
issue 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.


                                      -61-



SECTION 10.9 COVENANT AS TO COMMON STOCK.

            The Company agrees that all shares of Common Stock that may be
delivered upon conversion of Securities, upon such delivery, will be newly
issued shares and will have been duly authorized and validly issued and will be
fully paid and nonassessable and, except as provided in Section 10.8, the
Company will pay all taxes, liens and charges with respect to the issue thereof.

SECTION 10.10 CANCELLATION OF CONVERTED SECURITIES.

            All Securities delivered for conversion shall be delivered to the
Trustee or its agent to be cancelled by or at the direction of the Trustee,
which shall dispose of the same as provided in Section 2.10.

SECTION 10.11 PROVISION IN CASE OF CONSOLIDATION, MERGER OR SALE OF ASSETS.

            In case of any consolidation or merger of the Company with or into
any other Person, any merger of another Person with or into the Company (other
than a merger that does not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of Common Stock of the Company) or any
conveyance, sale, transfer or lease of all or substantially all of the assets of
the Company, the Person formed by such consolidation or resulting from such
merger or that acquires such assets, as the case may be, shall execute and
deliver to the Trustee a supplemental indenture providing that the Holder of
each Security then Outstanding shall have the right thereafter, during the
period such Security shall be convertible as specified in Section 11.1, to
convert such Security only into the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, conveyance, sale,
transfer or lease by a holder of the number of shares of Common Stock of the
Company into which such Security might have been converted immediately prior to
such consolidation, merger, conveyance, sale, transfer or lease, assuming such
holder of Common Stock of the Company (a) is not a Person with which the Company
consolidated or merged with or into or that merged into or with the Company or
to which such conveyance, sale, transfer or lease was made, as the case may be
(a "CONSTITUENT PERSON"), or an Affiliate of a Constituent Person and (b) failed
to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, sale, transfer or lease (provided that if the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, sale, transfer, or lease is not the same for each share of Common
Stock of the Company held immediately prior to such consolidation, merger,
conveyance, sale, transfer or lease by others than a Constituent Person or an
Affiliate thereof and in respect of which such rights of election shall not have
been exercised ("NON-ELECTING SHARE"), then for the purpose of this Section
10.11 the kind and amount of securities, cash and other property receivable upon
such consolidation, merger, conveyance, sale, transfer or lease by the holders
of each Non-electing Share shall be deemed to be the kind and amount so
receivable per share by a plurality of the Non-electing Shares). Such
supplemental indenture shall provide for adjustments that, for events subsequent
to the effective date of such supplemental indenture, shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Article. The above provisions of this Section 10.11 shall similarly apply to
successive consolidations, mergers, conveyances, sales, transfers or leases.
Notice of the execution of such a supplemental indenture


                                      -62-


shall be given by the Company to the Holder of each Security as provided in
Section 1.6 promptly upon such execution.

            Neither the Trustee nor the Conversion Agent shall be under any
responsibility to determine the correctness of any provisions contained in any
such supplemental indenture relating either to the kind or amount of shares of
stock or other securities or property or cash receivable by Holders of
Securities upon the conversion of their Securities after any such consolidation,
merger, conveyance, transfer, sale or lease or to any such adjustment but may
accept as conclusive evidence of the correctness of any such provisions, and
shall be protected in relying upon, an Officers Certificate or an Opinion of
Counsel with respect thereto, which the Company shall cause to be furnished to
the Trustee upon request.

SECTION 10.12 RESPONSIBILITY OF TRUSTEE FOR CONVERSION PROVISIONS.

            The Trustee, subject to the provisions of Section 5.1, and any
Conversion Agent shall not at any time be under any duty or responsibility to
any Holder of Securities to determine whether any facts exist that may require
any adjustment of the Conversion Rate, or with respect to the nature or extent
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, or whether a supplemental indenture need be entered into. Neither the
Trustee, subject to the provisions of Section 5.1, nor any Conversion Agent
shall be accountable with respect to the validity or value (or the kind or
amount) of any Common Stock, or of any other securities or property or cash,
that may at any time be issued or delivered upon the conversion of any Security;
and it or they do not make any representation with respect thereto. Neither the
Trustee, subject to the provisions of Section 5.1, nor any Conversion Agent
shall be responsible for any failure of the Company to make or calculate any
cash payment or to issue, transfer or deliver any shares of Common Stock or
share certificates or other securities or property or cash upon the surrender of
any Security for the purpose of conversion; and the Trustee, subject to the
provisions of Section 5.1, and any Conversion Agent shall not be responsible for
any failure of the Company to comply with any of the covenants of the Company
contained in this Article.

                                 ARTICLE ELEVEN

                           SUBORDINATION OF SECURITIES

SECTION 11.1 SECURITIES SUBORDINATE TO SENIOR DEBT.

            The Company covenants and agrees, and each Holder of a Security by
his acceptance thereof likewise covenants and agrees, that to the extent and in
the manner hereinafter set forth in this Article (subject to the provisions of
Article Three) the indebtedness represented by the Securities and the payment of
the principal of (and premium, if any) and interest on, and any payment of the
Repurchase Price with respect to, each and all of the Securities are hereby
expressly made subordinate and subject in right of payment to the prior payment
in full in cash or Cash Equivalents of all Senior Debt.


                                      -63-


SECTION 11.2 NO PAYMENTS IN CERTAIN CIRCUMSTANCES; PAYMENT OVER OF PROCEEDS UPON
             DISSOLUTION, ETC.

            No payment on account of principal of, premium, if any, or interest
(and Liquidated Damages, if any) on, or redemption or repurchase of, the
Securities shall be made if, at the time of such payment: (a) a default in the
payment of principal, premium, if any, or interest or other amounts due on or in
connection with any Senior Debt, including any default under any redemption or
repurchase obligation, occurs and is continuing (or, in the case of Senior Debt
for which there is a period of grace, in the event of such a default that
continues beyond the period of grace, if any, specified in the instrument or
lease evidencing such Senior Debt), unless and until such default shall have
been cured or waived or shall have ceased to exist; or (b) a default, other than
a payment default, on Designated Senior Debt occurs and is continuing that then
permits holders of such Designated Senior Debt to accelerate its maturity and
the Trustee receives a notice of the default (a "PAYMENT BLOCKAGE NOTICE") from
the Company, a holder of Designated Senior Debt or a Representative.
Notwithstanding the foregoing, the Company may make, and the Trustee may receive
and shall apply, any payment in respect of the Securities (for principal,
premium, if any, or interest (and Liquidated Damages, if any) or repurchase) if
such payment was made prior to the occurrence of any of the contingencies
specified in clauses (a) and (b) above.

            If the Trustee receives any Payment Blockage Notice pursuant to
clause (b) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section 11.2 unless and until (1) at least 365 days shall have
elapsed since the effectiveness of the immediately prior Payment Blockage Notice
and (2) all scheduled payments of principal, premium, if any, interest and
Liquidated Damages, if any, on the Securities 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 unless such existing
nonpayment default has been cured for a period of at least 90 days.

            The Company may and shall resume payments on and distributions in
respect of the Securities (including missed payments, if any) upon the earlier
of: (A) the date upon which the default is cured or waived, or (B) in the case
of a default referred to in clause (b) of the second preceding paragraph, 179
days after notice is received if the maturity of such Designated Senior Debt has
not been accelerated such that such debt is then presently payable, unless this
Indenture otherwise prohibits the payment or distribution at the time of such
payment or distribution.

            Upon (i) any acceleration of the principal amount due on the
Securities or (ii) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any dissolution, winding up or total or partial liquidation or reorganization of
the Company, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, premium, if any, sinking
fund and interest or other amounts due, or to become due, upon or in connection
with all Senior Debt shall first be paid in full in cash or Cash Equivalents, or
payment thereof provided for in cash or Cash Equivalents in accordance with its
terms, before any payment is made on account of the principal of, premium, if
any, or interest (and Liquidated Damages, if any) on, or repurchase of, the


                                      -64-


indebtedness evidenced by the Securities, and upon any such dissolution or
winding up or liquidation or reorganization any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders of the Securities or the Trustee under this
Indenture would be entitled, except for the provisions hereof, shall be paid by
the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders of
the Securities or by the Trustee under this Indenture if received by them or it,
as the case may be, directly to the holders of Senior Debt (pro rata to each
such holder on the basis of the respective amounts of Senior Debt held by such
holder) or their representatives, to the extent necessary to pay all Senior Debt
in full, in cash or Cash Equivalents, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Debt, before any payment
or distribution is made to the Holders of the Securities or to the Trustee under
this Indenture.

            In the event that, contrary to the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (other than junior securities, as defined in Section
11.11), shall be received by the Trustee or the Holders of the Securities before
all Senior Debt is paid in full in cash or Cash Equivalents or provision made
for such payment in accordance with its terms, such payment or distribution
shall be paid over or delivered to the holders of such Senior Debt or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior Debt
have been issued, as their respective interests may appear, for application to
the payment of all Senior Debt remaining unpaid to the extent necessary to pay
all such Senior Debt in full in cash or Cash Equivalents in accordance with its
terms, after giving effect to any concurrent payment or distribution to or for
the holders of such Senior Debt.

            Subject to the payment in full in cash or Cash Equivalents of all
Senior Debt, the Holders of the Securities (together with the holders of any
other indebtedness of the Company that is subordinated in right of payment to
the payment in full of all Senior Debt that is not subordinated in right of
payment to the Securities and that by its terms grants such right of subrogation
to the holders thereof) shall be subrogated to the rights of the holders of
Senior Debt to receive payments or distribution of assets of the Company made on
the Senior Debt until the principal of, premium, if any, and interest on, or
amounts payable upon repurchase of, the Securities shall be paid in full; and,
for the purposes of such subrogation, no payments or distributions to the
holders of Senior Debt of any cash, property or securities to which the Holders
of the Securities or the Trustee would be entitled except for the provisions of
this Article, and no payment over pursuant to the provisions of this Article to
the holders of Senior Debt by the Holders of the Securities or the Trustee,
shall, as between the Company, its creditors other than the holders of Senior
Debt, and the Holders of Securities, be deemed to be a payment by the Company to
the holders of or on account of Senior Debt, it being understood that the
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders of the Securities, on the one hand,
and the holders of Senior Debt, on the other hand.

SECTION 11.3 TRUSTEE TO EFFECTUATE SUBORDINATION.

            Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the


                                      -65-



subordination provided in this Article and appoints the Trustee his
attorney-in-fact for any and all such purposes.

SECTION 11.4 NO WAIVER OF SUBORDINATION PROVISIONS.

            No right of any present or future holder of any Senior Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder of any Senior
Debt or by any non-compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof any such holder
may have or be otherwise charged with.

            Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Debt, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Debt or otherwise amend or supplement in any manner Senior Debt or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding; (b) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt; (c) release any Person
liable in any manner for the collection of Senior Debt; and (d) exercise or
refrain from exercising any rights against the Company and any other Person.

SECTION 11.5 NOTICE TO TRUSTEE.

            The Company shall give prompt written notice to the Trustee of any
fact known to the Company that would prohibit the making of any payment to or by
the Trustee in respect of the Securities. Notwithstanding the provisions of this
Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts that would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until a Responsible Officer of the Trustee shall have received written
notice thereof from the Company or a holder of Senior Debt or from any trustee,
agent or representative therefor; and, prior to the receipt of any such written
notice, the Trustee, subject to the provisions of Section 5.1, shall be entitled
in all respects to assume that no such facts exist; provided, however, that if
the Trustee shall not have received the notice provided for in this Section 11.5
prior to the date upon which by the terms hereof any money may become payable
for any purpose (including without limitation the payment of the principal of
(and premium, if any) or interest on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for which
such money was received and shall not be affected by any notice to the contrary
that may be received by it within two Business Days prior to such date.

            Subject to the provisions of Section 5.1, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt (or a trustee, agent or
representative therefor) to establish that such notice has been given by a


                                      -66-


holder of Senior Debt (or a trustee, agent or representative therefor). In the
event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article Eleven, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt held by such Person,
the extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article Eleven, 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.

SECTION 11.6 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.

            Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee, subject to the provisions of Section 5.1, and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Debt 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.

SECTION 11.7 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.

            The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt and shall not be liable to any such holders if it shall
in good faith mistakenly pay over or distribute to Holders of Securities or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Debt shall be entitled by virtue of this Article or otherwise.
With respect to the holders of Senior Debt, the Trustee undertakes to perform or
to observe only such of its covenants or obligations as are specifically set
forth in this Article Eleven, and no implied covenants or obligations with
respect to holders of Senior Debt shall be read into this Indenture against the
Trustee.

SECTION 11.8 RELIANCE BY HOLDERS OF SENIOR DEBT ON SUBORDINATION PROVISIONS.

            Each Holder by accepting a Security 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 Debt, whether such Senior Debt
was created or acquired before or after the issuance of the Securities, to
acquire and continue to hold, or to continue to hold, such Senior Debt, and such
holder of Senior Debt shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Debt. Such holders of the Company's Senior Debt are
intended by the parties to the Indenture to be third party creditor
beneficiaries under this Indenture for the purposes of enforcing the provisions
of this Article Eleven.


                                      -67-


SECTION 11.9 RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION OF
             TRUSTEE'S RIGHTS.

            The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Eleven with respect to any Senior Debt that may
at any time be held by it, to the same extent as any other holder of Senior
Debt, and nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.

            Nothing in this Article Eleven shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 5.7.

SECTION 11.10 ARTICLE APPLICABLE TO PAYING AGENTS.

            In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article Eleven in addition to or in place of the Trustee;
provided, however, that Section 11.9 shall not apply to the Company or any
Affiliate of the Company if it or such Affiliate acts as Paying Agent.

SECTION 11.11 CERTAIN CONVERSIONS AND REPURCHASES DEEMED PAYMENT.

            For the purposes of this Article Eleven only, (a) the issuance and
delivery of junior securities upon conversion of Securities in accordance with
Article Ten or upon the repurchase of Securities in accordance with Article
Twelve shall not be deemed to constitute a payment or distribution on account of
the principal of or premium or interest or Liquidated Damages on Securities or
on account of the purchase or other acquisition of Securities, and (b) the
payment, issuance or delivery of cash, property or securities (other than junior
securities) upon conversion of a Security shall be deemed to constitute payment
on account of the principal of such Security. For the purposes of this Section
11.11, the term "junior securities" means (1) shares of any stock of any class
of the Company and any cash, property or securities into which the Securities
are convertible pursuant to Article Ten and (2) securities of the Company that
are subordinated in right of payment to all Senior Debt that may be outstanding
at the time of issuance or delivery of such securities to substantially the same
extent as, or to a greater extent than, the Securities are so subordinated as
provided in this Article Eleven. Nothing contained in this Article Eleven or
elsewhere in this Indenture or in the Securities is intended to or shall impair,
as among the Company, its creditors other than holders of Senior Debt and the
Holders of the Securities, the right, which is absolute and unconditional, of
the Holder of any Security to convert such Security in accordance with Article
Ten or to exchange such Security for Common Stock in accordance with Article
Twelve if the Company elects to satisfy the obligations under Article Twelve by
the delivery of Common Stock.


                                      -68-



                                 ARTICLE TWELVE

  REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER UPON A CHANGE IN CONTROL

SECTION 12.1 RIGHT TO REQUIRE REPURCHASE.

            In the event that a Change in Control shall occur, then each Holder
shall have the right, at the Holder's option, but subject to the provisions of
Section 12.2, to require the Company to repurchase, and upon the exercise of
such right the Company shall repurchase, all of such Holder's Securities not
theretofore called for redemption, or any portion of the principal amount
thereof that is equal to U.S.$1,000 or any greater integral multiple of
U.S.$1,000, on the date (the "REPURCHASE DATE") that is fixed by the Company at
a cash purchase price equal to 100% of the principal amount of the Securities to
be repurchased plus interest accrued to the Repurchase Date (the "REPURCHASE
PRICE"); provided, however, that installments of interest and Liquidated
Damages, if any, on Securities whose Stated Maturity is on or prior to the
Repurchase Date shall be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such on the relevant Record Date
according to their terms and the provisions of Section 2.8. The Repurchase Date
will be determined by the Company in the following manner: (i) the Company will
give notice of the Change in Control as contemplated in Section 12.3(a); (ii)
each Holder electing to exercise the repurchase right must deliver, on or before
the thirtieth (30th) day (or such greater period as may be required by
applicable law) after the date of the Company's notice provided in provision (i)
above: (A) irrevocable written notice to the trustee of such Holder's exercise
of its repurchase right, and (B) the Securities with respect to which such
repurchase right is being exercised; and (iii) the Company will make the
repurchase on a date that is no later than 45 days after the Holder has
delivered the notice provided in proviso (ii) above. Such right to require the
repurchase of the Securities shall not continue after a discharge of the Company
from its obligations with respect to the Securities in accordance with Article
Three unless a Change in Control shall have occurred prior to such discharge. At
the option of the Company, the Repurchase Price may be paid in cash or, subject
to the fulfillment by the Company of the conditions set forth Section 12.2, by
delivery of shares of Common Stock or in a combination of cash and Common Stock
having a fair market value equal to the Repurchase Price. Whenever in this
Indenture (including Sections 2.2, 4.1(a) and 4.8) there is a reference, in any
context, to the principal of any Security as of any time, such reference shall
be deemed to include reference to the Repurchase Price that has become and
remains payable in respect of such Security to the extent that such Repurchase
Price is, was or would be so payable at such time, and express mention of the
Repurchase Price in any provision of this Indenture shall not be construed as
excluding the Repurchase Price in those provisions of this Indenture when such
express mention is not made; provided, however, that for the purposes of Article
Eleven such reference shall be deemed to include reference to the Repurchase
Price only to the extent the Repurchase Price is payable in cash.

            For purposes of this Section 12.1, the fair market value of shares
of Common Stock shall be determined by the Company and shall be equal to 95% of
the average of the high and low sales price per share of the Common Stock on the
New York Stock Exchange (or, if not listed on the New York Stock Exchange, such
other national securities exchange or otherwise in


                                      -69-


the over-the-counter market, as applicable) for each of the five consecutive
Trading Days immediately preceding and including the third Trading Day prior to
the Repurchase Date.

SECTION 12.2 CONDITIONS TO THE COMPANY'S ELECTION TO PAY THE REPURCHASE PRICE IN
             COMMON STOCK.

            The Company may elect to pay the Repurchase Price by delivery of
shares of Common Stock pursuant to Section 12.1 if and only if the following
conditions shall have been satisfied:

            (a) As to each Holder, the Repurchase Price shall be paid only in
cash in the event any shares of Common Stock to be issued to such Holder upon
repurchase of Securities hereunder (1) 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 repurchase
and if such registration is not completed or does not become effective prior to
the Repurchase Date or (2) require registration with or approval of any
governmental authority under any state law or any other federal law before such
shares may be validly issued or delivered upon repurchase and if such
registration is not completed or does not become effective or such approval is
not obtained prior to the Repurchase Date;

            (b) Payment of the Repurchase Price may not be made in Common Stock
unless such stock is, or shall have been, approved for quotation on The Nasdaq
Stock Market or listed or quoted on a national securities exchange or other
quotation system, in either case, prior to the Repurchase Date; and

            (c) All shares of Common Stock that may be issued upon repurchase of
Securities will be issued out of the Company's authorized but unissued Common
Stock will and, upon issue, be duly and validly issued and fully paid and
non-assessable and free of any preemptive rights.

            If all of the conditions set forth in this Section 12.2 are not
satisfied in accordance with the terms thereof, the Repurchase Price shall be
paid by the Company only in cash.

SECTION 12.3 NOTICES; METHOD OF EXERCISING REPURCHASE RIGHT, ETC.

            (a) Unless the Company shall have theretofore called for redemption
all of the Outstanding Securities, on or before the thirtieth day after the
occurrence of a Change in Control, the Company or, at the request and expense of
the Company on or before the thirtieth day after such occurrence, the Trustee,
shall give to all Holders of Securities, in the manner provided in Section 1.6,
notice (the "COMPANY NOTICE") of the occurrence of the Change in Control and of
the repurchase right set forth herein arising as a result thereof. The Company
shall also deliver a copy of such notice of a repurchase right to the Trustee.

            Each notice of a repurchase right shall state:

            (1) the Repurchase Date,

            (2) the date by which the repurchase right must be exercised,


                                      -70-



            (3) the Repurchase Price, and whether the Repurchase Price shall be
        paid by the Company in cash or by delivery of shares of Common Stock,

            (4) a description of the procedure that a Holder must follow to
        exercise a repurchase right, and the place or places where such
        Securities are to be surrendered for payment of the Repurchase Price and
        accrued interest and Liquidated Damages, if any,

            (5) that on the Repurchase Date, the Repurchase Price, and accrued
        interest and Liquidated Damages, if any, will become due and payable
        upon each such Security designated by the Holder to be repurchased and
        that interest thereon shall cease to accrue on and after said date,

            (6) the Conversion Rate then in effect, the date on which the right
        to convert the principal amount of the Securities to be repurchased will
        terminate and the place or places where such Securities may be
        surrendered for conversion,

            (7) the place or places that the Notice of Election of Holder to
        Require Repurchase attached hereto as Exhibit B, shall be delivered, and
        the form of such notice, and

            (8) the CUSIP number or numbers of such Securities.

            No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Securities.

            If any of the foregoing provisions or other provisions of this
Article Twelve are inconsistent with applicable law, such law shall govern.

            (b) To exercise a repurchase right, a Holder shall deliver to the
Trustee on or before the thirtieth day (or such greater period as may be
required by applicable law) after the date of the Company Notice (1) written
notice of the Holder's exercise of such right, which notice shall set forth the
name of the Holder, the principal amount of the Securities to be repurchased
(and, if any Security is to repurchased in part, the serial number thereof, the
portion of the principal amount thereof to be repurchased and the name of the
Person in which the portion thereof to remain Outstanding after such repurchase
is to be registered) and a statement that an election to exercise the repurchase
right is being made thereby, and, in the event that the Repurchase Price shall
be paid in shares of Common Stock, the name or names (with addresses) in which
the certificate or certificates for shares of Common Stock shall be issued, and
(2) the Securities with respect to which the repurchase right is being
exercised. Such written notice shall be irrevocable, except that the right of
the Holder to convert the Securities with respect to which the repurchase right
is being exercised shall continue until the close of business on the Business
Day immediately preceding the Repurchase Date.

            (c) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid to the Trustee
the Repurchase Price in cash or shares of Common Stock, as provided above, for
payment to the Holder on the Repurchase Date or, if shares of Common Stock are
to be paid, as promptly after the Repurchase


                                      -71-



Date as practicable, together with accrued and unpaid interest and Liquidated
Damages, if any, to the Repurchase Date payable with respect to the Securities
as to which the purchase right has been exercised; provided, however, that
installments of interest that mature on or prior to the Repurchase Date shall be
payable in cash to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Regular
Record Date.

            (d) If any Security (or portion thereof) surrendered for repurchase
shall not be so paid on the Repurchase Date, the principal amount of such
Security (or portion thereof, as the case may be) shall, until paid, bear
interest to the extent permitted by applicable law from the Repurchase Date at
the rate then in effect per annum, and each Security shall remain convertible
into Common Stock until the principal of such Security (or portion thereof, as
the case may be) shall have been paid or duly provided for.

            (e) Any Security that is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such
Security without service charge, a new Security or Securities, containing
identical terms and conditions, each in an authorized denomination in aggregate
principal amount equal to and in exchange for the unrepurchased portion of the
principal of the Security so surrendered.

            (f) Any issuance of shares of Common Stock in respect of the
Repurchase Price shall be deemed to have been effected immediately prior to the
close of business on the Repurchase Date and the Person or Persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such repurchase shall be deemed to have become on the Repurchase
Date the holder or holders of record of the shares represented thereby;
provided, however, that any surrender for repurchase 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 certificate or certificates for such shares
are to be issued as the record holder or holders thereof 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 issued upon repurchase of any Security
declared prior to the Repurchase Date.

            (g) No fractions of shares shall be issued upon repurchase of
Securities. If more than one Security shall be repurchased from the same Holder
and the Repurchase Price shall be payable in shares of Common Stock, the number
of full shares that shall be issuable upon such repurchase shall be computed on
the basis of the aggregate principal amount of the Securities so repurchased.
Instead of any fractional share of Common Stock that would otherwise be issuable
on the repurchase of any Security or Securities, the Company will deliver to the
applicable Holder its check for the current market value of such fractional
share. The current market value of a fraction of a share is determined by
multiplying the current market price of a full share by the fraction and
rounding the result to the nearest cent. For purposes of this Section 12.3, the
current market price of a share of Common Stock is the average of the high


                                      -72-



and low sales price per Share of the Common Stock on the Trading Day immediately
preceding the Repurchase Date.

            (h) Any issuance and delivery of certificates for shares of Common
Stock on repurchase of Securities shall be made without charge to the Holder of
Securities being repurchased for such certificates or for any tax or duty in
respect of the issuance or delivery of such certificates or the securities
represented thereby; provided, however, that the Company shall not be required
to pay any tax or duty that may be payable in respect of (1) income of the
Holder or (2) any transfer involved in the issuance or delivery of certificates
for shares of Common Stock in a name other than that of the Holder of the
Securities being repurchased, and no such issuance or delivery shall be made
unless and until the Person 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.

            (i) All Securities delivered for repurchase shall be delivered to
the Trustee to be canceled at the direction of the Trustee, which shall dispose
of the same as provided in Section 2.10.

                                ARTICLE THIRTEEN

         HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE

SECTION 13.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.

            The Company will furnish or cause to be furnished to the Trustee:

            (a) semi-annually, not more than 15 days after the Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders of Securities as of such Regular Record Date, and

            (b) at such other times as the Trustee may reasonably request in
writing, within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;

provided, however, that no such list need be furnished so long as the Trustee is
acting as Security Registrar.

SECTION 13.2 PRESERVATION OF INFORMATION.

            (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 13.1 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 13.1 upon receipt of a new list so furnished.

            (b) After this Indenture has been qualified under the Trust
Indenture Act, the rights of Holders to communicate with other Holders with
respect to their rights under this


                                      -73-


Indenture or under the Securities, and the corresponding rights and duties of
the Trustee, shall be as provided by the Trust Indenture Act.

            (c) Every Holder of Securities, 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 made pursuant to
the Trust Indenture Act.

SECTION 13.3 NO RECOURSE AGAINST OTHERS.

            An incorporator or any past, present or future director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Holder shall waive and release all such
liability. Such waiver and release shall be part of the consideration for the
issue of the Securities.

SECTION 13.4 REPORTS BY TRUSTEE.

            (a) After this Indenture has been qualified under the Trust
Indenture Act, the Trustee shall transmit to Holders such reports 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 therein. If required
by Section 313(a) of the Trust Indenture Act, the Trustee shall, within 60 days
after each ________ following the date of this Indenture, deliver to Holders a
brief report, dated as of such ________, that complies with the provisions of
such Section 313(a).

            (b) After this Indenture has been qualified under the Trust
Indenture Act, a copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will promptly notify the Trustee when the Securities are listed on any
stock exchange.

SECTION 13.5 REPORTS BY COMPANY.

            After this Indenture has been qualified under the Trust Indenture
Act, the Company shall file with the Trustee and the Commission, and transmit to
Holders, 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 therein; provided, however, 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
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 thereof 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 Officers' Certificates).


                                      -74-



            IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.

                                         Skechers U.S.A., Inc.


                                         By /s/ DAVID WEINBERG
                                            -------------------------
                                            Name:  David Weinberg
                                            Title: Chief Financial Officer

                                         Wells Fargo Bank, National Association,
                                         as Trustee


                                         By /s/ JEANIE MAR
                                            -------------------------
                                            Name:  Jeanie Mar
                                            Title: Vice President



                                                                       EXHIBIT A

[FORM OF FACE]

[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH RESTRICTED SECURITY OTHER
THAN ANY RESTRICTED GLOBAL SECURITY:

            THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.

            THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A
PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN
ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR
WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT THAT PRIOR TO SUCH TRANSFER PROVIDES TO THE TRUSTEE FOR THE NOTES
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF THE LETTER CAN BE
OBTAINED FROM THE TRUSTEE OF THE NOTES), (4) PURSUANT TO ANOTHER EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO SKECHERS U.S.A., INC.) OR (5) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS.

            THIS NOTE, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION
AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME
TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY
SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE
INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF
RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS NOTE AND SUCH SHARES SHALL
BE DEEMED BY THE ACCEPTANCE OF




THIS NOTE AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR
SUPPLEMENT.]

[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH RESTRICTED GLOBAL
SECURITY:

        THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON THE CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.

THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A
PERSON THAT THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS
OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR
WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT THAT PRIOR TO SUCH TRANSFER PROVIDES TO THE TRUSTEE FOR THE NOTES
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF THE LETTER CAN BE
OBTAINED FROM THE TRUSTEE FOR THE NOTES), (4) PURSUANT TO ANOTHER EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO SKECHERS U.S.A., INC.) OR (5) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS.

        THIS NOTE, ANY CLASS A COMMON SHARES ISSUABLE UPON ITS CONVERSION AND
ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO
MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY SUCH
SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE
INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF
RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS


                                      A-2



NOTE AND SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY SUCH
SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.]

[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY:

            THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY,
THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR ALL
PURPOSES.]

        [THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY
FOR WHICH THE DEPOSITORY TRUST COMPANY IS TO BE THE DEPOSITARY:

        UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER 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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), 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.]


                                      A-3


SKECHERS U.S.A., INC.

        ____% CONVERTIBLE SUBORDINATED NOTE DUE __________, 2007

        NO. ____________     U.S.$_____

CUSIP NO. ___________

        Skechers U.S.A., Inc., a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company," which term
includes any successor Person under the Indenture referred to on the reverse
hereof), for value received, hereby promises to pay to Cede & Co., or registered
assigns, the principal sum of _____________ United States Dollars (U.S.$ _____)
[IF THIS SECURITY IS A GLOBAL SECURITY, THEN INSERT -- (WHICH PRINCIPAL AMOUNT
MAY FROM TIME TO TIME BE INCREASED OR DECREASED TO SUCH OTHER PRINCIPAL AMOUNTS
(WHICH, TAKEN TOGETHER WITH THE PRINCIPAL AMOUNTS OF ALL OTHER OUTSTANDING
SECURITIES, SHALL NOT EXCEED $___,000,000 IN THE AGGREGATE AT ANY TIME, UNLESS
THE INITIAL PURCHASER EXERCISES AS OVER-ALLOTMENT RIGHTS, IN WHICH CASE THE
PRINCIPAL AMOUNT OF THE OUTSTANDING SECURITIES SHALL NOT EXCEED U.S.
$___,000,000) BY ADJUSTMENTS MADE ON THE RECORDS OF THE TRUSTEE HEREINAFTER
REFERRED TO IN ACCORDANCE WITH THE INDENTURE)] on _________, 2007, unless
redeemed or repurchased on an earlier date, and to pay interest thereon, from
_________, 2002, or from the most recent Interest Payment Date (as defined
below) to which interest has been paid or duly provided for, semiannually in
arrears on _________ and __________ in each year (each, an "Interest Payment
Date"), commencing ____________, 2002, at the rate of ____% per annum, until the
principal hereof is due, and at the rate then in effect on any overdue principal
and premium, if any, and, to the extent permitted by law, on any overdue
interest. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the __________ and _________ (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Except as
otherwise provided in the Indenture, any such interest not so punctually paid or
duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Company, notice whereof shall be given to Holders of Registered
Securities not less than ten days prior to such Special Record Date, or be paid
at any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture. Payments of principal shall be made upon the surrender of this
Security at the option of the Holder at the Corporate Trust Office or at such
other office or agency of the Company as may be designated by it for such
purpose in the Borough of Manhattan, The City of New York, 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, or at such other
offices or agencies as the Company may designate, by United States Dollar check
drawn on, or wire transfer to, a United States Dollar account (such a wire
transfer to be made only to a Holder of an aggregate principal amount of
Registered Securities in excess of U.S.$2,000,000 and only if such Holder shall
have furnished wire instructions in writing to the Trustee no later than 15 days
prior


                                      A-4



to the relevant payment date) maintained by the payee. Payment of interest on
this Security may be made by United States Dollar check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register or, upon written application by the Holder to the Security Registrar
setting forth wire instructions not later than the relevant Record Date, by wire
transfer to a United States dollar account (such a wire transfer to be made only
to a Holder of an aggregate principal amount of Registered Securities in excess
of U.S.$2,000,000 and only if such Holder shall have furnished wire instructions
in writing to the Trustee no later than 15 days prior to the relevant payment
date) maintained by the payee.

        Except as specifically provided herein and in the Indenture, the Company
shall not be required to make any payment with respect to any tax, assessment or
other governmental charge imposed by any government or any political subdivision
or taxing authority thereof or therein.

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

        Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof or an Authenticating Agent by the
manual signature of one of their respective authorized signatories, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

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


                                      A-5



                                            SKECHERS U.S.A., INC.


                                            By:______________________________
                                               Name:
                                               Title:
Attest:



- ------------------------------
Name:


Dated:  April 9, 2002

        This is one of the Securities referred to in the within-mentioned
Indenture.

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee



By:     ______________________________
        Authorized Signatory


                                      A-6



                                [FORM OF REVERSE]

        This Security is one of a duly authorized issue of securities of the
Company designated as its "____% Convertible Subordinated Notes due _______,
2007" (herein called the "Securities"), limited in aggregate principal amount to
U.S.$___,000,000 (U.S.$___,000,000 if the over-allotment is fully exercised),
issued and to be issued under an Indenture, dated as of _________, 2002 (herein
called the "Indenture"), between the Company and Wells Fargo Bank, National
Association, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, the holders of Senior Debt and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. As provided in the Indenture and subject to certain limitations set
forth therein, Registered Securities are exchangeable for a like aggregate
principal amount of Registered Securities of any authorized denominations as
requested by the Holder surrendering the same upon surrender of the Registered
Security or Registered Securities to be exchanged at the Corporate Trust Office.
The Trustee upon such surrender by the Holder will issue the new Registered
Securities in the requested denominations.

        No sinking fund is provided for the Securities.

        The Securities are subject to redemption at the option of the Company at
any time on or after ________, 2005, in whole or in part, upon not less than 30
nor more than 60 days' notice to the Holders prior to the Redemption Date at the
following Redemption Prices (expressed as percentages of the principal amount)
for the twelve-month period beginning on _________ of the following years
(__________ through __________ in the case of the first of such periods):



YEAR                                                            REDEMPTION PRICE
- ----                                                            ----------------
                                                             
2005..............................................................  _______%
2006..............................................................  _______%


and thereafter at a Redemption Price equal to 100% of the principal amount,
together, in each case, with accrued interest to, but excluding the Redemption
Date; provided, however, that interest installments on Securities whose Stated
Maturity is on or prior to such Redemption Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Dates referred to on the face hereof,
all as provided in the Indenture.

        The Securities are subject to redemption at the option of the Company at
any time before _________, 2005 ("Provisional Redemption"), in whole or in part,
upon not less than 30 nor more than 60 days' notice to the Holders prior to the
Redemption Date at a Redemption Price equal to 100% of the principal amount,
together, in each case, with accrued interest and Liquidated Damages, if any,
to, but excluding, the Redemption Date, if (a) the closing price of


                                      A-7



the Company's Common Stock has exceeded 150% of the Conversion Price then in
effect for at least 20 trading days within a period of 30 consecutive trading
days ending on the trading day immediately before the date of mailing of the
notice of the Provisional Redemption, and (b) the Shelf Registration Statement
is effective and available for use and is expected to remain effective and
available for use for the 30 days following the Redemption Date, unless
registration is no longer required. Upon any Provisional Redemption, the Company
will pay to the Holders cash or Common Stock, or in a combination of cash and
Common Stock, with respect to the Securities called for Provisional Redemption,
and previously converted after the notice of Provisional Redemption and before
to the date of the Provisional Redemption, in an amount equal to $______ per
$1,000 principal amount of the Securities, less the amount of any interest paid
on the Securities before the date of the Provisional Redemption. For purposes of
any such payment in Common Stock, the value of such Common Stock will be at 95%
of the average of the closing sales prices of the Company's Common Stock for
each of the five trading days ending with the third trading day immediately
prior to the Redemption Date.

        In the event of a redemption of the Securities, the Company will not be
required (a) to register the transfer or exchange of Registered Securities for a
period of 15 days immediately preceding the date notice is given identifying the
serial numbers of the Securities called for such redemption (it being understood
that the Company will not be required to identify the serial numbers of
Outstanding Securities if all such Securities are called for redemption) or (b)
to register the transfer or exchange of any Registered Security, or portion
thereof, called for redemption.

        Notice to the Holders will be given not less than 30 nor more than 60
days prior to the Redemption Date as provided in the Indenture.

        In any case where the due date for the payment of the principal of,
premium, if any, Liquidated Damages, if any, or interest on any Security or the
last day on which a Holder of a Security has a right to convert his Security
shall be, at any Place of Payment or Place of Conversion, as the case may be, a
day on which banking institutions at such Place of Payment or Place of
Conversion are authorized or obligated by law or executive order to close, then
payment of principal, premium, if any, Liquidated Damages, if any, or interest
or delivery for conversion of such Security need not be made on or by such date
at such place but may be made on or by the next succeeding day at such place
which is not a day on which banking institutions are authorized or obligated by
law or executive order to close, with the same force and effect as if made on
the date for such payment or the date fixed for redemption or repurchase, or by
such last day for conversion, and no interest shall accrue on the amount so
payable for the period from and after such due date.

        Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time following the
original issue date of the Securities and on or before the close of business on
_________, 2007, or in case this Security or a portion hereof is called for
redemption or the Holder hereof has exercised his right to require the Company
to repurchase this Security or such portion hereof, then in respect of this
Security until

                                      A-8


and including, but (unless the Company defaults in making the payment due upon
redemption or repurchase, as the case may be) not after, the close of business
on the Business Day immediately preceding the Redemption Date or the Repurchase
Date, as the case may be, to convert this Security or any portion of the
principal amount hereof that is an integral multiple of U.S.$1,000 (provided
that the unconverted portion of such principal amount is U.S.$1,000 or any
integral multiple of U.S.$1,000 in excess thereof) into fully paid and
nonassessable shares of Common Stock of the Company at an initial Conversion
Rate of _________ (or at the current adjusted Conversion Rate if an adjustment
has been made as provided in the Indenture) by surrender of this Security, duly
endorsed or assigned to the Company or in blank and, in case such surrender
shall be made during the period from the close of business on any Regular Record
Date next preceding any Interest Payment Date to the opening of business on such
Interest Payment Date (except if this Security has been called for redemption on
a Redemption Date or is repurchasable on a Repurchase Date, with the consequence
that the conversion right of such Security would terminate between such Regular
Record Date and the close of business on such Interest Payment Date), also
accompanied by payment in New York Clearing House or other funds acceptable to
the Company of an amount equal to the interest payable on such Interest Payment
Date on the principal amount of this Security then being converted, and also the
conversion notice hereon duly executed, to the Company at the Corporate Trust
Office, or at such other office or agency of the Company, subject to any laws or
regulations applicable thereto and subject to the right of the Company to
terminate the appointment of any Conversion Agent (as defined below) as may be
designated by it for such purpose in the Borough of Manhattan, The City of New
York, or at such other offices or agencies as the Company may designate (each a
"Conversion Agent"), provided, further, that in case surrender of this Security
for conversion shall be made during the period from the close of business on any
Regular Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date and if this Security or portion hereof
has been called for redemption on a Redemption Date or is repurchasable on a
Repurchase Date, with the consequence that the conversion right of such Security
would terminate between such Regular Record Date and the close of business on
such Interest Payment Date, then the Holder of this Security will be entitled to
receive the interest accruing hereon from the Interest Payment Date next
preceding the date of such conversion to such succeeding Interest Payment Date
and shall not be required to pay such interest upon surrender of this Security
for conversion. Subject to the provisions of the preceding sentence and, in the
case of a conversion after the close of business on the Regular Record Date next
preceding any Interest Payment Date and on or before the close of business on
such Interest Payment Date, to the right of the Holder of this Security (or any
Predecessor Security of record as of such Regular Record Date) to receive the
related installment of interest to the extent and under the circumstances
provided in the Indenture, no cash payment or adjustment is to be made on
conversion for interest accrued hereon from the Interest Payment Date next
preceding the day of conversion, or for dividends on the Common Stock issued on
conversion hereof. The Company shall thereafter deliver to the Holder the fixed
number of shares of Common Stock (together with any cash adjustment or rights or
warrants, as provided in the Indenture) into which this Security is convertible
and such delivery will be deemed to satisfy the Company's obligation to pay the
principal amount of this Security. No fractions of shares or scrip representing
fractions of shares will be issued on


                                      A-9



conversion, but instead of any fractional interest (calculated to the nearest
1/100th of a share) the Company shall pay a cash adjustment as provided in the
Indenture. The Conversion Rate is subject to adjustment as provided in the
Indenture. In addition, the Indenture provides that in case of certain
consolidations or mergers to which the Company is a party or the conveyance,
transfer, sale or lease of all or substantially all of the property and assets
of the Company, the Indenture shall be amended, without the consent of any
Holders of Securities, so that this Security, if then Outstanding, will be
convertible thereafter, during the period this Security shall be convertible as
specified above, only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance, transfer, sale
or lease by a holder of the number of shares of Common Stock of the Company into
which this Security could have been converted immediately prior to such
consolidation, merger, conveyance, transfer, sale or lease (assuming such holder
of Common Stock is not a Constituent Person, failed to exercise any rights of
election and received per share the kind and amount received per share by a
plurality of Non-electing Shares). No adjustment in the Conversion Rate will be
made until such adjustment would require an increase or decrease of at least one
percent of such rate, provided that any adjustment that would otherwise be made
will be carried forward and taken into account in the computation of any
subsequent adjustment.

        Subject to certain limitations in the Indenture, at any time when the
Company is not subject to Section 13 or 15(d) of the United States Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a Security or
the holder of shares of Common Stock issued upon conversion thereof, the Company
will promptly furnish or cause to be furnished Rule 144A Information (as defined
below) to such Holder of Securities or such holder of shares of Common Stock
issued upon conversion of Securities, or to a prospective purchaser of any such
security designated by any such Holder or holder, as the case may be, to the
extent required to permit compliance by such Holder or holder with Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act"), in
connection with the resale of any such security. "Rule 144A Information" shall
be such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act (or any successor provision thereto).

        The Holder of this Security [IF THIS SECURITY IS A GLOBAL SECURITY, THEN
INSERT--(INCLUDING ANY PERSON THAT HAS A BENEFICIAL INTEREST IN THIS SECURITY)]
and the Common Stock issuable upon conversion hereof is entitled to the benefits
of a Registration Rights Agreement, dated as of ________, 2002 (the
"Registration Rights Agreement"), executed by the Company. Pursuant to the
Registration Rights Agreement, the Company has agreed for the benefit of the
Holders from time to time of Registered Securities and the Common Stock issuable
upon conversion thereof, in each case, that are Registrable Securities, at the
Company's expense, (a) to file on or before 90 days after the first date of
original issuance of the Securities, a shelf registration statement (the "Shelf
Registration Statement") with the Commission with respect to resales of the
Registrable Securities, (b) thereafter to use its reasonable best efforts to
cause such Shelf Registration Statement to be declared effective by the
Commission on or before 180 days after the first date of original issuance of
the Securities, subject to the Company's right to postpone having the Shelf
Registration Statement declared effective for an additional 60 days in limited


                                      A-10



circumstances described in the Registration Rights Agreement, and (c) to use its
reasonable best efforts to maintain such Shelf Registration Statement
continuously effective under the Securities Act until the earlier of (1) the
sale under the Shelf Registration Statement of all the Registrable Securities
registered thereunder and (2) the expiration of the holding period applicable to
such Registrable Securities held by persons that are not affiliates of the
Company under Rule 144(k) under the Securities Act or any successor previously
subject to specific permitted exceptions. The Company is required to pay
Liquidated Damages to holders of Registrable Securities for failure to comply
with the foregoing registration obligations, all as more fully set forth in the
Registration Rights Agreement.

        Whenever in this Security there is a reference, in any context, to the
payment of the principal of, premium, if any, or interest on, or in respect of,
any Security such mention shall be deemed to include mention of the payment of
Liquidated Damages payable as described in the Registration Rights Agreement to
the extent that, in such context, Liquidated Damages are, were or would be
payable in respect of this Security pursuant to the Registration Rights
Agreement, and an express mention of the payment of Liquidated Damages (if
applicable) in any provisions of this Security shall not be construed as
excluding Liquidated Damages in those provisions of this Security where such
express mention is not made. If the Holder of this Security [IF THIS SECURITY IS
A GLOBAL SECURITY, THEN INSERT--(INCLUDING ANY PERSON THAT HAS A BENEFICIAL
INTEREST IN THIS SECURITY)] elects to sell this Security pursuant to the Shelf
Registration Statement then, by its acceptance hereof, such Holder of this
Security agrees to be bound by the terms of the Registration Rights Agreement
relating to the Registrable Securities which are the subject of such election.

        If a Change in Control occurs, the Holder of this Security, at the
Holder's option, shall have the right, in accordance with the provisions of the
Indenture, to require the Company to repurchase this Security (or any portion of
the principal amount hereof that is equal to U.S.$1,000 or any greater integral
multiple of U.S.$1,000) for cash at a Repurchase Price equal to 100% of the
principal amount thereof plus interest accrued to, but excluding, the Repurchase
Date. At the option of the Company, the Repurchase Price may be paid in cash or,
subject to the conditions provided in the Indenture, by delivery of shares of
Common Stock or in a combination of cash and Common Stock, having a fair market
value equal to the Repurchase Price. For purposes of this paragraph, the fair
market value of shares of Common Stock shall be determined by the Company and
shall be equal to 95% of the average of the high and low sales price per share
for the five consecutive Trading Days immediately preceding and including the
third Trading Day prior to the Repurchase Date. Whenever in this Security there
is a reference, in any context, to the principal of any Security as of any time,
such reference shall be deemed to include reference to the Repurchase Price
payable in respect of such Security to the extent that such Repurchase Price is,
was or would be so payable at such time, and express mention of the Repurchase
Price in any provision of this Security shall not be construed as excluding the
Repurchase Price so payable in those provisions of this Security when such
express mention is not made; provided, however, that, for the purposes of the
paragraph below concerning the


                                      A-11



consequences of an Event of Default, such reference shall be deemed to include
reference to the Repurchase Price only to the extent the Repurchase Price is
payable in cash.

        [THE FOLLOWING PARAGRAPH SHALL APPEAR IN EACH REGISTERED SECURITY THAT
IS NOT A GLOBAL SECURITY:

        IN THE EVENT OF REDEMPTION, REPURCHASE OR CONVERSION OF THIS SECURITY IN
PART ONLY, A NEW REGISTERED SECURITY OR REGISTERED SECURITIES FOR THE
UNREDEEMED, UNREPURCHASED OR UNCONVERTED PORTION HEREOF WILL BE ISSUED IN THE
NAME OF THE HOLDER HEREOF.]

        [THE FOLLOWING PARAGRAPH SHALL APPEAR IN EACH GLOBAL SECURITY:

        IN THE EVENT OF A DEPOSIT OR WITHDRAWAL OF AN INTEREST IN THIS SECURITY,
INCLUDING AN EXCHANGE, TRANSFER, REDEMPTION, REPURCHASE OR CONVERSION OF THIS
SECURITY IN PART ONLY, THE TRUSTEE, AS CUSTODIAN OF THE DEPOSITARY, SHALL MAKE
AN ADJUSTMENT ON ITS RECORDS TO REFLECT SUCH DEPOSIT OR WITHDRAWAL IN ACCORDANCE
WITH THE APPLICABLE PROCEDURES.]

        The indebtedness evidenced by this Security is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full in cash or Cash Equivalents of all Senior Debt of the
Company, and this Security is issued subject to such provisions of the Indenture
with respect thereto. Each Holder of this Security, by accepting the same,

        (a) agrees to and shall be bound by such provisions,

        (b) authorizes and directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination so provided
and

        (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.

        If an Event of Default shall occur and be continuing, the principal of
all the Securities, together with accrued interest to the date of declaration,
may be declared due and payable in the manner and with the effect provided in
the Indenture. Upon payment (i) of the amount of principal so declared due and
payable, together with accrued interest to the date of declaration, and (ii) of
interest on any overdue principal and, to the extent permitted by applicable
law, overdue interest, all of the Company's obligations in respect of the
payment of the principal of and interest on the Securities shall terminate.

        The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the written consent of the Holders
of a majority in principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities at the time Outstanding, on
behalf of the


                                      A-12


Holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security or
such other Security.

        As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default, the Holders of not
less than 25% in principal amount of the Outstanding Securities shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity, the Trustee
shall have failed to institute any such proceeding for 60 days after receipt of
such notice, request and offer of indemnity, and the Trustee has not received
any direction inconsistent with such written request from the Holders of a
majority of the aggregate principal amount of the Outstanding Securities during
such 60 day period. The foregoing shall not apply to any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof,
premium, if any, Liquidated Damages, if any, or interest hereon on or after the
respective due dates expressed herein or for the enforcement of the right to
convert this Security as provided in the Indenture.

        No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, premium, if any,
Liquidated Damages, if any, and interest on this Security at the times, places
and rate, and in the coin or currency, herein prescribed or to convert this
Security as provided in the Indenture.

        As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of Registered Securities is registrable on the Security
Register upon surrender of a Registered Security for registration of transfer at
the Corporate Trust Office of the Trustee or at such other office or agency of
the Company as may be designated by it for such purpose in the Borough of
Manhattan, The City of New York, or at such other offices or agencies as the
Company may designate, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder thereof or his attorney duly authorized in writing, and
thereupon one or more new Registered Securities, of authorized denominations and
for the same aggregate principal amount, will be issued to the designated
transferee or transferees by the Registrar. No service charge shall be made for
any such registration of transfer or exchange, but the Company may require
payment of a sum sufficient to recover any tax or other governmental charge
payable in connection therewith.

        Prior to due presentation of a Registered Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in


                                      A-13


whose name such Registered Security is registered as the owner thereof for all
purposes, whether or not such Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

        Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months. The Indenture and this Security shall be governed
by and construed in accordance with the laws of the State of New York, United
States of America, including, without limitation, Section 5-1401 of the New York
General Obligations Law.

        All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.


                                      A-14




                                                                       EXHIBIT B

                    ELECTION OF HOLDER TO REQUIRE REPURCHASE

        1. Pursuant to Section 12.1 of the Indenture, the undersigned hereby
elects to have this Security repurchased by the Company.

        2. The undersigned hereby directs the Trustee or the Company to pay it
or ___________________ an amount in cash equal to 100% of the principal amount
to be repurchased (as set forth below), plus interest accrued to the Repurchase
Date or, at the Company's election, Common Stock, valued as set forth in the
Indenture.

                                     DATED: ____________________________________



                                     ___________________________________________
                                     SIGNATURE

                                     SIGNATURE GUARANTEED

                                     ___________________________________________



PRINCIPAL AMOUNT TO BE REPURCHASED:


___________________________________________
(must be equal to U.S.$1,000 or any
 greater integral multiple of U.S.$1,000):

REMAINING PRINCIPAL AMOUNT FOLLOWING SUCH REPURCHASE:




NOTICE: The signature to the foregoing election must correspond to the name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.






                                                                       EXHIBIT C

                                CONVERSION NOTICE

        The undersigned Holder of this Security hereby irrevocably exercises the
option to convert this Security, or any portion of the principal amount hereof
(which is an integral multiple of U.S.$1,000) below designated, into shares of
Common Stock in accordance with the terms of the Indenture referred to in this
Security and directs that such shares, together with a check in payment for any
fractional share and any Securities representing any unconverted principal
amount hereof, be delivered to and be registered in the name of the undersigned
unless a different name has been indicated below. If shares of Common Stock or
Securities are to be registered in the name of a Person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto. Any amount required to be paid by the undersigned on account of
interest accompanies this Security.

                                              
DATED: _________________                         _____________________________________
                                                               Signature

If shares or Registered Securities are to be     If only a portion of the Securities is to be
registered in the name of a Person other than    converted, please indicate:
the Holder, please print such Person's name
and address:                                     1.    Principal amount to be converted:

_____________________________________________          U.S.$_______________________
                                                       (any integral multiple of U.S. $1,000)
_____________________________________________
                    Address                      2.    Principal amount and denomination of
                                                       Registered Securities representing
                                                       unconverted principal amount to be
_____________________________________________          issued:
Social Security or other Taxpayer
Identification Number, if any
                                                       Amount:  U.S.$__________________
_____________________________________________
            [Signature Guaranteed]

EX-4.3

                                                                     Exhibit 4.3

        THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON THE CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.

THIS NOTE AND ANY CLASS A COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A
PERSON THAT THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS
OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR
WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT THAT PRIOR TO SUCH TRANSFER PROVIDES TO THE TRUSTEE FOR THE NOTES
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF THE LETTER CAN BE
OBTAINED FROM THE TRUSTEE FOR THE NOTES), (4) PURSUANT TO ANOTHER EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO SKECHERS U.S.A., INC.) OR (5) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS.

            THIS NOTE, ANY CLASS A COMMON SHARES ISSUABLE UPON ITS CONVERSION
AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME
TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY
SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE
INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF
RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS NOTE AND SUCH SHARES SHALL
BE DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY SUCH SHARES TO HAVE AGREED TO
ANY SUCH AMENDMENT OR SUPPLEMENT.

            THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE


                                       1



NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY
THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS
SECURITY FOR ALL PURPOSES.

            UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), 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.


                                       2



SKECHERS U.S.A., INC.

            4.50% CONVERTIBLE SUBORDINATED NOTE DUE APRIL 15, 2007

            NO. 1 U.S. $75,000,000

CUSIP NO. 830566AA3

            Skechers U.S.A., Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company," which term
includes any successor Person under the Indenture referred to on the reverse
hereof), for value received, hereby promises to pay to Cede & Co., or registered
assigns, the principal sum of seventy five million United States Dollars (U.S.
$75,000,000) (which principal amount may from time to time be increased or
decreased to such other principal amounts (which, taken together with the
principal amounts of all other Outstanding Securities, shall not exceed
$110,000,000 in the aggregate at any time, unless the Initial Purchaser
exercises its over-allotment rights, in which case the principal amount of the
Outstanding Securities shall not exceed U.S. $125,000,000) by adjustments made
on the records of the Trustee hereinafter referred to in accordance with the
Indenture) on April 15, 2007, unless redeemed or repurchased on an earlier date,
and to pay interest thereon, from April 9, 2002, or from the most recent
Interest Payment Date (as defined below) to which interest has been paid or duly
provided for, semiannually in arrears on April 15 and October 15 in each year
(each, an "Interest Payment Date"), commencing October 15, 2002, at the rate of
4.50% per annum, until the principal hereof is due, and at the rate then in
effect on any overdue principal and premium, if any, and, to the extent
permitted by law, on any overdue interest. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest, which shall be the April 1 and
October 1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Except as otherwise provided in the Indenture, any
such interest not so punctually paid or duly provided for will forthwith cease
to be payable to the Holder on such Regular Record Date and may either be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Company, notice
whereof shall be given to Holders of Registered Securities not less than ten
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in the Indenture. Payments of
principal shall be made upon the surrender of this Security at the option of the
Holder at the Corporate Trust Office or at such other office or agency of the
Company as may be designated by it for such purpose in the Borough of Manhattan,
The City of New York, 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, or at such other offices or agencies as the Company may
designate, by United States Dollar check drawn on, or wire transfer to, a United
States Dollar account (such a wire transfer to be made only to a Holder of an
aggregate principal amount of Registered Securities in excess of U.S.$2,000,000
and only if such Holder shall have furnished wire instructions in writing to the
Trustee no later than 15 days prior to the relevant payment date) maintained by
the payee. Payment of interest on this Security may


                                       3



be made by United States Dollar check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register or, upon
written application by the Holder to the Security Registrar setting forth wire
instructions not later than the relevant Record Date, by wire transfer to a
United States dollar account (such a wire transfer to be made only to a Holder
of an aggregate principal amount of Registered Securities in excess of
U.S.$2,000,000 and only if such Holder shall have furnished wire instructions in
writing to the Trustee no later than 15 days prior to the relevant payment date)
maintained by the payee.

            Except as specifically provided herein and in the Indenture, the
Company shall not be required to make any payment with respect to any tax,
assessment or other governmental charge imposed by any government or any
political subdivision or taxing authority thereof or therein.

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

            Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof or an Authenticating Agent by the
manual signature of one of their respective authorized signatories, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.


                                       4


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

                                            SKECHERS U.S.A., INC.


                                            By: /s/ MICHAEL GREENBERG
                                                -----------------------------
                                               Name:  Michael Greenberg
                                               Title: President
Attest:


/s/ PHILIP PACCIONE
- ------------------------------
Name: Philip Paccione


Dated:  April 9, 2002

        This is one of the Securities referred to in the within-mentioned
Indenture.

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee



By:     /s/ JEANIE MAR
        ------------------------------
        Authorized Signatory



                                       5


                                [REVERSE OF NOTE]

            This Security is one of a duly authorized issue of securities of the
Company designated as its "4.50% Convertible Subordinated Notes due April 15,
2007" (herein called the "Securities"), limited in aggregate principal amount to
U.S. $75,000,000 (U.S. $90,000,000 if the over-allotment is fully exercised),
issued and to be issued under an Indenture, dated as of April 9, 2002 (herein
called the "Indenture"), between the Company and Wells Fargo Bank, National
Association, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, the holders of Senior Debt and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. As provided in the Indenture and subject to certain limitations set
forth therein, Registered Securities are exchangeable for a like aggregate
principal amount of Registered Securities of any authorized denominations as
requested by the Holder surrendering the same upon surrender of the Registered
Security or Registered Securities to be exchanged at the Corporate Trust Office.
The Trustee upon such surrender by the Holder will issue the new Registered
Securities in the requested denominations.

            No sinking fund is provided for the Securities.

            The Securities are subject to redemption at the option of the
Company at any time on or after April 15, 2005, in whole or in part, upon not
less than 30 nor more than 60 days' notice to the Holders prior to the
Redemption Date at the following Redemption Prices (expressed as percentages of
the principal amount) for the twelve-month period beginning on April 15 of the
following years (April 15, 2005 through April 15, 2006 in the case of the first
of such periods):



YEAR                                                            REDEMPTION PRICE
- ----                                                            ----------------
                                                             
2005..............................................................  101.80%
2006..............................................................  100.90%


and thereafter at a Redemption Price equal to 100% of the principal amount,
together, in each case, with accrued interest to, but excluding the Redemption
Date; provided, however, that interest installments on Securities whose Stated
Maturity is on or prior to such Redemption Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Dates referred to on the face hereof,
all as provided in the Indenture.

            The Securities are subject to redemption at the option of the
Company at any time before April 15, 2005 ("Provisional Redemption"), in whole
or in part, upon not less than 30 nor more than 60 days' notice to the Holders
prior to the Redemption Date at a Redemption Price equal to 100% of the
principal amount, together, in each case, with accrued interest and Liquidated
Damages, if any, to, but excluding, the Redemption Date, if (a) the closing
price of the Company's Common Stock has exceeded 150% of the Conversion Price
then in effect for at least 20 trading days within a period of 30 consecutive
trading days ending on the trading day


                                       6



immediately before the date of mailing of the notice of the Provisional
Redemption, and (b) the Shelf Registration Statement is effective and available
for use and is expected to remain effective and available for use for the 30
days following the Redemption Date, unless registration is no longer required.
Upon any Provisional Redemption, the Company will pay to the Holders cash or
Common Stock, or in a combination of cash and Common Stock, with respect to the
Securities called for Provisional Redemption, and previously converted after the
notice of Provisional Redemption and before to the date of the Provisional
Redemption, in an amount equal to $135.00 per $1,000 principal amount of the
Securities, less the amount of any interest paid on the Securities before the
date of the Provisional Redemption. For purposes of any such payment in Common
Stock, the value of such Common Stock will be at 95% of the average of the
closing sales prices of the Company's Common Stock for each of the five trading
days ending with the third trading day immediately prior to the Redemption Date.

            In the event of a redemption of the Securities, the Company will not
be required (a) to register the transfer or exchange of Registered Securities
for a period of 15 days immediately preceding the date notice is given
identifying the serial numbers of the Securities called for such redemption (it
being understood that the Company will not be required to identify the serial
numbers of Outstanding Securities if all such Securities are called for
redemption) or (b) to register the transfer or exchange of any Registered
Security, or portion thereof, called for redemption.

            Notice to the Holders will be given not less than 30 nor more than
60 days prior to the Redemption Date as provided in the Indenture.

            In any case where the due date for the payment of the principal of,
premium, if any, Liquidated Damages, if any, or interest on any Security or the
last day on which a Holder of a Security has a right to convert his Security
shall be, at any Place of Payment or Place of Conversion, as the case may be, a
day on which banking institutions at such Place of Payment or Place of
Conversion are authorized or obligated by law or executive order to close, then
payment of principal, premium, if any, Liquidated Damages, if any, or interest
or delivery for conversion of such Security need not be made on or by such date
at such place but may be made on or by the next succeeding day at such place
which is not a day on which banking institutions are authorized or obligated by
law or executive order to close, with the same force and effect as if made on
the date for such payment or the date fixed for redemption or repurchase, or by
such last day for conversion, and no interest shall accrue on the amount so
payable for the period from and after such due date.

            Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Security is entitled, at his option, at any time following
the original issue date of the Securities and on or before the close of business
on April 15, 2007, or in case this Security or a portion hereof is called for
redemption or the Holder hereof has exercised his right to require the Company
to repurchase this Security or such portion hereof, then in respect of this
Security until and including, but (unless the Company defaults in making the
payment due upon redemption or repurchase, as the case may be) not after, the
close of business on the Business Day immediately preceding the Redemption Date
or the Repurchase Date, as the case may be, to convert this Security or any
portion of the principal amount hereof that is an integral multiple of
U.S.$1,000 (provided that the unconverted portion of such principal amount is
U.S.$1,000 or any integral


                                       7


multiple of U.S.$1,000 in excess thereof) into fully paid and nonassessable
shares of Common Stock of the Company at an initial Conversion Rate of 38.5089
(or at the current adjusted Conversion Rate if an adjustment has been made as
provided in the Indenture) by surrender of this Security, duly endorsed or
assigned to the Company or in blank and, in case such surrender shall be made
during the period from the close of business on any Regular Record Date next
preceding any Interest Payment Date to the opening of business on such Interest
Payment Date (except if this Security has been called for redemption on a
Redemption Date or is repurchasable on a Repurchase Date, with the consequence
that the conversion right of such Security would terminate between such Regular
Record Date and the close of business on such Interest Payment Date), also
accompanied by payment in New York Clearing House or other funds acceptable to
the Company of an amount equal to the interest payable on such Interest Payment
Date on the principal amount of this Security then being converted, and also the
conversion notice hereon duly executed, to the Company at the Corporate Trust
Office, or at such other office or agency of the Company, subject to any laws or
regulations applicable thereto and subject to the right of the Company to
terminate the appointment of any Conversion Agent (as defined below) as may be
designated by it for such purpose in the Borough of Manhattan, The City of New
York, or at such other offices or agencies as the Company may designate (each a
"Conversion Agent"), provided, further, that in case surrender of this Security
for conversion shall be made during the period from the close of business on any
Regular Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date and if this Security or portion hereof
has been called for redemption on a Redemption Date or is repurchasable on a
Repurchase Date, with the consequence that the conversion right of such Security
would terminate between such Regular Record Date and the close of business on
such Interest Payment Date, then the Holder of this Security will be entitled to
receive the interest accruing hereon from the Interest Payment Date next
preceding the date of such conversion to such succeeding Interest Payment Date
and shall not be required to pay such interest upon surrender of this Security
for conversion. Subject to the provisions of the preceding sentence and, in the
case of a conversion after the close of business on the Regular Record Date next
preceding any Interest Payment Date and on or before the close of business on
such Interest Payment Date, to the right of the Holder of this Security (or any
Predecessor Security of record as of such Regular Record Date) to receive the
related installment of interest to the extent and under the circumstances
provided in the Indenture, no cash payment or adjustment is to be made on
conversion for interest accrued hereon from the Interest Payment Date next
preceding the day of conversion, or for dividends on the Common Stock issued on
conversion hereof. The Company shall thereafter deliver to the Holder the fixed
number of shares of Common Stock (together with any cash adjustment or rights or
warrants, as provided in the Indenture) into which this Security is convertible
and such delivery will be deemed to satisfy the Company's obligation to pay the
principal amount of this Security. No fractions of shares or scrip representing
fractions of shares will be issued on conversion, but instead of any fractional
interest (calculated to the nearest 1/100th of a share) the Company shall pay a
cash adjustment as provided in the Indenture. The Conversion Rate is subject to
adjustment as provided in the Indenture. In addition, the Indenture provides
that in case of certain consolidations or mergers to which the Company is a
party or the conveyance, transfer, sale or lease of all or substantially all of
the property and assets of the Company, the Indenture shall be amended, without
the consent of any Holders of Securities, so that this Security, if then
Outstanding, will be convertible thereafter, during the period this Security
shall be convertible as specified above, only into the kind and amount of
securities, cash and other


                                       8



property receivable upon such consolidation, merger, conveyance, transfer, sale
or lease by a holder of the number of shares of Common Stock of the Company into
which this Security could have been converted immediately prior to such
consolidation, merger, conveyance, transfer, sale or lease (assuming such holder
of Common Stock is not a Constituent Person, failed to exercise any rights of
election and received per share the kind and amount received per share by a
plurality of Non-electing Shares). No adjustment in the Conversion Rate will be
made until such adjustment would require an increase or decrease of at least one
percent of such rate, provided that any adjustment that would otherwise be made
will be carried forward and taken into account in the computation of any
subsequent adjustment.

            Subject to certain limitations in the Indenture, at any time when
the Company is not subject to Section 13 or 15(d) of the United States
Securities Exchange Act of 1934, as amended, upon the request of a Holder of a
Security or the holder of shares of Common Stock issued upon conversion thereof,
the Company will promptly furnish or cause to be furnished Rule 144A Information
(as defined below) to such Holder of Securities or such holder of shares of
Common Stock issued upon conversion of Securities, or to a prospective purchaser
of any such security designated by any such Holder or holder, as the case may
be, to the extent required to permit compliance by such Holder or holder with
Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"),
in connection with the resale of any such security. "Rule 144A Information"
shall be such information as is specified pursuant to Rule 144A(d) (4) under the
Securities Act (or any successor provision thereto).

            The Holder of this Security (including any Person that has a
beneficial interest in this Security) and the Common Stock issuable upon
conversion hereof is entitled to the benefits of a Registration Rights
Agreement, dated as of April 9, 2002 (the "Registration Rights Agreement"),
executed by the Company. Pursuant to the Registration Rights Agreement, the
Company has agreed for the benefit of the Holders from time to time of
Registered Securities and the Common Stock issuable upon conversion thereof, in
each case, that are Registrable Securities, at the Company's expense, (a) to
file on or before 90 days after the first date of original issuance of the
Securities, a shelf registration statement (the "Shelf Registration Statement")
with the Commission with respect to resales of the Registrable Securities, (b)
thereafter to use its reasonable best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before 180 days after
the first date of original issuance of the Securities, subject to the Company's
right to postpone having the Shelf Registration Statement declared effective for
an additional 60 days in limited circumstances described in the Registration
Rights Agreement, and (c) to use its reasonable best efforts to maintain such
Shelf Registration Statement continuously effective under the Securities Act
until the earlier of (1) the sale under the Shelf Registration Statement of all
the Registrable Securities registered thereunder and (2) the expiration of the
holding period applicable to such Registrable Securities held by persons that
are not affiliates of the Company under Rule 144(k) under the Securities Act or
any successor previously subject to specific permitted exceptions. The Company
is required to pay Liquidated Damages to holders of Registrable Securities for
failure to comply with the foregoing registration obligations, all as more fully
set forth in the Registration Rights Agreement.

            Whenever in this Security there is a reference, in any context, to
the payment of the principal of, premium, if any, or interest on, or in respect
of, any Security such mention shall


                                       9



be deemed to include mention of the payment of Liquidated Damages payable as
described in the Registration Rights Agreement to the extent that, in such
context, Liquidated Damages are, were or would be payable in respect of this
Security pursuant to the Registration Rights Agreement, and an express mention
of the payment of Liquidated Damages (if applicable) in any provisions of this
Security shall not be construed as excluding Liquidated Damages in those
provisions of this Security where such express mention is not made. If the
Holder of this Security (including any Person that has a beneficial interest in
this Security) elects to sell this Security pursuant to the Shelf Registration
Statement then, by its acceptance hereof, such Holder of this Security agrees to
be bound by the terms of the Registration Rights Agreement relating to the
Registrable Securities which are the subject of such election.

            If a Change in Control occurs, the Holder of this Security, at the
Holder's option, shall have the right, in accordance with the provisions of the
Indenture, to require the Company to repurchase this Security (or any portion of
the principal amount hereof that is equal to U.S.$1,000 or any greater integral
multiple of U.S.$1,000) for cash at a Repurchase Price equal to 100% of the
principal amount thereof plus interest accrued to, but excluding, the Repurchase
Date. At the option of the Company, the Repurchase Price may be paid in cash or,
subject to the conditions provided in the Indenture, by delivery of shares of
Common Stock or in a combination of cash and Common Stock, having a fair market
value equal to the Repurchase Price. For purposes of this paragraph, the fair
market value of shares of Common Stock shall be determined by the Company and
shall be equal to 95% of the average of the high and low sales price per share
for the five consecutive Trading Days immediately preceding and including the
third Trading Day prior to the Repurchase Date. Whenever in this Security there
is a reference, in any context, to the principal of any Security as of any time,
such reference shall be deemed to include reference to the Repurchase Price
payable in respect of such Security to the extent that such Repurchase Price is,
was or would be so payable at such time, and express mention of the Repurchase
Price in any provision of this Security shall not be construed as excluding the
Repurchase Price so payable in those provisions of this Security when such
express mention is not made; provided, however, that, for the purposes of the
paragraph below concerning the consequences of an Event of Default, such
reference shall be deemed to include reference to the Repurchase Price only to
the extent the Repurchase Price is payable in cash.

            In the event of a deposit or withdrawal of an interest in this
Security, including an exchange, transfer, redemption, repurchase or conversion
of this Security in part only, the Trustee, as custodian of the Depositary,
shall make an adjustment on its records to reflect such deposit or withdrawal in
accordance with the Applicable Procedures.

            The indebtedness evidenced by this Security is, to the extent and in
the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full in cash or Cash Equivalents of all Senior
Debt of the Company, and this Security is issued subject to such provisions of
the Indenture with respect thereto. Each Holder of this Security, by accepting
the same,

            (a) agrees to and shall be bound by such provisions,

            (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and


                                       10



            (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.

            If an Event of Default shall occur and be continuing, the principal
of all the Securities, together with accrued interest to the date of
declaration, may be declared due and payable in the manner and with the effect
provided in the Indenture. Upon payment (i) of the amount of principal so
declared due and payable, together with accrued interest to the date of
declaration, and (ii) of interest on any overdue principal and, to the extent
permitted by applicable law, overdue interest, all of the Company's obligations
in respect of the payment of the principal of and interest on the Securities
shall terminate.

            The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the written consent of the Holders
of a majority in principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities at the time Outstanding, on
behalf of the Holders of all the Securities, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security or such other Security.

            As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default, the Holders of not
less than 25% in principal amount of the Outstanding Securities shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity, the Trustee
shall have failed to institute any such proceeding for 60 days after receipt of
such notice, request and offer of indemnity, and the Trustee has not received
any direction inconsistent with such written request from the Holders of a
majority of the aggregate principal amount of the Outstanding Securities during
such 60 day period. The foregoing shall not apply to any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof,
premium, if any, Liquidated Damages, if any, or interest hereon on or after the
respective due dates expressed herein or for the enforcement of the right to
convert this Security as provided in the Indenture.

            No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, premium,
if any, Liquidated Damages, if any, and interest on this Security at the times,
places and rate, and in the coin or currency, herein prescribed or to convert
this Security as provided in the Indenture.

            As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of Registered Securities is registrable on the
Security Register upon surrender of a Registered Security for registration of
transfer at the Corporate Trust Office of the Trustee or at


                                       11



such other office or agency of the Company as may be designated by it for such
purpose in the Borough of Manhattan, The City of New York, or at such other
offices or agencies as the Company may designate, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder thereof or his
attorney duly authorized in writing, and thereupon one or more new Registered
Securities, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees by the
Registrar. No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to recover
any tax or other governmental charge payable in connection therewith.

            Prior to due presentation of a Registered Security for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name such Registered Security is
registered as the owner thereof for all purposes, whether or not such Security
be overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.

            Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months. The Indenture and this Security shall be
governed by and construed in accordance with the laws of the State of New York,
United States of America, including, without limitation, Section 5-1401 of the
New York General Obligations Law.

            All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.


                                       12

EX-4.4

                                                                     EXHIBIT 4.4

                              SKECHERS U.S.A., INC.

                  4.50% CONVERTIBLE SUBORDINATED NOTES DUE 2007

                          REGISTRATION RIGHTS AGREEMENT

                                                                   April 9, 2002

CIBC World Markets Corp.
One World Financial Center
New York, New York  10281

Ladies and Gentlemen:

        Skechers U.S.A., Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to the Purchaser (as defined herein) upon the terms set forth
in the Purchase Agreement (as defined herein) its 4.50% Convertible Subordinated
Notes due 2007 (the "Securities"). As an inducement to the Purchaser to enter
into the Purchase Agreement and in satisfaction of a condition to the
obligations of the Purchaser thereunder, the Company agrees with the Purchaser
for the benefit of holders (as defined herein) from time to time of the
Registrable Securities (as defined herein) as follows:

        1. Definitions.

            (a) Capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Purchase Agreement. As used in this
Registration Rights Agreement (the "Agreement"), the following defined terms
shall have the following meanings:

        "Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

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

        "Commission" means the United States Securities and Exchange Commission,
or any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.


                                       1



        "Class A Common Stock" means the Company's Class A common stock, $0.001
par value per share.

        "DTC" means The Depository Trust Company.

        "Effectiveness Period" has the meaning assigned thereto in Section
2(b)(i) hereof.

        "Effective Time" means the date on which the Commission declares the
Shelf Registration Statement effective or on which the Shelf Registration
Statement otherwise becomes effective.

        "Electing Holder" has the meaning assigned thereto in Section 3(a)(iii)
hereof.

        "Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.

        The term "holder" means, when used with respect to any Security, the
Holder (as defined in the Indenture) and, with respect to any Class A Common
Stock, the record holder of such Class A Common Stock.

        "Indenture" means the Indenture, dated as of April 9, 2002, between the
Company and Wells Fargo Bank Minnesota, N.A., as Amended and supplemented from
time to time in accordance with its terms.

        "Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering,
if any, conducted pursuant to Section 7 hereof.

        "NASD Rules" means the rules of the National Association of Securities
Dealers, Inc., as amended from time to time.

        "Notice and Questionnaire" means a Notice of Registration Statement and
Selling Securityholder Questionnaire, substantially in the form of Exhibit A
attached hereto, relating to the Securities.

        The term "person" means an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.

        "Prospectus" means the prospectus (including, without limitation, any
preliminary prospectus, any final prospectus and any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act)
included in the Shelf Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Shelf Registration Statement and by
all other amendments and supplements to such prospectus, including all material
incorporated by


                                       2


reference in such prospectus and all documents filed after the date of such
prospectus by the Company under the Exchange Act and incorporated by reference
therein.

        "Purchase Agreement" means the Purchase Agreement, dated as of April 4,
2002, between the Company and the Purchaser.

        "Purchaser" means the CIBC World Markets Corp.

        "Registrable Securities" means all or any portion of the Securities
issued from time to time under the Indenture and the shares of Class A Common
Stock issuable upon conversion of such Securities; provided, however, that a
security ceases to be a Registrable Security when it is no longer a Restricted
Security.

        "Restricted Security" means any Security or share of Class A Common
Stock issuable upon conversion thereof except any such Security or share of
Class A Common Stock that (i) has been registered pursuant to an effective
registration statement under the Securities Act and sold in a manner
contemplated by the Shelf Registration Statement, (ii) has been transferred in
compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any
successor provision thereto) or (iii) has otherwise been transferred and a new
Security or share of Class A Common Stock not subject to transfer restrictions
under the Securities Act has been delivered by or on behalf of the Company in
accordance with Section 2.6 of the Indenture.

        "Rules and Regulations" means the published rules and regulations of the
Commission promulgated under the Securities Act or the Exchange Act, as in
effect at any relevant time.

        "Securities Act" means the United States Securities Act of 1933, as
amended.

        "Shelf Registration" means a registration effected pursuant to Section 2
hereof.

        "Shelf Registration Statement" means a "shelf" registration statement
filed under the Securities Act providing for the registration of, and the sale
on a continuous or delayed basis by the holders of, all of the Registrable
Securities pursuant to Rule 415 under the Securities Act and/or any similar rule
that may be adopted by the Commission, filed by the Company pursuant to the
provisions of Section 2 of this Agreement, including the Prospectus contained
therein, any amendments and supplements to such registration statement,
including post-effective amendments, and all exhibits and all material
incorporated by reference in such registration statement.

        "Trust Indenture Act" means the Trust Indenture Act of 1939, or any
successor thereto, and the rules, regulations and forms promulgated thereunder,
as the same shall be amended from time to time.

        The term "underwriter" means any underwriter of Registrable Securities
in connection with an offering thereof under a Shelf Registration Statement.


                                       3



            (b) Wherever there is a reference in this Agreement to a percentage
of the "principal amount" of Registrable Securities or to a percentage of
Registrable Securities, Class A Common Stock shall be treated as representing
the principal amount of Securities which was surrendered for conversion or
exchange in order to receive such number of shares of Class A Common Stock.

        2. Shelf Registration.

            (a) The Company shall, on or prior to 90 calendar days after the
Closing Date (as defined in the Purchase Agreement), file with the Commission a
Shelf Registration Statement relating to the offer and sale of the Registrable
Securities and, thereafter, shall use its reasonable best efforts to cause such
Shelf Registration Statement to be declared effective under the Securities Act
on or prior to 180 calendar days after the Closing Date; provided, however, that
no holder shall be entitled to be named as a selling securityholder in the Shelf
Registration Statement or to use the Prospectus for resales of Registrable
Securities unless such holder is an Electing Holder (as defined herein).

            (b) The Company shall use its reasonable best efforts:

               (i) to keep the Shelf Registration Statement continuously
        effective in order to permit the Prospectus to be usable by holders for
        resales of Registrable Securities until the earlier of (A) the date on
        which there are no outstanding Registrable Securities and (B) the
        expiration of the holding period applicable to such Registrable
        Securities held by persons that are not affiliates of the Company under
        Rule 144(k) of the Securities Act or any successor previously subject to
        specific permitted exceptions (such period being referred to herein as
        the "Effectiveness Period");

               (ii) after the Effective Time, promptly upon the request of any
        holder of Registrable Securities that is not then an Electing Holder, to
        take any action reasonably necessary to enable such holder to use the
        Prospectus for resales of Registrable Securities, including without
        limitation any action necessary to identify such holder as a selling
        securityholder in the Shelf Registration Statement; provided, however,
        that nothing in this subparagraph shall relieve such holder of the
        obligation to return a completed and signed Notice and Questionnaire to
        the Company in accordance with Section 3(a) (ii) hereof; and

               (iii) if at any time the Securities are convertible into
        securities other than Class A Common Stock pursuant to Article Ten of
        the Indenture, the Company shall, or shall cause any successor under the
        Indenture to, cause such securities to be included in the Shelf
        Registration Statement no later than the date on which the Securities
        may then be convertible into such securities.

        3. Registration Procedures.

            (a) In connection with the Shelf Registration Statement, the
following provisions shall apply:

               (i) Not less than 30 calendar days prior to the Effective Time,
        as


                                       4



        determined by the Company in good faith, the Company shall mail the
        Notice and Questionnaire to the holders of Registrable Securities. No
        holder shall be entitled to be named as a selling securityholder in the
        Shelf Registration Statement as of the Effective Time, and no holder
        shall be entitled to use the Prospectus for offers of Registrable
        Securities at any time unless such holder has returned a completed and
        signed Notice and Questionnaire to the Company by the deadline for
        response set forth therein; provided, however, holders of Registrable
        Securities shall have at least 20 calendar days from the date on which
        the Notice and Questionnaire is first mailed to such holders to return a
        completed and signed Notice and Questionnaire to the Company.

               (ii) After the Effective Time, the Company shall, upon the
        request of any holder of Registrable Securities that is not then an
        Electing Holder, promptly send a Notice and Questionnaire to such
        holder. The Company shall not be required to take any action to name
        such holder as a selling securityholder in the Shelf Registration
        Statement or to enable such holder to use the Prospectus for resales of
        Registrable Securities until such holder has returned a completed and
        signed Notice and Questionnaire to the Company.

               (iii) The term "Electing Holder" shall mean any holder of
        Registrable Securities that has returned a completed and signed Notice
        and Questionnaire to the Company in accordance with Section 3(a)(i) or
        3(a)(ii) hereof.

            (b) The Company shall furnish to each Electing Holder, counsel to
the Electing Holders, and the Managing Underwriters, if any, no fewer than five
Business Days prior to the initial filing of the Shelf Registration Statement, a
copy of such Shelf Registration Statement, and shall furnish to such holders,
counsel to such holders, and the Managing Underwriters, if any, no fewer than
two Business Days prior to the filing of any amendment or supplement to the
Prospectus, a copy of such amendment or supplement and shall use all reasonable
efforts to reflect in each such document when so filed with the Commission such
comments as such holders and their respective counsel reasonably may propose;
provided, however, that the Company shall make the final decision as to the form
and content of each such document. If any such Shelf Registration Statement
refers to any Electing Holder by name or otherwise as the holder of any
securities of the Company, then such Electing Holder shall have the right to
require (i) the insertion therein of language, in form and substance reasonably
satisfactory to such Electing Holder, to the effect that the holding by such
Electing Holder of such securities is not to be construed as a recommendation by
such Electing Holder of the investment quality of the Company's securities
covered thereby and that such holding does not imply that such Electing Holder
will assist in meeting any future financial requirements of the Company or (ii)
in the event that such reference to such Electing Holder by name or otherwise is
not required by the Securities Act or any similar Federal statute then in force,
the deletion of the reference to such Electing Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.

            (c) From the date hereof until the end of the Effective Period, the
Company shall (subject to paragraph (j) below) promptly take such action as may
be necessary so that (i) each of the Shelf Registration Statement and any
amendment thereto and the Prospectus and any amendment or supplement thereto
(and each report or other document incorporated by reference


                                       5


therein in each case) complies in all material respects with the Securities Act
and the Exchange Act and the respective rules and regulations thereunder, (ii)
each of the Shelf Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading and (iii) each of the Prospectus and any amendment or
supplement to the Prospectus does not at any time during the Effectiveness
Period include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.

            (d) The Company shall promptly advise each Electing Holder, and
shall confirm such advice in writing if so requested by any such holder (which
notice pursuant to clauses (ii) through (iv) hereof shall be accompanied by an
instruction to suspend the use of the Prospectus until the requisite changes
have been made):

               (i) when the Shelf Registration Statement and any amendment
        thereto has been filed with the Commission and when the Shelf
        Registration Statement or any post-effective amendment thereto has
        become effective;

               (ii) of the issuance by the Commission of any stop order
        suspending the effectiveness of the Shelf Registration Statement or the
        initiation of any proceedings for such purpose;

               (iii) of the receipt by the Company of any notification with
        respect to the suspension of the qualification of the securities
        included in the Shelf Registration Statement for sale in any
        jurisdiction or the initiation of any proceeding for such purpose; and

               (iv) if changes in the Shelf Registration Statement or the
        Prospectus are required in order that the Shelf Registration Statement
        and Prospectus do not contain an untrue statement of a material fact and
        do not omit to state a material fact required to be stated therein or
        necessary to make the statements therein (in the case of the Prospectus,
        in light of the circumstances under which they were made) not
        misleading.

            (e) The Company shall use all reasonable efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order suspending the
effectiveness of the Shelf Registration Statement at the earliest possible time.

            (f) The Company shall furnish to each requesting Electing Holder,
without charge, at least one copy of the Shelf Registration Statement and all
post-effective amendments thereto, including financial statements and schedules,
and, if such holder so requests in writing, all reports, other documents and
exhibits that are filed with or incorporated by reference in the Shelf
Registration Statement.

            (g) The Company shall, during the Effectiveness Period, deliver to
each Electing Holder, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) and any amendment or supplement thereto
as such Electing Holder may reasonably request; and the Company consents (except
during the continuance of any event described in


                                       6



Section 3(d)(iv) above) to the use of the Prospectus and any amendment or
supplement thereto by each of the Electing Holders in connection with the
offering and sale of the Registrable Securities covered by the Prospectus and
any amendment or supplement thereto during the Effectiveness Period.

            (h) Prior to any offering of Registrable Securities pursuant to the
Shelf Registration Statement, the Company shall (i) register or qualify or
cooperate with the Electing Holders and a single counsel for the Electing
Holders in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or "blue sky" laws of such
jurisdictions within the United States as any Electing Holder may reasonably
request, (ii) keep such registrations or qualifications in effect and comply
with such laws so as to permit the continuance of offers and sales in such
jurisdictions for so long as may be necessary to enable any Electing Holder or
underwriter, if any, to complete its distribution of Registrable Securities
pursuant to the Shelf Registration Statement, and (iii) take any and all other
actions necessary or advisable to enable the disposition in such jurisdictions
of such Registrable Securities; provided, however, that in no event shall the
Company be obligated to (A) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to so
qualify but for this Section 3(h) or (B) file any general consent to service of
process in any jurisdiction where it is not as of the date hereof so subject.

            (i) The Company shall cooperate with the Electing Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to the Shelf Registration Statement,
which certificates shall not bear any restrictive legends and, if so required by
any securities exchange upon which any Registrable Securities are listed, shall
be penned, lithographed or engraved, or produced by any combination of such
methods, on steel engraved borders, and which certificates shall be free of any
restrictive legends and in such permitted denominations and registered in such
names as Electing Holders may request in connection with the sale of Registrable
Securities pursuant to the Shelf Registration Statement.

            (j) Upon the occurrence of any fact or event contemplated by
paragraph 3(d)(iv) above, the Company shall (subject to the next sentence)
promptly prepare a post-effective amendment or supplement to the Shelf
Registration Statement or the Prospectus, or any document incorporated therein
by reference, or file any other required document so that, as thereafter
delivered to purchasers of the Registrable Securities included therein, the
Prospectus will not include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If the Company
notifies the Electing Holders in accordance with clauses (ii) through (iv) of
paragraph 3(d) above to suspend the use of the Prospectus until the requisite
changes to the Prospectus have been made, then each Electing Holder shall
suspend the use of the Prospectus and keep the notification provided pursuant to
paragraph 3(d) above confidential until (i) such Electing Holder has received
copies of the supplemented or amended Prospectus contemplated by the preceding
sentence or (ii) such Electing Holder is advised in writing by the Company that
the use of the Prospectus may be resumed and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus. Notwithstanding the foregoing, but subject to Section 7 hereof, the
Company shall not be required to amend or supplement the Shelf Registration
Statement, any related Prospectus or any


                                       7


document incorporated by reference for a period not to exceed 60 consecutive
days if the Company is in possession of material non-public information the
disclosure of which would have a material adverse effect on the business,
operations, prospects, condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole.

            (k) Not later than the Effective Time, the Company shall provide a
CUSIP number for the Registrable Securities that are debt securities.

            (l) The Company shall use all reasonable efforts to comply with all
applicable Rules and Regulations, and to make generally available to its
securityholders as soon as practicable, but in any event not later than eighteen
months after (i) the effective date (as defined in Rule 158(c) under the
Securities Act) of the Shelf Registration Statement, (ii) the effective date of
each post-effective amendment to the Shelf Registration Statement, and (iii) the
date of each filing by the Company with the Commission of an Annual Report on
Form 10-K that is incorporated by reference in the Shelf Registration Statement,
an earnings statement of the Company and its subsidiaries complying with Section
11(a) of the Securities Act and the Rules and Regulations of the Commission
thereunder (including, at the option of the Company, Rule 158).

            (m) Not later than the Effective Time, the Company shall cause the
Indenture to be qualified under the Trust Indenture Act; in connection with such
qualification, the Company shall cooperate with the Trustee under the Indenture
and the Holders (as defined in the Indenture) to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in accordance
with the terms of the Trust Indenture Act; and the Company shall execute, and
shall use all reasonable efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be so
qualified in a timely manner. In the event that any such amendment or
modification referred to in this Section 3(m) involves the appointment of a new
trustee under the Indenture, the Company shall appoint a new trustee thereunder
pursuant to the applicable provisions of the Indenture.

            (n) In the event of an underwritten offering conducted pursuant to
Section 7 hereof, the Company shall (subject to paragraph 3(j) above), if
requested, promptly include or incorporate in a Prospectus supplement or
post-effective amendment to the Shelf Registration Statement such information as
the Managing Underwriters reasonably agree should be included therein and to
which the Company does not reasonably object and shall (subject to paragraph
3(j) above) make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is notified of the
matters to be included or incorporated in such Prospectus supplement or
post-effective amendment.

            (o) The Company shall enter into such customary agreements
(including an underwriting agreement in customary form in the event of an
underwritten offering conducted pursuant to Section 7 hereof) and take all other
appropriate action in order to expedite and facilitate the registration and
disposition of the Registrable Securities, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures substantially identical to those set
forth in Section 5 hereof with respect to all parties to be indemnified pursuant
to Section 5 hereof; provided,


                                       8


however, the Company shall not be required to facilitate an underwritten
offering pursuant to the Shelf Registration Statement by any holders unless the
offering relates to at least $15,000,000 principal amount of Securities or the
equivalent number of shares of Class A Common Stock in which such Securities are
convertible.

            (p) The Company shall:

               (i) (A) make reasonably available for inspection by requesting
        Electing Holders, any underwriter participating in any disposition
        pursuant to the Shelf Registration Statement, and any attorney selected
        in accordance with Section 4(b) hereof, one accountant and any other
        agent retained by such holders or any such underwriter all relevant
        financial and other records, pertinent corporate documents and
        properties of the Company and its subsidiaries and (B) cause the
        Company's officers, directors and employees to supply all information
        reasonably requested by such holders or any such underwriter, attorney,
        accountant or agent in connection with the Shelf Registration Statement,
        in each case, as is customary for similar due diligence examinations;
        provided, however, that all records, information and documents that are
        designated in writing by the Company, in good faith, as confidential
        shall be kept confidential by such holders and any such underwriter,
        attorney, accountant or agent, unless such disclosure is made in
        connection with a court proceeding or required by law, or such records,
        information or documents become available to the public generally or
        through a third party without an accompanying obligation of
        confidentiality; and provided further that, if the foregoing inspection
        and information gathering would otherwise disrupt the Company's conduct
        of its business, such inspection and information gathering shall, to the
        greatest extent possible, be coordinated on behalf of the requesting
        Electing Holders and the other parties entitled thereto by one counsel
        designated by and on behalf of Electing Holders and other parties;

               (ii) in connection with any underwritten offering conducted
        pursuant to Section 7 hereof, make such representations and warranties
        to the Electing Holders participating in such underwritten offering and
        to the Managing Underwriters, in form, substance and scope as are
        customarily made by the Company to underwriters in primary underwritten
        offerings of equity and convertible debt securities;

               (iii) in connection with any underwritten offering conducted
        pursuant to Section 7 hereof, obtain opinions of counsel to the Company
        (which counsel and opinions (in form, scope and substance) shall be
        reasonably satisfactory to the Managing Underwriters) addressed to each
        requesting Electing Holder, covering such matters as are customarily
        covered in opinions requested in primary underwritten offerings of
        equity and convertible debt securities and such other matters as may be
        reasonably requested by such Electing Holders and underwriters (it being
        agreed that the matters to be covered by such opinions shall include,
        without limitation, as of the date of the opinion and as of the
        Effective Time or the date of the most recent post-effective amendment
        thereto, as the case may be, the absence from the Shelf Registration
        Statement and the Prospectus, including the documents incorporated by
        reference therein, of an untrue statement of a material fact or the
        omission of a material fact required to be stated therein or necessary
        to make the statements therein (in the case of the Prospectus, in light
        of the circumstances


                                       9


        under which they were made) not misleading);

               (iv) in connection with any underwritten offering conducted
        pursuant to Section 7 hereof, obtain "cold comfort" letters and updates
        thereof from the independent public accountants of the Company (and, if
        necessary, from the independent public accountants of any subsidiary of
        the Company or of any business acquired by the Company for which
        financial statements and financial data are, or are required to be,
        included in the Shelf Registration Statement), addressed to each
        requesting Electing Holder (if such Electing Holder has provided such
        letter, representations or documentation, if any, required for such cold
        comfort letter to be so addressed) and the underwriters, in customary
        form and covering matters of the type customarily covered in "cold
        comfort" letters in connection with primary underwritten offerings;

               (v) in connection with any underwritten offering conducted
        pursuant to Section 7 hereof, deliver such documents and certificates as
        may be reasonably requested by any Electing Holders and the Managing
        Underwriters, if any, including without limitation certificates to
        evidence compliance with Section 3(j) hereof and with any conditions
        contained in the underwriting agreement or other agreements entered into
        by the Company.

            (q) The Company will use all reasonable efforts to cause the Class A
Common Stock issuable upon conversion of the Securities to be listed for
quotation on the New York Stock Exchange or other stock exchange or trading
system, if any, on which the Class A Common Stock primarily trades on or prior
to the Effective Time.

            (r) The Company shall use all reasonable efforts to take all other
steps necessary to effect the registration, offering and sale of the Registrable
Securities covered by the Shelf Registration Statement contemplated hereby.

        4. Registration Expenses.

            (a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by it whether or
not any Shelf Registration Statement is filed or becomes effective and whether
or not any securities are issued or sold pursuant to any Shelf Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including
without limitation fees and expenses (A) with respect to filings required to be
made with the National Association of Securities Dealers, Inc. and (B) in
compliance with securities or Blue Sky laws (including without limitation and in
addition to that provided for in (b) below, reasonable fees and disbursements of
counsel for the underwriters or counsel for the holders of Registrable
Securities in connection with Blue Sky qualifications of the Registrable
Securities )), (ii) printing expenses (including without limitation expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with DTC and of printing Prospectuses if the printing of Prospectuses is
requested by the Managing Underwriters, if any), (iii) messenger, telephone and
delivery expenses, (iv) in the event of an underwritten offering of Registrable
Securities conducted pursuant to Section 7 hereof, or if in any other event the
Company requires that inspection and information gathering be coordinated by
counsel for the Electing Holders as


                                       10



provided in Section 3(p)(i) hereof, the Company shall pay the fees and
disbursements of counsel for the Company and one counsel for the holders of
Registrable Securities, in accordance with the provisions of Section 4(b)
hereof, (v) fees and disbursements of all independent certified public
accountants referred to in Section 3(p)(iv) hereof (including without limitation
the expenses of any special audit and "cold comfort" letters required by or
incident to such performance), (vi) Securities Act liability insurance, if the
Company desires such insurance, and (vii) fees and expenses of all other persons
retained by the Company. In addition, the Company shall pay its internal
expenses (including without limitation all salaries and expenses of its officers
and employees performing legal or accounting duties), the expense of any annual
audit, and the fees and expenses incurred in connection with the listing of the
securities on the New York Stock Exchange. Notwithstanding the foregoing or
anything in this Agreement to the contrary, each holder of the Registrable
Securities being registered shall pay all commissions, placement agent fees and
underwriting discounts and commissions with respect to any Registrable
Securities sold by it and the fees and disbursements of any counsel or other
advisors or experts retained by such holders (severally or jointly), other than
counsel and local counsel referred to in clause (iv) above.

            (b) In connection with any registration hereunder, the Company shall
reimburse the holders of the Registrable Securities being registered in such
registration for the reasonable fees and disbursements of not more than one
counsel chosen by the holders of a majority in amount of the Registrable
Securities (determined on a fully converted basis) for whose benefit the
applicable Shelf Registration Statement is being prepared.

        5. Indemnification and Contribution.

            (a) Indemnification by the Company. Upon the registration of the
Registrable Securities pursuant to Section 2 hereof, the Company shall indemnify
and hold harmless each Electing Holder and each underwriter, selling agent or
other securities professional, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors and
each person who controls such Electing Holder, underwriter, selling agent or
other securities professional within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act (each such person being sometimes referred
to as an "Indemnified Person") against any losses, claims, damages or
liabilities, joint or several, to which such Indemnified Person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Shelf Registration Statement or any Prospectus contained
therein or furnished by the Company to any Indemnified Person, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, and the Company hereby agrees to reimburse such
Indemnified Person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
to any such Indemnified Person in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such Shelf Registration Statement or Prospectus, or amendment or supplement
thereto, in reliance upon and in conformity with


                                       11



written information furnished to the Company by or on behalf of such Indemnified
Person expressly for use therein; provided, further, however, that the foregoing
indemnity agreement with respect to any preliminary Prospectus shall not inure
to the benefit of any Indemnified Person who failed to deliver a final
Prospectus (as then amended or supplemented, provided by the Company to the
several Indemnified Persons in the requisite quantity and on a timely basis to
permit proper delivery on or prior to the relevant transaction date) to the
person asserting any losses, claims, damages and liabilities and judgments
caused by any untrue statement or alleged untrue statement of a material fact
contained in any preliminary Prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, if such material misstatement or omission
or alleged material misstatement or omission was cured in the final Prospectus.

            (b) Indemnification by the Holders and any Agents and Underwriters.
Each Electing Holder agrees, as a consequence of the inclusion of any of such
holder's Registrable Securities in any Shelf Registration Statement, and each
underwriter, selling agent or other securities professional, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors and executive officers who sign such Shelf Registration Statement and
each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities to which the Company or such other
persons may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such Shelf Registration Statement or Prospectus,
or any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such holder, underwriter, selling agent or other securities
professional expressly for use therein and (ii) reimburse the Company and its
directors and officers who sign such Shelf Registration Statement for any legal
or other expenses reasonably incurred by the Company and such directors and
officers in connection with investigating or defending any such action or claim
as such expenses are incurred.

            (c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) of this Section 5 of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under this Section 5, notify
such indemnifying party in writing of the commencement thereof; but the omission
to so notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Section 5.
In the case that any such action is brought against any indemnified party it
shall notify the indemnifying party of the commencement thereof and such
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and,


                                       12



after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, such indemnifying party shall not be
liable to such indemnified party under this Section 5 for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, which consent will not be unreasonably withheld,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party.

            (d) Contribution. If the indemnification provided for in this
Section 5 is unavailable to or insufficient to hold harmless an indemnified
party under subsection (a) or (b) of this Section 5 in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party and the indemnified
party in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contribution pursuant to this
Section 5(d) were determined by pro rata allocation (even if the Electing
Holders or any underwriters, selling agents or other securities professionals or
all of them were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in this Section 5(d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligations of the Electing
Holders and any underwriters, selling agents or other securities professionals
in this Section 5(d) to contribute shall be several in proportion to the
percentage of principal amount of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.

            (e) Notwithstanding any other provision of this Section 5, in no
event will any (i) Electing Holder be required to undertake liability to any
person under this Section 5 for any amounts in excess of the dollar amount of
the proceeds to be received by such holder from the sale of such holder's
Registrable Securities (after deducting any fees, discounts and commissions


                                       13



applicable thereto) pursuant to any Shelf Registration Statement and (ii)
underwriter, selling agent or other securities professional be required to
undertake liability to any person hereunder for any amounts in excess of the
discount, commission or other compensation payable to such underwriter, selling
agent or other securities professional with respect to the Registrable
Securities underwritten by it and distributed to the public.

            (f) The obligations of the Company under this Section 5 shall be in
addition to any liability that the Company may otherwise have to any Indemnified
Person and the obligations of any Indemnified Person under this Section 5 shall
be in addition to any liability that such Indemnified Person may otherwise have
to the Company. The remedies provided in this Section 5 are not exclusive and
shall not limit any rights or remedies that may otherwise be available to an
indemnified party at law or in equity.

        6. Liquidated Damages. If (i) on or prior to 90 days after the Closing
Date, a Shelf Registration Statement has not been filed with the Commission,
(ii) on or prior to 180 days after the Closing Date, such Shelf Registration
Statement is not declared effective or, (iii) the Shelf Registration Statement
ceases to be effective or the Company otherwise prevents or restricts the
Electing Holders from making sales of Registrable Securities under such Shelf
Registration Statement during the Effectiveness Period for a period in excess of
60 consecutive days (each, a "Registration Default"), liquidated damages
("Liquidated Damages") will accrue on the Registrable Securities at a rate equal
to 0.5% of the principal amount of Registrable Securities per annum from and
including the day following such Registration Default to, but excluding, the day
on which such Registration Default is cured. The Company shall notify the
Trustee as promptly as possible, but in no event more than three Business Days
after each and every date on which a Registration Default occurs. Liquidated
Damages will be paid semi-annually in arrears, with the first semi-annual
payment due on the first Interest Payment Date in respect of the Registrable
Securities following the date on which such Liquidated Damages begin to accrue.

        7. Underwritten Offering. Any holder of Registrable Securities who
desires to do so may sell Registrable Securities (in whole or in part) in an
underwritten offering; provided, however, the Company shall not be required to
facilitate an underwritten offering pursuant to the Shelf Registration Statement
by any holders unless the offering relates to at least $20,000,000 principal
amount of Securities or the equivalent number of shares of Class A Common Stock
in which such Securities are convertible. In any such underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by, and the underwriting arrangements
with respect thereto (including the size of the offering) will be approved by,
the holders of a majority of the Registrable Securities to be included in such
offering; provided, however, that such investment bankers and managers and
underwriting arrangements must be reasonably satisfactory to the Company. No
holder may participate in any underwritten offering contemplated hereby unless
(a) such holder agrees to sell such holder's Registrable Securities to be
included in the underwritten offering in accordance with any approved
underwriting arrangements, (b) such holder completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents required under the terms of such approved
underwriting arrangements and (c) if such holder is not then an Electing Holder,
such holder returns a completed and signed Notice and Questionnaire to the
Company in accordance with Section 3(a)(ii) hereof within a reasonable amount of
time before such underwritten offering. The holders participating in any
underwritten


                                       14



offering shall be responsible for any underwriting discounts and commissions and
fees and, subject to Section 4 hereof, expenses of their own counsel. The
Company shall pay all expenses customarily borne by issuers, including but not
limited to filing fees, the fees and disbursements of its counsel and
independent public accountants and any printing expenses incurred in connection
with such underwritten offering. Notwithstanding the foregoing or the provisions
of Section 3(n) hereof, upon receipt of a request from the Managing Underwriter
or a representative of holders of a majority of the Registrable Securities to be
included in an underwritten offering to prepare and file an amendment or
supplement to the Shelf Registration Statement and Prospectus in connection with
an underwritten offering, the Company may delay the filing of any such amendment
or supplement for up to 60 days if the Company is in possession of material
non-public information the disclosure of which would have a material adverse
effect on the business, operations, prospects, condition (financial or
otherwise) of the Company and its subsidiaries, taken as a whole.

        8. Rules 144 and 144A.

            The Company agrees, for so long as any Registrable Securities remain
outstanding and during any period in which the Company (a) is not subject to
Section 13 of 15(d) of the Exchange Act, to make available, upon request of any
holder of Registrable Securities, to such holder or beneficial owner of
Registrable Securities in connection with any sale thereof and any prospective
purchaser of such Registrable Securities designated by such holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Securities Act in
order to permit resales of such Registrable Securities pursuant to Rule 144A of
the Securities Act, and (b) is subject to Section 13 of 15 (d) of the Exchange
Act, to make all filings required thereby in a timely manner in order to permit
resales of such Registrable Securities pursuant to Rule 144 of the Securities
Act.

        9. Miscellaneous.

            (a) Remedies. The Company acknowledges and agrees that any failure
by the Company to comply with its obligations under this Agreement may result in
material irreparable injury to the Purchaser or the holders of Registrable
Securities for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Purchaser or any holder of Registrable Securities may
obtain such relief as may be required to specifically enforce the Company's
obligations hereunder. The Company further agrees to waive the defense in any
action for specific performance where a remedy at law would be adequate.

            (b) Other Registration Rights. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The Company shall not permit any securities other than the Registrable
Securities to be included in any Shelf Registration Statement. Except as set
forth in the Registration Rights Agreement, dated June 9, 1999 entered into by
and among the Company, the Greenberg Family Trust and Michael Greenberg (where
such conflict has already been waived), the rights granted to the holders of
Registrable Securities hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's


                                       15



securities under any agreement in effect on the date hereof.

            (c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 2
hereof and this Section 9(c)(i), the Company has obtained the written consent of
holders of all outstanding Registrable Securities and (ii) in the case of all
other provisions hereof, the Company has obtained the written consent of holders
of a majority of the outstanding principal amount of Registrable Securities
(determined on a fully converted basis) (excluding Registrable Securities held
by the Company or its Affiliates). Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of holders whose Registrable Securities are being sold pursuant to a
Shelf Registration Statement and that does not affect directly or indirectly the
rights of other holders of Registrable Securities may be given by the holders of
a majority of the outstanding principal amount of Registrable Securities
(determined on a fully converted basis) being sold by such holders pursuant to
such Shelf Registration Statement.

            (d) Third Party Beneficiary. The holders of Registrable Securities
shall be third party beneficiaries to the agreements made hereunder between the
Company, on the one hand, and the Purchaser, on the other hand, and shall have
the right to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect its rights or the rights of
holders of Registrable Securities hereunder.

            (e) Notices. All notices and other communications provided for or
permitted hereunder shall be given as provided in the Indenture.

            (f) Parties in Interest. The parties to this Agreement intend that
all holders of Registrable Securities shall be entitled to receive the benefits
of this Agreement and that any Electing Holder shall be bound by the terms and
provisions of this Agreement by reason of such election with respect to the
Registrable Securities that are included in a Shelf Registration Statement. All
the terms and provisions of this Agreement shall be binding upon, shall inure to
the benefit of and shall be enforceable by the respective successors and assigns
of the parties hereto and any holder from time to time of the Registrable
Securities to the aforesaid extent. In the event that any transferee of any
holder of Registrable Securities shall acquire Registrable Securities, in any
manner, whether by gift, bequest, purchase, operation of law or otherwise, such
transferee shall, without any further writing or action of any kind, be entitled
to receive the benefits of and, if an Electing Holder, be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement to the aforesaid extent.

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

            (h) Headings. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning, construction
or interpretation hereof.


                                       16



            (i) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, including without
limitation New York General Obligations Law Section 5-1401.

            (j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties hereto shall be enforceable to the fullest extent permitted by law.

            (k) Survival. The respective indemnities, agreements,
representations, warranties and other provisions set forth in this Agreement or
made pursuant hereto shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Electing Holder, any director, officer or partner of such holder, any
agent or underwriter, any director, officer or partner of such agent or
underwriter, or any controlling person of any of the foregoing, and shall
survive the transfer and registration of the Registrable Securities of such
holder.

            (l) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein, with respect to
the registration rights granted with respect to the Registrable Securities. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.


                                       17



        Please confirm by signing in the space provided below that the foregoing
correctly sets forth the agreement between the Company and you.

                                            Very truly yours,

                                            SKECHERS U.S.A., INC.



                                            By: /s/ DAVID WEINBERG
                                                -----------------------------
                                                Name:  David Weinberg
                                                Title: Chief Financial Officer

CIBC WORLD MARKETS CORP.



By: /s/ STEVEN H. REINER
    -----------------------------
    Name:  Steven H. Reiner
    Title: Executive Director


                                       18




                                    EXHIBIT A

                              SKECHERS U.S.A., INC.


                        Notice of Registration Statement
                                       and
                      Selling Securityholder Questionnaire


                                     (Date)


        Reference is hereby made to the Registration Rights Agreement (the
"Registration Rights Agreement") between Skechers U.S.A., Inc. (the "Company")
and the Purchaser named therein. Pursuant to the Registration Rights Agreement,
the Company has filed with the United States Securities and Exchange Commission
(the "Commission") a registration statement on Form S-_ (the "Shelf Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Company's 4.50% Convertible
Subordinated Notes due 2007 (the "Securities") and the shares of Class A common
stock, $0.001 par value per share (the "Class A Common Stock"), issuable upon
conversion thereof. A copy of the Registration Rights Agreement is attached
hereto. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Registration Rights Agreement.

        Each beneficial owner of Registrable Securities (as defined below) is
entitled to have the Registrable Securities beneficially owned by it included in
the Shelf Registration Statement. In order to have Registrable Securities
included in the Shelf Registration Statement, this Notice of Registration
Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire")
must be completed, executed and delivered to the Company's counsel at the
address set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE].
Beneficial owners of Registrable Securities who do not complete, execute and
return this Notice and Questionnaire by such date (i) will not be named as
selling securityholders in the Shelf Registration Statement and (ii) may not use
the Prospectus forming a part thereof for resales of Registrable Securities.

        Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Shelf Registration
Statement and related Prospectus.

        The term "Registrable Securities" is defined in the Registration Rights
Agreement to mean all or any portion of the Securities issued from time to time
under the Indenture and the shares of Class A Common Stock issuable upon
conversion of such Securities; provided, however, that a security ceases to be a
Registrable Security when it is no longer a Restricted Security.

        The term "Restricted Security" is defined in the Registration Rights
Agreement to mean any Security or share of Class A Common Stock issuable upon
conversion thereof except any such Security or share of Class A Common Stock
that (i) has been registered pursuant to an


                                      A-1



effective registration statement under the Securities Act and sold in a manner
contemplated by the Shelf Registration Statement, (ii) has been transferred in
compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any
successor provision thereto), or (iii) has otherwise been transferred and a new
Security or share of Class A Common Stock not subject to transfer restrictions
under the Securities Act has been delivered by or on behalf of the Company in
accordance with Section 2.6 of the Indenture.


                                    ELECTION

        The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities beneficially owned by it and the Registrable Securities
listed below in Item (3). The undersigned, by signing and returning this Notice
and Questionnaire, agrees to be bound with respect to such Registrable
Securities by the terms and conditions of this Notice and Questionnaire and the
Registration Rights Agreement, including without limitation Section 5 of the
Registration Rights Agreement as if the undersigned Selling Securityholder were
an original party thereto.

        The Selling Securityholder hereby provides the following information to
the Company and represents and warrants that such information is accurate and
complete:

                                  QUESTIONNAIRE

        Certain capitalized terms used in this Questionnaire are defined in
Appendix l attached hereto. Capitalized terms used in this Questionnaire but not
defined in Appendix 1 have the meanings given to them in the accompanying
letter.

(1)     (a)    Full legal name of Selling Securityholder:

               ---------------------------------------------------------------

        (i)    Is such Selling Securityholder a:

               [ ] Corporation [ ] General Partnership
               [ ] Individual  [ ] Limited Partnership
               [ ] Other (please specify:____________________)

               (ii)   In what state is such Selling Securityholder organized or
                      domiciled?

                      -----------------------------

        (b)    Full legal name of Registered Holder (if not the same as in (a)
               above) of Registrable Securities listed in Item (4) below:

               ---------------------------------------------------------------


                                      A-2



        (c)    Full legal name of DTC participant (if applicable and if not the
               same as (b) above) through which Registrable Securities listed in
               Item (4) below are held:

               ----------------------------------------------------------------

(2)     Address for Notices to Selling Securityholder:
                             ____________________________
                             ____________________________
        Telephone:           ____________________________
        Fax:                 ____________________________
        Contact Person:      ____________________________

(3)     Beneficial Ownership of Securities by Another Entity or Individual:

        (a)    Is another entity or individual the Beneficial Owner of any
               Securities or shares of Class A Common Stock issued upon
               conversion of any Securities?

               [ ] No (skip questions (b)-(e) below)

               [ ] Yes (answer questions (b)-(e) below)

        (b)    What is the full legal name of such Beneficial Owner?

               -----------------------------------------------------

        (c)    Is such Beneficial Owner a:

               [ ] Corporation      [ ] General Partnership

               [ ] Individual       [ ] Limited Partnership

               [ ] Other (please specify:____________________)

        (d)    In what state is such Beneficial Owner organized or domiciled?

               ---------------------------------------------------

        (e)    Please provide the name, address and telephone number of a
               contact person for such Beneficial Owner.

               ---------------------------------------------------

               ---------------------------------------------------

               ---------------------------------------------------


                                      A-3



        ------------------------------------------------------------------------

(4)     Beneficial Ownership of Securities:

        Except as set forth below in this Item (4), the undersigned is not a
        Beneficial Owner of any Securities or shares of Class A Common Stock
        issued upon conversion of any Securities.

        (a)    Principal amount of Registrable Securities (as defined in the
               Registration
               Rights Agreement) Beneficially Owned: ___________________________
               CUSIP No(s). of such Registrable Securities: ____________________

               Number of shares of Class A Common Stock (if any) issued upon
               conversion of such Registrable Securities:
               _______________________________________

        (b)    Principal amount of Securities other than Registrable Securities
               Beneficially Owned:

               -----------------------------------------------------------------
               CUSIP No(s). of such other Securities:

               ____________________________________ Number of shares of Class A
               Common Stock (if any) issued upon conversion of such other
               Securities:

               -----------------------------------------------------------

        (c)    Principal amount of Registrable Securities that the undersigned
               wishes to be included in the Shelf Registration Statement:
               ________________________________

               CUSIP No(s). of such Registrable Securities to be included in the
               Shelf Registration Statement:

               -----------------------------------------------------------

               Number of shares of Class A Common Stock (if any) issued upon
               conversion of Registrable Securities that are to be included in
               the Shelf Registration Statement:__________

(5)     Beneficial Ownership of Other Securities of the Company:

        Except as set forth below in this Item (5), the undersigned Selling
        Securityholder is not a Beneficial Owner of any shares of Class A Common
        Stock or any other securities of the Company, other than the Securities
        and shares of Class A Common Stock listed above in Item (4).

        State any exceptions here:


                                      A-4



(6)     Relationships with the Company:

        Except as set forth below, neither the Selling Securityholder nor any of
        its Affiliates, officers, directors or principal equity holders (5% or
        more) has held any position or office or has had any other Material
        Relationship with the Company (or its predecessors or Affiliates) during
        the past three years.

        State any exceptions here:

(7)     Plan of Distribution:

        Except as set forth below, the undersigned Selling Securityholder
        intends to distribute the Registrable Securities listed above in Item
        (4) only as follows (if at all): Such Registrable Securities may be sold
        from time to time directly by the undersigned Selling Securityholder or,
        alternatively, through underwriters, broker-dealers or agents who may
        receive discounts, concessions or commissions from the Selling
        Stockholder or the purchaser. Such Registrable Securities may be sold in
        one or more transactions at fixed prices, at prevailing market prices at
        the time of sale, at prices relating to the prevailing market prices at
        the time of sale, at varying prices determined at the time of sale, or
        at negotiated prices. Such sales may be effected in transactions (which
        may involve crosses or block transactions) (i) on any national
        securities exchange or quotation service on which the Registered
        Securities may be listed or quoted at the time of sale, (ii) in the
        over-the-counter market, (iii) in transactions otherwise than on such
        exchanges or services or in the over-the-counter market, (iv) through
        the writing of options, whether such options are listed on an option
        exchange or otherwise, or (iv) through the settlement of short sales. In
        connection with sales of the Registrable Securities or otherwise, the
        Selling Securityholder may enter into hedging transactions with
        broker-dealers or other financial institutions, which may in turn engage
        in short sales of the Registrable Securities in the course of hedging
        the positions they assume. The Selling Securityholder may also sell
        Registrable Securities short and deliver Registrable Securities to close
        out such short positions, or loan or pledge Registrable Securities to
        broker-dealers that in turn may sell such securities.

        State any exceptions here:



(8)     Are you a Member, an affiliate of a Member, or a person associated with
        a Member, of the National Association of Securities Dealers, Inc. (the
        "NASD")?

               Yes _____ No _____


                                      A-5



        If the answer to Question 8 is "yes", state (a) the name of any such
        NASD Member, (b) the nature of your affiliation or association with such
        NASD Member, (c) information as to such NASD Member's participation in
        any capacity in the Offering or the original placement of the
        Securities, (d) the number of shares of equity securities or face value
        of debt securities of the Company owned by you, (e) the date such
        securities were acquired and (f) the price paid for such securities.

        ------------------------------------------------------------------------
        ------------------------------------------------------------------------
        --------------------------------------------.

(9)     If you answered "yes" to Question 8 above, please fill out the following
        table with respect to any purchases from the Company or any of its
        Affiliates in a private placement within twelve months prior to the date
        hereof (excluding your purchase of the Shares).



        ======================================================================
                                         Amount and Name    Price or Other
         Date of Purchase      Seller     of Securities     Consideration
        ----------------------------------------------------------------------
                                                
        ----------------------------------------------------------------------

        ----------------------------------------------------------------------

        ----------------------------------------------------------------------

        ----------------------------------------------------------------------

        ======================================================================


        Note: In no event may such method(s) of distribution take the form of an
underwritten offering of the Registrable Securities without the prior agreement
of the Company.

        By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Exchange Act and the rules and regulations thereunder,
particularly Regulation M. The Selling Securityholder also acknowledges that it
understands that the answers to this Questionnaire are furnished for use in
connection with the Registration Statement and any amendments or supplements
thereto filed with the SEC pursuant to the Securities Act of 1933, as amended.

        In the event that the Selling Securityholder transfers all or any
portion of the Registrable Securities listed in Item (3) above after the date on
which such information is provided to the Company, the Selling Securityholder
agrees to notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Registration Rights
Agreement.

        By signing below, the Selling Securityholder consents to the disclosure
of the information contained herein in its answers to Items (1) through (9)
above and the inclusion of such information in the Shelf Registration Statement
and related Prospectus. The Selling


                                      A-6



Securityholder understands that such information will be relied upon by the
Company in connection with the preparation of the Shelf Registration Statement
and related Prospectus.

        The Selling Securityholder acknowledges that material misstatements and
omissions of material facts in the Registration Statement and any amendments or
supplement thereto may give rise to civil and criminal liabilities to the
Company and to each officer and director of the Company signing the Registration
Statement and to other persons signing such document. As a result, in accordance
with the Selling Securityholder's obligation under Section 3(a) of the
Registration Rights Agreement to provide such information as may be required by
law for inclusion in the Shelf Registration Statement, the Selling
Securityholder agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Registration Rights Agreement
shall be made in writing, by hand-delivery, first-class mail, or air courier
guaranteeing overnight delivery as follows:

        (i)    to the Company:

                      Skechers U.S.A., Inc.
                      228 Manhattan Beach Blvd.
                      Manhattan Beach, California  90266
                      Attention:_________________

        (ii)   with a copy to:

                      Kirkpatrick & Lockhart LLP
                      10100 Santa Monica Blvd.
                      7th Floor
                      Los Angeles, California  90067
                      Attention:  Ted Weitzman, Esq.

        Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company's counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable
Securities Beneficially Owned by such Selling Securityholder and the Registrable
Securities listed in Item (3) above). This Agreement shall be governed in all
respects by the laws of the State of New York.

        I confirm that, to the best of my knowledge and belief, the foregoing
statements (including without limitation the answers to this Questionnaire) are
correct.

        IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.


                                      A-7




Dated: __________________

                                            ------------------------------------
                                            Selling Securityholder
                                            (Print/type full legal name of
                                            beneficial owner of Registrable
                                            Securities)


                                            By: ________________________________
                                                Name:
                                                Title:

PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:



                      Kirkpatrick & Lockhart LLP
                      10100 Santa Monica Blvd.
                      7th Floor
                      Los Angeles, California  90067
                      Attention:  Ted Weitzman, Esq.


                                      A-8



                                                                      APPENDIX 1

                                   DEFINITIONS


        For the purpose of this Questionnaire, the following definitions apply:

1. Affiliate. As used in Questions 1 - 7 and Question 9, a person is an
"Affiliate" of a person if such person controls, is controlled by, or is under
common control with, another person. Please assume that an "Affiliate" of the
Company includes without limitation, any 5% stockholder of the Company
(including any person who owns, controls, or holds or holds an option to
acquire, and has the power to vote, 5% or more of the Company's outstanding
voting securities). "Control" is the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of an
entity, whether through the ownership of voting securities, by contract or
otherwise.

        As used in Question 8 of this Questionnaire, an "affiliate" of an NASD
member has the following meaning:

        (1)    a company which controls, is controlled by or is under common
               control with a member;

        (2)    the term affiliate is presumed to include, but is not limited to,
               the following:

               (a)    a company will be presumed to control a member if the
                      company beneficially owns 10% or more of the outstanding
                      voting securities of a member which is a corporation, or
                      beneficially owns a partnership interest in 10% or more of
                      the distributable profits or losses of a member which is a
                      partnership;

               (b)    a member will be presumed to control a company if the
                      member and persons associated with the member beneficially
                      own (i) 10% or more of the outstanding subordinated debt
                      of a company, (ii) 10% or more of the outstanding voting
                      securities of a company which is a corporation or (iii) a
                      partnership interest in 10% or more of the distributable
                      profits or losses of a company which is a partnership;

               (c)    a company will be presumed to be under common control with
                      a member if:

                      (i)    the same natural person or company controls both
                             the member and company by beneficially owning 10%
                             or more of the outstanding voting securities of a
                             member or company which is a corporation, or by
                             beneficially owning a partnership interest in 10%
                             or more of the distributable profits or losses of a
                             member or company which is a partnership; or


                                      A-9



                      (ii)   a person having the power to direct or cause the
                             direction of the management or policies of the
                             member or the company also has the power to direct
                             or cause the direction of the management or
                             policies of the other entity in question.

2. Beneficial Owner. A "Beneficial Owner" of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares voting power and/or investment power
with respect to such security. Voting power includes "the power to vote, or to
direct the voting, of such security" and investment power includes "the power to
dispose, or to direct the disposition, of such security."

        A person is also a Beneficial Owner of a security if he has the right to
acquire beneficial ownership of such security, at any time within sixty days,
including but not limited to, any right to acquire through: (a) the exercise of
an option, warrant or right, (b) the conversion of a convertible security, (c)
the power to revoke a trust, discretionary account or similar arrangement, or
(d) the automatic termination of a trust, discretionary account or similar
arrangement; provided, however, that if the acquisition of an option, warrant,
right, convertible security or power described in (a), (b) or (c) is for the
purpose of maintaining or obtaining control over the issuer of the security, the
holder of the option, warrant, right, convertible security or power shall,
immediately upon such acquisition and regardless of when it is exercisable, be
deemed a beneficial owner of the underlying securities.

        The possession of the legal power to vote and/or direct the disposition
of securities, absent unusual circumstances, will be sufficient to confer
beneficial ownership. Such power may be held directly, or indirectly, through
one or more controlled entities.

3. Material Relationship. The term "material relationship" has not been defined
by the Securities and Exchange Commission (the "SEC"). The SEC, however, is
likely to construe as material any relationship which tends to impact arm's
length bargaining in dealings with a company, whether arising from a close
business connection, family relationship, a relationship of control or
otherwise. For example, you should conclude that you have such a relationship
with any organization of which you own, directly or indirectly, 10% more of the
outstanding voting stock, or in which you have some other substantial interest,
and with any person or organization with whom you have, or with whom any
relative (or any other person or organization as to which you have any of the
foregoing other relationships) has, a contractual relationship.

4. Member. Rule 0120 of the NASD's Rules of Fair Practice defines the term
"member" to mean any individual, partnership, corporation or other legal entity
admitted to membership in the NASD, and Article l of the NASD's By-Laws defines
the term "person associated with a member" to mean every sole proprietor,
partner, officer, director, or branch manager of any member, or any natural
person occupying a similar status or performing similar functions, or any
natural person engaged in the investment banking or securities business who is
directly or indirectly controlling or controlled by such member (for example,
any employee), whether or not such person is registered or exempt from
registration with the NASD.


                                      A-10

EX-99.1

Exhibit 99.1