First Supplemental Indenture for 7.250% Senior Subordinated Convertible Notes due 2037 among CapitalSource Inc., CapitalSource Finance LLC, and Wells Fargo Bank, N.A.

     The holders of a majority in aggregate principal amount of the Notes at the time outstanding may, on behalf of the holders of all of the Notes, waive any past default or Event of Default hereunder and its consequences except (i) a default in the payment of Interest on, or the principal of, the Notes, (ii) a failure by the Company to convert any Notes into Common Stock, cash or a combination of cash and Common Stock (iii) a default in the payment of the Redemption Price pursuant to Section 3.04, (iv) a default in the payment of the Fundamental Change Repurchase Price pursuant to Section 3.06 or Company Repurchase Price pursuant to Section 3.07 or (v) a default in respect of a covenant or provision hereof which under Article VI cannot be modified or amended without the consent of the holders of each or all Notes then outstanding or affected thereby. Upon any such waiver, the Company, the Guarantor, the Trustee and the holders of the Notes shall be restored to their former positions and rights hereunder; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section 5.03, said default or Event of Default shall for all purposes of the Notes and this Indenture be deemed to have been cured and to be not continuing; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

ARTICLE VI

SUPPLEMENTAL INDENTURES

     Section 6.01. Applicability of Article. To the extent the terms of this Article VI differ or conflict with the terms of Article IX of the Original Indenture, the terms of this Article VI shall govern.

     Section 6.02. Supplemental Indentures Without Consent of Noteholders. The Company and the Guarantor, when authorized by a Board Resolution or a Member Action, as applicable, and the Trustee may, from time to time, and at any time enter into an indenture or indentures supplemental hereto for one or more of the following purposes:

     (a) to make provision with respect to the conversion rights of the holders of Notes pursuant to the requirements of Section 9.07 or the repurchase obligations of the Company pursuant to the requirements of Section 3.08(h).

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

     (c) to evidence the assumption by a successor Person of the obligations of the Company or the Guarantor pursuant to Article VII;

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

     (e) to establish the forms or terms of the Notes;

     (f) to cure any ambiguity or correct any error in this Indenture;

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

     (h) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to qualify or maintain the qualification of this First Supplemental Indenture under the Trust Indenture Act, or under any similar federal statute hereafter enacted;

     (i) to increase the Conversion Rate;

     (j) to facilitate the discharge of the Notes;

     (k) to facilitate the registration of the Notes; or

     (l) to make other changes to the Indenture or forms or terms of the Notes, provided, no such change individually or in the aggregate with all other such changes, individually or in the aggregate, has or will have a material adverse effect on the interests of the Noteholders.

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

     Any supplemental indenture authorized by the provisions of this Section 6.02 may be executed by the Company, the Guarantor, and the Trustee without the consent of the holders of any of the Notes at the time outstanding, notwithstanding any of the provisions of Section 6.03.

     Section 6.03. Supplemental Indenture with Consent of Noteholders. With the consent of the holders of at least a majority in aggregate principal amount of the Notes at the time outstanding, the Company and the Guarantor, when authorized by Board Resolution and Member Action, and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or any supplemental indenture or of modifying in any manner the rights of the holders of the Notes; provided, that no such supplemental indenture shall, without the consent of the holders of all Notes then Outstanding:

     (a) extend the Stated Maturity of any Note;

     (b) reduce the rate or extend the time for payment of Interest thereon;

     (c) reduce the principal amount thereof;

     (d) reduce any amount payable on redemption or repurchase thereof;

     (e) impair the right of any Noteholder to institute suit for the payment thereof;

     (f) make the principal thereof or Interest thereon payable in any coin or currency other than that provided in the Notes;

     (g) affect the obligation of the Company to redeem any Note on a Redemption Date in a manner adverse to the holders of Notes;

     (h) affect the obligation of the Company to repurchase any Note upon the happening of a Fundamental Change in a manner adverse to the holders of Notes;

     (i) affect the obligation of the Company to repurchase any Note on a Company Repurchase Date in a manner adverse to the holders of Notes;

     (j) impair the right to convert the Notes into Common Stock subject to the terms set forth herein, including Section 9.07;

     (k) reduce the number of shares of Common Stock, the amount of cash or the amount of other property receivable upon conversion, in each case, without the consent of the holder of each Note so affected;

     (l) modify any of the provisions of Sections 5.03 and 6.03 hereof or Sections 512 and 1013 of the Original Indenture, except to increase any such percentage or to provide that certain other provisions of this First Supplemental Indenture cannot be modified or waived without the consent of the holder of each Note so affected;

     (m) reduce the quorum or voting requirements set forth in Article XV of the Original Indenture; or

     (n) reduce the aforesaid percentage of Notes, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of all Notes then outstanding.

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

     It shall not be necessary for the consent of the Noteholders under this Section 6.03 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.

     Section 6.04. Effect of Supplemental Indenture. Any supplemental indenture executed pursuant to the provisions of this Article VI shall comply with the Trust Indenture Act, as then in effect, provided that this Section 6.04 shall not require such supplemental indenture or the Trustee to be qualified under the Trust Indenture Act prior to the time such qualification is in fact required under the terms of the Trust Indenture Act or the Indenture has been qualified under the Trust Indenture Act, nor shall it constitute any admission or acknowledgment by any party to such supplemental indenture that any such qualification is required prior to the time such qualification is in fact required under the terms of the Trust Indenture Act or the Indenture has been qualified under the Trust Indenture Act. Upon the execution of any supplemental indenture pursuant to the provisions of this Article VI, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitation of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company, the Guarantor and the holders of Notes shall thereafter be determined, exercised and enforced hereunder,

subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

     Section 6.05. Notation on Notes. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article VI may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, Notes so modified as to conform, in the opinion of the Trustee and the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may, at the Company’s expense, be prepared and executed by the Company, authenticated by the Trustee (or an authenticating agent duly appointed by the Trustee pursuant to Section 13.11) and delivered in exchange for the Notes then outstanding, upon surrender of such Notes then outstanding.

     Section 6.06. Evidence of Compliance of Supplemental Indenture to Be Furnished to Trustee. Prior to entering into any supplemental indenture, the Trustee shall be provided with an Officers’ Certificate of the Company and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article VI and is otherwise authorized or permitted by this Indenture.

ARTICLE VII

[INTENTIONALLY OMITTED]

ARTICLE VIII

SATISFACTION AND DISCHARGE OF INDENTURE

     Section 8.01. [Intentionally Omitted]

     Section 8.02. Paying Agent to Repay Monies Held. The following provision shall be added to Article IV of the Original Indenture:

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

     Section 8.03. Return of Unclaimed Monies. The following provision shall be added to Article IV of the Original Indenture:

     Subject to the requirements of applicable law, any monies deposited with or paid to the Trustee for payment of the principal of or Interest on Notes and not applied but remaining unclaimed by the holders of Notes for two years after the date upon which the principal of or Interest on such Notes, as the case may be, shall have become due and payable, shall be repaid to the Company by the Trustee on demand and all liability of the Trustee shall thereupon cease with respect to such monies; and the holder of any of the Notes shall thereafter look only to the Company for any payment that such holder may be entitled to collect unless an applicable abandoned property law designates another Person.

ARTICLE IX

CONVERSION OF NOTES

     Section 9.01. Right to Convert.

     (a) Subject to and upon compliance with the provisions of this First Supplemental Indenture, including Section 9.03 hereof, prior to July 15, 2037, the holder of any Note shall have the right, at such holder’s option, to convert the principal amount of the Note, or any portion of such principal amount which is an integral multiple of $1,000 at the Conversion Rate in effect at such time, by surrender of the Note so to be converted in whole or in part, together with any required funds, under the circumstances described in this Section 9.01 and in the manner provided in Section 9.02. Settlement of conversions in cash or shares of Common Stock, or a combination thereof, shall be made as set forth in Section 9.03 hereof. The Notes shall be convertible only during the following periods upon the occurrence of one of the following events:

     (i) during any calendar quarter commencing after the calendar quarter ended September 30, 2007 and before the Business Day immediately prior to the Stated Maturity (and only during such calendar quarter) if the Last Reported Sale Price for the Common Stock for at least twenty (20) Trading Days during the period of thirty (30) consecutive Trading Days ending on the last Trading Day of the previous calendar quarter is greater than or equal to 120% of the Conversion Price on such last Trading Day;

     (ii) in the event that the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the second Business Day immediately preceding the Redemption Date (unless the Company fails to pay the Redemption Price); provided, that only those Notes that are called for redemption may be converted following such an event;

     (iii) during the five (5) consecutive Business Day period after any five (5) consecutive Trading Day period in which the Trading Price per Note, as determined following a request by a holder in accordance with the procedures described below, for each day of that period was less than 98% of the product of the Conversion Rate and the Last Reported Sale Price of the Common Stock such day (the “98% Trading Exception”); provided, however, that if on the date of any conversion pursuant to the 98% Trading Exception that is on or after July 15, 2022, the Last Reported Sale Price of the Common Stock on the Trading Day immediately prior to the Conversion Date is greater than 100% of the Conversion Price, then Noteholders surrendering Notes for conversion will receive, in lieu of shares of Common Stock based on the Conversion Rate, shares of Common Stock with a value equal to the principal amount of Notes being converted (a “Principal Value Conversion”). Shares of Common Stock delivered upon a Principal Value Conversion will be valued at the greater of the effective Conversion Price on the eighth day prior to the Conversion Date and the Last Reported Sale Price as of the Conversion Date and will be delivered no later than the third Business Day following the determination of the Last Reported Sale Price;

     (iv) as provided in Section (b) of this Section 9.01; or

     (v) after the effective date of a Make-Whole Fundamental Change, until the 30th calendar day following such date, or, if such Make-Whole Fundamental Change also constitutes a Fundamental Change pursuant to which the Company is required to purchase the Notes at the Noteholder’s option, until the related Fundamental Change Repurchase Date. The Company will notify holders of ay such Make-Whole Fundamental Change and the anticipated effective date

and issue a press release no later than ten (10) days prior to such transaction’s anticipated effective date. If the effective date of a Make-Whole Fundamental Change occurs on or prior to July 15, 2012, and a holder elects to convert the Notes during such period (regardless of whether any other conditions to conversion set forth in clauses (i) through (iv) have been satisfied), the Company shall increase the Conversion Rate surrendered for conversion by a number of additional shares of Common Stock, which shall be determined by reference to the table below and is based on the effective date and sale price of Common Stock in such Make-Whole Fundamental Change determined as follows: (A) if the consideration paid to holders of Common Stock in such transaction consists exclusively of cash, the cash price per share and (B) otherwise, the average of the Last Reported Price of Common Stock for the ten (10) Trading Day period ending on the Trading Day immediately preceding the effective date of the transaction.

     The stock prices set forth in the first column of the table shall be adjusted as of any date on which the Conversion Rate is adjusted. The adjusted stock prices will equal the stock prices applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to such adjustment and the denominator of which is the Conversion Rate as so adjusted. The number of additional shares of Common Stock to added to the Conversion Rate will be subject to adjustment in the same manner as adjustments to the Conversion Rate set forth in Section 9.06 hereof.

		Effective Price
Effective Date		$20.07				$22.50				$25.00				$27.50				$30.00				$32.50				$35.00				$40.00				$45.00				$50.00				$55.00
July 25, 2007			12.9177				8.4082				5.2002				3.0489				1.6502				0.7808				0.2888				0.0110				0.0001				0.0000				0.0000
July 15, 2008			12.9177				8.6432				5.4361				3.2736				1.8558				0.9603				0.4285				0.0403				0.0011				0.0000				0.0000
July 15, 2009			12.9177				8.7250				5.4872				3.3061				1.8812				0.9847				0.4524				0.0505				0.0019				0.0000				0.0000
July 15, 2010			12.9177				8.5942				5.2888				3.0900				1.6885				0.8386				0.3607				0.0353				0.0013				0.0000				0.0000
July 15, 2011			12.9177				8.1176				4.6260				2.3941				1.0946				0.4226				0.1310				0.0059				0.0001				0.0000				0.0000
July 15, 2012			12.9177				7.5365				3.0921				0.0000				0.0000				0.0000				0.0000				0.0000				0.0000				0.0000				0.0000

     The exact stock price and effective date may not be set forth on the table, in which case: (A) if the stock price is between two stock price amounts on the table above or the effective date is between two dates on the table, the number of additional shares will be determined by straight-line interpolation between the number of additional shares set forth for the higher and lower stock price amounts and the two dates, as applicable, based on a 365-day year; (B) if the stock price exceeds $55.00 per share (subject to adjustment), no additional shares will be added to the Conversion Rate; (C) if the stock price is less than $20.07 per share (subject to adjustment), no additional share will be added to the Conversion Rate; and the Conversion Rate shall not exceed 49.8256 per $1,000.00 principal amount of such Notes, subject to adjustment as provided in Section 9.06.

     In connection with any conversion pursuant to (iii), the Trustee shall have no obligation to obtain the bids necessary for the Company to determine the Trading Price of the Notes unless the Company has requested it to do so, and the Company shall have no obligation to make such request unless a holder provides the Company with reasonable evidence that the Trading Price per Note is less than 98% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate. At such time, the Company will instruct the Trustee to obtain the bids (in the manner described in the definition of Trading Price) beginning on the next Trading Day and on each successive Trading Day until the Trading Price per Note is greater than or equal to 98% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate.

     The Company or its designated agent shall determine on a daily basis during the time period specified in Section 9.01(a)(i) and (iii) whether the Notes shall be convertible as a result of the occurrence of an event specified in clause (i) or (iii) above and, if the Notes shall be so convertible, the Company

shall promptly deliver to the Trustee (or other Conversion Agent appointed by the Company) written notice thereof. Whenever the Notes shall become convertible pursuant to this Section 9.01, the Company or, at the Company’s request, the Trustee in the name and at the expense of the Company, shall notify the holders of the event triggering such convertibility in the manner provided in Section 13.03, and the Company shall also publicly announce such information by publication on the Company’s Web site or through such other public medium as it may use at such time. Any notice so given shall be conclusively presumed to have been duly given, whether or not the holder receives such notice.

     The Trustee shall be entitled at its sole discretion to consult with the Company and to request the assistance of the Company in connection with the Trustee’s duties and obligations pursuant to Section 9.01 hereof, and the Company agrees, if requested by the Trustee, to cooperate with, and provide assistance to, the Trustee in carrying out its duties under this Section 9.01; provided, however, that nothing herein shall be construed to relieve the Trustee of its duties pursuant to Section 9.01 hereof.

     (b) In addition, if:

     (i) the Company distributes to all holders of Common Stock rights or warrants entitling them to subscribe for or purchase (for a period expiring within 45 days of the date of the distribution) shares of Common Stock at less than the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the declaration date of the distribution, or (B) the Company distributes to all holders of Common Stock assets, debt securities or rights to purchase securities of the Company, which distribution has a per share value as determined by the Board of Directors of the Company and set forth in a Board Resolution exceeding five (5) percent of the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the declaration date for such distribution, then, in either case, the Notes may be surrendered for conversion at any time on and after the date that the Company gives notice to the holders of such distribution, which shall be not less than 20 Business Days prior to the Ex-Dividend Date for such distribution, until the earlier of the close of business on the Business Day immediately preceding, but not including, the Ex-Dividend Date or the date the Company publicly announces that such distribution will not take place; provided, that no holder may exercise this right to convert if the holder will otherwise participate in such distribution without conversion;

     (ii) the Company consolidates with or merges with or into another Person or is a party to a binding share exchange, in each case pursuant to which the Common Stock is converted into cash or property other than securities, then the Notes may be surrendered for conversion at any time from and after the date which is fifteen (15) days prior to the anticipated effective date of the transaction until and including the date which is fifteen (15) days after the actual effective date of the transaction. The Board of Directors of the Company shall determine the anticipated effective date of the transaction, and such determination shall be conclusive and binding on the holders and shall be publicly announced by the Company by publication on its Web site or through such other public medium as it may use at that time not later than two (2) Business Days prior to the 15th day prior to the anticipated effective date of the transaction. If Notes are not surrendered pursuant to this paragraph for conversion, at the effective time of the transaction, the right to convert the Notes into Common Stock will be changed into a right to convert the Notes into the kind and amount of, cash, securities or other property that a Noteholder would have received if such holder had converted such holder’s Notes immediately prior to the applicable Record Date for such transaction.

     (c) A Note in respect of which a holder is electing to exercise its option to require repurchase upon a Fundamental Change pursuant to Section 3.06 or repurchase pursuant to Section 3.07 may be converted only if such holder withdraws its election in accordance with Section 3.08(d). A Noteholder is

not entitled to any rights of a holder of Common Stock until such holder has converted his Notes to Common Stock, and only to the extent such Notes are deemed to have been converted to Common Stock under this Article IX.

     Section 9.02. Exercise of Conversion Privilege; No Adjustment for Interest or Dividends. In order to exercise the conversion privilege with respect to any Note in certificated form, the Company must receive at the office or agency of the Company maintained for that purpose or, at the option of such holder, the Corporate Trust Office, such Note with the original or facsimile of the form entitled “Form of Notice of Conversion” on the reverse thereof, duly completed and manually signed, together with the appropriate endorsements and transfer documents, and accompanied by the funds, if any, required by this Section 9.02. Such notice (a “Notice of Conversion”) shall also state the name or names (with address or addresses) in which the certificate or certificates for shares of Common Stock which shall be issuable on such conversion, if any, shall be issued, and shall be accompanied by transfer or similar taxes, if required pursuant to Section 9.08.

     In order to exercise the conversion privilege with respect to any interest in a Global Note, the beneficial holder must complete, or cause to be completed, the appropriate instruction form for conversion pursuant to the Depositary’s book-entry conversion program, deliver, or cause to be delivered, by book-entry delivery an interest in such Global Note, furnish appropriate endorsements and transfer documents if required by the Company or the Trustee or Conversion Agent, and pay the funds, if any, required by this Section 9.02 and any transfer taxes if required pursuant to Section 9.08.

     As promptly as practicable after satisfaction of the requirements for conversion set forth above, but no later than the fifth Business Day following receipt by the Company of a Notice of Conversion, subject to Section 9.03 and subject also to compliance with any restrictions on transfer if shares issuable on conversion are to be issued in a name other than that of the Noteholder (as if such transfer were a transfer of the Note or Notes (or portion thereof) so converted), the Company shall issue and shall deliver, or cause the Conversion Agent to deliver, to such Noteholder at the office or agency maintained by the Company for such purpose pursuant to Section 1002 of the Original Indenture, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such Note or portion thereof, if any, as determined by the Company in accordance with the provisions of this Article IX and a check or cash in respect of any cash amounts due upon conversion, calculated by the Company as provided in Section 9.03. In case any Note of a denomination greater than $1,000 shall be surrendered for partial conversion, and subject to Section 2.03, the Company shall execute and the Trustee shall authenticate and deliver to the holder of the Note so surrendered, without charge to him, a Note or Notes in authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Note.

     Each conversion shall be deemed to have been effected as to any such Note (or portion thereof) on the date on which the requirements set forth above in this Section 9.02 have been satisfied as to such Note (or portion thereof) (such date, the “Conversion Date”), and the Person in whose name any certificate or certificates for shares of Common Stock, if any, shall be issuable upon such conversion shall be deemed to have become immediately prior to the close of business on said date the holder of record of the shares represented thereby.

     Any Note or portion thereof surrendered for conversion during the period from the close of business on any Regular Record Date to the opening of business on the immediately following Interest Payment Date shall be accompanied by payment, in immediately available funds or other funds acceptable to the Company, of an amount equal to the Interest otherwise payable on such Interest Payment Date on the principal amount being converted; provided, that no such payment need be made (1) if the Company has specified a Redemption Date that is after a Regular Record Date and prior to the next

Interest Payment Date, (2) if the Company has specified a Repurchase Date following a Fundamental Change that is after a Regular Record Date and on or prior to the next Interest Payment Date or (3) to the extent of any overdue Interest, if any overdue Interest exists at the time of conversion with respect to such Note. Except as provided above in this Section 9.02, no payment or other adjustment shall be made for Interest accrued on any Note converted or for dividends on any shares issued upon the conversion of such Note as provided in this Article IX.

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

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

     Section 9.03. Payment and Delivery Due upon Conversion; Payment of Cash in Lieu of Common Stock. As set forth in this Section 9.03, the Company shall settle its obligation (the “Conversion Obligation”) in respect of any conversion of Notes by delivering, in respect of each $1,000 principal amount of Notes converted, a “Settlement Amount” equal to the sum of the Daily Settlement Amounts for each of the 16 Trading Days of related Observation Period. Settlement in cash or in shares of Common Stock, as applicable, will occur on the third Business Day following the final day of the Observation Period.

     Section 9.04. Fractional Shares. No fractional shares of Common Stock or scrip certificates representing fractional shares shall be issued upon conversion of Notes. If more than one Note shall be surrendered for conversion at one time by the same holder, the number of full shares that shall be issuable upon conversion shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the extent permitted hereby) so surrendered. If any fractional share of stock would be issuable upon the conversion of any Note or Notes, the Company shall make an adjustment and payment therefor in cash to the Noteholders at the Last Reported Sale Price on the last Trading Day immediately preceding the day on which the Notes (or specified portions thereof) are deemed to have been converted.

     Section 9.05. Conversion Rate. Each $1,000 principal amount of the Notes shall be convertible into the number of shares of Common Stock specified in the form of Note (herein called the “Conversion Rate”) attached as Exhibit A hereto (initially 36.9079 shares), subject to adjustment as provided in this Article IX.

     Section 9.06. Adjustment of Conversion Rate. The Conversion Rate shall be adjusted from time to time by the Company as follows:

     (a) If the Company issues shares of Common Stock as a dividend or distribution on shares of the Common Stock, or effects a share split or share combination, the Conversion Rate will be adjusted based on the following formula:

		CR’       =       CR0       x		OS’
				OS0

where,
CR0		=		the Conversion Rate in effect immediately prior to such event
CR’		=		the Conversion Rate in effect immediately after such event
OS0		=		the number of shares of Common Stock outstanding immediately prior to such event
OS’		=		the number of shares of Common Stock outstanding immediately after such event

     Such adjustment shall become effective immediately after the opening of business on the Business Day following the date fixed for such determination. The Company will not pay any dividend or make any distribution on shares of Common Stock held in treasury by the Company. If any dividend or distribution of the type described in this Section 9.06(a) is declared but not so paid or made, the Conversion Rate shall again be adjusted to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

     (b) If the Company issues to all or substantially all holders of its Common Stock any rights or warrants entitling them for a period of not more than 45 days to subscribe for or purchase shares of Common Stock, or securities convertible into shares of Common Stock, at a price per share or a conversion price per share less than the Last Reported Sale Price of shares of Common Stock on the Business Day immediately preceding the time of announcement of such issuance, the Conversion Rate will be adjusted based on the following formula (provided, that the Conversion Rate will be readjusted to the extent that such rights or warrants are not exercised prior to their expiration):

		CR’       =      CR0		OS0 + X   OS0 + Y

where,
CR0		=		the Conversion Rate in effect immediately prior to such event
CR’		=		the Conversion Rate in effect immediately after such event

OS0		=		the number of shares of Common Stock outstanding immediately prior to such event
X		=		the total number of shares of Common Stock issuable pursuant to such rights
Y		=		the number of shares of Common Stock equal to the aggregate price payable to exercise such rights divided by the average of the Last Reported Sale Prices of Common Stock for the ten consecutive Trading Days prior to the Business Day immediately preceding the Ex-Dividend Date with respect to the issuance of such rights

     Such adjustment shall be successively made whenever any such rights or warrants are issued and shall become effective immediately after the opening of business on the Business Day following the date fixed for such determination. The Company shall not issue any such rights, options or warrants in respect of shares of Common Stock held in treasury by the Company. To the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. If such rights or warrants are not so issued, the Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such date fixed for the determination of shareholders entitled to receive such rights or warrants had not been fixed.

     In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of Common Stock at less than the Last Reported Sale Price of shares of Common Stock on the Business Day immediately preceding the time of announcement of such issuance, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received by the Company for such rights or warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board of Directors of the Company.

     (c) If the Company distributes shares of its Capital Stock, evidences of its Indebtedness or other assets or property of the Company to all or substantially all holders of the Common Stock, excluding:

     (i) dividends, distributions and rights or warrants referred to in clause (a) or (b) above; and

     (ii) dividends or distributions paid exclusively in cash referred to in clause (d) below; then the Conversion Rate will be adjusted based on the following formula:

		CR’       =       CR0       x		SP0
				SP0— FMV

where,
CR0		=		the Conversion Rate in effect immediately prior to such distribution

CR’		=		the Conversion Rate in effect immediately after such distribution
SP0		=		the average of the Last Reported Sale Prices of the Common Stock for the ten days prior to the Business Day immediately preceding the Ex-Dividend Date with respect to such distribution
FMV		=		the fair market value (as determined by the Board of Directors of the Company) of the shares of the Company’s Capital Stock, evidences of Indebtedness, assets or property distributed with respect to each outstanding share of Common Stock on the Record Date for such distribution

     Such adjustment shall become effective immediately prior to the opening of business on the Business Day following the date fixed for the determination of shareholders entitled to receive such distribution.

     (d) If the Company makes any cash dividend or distribution during any quarterly fiscal period to all or substantially all holders of Common Stock, other than regular quarterly dividends that do not exceed $0.60 per share (the “Quarterly Dividend Threshold Amount”), the Conversion Rate will be adjusted based on the following formula:

		CR’       =      CR0       x		SP0
				SP0 — C

CR0		=		the Conversion Rate in effect immediately prior to the Ex-Dividend Date for such distribution
CR’		=		the Conversion Rate in effect immediately after the Ex-Dividend Date for such distribution
SP0		=		the average of the closing sale prices of our Common Stock for the ten consecutive Trading Days prior to the Business Day immediately preceding the Ex-Dividend Date with respect to such distribution
C		=		the amount in cash per share the Company distributes to holders of Common Stock that exceeds the Quarterly Dividend Threshold Amount

     Such adjustment shall become effective immediately prior to the opening of business on the Business Day following the date fixed for the determination of shareholders entitled to receive such distribution.

     The quarterly dividend threshold amount is subject to adjustment in a manner inversely proportional to adjustments to the Conversion Rate and shall be adjusted at the same time that Conversion Rate is adjusted; provided, that no adjustment will be made to the quarterly dividend threshold amount for any adjustment made to the Conversion Rate under clause (d) hereof. If any dividend or distribution declared in clause (d) hereof is declared but not paid or so made, the new Conversion Rate shall be

readjusted to the Conversion Rate that then would have been in effect if such dividend or distribution had not been declared.

     (e) If the Company or any of its Subsidiaries makes a payment in respect of a tender offer or exchange offer for the Common Stock, to the extent that the cash and value of any other consideration included in the payment per share of Common Stock exceeds the Last Reported Sale Price of the Common Stock on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer (the “Expiration Time”), the Conversion Rate will be increased based on the following formula:

		CR’       =      CR0      x		AC + (SP’ x OS’)
				OS0 — SP’

where,
CR0		=		the Conversion Rate in effect on the date such tender or exchange offer expires
CR’		=		the Conversion Rate in effect on the day next succeeding the date such tender or exchange offer expires
AC		=		the aggregate value of all cash and any other consideration (as determined by the Board of Directors of the Company) paid or payable for shares purchased in such tender or exchange offer
OS0		=		the number of shares of Common Stock outstanding immediately prior to the date such tender or exchange offer expires
OS’		=		the number of shares of Common Stock outstanding immediately after the date such tender or exchange offer expires
SP’		=		the average of the Last Reported Sale Prices of Common Stock for the ten consecutive Trading Days commencing on the Trading Day next succeeding the date such tender or exchange offer expires.

     If the Company is obligated to purchase shares pursuant to any such tender or exchange offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such tender or exchange offer had not been made.

     If, however, the application of the foregoing formula would result in a decrease in the Conversion Rate, no adjustment to the Conversion Rate will be made.

     Except as stated herein, the Company will not adjust the Conversion Rate for the issuance of shares of Common Stock or any securities convertible into or exchangeable for shares of Common Stock or the right to purchase shares of Common Stock or such convertible or exchangeable securities.

     (f) Notwithstanding the foregoing provisions of this Section 9.06, no adjustment shall be made thereunder, nor shall an adjustment be made to the ability of a holder of a Note to convert, for any

distribution described therein if the holder will otherwise participate in the distribution without conversion of such holder’s Notes.

     (g) The Company may (but is not required to) make such increases in the Conversion Rate, in addition to those required by clauses (a) through (e) of this Section 9.06 as the Board of Directors of the Company considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock in connection with a dividend or distribution of shares (or rights to acquire shares) or any similar 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 at least twenty (20) days if the Board of Directors of the Company shall have made a determination that such increase would be in the best interests of the Company, which determination shall be conclusive. Whenever the Conversion Rate is increased pursuant to the preceding sentence, the Company shall mail to holders of record of the Notes a notice of the increase at least fifteen (15) days prior to the date the increased Conversion Rate takes effect, and such notice shall state the increased Conversion Rate and the period during which it will be in effect.

     (h) No adjustment to the Conversion Rate need be made:

     (i) upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock under any plan;

     (ii) upon the issuance of any shares of Common Stock or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company or any of its Subsidiaries;

     (iii) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security not described in subclause (ii) above and outstanding as of the date the Notes were first issued;

     (iv) if the Noteholders may participate in the transaction that would otherwise give rise to an adjustment pursuant to this Section 9.06;

     (v) for a change in the par value of the Common Stock; or

     (vi) for accrued and unpaid Interest.

     (i) No adjustment to the Conversion Rate shall be required pursuant to this Section 9.06 until the earlier of (1) such time as the Company shall have mailed or caused to be mailed a Redemption Notice to be made pursuant to Section 3.03, (2) such adjustment would require an increase or decrease of at least one (1) percent in the Conversion Rate or (3) the Conversion Date upon a conversion of the Notes; provided, however, that any adjustments which by reason of this clause (j) of Section 9.06 are not required to be made, shall be carried forward and taken into account in any subsequent adjustment.

     (j) All calculations under this Article IX shall be made by the Company and shall be made to the nearest cent or to the nearest one-ten thousandth (1/10,000) of a share, as the case may be.

     (k) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly file with the Trustee and any Conversion Agent other than the Trustee an Officers’ Certificate

setting forth the Conversion Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Unless and until a Responsible Officer of the Trustee shall have received such Officers’ Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Conversion Rate and may assume that the last Conversion Rate of which it has knowledge is still in effect. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Rate to the holder of each Note at his last address appearing on the Note Register provided for in Section 305 of the Original Indenture, within twenty (20) days after execution of such Officers’ Certificate. Failure to deliver such notice shall not affect the legality or validity of any such adjustment.

     (l) In any case in which this Section 9.06 provides that an adjustment shall become effective immediately after (i) a Record Date for an event, (ii) the date fixed for the determination of shareholders entitled to receive a dividend or distribution pursuant to Section 9.06(a), (c), or (d), (iii) a date fixed for the determination of shareholders entitled to receive rights or warrants pursuant to Section 9.06(b), or (iv) the Expiration Time for any tender or exchange offer pursuant to Section 9.06(e), (each a “Determination Date”), the Company may elect to defer until the occurrence of the applicable Adjustment Event (as hereinafter defined) (x) issuing to the holder of any Note converted after such Determination Date and before the occurrence of such Adjustment Event, the additional shares of Common Stock or other securities issuable upon such conversion by reason of the adjustment required by such Adjustment Event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (y) paying to such holder any amount in cash in lieu of any fractional shares of Common Stock pursuant to Section 9.04. For purposes of this clause (l), the term “Adjustment Event” shall mean:

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

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

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

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

     (m) For purposes of this Section 9.06, 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 fractional 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.

     (n) If, in connection with any adjustment to the Conversion Rate as set forth in this Section 9.06 a Noteholder shall be deemed for U.S. federal tax purposes to have received a distribution, the Company may set off any withholding tax it is required to collect with respect to any such deemed distribution against cash payments of interest in accordance with the provisions of Article II hereof or from cash and shares of Common Stock, if any, otherwise deliverable to a Noteholder upon a conversion of Notes in accordance with the provisions of Section 9.03 hereof or a redemption or repurchase of a Note in accordance with the provisions of Article III hereof.

     Section 9.07. Effect of Reclassification, Consolidation, Merger or Sale. If any of the following events occur, namely (i) any reclassification or change of the outstanding shares of Common Stock (other than a subdivision or combination to which Section 9.06(a) applies), (ii) any consolidation, merger, binding share exchange or combination of the Company with another Person as a result of which holders of Common Stock shall be entitled to receive cash, securities or other property with respect to or in exchange for such Common Stock, or (iii) any sale or conveyance of all or substantially all of the properties and assets of the Company to any other Person, in each case as a result of which holders of Common Stock shall be entitled to receive cash, securities or other property with respect to or in exchange for such Common Stock, then the Company or the successor or purchasing Person, as the case may be, shall execute with the Trustee a supplemental indenture (which shall comply with the Trust Indenture Act as in force at the date of execution of such supplemental indenture) providing that each Note shall be convertible into the kind and amount of cash, securities or other property receivable upon such reclassification, change, consolidation, merger, binding share exchange, combination, sale or conveyance by a holder of a number of shares of Common Stock issuable upon conversion of such Notes immediately prior to such reclassification, change, consolidation, merger, binding share exchange, combination, sale or conveyance, assuming such holder of Common Stock did not exercise his rights of election, if any, as to the kind or amount of cash, securities or other property receivable upon such reclassification, change, consolidation, merger, binding share exchange, combination, sale or conveyance (provided, that, if the kind or amount of cash, securities or other property receivable upon such reclassification, change, consolidation, merger, binding share exchange, combination, sale or conveyance is not the same for each share of Common Stock in respect of which such rights of election shall not have been exercised (“non-electing share”), then for the purposes of this Section 9.07 the kind and amount of cash, securities or other property receivable upon such reclassification, change, consolidation, merger, binding share exchange, combination, sale or conveyance for 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 which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article IX. For purposes of this Section 9.07, where a consolidation, merger or binding share exchange involves a transaction that causes the shares of Common Stock to be converted into the right to receive more than a single type of consideration based upon any form of stockholder election, such consideration will be deemed to be weighted average of the types and amounts of consideration received by the holders of shares of Common Stock that affirmatively make such an election.

     The Company shall cause notice of the execution of such supplemental indenture to be mailed to each Noteholder, at its address appearing on the Note Register provided for in Section 305 of the Original Indenture, within twenty (20) days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.

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

     If this Section 9.07 applies to any event or occurrence, Section 9.06 shall not apply.

     Section 9.08. Taxes on Shares Issued. The issuance of stock certificates on conversions of Notes shall be made without charge to the converting Noteholder for any documentary, stamp or similar issue or transfer tax in respect of the issue thereof. The Company shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issue and delivery of stock in any name other than that of the holder of any Note converted, and the Company shall not be required to issue or deliver any such stock certificate unless and until the Person or Persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

     Section 9.09. Reservation of Shares, Shares to Be Fully Paid; Compliance with Governmental Requirements; Listing of Common Stock. The Company shall provide, free from preemptive rights, out of its authorized but unissued shares or shares held in treasury, sufficient shares of Common Stock to provide for the conversion of the Notes from time to time as such Notes are presented for conversion.

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

     The Company covenants that all shares of Common Stock which may be issued upon conversion of Notes will upon issue be fully paid and non-assessable by the Company and free from all taxes, liens and charges with respect to the issue thereof.

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

     The Company further covenants that, if at any time the Common Stock shall be listed on the New York Stock Exchange, National Association of Securities Dealers Automated Quotation System or any other national securities exchange or automated quotation system, the Company will, if permitted by the rules of such exchange or automated quotation system, list and keep listed, so long as the Common Stock shall be so listed on such exchange or automated quotation system, all Common Stock issuable upon conversion of the Notes.

     Section 9.10. Responsibility of Trustee. The Trustee and any other Conversion Agent shall not at any time be under any duty or responsibility to the Company or any Noteholders to determine the Conversion Rate or whether any facts exist which may require any adjustment of the Conversion Rate, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. The Trustee and any other Conversion Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, which may at any time be issued or delivered upon the conversion of any Note; and the Trustee and any other Conversion Agent make no representations with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property or cash upon the surrender of any Note for the purpose of conversion or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article IX. Without limiting the generality of the foregoing, neither the Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant to Section 9.07 relating either to the kind or amount of shares of stock or securities or property (including cash) receivable by Noteholders upon the conversion of their Notes after any event referred to in such Section 9.07 or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 9.01, may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, the Officers’ Certificate (which the Company shall be obligated to file with the Trustee prior to the execution of any such supplemental indenture) with respect thereto.

     Section 9.11. Notice to Holders Prior to Certain Actions. In case:

     (a) the Company shall declare a dividend (or any other distribution) on its Common Stock that would require an adjustment in the Conversion Rate pursuant to Section 9.06; or

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

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

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

     the Company shall cause to be filed with the Trustee and to be mailed to each Noteholder at his address appearing on the Note Register provided for in Section 305 of the Original Indenture, as promptly as possible but in any event at least ten (10) days prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up.

     Section 9.12. Shareholders. If the Company adopts or subsequently amends a shareholder rights plan and if the rights provided for in such plan have separated from the shares of Common Stock in accordance with the provisions of the applicable shareholder rights agreement so that the holders of the Notes would not be entitled to receive any rights in respect of Common Stock issuable upon conversion of the Notes, the conversion rate will be adjusted as if the Company distributed to all holders of Common Stock shares of the Company’s Capital Stock, evidences of Indebtedness or assets (including securities but excluding rights or warrants to purchase Common Stock issued to all holders of Common Stock, Common Stock issued as a dividend or distribution on Common Stock and cash distributions), subject to readjustment upon the subsequent expiration, termination or redemption of the rights. In lieu of any such adjustment, the Company may amend any such future shareholder rights agreement to provide that upon conversion of the Notes the holders will receive, in addition to the Common Stock issuable upon such conversion, the rights which would have attached to such Common Stock if the rights had not become separated from the Common Stock under such applicable shareholder rights agreement.

ARTICLE X

GUARANTEE

     Section 10.01. Release of Guarantee. Section 1207 of the Original Indenture is replaced in its entirety by the following:

     (a) Concurrently with the payment in full of (i) the principal of and Interest on the Notes and (ii) all other obligations of the Company under this First Supplemental Indenture, the Guarantor shall be released from and relieved of its obligations under this Article X. Upon the delivery by the Company to the Trustee of an Officers’ Certificate and an Opinion of Counsel to the effect that the transaction giving rise to the release of the Guarantee was made by the Company in accordance with the provisions of this First Supplemental Indenture and the Notes, the Trustee shall execute any documents reasonably required in order to evidence the release of the Guarantor from its obligations under the Guarantee. If any of the obligations to pay the principal of and Interest on the Notes and all other obligations of the Company are revived and reinstated after the termination of the Guarantee, then all of the obligations of the Guarantor under the Guarantee shall be revived and reinstated as if the Guarantee had not been terminated until such time as the principal of and Interest on the Notes are paid in full, and the Guarantor shall enter into an amendment to the Guarantee, reasonably satisfactory to the Trustee, evidencing such revival and reinstatement.

     (b) The Guarantor will be automatically and unconditionally released from its obligations under the Guarantee and all its obligations under this First Supplemental Indenture with respect to the Notes (i) upon the sale or other disposition by the Company of the Guarantor or all or substantially all of its assets (including by way of merger or consolidation or any sale, distribution or transfer or all of the Capital Stock of the Guarantor) to a Person that is not a Subsidiary of the Company; (ii) if at any time all of the Guarantees that the Guarantor shall have provided in respect of any of the Company’s then outstanding senior convertible notes due 2037 or senior subordinated convertible notes due 2037 shall have been permanently terminated; (iii) if at any time, as a result of any transaction or series of related transaction, (1) the Company and the Subsidiaries own, in the aggregate, less than 20% of the outstanding shares of each class and series of then outstanding Capital Stock of the Guarantor and (2) the Company is no longer required to treat the Guarantor as a consolidated Subsidiary for purpose of its consolidated financial statements prepared in accordance with GAAP.

ARTICLE XI

SUBORDINATION OF THE NOTES

     Section 11.01. Applicability of Article. To the extent the terms of this Article XI differ or conflict with the terms of Article XVI of the Original Indenture, the terms of this Article XI shall govern.

     Section 11.02. Agreement of Subordination.

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

     The payment of the principal of, and the cash portion of the Conversion Obligation as set forth in Section 9.03, and any Interest on, all Notes (including, but not limited to, the Fundamental Change Repurchase Price with respect to the Notes subject to purchase in accordance with pursuant to Section 3.06) issued hereunder shall, except to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full, in cash or other payment satisfactory to the holders of all of the Company’s other existing and future Senior Indebtedness, whether outstanding at the date of this First Supplemental Indenture or thereafter incurred. The Notes shall rank senior in right of payment to all of the Company’s Indebtedness, whether outstanding at the date of this First Supplemental

Indenture or thereafter incurred, that provides for its subordination to the Notes, including any guarantee issued by the Company of Indebtedness incurred by the Guarantor in connection with the TP Securities outstanding as of the date of this First Supplemental Indenture. The Notes shall rank equal in right of payment to all of the Company’s Indebtedness, whether outstanding at the date of this First Supplemental Indenture or thereafter incurred, which provides for equal ranking with the Notes, including Indebtedness issued by the Company in connection with the Contemporaneous Exchange Offer.

     No provision of this Article XI shall prevent the occurrence of any default or Event of Default hereunder.

     Section 11.03. Payments to Holders.

     (a) No payment shall be made with respect to the principal of (including any Redemption Price or Repurchase Price pursuant to Article III) and Interest on, the Notes, except payments and distributions made by the Trustee as permitted by the first or second paragraph of Section 11.08, if:

     (i) a default in the payment of Senior Indebtedness occurs and is continuing beyond any applicable period of grace (a “Payment Default”),

     (ii) the Company receives written notice of such Payment Default by the holders of such Senior Indebtedness, or any trustee therefor, and

     (iii) unless and until such Payment Default shall have been cured or waived or shall have ceased to exist.

     Promptly upon receiving notice of a Payment Default, and subject to Section 11.08, the Company shall deliver to the Trustee an Officers’ Certificate specifying with particularity such Payment Default and further stating what action the Company has taken, is taking or proposes to take with respect thereto. The Company hereby covenants and agrees that it shall resume payments on and distributions in respect of the Notes upon the date on which such Payment Default is cured or waived or ceases to exist. Promptly upon becoming aware that a Payment Default has been cured or waived or ceased to exist, and subject to Section 11.08, the Company shall deliver to the Trustee an Officers’ Certificate specifying that a Payment Default no longer exists and that payments in respect of principal (including any Redemption Price or Repurchase Price pursuant to Article III and Interest (including, if any, Interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (the “Defaulted Interest”)) shall resume.

     (b) In the event of a bankruptcy, insolvency or other proceeding described in clause (k) or (l) of the definition of Event of Default in Section 5.02 (each such event, if any, herein sometimes referred to as a “Proceeding”), all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceedings) of the Company shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made to any Noteholder on account thereof. Any payment or distribution, whether in cash, securities or other property (other than securities of the Company or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the Indebtedness evidenced by the Notes or the Guarantee, to the payment of all Senior Indebtedness of the Company at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), which would otherwise (but for these subordination provisions) be payable or deliverable in respect of the Notes shall be paid or delivered directly to the holders of Senior Indebtedness of the Company in accordance with the priorities then existing among such holders until all

Senior Indebtedness (including any interest thereon accruing after the commencement of any Proceeding) of the Company shall have been paid in full.

     (c) In the event of any Proceeding, after payment in full of all sums owing with respect to Senior Indebtedness of the Company, the Noteholders, together with the holders of any obligations of the Company ranking pari passu with the Notes, shall be entitled to be paid from the remaining assets of the Company the amounts at the time due and owing on account of unpaid principal of and any premium and Interest on the Notes and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any equity or membership interests or any obligations of the Company ranking junior to the Notes and such other obligations. If, notwithstanding the foregoing, any payment or distribution of any character or any security, whether in cash, securities or other property (other than securities of the Company or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the Indebtedness evidenced by the Notes, to the payment of all Senior Indebtedness of the Company at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) shall be received by the Trustee or any Noteholder in contravention of any of the terms hereof and before all Senior Indebtedness of the Company shall have been paid in full, such payment or distribution or security shall be received in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Indebtedness of the Company at the time outstanding in accordance with the priorities then existing among such holders for application to the payment of all Senior Indebtedness of the Company remaining unpaid, to the extent necessary to pay all such Senior Indebtedness (including any interest thereon accruing after the commencement of any Proceeding) of the Company in full. In the event of the failure of the Trustee or any Noteholder to endorse or assign any such payment, distribution or security, each holder of Senior Indebtedness of the Company is hereby irrevocably authorized to endorse or assign the same.

     (d) Upon any payment or distribution of assets of the Company referred to in this Article XI, the Trustee and the Noteholders shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such 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 Noteholders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XI.

     (e) The Trustee and the Noteholders, at the expense of the Company, shall take such reasonable action (including the delivery of this First Supplemental Indenture to an agent for any holders of Senior Indebtedness of the Company or consent to the filing of a financing statement with respect hereto) as may, in the opinion of counsel designated by the holders of a majority in principal amount of the Senior Indebtedness of the Company at the time outstanding, be necessary or appropriate to assure the effectiveness of the subordination effected by these provisions.

     (f) The provisions of this Section 11.03 shall not impair any rights, interests, remedies or powers of any secured creditor of the Company in respect of any security interest the creation of which is not prohibited by the provisions of this First Supplemental Indenture.

     (g) The securing of any obligations of the Company, otherwise ranking on a parity with the Notes or the Guarantee or ranking junior to the Notes or Guarantee, shall not be deemed to prevent such obligations from constituting, respectively, obligations ranking on a parity with the Notes or the Guarantee or ranking junior to the Notes or the Guarantee.

     Section 11.04. Payment Permitted If No Default.

     Nothing contained in this Article XI or elsewhere in this First Supplemental Indenture or in any of the Notes shall prevent (a) the Company, at any time, except during the pendency of the conditions described in paragraph (a) of Section 11.03 or of any Proceeding referred to in Section 11.03, from making payments at any time of principal of and any premium or Interest on the Notes or (b) the application by the Trustee of any monies deposited with it hereunder to the payment of or on account of the principal of and any premium or Interest on the Notes or the retention of such payment by the Noteholders, if, at the time of such application by the Trustee, it did not have knowledge (in accordance with Section 11.08 that such payment would have been prohibited by the provisions of this Article XI, except as provided in Section 11.08.

     Section 11.05. Provisions Solely to Define Relative Rights.

     The provisions of this Article XI are and are intended solely for the purpose of defining the relative rights of the Noteholders on the one hand and the holders of Senior Indebtedness of the Company on the other hand. Nothing contained in this Article XI or elsewhere in this First Supplemental Indenture or in the Notes is intended to or shall (a) impair, as between the Company and the Noteholders, the obligations of the Company, which are absolute and unconditional, to pay to the Noteholders the principal of and any premium and Interest on the Notes as and when the same shall become due and payable in accordance with their terms, (b) affect the relative rights against the Company of the Noteholders and creditors of the Company other than their rights in relation to the holders of Senior Indebtedness of the Company or (c) prevent the Trustee or the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon default under this First Supplemental Indenture, including filing and voting claims in any Proceeding, subject to the rights, if any, under this Article XI of the holders of Senior Indebtedness of the Company to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder.

     Section 11.06. Subrogation of Notes.

     Subject to the payment in full of all amounts due or to become due on all Senior Indebtedness of the Company, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness of the Company, the Noteholders shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article XI (equally and ratably with the holders of all Indebtedness of the Company that by its express terms is subordinated to Senior Indebtedness of the Company to substantially the same extent as the Notes are subordinated to the Senior Indebtedness of the Company and are entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Indebtedness of the Company) to the rights of the holders of such Senior Indebtedness of the Company to receive payments and distributions of cash, property and securities applicable to such Senior Indebtedness of the Company until the principal of and any premium and interest on the Notes shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of the Company of any cash, property or securities to which the Noteholders or the Trustee would be entitled except for the provisions of this Article XI, and no payments made pursuant to the provisions of this Article XI to the holders of Senior Indebtedness of the Company by Noteholders or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness of the Company, and the Noteholders, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness of the Company.

     Section 11.07. Authorization to Effect Subordination.

     Each Noteholder by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article XI and appoints the Trustee his or her attorney-in-fact for any and all such purposes.

     Section 11.08. Notice to Trustee.

     (a) The Company shall give prompt written notice to a Responsible Officer of 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 Notes. Notwithstanding the provisions of this Article XI or any other provision of this First Supplemental 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 Notes, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee, agent or representative therefor; provided, that if the Trustee shall not have received the notice provided for in this Section 11.08 at least two Business Days prior to the date upon which by the terms hereof any monies may become payable for any purpose (including, the payment of the principal of and any premium on or interest on any Note), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date.

     (b) The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or herself to be a holder of Senior Indebtedness of the Company (or a trustee, agent, representative or attorney-in-fact therefor) to establish that such notice has been given by a holder of Senior Indebtedness of the Company (or a trustee, agent, representative or attorney-in-fact 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 Indebtedness of the Company to participate in any payment or distribution pursuant to this Article XI, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of the Company 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 XI, 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 11.09. Rights of Trustee as Holder of Senior Indebtedness.

     The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XI with respect to any Senior Indebtedness of the Company that may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of the Company, and nothing in this First Supplemental Indenture shall deprive the Trustee of any of its rights as such holder.

     Section 11.10. No Waiver of Subordination Provisions.

     (a) No right of any present or future holder of any Senior Indebtedness of the Company to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this First Supplemental Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with.

     (b) Without in any way limiting the generality of paragraph (a) of this Section 11.10, the holders of Senior Indebtedness of the Company may, at any time and from to time, without the consent of or notice to the Trustee or the Noteholders, without incurring responsibility to such Noteholders and without impairing or releasing the subordination provided in this Article XI or the obligations hereunder of such Noteholders to the holders of Senior Indebtedness of the Company, do any one or more of the following:

     (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding;

     (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness;

     (iii) release any Person liable in any manner for the payment of such Senior Indebtedness; and

     (iv) exercise or refrain from exercising any rights against the Company and any other Person.

     Section 11.11. Certain Conversions Deemed Payment.

     For the purposes of this Article XI only, (1) the issuance and delivery of junior securities upon conversion of Notes in accordance with Section 9.03 shall not be deemed to constitute a payment or distribution on account of the principal of, or premium, if any, the cash portion of the principal of, if any, or Interest on, Notes or on account of the purchase or other acquisition of Notes, and (2) the payment, issuance or delivery of cash (except in satisfaction of fractional shares pursuant to Section 9.03), property or securities (other than junior securities) upon conversion of a Note shall be deemed to constitute payment on account of the principal of such Note. For the purposes of this Section 11.11, the term “junior securities” means (a) shares of capital stock of any class or series of the Company or (b) securities of the Company which are subordinated in right of payment to all Senior Indebtedness of the Company which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Notes are so subordinated as provided in this Article XI. Nothing contained in this Article XI or elsewhere in this First Supplemental Indenture or in the Notes is intended to or shall impair, as among the Company, its creditors other than holders of Senior Indebtedness of the Company and the Noteholders, the right, which is absolute and unconditional, of any Noteholder to convert Notes in accordance with Article IX.

     Section 11.12. Article Applicable to Paying Agents.

     If at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term “Trustee” as used in this Article XI 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 XI in addition to or in place of the Trustee.

     Section 11.13. Senior Indebtedness Entitled to Rely.

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

     Section 11.14. Trustee Not Fiduciary for Holders of Senior Indebtedness.

     The Trustee, in its capacity as trustee under this First Supplemental Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Noteholders or to the Company or to any other Person cash, property or securities to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article XI or otherwise.

ARTICLE XII

SUBORDINATION OF THE GUARANTEE

     Section 12.01. Agreement of Subordination.

     The Guarantor covenants and agrees, and each Noteholder issued hereunder by its acceptance thereof likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Article XII; and each Person holding any Note, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees to be bound by such provisions.

     The payment of the principal of, and the cash portion of the Conversion Obligation as set forth in Section 9.03, and any Interest on, all Notes (including, but not limited to, the Fundamental Change Repurchase Price with respect to the Notes subject to purchase in accordance with pursuant to Section 3.05) issued hereunder shall, except to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full, in cash or other payment satisfactory to the holders of all of the Guarantor’s other existing and future Indebtedness, whether outstanding at the date of this First Supplemental Indenture or thereafter incurred.

     The Guarantee shall, except to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to all of the Guarantor’s Indebtedness or guarantees of Indebtedness, whether outstanding at the date of this First Supplemental Indenture or thereafter incurred. The Guarantee shall rank senior in right of payment to all of the Guarantor’s Indebtedness that provides for its subordination to the Guarantee, whether outstanding at the date of this First Supplemental Indenture, including Indebtedness of the Guarantor issued in connection with the TP Securities outstanding as of the date of this First Supplemental Indenture, or thereafter incurred. The Guarantee shall rank equal in right of payment to all of the Guarantor’s Indebtedness, whether outstanding at the date of this First Supplemental Indenture or thereafter incurred, which provides for equal ranking with the Guarantee, including the guarantee provided by the Guarantor of the Indebtedness issued in the Contemporaneous Exchange Offer.

     No provision of this Article XII shall prevent the occurrence of any default or Event of Default hereunder.

     Section 12.02. Payments to Holders.

     (a) No payment shall be made with respect to the principal of (including any Redemption Price or Repurchase Price pursuant to Article III) and Interest on, the Notes, except payments and distributions made by the Trustee as permitted by the first or second paragraph of Section 12.07, in the event and during the continuation of any Payment Default by the Guarantor, upon written notice of such default to the Guarantor by the holders of such Senior Debt of the Guarantor or any trustee therefor, unless and until such Payment Default shall have been cured or waived or shall have ceased to exist. Promptly upon receiving notice of a Payment Default, and subject to Section 12.07, the Guarantor shall deliver to the Trustee an Officers’ Certificate specifying with particularity such Payment Default and further stating what action the Guarantor has taken, is taking or proposes to take with respect thereto. The Guarantor hereby covenants and agrees that it shall resume payments on and distributions in respect of the Notes upon the date on which such Payment Default is cured or waived or ceases to exist. Promptly upon becoming aware that a Payment Default has been cured or waived or ceased to exist, and subject to Section 12.07, the Guarantor shall deliver to the Trustee an Officers’ Certificate specifying that a Payment Default no longer exists and that payments in respect of principal (including any Redemption Price or Repurchase Price pursuant to Article III and Interest (including, if any, Defaulted Interest) shall resume.

     (b) In the event of a Proceeding, all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceedings) of the Guarantor shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made to any Noteholder on account thereof. Any payment or distribution, whether in cash, securities or other property (other than securities of the Guarantor or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the Indebtedness evidenced by the Notes or the Guarantee, to the payment of all Senior Indebtedness of the Guarantor at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), which would otherwise (but for these subordination provisions) be payable or deliverable in respect of the Notes shall be paid or delivered directly to the holders of Senior Indebtedness of the Guarantor in accordance with the priorities then existing among such holders until all Senior Indebtedness (including any interest thereon accruing after the commencement of any Proceeding) of the Guarantor shall have been paid in full.

     (c) In the event of any Proceeding, after payment in full of all sums owing with respect to Senior Indebtedness of the Guarantor, the Noteholders, together with the holders of any obligations of the Guarantor ranking pari passu with the Notes, shall be entitled to be paid from the remaining assets of the Guarantor the amounts at the time due and owing on account of unpaid principal of and any premium and Interest on the Notes and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any equity or membership interests or any obligations of the Guarantor ranking junior to the Notes and such other obligations. If, notwithstanding the foregoing, any payment or distribution of any character or any security, whether in cash, securities or other property (other than securities of the Guarantor or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the Indebtedness evidenced by the Notes, to the payment of all Senior Indebtedness of the Guarantor at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) shall be received by the Trustee or any Noteholder in contravention of any of the terms hereof and before all Senior Indebtedness of the Guarantor shall have been paid in full, such payment or distribution or security shall be received in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Indebtedness of the Guarantor at the time outstanding in accordance with the priorities then existing among such holders for application to the payment of all Senior Indebtedness of the Guarantor remaining unpaid, to the extent necessary to pay all such Senior Indebtedness (including any interest thereon accruing after the commencement of any Proceeding) of the Guarantor in full. In the event of the failure

of the Trustee or any Noteholder to endorse or assign any such payment, distribution or security, each holder of Senior Indebtedness of the Guarantor is hereby irrevocably authorized to endorse or assign the same.

     (d) Upon any payment or distribution of assets of the Guarantor referred to in this Article XII, the Trustee and the Noteholders shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such 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 Noteholders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other Indebtedness of the Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XII.

     (e) The Trustee and the Noteholders, at the expense of the Guarantor, shall take such reasonable action (including the delivery of this First Supplemental Indenture to an agent for any holders of Senior Indebtedness of the Guarantor or consent to the filing of a financing statement with respect hereto) as may, in the opinion of counsel designated by the holders of a majority in principal amount of the Senior Indebtedness of the Guarantor at the time outstanding, be necessary or appropriate to assure the effectiveness of the subordination effected by these provisions.

     (f) The provisions of this Section 12.02 shall not impair any rights, interests, remedies or powers of any secured creditor of the Guarantor in respect of any security interest the creation of which is not prohibited by the provisions of this First Supplemental Indenture.

     (g) The securing of any obligations of the Guarantor, otherwise ranking on a parity with the Notes or the Guarantee or ranking junior to the Notes or Guarantee, shall not be deemed to prevent such obligations from constituting, respectively, obligations ranking on a parity with the Notes or the Guarantee or ranking junior to the Notes or the Guarantee.

     Section 12.03. Payment Permitted If No Default.

     Nothing contained in this Article XII or elsewhere in this First Supplemental Indenture or in any of the Notes shall prevent (a) the Guarantor, at any time, except during the pendency of the conditions described in paragraph (a) of Section 12.02 or of any Proceeding referred to in Section 12.02, from making payments at any time of principal of and any premium or Interest on the Notes or (b) the application by the Trustee of any monies deposited with it hereunder to the payment of or on account of the principal of and any premium or Interest on the Notes or the retention of such payment by the Noteholders, if, at the time of such application by the Trustee, it did not have knowledge (in accordance with Section 12.07 that such payment would have been prohibited by the provisions of this Article XII, except as provided in Section 12.07.

     Section 12.04. Provisions Solely to Define Relative Rights.

     The provisions of this Article XII are and are intended solely for the purpose of defining the relative rights of the Noteholders on the one hand and the holders of Senior Indebtedness of the Guarantor on the other hand. Nothing contained in this Article XII or elsewhere in this First Supplemental Indenture or in the Notes is intended to or shall (a) impair, as between the Guarantor and the Noteholders, the obligations of the Guarantor, which are absolute and unconditional, to pay to the Noteholders the principal of and any premium and Interest on the Notes as and when the same shall become due and payable in accordance with their terms, (b) affect the relative rights against the Guarantor of the

Noteholders and creditors of the Guarantor other than their rights in relation to the holders of Senior Indebtedness of the Guarantor or (c) prevent the Trustee or the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon default under this First Supplemental Indenture, including filing and voting claims in any Proceeding, subject to the rights, if any, under this Article XII of the holders of Senior Indebtedness of the Guarantor to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder.

     Section 12.05. Subrogation of Notes.

     Subject to the payment in full of all amounts due or to become due on all Senior Indebtedness of the Guarantor, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness of the Guarantor, the Noteholders shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article XII (equally and ratably with the holders of all Indebtedness of the Guarantor that by its express terms is subordinated to Senior Indebtedness of the Guarantor to substantially the same extent as the Notes are subordinated to the Senior Indebtedness of the Guarantor and are entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Indebtedness) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to such Senior Indebtedness until the principal of and any premium and interest on the Notes shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of the Guarantor of any cash, property or securities to which the Noteholders or the Trustee would be entitled except for the provisions of this Article XII, and no payments made pursuant to the provisions of this Article XII to the holders of Senior Indebtedness of the Guarantor by Noteholders or the Trustee, shall, as among the Guarantor, its creditors other than holders of Senior Indebtedness of the Guarantor, and the Noteholders, be deemed to be a payment or distribution by the Guarantor to or on account of the Senior Indebtedness of the Guarantor.

     Section 12.06. Authorization to Effect Subordination.

     Each Noteholder by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article XII and appoints the Trustee his or her attorney-in-fact for any and all such purposes.

     Section 12.07. Notice to Trustee.

     (a) The Guarantor shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Guarantor that would prohibit the making of any payment to or by the Trustee in respect of the Notes. Notwithstanding the provisions of this Article XII or any other provision of this First Supplemental 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 Notes, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Guarantor or a holder of Senior Indebtedness or from any trustee, agent or representative therefor; provided, that if the Trustee shall not have received the notice provided for in this Section 12.07 at least two Business Days prior to the date upon which by the terms hereof any monies may become payable for any purpose (including, the payment of the principal of and any premium on or interest on any Note), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date.

     (b) The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or herself to be a holder of Senior Indebtedness of the Guarantor (or a trustee, agent, representative or attorney-in-fact therefor) to establish that such notice has been given by a holder of Senior Indebtedness of the Guarantor (or a trustee, agent, representative or attorney-in-fact 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 Indebtedness of the Guarantor to participate in any payment or distribution pursuant to this Article XII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of the Guarantor 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 XII, 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 12.08. Rights of Trustee as Holder of Senior Indebtedness.

     The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XII with respect to any Senior Indebtedness of the Guarantor that may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of the Guarantor, and nothing in this First Supplemental Indenture shall deprive the Trustee of any of its rights as such holder.

     Section 12.09. No Waiver of Subordination Provisions.

     (a) No right of any present or future holder of any Senior Indebtedness of the Guarantor 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 Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Guarantor with the terms, provisions and covenants of this First Supplemental Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with.

     (b) Without in any way limiting the generality of paragraph (a) of this Section 12.09, the holders of Senior Indebtedness of the Guarantor may, at any time and from to time, without the consent of or notice to the Trustee or the Noteholders, without incurring responsibility to such Noteholders and without impairing or releasing the subordination provided in this Article XII or the obligations hereunder of such Noteholders to the holders of Senior Indebtedness of the Guarantor, do any one or more of the following:

     (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding;

     (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness;

     (iii) release any Person liable in any manner for the payment of such Senior Indebtedness; and

     (iv) exercise or refrain from exercising any rights against the Guarantor and any other Person.

     Section 12.10. Certain Conversions Deemed Payment.

     For the purposes of this Article XII only, (1) the issuance and delivery of junior securities upon conversion of Notes in accordance with Section 9.03 shall not be deemed to constitute a payment or distribution on account of the principal of, or premium, if any, the cash portion of the principal of, if any, or Interest on, Notes or on account of the purchase or other acquisition of Notes, and (2) the payment, issuance or delivery of cash (except in satisfaction of fractional shares pursuant to Section 9.03), property or securities (other than junior securities) upon conversion of a Note shall be deemed to constitute payment on account of the principal of such Note. For the purposes of this Section 12. 10, the term “junior securities” means (a) shares of capital stock of any class or series of the Guarantor or (b) securities of the Guarantor which are subordinated in right of payment to all Senior Indebtedness of the Guarantor which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Notes are so subordinated as provided in this Article XII. Nothing contained in this Article XII or elsewhere in this First Supplemental Indenture or in the Notes is intended to or shall impair, as among the Guarantor, its creditors other than holders of Senior Indebtedness of the Guarantor and the Noteholders, the right, which is absolute and unconditional, of any Noteholder to convert Notes in accordance with Article IX.

     Section 12.11. Article Applicable to Paying Agents.

     If at any time any Paying Agent other than the Trustee shall have been appointed by the Guarantor and be then acting hereunder, the term “Trustee” as used in this Article XII 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 XII in addition to or in place of the Trustee.

     Section 12.12. Senior Indebtedness Entitled to Rely.

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

     Section 12.13. Trustee Not Fiduciary for Holders of Senior Indebtedness.

     The Trustee, in its capacity as trustee under this First Supplemental Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Guarantor and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Noteholders or to the Guarantor or to any other Person cash, property or securities to which any holders of Senior Indebtedness of the Guarantor shall be entitled by virtue of this Article XII or otherwise.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

     Section 13.01. Provisions Binding on Company’s and Guarantor’s Successors. All the covenants, stipulations, promises and agreements by the Company or the Guarantor contained in this First Supplemental Indenture shall bind the Company’s and the Guarantor’s, as the case may be, successors and assigns whether so expressed or not.

     Section 13.02. Official Acts by Successor Corporation. Any act or proceeding by any provision of this First Supplemental Indenture authorized or required to be done or performed by any board,

committee or officer of the Company or the Guarantor shall and may be done and performed with like force and effect by the like board, committee or officer of any Person that shall at the time be the lawful sole successor of the Company or the Guarantor.

     Section 13.03. Addresses for Notices, Etc. Any request, notice or demand which by any provision of this First Supplemental Indenture is required or permitted to be given or served by the Trustee or by the holders of Notes on the Company or the Guarantor shall be deemed to have been sufficiently given or made, for all purposes, if delivered by messenger or overnight carrier, given or served by being deposited postage prepaid by registered or certified mail in a post office letter box or sent by telecopier transmission addressed as follows: to CapitalSource Inc., 4445 Willard Avenue, 12th Floor, Chevy Chase, Maryland 20815, Telecopier No.: 301 ###-###-####, Attention: Chief Financial Officer. Any notice, direction, request or demand hereunder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if delivered by messenger or overnight carrier, given or served by being deposited, postage prepaid, by registered or certified mail in a post office letter box, addressed as follows: Wells Fargo Bank, N.A., 1600 J.F. Kennedy Blvd., Suite 810, Philadelphia, PA 19103; Telephone: 215 ###-###-####, Facsimile: 215 ###-###-####; provided, however, that the Trustee shall not be deemed to have received notice until such notice is actually received.

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

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

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

     Section 13.04. Notice to Holders. Where this First Supplemental 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 Noteholders 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.

     Section 13.05. Governing Law. This First Supplemental Indenture and each Note shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of the State of New York (including Section 5-1401 of the New York General Obligations Law or any successor to such statute).

     Section 13.06. Company Responsible for Making Calculations. The Company will be responsible for making all calculations called for under this First Supplemental Indenture. These calculations include, but are not limited to, determination of the Last Reported Sale Price or Trading Price, the amount of accrued Interest payable on the Notes and the Conversion Rate of the Notes. The Company will make these calculations in good faith and, absent manifest error, these calculations will be final and binding on the Noteholders. Promptly after the calculation thereof, the Company will provide to each of the Trustee and the Conversion Agent an Officers’ Certificate setting forth a schedule of its calculations, and each of the Trustee and the Conversion Agent is entitled to conclusively rely upon the accuracy of such calculations without independent verification. The Trustee will forward the Company’s calculations to any Noteholder upon the written request of such Noteholder.

     Section 13.07. Evidence of Compliance with Conditions Precedent, Certificates to Trustee. Upon any application, request or demand by the Company or the Guarantor to the Trustee to take any action under any of the provisions of this Indenture, the Company or the Guarantor, as applicable, 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 an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

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

     Section 13.08. Trust Indenture Act. This First Supplemental Indenture is hereby made subject to, and shall be governed by, the provisions of the Trust Indenture Act required to be part of and to govern indentures qualified under the Trust Indenture Act; provided, that unless otherwise required by law, notwithstanding the foregoing, this First Supplemental Indenture and the Notes issued hereunder shall not be subject to the provisions of subsections (a)(1), (a)(2), and (a)(3) of Section 314 of the Trust Indenture Act as now in effect or as hereafter amended or modified; provided further that this Section 19.09 shall not require this First Supplemental Indenture or the Trustee to be qualified under the Trust Indenture Act prior to the time such qualification is in fact required under the terms of the Trust Indenture Act, nor shall it constitute any admission or acknowledgment by any party to the Indenture that any such qualification is required prior to the time such qualification is in fact required under the terms of the Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in an indenture qualified under the Trust Indenture Act, such required provision shall control.

     Section 13.09. No Security Interest Created. Except as provided in Section 9.06, nothing in this First Supplemental Indenture or in the Notes, expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction in which property of the Company or its subsidiaries is located.

     Section 13.10. Benefits of Indenture. Nothing in the First Supplemental Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any authenticating agent, any Note Registrar and their successors hereunder and the Noteholders, any benefit or any legal or equitable right, remedy or claim under this First Supplemental Indenture.

     Section 13.11. Authenticating Agent. The Trustee may appoint an authenticating agent that shall be authorized to act on its behalf, and subject to its direction, in the authentication and delivery of Notes in connection with the original issuance thereof and transfers and exchanges of Notes hereunder, including under Section 2.04, Section 305 of the Original Indenture, Section 3.03 and Section 3.08, as fully to all intents and purposes as though the authenticating agent had been expressly authorized by this First Supplemental Indenture and those Sections to authenticate and deliver Notes. For all purposes of this First Supplemental Indenture, the authentication and delivery of Notes by the authenticating agent shall be deemed to be authentication and delivery of such Notes “by the Trustee” and a certificate of authentication executed on behalf of the Trustee by an authenticating agent shall be deemed to satisfy any requirement hereunder or in the Notes for the Trustee’s certificate of authentication. Such authenticating agent shall at all times be a Person eligible to serve as trustee hereunder pursuant to Section 9.09.

     Any corporation into which any authenticating agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any authenticating agent shall be a party, or any corporation succeeding to the corporate trust business of any authenticating agent, shall be the successor of the authenticating agent hereunder, if such successor corporation is otherwise eligible under this Section 13.11, without the execution or filing of any paper or any further act on the part of the parties hereto or the authenticating agent or such successor corporation.

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

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

     Section 13.12. Execution in Counterparts. This First Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

     Section 13.13. Severability. In case any provision in this First Supplemental Indenture or in the Notes shall be invalid, illegal or unenforceable, then (to the extent permitted by law), the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

     Wells Fargo Bank, N.A., hereby accepts the trusts in this First Supplemental Indenture declared and provided, upon the terms and conditions herein above set forth.

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

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

EXHIBIT A

[Include only for Global Notes:]

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

     THE NOTES ARE BEING ISSUED WITH “ORIGINAL ISSUE DISCOUNT” FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. A HOLDER OF NOTES MAY OBTAIN THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY ON THE NOTES, DETERMINED BY CAPITALSOURCE INC., BY REGISTERED OR CERTIFIED MAIL IN A POST OFFICE LETTER BOX OR SENT BY TELECOPIER TRANSMISSION ADDRESSED AS FOLLOWS: TO CAPITALSOURCE INC., 4445 WILLARD AVENUE, 12TH FLOOR, CHEVY CHASE, MARYLAND 20815, TELECOPIER NO.: 301 ###-###-####, ATTENTION: CHIEF FINANCIAL OFFICER.

CAPITALSOURCE INC.
7.250% SENIOR SUBORDINATED CONVERTIBLE NOTE DUE 2037

CUSIP: ISIN:		14055X AG7 US14055XAG79

No. 1		$250,000,000

     CapitalSource Inc., a corporation duly organized and validly existing under the laws of the State of Delaware (herein called the “Company,” which term includes any successor corporation under the Indenture referred to on the reverse hereof), for value received hereby promises to pay to CEDE & CO. or its registered assigns, the principal sum set forth on Schedule I hereto on July 15, 2037 at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, dated as of July 30, 2007 (the “Original Indenture”) and the First Supplemental Indenture thereto, dated as of July 30, 2007 (the “First Supplemental Indenture” and together with the Original Indenture, the “Indenture”), in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest, semiannually on January 15 and July 15 of each year, commencing January 15, 2008, on said principal sum at said office or agency, in like coin or currency, at the rate per annum of 7.250%. On January 15, 2008, the Company promises to pay to the Person entitled thereto as it appears in the Note Register on the Regular Record Date, which shall be January 1, 2008 (whether or not a Business Day), as provided in the Indenture, interest accruing from July 15, 2007 at 7.250% per annum from, and including, the date of this 7.250% Senior Subordinated Convertible Note Due 2037 (“Note”). Except as otherwise provided in the Indenture, the interest payable on the Note pursuant to the Indenture on any January 15 or July 15 will be paid to the Person entitled thereto as it appears in the Note Register on the Regular Record Date, which shall be the January 1 or July 1 (whether or not a Business Day) next preceding such January 15 or July 15, as provided in the Indenture; provided, that any such interest not punctually paid or duly provided for shall be payable as provided in the Indenture. The Company shall pay interest (i) on any Notes in certificated form by check mailed to the address of the Person entitled thereto as it appears in the Note Register (or, upon written notice, by wire transfer in immediately available funds, if such Person is entitled to interest on Notes with an aggregate principal amount in excess of $2,000,000) or (ii) on any Global Note by wire transfer of immediately available funds to the account of the Depositary or its nominee.

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

     This Note shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with and governed by the laws of the State of New York (including Section 5-1401 of the New York General Obligations Law or any successor to such statute).

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

GUARANTEE

     For value received, the undersigned hereby unconditionally guarantees to the holder of this Note the payment of principal of, and Interest on this Note in the amounts and at the time when due and Interest on the overdue principal and Interest, if any, of this Note, if lawful, and the payment of all other obligations of the Company under the Indenture or the Notes, to the holder of this Note and the Trustee, all in accordance with and subject to the terms and limitations of this Note and the Indenture. This Guarantee will not become effective until the Trustee duly executes the certificate of authentication on this Note.

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

July 30, 2007

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

THIS IS ONE OF THE NOTES DESCRIBED IN THE WITHIN-NAMED INDENTURE.

FORM OF REVERSE OF NOTE
CAPITALSOURCE INC.
7.250% SENIOR SUBORDINATED CONVERTIBLE NOTE DUE 2037

     This Note is one of a duly authorized issue of Notes of the Company, designated as its Senior Subordinated Convertible Notes due 2037 (herein called the “Notes”), initially limited in aggregate principal amount to $287,500,000, issued and to be issued under and pursuant to an Indenture, dated as of July 30, 2007 (the “Original Indenture”) and the First Supplemental Indenture thereto, dated as of July 30, 2007 (the “First Supplemental Indenture” and, together with the Original Indenture, the “Indenture”), among the Company and CapitalSource Finance LLC, as guarantor (herein called the “Guarantor”), and Wells Fargo Bank, N.A., as trustee (herein called the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company, the Guarantor and the holders of the Notes.

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

     The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of at least a majority in aggregate principal amount of the Notes at the time outstanding, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the holders of the Notes; provided, that no such supplemental indenture shall (A) extend the Stated Maturity of any Note, or (B) reduce the rate or extend the time for payment of Interest thereon, or (C) reduce the principal amount thereof, or (D) reduce any amount payable on redemption or repurchase thereof, or (E) impair the right of any holder to institute suit for the payment thereof, or (F) make the principal thereof or Interest thereon payable in any coin or currency other than that provided in the Notes, or (G) affect the obligation of the Company to redeem any Note on a Redemption Date in a manner adverse to the holders of Notes, or (H) affect the obligation of the Company to repurchase any Note upon the happening of a Fundamental Change in a manner adverse to the holders of Notes, or (I) affect the obligation of the Company to repurchase any Note on a Company Repurchase Date in a manner adverse to the holders of Notes, or (J) impair the right to convert the Notes into Common Stock subject to the terms set forth in the First Supplemental Indenture, including Section 9.07 thereof, or (K) reduce the number of shares of Common Stock, the amount of cash or the amount of other property receivable upon conversion, in each case, without the consent of the holder of each Note so affected, or (L) modify any of the provisions of Sections 512 and 1013 of the Original Indenture or Sections 5.03 and 6.03 of the First Supplemental Indenture, except to increase any such percentage or to provide that certain other provisions of this First Supplemental Indenture cannot be modified or waived without the consent of the holder of each Note so affected, or (M) reduce the quorum or voting requirements set forth in Article IX of the Indenture or (N) reduce the aforesaid percentage of Notes, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of all Notes then outstanding. Subject to the provisions of the Indenture, the holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the holders of all of the Notes waive any past default or Event of Default under the Indenture and its consequences except (A) a default in the payment of Interest on or the principal of any of the Notes, (B) a failure by the Company to convert any Notes into Common Stock, cash or a combination of cash and Common Stock of the Company, (C) a default in the payment of the Redemption Price pursuant to Article III of the First Supplemental Indenture, (D) a default in the payment of the Company Repurchase Price or Fundamental Change Repurchase Price pursuant to Article III of the First Supplemental Indenture, or (E) a default in respect of a covenant or provision of the

Indenture which under Article X of the Original Indenture and Article IV of the First Supplemental Indenture cannot be modified or amended without the consent of the holders of each or all Notes then outstanding or affected thereby. Any such consent or waiver by the holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Note and any Notes which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Note or such other Notes.

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

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

     The Notes are issuable in fully registered form, without interest coupons, in denominations of $1,000 principal amount and any multiple of $1,000. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations provided in the Indenture, without payment of any service charge but with payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in connection with any registration or exchange of Notes, Notes may be exchanged for a like aggregate principal amount of Notes of any other authorized denominations.

     At any time on or after July 20, 2012 and prior to maturity, the Notes may be redeemed at the option of the Company, in whole or in part, in cash, or a combination of cash and shares of Common Stock, upon mailing a notice of such redemption not less than 30 days but not more than 60 days before the Redemption Date to the holders of Notes at their last registered addresses, all as provided in the Indenture, at a Redemption Price equal to 100% of the principal amount of Notes being redeemed plus accrued and unpaid Interest to, but excluding, the Redemption Date; provided, that if the applicable Redemption Date is an Interest Payment Date, the Interest payable on such Interest Payment Date shall be paid on such Interest Payment Date to the holders of record of such Notes on the applicable Record Date instead of the holders surrendering such Notes for redemption on such date.

     In no event will any Note be redeemable at the option of the Company before July 20, 2012.

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

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

     If a Fundamental Change occurs at any time prior to maturity of the Notes, each holder shall have the right, at such holder’s option, to require the Company to repurchase this Note for cash, or subject to certain conditions, Common Stock, on a Fundamental Change Repurchase Date, specified by the Company, which shall be no later than 30 Business Days after notice thereof, at a Fundamental Change Repurchase Price equal to at least 100% of the principal amount thereof, together with accrued Interest to, but excluding, the Fundamental Change Repurchase Date. The Company shall mail to all holders of record of the Notes a notice of the occurrence of a Fundamental Change and of the repurchase right arising as a result thereof on or before the 30th day after the occurrence of such Fundamental Change. For a Note to be so repurchased at the option of the holder, the Company must receive at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, such Note with the form entitled “Form of Fundamental Change Repurchase Notice” on the reverse thereof

duly completed, together with such Note, duly endorsed for transfer at any time prior to the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date.

     Subject to the terms and conditions of the Indenture, the Company shall become obligated to repurchase, at the option of the holder, all or any portion of the Notes held by such holder on July 15, 2012, July 15, 2017, July 15, 2022, July 15, 2027, and July 15, 2032 in integral multiples of $1,000 at a Company Repurchase Price of 100% of the principal amount, plus any accrued and unpaid Interest on such Note to but excluding the Company Repurchase Date. To exercise such right, a holder shall deliver to the Company such Note with the form entitled “Form of Company Repurchase Election” on the reverse thereof duly completed, together with the Note, duly endorsed for transfer, at any time from the opening of business on the 20th Business Day prior to such Company Repurchase Date until the close of business on the Business Day immediately preceding the Company Repurchase Date, and shall deliver, or arrange for book-entry transfer of, the Notes to the Trustee (or other Paying Agent appointed by the Company) as set forth in the Indenture.

     The Company Repurchase Price to be paid on any of July 15, 2012, July 15, 2017, July 15, 2022, July 15, 2027, and July 15, 2032 shall be paid in cash and the Fundamental Change Repurchase Price to be paid on any Fundamental Change Repurchase Date shall be paid in cash or Common Stock, subject to the terms and conditions of the Indenture.

     Holders have the right to withdraw any Repurchase Election by delivering to the Trustee (or other Paying Agent appointed by the Company) a written notice of withdrawal up to the close of business on the Business Day immediately preceding the Repurchase Date, all as provided in the Indenture.

     If money or Common Stock, if allowed under the Indenture, sufficient to pay the Repurchase Price with respect to all Notes or portions thereof to be repurchased as of any Repurchase Date is deposited with the Trustee (or other Paying Agent appointed by the Company), then on and after such Repurchase Date, such Notes will cease to be outstanding, Interest will cease to accrue on such Notes (or portions thereof), and the holder thereof shall have no other rights as such other than the right to receive the Repurchase Price upon surrender of such Note.

     Subject to the occurrence of certain events and in compliance with the provisions of the Indenture, prior to the Stated Maturity of the Notes, the holder hereof has the right, at its option, to convert each $1,000 principal amount of the Notes into 36.9079 shares of the Common Stock (a Conversion Price of approximately $27.09 per share), as such shares shall be constituted at the date of conversion and subject to adjustment from time to time as provided in the Indenture, upon surrender of this Note with the form entitled “Form of Notice of Conversion” on the reverse hereof duly completed, to the Company at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, or at the option of such holder, the Corporate Trust Office, and, unless the shares issuable on conversion are to be issued in the same name as this Note, duly endorsed by, or accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the holder or by his duly authorized attorney. The Company will notify the holder thereof of any event triggering the right to convert the Notes as specified above in accordance with the Indenture.

     If the Company (i) is a party to a consolidation, merger, statutory share exchange or combination, (ii) reclassifies the Common Stock, or (iii) sells or conveys its properties and assets substantially as an entirety to any Person, the right to convert a Note into shares of Common Stock will be changed into a right to convert it into the kind or amount of cash, securities or other property receivable upon such event, in each case in accordance with the Indenture.

     No adjustment in respect of Interest on any Note converted or dividends on any shares issued upon conversion of such Note will be made upon any conversion except as set forth in the next sentence. If this Note (or portion hereof) is surrendered for conversion during the period from the close of business on any Record Date for the payment of Interest to the opening of business on the immediately following Interest Payment Date, this Note (or portion hereof being converted) must be accompanied by payment, in immediately available funds or other funds acceptable to the Company, of an amount equal to the Interest otherwise payable on such Interest Payment Date on the principal amount being converted; provided, that no such payment shall be required (1) if the Company has specified a Redemption Date that is after a Record Date and prior to the next Interest Payment Date, (2) if the Company has specified a Repurchase Date following a Fundamental Change that is after a Record Date and on or prior to the next Interest Payment Date or (3) to the extent of any Defaulted Interest, if any Defaulted Interest exists at the time of conversion with respect to such Note.

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

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

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

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

     No recourse for the payment of the principal of or Interest on this Note, or for any claim based hereon or otherwise in respect hereof, and no recourse under or upon any obligation, covenant or agreement of the Company or the Guarantor in the Indenture or any supplemental indenture or in any Note, or because of the creation of any Indebtedness represented thereby, or for any of the obligations of the Guarantor under the Guarantee shall be had against any incorporator, shareholder, member, employee, agent, officer or director or subsidiary, as such, past, present or future, of the Company, the Guarantor, or of any successor corporation or limited liability company, either directly or through the Company, or the Guarantor, or any successor corporation or limited liability company, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.

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

ABBREVIATIONS

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

TEN COM —		as tenants in common		UNIF GIFT MIN ACT—                    Custodian
TEN ENT —		as tenant by the entireties		(Cust) (Minor)
JT TEN —		as joint tenants with right of survivorship and not as tenants in common		under Uniform Gifts to Minors Act

(State)

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

FORM OF
NOTICE OF CONVERSION

TO:		CAPITALSOURCE INC. WELLS FARGO BANK, N.A.

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

Dated:                                      

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

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

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

(Name)                                                                                  

(Street Address)                                                                              

(City, State and Zip Code)                                                             

Please print name and address

Principal amount to be converted (if less than all): $                

Social Security or Other Taxpayer Identification
Number:                                                                     

Exh. A-12

FORM OF
FUNDAMENTAL CHANGE REPURCHASE NOTICE

TO:    CAPITALSOURCE INC.
          WELLS FARGO BANK, N.A.

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

Dated:                                         

                                                                                  

Signature(s)

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

Note Certificate Number (if applicable):                                                             

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

Social Security or Other Taxpayer Identification Number:                                                             

Exh. A-13

FORM OF
COMPANY REPURCHASE ELECTION

TO:    CAPITALSOURCE INC.
           WELLS FARGO BANK, N.A.

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

Dated:                                         

                                                                                  

Signature(s)

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

Note Certificate Number (if applicable):                                                             

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

Social Security or Other Taxpayer Identification Number:                                                             

Exh. A-14

ASSIGNMENT

     For value received                      hereby sell(s) assign(s) and transfer(s) unto                       (please insert social security or other Taxpayer Identification Number of assignee) the within Note, and hereby irrevocably constitutes and appoints                      attorney to transfer said Note on the books of the Company, with full power of substitution in the premises.

Dated:                                       

                                                                                    

Signature(s)

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

Signature Guarantee

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

Exh. A-15

Schedule I

CAPITALSOURCE INC.
7.250% Senior Subordinated Convertible Notes due 2037

No. 1

					Notation Explaining			Authorized Signature
					Principal Amount			of Trustee or
Date		Principal Amount			Recorded			Custodian

Sch. I-1