Document:

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                                                                   Exhibit 10.57

                              ACQUISITION AGREEMENT

                                  BY AND AMONG

                             KAYNE ANDERSON RUDNICK
                           INVESTMENT MANAGEMENT, LLC,

                         THE EQUITYHOLDERS NAMED HEREIN

                                       AND

                        PHOENIX INVESTMENT PARTNERS, LTD.

                          DATED AS OF NOVEMBER 12, 2001
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                                    ARTICLE 1

                                   DEFINITIONS

1.1   Defined Terms............................................................1
1.2   Other Defined Terms.....................................................13

                                    ARTICLE 2

                    PURCHASE AND SALE OF MEMBERSHIP INTERESTS

2.1   Membership Interests To Be Sold on the Closing Date.....................15
2.2   Determination of Closing Date Payment Amount............................15
2.3   [Intentionally Omitted].................................................15
2.4   Instruments of Transfer; Payment of Purchase Price......................15
2.5   Determination of Adjusted Closing Date Payment Amount...................16
2.6   Post-Closing Reclassification...........................................17
2.7   Class C Units to be Purchased on each Future Purchase Date..............17
2.8   Determination of Future Purchase Price..................................17
2.9   Future Purchase Closings................................................19

                                    ARTICLE 3

                                     CLOSING

3.1   Closing.................................................................19
3.2   Conditions to Obligations of the Class A Equityholders and Class B
      Equityholders on the Closing Date.......................................19
3.3   Conditions to Obligations of Buyer on the Closing Date..................21

                                    ARTICLE 4

           REPRESENTATIONS AND WARRANTIES OF KAR AND THE EQUITYHOLDERS

4.1   Organization, Standing and Authority....................................23
4.2   Subsidiaries............................................................23
4.3   Authorization...........................................................23
4.4   Organizational Documents................................................24
4.5   No Violation............................................................24
4.6   Governmental Authorization..............................................24
4.7   Ownership of Membership Interests.......................................24
4.8   Financial Statements....................................................25
4.9   Absence of Undisclosed Liabilities......................................25
4.10  Accounts Receivable.....................................................25
4.11  Absence of Certain Changes..............................................26
4.12  Litigation..............................................................27
4.13  Title to Assets.........................................................27
4.14  Technology and Intellectual Property....................................27
4.15  Contracts...............................................................28
4.16  No Default Under Contracts or Agreements................................29

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4.17  Investment Contracts and Clients........................................29
4.18  Compliance with Laws....................................................30
4.19  Business; Registrations.................................................30
4.20  Taxes...................................................................31
4.21  Employee Benefit Plans..................................................32
4.22  Partners, Shareholders, Officers and Employees..........................36
4.23  Insurance...............................................................37
4.24  Transactions with Interested Persons....................................37
4.25  Certain Additional Representations and Warranties as to the Fund........37
4.26  No Other Agreements to Sell.............................................41
4.27  No Brokers..............................................................41
4.28  Filing Documents........................................................41
4.29  Environmental Matters...................................................41
4.30  Information in Proxy Materials and Other Disclosure.....................42

                                    ARTICLE 5

                     REPRESENTATIONS AND WARRANTIES OF BUYER

5.1   Organization and Standing...............................................42
5.2   Authorization...........................................................42
5.3   No Violation............................................................43
5.4   Governmental Authorization..............................................43
5.5   Financial Statements....................................................43
5.6   Compliance with Laws....................................................43
5.7   Advisers Act............................................................44
5.8   Adequate Financing......................................................45
5.9   No Brokers..............................................................45
5.10  Filing Documents........................................................45
5.11  Information in Proxy Materials and Other Disclosure.....................45

                                    ARTICLE 6

                    CONDUCT OF BUSINESS PRIOR TO THE CLOSING

6.1   Conduct Prior to Closing................................................45
6.2   Consents and Approvals..................................................48
6.3   KAA.....................................................................49

                                    ARTICLE 7

                              ADDITIONAL AGREEMENTS

7.1   Current Information; Notification of Certain Matters....................50
7.2   Access; Confidential Information........................................50
7.3   Third-party Proposals...................................................51
7.4   Publicity...............................................................51
7.5   Satisfaction of Conditions in Section 15(f) of the Investment
      Company Act.............................................................52
7.6   Name Change for Fund....................................................52
7.7   Further Assurances......................................................52

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7.8   State Takeover Statutes.................................................52
7.9   Distribution of 2001 Earnings...........................................52
7.10  Buyer Reliance Upon Equityholder Designee...............................53

                                    ARTICLE 8

                                   TERMINATION

8.1   Termination.............................................................53
8.2   Survival After Termination..............................................55

                                    ARTICLE 9

                                 INDEMNIFICATION

9.1   Indemnification.........................................................55

                                   ARTICLE 10

                                   TAX MATTERS

10.1  Pre-Closing Taxes; Amendment of Returns.................................58
10.2  Assistance and Cooperation..............................................59
10.3  Contests and Payment Procedures.........................................60

                                   ARTICLE 11

                                  MISCELLANEOUS

11.1  Survival of Representations and Warranties..............................60
11.2  Expenses; Transfer Taxes................................................60
11.3  Set-Off.................................................................61
11.4  Notices.................................................................61
11.5  Counterparts............................................................62
11.6  Governing Law...........................................................62
11.7  Waiver; Amendment.......................................................63
11.8  Entire Agreement; Persons Benefiting; Etc...............................63
11.9  Arbitration.............................................................63

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EXHIBITS:

   Exhibit A-1  - Form of Employment Agreement (Management Committee)
   Exhibit A-2  - Form of Employment Agreement (Messrs. Nadal and
                  Schwarzkopf)
   Exhibit B    - Form of Opinion of Counsel for Buyer
   Exhibit C    - Form of Opinion of Counsel for KAR and the Equityholders
   Exhibit D    - Form of Class C Put/Call Agreement
   Exhibit E    - Form of Class D Put/Call Agreement
   Exhibit F    - Form of Amended and Restated Operating Agreement
   Exhibit G-1  - Form of Noncompetition/Nonsolicitation Agreement for
                  Management Committee Members
   Exhibit G-2  - Form of Noncompetition/Nonsolicitation Agreement for Messrs.
                  Nadal and Schwartzkopf
   Exhibit G-3  - Form of Noncompetition/Nonsolicitation Agreement for Certain
                  Equityholders without Employment Agreements
   Exhibit H    - Form of Consent Letter: Affirmative Consent Clients
   Exhibit I    - Form of Consent Letter: Negative Consent Clients
   Exhibit J    - Form of Security Agreement

SCHEDULES:

   Schedule A        -  List of Equityholders and of Membership Interests Being
                        Sold on Closing Date
   Schedule B        -  List of Equityholders and Membership Interests Being
                        Sold on Future Purchase Dates
   Schedule C        -  List of Equityholders and Membership Interests
   Schedule D        -  List of Affirmative Consent Clients
   Schedule E        -  List of Negative Consent Clients
   Schedule F        -  Affiliated Accounts
   Schedule G        -  Arbitration Provisions
   Schedule H        -  Procedures for Calculation of Closing Run Rate Revenues
   Schedule I        -  Procedures for Calculation of Current Run Rate Revenues
   Schedule J        -  Sample Calculation of Net Investment Advisory Fees
   Schedule K        -  TOPA Equities Agreement
   Schedule 3.2(e)   -  Persons entering into Employment Agreements
   Schedule 4        -  Disclosure Schedule

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                              ACQUISITION AGREEMENT

            ACQUISITION AGREEMENT, dated as of November 12, 2001, by and among
Phoenix Investment Partners, Ltd., a Delaware corporation ("Buyer"), Kayne
Anderson Rudnick Investment Management, LLC, a California limited liability
company ("KAR"), and the Equityholders (as defined below).

            WHEREAS, pursuant to the terms and subject to the conditions of this
Agreement, Buyer wishes to acquire a portion of the Membership Interests of KAR;
and

            WHEREAS, the members, listed on Schedule A hereto, being the members
of KAR holding all of the equity interests of KAR (collectively, including their
successors and permitted transferees, the "Equityholders"), wish to sell a
portion of their Membership Interests to Buyer;

            NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and
subject to the conditions and other terms herein set forth, the parties hereto
hereby agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

            1.1   Defined Terms.  As used herein, the terms below shall have the
following meanings:

            "Action" means any claim, action, suit, proceeding, investigation,
inspection, examination or audit, whether at law or in equity, or by or before
any court, arbitrator, arbitration panel or Governmental Entity.

            "Adjusted Closing Date Payment Amount" means the following: (i) if
the Adjusted Closing Run Rate Revenues equal at least 90% and not more than 110%
of Current Run Rate Revenues, then the Adjusted Closing Date Payment Amount
shall equal the Assumed Closing Date Payment Amount, (ii) if the Adjusted
Closing Run Rate Revenues are less than 90% of Current Run Rate Revenues, then
the Adjusted Closing Date Payment Amount shall equal the product of (x) the
Assumed Closing Date Payment Amount and (y) 100% minus the difference between
(A) 90% and (B) the percentage determined by dividing the Adjusted Closing Run
Rate Revenues by the Current Run Rate Revenues and (iii) if the Adjusted Closing
Run Rate Revenues are more than 110% of Current Run Rate Revenues, then the
Adjusted Closing Date Payment Amount shall equal the product of (x) the Assumed
Closing Date Payment Amount and (y) 100% plus the difference between (A) the
percentage determined by dividing the Adjusted Closing Run Rate Revenues by the
Current Run Rate Revenues and (B) 110%.

            "Adjusted Closing Run Rate Revenues" means Closing Run Rate Revenues
adjusted as follows: (i) Closing Run Rate Revenues shall be increased by the
aggregate amount, if any, that would have been included in Closing Run Rate
Revenues if the accounts that were excluded from the calculation of Closing Run
Rate Revenues solely pursuant to clause (i)(A) of the second sentence of the
definition of Closing Run Rate Revenues because an affirmative
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consent in respect of such accounts was not obtained from the respective Clients
on or prior to the Closing Date had not been so excluded, provided that a valid
affirmative consent in respect of such accounts otherwise in accordance with
Section 6.2 was received by KAR on or prior to the date that is the 90th day
after the Closing Date; and (ii) Closing Run Rate Revenues shall be reduced by
the excess, if any, of (A) the aggregate amount that was included in Closing Run
Rate Revenues in respect of accounts for which the respective Clients terminated
their Investment Contracts after the Closing Date and on or prior to the 90th
day after the Closing Date over (B) the aggregate amount that would have been
included in Closing Run Rate Revenues in respect of new accounts established
after the Closing Date and on or prior to the 90th day after the Closing Date by
Clients who were not Clients on or prior to the Closing Date had such new
accounts existed on the Closing Date (based on the aggregate amount deposited in
such new accounts less the aggregate amount of withdrawals from such accounts on
or prior to the 90th day after the Closing Date).

            "Advisers Act" means the Investment Advisers Act of 1940, as amended
(together with the rules and regulations promulgated thereunder).

            "Affiliate" means, when used with respect to a specified Person,
another Person that, either directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with,
the Person specified. As used herein, the term "control" means the power through
the ownership of voting securities or other equity interests, contract or
otherwise to direct the affairs of another Person.

            "Affiliated Accounts" means all accounts of KAR with any of the
Equityholders, members of their families or entities owned or controlled or
otherwise Affiliated with or for the benefit of any of the Sellers or members of
their families (provided, however, that (i) all accounts of KAR with TOPA
Equities shall be deemed not to be Affiliated Accounts for purposes of this
Agreement provided that, at the relevant time, the TOPA Equities Agreement has
been executed by the parties thereto, has not been supplemented or amended
without the prior written consent of Buyer and is in full force and effect and
there has been no default under or breach of such agreement by the parties
thereto, and (ii) all 401(k) accounts of the Equityholders under management by
KAR shall be deemed not to be Affiliated Accounts for purposes of this
Agreement), all of which accounts are listed on Schedule F hereto. For purposes
of this definition of Affiliated Accounts, the members of an Equityholder's
respective family shall refer to such Equityholder's spouse, lineal ascendants,
lineal descendants and siblings (including by adoption).

            "Affirmative Consent Client" means each Client who is party to an
Affirmative Consent Contract.

            "Affirmative Consent Contract" means each investment advisory
contract with a Client of KAR requiring the written consent of the Client for
the assignment thereof. All of the Affirmative Consent Contracts are listed on
Schedule D.

            "Applicable Law" means any domestic or foreign federal, state or
local statute, law, ordinance, rule, administrative interpretation, regulation,
order, writ, injunction, directive, judgment, decree, policy, guideline or other
requirement (including those of the NASD or any

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other self-regulatory organization) applicable to KAR, the Equityholders, the
Fund, Buyer or any of their respective Affiliates, properties, assets, officers,
directors, employees or agents, as the case may be.

            "Assumed Closing Date Payment Amount" means an amount equal to the
product of (i) 60%, multiplied by (ii) 4, multiplied by (iii) the Current Run
Rate Revenues.

            "Audited Balance Sheets" means the audited consolidated balance
sheets of KAR as of December 31, 2000, 1999 and 1998, together in each case with
the related notes thereto and the related unqualified reports thereon of Briggs,
Bunting & Dougherty, LLP.

            "Audited Financial Statements" means the Audited Balance Sheets and
the audited consolidated statements of income, changes in members' capital and
cash flows of for the years ended December 31, 2000, 1999 and 1998, together in
each case with the related notes thereto and the related unqualified reports
thereon of Briggs, Bunting & Dougherty, LLP.

            "Balance Sheet" means the unaudited consolidated balance sheet of
KAR as of the Balance Sheet Date, together with the related notes thereon.

            "Balance Sheet Date" means September 30, 2001.

            "Business" means the businesses of KAR and the Fund.

            "Business Day" shall mean any day that the New York Stock Exchange
is normally open for trading and that is not a Saturday, a Sunday or a day on
which banks in the State of New York are generally closed for regular banking
business.

            "Business Manager Revenue Sharing" means revenue sharing payments by
KAR that are made pursuant to contractual obligations with Persons who are not
employees of KAR for KAR specified investment management accounts.

            "Buyer" has the meaning given such term in the recitals.

            "Class A Equityholder" means a holder of Class A Units on the date
hereof or any such holder's successors or permitted assigns.

            "Class A Units" means the Class A Units issued by KAR pursuant to
the KAR LLC Agreement.

            "Class B Equityholder" means a holder of Class B Units on the date
hereof or any such holder's successors or permitted assigns.

            "Class B Units" means the Class B Units issued by KAR pursuant to
the KAR LLC Agreement.

            "Class C Equityholder" means a holder of Class C Units on the date
hereof or any such holder's successors or permitted assigns.

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            "Class C Units" means the Class C Units issued by KAR pursuant to
the KAR LLC Agreement.

            "Class D Units" means the Class D Units to be issued by KAR pursuant
to the Restated KAR LLC Agreement.

            "Class E Units" means the Class E Units to be issued by KAR pursuant
to the Restated KAR LLC Agreement.

            "Class C Put/Call Agreements" means the Put/Call Agreements between
Buyer and each of the Class C Equityholders, substantially in the form of
Exhibit D, as may be amended from time to time.

            "Class D Put/Call Agreements" means the Put/Call Agreements between
Buyer and each of the Class D Equityholders, substantially in the form of
Exhibit E, as may be amended from time to time.

            "Client" means any client (including the Fund) to which KAR provides
investment management or investment advisory services, including sub-advisory
services, on the date of this Agreement.

            "Closing" means the consummation of the Initial Purchase as more
particularly described in Sections 2.1 through 2.4.

            "Closing Date" means (i) the fifth Business Day following the day on
which all approvals described in Section 3.3(f) shall have been obtained and all
other conditions to Closing set forth in Sections 3.2 and 3.3 have been
satisfied or waived as provided therein or (ii) such other date as Buyer and the
Equityholders may agree; provided, however, that (i) the Closing Date shall be
no earlier than January 4, 2002 and (ii) the Closing Date shall occur during the
first 10 Business Days of a calendar month and, if the Closing Date would
otherwise occur after such time in a calendar month, the Closing Date shall
occur on a mutually-agreed date during the first 10 Business Days of the next
calendar month.

            "Closing Date Payment Amount" means an amount equal to (i) the
Assumed Closing Date Payment Amount, if the Estimated Closing Run Rate Revenues
equal at least 90% and not more than 110% of the Current Run Rate Revenues, or
(ii) the product of (x) the Assumed Closing Date Payment Amount and (y) 100%
minus the difference between (A) 90% and (B) the percentage determined by
dividing the Estimated Closing Run Rate Revenues by the Current Run Rate
Revenues, if the Estimated Closing Run Rate Revenues are less than 90% of the
Current Run Rate Revenues or (iii) the product of (x) the Assumed Closing Date
Payment Amount and (y) 100% plus the difference between (A) the percentage
determined by dividing the Estimated Closing Run Rate Revenues by the Current
Run Rate Revenues and (B) 110%, if the Estimated Closing Run Rate Revenues are
more than 110% of the Current Run Rate Revenues.

            "Closing Run Rate Revenues" means, as of the last Business Day of
the calendar month immediately preceding the Closing Date, an amount determined
in accordance with the procedures set forth in Schedule H. There shall be
excluded from the calculation of Closing Run Rate Revenues, (i) the aggregate
amount, if any, of the assets in all accounts under management as

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to which (A) consents to the Transactions (affirmative or negative, as
applicable) have not been obtained from the account owner in accordance with
Section 6.2 prior to the Closing Date, (B) the consents with respect to the Fund
party to the Fund Agreements required by Section 3.3(f) shall not have been
obtained prior to the Closing Date, (C) KAR has been informed (orally or in
writing) prior to the Closing Date of (x) the intention of the Clients owning
such accounts to terminate their Investment Contracts or to withdraw all or a
portion (in which event, only such portion shall be excluded) of the assets in
such accounts within six months after the Closing Date or (y) the intention of
the Fund party to the Fund Agreements to terminate, or not renew, such Fund
Agreements within six months after the Closing Date, or (D) there exists on the
Closing Date an Overdue Receivable, (ii) all Affiliated Accounts and (iii) any
payments made by KAA to KAR. In addition, there shall be excluded from revenues
for the purposes of calculating Closing Run Rate Revenues (without duplication)
the amount of any revenue sharing payments (other than (x) revenue sharing
payments that arise out of the Sefton Acquisition Agreement, as in effect on the
date hereof, (y) Business Manager Revenue Sharing up to a maximum of $300,000
(and any excess over such amount shall be deducted from Closing Run Rate
Revenues) and (z) charitable contributions to Clients that are qualified
charitable institutions) and sub-advisory fees or similar arrangements payable
to any third party and any expense reimbursement in connection with any account
under management (including, without limitation any "WRAP" program) by KAR or
the Fund.

            "Code" means the Internal Revenue Code of 1986, as such may be
amended from time to time.

            "Contracts" mean all contracts, agreements, indentures, licenses,
leases, commitments, plans, arrangements and instruments of every kind, whether
written or oral, other than Investment Contracts.

            "Current Run Rate Revenues" means the amount set forth in Schedule
I, which amount was determined as of the last Business Day of the calendar month
immediately preceding the Execution Date. There shall be excluded from the
calculation of Current Run Rate Revenues, (i) the aggregate amount, if any, of
the assets in all accounts under management or assets managed under Fund
Agreements as to which (A) KAR has been informed (orally or in writing) on or
prior to the Execution Date of the intention of the Clients owning such accounts
to terminate their Investment Contracts or to withdraw all or a portion (in
which event, only such portion shall be excluded) of the assets in such accounts
within six months after such date, (B) KAR has been informed (orally or in
writing) on or prior to the Execution Date of the intention of the Fund party to
such Fund Agreements to terminate, or not renew, their Fund Agreements within
six months after such date, or (C) there exists on the Execution Date an Overdue
Receivable, (ii) all Affiliated Accounts and (iii) any payments made by KAR to
KAA. In addition, there shall be excluded from revenues for the purposes of
calculating Current Run Rate Revenues (without duplication), the amount of any
revenue sharing payments (other than (x) revenue sharing payments that arise out
of the Sefton Acquisition Agreement, as in effect on the date hereof, (y)
Business Manager Revenue Sharing up to a maximum of $300,000 (and any excess
over such amount shall be deducted from Current Run Rate Revenues) and (z)
charitable contributions to Clients that are qualified charitable institutions)
and sub-advisory fees or similar arrangements payable to any third party and any
expense reimbursement in connection with any

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account under management (including, without limitation, any "WRAP" program) by
KAR or the Fund.

            "Damages" means costs, losses (including, without limitation,
diminution in value and losses from suspension of operations), Liabilities,
damages, lawsuits, deficiencies, claims, Taxes and expenses (whether or not
arising out of third-party Actions or governmental examinations, inspections or
audits) actually suffered or sustained by the relevant party, including, without
limitation, interest, penalties, reasonable attorneys' fees and all amounts paid
in investigation, defense or settlement of any of the foregoing. The term
"Damages" is not limited to matters asserted by third parties against KAR, the
Equityholders or their respective Affiliates or Buyer or its Affiliates, but
includes Damages incurred or sustained by KAR, the Equityholders or their
respective Affiliates or by Buyer or its Affiliates in the absence of
third-party claims or other Actions.

            "Disclosure Schedule" means, (i) with respect to the Equityholders
and KAR, a schedule executed and delivered by the Equityholders and KAR to Buyer
concurrently herewith which sets forth the exceptions to the representations and
warranties contained in Article 4 hereof and certain other information called
for by Article 4 hereof and (ii) with respect to Buyer, a schedule executed and
delivered by the Buyer to the Equityholders concurrently herewith which sets
forth the exceptions to the representations and warranties contained in Article
5 hereof and certain other information called for by Article 5 hereof. If a
document or matter is disclosed in the Disclosure Schedule in connection with
any representation or warranty made in this Agreement, such document or matter
shall not be deemed to be disclosed in the Disclosure Schedule in connection
with any other representation or warranty except where specific repetition or
cross-reference is made.

            "Employment Agreements" means the employment agreements between KAR
and each of the Persons listed on Schedule 3.2(e) hereto, substantially in the
form of Exhibits A-1 and A-2 hereto.

            "Equityholder Designee" shall mean Ralph Collins Walter, for so long
as Ralph Collins Walter is employed by KAR, and thereafter such other Person,
reasonably acceptable to Buyer, designated by the Equityholders who have a right
to receive a majority of the purchase price payable by the Buyer pursuant to
Section 2.3(a) (by giving written notice of such designation to Buyer) to serve
as such for purposes of this Agreement; provided, however, if no such
designation is made or written notice thereof is not given to Buyer, then the
senior officer of KAR taking over the responsibilities of the preceding
Equityholder Designee shall be deemed to be the Equityholder Designee for all
purposes under this Agreement until so designated. All actions taken by the
Equityholder Designee hereunder shall be taken by the Equityholder Designee,
individually and as attorney-in-fact for each of the other individual
Equityholders.

            "Equityholders" has the meaning given such term in the recitals and
shall specifically include all of the Class A Equityholders, the Class B
Equityholders and the Class C Equityholders.

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

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            "Execution Date" means the date of this Agreement.

            "Expenses" means all out-of-pocket expenses (including, without
limitation, reasonable fees and expenses of counsel, accountants, investment
bankers, experts and consultants, commitment fees and other financing fees and
expenses, printing costs and expenses, publishing fees, filing fees and mailing
costs) incurred by the KAR, the Equityholders or Buyer or on behalf of any such
party in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the Related
Agreements and all other matters related to the consummation of the
Transactions, including the costs and expenses incurred by the Equityholders and
KAR in respect of obtaining shareholder approval of the Fund, including, without
limitation, reasonable attorneys' fees and expenses, printing costs and postage.

            "Fee CAGR" means, for each Future Purchase Measurement Date, the
annual growth rate (compounded on an annual basis) of the Net Investment
Advisory Fees received by KAR for the twelve-month period ending on such Future
Purchase Measurement Date determined by reference to such Net Investment
Advisory Fees received by KAR for the twelve-month period ending on the last day
of the month preceding the month in which the Closing Date occurs.

            "Fund" means The Kayne Anderson Rudnick Mutual Funds, a Delaware
business trust, which includes the following five series: (i) Kayne Anderson
Rudnick Large Cap Fund; (ii) Kayne Anderson Rudnick Small- and Mid-Cap Fund;
(iii) Kayne Anderson Rudnick International Fund; (iv) Kayne Anderson Rudnick
Intermediate Total Return Bond Fund; and (v) Kayne Anderson Rudnick California
Intermediate Tax-Free Bond Fund.

            "Fund Board" means the board of trustees of the Fund.

            "Future Purchase Date" means a date not more than 5 days following
the date on which each Future Purchase Statement has become final and binding in
accordance with Section 2.8(c), notified by Buyer to the Equityholder Designee.

            "Future Purchase Measuring Date" means each of December 31, 2004,
December 31, 2005 and December 31, 2006.

            "Future Purchase Multiple" means, with respect to each Future
Purchase Measuring Date, at the election of the Equityholder Designee, either
(i) 4.5 or (ii)(x) 3, if the Fee CAGR with respect to such Future Purchase
Measuring Date is equal to 15% or less, (y) 7, if the Fee CAGR with respect to
such Future Purchase Measuring Date is equal to or greater than 35% or (z) the
sum of (A) 3 plus (B) 4 multiplied by the quotient (rounded to the nearest
one-thousandth of a percent) of (x) the excess of the Fee CAGR over 15% divided
by (y) 20, if the Fee CAGR with respect to such Future Purchase Measuring Date
is greater than 15% and less than or equal to 35%. The Equityholder Designee
shall irrevocably notify the Buyer of its election of clause (i) or (ii) to
determine the Future Purchase Multiple not later than the first anniversary of
the last day of the month in which the Closing Date occurs. If no such
determination is received by such date, Buyer shall make such determination.

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            "Future Purchase Percentage" means 5%, provided that if (i) the
Buyer has purchased Class C Units from a Class C Equityholder pursuant to the
Class C Put/Call Agreements or (ii) KAR has purchased Class C Units from a Class
C Equityholder pursuant to the Restated KAR LLC Agreement which Class C Units,
in each case, were otherwise subject to purchase by Buyer pursuant to Section
2.7, the Future Purchase Percentage shall equal 5% multiplied by a fraction the
numerator of which is the number of Class C Units owned by the Class C
Equityholders (other than the Class C Units described in subclauses (i) and (ii)
above) that are subject to repurchase by Buyer pursuant to Section 2.7 and the
denominator of which is 3,750.

            "Future Purchase Price" means, with respect to each Future Purchase
Measuring Date, the product of (i) the aggregate amount of Net Investment
Advisory Fees accrued by KAR during the twelve-month period ended on such Future
Purchase Measurement Date, (ii) the Future Purchase Multiple and (iii) the
Future Purchase Percentage.

            "GAAP" means United States generally accepted accounting principles
consistently applied.

            "Governmental Entity" means any governmental or regulatory entity,
department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.

            "Historical Financial Statements" means the Audited Financial
Statements and the Unaudited Financial Statements.

            "Indemnification Threshold" means $1,250,000.

            "Initial Purchase Shortfall Amount" shall mean the excess (if any)
of (a) $100,000,000 over (b) the Adjusted Closing Date Payment Amount. If the
Adjusted Closing Date Payment Amount equals or exceeds $100,000,000, the Initial
Purchase Shortfall Amount shall be zero

            "Investment Company Act" means the Investment Company Act of 1940,
as amended together with the rules and regulations promulgated thereunder.

            "Investment Contract" means a contract or agreement in effect on the
date hereof, together with any such contract or agreement entered into after the
date hereof, relating to KAR's rendering of investment management or investment
advisory services, including sub-advisory services, underwriting, distribution
or marketing services or any administrative services to any Person.

            "Investment Management Services" means any services which involve
(a) the management of an investment account or fund (or portions thereof or a
group of investment accounts or funds), including the Fund or (b) the giving of
advice with respect to the investment and/or reinvestment of assets or funds (or
any group of assets or funds).

            "KAA" means KA Associates, Inc., a Nevada corporation.

                                       8
<PAGE>
            "KAR LLC Agreement" means that certain KAR Limited Liability Company
Operating Agreement, as amended and restated as of July 1, 2000.

            "Liabilities" mean debts, liabilities, obligations, duties and
responsibilities of any kind and description, whether absolute or contingent,
monetary or non-monetary, direct or indirect, known or unknown or matured or
unmatured, or of any other nature.

            "Lien" means any lien, pledge, claim, option, charge, easement,
security interest, limitation, commitment, encroachment, restriction, financing
statement, right-of-way, encumbrance or other right of any third-party of any
kind or nature whatsoever (whether absolute or contingent).

            "Material Adverse Effect" means, (i) with respect to any matter or
matters affecting KAR or the Equityholders, a material adverse effect on the
business, operations, assets, condition (financial or otherwise) or results of
operations of KAR or on the ability of KAR or the Equityholders to consummate
the Transactions, and (ii) with respect to any matter or matters affecting Buyer
or any of its Affiliates, a material adverse effect on the business, operations,
assets, condition (financial or otherwise) or results of operations of Buyer and
its Subsidiaries taken as a whole or on the ability of Buyer to consummate the
Transactions; except, in each case, for material adverse effects arising out of
(A) general economic conditions or (B) conditions affecting the investment
management industry or capital markets generally, including, without limitation,
a loss in value of portfolio securities or a reduction in assets under
management by KAR.

            "Membership Interest" means any Class A Units, Class B Units or
Class C Units issued by KAR pursuant to the KAR LLC Agreement.

            "Mutual Fund Fee Percentage" means, for the Fund, the annual
management fee rate expressed as a decimal, charged by KAR to the Fund, as in
effect on the date in question.

            "NASD" means the National Association of Securities Dealers, Inc.

            "Negative Consent Client" means each Client who is party to a
Negative Consent Contract.

            "Negative Consent Contract" means each investment advisory contract
with a Client of KAR not requiring written consent for the assignment thereof.
All Negative Consent Contracts are listed on Schedule E.

            "Net Investment Advisory Fees" means, for any period, an amount
equal to the total investment management fees accrued by KAR for such period net
of any amounts paid by KAR to third parties pursuant to (i) revenue sharing
(including Business Manager Revenue Sharing, but excluding (x) revenue sharing
that arises out of the Sefton Acquisition Agreement, as in effect on the date
hereof, and (y) charitable contributions to Clients that are qualified
charitable institutions), (ii) sub-advisory or similar arrangements and (iii)
expense reimbursement in connection with any account under management
(including, without limitation, any "WRAP" program) of KAR or the Fund,
determined in accordance with GAAP in a manner consistent with the Audited
Financial Statements for the year ended December 31, 2000,

                                       9
<PAGE>
adjusted in accordance with this definition and as set forth on Schedule J. The
Calculation of Net Investment Advisory Fees is illustrated on Schedule J hereto.
Notwithstanding the foregoing, there shall be excluded from investment
management fees for the purpose of calculating Net Investment Advisory Fees
(without duplication) (i) any fees related to Phoenix Transferred Assets, (ii)
any fees related to Affiliated Accounts (iii) any payments by KAA to KAR and
(iv) any Overdue Receivables as of the applicable Future Purchase Measuring
Date.

            "Noncompetition/Nonsolicitation Agreements" means the
Noncompetition/ Nonsolicitation Agreements between Buyer and each of the
Equityholders, substantially in the form of Exhibits G-1, G-2 and G-3, as
amended from time to time.

            "Offset Account" shall mean, with respect to each Class C
Equityholder as of the Closing Date (each such Person, a "Class C Holder"), an
account which shall be credited and debited as follows:

            (a)   the initial balance in such account shall be an amount equal
to the product of the Initial Purchase Shortfall Amount multiplied by a fraction
the numerator of which is the number of Class C Units held by such Class C
Holder immediately following the Closing and the reclassification of Units
pursuant to Section 2.6 and the denominator of which is 10,000 (such fraction,
expressed as a percentage, the "Class C Holder Percentage");

            (b)   such account shall be credited with a daily accrual factor
("Daily Accrual Factor") equal to 0.0119178% of the balance in such account as
of the close of the immediately preceding day;

            (c)   as of the date on which the True-Up Differential (if any) is
calculated as provided in the definition thereof, such account shall be credited
with the sum of (i) an amount equal to the product of the True-Up Differential
multiplied by the Class C Holder's Percentage, plus (ii) an amount equal to the
aggregate credit to the account that would have been made pursuant to
subparagraph (b) above if the amount described in the foregoing clause (i) had
been credited to the account as of the Closing Date;

            (d)   such account shall be debited, but not reduced below zero, by
the amount of the purchase price payment for Class C Units or Class D Units
which is offset by balances in such account pursuant to the provisions of such
Class C Holder's Put/Call Agreements, Section 2.9(b) of this Agreement and
Section 9.03(a) and 9.03(b) of the Operating Agreement;

            (e)   upon sale by such Class C Holder of all of his Class C Units
and Class D Units held as of the Closing Date pursuant to the provisions of the
Put/Call Agreements, Section 2.7 of this Agreement and Article IX of the
Operating Agreement, any remaining balance in the Offset Account shall be
debited; and

            (f)   once the balance in the Offset Account is reduced to zero
pursuant to the provisions of the foregoing subsection (d) or subsection (e),
such account shall be terminated.

            If the Initial Purchase Shortfall Account is zero and the True-Up
Differential is zero, there shall not be established any Offset Account for any
Class C Holder.

                                       10
<PAGE>
            "Overdue Receivable" means an unpaid account receivable that is 135
days or more old as of the applicable determination date with respect to which
the obligor under such account receivable has not in writing specifically
committed or reaffirmed its obligation to pay.

            "Organizational Documents" means the certificate of formation and
limited liability company operating agreement of KAR, together with all
amendments effective through the date hereof.

            "PEPCO" means Phoenix Equity Planning Corporation, a Connecticut
corporation and a wholly-owned subsidiary of Buyer.

            "Permitted Liens" means (i) Liens for taxes, assessments and
governmental charges or levies not yet due and payable; and (ii) Liens imposed
by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's
liens and other similar Liens arising in the ordinary course of business
securing obligations that are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings.

            "Person" means an individual, firm, trust, association, corporation,
partnership (limited or general), limited liability company, indenture,
Governmental Entity or other entity.

            "Phoenix Transferred Assets" means (i) any assets of Buyer, its
Affiliates or their clients over which Buyer or its controlled Affiliates have
discretion to direct investments or (ii) subadvisory accounts with respect to
mutual funds sponsored by Buyer or its Affiliates or for which Buyer or an
Affiliate serves as investment advisor or manager that are transferred or
assigned by Buyer or any of its Affiliates to KAR for management after the
Closing. "Phoenix Transferred Assets" shall not include any appreciation or
depreciation on such transferred assets after the applicable date of transfer or
any new assets generated after Closing by Buyer's and its Affiliates' (other
than KAR) distribution efforts for or on behalf of KAR.

            "Regulatory Documents" shall mean, with respect to a Person, all
forms, reports, registration statements, schedules and other documents filed, or
required to be filed, by such Person pursuant to the Securities Laws.

            "Related Agreements" means the Employment Agreements, the
Noncompetition/Nonsolicitation Agreements, the Put/Call Agreements, the Restated
KAR LLC Agreement, the Security Agreements and the Control Agreement.

            "Representative" means any officer, director, principal, attorney,
agent, employee or other representative.

            "Restated KAR LLC Agreement" means the Amended and Restated Limited
Liability Company Operating Agreement of KAR, a copy of which is attached hereto
as Exhibit F, which is to become effective upon the Closing.

            "SEC" means the Securities and Exchange Commission, or any successor
agency thereto.

            "Securities Act" means the Securities Act of 1933, as amended.

                                       11
<PAGE>
            "Securities Laws" means the Securities Act, the Exchange Act, the
Investment Company Act, the Advisers Act and state "blue sky" laws, and the
rules and regulations promulgated thereunder.

            "Sefton Acquisition Agreement" means the Consulting Agreement, dated
November 19, 1999, among Kayne Anderson Investment Management LLC, Sefton
Capital Management and Harley K. Sefton.

            "Subsidiary" of a Person shall mean any Person a majority of the
voting stock (or of any other form of general partnership or other voting or
controlling equity interest in the case of a Person that is not a corporation)
of which is beneficially owned by the Person directly or indirectly through one
or more Persons.

            "Tax" or "Taxes" means (i) all forms of taxation, charges, levies or
other assessments, whether direct or indirect and whether levied by reference to
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding (whether with
respect to receipts or payments), payroll, privilege, employment, excise,
severance, capital gains, transfer gains, stamp, occupation, premium or similar
tax measured by insurance premiums, real and personal property, environmental or
windfall profit tax, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, and any interest or any penalty,
addition to tax or additional amount, imposed by any Taxing Authority, (ii)
Liability, whether to a Taxing Authority or pursuant to an agreement with or
legal obligation to any Person, for the payment of any amounts of the type
described in clause (i) of this definition as a result of being a member of an
affiliated, consolidated, combined or unitary group for any taxable period and
(iii) Liability for the payment of any amounts of the type described in clause
(i) or (ii) of this definition as a result of an obligation to indemnify any
other Person.

            "Tax Benefit" means a Tax deduction, Tax credit or other Tax
benefit.

            "Taxing Authority" means a Governmental Entity responsible for and
having requisite jurisdiction with respect to the imposition of Taxes.

            "TOPA Equities Agreement" means the agreement to be entered into
between KAR and TOPA Equities, Ltd. substantially in the form attached as
Schedule K to this Agreement.

            "Transactions" means the transactions contemplated by this Agreement
and the Related Agreements.

            "True-Up Differential" means the amount equal to the excess, if any,
of (i) the product of (x) 4, (y) 60% and (z) the amount of the Business Manager
Revenue Sharing included in the calculation of the Adjusted Closing Run Rate
Revenues over (ii) the aggregate of the Holder's Put Call Price paid or payable
by Buyer under all of the Class D Put/Call Agreements (without giving effect to
any reduction of such amounts through debits to the Offset Account). Such amount
shall be calculated on the date in 2004 on which the Holder's Put/Call Price is
finally determined in accordance with the Class D Put/Call Agreements or, if
earlier, the date on

                                       12
<PAGE>
which Buyer has purchased all Class D Units outstanding pursuant to all Class D
Put/Call Agreements.

            "Unaudited Financial Statements" means the Balance Sheet and the
unaudited consolidated statements of income, changes in partners' capital,
members' capital or stockholders' equity, as the case may be, and cash flows of
KAR for the nine months ended September 30, 2001, together with the related
notes thereon.

            "Wire Transfer" means a payment in immediately available funds by
wire transfer in lawful money of the United States of America to such account or
to a number of accounts as shall have been designated by written notice to the
paying party.

            1.2   Other Defined Terms.  The following terms shall have the
meanings defined for such terms in the Sections set forth below:

Term                                     Section
----                                     -------
Acquisition Proposal                     7.3
Allocable Share                          9.1(a)
Benefit Arrangement                      4.21(a)
Benefit Plans                            4.21(a)
Buyer Financial Statements               5.5
Buyer's Accountant                       2.8(a)
Buyer Indemnitees                        9.1(a)
Client Consents                          6.2(b)
Closing                                  3.1
Closing Balance Sheet                    2.5(a)
Confidentiality Agreement                7.2(b)
Control Agreement                        3.3(g)
Distribution Time                        7.9
Employees                                4.22(b)
Employment Arrangement                   4.22(b)
Environmental Law                        4.30
ERISA                                    4.21(a)
ERISA Affiliate                          4.21(a)
ERISA Pension Plan                       4.21(a)
ERISA Welfare Plan                       4.21(a)
Estimated Closing Run Rate Revenues      2.2
Fund Agreements                          4.25(d)
Future Purchase Statement                2.8(a)
Hazardous Substance                      4.29
Immediate Family                         4.10
Indemnified Party                        9.1(d)
Indemnifying Party                       9.1(d)
Information                              7.2(b)
Initial Purchase                         2.1
Intellectual Property                    4.14
KAR Accountant                           2.5(a)

                                       13
<PAGE>
Licenses                                 4.19(d)
Material Contracts                       4.15
Multiemployer Plan                       4.21(a)
Neutral Accountants                      2.4(a)
Notice of Dispute                        2.6(c)
Notified Party                           8.1(a)
Notifying Party                          8.1(a)
Permits                                  4.18
Post-Closing Payment Adjustment          2.4(b)
Post-Closing Statement                   2.4(a)
Reports                                  4.25(f)
Rights                                   4.2
Security Agreements                      3.3(q)
Straddle Period                          10.1(b)
Stub Period                              10.1(c)
Taxpayers                                4.20(a)
Tax Returns                              4.20(a)

                                       14
<PAGE>
                                    ARTICLE 2

                    PURCHASE AND SALE OF MEMBERSHIP INTERESTS

            2.1   Membership Interests To Be Sold on the Closing Date. Upon and
subject to the terms, agreements, warranties, representations and conditions
hereof, the Class A Equityholders and the Class B Equityholders agree to sell,
transfer, assign, convey and deliver to Buyer (and/or at Buyer's election, one
or more Affiliates of Buyer) and Buyer agrees to purchase and accept from the
Class A Equityholders and the Class B Equityholders, on the Closing Date, an
aggregate of 20,000 outstanding Class A Units and Class B Units (the "Initial
Purchase") (which represent all of the outstanding Class A and Class B Units) as
set forth on Schedule A hereto for a purchase price equal to $5,000 per unit.
Buyer may, at its election, assign its right to purchase all or a portion of the
Membership Interests to be purchased by it hereunder to one or more Affiliates
of Buyer, provided that no such assignment shall relieve Buyer from its
obligations hereunder.

            2.2   Determination of Closing Date Payment Amount. On or prior to
the Execution Date, the Equityholder Designee shall advise the Buyer in writing
of the Current Run Rate Revenues and shall provide Buyer with evidence
reasonably acceptable to Buyer to support the accuracy of such amount. At least
three (3) Business Days prior to the Closing Date, the Equityholder Designee
shall advise Buyer in writing of (i) the Equityholders' good faith estimate of
the Closing Run Rate Revenues and shall provide Buyer with evidence reasonably
acceptable to Buyer to support the reasonableness of such estimate and (ii) the
Closing Date Payment Amount based thereon. The estimated amount of the Closing
Run Rate Revenues is herein referred to as the "Estimated Closing Run Rate
Revenues."

            2.3   [Intentionally Omitted].

            2.4   Instruments of Transfer; Payment of Purchase Price.

            (a)   At least two (2) Business Days prior to the Closing Date, the
Class A Equityholders and the Class B Equityholders shall deliver to Buyer
written Wire Transfer instructions designating the account to which the Closing
Date Payment Amount shall be paid by Buyer at the Closing.

            (b)   At the Closing, the Class A Equityholders and the Class B
Equityholders shall deliver, or shall cause to be delivered, to Buyer the
following:

                  (i)   evidence of transfer to the Buyer of all of the Class A
Units and Class B Units being sold to the Buyer on such date in form and
substance reasonably acceptable to the Buyer; and

                  (ii)  the documents required to be delivered pursuant to
Section 3.3.

            (c)   At the Closing, Buyer shall deliver, or shall cause to be
delivered, to each Class A Equityholder and Class B Equityholder the following:

                                       15
<PAGE>
                  (i)   By Wire Transfer, an amount equal to the product of the
aggregate number of Class A Units and Class B Units being sold on the Closing
Date by such Class A Equityholder and Class B Equityholder as set forth opposite
such Equityholder's name on Schedule A hereto multiplied by $5,000; and

                  (ii)  the documents required to be delivered pursuant to
Section 3.2.

            2.5   Determination of Adjusted Closing Date Payment Amount.

            Within 120 days after the Closing Date, KAR shall cause the
independent public accounting firm regularly employed by KAR (the "KAR
Accountant") to prepare and deliver to Buyer and the Equityholder Designee (i)
an audited balance sheet of KAR as of the Closing Date prepared in a manner
consistent with the Audited Balance Sheets, together with the accountants'
report thereon (the "Closing Balance Sheet") and (ii) a statement (the
"Post-Closing Statement"), reviewed by such accountants, setting forth, as of
the Closing Date, the Closing Run Rate Revenues, the Adjusted Closing Run Rate
Revenues and the Adjusted Closing Date Payment Amount. In reviewing the
Post-Closing Statement, the KAR Accountant shall make any determination or
calculation solely in accordance with the provisions of this Agreement and, to
the extent applicable, KAR's historical practice as reflected on the Audited
Financial Statements for the year ended December 31, 2000. Buyer and the
Equityholder Designee shall have a period of 30 days after delivery of the
Closing Balance Sheet and the Post-Closing Statement to present in writing to
each other and the KAR Accountant any objections to the Closing Balance Sheet
and the Post-Closing Statement which objections shall be set forth in reasonable
detail. If no objections are raised within such 30-day period, the Closing
Balance Sheet and the Post-Closing Statement shall be deemed accepted and
approved by Buyer and the Equityholders and shall be final, binding and
conclusive upon Buyer and the Equityholders. If Buyer or the Equityholder
Designee shall object in any respect as to the Closing Balance Sheet and the
Post-Closing Statement within the 30-day period described above, Buyer and the
Equityholder Designee shall use their best efforts promptly to resolve the
matter or matters in disagreement. If Buyer and the Equityholder Designee
resolve the matter or matters in disagreement, Buyer and the Equityholder
Designee shall either confirm or revise the Closing Balance Sheet and the
Post-Closing Statement in writing and such calculations shall be final, binding
and conclusive upon Buyer and the Equityholders. If Buyer and the Equityholder
Designee are unable to resolve the matter or matters in disagreement within 15
days following receipt of written notice of objection, then the items in dispute
shall be submitted to a mutually agreed upon "big five" accounting firm (the
"Neutral Accountants") for resolution, provided that if Buyer and Equityholder
Designee fail to appoint such firm within 15 days after the end of such 15-day
period, any party may request the American Arbitration Association in Los
Angeles, California to appoint an independent firm of certified public
accountants of recognized national standing to act as Neutral Accountants;
provided, however, that PricewaterhouseCoopers may, in no event, be selected to
act as Neutral Accountants. Each party shall furnish to the Neutral Accountants
such work papers and other documents and information relating to the disputed
issues as the Neutral Accountants may request and are available to that party
(or its independent public accountants), and each party shall be afforded the
opportunity to present to the Neutral Accountants any material relating to the
determination and to discuss the determination with the Neutral Accountants. The
Neutral Accountants shall be directed to furnish written notice to Buyer and the
Equityholder Designee of their resolution of any disputed issues referred to
them as soon as

                                       16
<PAGE>
practicable but in no event later than 20 days following the referral of such
disputed issues to the Neutral Accountants. In resolving any dispute, the
Neutral Accountants shall be required to make any determination and/or
calculation solely in accordance with the provisions of this Agreement and, to
the extent applicable, KAR's historical practices as reflected on the Audited
Financial Statements for the year ended December 31, 2000. The determination by
the Neutral Accountants, as set forth in such notice, shall be final, binding
and conclusive on the parties and enforceable in a court of law. The fees and
expenses of the Neutral Accountants shall be borne equally by Buyer, on the one
hand, and the Class A Equityholders and the Class B Equityholders, on the other
hand.

            2.6   Post-Closing Reclassification. As provided in the Restated KAR
LLC Agreement, immediately following the Closing, the outstanding Units of the
Company shall be reclassified as follows: (i) the Class A Units and Class B
Units purchased by Buyer shall be reclassified as and shall become 15,000 Class
E Units; (ii) the Class A Units and Class B Units, if any, purchased by KAR
shall be cancelled and no longer constitute authorized Units of KAR; and (iii)
each of the 10,000 outstanding Class C Units shall be reclassified into one
Class C Unit and one Class D Unit.

            2.7   Class C Units to be Purchased on each Future Purchase Date.
Upon and subject to the terms, agreements, warranties, representations and
conditions hereof, the Class C Equityholders agree to sell, transfer, assign,
convey and to deliver to Buyer (and/or at Buyer's election, one or more
Affiliates of Buyer), and Buyer agrees to purchase and accept from such Class C
Equityholders on each Future Purchase Date, the Class C Units scheduled to be
purchased on such Future Purchase Date (other than any Class C Units that were
scheduled to be purchased on such Future Purchase Date and were previously
purchased by Buyer pursuant to the Class C Put/Call Agreements or by the Company
pursuant to the Restated KAR LLC Agreement) as set forth on Schedule B. Buyer
may, at its election, assign its right to purchase all or a portion of the Class
C Units to be purchased by it hereunder to one more Affiliates of Buyer,
provided that no such assignment shall relieve Buyer from its obligations
hereunder.

            2.8   Determination of Future Purchase Price.

            (a)   As soon as reasonably practicable after each Future Purchase
Measurement Date, but in no event more than 45 days after each Future Purchase
Measurement Date, Buyer shall cause the accounting firm then retained by Buyer
to audit its consolidated financial statements ("Buyer's Accountant") to prepare
and deliver to Buyer and the Equityholder Designee a statement of determination
of the Future Purchase Price payable with respect to such Future Purchase
Measurement Date (the "Future Purchase Statement"). In preparing the Future
Purchase Statement, the Buyer's Accountant shall make any determination or
calculation solely in accordance with the provisions of this Agreement and, to
the extent applicable, KAR's historical practice as reflected on the Audited
Financial Statements for the year ended December 31, 2000. Buyer and the
Equityholder Designee shall have a period of 30 days after delivery of the
Future Purchase Statement to present in writing (a "Notice of Dispute") to each
other and the Buyer's Accountant any objections to the Future Purchase
Statement, which objections shall be set forth in reasonable detail and shall
specify, to the extent then determinable, the specific dollar amount and basis
thereof. Buyer and the Equityholder Designee and their Representatives may
inspect the financial books and records of the Business for the

                                       17
<PAGE>
purpose of verifying the accuracy of the Future Purchase Statement during normal
business hours within the 30 days following delivery of such Future Purchase
Statement. Any non-public records, books, contracts, instruments, computer data
and information delivered to or reviewed by Buyer, the Equityholder Designee or
their Representatives pursuant to this paragraph shall be treated as
confidential unless (i) Buyer or KAR has made such documents or information
available to the public generally, or (ii) such documents or information are
required to be disclosed by applicable laws or regulations or by court order or
decree. No such documents or information furnished to Buyer, the Equityholder
Designee or their Representatives shall be used by the Equityholder Designee or
the Equityholders or disclosed to any other Person for any purpose other than
with respect to reviewing the Future Purchase Statement.

            (b)   If no objections are raised within such 30-day period, the
Future Purchase Statement shall be deemed accepted and approved by Buyer and the
Equityholder Designee and shall be final, binding and conclusive upon Buyer and
the Equityholders. If Buyer or the Equityholder Designee shall object in any
respect as to the Future Purchase Statement within the 30-day period described
above, Buyer and the Equityholder Designee shall use their best efforts promptly
to resolve the matter or matters in disagreement. If Buyer and the Equityholder
Designee resolve the matter or matters in disagreement, Buyer and the
Equityholder Designee shall either confirm or revise the Future Purchase
Statement in writing and such calculations shall be final, binding and
conclusive upon Buyer and the Equityholders. If Buyer and the Equityholder
Designee are unable to resolve the matter or matters in disagreement within 15
days following receipt of written notice of objection, then the items in dispute
shall be submitted to the Neutral Accountants for resolution, provided that if
Buyer and the Equityholder Designee fail to appoint such firm within 15 days
after the end of such 15-day period, any party may request that the American
Arbitration Association in Los Angeles, California to appoint an independent
firm of certified public accountants of recognized national standing to act as
Neutral Accountants; provided, however, that PricewaterhouseCoopers may, in no
event, be selected to act as Neutral Accountants. Each party shall furnish to
the Neutral Accountants such workpapers and other documents and information
relating to the unresolved matters in the Notice of Dispute as the Neutral
Accountants may request and are available to that party (or its independent
public accountants), and each party shall be afforded the opportunity to present
to the Neutral Accountants any material relating to the matter in disagreement
and to discuss the determination with the Neutral Accountants. The Neutral
Accountants shall be directed to furnish written notice to Buyer and the
Equityholder Designee of their resolution of any disputed issues referred to
them as soon as practicable, but in no event later than 20 days following the
referral of such disputed issues to the Neutral Accountants. In resolving any
dispute, the Neutral Accountants shall be required to make any determination
and/or calculation solely in accordance with the provisions of this Agreement
and, to the extent applicable, KAR's historical practice as reflected on the
Audited Financial Statements for the year ended December 31, 2000. The
determination by the Neutral Accountants, as set forth in such notice, shall be
final, binding and conclusive on the parties and enforceable in a court of law.
The fees and expenses of the Neutral Accountants shall be borne equally by
Buyer, on the one hand, and the Class C Equityholders, on the other hand.

                                       18
<PAGE>
            2.9   Future Purchase Closings.

            (a)   On each Future Purchase Date, the Class C Equityholders
selling Class C Units shall deliver, or shall cause to be delivered, to Buyer
the following:

                  (i)   evidence of transfer to the Buyer of all of the Class C
Units being sold to the Buyer on such date in form and substance reasonably
acceptable to the Buyer; and

                  (ii)  the documents required to be delivered pursuant to
Section 3.3(e).

            (b)   On each Future Purchase Date, Buyer shall deliver, or cause to
be delivered, by Wire Transfer to each Class C Equityholder selling Class C
Units an amount equal to the excess (if any) of (i) the product obtained by
multiplying the Future Purchase Price by a fraction (expressed as a percentage)
the numerator of which is the number of Class C Units being sold by such Class C
Equity Equityholder on the applicable Future Purchase Date as set forth opposite
such Class C Equityholder's name on Schedule B (the "Future Purchase Price
Payment Amount Schedule") and the denominator of which is 1,250 over (ii) the
remaining balance (if any) in such Class Equityholder's Offset Account. For
purposes of the foregoing, if a Class C Equityholder is concurrently selling
Class C Units pursuant to Section 2.7 hereof and Class C Units or Class D Units
pursuant to the provisions of a Put/Call Agreement or Article IX of the
Operating Agreement, the balance (if any) in such Class C Equityholder's Offset
Account shall be applied as a purchase price reduction in the following sequence
(in each case to the extent applicable: first as a purchase price reduction
under Article IX of the Operating Agreement; second, as a purchase price
reduction under such Equityholder's Put/Call Agreement (Class D Units); third,
as a purchase price reduction under this Section 2.9(b); and last, as a purchase
price reduction under such Equityholder's Put/Call Agreement (Class C Units), in
each case with the balance of such Equityholder's Offset Account being debited
to reflect any preceding purchase price reduction.

                                    ARTICLE 3

                                     CLOSING

            3.1   Closing. The closing of the Initial Purchase (the "Closing")
shall take place at the offices of Gibson, Dunn & Crutcher, 2029 Century Park
East, Los Angeles, California 90067-3026, at 10:00 a.m., Los Angeles time, on
the Closing Date, unless the parties hereto otherwise agree. All transactions at
the Closing shall be deemed to take place simultaneously.

            3.2   Conditions to Obligations of the Class A Equityholders and
Class B Equityholders on the Closing Date. The obligations of the Class A
Equityholders and Class B Equityholders to consummate the transactions
contemplated hereby at the Closing are, at the option of the Class A
Equityholders and Class B Equityholders, subject to the following conditions,
which conditions may be waived by the Equityholder Designee without releasing or
waiving any of their rights hereunder:

            (a)   Representations and Warranties. The representations and
warranties of Buyer set forth in Article 5 that are qualified as to materiality
shall be true and correct in

                                       19
<PAGE>
accordance with their terms, and the representations and warranties of Buyer set
forth in Article 5 that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing as though made on and as of the Closing Date, except to the extent such
representations and warranties speak as of an earlier date or except for
transactions explicitly contemplated by this Agreement and in each case except
to the extent the breaches of all the representations and warranties, if any
(excluding, for this purpose, any qualifications as to materiality therein), in
the aggregate, do not have or would not reasonably be expected to have a
Material Adverse Effect on Buyer.

            (b)   Performance of Obligations of Buyer. Buyer shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing (excluding, for this purpose,
any qualification as to materiality therein).

            (c)   Certificate. The Equityholder Designee shall have received a
certificate of Buyer dated as of the Closing Date and signed on behalf of Buyer
by an authorized officer thereof, to the effect that the conditions set forth in
Sections 3.2(a) and (b) hereof to the Equityholders' obligations have been
satisfied.

            (d)   No Governmental Proceedings or Litigation. No Action by any
Governmental Entity shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage any Equityholder if the transactions
contemplated hereunder are consummated.

            (e)   Employment Agreements. KAR shall have entered into an
Employment Agreement with each of the Persons listed on Schedule 3.2(e) hereto
on the Execution Date.

            (f)   Required Consents and/or Approvals. All regulatory approvals
required to consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect.

            (g)   Class C Put/Call Agreements. Buyer shall have entered into the
Class C Put/Call Agreement with each Class C Equityholder.

            (h)   Class D Put/Call Agreements. Buyer shall have entered into the
Class D Put/Call Agreement with each Class D Equityholder.

            (i)   Restated KAR LLC Agreement. The Restated KAR LLC Agreement
shall have been executed and delivered by the parties thereto.

            (j)   No Material Adverse Change. There shall not have occurred any
one or more events with respect to Buyer between the date of this Agreement and
the Closing Date which, individually or in the aggregate, has or would
reasonably be expected to have a Material Adverse Effect on Buyer.

            (k)   Estimated Closing Run Rate Revenues. The Estimated Closing Run
Rate Revenues determined pursuant to Section 2.2 shall equal at least 80% of the
Current Run Rate Revenues determined pursuant to Section 2.2.

                                       20
<PAGE>
            (l)   Opinion of Counsel. Buyer shall have delivered to the
Equityholders Designee opinions of Stroock & Stroock & Lavan LLP, counsel to
Buyer, and internal counsel to the Buyer, each dated as of the Closing Date,
with respect to the transactions contemplated hereby which collectively cover
the matters set forth on Exhibit B hereto, in form and substance reasonably
satisfactory to the Equityholders Designee.

            3.3   Conditions to Obligations of Buyer on the Closing Date. The
obligations of Buyer to consummate the transactions contemplated hereby at the
Closing are, at the option of Buyer, subject to the following conditions, which
conditions may be waived by Buyer without releasing or waiving any of its rights
hereunder:

            (a)   Representations and Warranties. The representations and
warranties of KAR and the Equityholders set forth in Article 4 that are
qualified as to materiality shall be true and correct in accordance with their
terms, and the representations and warranties of KAR and the Equityholders set
forth in Article 4 that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing as though made on and as of the Closing Date, except to the extent such
representations and warranties speak as of an earlier date or except for
transactions explicitly contemplated by this Agreement and in each case except
to the extent the breaches of all the representations and warranties, if any
(excluding, for this purpose, any qualifications as to materiality therein or in
the Disclosure Schedule), in the aggregate, do not have or would not reasonably
be expected to have a Material Adverse Effect on KAR.

            (b)   Performance of Obligations of KAR and the Equityholders. KAR
and the Equityholders shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Closing (excluding, for this purpose, any qualification as to materiality
therein).

            (c)   Certificate. Buyer shall have received a certificate of KAR
and the Equityholder Designee dated as of the Closing Date and signed by the
principal executive officer and the principal financial officer of KAR and by
the Equityholder Designee, as applicable, to the effect that the conditions set
forth in Sections 3.3(a), (b) and (r) hereof to Buyer's obligations have been
satisfied.

            (d)   No Governmental Proceedings or Litigation. No Action by any
Governmental Entity shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to affect the right or ability of Buyer to operate the
Business after the Closing or to damage Buyer if the transactions contemplated
hereunder are consummated.

            (e)   Conveyance Documents. KAR and the Class A Equityholders and
the Class B Equityholders shall have executed and delivered to Buyer all
conveyances, assignments, bills of sale and any and all further instruments as
may in the judgment of Buyer and its counsel be reasonably necessary, expedient
and proper (i) in order to complete any and all conveyances, transfers and
assignments herein provided for or (ii) to otherwise effectuate the transactions
contemplated hereby.

                                       21
<PAGE>
            (f)   Approvals Relating to the Fund. (i) The Fund Board shall have
approved in connection with the transactions contemplated hereby the respective
new investment advisory agreements, underwriting and distribution agreements and
administrative services agreements as provided in Section 6.2(b) hereof, as
required by the Advisers Act, the Investment Company Act and/or their respective
terms; and (ii) the shareholders of the Fund shall have approved the respective
new investment advisory agreements referred to in clause (i) above as required
by the Advisers Act, the Investment Company Act and/or by their respective
terms.

            (g)   No Material Adverse Change. There shall not have occurred any
one or more events with respect to KAR or the Fund between the date of this
Agreement and the Closing Date which, individually or in the aggregate, has or
would reasonably be expected to have a Material Adverse Effect on KAR.

            (h)   Employment Agreements. Each of the Persons listed on Schedule
3.2(e) hereof shall have entered into an Employment Agreement with KAR on the
Execution Date.

            (i)   Required Consents and/or Approvals. All regulatory approvals
required to consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect.

            (j)   Noncompetition/Nonsolicitation Agreements. Each of the
Equityholders shall have entered into a Noncompetition/Nonsolicitation Agreement
with the Buyer.

            (k)   Key Employees. None of the employees of the Companies listed
on Schedule 3.2(e) hereto shall have terminated or given notice to terminate his
or her employment, excluding termination by reason of death or disability.

            (l)   Good Standing Certificates. There shall have been delivered to
Buyer good standing certificates, dated no more than ten days prior to the
Closing Date, from and certified by the appropriate authorities in the state of
organization of KAR and in each jurisdiction in which KAR is qualified to do
business, showing such Person to be in good standing in the applicable
jurisdiction.

            (m)   Class C Put/Call Agreements. Each Class C Equityholder shall
have entered into the Class C Put/Call Agreement with Buyer.

            (n)   Class D Put/Call Agreements. Each Class D Equityholder shall
have entered into the Class D Put/Call Agreement with the Buyer.

            (o)   Restated KAR LLC Agreement. The Restated KAR LLC Agreement
shall have been executed and delivered by the parties thereto.

            (p)   Estimated Closing Run Rate Revenues. The Estimated Closing Run
Rate Revenues determined pursuant to Section 2.2 shall equal at least 80% of the
Current Run Rate Revenues determined pursuant to Section 2.2.

            (q)   Security Documents. Each Equityholder (and their spouse, if
any) shall have executed and delivered to Buyer security agreements,
substantially in the form of Exhibit J

                                       22
<PAGE>
(the "Security Agreements") and each Equityholder (and their spouse, if any) and
KAR shall have executed and delivered to Buyer the related Control Agreement,
substantially in the form of Exhibit A to the Security Agreements (the "Control
Agreement").

            (r)   Opinion of Counsel. KAR and the Equityholders shall have
delivered to Buyer opinions of Gibson, Dunn & Crutcher LLP, counsel to KAR and
the Equityholders, and internal counsel to KAR, each dated as of the Closing
Date, with respect to the transactions contemplated hereby, which collectively
cover the matters set forth on Exhibit C hereto, in form and substance
reasonably satisfactory to the Buyer.

            (s)   TOPA Equities. The TOPA Equities Agreement shall have been
executed by the parties thereto and shall not have been supplemented or amended
and shall be in full force and effect as of the Closing Date and there shall
have been no default under or breach of such agreement by KAR or TOPA Equities
as of the Closing Date.

                                    ARTICLE 4

           REPRESENTATIONS AND WARRANTIES OF KAR AND THE EQUITYHOLDERS

            Except as set forth on the Disclosure Schedule, KAR and each of the
Equityholders, severally and not jointly, hereby represents and warrants to
Buyer as follows:

            4.1   Organization, Standing and Authority. KAR is a limited
liability company, duly organized, validly existing and in good standing under
the laws of the State of California. KAR has the limited liability company power
and authority to carry on its business as it is now being conducted and to own,
lease and operate all of its properties and assets. KAR is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned, leased or operated by it makes such qualification or licensing
necessary. There are no proceedings or actions pending or contemplated to
dissolve KAR. KAR has all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now conducted, except for any such
authorizations, the lack of which either individually or in the aggregate, has
or would reasonably be expected to have a Material Adverse Effect on KAR.

            4.2   Subsidiaries. KAR does not have, and has not in the past had,
any Subsidiaries.

            4.3   Authorization. KAR has full limited liability company power
and authority to, and each Equityholder has full legal right, power, authority
and capacity to, execute and deliver this Agreement and the Related Agreements
to which it is a party and to consummate the transactions contemplated hereby
and thereby and to perform its respective obligations hereunder and thereunder.
The execution and delivery of this Agreement and the Related Agreements to which
each is a party and the consummation of the transactions contemplated hereby and
thereby have been duly and validly approved by all requisite limited liability
company action on the part of KAR and no other limited liability company
proceedings on the part of KAR are necessary to approve this Agreement and the
Related Agreements and to

                                       23
<PAGE>
authorize and consummate the transactions contemplated hereby and thereby. This
Agreement has been, and each Related Agreement will at Closing be, duly and
validly executed and delivered by KAR and each Equityholder party thereto, and
(assuming the due authorization, execution and delivery of this Agreement and
the Related Agreements by Buyer) this Agreement constitutes, and each of the
Related Agreements will at Closing constitute, a legal, valid and binding
obligation of KAR and each Equityholder party thereto, enforceable against KAR
and each such Equityholder in accordance with its terms, except as the
enforceability thereof may be subject to or limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the rights
of creditors generally and general principles of equity, regardless of whether
applied in proceedings at law or in equity.

            4.4   Organizational Documents. The copies of the Organizational
Documents furnished or made available by KAR to Buyer are true, correct and
complete copies thereof. The Organizational Documents are the only documents
which govern operations, management and sharing of profits and losses and
distributions of KAR. The Disclosure Schedule sets forth a list of all of the
Organizational Documents, as well as any amendments thereto.

            4.5   No Violation. Neither the execution and delivery of this
Agreement or the Related Agreements by KAR and the Equityholders, nor the
consummation by KAR and the Equityholders of the transactions contemplated
hereby to be performed by them, nor compliance by KAR and the Equityholders with
any of the terms or provisions hereof, will (i) violate any provision of the
Organizational Documents of KAR or (ii), (x) violate, conflict with or require
any notice, filing, consent or approval under any Applicable Law to which KAR or
any Equityholder or any of their respective Affiliates or any of their
respective properties, contracts or assets is subject, or (y) violate, conflict
with, result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate or result in a right of
acceleration of the performance required by, result in the creation of any Lien
upon the partnership or equity interests or the material properties, Material
Contracts or material assets of KAR or require any notice, approval or consent
under any Material Contract to which KAR or any Equityholder or any of their
respective Affiliates is a party, or by which KAR or any Equityholder or any of
their Affiliates, or any of their material properties or material assets, may be
bound or affected or could reasonably be expected to prevent consummation of the
transactions contemplated hereby.

            4.6   Governmental Authorization. Except for (a) consents, approvals
and notices as are set forth in Section 6.2 hereof and the Disclosure Schedule
and (b) the applicable filings under the HSR Act, no consents, approvals or
authorizations of, or filings or registrations with, or licenses from, or
notices to, any Governmental Entity or any third-party are necessary in
connection with (i) the execution, delivery and performance by KAR and each
Equityholder of this Agreement and the Related Agreements to which each is a
party and (ii) the consummation by KAR and the Equityholders of the transactions
contemplated hereby and thereby.

            4.7   Ownership of Membership Interests. Schedule C hereto sets
forth all record and beneficial interests owned by each Equityholder in KAR.
Except as set forth in the Disclosure Schedule, each Equityholder owns
beneficially and of record all of the Membership Interests listed as owned by
such Equityholder on Schedule C hereof, free and clear of any Liens.

                                       24
<PAGE>
There are no Membership Interests or other equity interests of KAR issued or
outstanding other than as listed on Schedule C hereto. All of the Membership
Interests are duly authorized, validly issued, fully paid, nonassessable and
free of any preemptive rights. There is no outstanding option, warrant,
convertible or exchangeable security, right, subscription, call, legally binding
commitment, unsatisfied preemptive right or other agreement or right of any kind
to purchase or otherwise acquire (including, without limitation, by exchange or
conversion) from any of KAR or any Equityholder any Membership Interests or
other equity interests of KAR, whether issued and outstanding, authorized but
unissued or treasury shares. Except as set forth in the Disclosure Schedule,
there are no outstanding obligations of KAR to redeem, repurchase or otherwise
acquire any of the Membership Interests or other equity interests in KAR.
Immediately upon consummation of the Initial Purchase, Buyer will own 100% of
the issued and outstanding Class A Units and Class B Units free and clear of all
Liens.

            4.8   Financial Statements. KAR has heretofore delivered to Buyer
the Historical Financial Statements. The Historical Financial Statements have
been prepared in conformity with GAAP (except as may otherwise be noted in the
footnotes thereto, and except for the absence of footnotes with respect to the
Unaudited Financial Statements) heretofore adopted by, and applied consistently
with the past practices of and consistent with the books and records of, KAR and
fairly present (subject, in the case of the Unaudited Financial Statements, to
recurring audit adjustments normal in nature and amount) the consolidated
financial position, results of operations and cash flows of KAR as at, or for
the periods ended on, such dates. Since the Balance Sheet Date, KAR has
conducted its business in a consistent manner without a material change of
policy or procedure. The Disclosure Schedule sets forth all material changes in
methods of accounting or accounting practice or policy or application thereof by
KAR since December 31, 2000.

            4.9   Absence of Undisclosed Liabilities. On the Balance Sheet Date,
there were no Liabilities of KAR (including, but not limited to, Liabilities for
Taxes relating to any prior period) that are or would be required by GAAP to be
shown on the Balance Sheet that were not fully reflected and reserved against on
the Balance Sheet. On the date hereof there are, and on the Closing Date there
will be, no other Liabilities of KAR of a nature required to be reflected on a
balance sheet in accordance with GAAP except (i) those incurred since the
Balance Sheet Date, in the ordinary course of the business consistent with past
practice, not in violation of or in conflict with any of the terms, agreements,
warranties, representations and conditions of KAR and the Equityholders
contained in this Agreement and (ii) those set forth in the Disclosure Schedule.

            4.10  Accounts Receivable. All of the accounts receivable of KAR
shown or reflected on the Balance Sheets or existing on the date of this
Agreement are valid and enforceable claims for services fully performed and
subject to no set-off or counterclaim (it being agreed and understood that KAR
and the Equityholders are not by this representation guaranteeing the collection
of any such account receivable). Except as set forth in the Disclosure Schedule,
KAR has no accounts or loans receivable from any Person which is affiliated with
KAR or from any officer, partner or employee of KAR or any member of the
Immediate Family of any Equityholder. For purposes of this Agreement, "Immediate
Family" means, with respect to any individual, such individual's spouse, former
spouse, parents, grandparents, children, grandchildren or siblings (and estates,
trusts, partnerships or other entities and legal relationships

                                       25
<PAGE>
of which a substantial majority in interest of the beneficiaries, owners,
investors, partners, members or participants at all times in question are,
directly or indirectly, one or more of the Persons described above and/or such
individuals).

            4.11  Absence of Certain Changes. From the Balance Sheet Date
through the Execution Date, KAR has conducted its Business in the ordinary and
regular course, in a manner consistent with past practice, and, except as
contemplated by this Agreement or the Related Agreements or as set forth on the
Disclosure Schedule, there has not been:

            (a)   any event or events or occurrence or occurrences which has had
or would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on KAR;

            (b)   any declaration, setting aside or payment or any dividend or
other distribution with respect to any Membership Interest or other equity
interest of KAR, or any repurchase, redemption or other acquisition by KAR or
any outstanding shares of capital stock or other securities of, or other
ownership interest in, KAR;

            (c)   any incurrence, assumption or guarantee by KAR of any
outstanding amount of indebtedness for borrowed money other than in the ordinary
course of business in accordance with its customary practices;

            (d)   any transaction or commitment made, or any contract or
agreement entered into, by KAR relating to its assets or business (including the
acquisition or disposition of any assets) or any loss or relinquishment by KAR
of any material contract or other material right, other than transactions and
commitments made, and contracts or agreements entered into or terminations of
Investment Contracts, in each case in the ordinary course of business in
accordance with their customary practices;

            (e)   any material modifications or amendments to any Investment
Contracts, Contracts or Fund Agreements other than in the ordinary course of
business;

            (f)   any material change in any method of accounting or accounting
practice or policy or application thereof by KAR;

            (g)   any increase in (or commitment, oral or written, to increase)
the rate or terms (including, without limitation, any acceleration of the right
to receive payment) of compensation payable or to become payable by KAR to the
Equityholders or to KAR's officers, employees or consultants except increases
occurring in the ordinary course of business in accordance with its customary
practices, or any new written employment agreements with any of such Persons or
any new commitments (oral or written) with any Equityholder or officer of KAR;

            (h)   any increase in (or commitment, oral or written, to increase)
the rate or terms (including, without limitation, any acceleration of the right
to receive payment) of any bonus, severance, insurance, pension or other
employee benefit plan or contract, payment or arrangement made to, for or with
any director, officer, employee or consultant of KAR, except

                                       26
<PAGE>
increases occurring in the ordinary course, or any new bonus, severance or
employee benefit plan, contracts, payments or arrangements with any of such
Persons;

            (i)   any action or event taken by any Company that if taken or
suffered after the date hereof would violate Section 6.1 of this Agreement; or

            (j)   any suspension of any license or permit issued to KAR or any
material impairment of its right to conduct business.

            4.12  Litigation. Except as set forth on the Disclosure Schedule,
there is no Action pending, or to the knowledge of KAR and each Equityholder,
threatened (i) against KAR, the Business, or with respect to KAR's activities,
properties or assets or any of the Fund or with respect to their respective
activities, properties or assets or (ii) relating to or affecting the
transactions contemplated by this Agreement or any of the Related Agreements.
Neither KAR nor any Fund is in default with respect to any judgment, order,
writ, injunction, decree or restriction of any court or Governmental Entity, and
there are no unsatisfied judgments against (x) KAR, the Business or the
activities, properties or assets of KAR or (y) any Fund or the respective
activities, properties or assets of any Fund. There is no Action pending, or to
the knowledge of KAR and each Equityholder, threatened relating to the
termination of, or limitation of, the rights of KAR under its registration under
the Advisers Act as an investment adviser or any similar or related rights under
any registrations or qualifications with various self-regulatory bodies, states
or other jurisdictions.

            4.13  Title to Assets. KAR has good, valid and marketable title to
all of the properties and assets, tangible and intangible, reflected in the
Balance Sheet as being owned by it, except those sold or otherwise disposed of
in the ordinary course of business, free and clear of all Liens, except for
Permitted Liens which in the aggregate are not substantial in amount, do not
detract from the value of the property or assets subject thereto or interfere
with the present or anticipated use thereof and have not arisen other than in
the ordinary course of the Business and except as disclosed in filings made
pursuant to the Uniform Commercial Code. The Disclosure Schedule lists all
leases and related material agreements relating to real estate and equipment
providing for annual payments in excess of $50,000 to which KAR is a party. KAR
has made available for review by Buyer true, correct and complete copies of all
such leases and related agreements providing for annual payments in excess of
$50,000. KAR has performed all obligations required to be performed by it with
respect to all assets and properties leased by it through the date hereof,
except where the failure to perform does not have, or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
KAR. The assets and properties owned or leased by KAR include all assets and
properties that are used in the conduct of their respective businesses. KAR does
not own any real property. All buildings and all fixtures, equipment and other
property and assets which are held under leases or subleases by KAR are held
under valid leases or subleases.

            4.14  Technology and Intellectual Property. KAR has (and upon
consummation of the transactions contemplated hereby will have) ownership of, or
such other rights by license, lease or other agreement in and to, all items of
intangible property necessary for the conduct of the Business as presently
conducted, including, without limitation, trademarks and service marks, trade
names, brand names, patents, copyrights, proprietary rights, logos, names,

                                       27
<PAGE>
trademark applications, service mark applications and patent applications
(collectively the "Intellectual Property"), as necessary to conduct the Business
as presently conducted. The Disclosure Schedule lists all such items of
Intellectual Property other than off-the-shelf shrink-wrap licensed software. To
the knowledge of KAR, KAR has not infringed or violated any trademark, trade
name, copyright, patent, trade secret right or other proprietary right of
others, nor, to the knowledge of KAR and the Equityholders, has any other Person
infringed on a continuing basis any rights that KAR and the Fund have in the
Intellectual Property. KAR owns or licenses all computer software developed or
currently used by it which is material to the conduct of its business as
currently conducted and, to the knowledge of KAR, has the right to use such
software without infringing upon the intellectual property rights (including
trade secrets rights) of any third-party. Since January 1, 2000, neither KAR nor
the Fund has received written notice of any claim respecting any such violation
or infringement.

            4.15  Contracts. The Disclosure Schedule sets forth as of the date
hereof a complete and accurate list of all Material Contracts to which KAR is a
party or by which KAR or any of its assets or properties is bound or subject.
Each Material Contract (excluding for these purposes, Investment Contracts) is
in full force and effect and constitutes the legal, valid and binding obligation
of KAR and, to the knowledge of KAR and each Equityholder, of the other parties
thereto, and is enforceable in accordance with its terms, except, in each case,
to the extent certain of the liability limitation provisions therein may be
contrary to public policy as expressed in the Securities Laws and therefore
unenforceable, and as limited by the effects of bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting creditors'
rights generally and court decisions with respect thereto and general principles
of equity regardless of whether enforcement is sought in a proceeding at law or
in equity and except where the failure to be enforceable does not have, or would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on KAR. True, correct and complete copies of all Material
Contracts have been previously delivered or made available by the Companies to
Buyer. For the purposes of this Agreement, "Material Contracts" means:

            (a)   any Contract not fully performed for the purchase by KAR for
its own account of any commodity, material, services or equipment, including,
without limitation, fixed assets, for a price in excess of $50,000;

            (b)   any Contract containing covenants limiting the freedom of KAR
to engage or compete (geographically or otherwise) in any line of business or
with any Person;

            (c)   any Contract (i) for cash payments for client solicitations;
(ii) in respect of the sale distribution of shares of the Fund; (iii) of the
type referred to in Rule 2830(i) of the NASD Conduct Rules; or (iv) of the type
referred to in NASD Notice to Members 98-75;

            (d)   any license agreement (as licensor or licensee) providing for
future payments in excess of $50,000 which by its terms does not terminate or is
not terminable without penalty by KAR upon notice of 60 days or less;

            (e)   any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money, by KAR in
excess of $50,000;

                                       28
<PAGE>
            (f)   any Contract involving payments based on profits or revenues
of KAR (including any contracts providing for Business Manager Revenue Sharing);
or

            (g)   any other Contract which creates future payment obligations of
KAR in excess of $50,000 and which by its terms does not terminate or is not
terminable without penalty by KAR upon notice of 60 days or less.

            4.16  No Default Under Contracts or Agreements. KAR is not in breach
or violation of, or in default under (with or without the giving of notice or
the passage of time), any term or provision of any Contract to which it is a
party or by which it is or may be bound or to which any of its properties or
assets is or may be subject, the effect of which breach, violation or default,
either individually or in the aggregate, has or would reasonably be expected to
have a Material Adverse Effect on KAR. To the knowledge of KAR and each
Equityholder, no other party is in breach or violation of, or in default under
(with or without the giving of notice or the passage of time), any term or
provision of any such Contract, the effect of which breach, violation or
default, either individually or in the aggregate, has or would reasonably be
expected to have a Material Adverse Effect on KAR.

            4.17  Investment Contracts and Clients. The aggregate assets under
management by KAR as of December 31, 2000 and September 30, 2001 are accurately
set forth on the Disclosure Schedule. The Disclosure Schedule also sets forth an
accurate and complete list as of December 31, 2000 and September 30, 2001 of (i)
all Clients with assets under management in excess of $1,000,000 as of the date
hereof, (ii) all Investment Contracts for the foregoing Clients setting forth
the names of the Fund or Persons under each such Investment Contract, (iii) the
amount of assets under management with respect to each of the foregoing, (iv)
the fee schedule for each of the foregoing and (v) any material fee adjustments
regarding the foregoing implemented since December 31, 2000 or presently
proposed to be implemented. KAR is in compliance in all material respects with
the terms of each Investment Contract and is not in material default or material
breach under (with or without the giving of notice or the passage of time) any
of the terms of any Investment Contract. Each Investment Contract is in full
force and effect and constitutes a legal, valid and binding obligation of KAR,
and, to the knowledge of KAR and the Equityholders of the Fund and the other
parties thereto, enforceable in accordance with its terms except for ordinary
course terminations of Investment Contracts after the Execution Date and
Investment Contracts with respect to which consents (affirmative or negative)
are not received prior to the Closing Date. True, correct and complete copies of
each Investment Contract, including a current fee schedule, have been provided
to or made available for review by Buyer. Except as set forth in the Disclosure
Schedule and except as notified to Buyer prior to the Closing Date, KAR has not
been notified of the intention of any Client with assets under management in
excess of $1,000,000 or the Fund to terminate its Investment Contract or to
withdraw all or the substantial portion of such assets within six months after
the Closing Date or to adjust the applicable fee schedule. Each Investment
Contract subject to Section 15 of the Investment Company Act has been duly
approved at all times in compliance with Section 15 of the Investment Company
Act and all other Applicable Laws in all material respects. Each such Investment
Contract has been performed by KAR in accordance with the Advisers Act and all
other Applicable Laws in all material respects.

                                       29
<PAGE>
            4.18  Compliance with Laws. KAR holds, and has at all times held,
and at Closing will hold, all licenses, franchises, permits and authorizations
necessary for the lawful ownership and use of its material properties and
material assets (collectively, "Permits")and the conduct of its businesses under
and pursuant to, and has complied with each, and is not in default under any,
Applicable Law relating to KAR or any of its assets, properties or operations,
and there are no outstanding violations of any of the above, except for any
failure to hold a Permit and such defaults and violations that do not have,
either individually or in the aggregate, a Material Adverse Effect on KAR, and
KAR has not received written notice asserting any such violation. All Permits
that are required to carry on the Business as presently conducted and the
absence of which would individually or in the aggregate, have a Material Adverse
Effect on KAR are listed on the Disclosure Schedule. All such Permits are valid
and in good standing and are not subject to any suspension, modification or
revocation or proceedings related thereto, and the consummation of the
transactions contemplated hereby will not result in any such revocation,
cancellation, suspension or modification of any such Permits except where the
revocation, cancellation, suspension or modification does not have, or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on KAR. KAR has made available for review by Buyer copies of all
material correspondence and communications received from any Governmental Entity
since January 1, 2000.

            4.19  Business; Registrations.

            (a)   Since January 1, 1999, KAR has been engaged solely in the
business of providing Investment Management Services and certain related
businesses and activities and has not engaged in any other business or activity
of any kind. Since January 1, 1999, KAR has not sponsored or participated in the
distribution by private offering or otherwise of any interests in any issuer
that is required to register as an investment company (within the meaning of the
Investment Company Act).

            (b)   KAR is duly registered as an investment adviser under the
Advisers Act and is duly registered, licensed or qualified as an investment
adviser in all jurisdictions where such registration, licensing or qualification
is required in order to conduct its business, except for failures to be so
registered, licensed or qualified that do not have, either individually or in
the aggregate, a Material Adverse Effect on KAR. KAR is in compliance in all
material respects with all applicable foreign, federal and state laws requiring
registration, licensing or qualification as an investment adviser. KAR has
delivered or made available to Buyer true, correct and complete copies of its
most recent Form ADV, as amended to date, and has made available true, correct
and complete copies of all foreign and state registration forms, as amended to
date. The information contained in such forms was true, correct and complete in
all material aspects at the time of filing and has been amended or modified as
required by applicable law.

            (c)   Neither KAR nor any "affiliated person" (as defined in the
Investment Company Act) thereof is ineligible pursuant to Section 9(a) or 9(b)
of the Investment Company Act to serve as an investment adviser (or in any other
capacity contemplated by the Investment Company Act) to a registered investment
company. Neither KAR nor any "associated person" (as defined in the Advisers
Act) thereof is ineligible pursuant to Section 203 of the Advisers Act to serve
as an investment adviser or as an associated person to a registered investment
adviser. Neither KAR nor any "associated person" (as defined in the Advisers
Act) has been convicted of

                                       30
<PAGE>
any crime or has engaged in any conduct that would require disclosure under Rule
206(4)-4(a)(2) under the Advisers Act or under applicable state law. Neither KAR
nor any "associated person" (as defined in the Exchange Act) thereof is
ineligible pursuant to Section 15(b) of the Exchange Act to serve as a
broker-dealer or as an associated person to a registered broker-dealer.

            (d)   Except as set forth on the Disclosure Schedule, KAR has all
permits, licenses, certificates of authority, orders and approvals of, and have
made all filings, applications and registrations with, Governmental Entities
(collectively, the "Licenses") that are required in order to permit them to
carry on the Business as presently conducted and the absence of which would,
individually or in the aggregate, have a Material Adverse Effect on KAR; such
Licenses are in full force and effect, except where the failure to be in full
force and effect would not have a Material Adverse Effect on KAR.

            (e)   Each Equityholder and each other Person "associated" (as
defined under the Advisers Act) with KAR has all Licenses that are required in
connection with the conduct of the Business as presently conducted and the
absence of which would have or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on KAR; such
Licenses are in full force and effect, except where the failure to be in full
force and effect would not have a Material Adverse Effect on KAR.

            (f)   As of their respective dates, the Regulatory Documents of KAR
and the Fund complied in all material respects with the requirements of the
Securities Laws applicable to such Regulatory Documents, and none of such
Regulatory Documents, as of their respective dates or as of such other dates as
so required under the Securities Laws, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. KAR has previously
delivered or made available to Buyer a true, correct and complete copy of each
such Regulatory Document filed with the SEC after January 1, 2000 and prior to
the date hereof and will deliver or make available to Buyer promptly after the
filing thereof a true, correct and complete copy of each Regulatory Document
filed by any of KAR and the Fund with the SEC after the date hereof and prior to
the Closing Date.

            4.20  Taxes.

            (a)   (i) All Tax returns and reports (including information
returns, declarations and reports) and amended or substituted returns and
reports required to be filed on or prior to the Closing Date (taking into
account any extension of time within which to file) with any Taxing Authority by
or on behalf of KAR or any Fund (collectively, the "Tax Returns" and singularly,
a "Tax Return"), have been or will be duly and timely filed when due in
accordance with all applicable laws (including any extensions of such due date);
(ii) as of the time of filing, the Tax Returns correctly reflected in all
material respects (and, as to any Tax Returns not filed as of the date hereof,
will correctly reflect in all material respects) the income or other measure of
Tax and any other information required to be shown therein; (iii) all Taxes due
and payable by KAR or any Fund (collectively, the "Taxpayers" and individually,
a "Taxpayer") have been timely paid or withheld or adequate provision has been
made therefor; (iv) the charges, accruals and reserves for deferred and
contingent Taxes reflected on the Historical Financial Statements described in
Section 4.7 hereof and the Fund Financial Statements described in Section
4.25(c) hereof are

                                       31
<PAGE>
adequate to cover all Taxes which are or may become payable by KAR or the Fund,
as the case may be, with respect to all periods through the date of such
Historical Financial Statements and Fund Financial Statements and the books and
records of KAR and the Fund, will contain accruals and reserves adequate to
cover all Taxes for all periods ending on or prior to the Closing Date and not
covered by such Historical Financial Statements or Fund Financial Statements;
(v) none of the Taxpayers is delinquent in the payment of any Tax nor have any
of them requested any extension of time within which to file any Tax Return,
which Tax Return either has not since been filed or with respect to which such
extended period has not yet expired; (vi) there are no pending audits,
investigations, claims, administrative or judicial proceedings, or collection
actions against or with respect to any Taxpayer in respect of any Tax or
assessment and neither Taxpayer has received any notice from any Tax Authority
advising that any such audit, investigation, claim, proceeding or action may or
will be commenced; (vii) there are no Liens for Taxes upon the assets of any
Taxpayer except Liens for current Taxes not yet due and Liens for Taxes that are
being disputed in good faith by appropriate proceedings and that have been
reserved against in accordance with GAAP; (viii) the Disclosure Schedule sets
forth the taxable years of each Taxpayer as to which audits have been completed,
those years which are currently under audit, those years for which audits have
not been initiated, and those years for which required Tax Returns have not yet
been filed; (ix) none of the Taxpayers is a party to any written or unwritten
Tax sharing agreement or indemnity agreement executed or agreed to on or prior
to the date of this Agreement; (x) none of the Taxpayers has any liability for
the Taxes of any Person other than the Taxpayers; (xi) KAR is not, nor has KAR
been, a United States real property interest within the meaning of Section 897
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code; (xii) none of the assets of KAR is treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code; (xiii) KAR has never
been included in a consolidated, combined or unitary group for any taxable
period; (xiv) KAR has not, and is not required to, file Tax Returns in any
jurisdiction outside of the United States of America; (xv) KAR has no income
which has been allocated, apportioned or otherwise sourced to any state other
than the State of California in any Tax Return of KAR; and (xv) KAR has not
agreed to, and is not required to, make, any adjustment under Section 481(a) or
Section 263(A) of the Code.

            (b)   All Taxes required to be withheld by each Taxpayer arising as
a result of payments to (or amounts allocable to) foreign members, foreign
partners or other foreign Persons have been collected and withheld, and have
been paid to the appropriate Taxing Authority.

            (c)   KAR qualifies, has qualified since the date of its formation,
and will qualify immediately after the Closing Date, to be treated as a
partnership for federal, state and local income tax purposes. Neither KAR nor
any Equityholder has taken or will take a position inconsistent with such
treatment.

            4.21  Employee Benefit Plans.

            (a)   Definitions. Each of the following terms, when used in this
Section 4.21, shall have the meanings indicated in this Section 4.21 for that
term. Any of these terms may, unless the context otherwise requires, be used in
the singular or the plural depending on the reference.

                                       32
<PAGE>
                  (i)   "Benefit Arrangement" shall mean any material employment
      or consulting policy, practice or plan providing for insurance coverage
      (including any self-insured arrangements), workers' compensation,
      disability benefits, supplemental unemployment benefits, vacation
      benefits, severance, retirement benefits, life, health, disability or
      accident benefits (including, without limitation, any "voluntary
      employees' beneficiary association" as defined in Section 501(c)(9) of the
      Code providing for the same or other benefits) or for deferred
      compensation, profit-sharing, bonuses, stock options, stock appreciation
      rights, stock purchases or other forms of incentive compensation or
      post-retirement insurance, compensation or other benefits which (A) is not
      an ERISA Welfare Plan, ERISA Pension Plan or Multiemployer Plan, (B) is
      maintained, contributed to or required to be contributed to, as the case
      may be, by KAR and (C) in which any individual while retained or employed
      by KAR participates by reason of being so retained or employed.

                  (ii)  "Benefit Plans" shall mean all Benefit Arrangements,
      Multiemployer Plans, ERISA Pension Plans and ERISA Welfare Plans.

                  (iii) "ERISA Affiliate" shall mean any entity (whether or not
      incorporated) which is (or at any relevant time was) a member of a
      "controlled group of corporations" with or under "common control" with KAR
      (as such terms are defined in Section 4001(a)(14) of ERISA or Sections
      414(b) or (c) of the Code).

                  (iv)  "ERISA Pension Plan" shall mean any "employee pension
      benefit plan" as defined in Section 3(2) of ERISA (other than a
      Multiemployer Plan) (A) which KAR or any ERISA Affiliate maintains,
      administers, contributes to or is required to contribute to, or has ever
      maintained, administered, contributed to or been required to contribute
      to, and (B) in which any individual while retained or employed by any
      Company or any ERISA Affiliate participates by reason of being so retained
      or employed.

                  (v)   "ERISA Welfare Plan" shall mean any "employee welfare
      benefit plan" as defined in Section 3(1) of ERISA, (A) which KAR or any
      ERISA Affiliate maintains, administers, contributes to or is required to
      contribute to, or has ever maintained, administered, contributed to or
      been required to contribute to, and (B) in which any individual while
      retained or employed by KAR or any ERISA Affiliate participates by reason
      of being so retained or employed.

                  (vi)  "Multiemployer Plan" shall mean any "multiemployer
      plan," as defined in Section 4001(a)(3) of ERISA.

                  (vii) "ERISA" shall mean the Employee Retirement Income
      Security Act of 1974, as amended.

            (b)   Disclosure; Delivery of Copies of Relevant Documents and Other
Information. The Disclosure Schedule contains a complete list of Benefit Plans
and a complete copy of each of the following documents has been delivered or
made available by the Companies to Buyer, in each case to the extent applicable:
(i) with respect to each Benefit Plan, the most

                                       33
<PAGE>
recent document (and, if applicable, related trust agreements) and all
amendments thereto, the most recent written description thereof which has been
distributed to employees of KAR or any ERISA Affiliate and all annuity contracts
or other funding instruments pertaining thereto, and for any Benefit Plan which
is not in writing, a description of the principal features thereof; (ii) the
most recent determination letter issued by the Internal Revenue Service with
respect to each ERISA Pension Plan and any pending or the most recent
application for such a determination letter with respect to each ERISA Pension
Plan; (iii) Annual Reports on Form 5500 Series (including all applicable
schedules thereto) filed with any Governmental Entity for each Benefit Plan and
Tax Returns, if any (including all applicable schedules thereto) for each trust
related thereto for the most recent plan year (or the three most recent plan
years in the case of an ERISA Pension Plan); (iv) all annual financial
statements and accountant's opinions relating to each ERISA Pension Plan and
ERISA Welfare Plan for the three most recent plan years; (v) any correspondence
or notifications received from any Governmental Entity during the three most
recent plan years relating to Benefit Plans other than routine correspondence
relative to Annual Reports on Form 5500 Series; (vi) a report of the claims
experience under any self-funded ERISA Welfare Plan for the three most recent
plan years; and (vii) all other contracts, agreements, insurance policies and
fidelity bonds relating to the Benefit Plans

            (c)   Compliance. Each ERISA Pension Plan, ERISA Welfare Plan,
Benefit Arrangement or trust agreement, annuity contract or funding instrument
materially complies, and has been maintained in compliance in all material
respects, with its terms and, both as to form and operation, with all applicable
requirements, including all reporting and disclosure requirements, prescribed by
any and all applicable statutes, orders, rules and regulations, including, but
not limited to, ERISA and the Code.

            (d)   Multiemployer Plans. Neither KAR nor any ERISA Affiliate has,
at any time, directly or indirectly contributed to or had an obligation to
contribute to a Multiemployer Plan.

            (e)   ERISA Welfare Plans.

                  (i)   Except as set forth in the Disclosure Schedule, KAR and
      each applicable ERISA Affiliate has reserved the right to amend or
      terminate (A) any ERISA Welfare Plan which it currently maintains or (B)
      its participation in any ERISA Welfare Plan in which it currently
      participates.

                  (ii)  Except as set forth in the Disclosure Schedule, none of
      KAR, any ERISA Affiliate or any ERISA Welfare Plan has any present or
      future obligation to make any payment to or under any ERISA Welfare Plan
      which provides benefits to retirees other than for COBRA benefits under
      Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code.

                  (iii) Each ERISA Welfare Plan which is a "group health plan,"
      as defined in Section 607(1) of ERISA, has been operated in material
      compliance with the provisions of Part 6 of Subtitle B of Title I of ERISA
      and Section 4980B of the Code at all times.

                                       34
<PAGE>
                  (iv)  Except as set forth in the Disclosure Schedule and
      except as may be payable by a third-party administrator or pursuant to an
      insured arrangement, there are no contributions or payments of benefit
      claims with respect to any ERISA Welfare Plan which are or will be 30 days
      past due.

            (f)   ERISA Pension Plans.

                  (i)   No ERISA Pension Plan is or has been subject to Title IV
      of ERISA. Neither KAR nor any ERISA Affiliate has any Liability for unpaid
      contributions with respect to any ERISA Pension Plan. There has not been,
      with respect to any ERISA Pension Plan, any "accumulated funding
      deficiency," whether or not waived, as defined in Section 302 of ERISA or
      Section 412 of the Code.

                  (ii)  Each ERISA Pension Plan (and each related trust
      agreement, annuity contract or other funding instrument) which is intended
      to be qualified and tax-exempt under the provisions of Sections 401(a) and
      501(a) of the Code has received a determination letter that it is so
      qualified and no event has occurred nor does any condition exist which is
      reasonably likely to cause it not to continue to be so qualified.

            (g)   Unrelated Business Taxable Income. To the knowledge of KAR and
the Equityholders, no Benefit Plan (or trust or other funding vehicle pursuant
thereto) currently has Liability for any Tax under Section 511 of the Code.

            (h)   Deductibility of Payments. There is no contract, agreement,
plan or arrangement covering any employee or former employee of KAR that,
individually or collectively, provides for the contribution or payment by KAR of
any amount that is not deductible or will not be deductible under Sections 162
or 404 of the Code.

            (i)   Fiduciary Duties and Prohibited Transactions. Except as would
not result in a material liability of KAR, neither KAR nor, to the knowledge of
KAR and the Equityholders, any plan fiduciary of any ERISA Welfare Plan or ERISA
Pension Plan has engaged in any transaction in violation of Sections 404 or 406
of ERISA or any "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975(c)(1) of the Code, for which no exemption exists under Section 408
of ERISA or Section 4975(c)(2) or (d) of the Code.

            (j)   Litigation. Except as disclosed in the Disclosure Schedule,
there are no pending or, to the knowledge of KAR and each Equityholder,
threatened Actions (other than claims for benefits in the normal course),
asserted or instituted against (i) any ERISA Welfare Plan or its assets, (ii)
any ERISA Pension Plan or its assets, (iii) any fiduciary of any ERISA Pension
Plan or ERISA Welfare Plan with respect thereto or (iv) KAR or any ERISA
Affiliate with respect to any Benefit Plan.

            (k)   No New Benefit Plans or Amendments. KAR has not announced any
plan or made any legally binding commitment to create or contribute to any
Benefit Plans other than those listed in the Disclosure Schedule or to amend or
modify materially any such Benefit Plan now existing except as may be required
by law or for compliance with an applicable qualification provision of the Code
and no ERISA Affiliate has announced any plan or made any legally binding
commitment to create or contribute to any ERISA Pension Plan which is subject

                                       35
<PAGE>
to Title IV of ERISA or any Multiemployer Plan, or to amend or modify materially
any ERISA Pension Plan, or create any new ERISA Pension Plan, which is subject
to Section 412 of the Code or Section 302 of ERISA, except as may be required by
law or for compliance with an applicable qualification provision of the Code.

            4.22  Partners, Shareholders, Officers and Employees.

            (a)   The Disclosure Schedule contains a true, correct and complete
list of all current officers of KAR. In addition, the Disclosure Schedule
contains a list of all partners, members, managers, shareholders, employees and
consultants of KAR who, individually, (x) have received compensation from KAR
for the year ended December 31, 2000 in excess of $100,000 or (y) are expected
to receive compensation in excess of such amount for the year ending December
31, 2001. The aggregate annual compensation of each such individual heretofore
furnished to Buyer in writing is true and correct.

            (b)   No consultant or other Person other than KAR's employees (the
"Employees") renders Investment Management Services to or on behalf of KAR.
Except as set forth on the Disclosure Schedule, KAR has no obligation,
contingent or otherwise, whether written or oral, under (i) any collective
bargaining or other labor agreement, (ii) any retainer or consulting
arrangements or (iii) any other employee or employment-related Contract or
non-terminable (whether with or without penalty) employment arrangement (each,
together with any service or employment-related Contract disclosed on the
Disclosure Schedule pursuant to Sections 4.15 and 4.21 (other than a Benefit
Arrangement) hereof, an "Employment Arrangement"). KAR is not in default with
respect to any material term or condition of any Employment Arrangement,
including, without limitation, after the giving of notice, lapse of time or
both. KAR is not delinquent (as determined in accordance with its payroll
practices and reimbursement policies) in payments to any of its employees for
any wages, salaries, commissions, bonuses or other direct compensation for any
services performed for it to the date hereof or amounts required to be
reimbursed to such employees. KAR has no agreement, policy, plan or program of
paying severance pay or any form of severance or termination compensation or
"parachute payments" in connection with the termination of employment or changes
in control, except as set forth in the Disclosure Schedule. KAR is in compliance
in all material respects with all applicable laws and regulations respecting
labor, employment, fair wages and hours. There are no charges that have been
filed of employment discrimination or unfair labor practices against or
involving KAR. There are no grievances, complaints or charges that have been
filed against KAR under any dispute resolution procedure that would have a
Material Adverse Effect on KAR or the conduct of the Business, and there is no
arbitration or similar proceeding pending and no claim therefor has been
asserted. KAR has in place all employee policies required by Applicable Laws,
except where the failure to have in place such policies would not have a
Material Adverse Effect on KAR and there have been no material violations of any
of such employee policies. Neither KAR nor the Equityholders has received any
written notice indicating that any of such employment policies or practices is
currently being audited or investigated by any Governmental Entity. KAR is, and
at all times since its inception has been, in compliance in all respects with
the requirements of the Immigration Reform Control Act of 1986 except where the
failure to comply does not have, or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on KAR.

                                       36
<PAGE>
            4.23  Insurance. KAR has in full force and effect such insurance
with respect to the Business, its property and assets for such amounts and such
terms as set forth in the Disclosure Schedule and all bonds required by ERISA
and by any Contract to which it is a party as set forth on the Disclosure
Schedule. KAR has delivered or made available copies of all such policies to
Buyer. KAR is not in material default under any such insurance policy or bond.

            4.24  Transactions with Interested Persons. Except as set forth in
the Disclosure Schedule, none of KAR or any partner, member, officer,
supervisory employee, shareholder or director of KAR or, to the knowledge of KAR
and each Equityholder, any member of the Immediate Family or Affiliate of such
Equityholder, (a) is a competitor of, or a party to any material transaction or
material Contract or arrangement with, KAR, (b) serves as an officer or director
or in another similar capacity of, any competitor of KAR, any Fund, or any
Person that has a material Contract or arrangement with KAR, or (c) owns
directly or indirectly on an individual or joint basis (other than in or through
beneficial ownership of less than five percent of the outstanding securities of
a publicly traded company), any interests in any competitor or any Person that
has a material Contract or arrangement with KAR. Each of the agreements or
arrangements listed on Item 4.24 of the Disclosure Schedule, at the time such
agreement or arrangement was entered into, was in the opinion of management of
KAR commercially reasonable and was entered into on terms and conditions no less
favorable to KAR than that which could have been obtained through arms-length
negotiation with an unrelated party.

            4.25  Certain Additional Representations and Warranties as to the
Fund.

            (a)   The Disclosure Schedule sets forth: (i) a true, complete and
correct list, as of the date hereof, of the Fund, (ii) the most recent date on
which each Investment Contract was renewed or continued in accordance with
Section 15 of the Investment Company Act, and (iii) the aggregate net asset
value (as defined for purposes of the Investment Company Act) of the Fund as of
December 31, 2000 and September 30, 2001. All payments due under each
distribution or principal underwriting agreement to which the Fund is a party
have been made in compliance with Applicable Law. The Fund Board has not adopted
any distribution plan under Rule 12b-1 under the Investment Company Act. Except
as set forth in the Disclosure Schedule, none of the Investment Contracts, or
any other arrangements or understandings relating to KAR's rendering of
investment advisory or management services (including, without limitation, all
sub-advisory services), administration or distribution services to the Fund
contains any undertaking by such entity to cap fees or to reimburse any or all
fees thereunder, except as required by Applicable Law. The Fund is duly
organized, validly existing and in good standing under the laws of Delaware and
has the requisite trust power and authority, and possesses all rights, licenses,
authorizations and approvals, governmental or otherwise, necessary to entitle it
to use its name, to own, lease or otherwise hold its properties and assets and
to carry on its business as it is now conducted and to perform its obligations
under the Fund Agreements to which it is a party, and is duly qualified,
licensed or registered to do business in each jurisdiction where it is required
to do so under Applicable Law except where the failure to be so qualified,
licensed or registered does not have, or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on KAR. KAR
has delivered or made available to Buyer a list of all such jurisdictions where
the Fund is qualified. The Fund is, and at all times required under the
Securities Laws has been, duly registered with the SEC as an investment company
under the Investment Company Act or is a series thereof. As to the Fund, there
has

                                       37
<PAGE>
been in full force and effect an investment advisory, sub-advisory, distribution
or underwriting agreement (as applicable) at all times since the inception of
the Fund and KAR received compensation respecting its activities in connection
with the Fund only as provided by the Fund Agreements and as permitted by the
Investment Company Act and other Applicable Law. The Fund is not in default in
the performance, observance or fulfillment of any of the material terms or
conditions of its organizational documents (each as amended to date), true and
complete copies of which have been provided or made available to Buyer, and such
documents are in full force and effect. The Fund has no subsidiaries or
affiliates (as such terms are defined in Rule 12b-2 of the Exchange Act) other
than KAR and the trustees of the Fund.

            (b)   Since the Fund's inception, the shares or units of beneficial
interest of the Fund have been duly and validly issued and are fully paid and
nonassessable and the shares or units of beneficial interest of the Fund are
qualified for public offering and sale in each jurisdiction where offers are
made to the extent required under Applicable Law; and the Fund, since inception,
has been operated and is currently operating in compliance in all respects with
its respective investment objectives and policies and Applicable Law. None of
the assets of the Fund constitute plan assets pursuant to the plan asset
regulations set forth in 29 C.F.R. Section 2510.3-101.

            (c)   KAR has delivered or made available to Buyer true, complete
and correct copies of the financial statements for the Fund for each of its
fiscal years ending in 1998, 1999 and 2000, respectively, as are currently
available, and unaudited financial statements of the Fund for the first
six-months of its most recent fiscal year if the date of this Agreement is eight
months after the beginning of the Fund's fiscal year, and will deliver or make
available to Buyer true, complete and correct copies of any such financial
statements as are not currently available promptly upon such financial
statements becoming available (collectively, the "Fund Financial Statements").
The Fund Financial Statements have been prepared in accordance with GAAP, except
as otherwise disclosed in such Fund Financial Statements or the notes thereto.
The Fund Financial Statements present fairly the financial position of the Fund
as of the date of each such Fund Financial Statement and the results of
operations and changes in net assets of the Fund during the period covered by
each such Fund Financial Statement in accordance with GAAP. The Fund Financial
Statements reflect and disclose all material changes in accounting principles
and practices adopted by the Fund during the periods covered by each Fund
Financial Statement. The Fund has no obligation or Liability (contingent or
other) of a nature required to be reflected on a balance sheet in accordance
with GAAP that, individually or in the aggregate, is material to the financial
condition or results of operations of the Fund, except (i) as reflected in the
Fund Financial Statements or (ii) as set forth in the Disclosure Schedule or
(iii) as may be incurred in the ordinary course of business, consistent with
past practice.

            (d)   KAR has delivered or made available to Buyer true, complete
and correct copies of the following documents (collectively, the "Fund
Agreements"):

                  (i)   all agreements and arrangements for the distribution of
      shares of the Fund by which the Fund is bound;

                  (ii)  all custody agreements, transfer agent agreements and
      similar agreements or arrangements by which the Fund is bound;

                                       38
<PAGE>
                  (iii) all administrative service and similar agreements by
      which the Fund is bound; and

                  (iv)  all Investment Contracts pursuant to which KAR provides
      any Investment Management Services to the Fund.

Each Fund Agreement was duly approved in accordance with the applicable
provisions of the Investment Company Act. Except as listed in the Disclosure
Schedule, each Fund Agreement is in full force and effect and enforceable in
accordance with its terms. There does not exist under any Fund Agreement any
event of default or event or condition that, after notice or lapse of time or
both, would constitute an event of default thereunder on the part of any of KAR
or the Fund or, to the knowledge of the KAR or the Equityholders, any other
party thereto except where the event of default does not have, or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on KAR.

            (e)   The Fund has issued its shares or interests pursuant to valid
and effective registration statements under the Investment Company Act and/or
the Securities Act and applicable state securities or "blue sky" laws, which
registration statements have, at all times when such registration statements
were effective, complied as to form in all material respects with the
requirements of the Investment Company Act and the Securities Act then in effect
and did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and which were, in the event of any subsequent material
misstatements or omissions, promptly amended or supplemented to correct any such
misstatement or omission. The offerings and sales of the shares and interests in
the Fund complied with Applicable Law. The Fund's investments have been made in
accordance with its investment policies and restrictions set forth in its
registration statement in effect at the time the investments were made and at
all times when the investments were held. No stop order suspending the
effectiveness of any such registration statement has been issued and no
proceedings for that purpose have been instituted or, to the knowledge of KAR
and the Equityholders, are contemplated.

            (f)   Except as set forth in the Disclosure Schedule, KAR has not
sponsored or participated in the distribution by public or private offering of
any interests in any limited partnerships or other entities or Persons other
than the Fund.

            (g)   The Fund has filed all prospectuses, annual information forms,
registration statements, proxy statements, financial statements, other forms,
reports, sales literature and advertising materials and any other documents
required to be filed with applicable regulatory or other Governmental Entities,
and any amendments thereto (the "Reports"). The Reports (i) have been prepared
in accordance with the requirements of Applicable Law, and (ii) did not at the
time they were filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were or are made, not misleading.

            (h)   Except as set forth in the Disclosure Schedule, since January
1, 1999, the Fund has not been enjoined, indicted, convicted or made the subject
of disciplinary proceedings,

                                       39
<PAGE>
consent decrees or administrative orders on account of any violation of the
Securities Laws. The Fund Board operates in all respects in conformity with the
requirements and restrictions of Sections 10, 15(f) and 16 of the Investment
Company Act.

            (i)   Except as set forth in the Disclosure Schedules, no exemptive
orders or SEC no-action letters have been obtained, nor are any requests pending
therefor, with respect to the Fund under the Securities Laws other than any such
orders or no-action letters which are no longer in effect or applicable to the
current operation of the Fund.

            (j)   Except as set forth in the Disclosure Schedule and except as
contemplated by Section 6.2 of this Agreement, no action of the Fund Board or
the shareholders of the Fund is required in connection with the transactions
contemplated by this Agreement.

            (k)   The Fund has made a valid election to be a regulated
investment company and the Fund has satisfied the relevant requirements of the
Code for all taxable years, or parts thereof, of the Fund ending prior to the
Closing as to its status as a regulated investment company as defined in
Sections 851-855 of the Code. Neither KAR nor the Fund has received any notice
or other communication relating to or affecting the Fund's compliance with any
of these relevant requirements.

            (l)   The Disclosure Schedule contains a true, complete and correct
list, as of the date hereof, of all agreements and contracts of the following
types, written or oral, to which the Fund is a party or by which the Fund or any
of its properties is bound as of the date hereof: (i) mortgages, indentures,
security agreements, loan, financing and credit agreements and other agreements,
guarantees and instruments relating to the borrowing of money by the Fund in
excess of $50,000; (ii) any lease for real property, material lease for personal
or intangible property (whether as lessee or lessor), and material license,
service and processing agreement which requires annual payments by KAR in excess
of $50,000; (iii) any agreement with respect to Tax allocation as to the Taxes
paid for credit for a Tax loss on a Tax Return or report and (iv) agreements,
contracts or commitments entered into outside the ordinary course of business
which creates future payment obligations of the Fund in excess of $10,000 or
limits the freedom of the Fund to engage in its business or with any Person.
True and complete copies of all such contracts, agreements and commitments (or,
in the case of material oral contracts, a description of the material terms
thereof) have been previously made available for review by Buyer, and such
contracts, agreements and commitments contain substantially the entire
understanding between the Fund and the other party or parties thereto with
respect to the subject matter thereof.

            (m)   The advertising and sales literature used by the Fund in
connection with the public offering and sale of the Fund (including any
advertising or sales literature used pursuant to Rule 482 under the Securities
Act and filed by KAR or the Fund with the NASD for review in accordance with
497(i) under the Securities Act) complies in all material respects with the
Securities Laws and, to the knowledge of KAR and the Equityholders, does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.

                                       40
<PAGE>
            (n)   None of KAR, any Affiliated Person (as defined in the
Investment Company Act) or any other "interested person" of KAR, as such term is
defined in the Investment Company Act, receives or is entitled to receive any
compensation directly or indirectly (i) from any person in connection with the
purchase or sale of securities or other property to, from or on behalf of the
Fund, other than bona fide ordinary compensation as principal underwriter for
the Fund or as broker in connection with the purchase or sale of securities in
compliance with Section 17(e) of the Investment Company Act, or (ii) from the
Fund or its security holders for other than bona fide investment advisory,
administrative or other services. Accurate and complete disclosure of all such
compensation arrangements has been made in the Fund's registration statements
filed under the federal securities laws.

            (o)   To KAR's and the Equityholders' knowledge, there is no reason
why the consents described in Section 6.2(b)(i) shall not be obtained.

            (p)   Since the Fund's inception, the Fund's net asset value
disseminated to shareholders and the public has been correctly calculated and
accurately disseminated.

            4.26  No Other Agreements to Sell. No Equityholder has any legal
obligation, absolute or contingent, to any Person to sell Membership Interests
or other equity interests in KAR (other than on termination of employment, to
effect any merger, consolidation or other reorganization of KAR or as otherwise
provided in the KAR LLC Agreement) or to enter into any agreement with respect
thereto. Except as contemplated by this Agreement, none of KAR or any
Equityholder has made a commitment or entered into negotiations, to sell or
transfer any part of the assets of KAR, other than in the ordinary course of its
business.

            4.27  No Brokers. Other than Putnam Lovell Securities Inc., whose
fees shall be paid by the Equityholders, no broker, finder or similar
intermediary has acted for or on behalf of, or is entitled to any broker's,
finder's or similar fee or other commission from KAR, any of the Equityholders
or any of their respective Affiliates in connection with this Agreement or the
transactions contemplated hereby.

            4.28  Filing Documents. None of the information regarding KAR or any
of its Affiliates or the Fund supplied or to be supplied by them for inclusion
in any documents to be filed with any Governmental Entity in connection with the
transactions contemplated hereby will, at the respective times such documents
are filed with any Governmental Entity, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.

            4.29  Environmental Matters. KAR has complied in all material
respects with all applicable Environmental Laws, and KAR is not subject to any
claim or liability under any Environmental Law except where the failure to
comply or the existence of any such claim or liability does not have, or would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on KAR. "Environmental Law" means (i) any federal, state, foreign
or local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, common law, legal doctrine, order, judgment,
decree, injunction, requirement or agreement with any governmental entity, (x)
relating to the protection,

                                       41
<PAGE>
preservation or restoration of the environment (including, without limitation,
air, water, vapor, surface water, groundwater, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, or (y) relating to the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances (as
hereinafter defined), in each case as amended and as now in effect. "Hazardous
Substance" means any substance presently listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law, whether by type or by quantity,
including any substance containing any such substance as a component.

            4.30  Information in Proxy Materials and Other Disclosure. The
information or data relating to KAR, the Equityholders and their respective
Affiliates provided by KAR in writing for inclusion in the proxy materials to be
furnished to shareholders of the Fund for the purpose of approving new
investment advisory agreements with KAR to take effect immediately after the
assignment at the Closing of the then existing investment advisory agreements
will not contain, at the times such proxy materials are furnished to the
shareholders or at the times of the meetings thereof, any untrue statement of a
material fact, or omit to state any material fact required to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Any information provided by KAR in writing for dissemination to
any Clients or the Fund Board in respect of the transactions contemplated hereby
at the time such information is disseminated, in each case, will be accurate and
complete and will not contain any untrue statement of a material fact, or omit
to state any material fact (x) required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading or (y) necessary to correct any statement in any
earlier communication that has become false or misleading.

                                    ARTICLE 5

                    REPRESENTATIONS AND WARRANTIES OF BUYER

            Except as set forth on the Disclosure Schedule, Buyer hereby
represents and warrants to the Companies and each Equityholder as follows:

            5.1   Organization and Standing. Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of Delaware.
Buyer has the power and authority to carry on its business as it is now being
conducted and to own, lease and operate all of its properties and assets.

            5.2   Authorization. Buyer has full corporate power and authority to
execute and deliver this Agreement and the Related Agreements to which each is a
party and to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement and the Related Agreements to which Buyer is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by all requisite corporate action on the part of Buyer, and
no other corporate proceedings on the part of Buyer are necessary to approve
this Agreement and the Related Agreements and to authorize and consummate the
transactions contemplated hereby and thereby. This Agreement has been, and the
Related Agreements will at

                                       42
<PAGE>
Closing be, duly and validly executed and delivered by Buyer and (assuming the
due authorization, execution and delivery of this Agreement and the Related
Agreements by each of KAR and the Equityholders party thereto) constitutes and
each of the Related Agreements will at Closing constitute a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except as the enforceability thereof may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
the rights of creditors generally and general principles of equity, regardless
of whether applied in proceedings at law or in equity.

            5.3   No Violation. Neither the execution and delivery of this
Agreement or the Related Agreements by Buyer, nor the consummation by Buyer of
the transactions contemplated hereby to be performed by it, nor compliance by
Buyer with any of the terms or provisions hereof, will (i) violate any provision
of the Organizational Documents of Buyer or (ii), (x) violate, conflict with or
require any notice, filing, consent or approval under any Applicable Law to
which Buyer or any of its Affiliates or any of their respective properties,
contracts or assets is subject, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate or result in a right of
acceleration of the performance required by, result in the creation of any Lien
upon the partnership or equity interests or the material properties, Material
Contracts or material assets of Buyer or require any notice, approval or consent
under any Material Contract to which Buyer or any of its Affiliates is a party,
or by which Buyer or any of its Affiliates, or any of their material properties
or material assets, may be bound or affected or could reasonably be expected to
prevent consummation of the transactions contemplated hereby.

            5.4   Governmental Authorization. Except for consents, approvals and
notices as are set forth in Section 6.2 hereof and the Disclosure Schedule, no
consents, approvals or authorizations of, or filings or registrations with, or
licenses from, or notices to, any Governmental Entity or any third-party are
necessary in connection with (i) the execution, delivery and performance by
Buyer of this Agreement and the Related Agreements to which Buyer is a party and
(ii) the consummation by Buyer of the transactions contemplated hereby and
thereby.

            5.5   Financial Statements. Buyer has heretofore delivered to KAR
the Buyer Financial Statements. The Buyer Financial Statements have been
prepared in conformity with GAAP (except as may otherwise be noted in the
footnotes thereto, and except for the absence of footnotes with respect to the
Unaudited Financial Statements) heretofore adopted by, and applied consistently
with the past practices of and consistent with the books and records of, Buyer
and fairly present (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount) the consolidated
financial position, results of operations and cash flows of Buyer as at, or for
the periods ended on, such dates. Since the Buyer Balance Sheet Date, Buyer has
conducted its business in a consistent manner without a material change of
policy or procedure.

            5.6   Compliance with Laws. Buyer holds, and has at all times held,
and at Closing will hold, all Permits necessary for the lawful ownership and use
of its material properties and material assets and the conduct of its businesses
under and pursuant to, and has

                                       43
<PAGE>
complied with each, and is not in default under any, Applicable Law relating to
Buyer or any of its assets, properties or operations, and there are no
outstanding violations of any of the above, except for any failure to hold a
Permit and such defaults and violations that do not have, either individually or
in the aggregate, a Material Adverse Effect on Buyer, and Buyer has not received
written notice asserting any such violation. All such Permits are valid and in
good standing and are not subject to any suspension, modification or revocation
or proceedings related thereto, and the consummation of the transactions
contemplated hereby will not result in any such revocation, cancellation,
suspension or modification of any such Permits except where the revocation,
cancellation, suspension or modification does not have, or would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on Buyer.

            5.7   Advisers Act.

            (a)   There is no Action pending, or to the knowledge of Buyer,
threatened relating to the termination of, or limitation of, the rights of Buyer
under its registration under the Advisers Act as an investment adviser or any
similar or related rights under any registrations or qualifications with various
self-regulatory bodies, states or other jurisdictions. Each Investment Contract
subject to Section 15 of the Investment Company Act has been duly approved at
all times in compliance with Section 15 of the Investment Company Act and all
other Applicable Laws in all material respects. Each such Investment Contract
has been performed by Buyer in accordance with the Advisers Act and all other
Applicable Laws in all material respects.

            (b)   Buyer is duly registered as an investment adviser under the
Advisers Act and is duly registered, licensed or qualified as an investment
adviser in all jurisdictions where such registration, licensing or qualification
is required in order to conduct its business, except for failures to be so
registered, licensed or qualified that do not have, either individually or in
the aggregate, a Material Adverse Effect on Buyer. Buyer is in compliance in all
respects with all applicable foreign, federal and state laws requiring
registration, licensing or qualification as an investment adviser except where
the failure comply does not have, or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Buyer. Buyer has
delivered or made available to Buyer true, correct and complete copies of its
most recent Form ADV, as amended to date, and has made available true, correct
and complete copies of all foreign and state registration forms, as amended to
date. The information contained in such forms was true, correct and complete in
all material aspects at the time of filing and has been amended or modified as
required by applicable law.

            (c)   Neither Buyer nor any "affiliated person" (as defined in the
Investment Company Act) thereof is ineligible pursuant to Section 9(a) or 9(b)
of the Investment Company Act to serve as an investment adviser (or in any other
capacity contemplated by the Investment Company Act) to a registered investment
company. Neither Buyer nor any "associated person" (as defined in the Advisers
Act) thereof is ineligible pursuant to Section 203 of the Advisers Act to serve
as an investment adviser or as an associated person to a registered investment
adviser. Neither Buyer nor any "associated person" (as defined in the Advisers
Act) has been convicted of any crime or has engaged in any conduct that would
require disclosure under Rule 206(4)-4(a)(2) under the Advisers Act or under
applicable state law. Neither Buyer nor any "associated person" (as defined in
the Exchange Act) thereof is ineligible pursuant to Section 15(b) of the
Exchange Act to serve as a broker-dealer or as an associated person to a
registered broker-dealer.

                                       44
<PAGE>
            5.8   Adequate Financing. Buyer has sufficient cash or sufficient
funds available under existing credit facilities to pay all of the amounts
required to be paid by Buyer on the Closing Date to the Equityholders hereunder.

            5.9   No Brokers. Other than De Guardiola Advisors, Inc., whose fees
shall be paid by the Buyer, no broker, finder or similar intermediary has acted
for or on behalf of, or is entitled to any broker's, finder's or similar fee or
other commission from Buyer or any of its Affiliates in connection with this
Agreement or the transactions contemplated hereby.

            5.10  Filing Documents. None of the information regarding Buyer or
any of its Affiliates supplied or to be supplied by them for inclusion in any
documents to be filed with any Governmental Entity in connection with the
transactions contemplated hereby will, at the respective times such documents
are filed with any Governmental Entity, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.

            5.11  Information in Proxy Materials and Other Disclosure. The
information or data relating to Buyer and its Affiliates provided by Buyer in
writing for inclusion in the proxy materials to be furnished to shareholders of
the Fund for the purpose of approving new investment advisory agreements with
KAR to take effect immediately after the assignment at the Closing of the then
existing investment advisory agreements will not contain, at the times such
proxy materials are furnished to the shareholders or at the times of the
meetings thereof, any untrue statement of a material fact, or omit to state any
material fact required to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any information
provided by Buyer in writing for dissemination to any Clients or the Fund Board
in respect of the transactions contemplated hereby at the time such information
is disseminated, in each case, will be accurate and complete and will not
contain any untrue statement of a material fact, or omit to state any material
fact (x) required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or (y) necessary to correct any statement in any earlier
communication that has become false or misleading.

                                   ARTICLE 6

                    CONDUCT OF BUSINESS PRIOR TO THE CLOSING

            6.1   Conduct Prior to Closing. During the period from the date
hereof through the Closing Date, except as expressly contemplated or permitted
by this Agreement, the Equityholders shall cause KAR to operate its Business
only in the ordinary course consistent with past practice, and shall use their
commercially reasonable efforts to preserve intact their business organization,
relationships and assets and maintain its rights, franchises, goodwill and
business and Client, customer, officer and employee relations necessary to
conduct the Business as currently conducted in all material respects. Without in
any way limiting the foregoing, during the period from the date hereof through
the Closing Date, except as provided in Schedule 6.1, the Equityholders shall
not permit KAR to do any of the following without the prior written consent of
Buyer:

                                       45
<PAGE>
            (a)   declare, set aside, make or pay any dividend or other
distribution (whether in cash, equity interests or property or any combination
thereof) in respect of its Membership Interests, capital stock or other equity
interests;

            (b)   purchase or redeem, directly or indirectly, any Membership
Interests, or other equity interests in KAR except as contemplated in Section
2.3 of this Agreement or in the ordinary course in connection with the
termination of employment of any Equityholder;

            (c)   issue or sell any Membership Interests or other equity
interests in KAR;

            (d)   incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise become responsible for obligations of any other Person, or
make any loans or advances to any Person, except in the ordinary course of
business consistent with past practice, or issue or sell any debt securities;

            (e)   mortgage, pledge or otherwise encumber any of its material
properties or material assets, tangible or intangible, or otherwise dispose of
any of its material assets or material properties or cancel, release or assign
any indebtedness owed to it or any claims held by it, except in the ordinary
course of business consistent with past practice;

            (f)   except in the ordinary course, amend, waive or otherwise
modify in any material respect the terms of any of the Investment Contracts,
including, but not limited to, reductions in the amount of fees owing to KAR
under such Investment Contracts except in the ordinary course;

            (g)   except as required by law or as set forth in the Disclosure
Schedule, (i) grant or make any change in control, severance or termination
payments to any Equityholder or any officer, employee or consultant of KAR
except pursuant to plans or agreements in existence on the date hereof, (ii)
enter into any option, employment, deferred compensation or other similar
agreement (other than an agreement for employment "at will") with any Person (or
enter into any amendment to any such existing agreement with any Equityholder or
any officer, employee or consultant of KAR) other than in connection with the
hiring of new employees by KAR in the ordinary course, (iii) increase benefits
payable under any existing severance or termination pay policies or agreements,
(iv) adopt, amend in any material respect or terminate any employment, bonus,
profit-sharing, compensation, stock option, pension, deferred compensation or
other plan, agreement, trust, fund or arrangement for the benefit of the
Equityholders or officers, employees or consultants, or (v) pay, or provide for,
any increase in compensation, bonus or other benefits payable to the
Equityholders or officers, directors, employees or consultants of KAR except (A)
for normal increases and bonuses in the ordinary course of business consistent
with past practice, (B) as required by the terms of contracts or agreements in
effect on the date hereof, and (C) as specifically contemplated by this
Agreement and the Employment Agreements;

            (h)   amend or agree to amend its Organizational Documents (or
comparable instruments), or merge with or into or consolidate with, or agree to
merge with or into or consolidate with, any other Person, subdivide or in any
way reclassify any shares of its capital

                                       46
<PAGE>
stock or its equity interests, or change or agree to change in any manner the
rights of its outstanding capital stock or its equity interests;

            (i)   change in any material respect its accounting practices or
principles except as required by law or GAAP;

            (j)   enter into or recommend that any Fund enter into any type of
business different from that conducted by KAR or the Fund as of the date of this
Agreement or enter into or participate in any additional joint ventures or
partnerships;

            (k)   other than in the ordinary course of business, acquire direct
or indirect control over any Person or make any acquisition of all or a
substantial part of the business or operations of any Person or dispose of any
business or operations;

            (l)   pay, discharge, settle or satisfy any claims or Liabilities
other than in the ordinary course of business consistent with past practice;

            (m)   except as directed by a Client, voluntarily divest itself of
management of any mutual fund or assets under management;

            (n)   except as and to the extent required, based on the written
advice of counsel, in the exercise of its fiduciary obligations, in the case of
any Fund, request that action be taken by the Fund Board, other than in
connection with the approvals referred to in Section 6.2(b) hereof and actions
in the ordinary course that would not reasonably be expected to have a Material
Adverse Effect on KAR or the Fund.

            (o)   except as set forth in the Disclosure Schedule, issue, sell or
purchase, or issue any option, warrant, convertible or exchangeable security,
right, subscription, call, unsatisfied preemptive right or other agreement or
right of any kind to purchase or otherwise acquire (including, without
limitation, by exchange or conversion), or enter into any contracts, agreements
or arrangements to issue or sell, any shares of its capital stock or its equity
interests;

            (p)   create, renew, amend, terminate or cancel, or take any action
that might result in the creation, renewal, amendment, termination or
cancellation of, any Contract other than in the ordinary course of business
consistent with past practice;

            (q)   enter into, or agree to enter into, any contract, agreement or
arrangement with any of its Affiliates other than those entered into in the
ordinary course of business consistent with past practice;

            (r)   except as set forth in the Disclosure Schedule and except in
the ordinary course of business consistent with past practice, incur or assume,
or agree to incur or assume, any liability or obligation (whether or not
currently due and payable) relating to its business or any of its assets;

            (s)   authorize, agree (by contract or otherwise) or commit to do
any of the foregoing.

                                       47
<PAGE>
            6.2   Consents and Approvals.

            (a)   Consents from Governmental Entities. Buyer and KAR shall
cooperate with each other and use their commercially reasonable efforts promptly
to prepare and file (on a confidential basis if requested by any of the other
parties and permitted under Applicable Law) all necessary documentation, to
effect (on a confidential basis if requested by any of the other parties and
permitted under Applicable Law) all applications, notices, petitions and
filings, and to obtain as promptly as practicable all permits, consents,
approvals, waivers and authorizations of all third parties and Governmental
Entities which are necessary or advisable to consummate the transactions
contemplated by this Agreement and the Related Agreements. Buyer and KAR will
have the right to review in advance, and will consult with the other on, in each
case subject to Applicable Laws relating to the exchange of information and
confidentiality, all the information relating to Buyer, KAR or the Fund, as the
case may be, which appear in any filing made with, or written materials
submitted to, any third-party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. Buyer and KAR agree that they will
consult with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the others apprised of the status of matters
relating to completion of the transactions contemplated herein. The party
responsible for a filing as set forth above shall promptly deliver to the Buyer
or KAR, as applicable, evidence of the filing of all applications, filings,
registrations and notifications relating thereto (except for any confidential
portions thereof), and any supplement, amendment or item of additional
information in connection therewith (except for any confidential portions
thereof). The party responsible for a filing shall also promptly deliver to
Buyer or KAR, as applicable, a copy of each material notice, order, opinion and
other item of correspondence received by such filing party from any Governmental
Entity in respect of any such application (except for any confidential portions
thereof). In exercising the foregoing rights and obligations, Buyer and KAR
shall act reasonably and as promptly as practicable. The parties hereto covenant
and agree to take no action (i) which would render any of their representations
and warranties contained herein untrue in any material respect at and as of the
Closing Date or (ii) which would materially and adversely affect the ability of
any of them to satisfy any of the conditions applicable to them set forth in
Article 3.

            (b)   Consents Related to the Fund.

                  (i)   The Equityholders shall cause KAR to use its
commercially reasonable efforts to, or cause the Fund to, as promptly as
practicable, cause the Fund Board to (x) approve new underwriting or
distribution agreements for the Fund with PEPCO, and (y) approve, and to solicit
their respective shareholders as promptly as practicable with regard to the
approval of, new investment advisory agreements and sub-advisory agreements with
KAR, in each case to be effective on the Closing Date, pursuant to the
provisions of Section 15 of the Investment Company Act and consistent with all
requirements of the Investment Company Act applicable thereto or any other
applicable foreign securities laws, provided that such agreements referenced in
clauses (x) and (y) above are identical in all material respects to the existing
agreements other than the term of the agreement. KAR shall, in consultation with
Buyer, retain a proxy solicitor reasonably acceptable to Buyer to assist in the
solicitation of proxies to obtain the requisite approval from the shareholders
of the Fund. KAR shall take any similar action required

                                       48
<PAGE>
under the Investment Company Act to continue any underwriting or distribution
agreements of the Fund. Buyer shall promptly provide KAR in writing with any
necessary information relating to Buyer and its Affiliates (including PEPCO)
necessary in order for the Fund Board to consider and act on the foregoing
matters.

                  (ii)  The Equityholders shall cause KAR to (x) use its
commercially reasonable efforts to cause the Fund to prepare, file with and
cause to be cleared by the SEC and all other Governmental Entities having
jurisdiction thereover, as promptly as practicable after the date hereof, all
proxy solicitation materials required to be distributed to the shareholders of
the Fund with respect to the actions to be approved by the shareholders of the
Fund in connection with this Agreement, and (y) use their commercially
reasonable efforts to cause the Fund to mail such proxy solicitation materials
to such shareholders promptly after clearance thereof by the SEC and to convene
a meeting of the shareholders of the Fund as soon as reasonably practicable
after the mailing of the proposal as described in subsection (x) hereof, all
such consents and proxy solicitation materials to be in a form reasonably
satisfactory to Buyer. Buyer shall, as promptly as practicable after KAR
requests information from Buyer in order to file any proxy solicitation
materials, provide to KAR in writing all necessary information relating to Buyer
and its Affiliates required by Applicable Law to be included therein.

            (c)   Client and Other Third-Party Consents. The parties hereto
shall cooperate with each other and use their respective commercially reasonable
efforts to obtain all permits, approvals, authorizations and consents of third
parties necessary for the consummation of the transactions contemplated hereby
prior to the Closing, including, without limitation, written consents (i) under
each Material Contract, if required by the terms thereof, to the transactions
contemplated hereby and (ii) to the assignment (as defined in the Advisers Act)
of the Investment Contracts in accordance with the terms hereof. With respect to
each Affirmative Consent Contract, promptly following the execution and delivery
hereof, KAR shall send a letter substantially in the form of Exhibit H attached
hereto to each Affirmative Consent Client requesting such Client's written
consent to the technical assignment of the relevant Affirmative Consent Contract
to Buyer by virtue of the transactions. With respect to each Negative Consent
Contract, promptly following the execution and delivery hereof, KAR shall send a
letter substantially in the form of Exhibit I attached hereto to each Negative
Consent Client requesting such Client's written consent to the technical
assignment of the relevant Negative Consent Contract to Buyer by virtue of the
transactions and stating that if KAR shall not have received a notice from such
Client withholding consent to such assignment and assumption on or prior to the
30th day following the sending of such letter (the "Consent Period"), such
Client's consent to the assignment thereof will be assumed. In connection with
the foregoing, Buyer will participate in the effort to obtain the consent of
Clients in accordance with this Section 6.2, including, without limitation, any
meetings or communications with the Clients. All notices and written materials
and forms of consents used in connection with such efforts shall be in form and
substance reasonably satisfactory to both the Equityholder Designee and Buyer.

            6.3   KAA. The Equityholders shall cause KAR to use its commercially
reasonable efforts, and in a manner that does not adversely impact the Business,
to cause Clients who maintain their accounts at KAA to move such accounts to
broker-dealers that are not Affiliates of any Equityholder.

                                       49
<PAGE>
                                    ARTICLE 7

                              ADDITIONAL AGREEMENTS

            7.1   Current Information; Notification of Certain Matters.

            (a)   During the period from the date of this Agreement through the
Closing Date, the Equityholders shall cause KAR to provide reasonable access to
Buyer's Representatives on the request of Buyer with respect to the status of
the Business, the Fund and their ongoing operations. The Equityholders shall
cause KAR to furnish to Buyer copies of monthly and quarterly consolidated
financial statements or other reports of the results of operations, if any,
prepared by the management of KAR for each month or quarter, as applicable, as
soon as the same become available. The Equityholders shall cause KAR to notify
Buyer and Buyer shall notify the Equityholders and KAR of the status of
regulatory applications and third-party consents related to the transactions
contemplated hereby. The Equityholders shall cause KAR to notify Buyer promptly
of any notices of governmental examinations, inspections or audits and as to the
results thereof, and Buyer shall notify KAR promptly of any notices of
governmental examinations, inspections or audits and as to the results thereof.

            (b)   The Equityholders shall cause KAR to give prompt notice to
Buyer of any event, act or omission of which it has knowledge which results or
is reasonably expected to result in a Material Adverse Effect on KAR or which
would constitute of breach of a representation and warranty made by KAR and the
Equityholders herein. The Equityholders shall cause KAR to give prompt notice to
Buyer of any event or act of which it has knowledge which materially and
adversely affects the ability of the Equityholders or KAR to consummate the
transactions contemplated hereby or by any Related Agreement or any written
notice or other communication from any third-party of which KAR has knowledge
alleging that the consent of such third-party is or may be required in
connection with any of the transactions contemplated by this Agreement. Buyer
shall give prompt notice to KAR of any event or act of which it has knowledge
which materially and adversely affects the ability of Buyer to consummate the
transactions contemplated hereby or by any Related Agreement or any written
notice or other communication from any third-party of which Buyer has knowledge
alleging that the consent of such third-party is or may be required in
connection with any of the transactions contemplated by this Agreement. Each
party shall use its commercially reasonable efforts to remedy any failure on its
part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.

            7.2   Access; Confidential Information.

            (a)   KAR shall allow Buyer, its accountants, counsel, financial
advisers and other Representatives such access during normal business hours, and
without material business interruption, to its books, records (including,
without limitation, Tax Returns and appropriate work papers of independent
auditors under normal professional courtesy) and properties, and to such other
information as such party may reasonably request in connection with the
transactions contemplated hereby.

                                       50
<PAGE>
            (b)   All non-public records, books, contracts, instruments,
computer data and other data and information (collectively, the "Information")
concerning KAR furnished to Buyer or its Representatives pursuant to this
Agreement shall be treated as confidential unless (i) the party providing the
Information has made such information available to the public generally, or (ii)
such Information is required to be disclosed by applicable laws or regulations
or by court order or decree or by Buyer's auditors or regulators. No Information
furnished to Buyer or its Representatives shall be used by such Person or
disclosed to any other person for any purpose other than with respect to the
transactions contemplated by this Agreement. In the event of the termination of
this Agreement pursuant to Article 8 hereof, this Section 7.2(b) and the
Confidentiality Agreement, dated March 21, 2001, between Buyer and Putnam Lovell
Securities, Inc. (the "Confidentiality Agreement") shall survive, and Buyer
shall promptly return or destroy all Information furnished to it and its
Representatives hereunder and all analyses, compilations, data, studies and
other documents prepared by Buyer or its Representatives containing or based in
whole or in part on any such Information.

            (c)   Upon consummation of the transactions contemplated hereby, all
Information concerning KAR and the Fund shall be treated as confidential by the
Equityholders unless (i) the Buyer has made such Information available to the
public generally, or (ii) such information is required to be disclosed by
applicable laws or regulations or by court order or decree.

            7.3   Third-party Proposals. During the period from the date hereof
through the Closing Date or the date on which this Agreement is terminated
pursuant to Section 8.1 hereof, none of KAR, the Equityholders or any of their
respective Representatives or advisors, shall directly or indirectly solicit
inquiries or proposals, or enter into any definitive agreement, with respect to,
or initiate or participate in any negotiations or discussions with any Person
concerning, any acquisition or purchase of all or a substantial portion of the
assets of, or of any Membership Interest, or other equity interest in, KAR, or
any merger or business combination with KAR or any voluntary assignment of any
investment advisory, sub-advisory, administrative or distribution agreements of
KAR, in each case other than as contemplated by this Agreement (each, an
"Acquisition Proposal") or furnish any information to any such Person. KAR and
the Equityholders shall notify Buyer immediately if any Acquisition Proposal
(including the terms thereof) is received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated with,
any of KAR, the Equityholders or any of their respective Representatives or
advisors. KAR and the Equityholders shall, and shall cause their respective
Representatives and advisors to, immediately cease or cause to be terminated any
existing activities, including discussions or negotiations with any parties,
conducted prior to the date hereof with respect to any Acquisition Proposal and
shall seek to have all materials distributed to Persons in connection therewith
returned to KAR promptly or destroyed. None of KAR, the Equityholders or any of
their respective Affiliates, Representatives or advisors, shall amend, modify,
waive or terminate, or otherwise release any Person from, any standstill,
confidentiality or similar agreement or arrangement currently in effect.

            7.4   Publicity. The parties hereto will consult with each other as
to the form, substance and timing of any press release or other public
disclosure with respect to this Agreement or any of the transactions
contemplated hereby, and no such release or other public disclosure shall be
made without the written consent of the other party, which shall not be

                                       51
<PAGE>
unreasonably withheld or delayed; provided, however, that the parties may make
such disclosures as are required by law after making reasonable efforts in the
circumstances to consult in advance with the other parties.

            7.5   Satisfaction of Conditions in Section 15(f) of the Investment
Company Act. Each of KAR, the Equityholders and Buyer agrees to use its
commercially reasonable efforts to assure compliance with the conditions of
Section 15(f) of the Investment Company Act in respect of the Fund. Without
limiting the foregoing, each of KAR, the Equityholders and Buyer agrees as
follows:

            (a)   For a period of not less than three years after the Closing
Date, Buyer shall assure that no more than 25% of the members of the Fund Board
shall be "interested persons" (as defined for purposes of Section 15(f)(1)(A) of
the Investment Company Act) of any of the Company, Buyer or any Affiliate of
Buyer, or of the predecessor investment adviser of the Fund;

            (b)   For a period of not less than two years after the Closing
Date, neither Buyer nor any of its Affiliates (or any entity which will act as
adviser to the Fund) shall impose an unfair burden on the Fund as a result of
the transactions contemplated hereby; and

            (c)   Buyer agrees not to amend or modify the indemnification
provisions or any exculpation provisions of any of the advisory or underwriting
agreements with the Fund in a manner designed to benefit the adviser or the
underwriter to the detriment of the Fund.

Notwithstanding anything to the contrary contained herein, the agreements
contained in this Section 7.5 are intended only for the benefit of the parties
hereto and their respective stockholders or members.

            7.6   Name Change for Fund. Upon the request of Buyer, the parties
agree to cooperate and to use their commercially reasonable efforts to take all
actions necessary to change the name of the Fund if requested by Buyer to
include the name "Phoenix" (or such other name as Buyer or its Affiliates may
hereafter adopt to identify mutual funds for which it serves as sponsor,
investment advisor or manger) in the name of the Fund.

            7.7   Further Assurances. Both before and after the Closing Date,
Buyer, KAR and the Equityholders shall cooperate in good faith with one another
and shall take all appropriate action and execute any documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the transactions contemplated hereunder.

            7.8   State Takeover Statutes. Each party will take all steps
necessary to exempt (or continue the exemption of) the transactions contemplated
hereby from, and challenge the validity of, any applicable state takeover law,
as now or hereafter in effect.

            7.9   Distribution of 2001 Earnings. From and after the date of this
Agreement, KAR shall (i) defer distributing to the Equityholders the
undistributed balance of KAR's net income for the year ending December 31, 2001
until such time (the "Distribution Time") following the Closing Date as KAR
shall have an aggregate cash balance at least equal to

                                       52
<PAGE>
$2,000,000 after giving effect to such distribution and (ii) distribute to the
Equityholders such undistributed balance at the Distribution Time.

            7.10  Buyer Reliance Upon Equityholder Designee.

            (a)   Following the Closing, Buyer may rely and shall be fully
protected in acting or refraining from acting upon any written notice,
instruction or request furnished to it hereunder by the Equityholder Designee.

            (b)   For purposes of this Agreement, the Equityholders, without any
further action on the part of any such Equityholder, shall be deemed to have
consented to the appointment of the Equityholder Designee as attorney-in-fact
for and on behalf of each such Equityholder, and the taking by the Equityholder
Designee of any and all actions and the making of any decisions required or
permitted to be taken by him under this Agreement, including the exercise of the
power agree to, negotiate, enter into settlements and compromises of and comply
with the orders of courts and awards of arbitrators with respect to Claims
asserted by the Buyer Indemnified Parties, (iii) resolve any Claims asserted by
the Buyer Indemnified Parties, and (iv) take all actions necessary in the
judgment of the Equityholder Designee for the accomplishment of the foregoing
and all of the other terms, conditions and limitations of this Agreement.
Accordingly, the Equityholder Designee has unlimited authority and power to act
on behalf of each Equityholder with respect to this Agreement and the
disposition, settlement or other handling of all Claims asserted by the Buyer
Indemnified Parties, rights or obligations arising from and taken pursuant to
this Agreement. The Equityholders will be bound by all actions taken by the
Equityholder Designee in connection with this Agreement, and Buyer shall be
entitled to rely in all respects on any action or decision of the Equityholder
Designee.

            (c)   The Equityholder Designee will incur no liability with respect
to any action taken or suffered by him in reliance upon any notice, direction,
instruction, consent, statement or other document believed by him to be genuine
and to have been signed by the proper person (and shall have no responsibility
to determine the authenticity thereof), nor for any other action or inaction in
such Person's capacity as Equityholder Designee, except his own willful
misconduct or gross negligence. The Equityholders shall indemnify and hold
harmless the Equityholder Designee for any costs or expenses incurred by the
Equityholder Designee in such Person's capacity as Equityholder Designee except
for costs or expenses incurred as a result of the Equityholder Designee's own
willful misconduct or gross negligence in connection with, relating to or
arising out of the Equityholder Designee performance or nonperformance as
Equityholder Designee.

                                    ARTICLE 8

                                   TERMINATION

            8.1   Termination.

            (a)   This Agreement may be terminated prior to the Closing as
follows:

            (i)   by mutual written consent of the Equityholder Designee and
Buyer;

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<PAGE>
            (ii)  by either Buyer or the Equityholder Designee (the "Notifying
Party") if the Equityholders or KAR, on the one hand, or Buyer, on the other
hand (the "Notified Party"), shall have failed to perform and comply in all
material respects with their or its agreements and covenants hereunder and such
failure to perform or comply shall not have been remedied within 30 days after
receipt by the Notified Party of notice in writing from the Notifying Party,
specifying the nature of such failure and requesting that such failure be
remedied; provided that the Notifying Party may not terminate this Agreement
pursuant to this subsection (ii) for an additional 30 days if the Notified Party
continues in good faith to use its commercially reasonable efforts to perform or
comply with such agreements and covenants, other than in respect of approvals of
any Governmental Entity, in which case the Notifying Party may not terminate
this Agreement under this subsection (ii) as long as the Notified Party
continues in good faith to use its commercially reasonable efforts to perform or
comply in respect of the approvals of any Governmental Entity as required
hereunder;

            (iii) by either Buyer or the Equityholder Designee if there shall be
any law or regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or Governmental Entity having competent jurisdiction;

            (iv)  by Buyer if any condition to Buyer's obligations hereunder
becomes incapable of fulfillment through no fault of such party and is not
waived by such party;

            (v)   by the Equityholder Designee if any condition to KAR's and the
Equityholders' obligations hereunder becomes incapable of fulfillment through no
fault of such parties and is not waived by such parties; or

            (vi)  without any further action on March 31, 2002, if the Closing
has not occurred on or before March 31, 2002, unless the failure of the Closing
to occur by such date shall be due to the failure of a party to perform or
observe the covenants and agreements of such party set forth herein, in which
case this Agreement shall terminate pursuant to this Section 8.1(a)(vi) only
upon delivery of written notice of such termination by a party that has not so
failed to perform or observe its covenants and agreements to each other party
hereto in accordance with the provisions of Section 8.1(b).

            Notwithstanding Section 8.1(a)(ii) through (v) hereof, a party who
is or whose Affiliate is in material breach of any of its obligations or
representations and warranties hereunder shall not have the right to terminate
this Agreement pursuant to Section 8.1(a)(iii) through (v).

            (b)   The termination of this Agreement shall be effectuated by the
delivery by the party terminating this Agreement to each other party of a
written notice of such termination, except for a termination pursuant to Section
8.1(a)(vi) which shall be effective as of the date set forth therein subject to
the terms of such Section 8.1(a)(vi). If this Agreement so terminates, it shall
become null and void and have no further force or effect, except as provided in
Section 8.2.

                                       54
<PAGE>
            8.2   Survival After Termination. If this Agreement is terminated in
accordance with Section 8.1 hereof and the transactions contemplated hereby are
not consummated, except as otherwise specifically provided herein, this
Agreement shall become void and of no further force and effect, without any
Liability on the part of any party hereto (or any of its Representatives),
except for the provisions of Sections 7.2 and 11.2 and this Section 8.2.
Notwithstanding the foregoing, nothing in this Section 8.2 or in Article 9 shall
relieve any party to this Agreement of liability for a willful breach of any
representation, warranty, agreement, covenant or other provision of this
Agreement or any agreement made as of the date hereof or subsequent thereto
pursuant to this Agreement.

                                    ARTICLE 9

                                 INDEMNIFICATION

            9.1   Indemnification.

            (a)   From and after the Closing Date, each Equityholder, severally
and not jointly, hereby covenants and agrees to indemnify, defend and hold
harmless Buyer and its Affiliates and Representatives and KAR (collectively, the
"Buyer Indemnitees") from and against such Equityholder's Allocable Share (as
defined in this Section 9.1(a)) of any and all Damages arising out of or
resulting from (i) any inaccuracy or breach of any representation or warranty
made by KAR or any Equityholder in or pursuant to this Agreement or the
Disclosure Schedule; (ii) any breach, non-compliance or nonfulfillment by KAR or
any Equityholder of any covenant, agreement or undertaking to be complied with
or performed by them contained in or pursuant to this Agreement or (iii) any
claim made by any Person relating to or arising from the conduct of the Business
at any time prior to the Closing Date (including without limitation, breach of
contract claims, indemnity or guaranty claims, malicious or intentional
misconduct, negligence, fraud, personal injury, property damage and workers'
compensation claims arising from events occurring prior to the Closing Date) to
the extent that it is not either (x) adequately accrued in the Balance Sheet,
(y) incurred by KAR since the Balance Sheet Date in the ordinary course of
business consistent with past practice, not in violation of or conflict with any
terms, agreements, warranties, representations and conditions of KAR and the
Equityholders contained in this Agreement and which is not material,
individually or in the aggregate or (z) disclosed on the Disclosure Schedule.
Each Equityholder acknowledges that Buyer has entered into this Agreement in
reliance upon, among other things, the indemnification provisions contained in
this Section 9.1(a). As used herein, the "Allocable Share" of any Equityholder
shall be the Indemnification Percentage as specified opposite such
Equityholder's name on Schedule A hereto. Notwithstanding the foregoing, the
representations and warranties contained in Section 4.7 are made severally by
each Equityholder as to such Equityholder only, and any Equityholder who has
breached any such representation, warranty or covenant as to himself or herself
(but only such Equityholder) shall be liable for Damages arising from the breach
thereof up to the full amount of the portion of the purchase price actually
received by such Equityholder with respect to the Membership Interests with
respect to which such breach arises. All Damages payable by the Equityholders
pursuant to this Section 9.1(a) shall be paid to KAR unless the Buyer and/or its
Affiliates (other than KAR) and Representatives shall incur such Damages
directly as opposed to Damages solely attributable to the diminution of the
value of KAR or other Damages incurred by, imposed on, or suffered by KAR or the
Fund, in which case the

                                       55
<PAGE>
portion of such Damages incurred by Buyer or its Affiliates or Representatives
directly shall be paid to the Buyer or its Affiliates or Representatives that
incurred such Damages. Subject to the limitations set forth in Section 9.1(f)
hereof, payment of Damages shall be in an amount equal to 100% of the Damages
incurred by KAR or the Buyer and its Affiliates (other than KAR) and
Representatives, as the case may be.

            (b)   In addition to the indemnifications provided for in Sections
9.1(a) above, each Equityholder shall be responsible for, and shall, severally
and not jointly, indemnify, defend and hold harmless KAR against such
Equityholder's Allocable Share of all Taxes imposed on (and related Damages
incurred by) KAR or the Fund relating to taxable periods ending on or prior to
the Closing Date or periods which include the Closing Date to the extent
attributable to the income, assets, operations or reporting requirements of KAR
or the Fund for all periods ending on or prior to the Closing Date (including,
without limitation, all Taxes referred to in the Disclosure Schedule as possible
of assessment for taxable periods prior to the Closing Date and all Taxes (and
Damages relating to, or to any dispute or defense against, such Taxes) resulting
from or attributable to the purchase of the Membership Interests, other than
Taxes for which Buyer is responsible under Section 11.2). If a Tax audit is
commenced or any Tax is claimed for any period of KAR, any Fund or any
Equityholder prior to the Closing Date, such Tax audit or claim shall be treated
as a lawsuit or enforcement action for purposes of Section 9.1(d) hereof.
Richard Kayne and John Anderson, jointly and severally, shall be responsible
for, and shall indemnify, defend and hold harmless KAR against all Damages
arising from any Claim made by any Person relating to or arising from the matter
described in Section 4.21(c) of the Disclosure Schedule.

            (c)   From and after the Closing Date, Buyer shall indemnify, defend
and hold harmless each Equityholder, their respective Affiliates and
Representatives from and against any and all Damages arising out of or resulting
from (i) any inaccuracy or breach of any representation or warranty made by
Buyer in or pursuant to this Agreement, or (ii) any breach, non-compliance or
nonfulfillment by Buyer of any covenant, agreement or undertaking to be complied
with or performed by it contained in or made pursuant to this Agreement.

            (d)   If a claim for Damages is to be made by a party entitled to
indemnification hereunder (the "Indemnified Party") against the indemnifying
party (the "Indemnifying Party"), the Indemnified Party shall give written
notice to the Indemnifying Party as soon as reasonably practicable after the
Indemnified Party becomes aware of any fact, condition or event which may give
rise to Damages for which indemnification may be sought under this Section 9.1
and shall provide a summary in reasonable detail of the basis for such claim. If
any lawsuit or enforcement action is filed against any Indemnified Party,
written notice thereof shall be given to the Indemnifying Party as soon as
reasonably practicable (and in any event within 15 Business Days after the
service of the citation or summons) and the Indemnified Party shall provide to
the Indemnifying Party copies promptly after receipt thereof of all notices and
documents (including court papers) received relating to such claim; provided,
that the failure of any Indemnified Party to give timely notice or provide
copies of such notices and documents shall not affect rights to indemnification
hereunder except to the extent that the Indemnifying Party demonstrates actual
material damage caused by such failure. After receipt of such notice, the
Indemnifying Party shall have the right at its expense to assume the defense of
the lawsuit or action using counsel reasonably acceptable to the Indemnified
Party.

                                       56
<PAGE>
                  (i)   If the Indemnifying Party assumes the defense thereof,
the Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party and such attorneys in the investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom; provided, however, that
the Indemnified Party may, subject to the Indemnifying Party's control of the
defense and investigation of such lawsuit or action, at its own cost,
participate in the investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom. No Indemnifying Party shall be permitted to
settle any such lawsuit or action without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld.

                  (ii)  If the Indemnifying Party does not assume the defense of
the lawsuit or action, the Indemnified Party shall have the right (but not the
obligation) to defend such lawsuit or action. If the Indemnified Party does
defend such lawsuit or action, the Indemnifying Party shall pay (or reimburse
the Indemnified Party) for its out-of-pocket expenses (including reasonable
attorney's fees) incurred in connection with defending such lawsuit or action on
an as-incurred basis, provided that the Indemnified Party shall repay the
Indemnifying Party the aggregate amount of any such expense payments if it is
determined pursuant to the arbitration provisions of Section 11.9 that such
Damages were not subject to indemnification pursuant to Section 9.1, and shall
cooperate in all reasonable respects with the Indemnified Party and such
attorneys in the investigation, trial and defense of such lawsuit or action and
any appeal arising therefrom. No Indemnified Party shall be permitted to settle
any such lawsuit or action without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld.

            (e)   All claims for indemnification under Sections 9.1(a)(i) or
(c)(i) must be initially asserted in accordance with the provisions of Section
9.1(d) within the applicable survival periods set forth in Section 11.1. All
claims for indemnification under Section 9.1(a)(iii) must be initially asserted
in writing in accordance with the provisions of Section 9.1(d) on or before the
date that is eighteen months after the Closing Date.

            (f)   Notwithstanding any of the provisions of this Section 9.1, KAR
and the Buyer shall not be entitled to make claims for money Damages under
Section 9.1(a) (except with respect to claims arising out of a breach of the
representation set forth in Section 4.7) unless and until the aggregate of all
such claims against the Equityholders individually and/or collectively exceeds
the Indemnification Threshold and then only to the extent of such excess.
Notwithstanding any of the provisions of this Section 9.1, in no event shall the
aggregate indemnification obligations of any Equityholder under Section 9.1(a)
exceed an amount equal to its Allocable Share multiplied by $50,000,000.00
Notwithstanding any of the provisions of this Section 9.1, the Equityholders
shall not be entitled to make claims for money Damages under Section 9.1(a)
unless and until the aggregate of such claims exceeds the Indemnification
Threshold and then only to the extent of such excess. Notwithstanding any of the
provisions of this Section 9.1, in no event shall the aggregate indemnification
obligations of the Buyer exceed $50,000,000. The amount to which an Indemnified
Party may become entitled in respect of any claim for Damages under this Article
9 shall be reduced by any insurance or other third-party recovery, reimbursement
or benefit received in respect of such claim before the expiration of two years
after payment of such claim by the Indemnifying Party. The amount of any such
recovery, less all reasonable costs, charges and expenses incurred by the
relevant Indemnified Party, as the

                                       57
<PAGE>
case may be, in obtaining such recovery from the third-party, shall be repaid by
the relevant Indemnified Party, as the case may be, to the relevant Indemnifying
Party promptly upon the receipt thereof from the third-party. The amount of any
claim for Damages for which indemnification is provided shall be reduced to take
account of any net tax benefit actually realized by the Indemnified Party
arising from the incurrence or payment of any such Damages. If a Buyer
Indemnitee is the Indemnified Party, the amount of any net tax benefit, if any,
realized by such Indemnified Party shall be determined by Buyer's independent
auditors whose determination shall be conclusive and binding on the
Equityholders, Buyer and KAR.

            (g)   The indemnification obligations of the parties set forth in
this Article 9 and the set-off provisions of Section 11.3 shall constitute the
sole and exclusive remedy of the parties with respect to any and all claims
related to the subject matter of this Agreement. In furtherance of the
foregoing, except as set forth in the immediately preceding sentence, each party
hereto hereby waives, from and after the Closing Date, to the fullest extent
permitted under applicable law, any and all rights, claims and causes of action
(other than claims of, or causes of action arising from fraud) that it may have
against any other party hereto relating to the subject matter of this Agreement
arising under or based upon any federal, state, or local statute, law,
ordinance, rule or regulation or otherwise.

                                   ARTICLE 10

                                   TAX MATTERS

            10.1  Pre-Closing Taxes; Amendment of Returns.

            (a)   The Equityholders shall be responsible for, and shall promptly
pay, any Taxes imposed on KAR for any taxable year or period that ends on or
before the Closing Date or any period which includes the Closing Date to the
extent attributable to the income, assets, operations or reporting requirements
of KAR for any such period ending on or prior to the Closing Date, and any
Damages incurred in connection with any Tax Return filed by KAR with respect to
any such period, including, but not limited to, all Taxes (and Damages relating
to, or to any dispute or defense against, such Taxes) resulting from or
attributable to the purchase of the Membership Interests, other than Taxes for
which Buyer is responsible under Section 11.2. The Equityholders covenant and
agree that they shall pay and be responsible for any personal Taxes due and
owing with respect to their Membership Interests.

            (b)   In the case of any Tax period of KAR that includes but does
not end as of the Closing Date (a "Straddle Period"), the allocation of any Tax
liability between the portion of any Straddle Period ending on the Closing Date
and the portion of such Straddle Period after such date shall be made by means
of a closing of the books and records of the Company as of the close of business
on the Closing Date as if a taxable period ended as of the close of such date;
provided, however, that exemptions, allowances or deductions that are calculated
on an annual basis (including, but not limited to, depreciation and amortization
deductions) shall be allocated between the period ending on such date and the
period after such date in the proportion which the number of days in each such
period bears to the total number of days in the Straddle Period.

                                       58
<PAGE>
            (c)   If the Closing Date is following January 2, 2002, and KAR is
deemed to have a short noncalendar Tax year for the period ending as of such
Closing Date (a "Stub Period"), the allocation of any Tax liability to the Stub
Period shall be made by treating such Stub Period as a separate taxable period
for purposes of Taxes payable by or assessable against KAR based on a closing of
KAR's books and records as of the close of business on the Closing Date and with
exemptions, allowances or deductions which are calculated on an annual basis
being allocated to the Stub Period in the proportion to which the number of says
in the Stub Period bears to the full 2002 calendar year.

            (d)   The Equityholders Designee shall, at the expense of KAR, cause
to be prepared and filed all Tax returns (including amended returns) required to
be filed by KAR with respect to the 2001 calendar year and, if applicable, any
Stub Period; provided, however, that (i) the Equityholder Designee shall provide
Buyer with a copy of such tax returns (including amended returns) at least
twenty (20) days prior to the filing thereof and (ii) at the request of Buyer,
such tax returns shall include an election under Section 754 of the Code. All
such Tax Returns shall be prepared by Briggs, Bunting & Dougherty in a manner
consistent with KAR's prior income Tax Returns. Responsibility for the
preparation and filing of KAR Tax Returns for periods commencing on or following
the Closing Date shall be as provided in the Restated KAR LLC Agreement.

            10.2  Assistance and Cooperation. From and after the Closing Date,
the Equityholders and Buyer shall:

            (a)   assist in all reasonable respects (and cause their respective
Affiliates to assist) the other party in preparing any Tax Returns of KAR which
such other party is responsible for preparing and filing;

            (b)   cooperate in all reasonable respects in preparing for any
audits of, or disputes with Taxing Authorities regarding, any Tax Returns of KAR
or any Affiliate of KAR;

            (c)   make available to the other and to any Taxing Authority as
reasonably requested all information, records, and documents relating to Taxes
of KAR;

            (d)   provide timely notice to the other in writing of any pending
or threatened tax audits or assessments of KAR for taxable periods for which the
other may have a liability under Article 10;

            (e)   furnish the other with copies of all correspondence received
from any Taxing Authority in connection with any tax audit or information
request with respect to KAR with respect to any such taxable period; and

            (f)   make available to Equityholders and to any Taxing Authority as
reasonably requested all information, records, and documents of KAR in
connection with any matter relating to Taxes of Equityholders.

                                       59
<PAGE>
            10.3  Contests and Payment Procedures.

                  (a)   Notwithstanding anything to the contrary in this
Agreement, the Equityholder Designee shall, in consultation with Buyer, control,
manage and be responsible for any audit, contest, claim, proceeding or inquiry
with respect to Taxes for any pre-Closing period and shall have the right to
settle or contest any such audit, contest, claim, proceeding or inquiry,
provided, however, that if any such settlement would materially and adversely
impact a Tax Return of any of KAR or its Affiliates with respect to the period
beginning the day after the Closing Date, Buyer and the Equityholder Designee
shall mutually agree on the terms of such settlement.

                  (b)   The control, management and responsibility for any
audit, contest, claim, proceeding or inquiry with respect to any item relating
to Taxes not covered by Section 10.3(a) shall be as provided in the Restated KAR
LLC Agreement.

                                   ARTICLE 11

                                  MISCELLANEOUS

            11.1  Survival of Representations and Warranties. The
representations and warranties contained herein and in any document, instrument,
certificate or other writing delivered pursuant hereto shall survive the Closing
for a period of eighteen months from the Closing Date, except for the
representations and warranties contained in (i) Sections 4.1, 4.3, 4.7, 4.27,
5.1, 5.2 and 5.9 hereof which shall survive indefinitely and (ii) Section 4.20
hereof which shall survive until the expiration of the applicable statute of
limitations with respect to the matters contained therein. All statements
contained in the Disclosure Schedule or in any certificate delivered at the
Closing pursuant to the transactions contemplated hereby shall be deemed to be
representations and warranties of the applicable party hereto contained herein.
Notwithstanding anything in this Agreement to the contrary, any Damages as to
which a notice of claim has been given in writing in accordance with Section
9.1(d) prior to the expiration of the applicable period set forth above in
Section 9.1(e) shall survive until payment or other final resolution of such
claim. Nothing contained in this Section 11.1 shall affect any covenant,
agreement or undertaking contained in this Agreement or in any instrument
delivered pursuant to this Agreement or pursuant to any agreement or
transactions contemplated hereby which covenant, agreement or undertaking is to
be performed after the Closing Date.

            11.2  Expenses; Transfer Taxes. All Expenses incurred in connection
with the transactions contemplated by this Agreement, other than those
associated with obtaining shareholder approval (including proxy solicitation
costs) shall be paid by the party incurring such Expenses. All printing costs,
postage and proxy solicitation costs (if any) associated with obtaining the
shareholder approval and any other approvals of the Fund Board described in
Section 6.2(b) shall be borne equally by Buyer, on the one hand, and the
Equityholders, on the other hand. Any Taxes in the nature of a sales or transfer
tax, and any stock transfer tax, payable on the sale or transfer of all or any
portion of the Membership Interests or the consummation of any other transaction
contemplated hereby shall be paid by the Equityholders.

                                       60
<PAGE>
            11.3  Set-Off. Without limiting any other rights that Buyer may have
pursuant to this Agreement or the Related Agreements, Buyer shall be entitled to
set off against any amount payable by it to any Equityholder pursuant to this
Agreement (other than amounts payable on the Closing Date pursuant to Section
2.3 hereof) or the Related Agreements (other than amounts payable under the
Employment Agreements) the amount of any Damages which Buyer determines in good
faith that it is then entitled to be indemnified by such Equityholder pursuant
to this Agreement for which Buyer has provided notice of a claim in writing in
accordance with Sections 9.1(d) and 9.1(e) (the "Set-Off Amount"); provided,
however, that if the Set-Off Amount exceeds the amount of Damages against which
Buyer is then entitled to be indemnified by such Equityholders pursuant to this
Agreement as provided in a final non-appealable judgment or as determined by
arbitration in accordance with Section 11.9, Buyer shall retain the amount, if
any, determined to be due to it and shall promptly pay over to the applicable
Equityholder any excess together with interest thereon from the date on which
such Set-Off Amount was otherwise due and payable by Buyer at a rate of 4.35%
per annum.

            11.4  Notices. Unless otherwise provided herein, any notice,
request, instruction or other document or communication to be given hereunder by
any party to any other party shall be in writing and shall be deemed to have
been given (a) if mailed, on the date received if mailed by registered or
certified mail (return receipt requested), (b) if sent by facsimile
transmission, when so sent and receipt acknowledged by an appropriate telephone
or facsimile receipt, (c) one Business Day following dispatch if sent by
reputable overnight courier or (d) if sent by other means, when actually
received by the party to which such notice has been directed, in each case at
the respective addresses or numbers set forth below or such other address or
number as such party may have fixed by notice:

If to Buyer, or to KAR after the Closing Date:

                        Phoenix Investment Partners, Ltd.
                        56 Prospect Street
                        Hartford, Connecticut 06115-0480
                        Attention: Chief Executive Officer
                        Telephone: (860) 403-5365
                        Facsimile: (860) 403-5545

                        -and-

                        Phoenix Investment Partners, Ltd.
                        56 Prospect Street
                        Hartford, Connecticut 06115-0480
                        Attention: Nancy J. Engberg, Esq.
                        Vice President and Counsel
                        Telephone: (860) 403-5973
                        Facsimile: (860) 403-7600

                        -and-

                                       61
<PAGE>
                        Stroock & Stroock & Lavan LLP
                        180 Maiden Lane
                        New York, New York  10038-4982
                        Attention: David L. Finkelman, Esq.
                        Telephone: (212) 806-5400
                        Facsimile: (212) 806-6006

If to any Equityholder, or to KAR prior to the Closing Date:

                        Kayne Anderson Rudnick Investment Management, LLC
                        1800 Avenue of the Stars
                        Second Floor
                        Los Angeles, California  90067
                        Attention: Ralph Collins Walter
                        Telephone: (310) 712-2929
                        Facsimile: (310) 712-2979

                        -and-

                        Kayne Anderson Rudnick Investment Management, LLC
                        1800 Avenue of the Stars
                        Second Floor
                        Los Angeles, California  90067
                        Attention: David Shladovsky
                        Telephone: (310) 284-6438
                        Facsimile: (310) 284-6444

                        -and-

                        Gibson, Dunn & Crutcher LLP
                        4 Park Plaza
                        Irvine, California 92614-8557
                        Attention: Gerard J. Kenny, Esq.
                        Telephone: (949)451-3800
                        Facsimile: (949)451-4220

            11.5  Counterparts. This Agreement may be executed in counterparts
(including executed counterparts delivered and exchanged by facsimile
transmission, provided that the originally signed counterpart is subsequently
delivered) each of which shall be deemed to constitute one and the same
instrument.

            11.6  Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of California, without
giving effect to principles of conflict of laws.

                                       62
<PAGE>
            11.7  Waiver; Amendment.

            (a)   Any provision of this Agreement may be amended or waived prior
to the Closing Date if, and only if, (i) such amendment or waiver is in writing
and (ii) in the case of an amendment, signed by Buyer, the Equityholder Designee
and KAR, and in the case of a waiver, signed by the party against whom the
waiver is to be effective.

            (b)   No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.

            11.8  Entire Agreement; Persons Benefiting; Etc. This Agreement, the
Related Agreements and the Confidentiality Agreement represent the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made. All terms and provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns provided that no party, except as otherwise provided in
Section 2.1 hereof, may assign, delegate or otherwise transfer any of its rights
or obligations under this Agreement without the consent of the other parties
thereto. No provision of this Agreement shall create any third-party beneficiary
rights in any employee or former employee (including any beneficiary or
dependent thereof) of KAR in respect of continued employment or resumed
employment.

            11.9  Arbitration. Any controversy or dispute arising out of or
relating to the construction or application of any term or provision of this
Agreement (a "Dispute") shall be, upon the written request of either of the
parties, submitted to binding arbitration by JAMS (or if JAMS is no longer in
existence, by another mutually selected arbitrator) in accordance with the
provisions set forth in Schedule G attached hereto (or arbitration by the
American Arbitration Society to the extent provided in Schedule G). The parties
agree to enter into a confidentiality and nondisclosure agreement with respect
to the use and dissemination of information obtained in connection with any
arbitration of a Dispute. In the event the parties cannot agree upon a
confidentially and nondisclosure agreement, JAMS shall have the authority to
issue a protective order to restrict the use and dissemination of information
obtained in connection with any arbitration of a Dispute. The terms of this
provision are intended to augment the terms of all provisions in this Agreement
pertaining to confidentiality. Notwithstanding the foregoing, a party who seeks
equitable relief, including injunctive relief, shall not be obligated to utilize
the arbitration proceedings required hereunder and instead may seek such relief
in any state or federal court sitting in Los Angeles County, California. Each of
the parties hereby irrevocably consents to the service of process in any such
action or proceeding by the mailing by certified mail of copies of any service
or copies of the summons and complaint and any other process to such party at
the address specified in Section 11.4 hereof. Nothing in this Section 11.9 shall
affect the right of a party to serve legal process in any other manner permitted
by law or affect the right of a party to bring any action or proceeding in the
courts of other jurisdictions.

                                       63
<PAGE>
            IN WITNESS WHEREOF, the parties have duly executed this Agreement,
all as of the date first written above.

                                       PHOENIX INVESTMENT PARTNERS, LTD.

                                       By: /s/ William R. Moyer
                                          ---------------------
                                       Name:  William R. Moyer
                                       Title: Executive Vice President and
                                              Chief Financial Officer

                                       KAYNE ANDERSON RUDNICK INVESTMENT
                                       MANAGEMENT, LLC

                                       By: /s/ RICHARD A. KAYNE
                                           --------------------
                                       Name:  Richard A. Kayne
                                       Title: Chief Executive Officer

                                       EQUITYHOLDERS

                                       /s/ RICHARD A. KAYNE
                                       --------------------
                                       RICHARD A. KAYNE

                                       /s/ ALLAN M. RUDNICK
                                       --------------------
                                       ALLAN M. RUDNICK

                                       /s/ JOHN E. ANDERSON
                                       --------------------
                                       JOHN E. ANDERSON

                                       /s/ JEAN-BAPTISTE NADAL
                                       -----------------------
                                       JEAN-BAPTISTE NADAL

                                       /s/ PAUL WAYNE
                                       --------------
                                       PAUL WAYNE

                                       64
<PAGE>
                                       /s/ ROBERT A. SCHWARZKOPF
                                       -------------------------
                                       ROBERT A. SCHWARZKOPF

                                       /s/ RALPH COLLINS WALTER
                                       ------------------------
                                       RALPH COLLINS WALTER

                                       /s/ JEANNINE VANIAN
                                       -------------------
                                       JEANNINE VANIAN

                                       /s/ VICTOR A. NORTON
                                       --------------------
                                       VICTOR A. NORTON

                                       /s/ SANDI GLEASON
                                       -----------------
                                       SANDI GLEASON

                                       /s/ SUSAN B. FRANK
                                       ------------------
                                       SUSAN B. FRANK

                                       /s/ STEPHEN A. RIGALI
                                       ---------------------
                                       STEPHEN A. RIGALI

                                       /s/ FRANK ARENTOWICZ
                                       --------------------
                                       FRANK ARENTOWICZ

                                       /s/ DAVID J. SHLADOVSKY
                                       -----------------------
                                       DAVID J. SHLADOVSKY

                                       /s/ KEVIN D. WELSH
                                       ------------------
                                       KEVIN D. WELSH

                                       65
<PAGE>
                                       /s/ ROBERT V. SINNOTT
                                       ---------------------
                                       ROBERT V. SINNOTT

                                       /s/ ALAN LIPMAN
                                       ---------------
                                       ALAN LIPMAN

                                       /s/ HOWARD M. ZELIKOW
                                       ---------------------
                                       HOWARD M. ZELIKOW

                                       /s/ STEVEN M. SIMERKA
                                       ---------------------
                                       STEVEN M. SIMERKA

                                       /s/ ROY REEVES
                                       --------------
                                       ROY REEVES

                                       /s/ RICHARD SHERRY
                                       ------------------
                                       RICHARD SHERRY

                                       /s/ FRANK LEE
                                       -------------
                                       FRANK LEE

                                       /s/ LEA SHALEV
                                       --------------
                                       LEA SHALEV

                                       66<PAGE>
                                                                     Exhibit 4.1

                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

                                       TO

                              THE BANK OF NEW YORK

                                     Trustee

                                    INDENTURE

                          Dated as of
                                      -----------------
<PAGE>
    CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318,
                 INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:

<TABLE>
<CAPTION>
TRUST INDENTURE                                               INDENTURE SECTION
ACT SECTION
<S>                                                           <C>
Section 310(a)(1)                                             609
       (a)(2)                                                 609
       (a)(3)                                                 Not Applicable
       (a)(4)                                                 Not Applicable
       (b)                                                    608
                                                              610
Section 31l(a)                                                613
       (b)                                                    613
Section 312(a)                                                701
                                                              702
       (b)                                                    702
       (c)                                                    702
Section 313(a)                                                703
       (b)                                                    703
       (c)                                                    703
       (d)                                                    703
Section 314(a)                                                704
       (a)(4)                                                 101
                                                              1004
       (b)                                                    Not Applicable
       (c)(1)                                                 102
       (c)(2)                                                 102
       (c)(3)                                                 Not Applicable
       (d)                                                    Not Applicable
       (e)                                                    102
Section 315(a)                                                601
       (b)                                                    602
       (c)                                                    601
       (d)                                                    601
       (e)                                                    514
Section 316(a)                                                101
       (a)(l)(A)                                              502
                                                              512
       (a)(1)(B)                                              513
       (a)(2)                                                 Not Applicable
       (b)                                                    508
       (c)                                                    104
Section 317(a)(1)                                             503
       (a)(2)                                                 504
       (b)                                                    1003
Section 318(a)                                                107
</TABLE>

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.

                                       ii
<PAGE>
                               TABLE OF CONTENTS

    NOTE: This table of contents shall not, for any purpose, he deemed to be a
    part of the Indenture.

<TABLE>
<S>                                                                                                    <C>
RECITALS OF THE COMPANY ...........................................................................      1

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

         SECTION 101. Definitions .................................................................      1

         SECTION 102. Compliance Certificates and Opinions ........................................      7

         SECTION 103. Form of Documents Delivered to Trustee ......................................      8

         SECTION 104. Acts of Holders; Record Dates ...............................................      8

         SECTION 105. Notices, Etc., to Trustee and Company .......................................      9

         SECTION 106. Notice to Holders; Waiver ...................................................      9

         SECTION 107. Conflict with Trust Indenture Act ...........................................      9

         SECTION 108. Effect of Headings and Table of Contents ....................................     10

         SECTION 109. Successors and Assigns ......................................................     10

         SECTION 110. Separability Clause .........................................................     10

         SECTION 111. Benefits of Indenture .......................................................     10

         SECTION 112. Governing Law ...............................................................     10

ARTICLE TWO           SECURITY FORMS ..............................................................     10

         SECTION 201. Forms Generally .............................................................     10

         SECTION 202. Form of Face of Security ....................................................     11

         SECTION 203. Form of Reverse of Security .................................................     12

         SECTION 204. Form of Legend for Global Securities ........................................     14

         SECTION 205. Form of Trustee's Certificate of Authentication .............................     15

ARTICLE THREE         THE SECURITIES ..............................................................     15

         SECTION 301. Title and Terms .............................................................     15

         SECTION 302. Denominations ...............................................................     16

         SECTION 303. Execution, Authentication, Delivery and Dating ..............................     16

         SECTION 304. Temporary Securities ........................................................     16

         SECTION 305. Registration, Registration of Transfer and Exchange;
                        Certain Transfers and Exchanges ...........................................     17

         SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities ............................     18

         SECTION 307. Payment of Interest; Interest Rights Preserved ..............................     19
</TABLE>

                                      iii
<PAGE>
<TABLE>
<S>                                                                                                    <C>
         SECTION 308. Persons Deemed Owners .......................................................     20

         SECTION 309. Cancellation ................................................................     20

         SECTION 310. Computation of Interest .....................................................     20

         SECTION 311. CUSIP Numbers ...............................................................     20

ARTICLE FOUR          SATISFACTION AND DISCHARGE ..................................................     20

         SECTION 401. Satisfaction and Discharge of Indenture .....................................     20

         SECTION 402. Application of Trust Money ..................................................     21

ARTICLE FIVE          REMEDIES ....................................................................     22

         SECTION 501. Events of Default ...........................................................     22

         SECTION 502. Acceleration of Maturity; Rescission and Annulment ..........................     23

         SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee .............     23

         SECTION 504. Trustee May File Proofs of Claim ............................................     24

         SECTION 505. Trustee May Enforce Claims Without Possession of Securities .................     24

         SECTION 506. Application of Money Collected ..............................................     25

         SECTION 507. Limitation on Suits .........................................................     25

         SECTION 508. Unconditional Right of Holders to Receive Principal,
                        Premium and Interest ......................................................     25

         SECTION 509. Restoration of Rights and Remedies ..........................................     26

         SECTION 510. Rights and Remedies Cumulative ..............................................     26

         SECTION 511. Delay or Omission Not Waiver ................................................     26

         SECTION 512. Control by Holders ..........................................................     26

         SECTION 513. Waiver of Past Defaults .....................................................     26

         SECTION 514. Undertaking for Costs .......................................................     27

         SECTION 515. Waiver of Usury, Stay or Extension Laws .....................................     27

ARTICLE SIX           THE TRUSTEE .................................................................     27

         SECTION 601. Certain Duties and Responsibilities .........................................     27

         SECTION 602. Notice of Defaults ..........................................................     27

         SECTION 603. Certain Rights of Trustee ...................................................     28

         SECTION 604. Not Responsible for Recitals or Issuance of Securities ......................     29

         SECTION 605. May Hold Securities .........................................................     29

         SECTION 606. Money Held in Trust .........................................................     29

         SECTION 607. Compensation and Reimbursement ..............................................     29

         SECTION 608. Conflicting Interests .......................................................     30
</TABLE>

                                       iv
<PAGE>
<TABLE>
<S>                                                                                                    <C>
         SECTION 609. Corporate Trustee Required, Eligibility .....................................     30

         SECTION 610. Resignation and Removal; Appointment of Successor ...........................     30

         SECTION 611. Acceptance of Appointment by Successor ......................................     31

         SECTION 612. Merger, Conversion, Consolidation or Succession to Business .................     32

         SECTION 613. Preferential Collection of Claims Against Company ...........................     32

         SECTION 614. Appointment of Authenticating Agent .........................................     32

ARTICLE SEVEN         HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY ...........................     33

         SECTION 701. Company to Furnish Trustee Names and Addresses of Holders ...................     33

         SECTION 702. Preservation of Information:  Communications to Holders .....................     34

         SECTION 703. Reports by Trustee ..........................................................     34

         SECTION 704. Reports by Company ..........................................................     34

ARTICLE EIGHT         CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE ........................     35

         SECTION 801. Company, May Consolidate, Etc., Only on Certain Terms .......................     35

         SECTION 802. Successor Substituted .......................................................     36

ARTICLE NINE          SUPPLEMENTAL INDENTURES .....................................................     36

         SECTION 901. Supplemental Indentures Without Consent of Holders ..........................     36

         SECTION 902. Supplemental Indentures With Consent of Holders .............................     37

         SECTION 903. Execution of Supplemental Indentures ........................................     37

         SECTION 904. Effect of Supplemental Indentures ...........................................     38

         SECTION 905. Conformity with Trust Indenture Act .........................................     38

         SECTION 906. Reference in Securities to Supplemental Indentures ..........................     38

ARTICLE TEN            COVENANTS ..................................................................     38

         SECTION 1001. Payment of Principal, Premium and Interest .................................     38

         SECTION 1002. Maintenance of Office or Agency ............................................     38

         SECTION 1003. Money for Securities Payments to Be Held in Trust ..........................     39

         SECTION 1004. Statement by Officers as to Default ........................................     39

         SECTION 1005. Existence ..................................................................     40

         SECTION 1006. Maintenance of Properties ..................................................     40

         SECTION 1007. Payment of Taxes and Other Claims ..........................................     40

         SECTION 1008. Limitation on Senior Indebtedness; Appraisals ..............................     40

         SECTION 1009. Waiver of Certain Covenants ................................................     40
</TABLE>

                                        v
<PAGE>
<TABLE>
<S>                                                                                                    <C>
ARTICLE ELEVEN         REDEMPTION OF SECURITIES ...................................................     41

         SECTION 1101. Right of Redemption ........................................................     41

         SECTION 1102. Election to Redeem; Notice to Trustee ......................................     41

         SECTION 1103. Selection by Trustee of Securities to Be Redeemed ..........................     41

         SECTION 1104. Notice of Redemption .......................................................     41

         SECTION 1105. Deposit of Redemption Price ................................................     42

         SECTION 1106. Securities Payable on Redemption Date ......................................     42

         SECTION 1107. Securities Redeemed in Part ................................................     42

ARTICLE TWELVE         DEFEASANCE AND COVENANT DEFEASANCE .........................................     43

         SECTION 1201. Company's Option to Effect Defeasance or Covenant Defeasance ...............     43

         SECTION 1202. Defeasance and Discharge ...................................................     43

         SECTION 1203. Covenant Defeasance ........................................................     43

         SECTION 1204. Conditions to Defeasance or Covenant Defeasance ............................     43

         SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held
                         in Trust; Miscellaneous Provisions .......................................     45

         SECTION 1206. Reinstatement ..............................................................     46

ARTICLE THIRTEEN       SUBORDINATION OF SECURITIES ................................................     46

         SECTION 1301. Securities Subordinate to Senior Indebtedness ..............................     46

         SECTION 1302. No Payment in Certain Circumstances, Payment over of Proceeds
                         upon Dissolution, Etc ....................................................     46

         SECTION 1303. Prior Payment to Senior Indebtedness upon Acceleration of
                         the Securities ...........................................................     48

         SECTION 1304. Payment Permitted If No Default ............................................     48

         SECTION 1305. Subrogation to Rights of Holders of Senior Indebtedness ....................     48

         SECTION 1306. Provisions Solely to Define Relative Rights ................................     49

         SECTION 1307. Trustee to Effectuate Subordination ........................................     49

         SECTION 1308. No Waiver of Subordination Provisions ......................................     49

         SECTION 1309. Notice to Trustee ..........................................................     49

         SECTION 1310. Reliance on Judicial Order or Certificate of Liquidating Agent .............     50

         SECTION 1311. Trustee Not Fiduciary for Holders of Senior Indebtedness ...................     50

         SECTION 1312. Reliance by Holders of Senior Indebtedness on Subordination
                         Provisions ...............................................................     50
</TABLE>

                                       vi
<PAGE>
<TABLE>
<S>                                                                                                    <C>
         SECTION 1313. Rights of Trustee as Holders of Senior Indebtedness;
                         Preservation of Trustee's Rights .........................................     51

         SECTION 1314. Article Applicable to Paying Agents ........................................     51
</TABLE>

                                      vii
<PAGE>
         INDENTURE, dated as of __________________ between CAREY INSTITUTIONAL
PROPERTIES INCORPORATED, a corporation duly organized and existing under the
laws of the State of Maryland (herein called the "Company"), having its
principal office at 50 Rockefeller Plaza, New York, New York 10022, and The Bank
of New York, a New York banking corporation, as Trustee (herein called the
"Trustee").

                             RECITALS OF THE COMPANY

         The Company has duly authorized the creation of an issue of its 4%
Subordinated Debentures Due December 31, 2004 (herein called the "Securities")
of substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture. The Securities rank junior and be subordinated to certain future
unsecured and unsubordinated obligations of the Company as more fully set forth
herein.

         All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.

                   Now, THEREFORE, THIS INDENTURE WITNESSETH:

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

                                   ARTICLE ONE

                        DEFINITIONS AND OTHER PROVISIONS
                             OF GENERAL APPLICATION

SECTION 101. Definitions.

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

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

                  (2) all other terms used herein which are defined in the Trust
         Indenture Act, either directly or by reference therein, have the
         meanings assigned to them therein;

                  (3) all accounting terms not otherwise defined herein have the
         meanings assigned to them in accordance with generally accepted
         accounting principles, and, except as otherwise herein expressly
         provided, the term "generally accepted accounting principles" with
         respect to any computation required or permitted hereunder shall mean
         such accounting principles as are generally accepted and applied by the
         Company on a consistent basis at the date of such computation;
<PAGE>
                  (4) unless the context otherwise requires, any reference to an
         "Article" or a "Section" refers to an Article or a Section, as the case
         may be, of this Indenture; and

                  (5) the word, "herein", "hereof" and "hereunder" and other
         words of similar import refer to this Indenture as a whole and not to
         any particular Article, Section or other subdivision.

         "Act", when used with respect to any Holder, has the meaning specified
in Section 104.

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

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

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

         "Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities.

         "Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.

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

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

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

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

         "Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.

                                      -2-
<PAGE>
         "Corporate Trust Office" means the principal office of the Trustee in
New York, New York at which at any particular time its corporate trust business
shall be administered, which office as of the date hereof is located at 101
Barclay Street, New York, New York 10286.

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

         "Covenant Defeasance" has the meaning specified in Section 1203.

         "Defaulted Interest" has the meaning specified in Section 307.

         "Defeasance" has the meaning specified in Section 1202.

         "Depository" means, with respect to Securities issuable or issued in
whole or in part in the form of one or more Global Securities, such clearing
agency, which shall be a clearing agency registered under the Exchange Act, as
the Company shall designate from time to time in an Officers' Certificate
delivered to the Trustee.

         "Event of Default" has the meaning specified in Section 501.

         "Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.

          "Global Security" means a Security that evidences all or part of the
Securities and bears the applicable legend set forth in Section 204, issued to
the Depository or its nominee, and registered in the name of such Depository or
its nominee,

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

         "Indebtedness" means, with respect to any Person:

                  (1) the principal of and any premium and interest on, whether
         outstanding on the date hereof or hereafter created, incurred, or
         assumed, which is (a) indebtedness of such Person for money borrowed
         and (b) indebtedness evidenced by notes, debentures, bonds or other
         similar instruments for the payment of which such Person is responsible
         or liable;

                  (2) all Capitalized Lease Obligations of such Person;

                  (3) all obligations of such Person issued or assumed as the
         deferred purchase price of property, all conditional sale obligations
         and all obligations under any title retention agreement (but excluding
         trade accounts payable arising in the ordinary course of business or
         which are payable in full within 90 days from the date such
         Indebtedness is incurred);

                  (4) all obligations of such Person for the reimbursement of
         any obligor on any letter of credit, banker's acceptance or similar
         credit transaction (other than obligations with respect to letters of
         credit securing obligations (other than obligations described in (1)
         through (3) above) entered into in the ordinary course of business of
         such Person to the extent such letters of credit are not drawn upon or,
         if and to the extent drawn upon. such drawing is reimbursed no later
         than the third Business Day following receipt by such Person of a
         demand for reimbursement following payment on the letter of credit);

                                      -3-
<PAGE>
                  (5) all obligations of the type referred to in clauses (1)
         through (4) of other Persons and all dividends of other Persons for the
         payment of which, in either case, such Person is responsible or liable
         as obligor, guarantor or otherwise;

                  (6) all obligations of the type referred to in clauses (1)
         through (5) of other Persons secured by any Lien on any property or
         asset of such Person (whether or not such obligation is assumed by such
         Person), the amount of such obligation being deemed to be the lesser of
         the value of such property or assets or the amount of the obligation so
         secured, and

                  (7) any amendments, modifications, refundings, renewals or
         extensions of any indebtedness or obligation described as Indebtedness
         in clauses (1) through (6) above.

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

         "Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.

         "Investment Company Act" means the Investment Company Act of 1940 and
any statute successor thereto, in each case as amended from time to time.

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

         "Notice of Default" means a written notice of the kind specified in
Section 501(3).

         "Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.

         "Opinion of Counsel" means a written opinion of counsel, who may be
in-house counsel for the Company, and who shall be acceptable to the Trustee.

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

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

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

                                      -4-
<PAGE>
                  (3) Securities as to which Defeasance has been effected
         pursuant to Section 1202; and

                  (4) Securities which have been paid pursuant to Section 306 or
         in exchange for or in lieu of which other Securities have been
         authenticated and delivered pursuant to this Indenture, other than any
         such Securities in respect of which there shall have been presented to
         the Trustee proof satisfactory to it that such Securities are held by a
         bona fide purchaser in whose hands such Securities are valid
         obligations of the Company;

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

         "Paying Agent" means any Person authorized by the Company. to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.

         "Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof

         "Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.

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

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

         "Regular Record Date" for the interest payable on any Interest Payment
Date means March 15, June 15, September 15 or December 15 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.

         "Responsible Person" means, when used with respect to the Trustee, any
officer within the corporate trust department of the Trustee (or any successor
of the Trustee), including any vice president, any assistant vice president, any
assistant secretary, any assistant treasurer, any trust office or any other
office of the Trustee who customarily performs functions similar to those
performed by the Persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of such person's
knowledge of and familiarity with the particular subject and who shall have
direct responsibility for the administration of this Indenture.

                                      -5-
<PAGE>
         "Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.

         "Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.

         "Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.

         "Senior Indebtedness" means the principal of (and premium, if any) and
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) on, and all fees and
other amounts payable or rent or other obligations, absolute or contingent,
secured or unsecured, due or to become due, created, incurred or assumed after
the date of this Indenture in connection with any of the following: (a) any
credit or loan agreement, note, bond, debenture or other written obligation of
the Company, (b) all obligations of the Company for money borrowed, (c) any note
or similar instrument issued by the Company in connection with the acquisition
of any businesses, properties or assets of any kind, (d) the Company's leasing
real or personal property (i) under leases, if capitalized on the balance sheet
of the lessee under generally accepted accounting principles or (ii) under
leases, participation agreements, guarantees or similar documents entered into
by the Company in connection with the leasing of real or personal property by
the Company or any of the Subsidiaries which provides that the Company is
contractually obligated to purchase or cause a third party to purchase the
leased property for a fixed price or otherwise guarantee a residual value of
leased property to the lessor or a third party, whether or not such lease is
properly classified as a operating or capital lease in accordance with generally
accepted accounting principles, (e) any interest rate and currency swaps, caps,
floors, collars, hedge agreements, forward contracts or similar agreements or
arrangements, (f) any letters of credit, bankers' acceptance and similar
facilities, including reimbursement obligations with respect to the foregoing,
(g) any deferred purchase price of property or services, (h) all obligations of
the type referred to in the above clauses of another Person and any dividends of
another Person, the payment of which, in either case, the Company has assumed or
guaranteed, or for which the Company is responsible or liable, directly or
indirectly, jointly or severally, or obligor, guarantor or otherwise, or which
are secured by a lien on the Company's property, and (i) renewals, extensions,
modifications, replacements, restatements and refunding of, any indebtedness or
obligation issued in exchange for, any such indebtedness or obligation described
in clauses (a) through (h) of this paragraph; provided, however, that "Senior
Indebtedness" shall include only such indebtedness or obligations which contain
terms (or the instrument under which or pursuant to which such indebtedness or
obligation was issued contains terms) specifically declaring the same to
constitute "Senior Indebtedness" under this Indenture.

         "Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307,

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

         "Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all

                                      -6-
<PAGE>
times or only so long as no senior class of stock has such voting power by
reason of any contingency.

         "Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.

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

         "Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder.

         "U.S. Government Obligation" has the meaning specified in Section 1204.

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

SECTION 102. Compliance Certificates and Opinions.

         Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.

         Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (except for certificates
provided for in Section 1004) shall include,

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

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

                  (3) a statement that, in the opinion of each such individual,
         he has made such examination or investigation as is necessary to enable
         him to express an informed opinion. as to whether or not such covenant
         or condition has been complied with; and

                  (4) a statement as to whether, in the opinion of each such
         individual, such condition or covenant has been complied with.

                                      -7-
<PAGE>
SECTION 103. Form of Documents Delivered to Trustee.

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

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

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

SECTION 104. Acts of Holders; Record Dates.

         Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given, made or
taken by Holders, may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.

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

         The Company may, in the circumstances permitted by the Trust Indenture
Act, fix any day as the record date for the purpose of determining, the Holder
entitled to give or take any request, demand, authorization, direction, notice,
consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided

                                      -8-
<PAGE>
pursuant to Section 701) prior to such first solicitation or vote, as the case
may be. With regard to any record date, only the Holders on such date (or their
duly designated proxies) shall be entitled to give or take, or vote on, the
relevant action.

         The ownership of Securities shall be proved by the Security Register.

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

SECTION 105. Notices, Etc., to Trustee and Company.

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

                  (1) the Trustee by any Holder or by the Company shall be
         sufficient for every purpose hereunder if made, given, furnished or
         filed in writing to or with the Trustee at its Corporate Trust Office,
         Attention: Corporate Trust Administration, or

                  (2) the Company by the Trustee or by any Holder shall be
         sufficient for every purpose hereunder (unless otherwise herein
         expressly provided) if in writing and mailed, first-class postage
         prepaid, to the Company addressed to it at the address of its principal
         office specified in the first paragraph of this instrument or at any
         other address previously furnished in writing to the Trustee by the
         Company.

SECTION 106. Notice to Holders; Waiver.

         Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed first-class postage prepaid, to each Holder affected by
such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders 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.

         In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.

SECTION 107. Conflict with Trust Indenture Act.

         If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act which is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any

                                      -9-
<PAGE>
provision of the Trust Indenture Act which may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be.

SECTION 108. Effect of Headings and Table of Contents.

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

SECTION 109. Successors and Assigns.

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

SECTION 110. Separability Clause.

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

SECTION 111. Benefits of Indenture.

         Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.

SECTION 112. Governing Law.

         This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of New York.

SECTION 113. Legal Holidays.

         In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities (other than a provision
of any Security which specifically states that such provision shall apply in
lieu of this Section)) payment of interest or principal (and premium, if any)
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity, provided that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption Date
or Stated Maturity, as the case may be.

                                   ARTICLE TWO

                                 SECURITY FORMS

SECTION 201. Forms Generally.

         Securities and the Trustee's certificates of authentication shall be in
substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or Depositary
therefor or as may,

                                      -10-
<PAGE>
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of such Securities.

         The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.

         Upon their original issuance, Securities shall be issued in the form of
one or more Global Securities registered in the name of the Depositary, or its
nominee and deposited with the Security Registrar, as custodian for the
Depositary, for credit by the Depositary to the respective accounts of
beneficial owners of the Securities represented thereby (or such other accounts
as they may direct). Such Global Securities, together with their Successor
Securities which are Global Securities, are collectively herein called the
"Global Security".

         The Company, the Trustee and either of their agents shall not be
responsible for any acts or omissions of a Depositary, for any depositary
records of beneficial ownership interests or for any transactions between the
Depositary and beneficial owners.

SECTION 202. Form of Face of Security.

                         [Insert subordination legend.]

          [Legend(s), if any, required by Section 204 of the Indenture]

                       CAREY INSTITUTIONAL PROPERTIES INC

                4% SUBORDINATED DEBENTURES DUE DECEMBER 31, 2004

<TABLE>
<S>                                                                   <C>
CUSIP No.

No.                                                                   $
</TABLE>

         CAREY INSTITUTIONAL PROPERTIES INCORPORATED, a corporation duly
organized and existing under the laws of the State of Maryland (herein called
the "Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
                  , or registered assigns, the principal sum of
Dollars, on December 31, 2004, and to pay interest thereon from
or from the most recent Interest Payment Date to which interest has been paid or
duly provided for, quarterly on March 31, June 30, September 30 and December 31
in each year, commencing              , 2002 at the rate of 4% per annum, until
the principal hereof is paid or made available for payment shall be computed on
the basis of a 360-day year of twelve 30-day months.

         The interest so payable. and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be March 15, June 15, September 15 or December 15 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the

                                      -11-
<PAGE>
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date, or be paid
at any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture.

         Payment of the principal of (and premium, if any) and any such interest
on this Security will be made at the office or agency of the Company maintained
for that purpose in New York, New York, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts, provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.

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

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

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

Dated:

                                 CAREY INSTITUTIONAL PROPERTIES INCORPORATED

                                 By:
                                    -----------------------------------------
                                    Name:
                                    Title:

SECTION 203. Form of Reverse of Security.

         This Security is one of a duly authorized issue of securities of the
Company designated as its 4% Subordinated Debentures Due December 31, 2004
(herein called the "Securities"), limited in aggregate principal amount to
$50,000,000, issued and to be issued under an Indenture, dated as of _________
(herein called the "Indenture", which term shall have the meaning assigned to it
in such instrument), between the Company and The Bank of New York, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture).

         Reference is hereby made to the Indenture for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered.

         The Securities are subject to redemption, as a whole or from time to
time in part, upon not less than 30 nor more than 60 days' notice mailed to each
Holder of Securities to be redeemed at its address as it appears in the
Securities Register, on any date prior to their Stated

                                      -12-
<PAGE>
Maturity at a Redemption Price equal to 100% of the principal amount of such
Securities to be redeemed, plus accrued interest thereon to the Redemption Date;
provided, however, that unless the Company defaults in payment of the Redemption
Price, on or after the Redemption Date, interest will cease to accrue on the
Securities or portions thereof called for redemption.

         In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.

         The Securities do not have the benefit of any sinking fund obligation.

         The Securities are subordinated in right of payment to Senior
Indebtedness as provided for in the Indenture.

         The Indenture contains provisions for defeasance at any time of the
entire Indebtedness of this Security or certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.

         In the event of a deposit or withdrawal of an interest in this Security
(including upon an exchange, transfer, redemption or repurchase of this Security
in part only) effected in accordance with the Applicable Procedures, the
Security Registrar, upon receipt of notice of such event from the Depositary's
custodian for this Security, shall make an adjustment on its records to reflect
an increase or decrease of the Outstanding principal amount of this Security
resulting from such deposit or withdrawal, as the case may be.

         If an Event of Default shall occur and be continuing, the principal of
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange therefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.

         As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity, and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Security for the enforcement

                                      -13-
<PAGE>
of any payment of principal hereof or any premium or interest hereon on or after
the respective due dates expressed herein.

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

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.

         The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.

         No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

         Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

         All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.

SECTION 204. Form of Legend for Global Securities.

      Every Global Security authenticated and delivered hereunder shall bear one
or more of the appropriate legends in substantially the following forms, as
relevant, below:

 [If the Security is a Global Security insert - THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY
NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER
OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED
BY AN AUTHORIZED REPRESENTATIVE ________________ ("DEPOSITORY"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF _______ OR IN SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED

                                      -14-
<PAGE>

REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO _________OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DEPOSITORY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHER WISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, _____________ HAS AN
INTEREST HEREIN.]

SECTION 205. Form of Trustee's Certificate of Authentication.

      The Trustee's certificates of authentication shall be in substantially the
following form:

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

      Dated:____________________

                                            THE BANK OF NEW YORK,
                                                                 As Trustee

                                        By......................................
                                                  Authorized Signatory

                                  ARTICLE THREE

                                 THE SECURITIES

SECTION 301. Title and Terms.

         The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $50,000,000, except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306,
906 or 1107.

         The Securities shall be known and designated as the "4% Subordinated
Debentures Due December 31, 2004" of the Company. Their Stated Maturity shall be
December 31, 2004, and they shall bear interest at the rate of 4% per annum,
from __________________ or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, payable
quarterly on March 31, June 30, September 30 and December 31, commencing
__________, 2002, until the principal thereof is paid or made available for
payment.

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

         The principal of and any premium and interest on the Securities shall
be payable at the office or agency of the Company in New York, New York
maintained for such purpose and at any other office or agency maintained by the
Company for such purpose; provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.

                                      -15-
<PAGE>
         The Securities shall be redeemable as provided in Article Eleven.

         The Securities shall be subordinated in right of payment to Senior
Indebtedness pursuant to Article Thirteen.

         The Securities shall not have the benefit of any sinking fund
obligations.

SECTION 302. Denominations.

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

SECTION 303. Execution, Authentication, Delivery and Dating.

         The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers and the corporate seal on the Securities may be manual or facsimile.

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

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

         Each Security shall be dated the date of its authentication.

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

SECTION 304. Temporary Securities.

         Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.

         If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency designated pursuant to Section 1002, without charge

                                      -16-
<PAGE>
to the Holder. Upon surrender for cancellation of any one or more temporary
Securities, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged, the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.

SECTION 305. Registration, Registration of Transfer and Exchange; Certain
Transfers and Exchanges.

         (a) Registration, Registration of Transfer and Exchange Generally. The
Company shall cause to be kept at the Corporate Trust Office of the Trustee a
register (the register maintained in such office and in any other office or
agency designated pursuant to Section 1002 being herein sometimes collectively
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby appointed
"Security Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.

         Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities, of any authorized denominations and of a like aggregate
principal amount.

         Subject to Section 305(b), at the option of the Holder, Securities may
be exchanged for other Securities of any authorized denominations and of a like
aggregate principal amount upon surrender of the Securities to be exchanged at
such office or agency. Whenever any Securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.

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

         Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.

         No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 303, 304, 906 or 1107.not involving any transfer.

         The Company shall not be required (A) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1103 and ending at the close of business
on the day of such mailing, or (B) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.

         (b) Global Securities. The provisions of this Section 305(b) shall
apply only to Global Securities:

                                      -17-
<PAGE>
                  Each Global Security authenticated under this Indenture shall
         be registered in the name of the Depositary designated for such Global
         Security or a nominee thereof and delivered to such Depositary or a
         nominee thereof or custodian therefor, and each such Global Security
         shall constitute a single Security for all purposes of this Indenture.

                  Notwithstanding any other provision in this Indenture, no
         Global Security may be exchanged in whole or in part for Securities
         registered, and no transfer of a Global Security in whole or in part
         may be registered, in the name of any Person other than the Depositary
         for such Global Security or a nominee thereof unless (A) such
         Depositary (i) has notified the Company that it is unwilling or unable
         to continue as Depositary for such Global Security or (ii) has ceased
         to be a clearing agency registered under the Exchange Act, (B) the
         Company in its sole discretion determines that such Global Security
         shall be exchangeable for definitive registered Securities and executes
         and delivers to the Security Registrar a Company Order providing that
         such Global Security shall be so exchangeable or (C) there shall have
         occurred and be continuing an Event of Default with respect to such
         Global Security.

                  Subject to Clause (2) above, any exchange of a Global Security
         for other Securities may be made in whole or in part and all Securities
         issued in exchange for a Global Security or any portion thereof shall
         be registered in such names as the Depositary for such Global Security
         shall direct.

                  Every Security authenticated and delivered upon registration
         of transfer of or in exchange for or in lieu of, a Global Security or
         any portion thereof, whether pursuant to this Section, Section 303,
         304, 306, 906 or 1107 or otherwise, shall be authenticated and
         delivered in the form of, and shall be, a Global Security, unless such
         Security is registered in the name of a Person other than the
         Depositary for such Global Security or a nominee thereof.

SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.

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

         If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.

         In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.

         Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.

                                      -18-
<PAGE>
         Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.

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

SECTION 307. Payment of Interest; Interest Rights Preserved.

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

         Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:

                  (1) The Company may elect to make payment of any Defaulted
         Interest to the Persons in whose names the Securities (or their
         respective Predecessor Securities), are registered at the close of
         business on a Special Record Date for the payment of such Defaulted
         Interest, which shall be fixed in the following manner. The Company
         shall notify the Trustee in writing of the amount of Defaulted Interest
         proposed to be paid on each Security and the date of the proposed
         payment, and at the same time the Company shall deposit with the
         Trustee an amount of money equal to the aggregate amount proposed to be
         paid in respect of such Defaulted Interest or shall make arrangements
         satisfactory to the Trustee for such deposit prior to the date of the
         proposed payment, such money when deposited to be held in trust for the
         benefit of the Persons entitled to such Defaulted Interest as in this
         Clause provided. Thereupon the Trustee shall fix a Special Record Date
         for the payment of such Defaulted Interest which shall be not more than
         15 days and not less than 10 days prior to the date of the proposed
         payment and not less than 10 days after the receipt by the Trustee of
         the notice of the proposed payment. The Trustee shall promptly notify
         the Company of such Special Record Date and, in the name and at the
         expense of the Company, shall cause notice of the proposed payment of
         such Defaulted Interest and the Special Record Date therefor to be
         given to each Holder of Securities in the manner set forth in Section
         106, not less than 10 days prior to such Special Record Date. Notice of
         the proposed payment of such Defaulted Interest and the Special Record
         Date therefor having been so mailed, such Defaulted Interest shall be
         paid to the Persons in whose names the Securities (or their respective
         Predecessor Securities) are registered at the close of business on such
         Special .Record Date and shall no longer be payable pursuant to the
         following Clause (2).

                  (2) The Company may make payment of any Defaulted Interest in
         any other lawful manner not inconsistent with the requirements of any
         securities exchange on which the Securities may be listed, and upon
         such notice as may be required by such exchange, if, after notice given
         by the Company to the Trustee of the proposed payment pursuant to this
         Clause, such manner of payment shall be deemed practicable by the
         Trustee.

                                      -19-
<PAGE>
         Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.

SECTION 308. Persons Deemed Owners.

         Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

SECTION 309. Cancellation.

         All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be disposed of as directed by a Company Order.

SECTION 310. Computation of Interest.

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

SECTION 311. CUSIP Numbers.

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

                                  ARTICLE FOUR

                           SATISFACTION AND DISCHARGE

SECTION 401. Satisfaction and Discharge of Indenture..

         This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when

                                      -20-
<PAGE>
                  (1) either

                           (A) all Securities theretofore authenticated and
                  delivered (other than (i) Securities which have been
                  destroyed, lost or stolen and which have been replaced or paid
                  as provided in Section 306 and (ii) Securities for whose
                  payment money has theretofore been deposited in trust or
                  segregated and held in trust by the Company and thereafter
                  repaid to the Company or discharged from such trust, as
                  provided in Section 1003) have been delivered to the Trustee
                  for cancellation; or

                           (B) all such Securities not theretofore delivered to
                  the Trustee for cancellation

                                    (i) have become due and payable, or

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

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

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

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

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

         Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive. Funds held in trust pursuant to this
Section are not subject to the provisions of Article Thirteen.

SECTION 402. Application of Trust Money.

      Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust for
the sole benefit of the Holders and shall not be subject to the subordination
provisions of Article Thirteen, and such money shall be applied by it, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own

                                      -21-
<PAGE>
Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of
the principal and any premium and interest for whose payment such money has been
deposited with the Trustee.

                                  ARTICLE FIVE

                                    REMEDIES

SECTION 501. Events of Default.

         "Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):

                  (1) default in the payment of any interest upon any Security
         when it becomes due and payable, and continuance of such default for a
         period of 60 days; or

                  (2) default in the payment of the principal of or any premium
         on any Security at its Maturity; or

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

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

                  (5) the commencement by the Company of a voluntary case or
         proceeding under any applicable Federal or State bankruptcy,
         insolvency, reorganization or other similar law or of any other case or
         proceeding to be adjudicated a bankrupt or insolvent, or the consent by
         it to the entry of a decree or order for relief in respect of the
         Company in an involuntary case or proceeding under any applicable
         Federal or State bankruptcy, insolvency, reorganization or other
         similar law or to the commencement of any bankruptcy or insolvency case
         or proceeding against it, or the filing by it of a petition or answer
         or consent seeking reorganization or relief under any applicable
         Federal or State law, or the consent by it to the filing of such
         petition or to the appointment of or taking

                                      -22-
<PAGE>
         possession by a custodian, receiver, liquidator, assignee, trustee,
         sequestrator or other similar official of the Company or of any
         substantial part of its property, or the making by it of an assignment
         for the benefit of creditors, or the admission by it in writing of its
         inability to pay its debts generally as they become due or the taking
         of corporate action by the Company in furtherance of any such action.

SECTION 502. Acceleration of Maturity; Rescission and Annulment.

         If an Event of Default (other than an Event of Default specified in
Section 501(4) or 501(5)) occurs and is continuing, then in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal shall
become immediately due and payable. If an Event of Default specified in Section
501(4) or 501(5) occurs, the principal of all the Securities shall
automatically, and without any declaration or other action on the part of the
Trustee or any Holder, become immediately due and payable.

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

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

                  (A) all overdue interest on all Securities,

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

                  (C) to the extent that payment of such interest is lawful,
         interest upon overdue interest at the rate borne by the Securities, and

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

            and

         (2) all Events of Default, other than the non-payment of the principal
of Securities which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513.

         No such rescission shall affect any subsequent default or impair any
right consequent thereon.

SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.

         The Company covenants that if

                  (1) default is made in the payment of any interest on any
         Security when such interest becomes due and payable and such default
         continues for a period of 60 days, or

                                      -23-
<PAGE>
                  (2) default is made in the payment of the principal of (or
         premium, if any, on) any Security at the Maturity thereof,

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

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

SECTION 504. Trustee May File Proofs of Claim.

         In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.

         No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.

SECTION 505. Trustee May Enforce Claims Without Possession of Securities.

         All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.

                                      -24-
<PAGE>
SECTION 506. Application of Money Collected.

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

                  FIRST: To the payment of all amounts due the Trustee under
         Section 607; and

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

                  THIRD: the balance, if any, to the Company.

SECTION 507. Limitation on Suits.

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

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

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

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

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

                  (5) no direction inconsistent with such written request has
         been given to the Trustee during such 60-day period by the Holders of a
         majority in principal amount of the Outstanding Securities;

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

SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.

         Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Section 307)
interest on such Security on the respective Stated

                                      -25-
<PAGE>
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder,

SECTION 509. Restoration of Rights and Remedies.

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

SECTION 510. Rights and Remedies Cumulative.

         Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and. remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

SECTION 511. Delay or Omission Not Waiver.

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

SECTION 512. Control by Holders.

         The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, provided that

                  (1) such direction shall not be in conflict with any rule of
         law or with this Indenture, and

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

SECTION 513. Waiver of Past Defaults.

         The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default

                                      -26-
<PAGE>
                  (1) in the payment of the principal of or any premium or
         interest on any Security, or

                  (2) in respect of a covenant or provision hereof which under
         Article Nine cannot be modified or amended without the consent of the
         Holder of each Outstanding Security.

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

SECTION 514. Undertaking for Costs.

         In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Art; provided that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company.

SECTION 515. Waiver of Usury, Stay or Extension Laws.

         The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

                                   ARTICLE SIX

                                   THE TRUSTEE

SECTION 601. Certain Duties and Responsibilities.

         The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.

SECTION 602. Notice of Defaults.

         The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; provided, however, that
in the case of any default of the character specified in Section 501(3), no such
notice to Holders shall be given until at least 60 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any

                                      -27-
<PAGE>
event which is, or after notice or lapse of time or both would become, an Event
of Default. Except in the case of the Default described in Section 501(4) or
501(5), the Trustee may withhold such notice if and so long, as a Responsible
Officer in good faith determines that the withholding of such notice is in the
interests of the Holders. The Trustee shall not be charged with knowledge of any
Default or Event of Default unless a Responsible Officer shall have actual
knowledge of the Default. The second sentence of this Section shall be in lieu
of the proviso to TIA Section 315(b). Said proviso is hereby expressly excluded
from this Indenture, as permitted by the TIA.

SECTION 603. Certain Rights of Trustee.

         Subject to the provisions of Section 601:

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

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

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

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

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

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

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

                                      -28-
<PAGE>
                  (8) the Trustee shall not be liable for any action taken,
         suffered, or omitted to be taken by it in good faith and reasonably
         believed by it to be authorized or within the discretion or rights or
         powers conferred upon it by this Indenture;

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

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

SECTION 604. Not Responsible for Recitals or Issuance of Securities.

         The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. Neither the
Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of Securities or the proceeds thereof.

SECTION 605. May Hold Securities.

         The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.

SECTION 606. Money Held in Trust.

         Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.

SECTION 607. Compensation and Reimbursement.

         The Company agrees

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

                  (2) except as otherwise expressly provided herein, to
         reimburse the Trustee upon its request for all reasonable expenses,
         disbursements and advances incurred or made by the Trustee in
         accordance with any provision of this Indenture (including the
         reasonable compensation and the expenses and disbursements of its
         agents and counsel), except any

                                      -29-
<PAGE>
         such expense, disbursement or advance as may be attributable to its
         negligence, bad faith or willful misconduct; and

                  (3) to indemnify the Trustee for, and to hold it harmless
         against, any loss, liability or expense incurred without negligence,
         bad faith or willful misconduct on its part, arising out of or in
         connection with the acceptance or administration of the trust or trusts
         hereunder, including the costs and expenses of defending itself against
         any claim or liability in connection with the exercise or performance
         of any of its powers or duties hereunder.

         The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 607, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.

         When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 501(4) or Section 501(5), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.

     The provisions of this Section shall survive the termination of this
Indenture.

SECTION 608. Conflicting Interests.

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

SECTION 609. Corporate Trustee Required, Eligibility.

         There shall at all times be one (and only one) Trustee hereunder which
shall be a Person that is eligible pursuant to the Trust Indenture Act to act as
such and has a combined capital and surplus of at least $50,000,000 and has its
Corporate Trust Office in Philadelphia, Pennsylvania or New York, New York. If
any such Person publishes reports of condition at least annually, pursuant to
law or to the requirements of its supervising or examining authority, then for
the purposes of this Section and to the extent permitted by the Trust Indenture
Act, the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.

SECTION 610. Resignation and Removal; Appointment of Successor.

         No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.

         The Trustee may resign at any time by giving written notice thereof to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 611 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee, at the
Company's expense, may petition any court of competent jurisdiction for the
appointment of a successor Trustee.

                                      -30-
<PAGE>
         The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.

      If at any time:

                  (1) the Trustee shall fail to comply with Section 608 after
         written request therefor by the Company or by any Holder who has been a
         bona fide Holder of a Security for at least six months, or

                  (2) the Trustee shall cease to be eligible under Section 609
         and shall fail to resign after written request therefor by the Company
         or by any such Holder, or

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

then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee, or (B) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.

         If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee and shall
comply with the applicable requirements of Section 611. If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 611, become the successor Trustee and
supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 611, any Holder who has been a
bona fide Holder of a Security for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee.

         The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.

SECTION 611. Acceptance of Appointment by Successor.

         Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder.

                                      -31-
<PAGE>
         Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts.

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

SECTION 612. Merger, Conversion, Consolidation or Succession to Business.

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

SECTION 613. Preferential Collection of Claims Against Company.

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

SECTION 614. Appointment of Authenticating Agent.

         The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 306, and Securities so authenticated
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.

         Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to

                                      -32-
<PAGE>
be an Authenticating Agent, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.

         An Authenticating Agent may resign at anytime by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.

         The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.

         If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:

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

                  Dated:______________________

                                 THE BANK OF NEW YORK,
                                                        As Trustee

                                 By.............................................
                                            As Authenticating Signatory

                                 By.............................................
                                                   Authorized Officer

                                  ARTICLE SEVEN

                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.

         The Company will furnish or cause to be furnished to the Trustee:

                                      -33-
<PAGE>
                  (1) quarterly, not more than 15 days after each Regular Record
         Date, a list, in such form as the Trustee may reasonably require, of
         the names and addresses of the Holders as of such Regular Record Date,
         and

                  (2) at such other times as the Trustee may request in writing,
         within 30 days after the receipt by the Company of any such request, a
         list of similar form and content as of a date not more than 15 days
         prior to the time such list is furnished;

excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.

SECTION 702. Preservation of Information:  Communications to Holders.

         The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.

         The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights, and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.

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

SECTION 703. Reports by Trustee.

         The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.

         Reports so required to be transmitted at stated intervals of not more
than 12 months shall be transmitted no later than July 15 in each calendar year,
commencing in 2002.

         A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange and
of any delisting thereof.

SECTION 704. Reports by Company.

         The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.

                                      -34-
<PAGE>
      Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).

SECTION 705. Statement by Officers as to Default.

      The Company shall deliver to the Trustee, as soon as possible and in any
event within five days after the Company becomes aware of the occurrence of any
Event of Default or an event which, with notice or the lapse of time or both,
would constitute an Event of Default, an Officers' Certificate setting forth the
details of such Event of Default or default and the action which the Company
proposes to take with respect thereto.

                                  ARTICLE EIGHT

             CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 801. Company, May Consolidate, Etc., Only on Certain Terms.

      The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and the Company shall not permit any Person to consolidate with
or merge into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless:

            (1) in case the Company shall consolidate with or merge into another
      Person. or convey, transfer or lease its properties and assets
      substantially as an entirety to any Person, the Person formed by such
      consolidation or into which the Company is merged or the Person which
      acquires by conveyance or transfer, or which leases the properties and
      assets of the Company substantially as an entirety shall be a corporation,
      partnership or trust, shall be organized and validly existing under the
      laws of the United States of America, any State thereof or the District of
      Columbia and shall expressly assume, by an indenture supplemental hereto,
      executed and delivered to the Trustee, in form satisfactory to the
      Trustee, the due and punctual payment of the principal of and any premium
      and interest on all the Securities and the performance or observance of
      every covenant of this Indenture on the part of the Company to be
      performed or observed;

            (2) immediately after giving effect to such transaction and treating
      any Indebtedness which becomes an obligation of the Company or any
      Subsidiary as a result of such transaction as having been incurred by the
      Company or such Subsidiary at the time of such transaction, no Event of
      Default, and no event which, after notice or lapse of time or both, would
      become an Event of Default, shall have happened and be continuing;

            (3) if, as a result of any such consolidation or merger or such
      conveyance, transfer or lease, properties or assets of the Company would
      become subject to a mortgage, pledge, lien, security interest or other
      encumbrance which would not be permitted by this Indenture, the Company or
      such successor Person, as the case may be, shall take such steps as shall
      be necessary effectively to secure the Securities equally and ratably with
      (or prior to) all Indebtedness secured thereby; and

            (4) the Company has delivered to the Trustee an Officers'
      Certificate and an Opinion of Counsel, each stating that such
      consolidation, merger, conveyance, transfer or

                                      -35-
<PAGE>
      lease and, if a supplemental indenture is required in connection with such
      transaction, such supplemental indenture comply with this Article and that
      all conditions precedent herein provided for relating to such transaction
      have been complied with.

SECTION 802. Successor Substituted.

      Upon any consolidation of the Company with, or merger of the Company into,
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with Section
801, the successor Person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein, and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and covenants
under this Indenture and the Securities.

                                  ARTICLE NINE

                             SUPPLEMENTAL INDENTURES

SECTION 901. Supplemental Indentures Without Consent of Holders.

      Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:

            (1) to evidence the succession of another Person to the Company
      and the assumption by any such successor of the covenants of the
      Company herein and in the Securities; or

            (2) to add to the covenants of the Company for the benefit of the
      Holders or to surrender any right or power herein conferred upon the
      Company; or

            (3) to add any additional Events of Default for the benefit of
      the Holders; or

            (4) to add to or change any of the provisions of this Indenture to
      such extent as shall be necessary to permit or facilitate the issuance of
      Securities in bearer form, registrable or not registrable as to principal,
      and with or without interest coupons, or to permit or facilitate the
      issuance of Securities in uncertificated form; or

            (5) to add to, change or eliminate any of the provisions of this
      Indenture, provided that any such addition, change or elimination (A)
      shall neither (i) apply to any Security created prior to the execution of
      such supplemental indenture and entitled to the benefit of such provision
      nor (ii) modify the rights of the Holder of any such Security with respect
      to such provision or (B) shall become effective only when there is no such
      Security Outstanding; or

            (6) subject to Section 1312, to make any change in Article Thirteen
      that would limit or terminate the benefits available to any holder of
      Senior Indebtedness under such Article; or

            (7) to evidence and provide for the acceptance of appointment
      hereunder of a successor Trustee; or

                                      -36-
<PAGE>
            (8) to cure any ambiguity, to correct or supplement any provision
      herein which may be defective or inconsistent with any other provision
      herein, or to make any other provisions with respect to matters or
      questions arising under this Indenture, provided that such action pursuant
      to this Clause (8) shall not adversely affect the interests of the Holders
      in any material respect.

SECTION 902. Supplemental Indentures With Consent of Holders.

      With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the Holders under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,

            (1) change the Stated Maturity of the principal of, or any
      installment of interest on, any Security, or reduce the principal amount
      thereof or the rate of interest thereon or any premium payable upon the
      redemption thereof, or reduce the amount of the principal of any Security
      which would be due and payable upon a declaration of acceleration of the
      Maturity thereof pursuant to Section 502, or change the place of payment
      where, or the coin or currency in which, any Security or any premium or
      interest thereon is payable, or impair the right to institute suit for the
      enforcement of any such payment on or after the Stated Maturity thereof
      (or, in the case of redemption, on or after the Redemption Date), or

            (2) reduce the percentage in principal amount of the Outstanding
      Securities, the consent of whose Holders is required for any such
      supplemental indenture, or the consent of whose Holders is required for
      any waiver (of compliance with certain provisions of this Indenture or
      certain defaults hereunder and their consequences) provided for in this
      Indenture, or

            (3) modify any of the provisions of this Section, Section 513 or
      Section 1011, except to increase any such percentage or to provide that
      certain other provisions of this Indenture cannot be modified or waived
      without the consent of the Holder of each Outstanding Security affected
      thereby; provided, however, that this clause shall not be deemed to
      require the consent of any Holder with respect to changes in the
      references to "the Trustee" and concomitant changes in this Section and
      Section 1011, or the deletion of this proviso, in accordance with the
      requirements of Sections 611 and 901(7).

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

SECTION 903. Execution of Supplemental Indentures.

    In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.

                                      -37-
<PAGE>
SECTION 904. Effect of Supplemental Indentures.

      Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.

SECTION 905. Conformity with Trust Indenture Act.

      Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.

SECTION 906. Reference in Securities to Supplemental Indentures.

      Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.

                                   ARTICLE TEN

                                    COVENANTS

SECTION 1001. Payment of Principal, Premium and Interest.

      The Company covenants and agrees that it will duly and punctually pay the
principal of and any premium and interest on the Securities in accordance with
the terms of the Securities and this Indenture.

SECTION 1002. Maintenance of Office or Agency.

      The Company will maintain in New York, New York an office or agency where
Securities may be presented or surrendered for payment, where Securities may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.

      The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain all office or agency in New York, New York
for such purposes. The Company will give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of any such
other office or agency.

                                      -38-
<PAGE>
SECTION 1003. Money for Securities Payments to Be Held in Trust.

      If the Company shall at any time act as its own Paying Agent, it will, on
or before each due date of the principal of or any premium or interest on any of
the Securities, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal and any premium and
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure so to act.

      Whenever the Company shall have one or more Paying Agents, it will, prior
to each due date of the principal of or any premium or interest on any
Securities, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.

      The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will (1) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent and (2) during the continuance of any default by the
Company (or any other obligor upon the Securities) in the making of any payment
in respect of the Securities, upon the written request of the Trustee, forthwith
pay to the Trustee all sums held in trust by such Paying Agent as such.

      The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.

      Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of or any premium or
interest on any Security and remaining unclaimed for two years after such
principal, premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust, and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in New York, New York,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.

SECTION 1004. Statement by Officers as to Default.

      The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in

                                      -39-
<PAGE>
default, specifying all such defaults and the nature and status thereof of which
they may have knowledge.

SECTION 1005. Existence.

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

SECTION 1006. Maintenance of Properties.

      The Company will cause all properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.

SECTION 1007. Payment of Taxes and Other Claims.

      The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.

SECTION 1008. Limitation on Senior Indebtedness; Appraisals.

      The Company will not incur any Senior Indebtedness if at the time of such
incurrance the amount of all Senior Indebtedness then outstanding and giving
effect to such proposed incurrance would exceed ten percent (10%) of value of
the Company's assets as measured by the most recent appraisal. The Company shall
have prepared an appraisal of its assets not less frequently than annually,
conducted by an appraiser which is not an Affiliate of the Company.

SECTION 1009. Waiver of Certain Covenants.

      The Company may omit in any particular instance to comply with any term,
provision or condition set forth in any covenant provided pursuant to Section
901(2) for the benefit of the Holders or in any of Sections 1005 to 1008,
inclusive, if before the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Securities shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition, but no such waiver shall
extend to or affect such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall

                                      -40-
<PAGE>
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such term, provision or condition shall remain in full force
and effect.

                                 ARTICLE ELEVEN

                            REDEMPTION OF SECURITIES

SECTION 1101. Right of Redemption.

      The Securities may be redeemed at the election of the Company, as a whole
or from time to time in part, at any time, at the Redemption Price specified in
the form of Security set forth in Section 203 herein, together with accrued
interest to the Redemption Date. Any such redemption of Securities at the
election of the Company shall be made in accordance with this Article.

SECTION 1102. Election to Redeem; Notice to Trustee.

      The election of the Company to redeem any Securities pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company of less than all the Securities, the Company shall, at
least 60 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee in
writing of such Redemption Date and of the principal amount of Securities to be
redeemed.

SECTION 1103. Selection by Trustee of Securities to Be Redeemed.

      If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by lot by the Trustee, which may provide for the
selection for redemption of portions (equal to $1,000 or any integral multiple
thereof) of the principal amount of Securities of a denomination larger than
$1,000.

      The Trustee shall promptly notify the Company and each Security Registrar
in writing of the Securities selected for redemption as aforesaid and, in case
of any Securities selected for partial redemption as aforesaid, the principal
amount hereof to be redeemed.

      For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.

SECTION 1104. Notice of Redemption.

      Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed at his address appearing in the
Security Register.

    All notices of redemption shall state:

            (1) the Redemption Date,

                                      -41-
<PAGE>
            (2) the Redemption Price,

            (3) if less than all the Outstanding Securities are to be redeemed,
      the identification (and, in the case of partial redemption of any
      Securities, the principal amounts) of the particular Securities to be
      redeemed,

            (4) that on the Redemption Date the Redemption Price will become due
      and payable upon each such Security to be redeemed and that interest
      thereon will cease to accrue on and after said date,

            (5) the place or places where each such Security is to be
      surrendered for payment of the Redemption Price, and

            (6) the CUSIP number, if any.

    Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's written request
delivered at least 15 days prior to the date such notice is to be given (unless
a shorter period shall be acceptable to the Trustee), by the Trustee in the name
and at the expense of the Company and shall be irrevocable.

SECTION 1105. Deposit of Redemption Price.

      Prior to any Redemption Date, the Company shall deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Securities which
are to be redeemed on that date.

SECTION 1106. Securities Payable on Redemption Date.

      Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date will be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.

      If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and any premium shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the
Security.

SECTION 1107. Securities Redeemed in Part.

      Any Security which is to be redeemed only in part shall be surrendered at
an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or

                                      -42-
<PAGE>
Securities, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered.

                                 ARTICLE TWELVE

                       DEFEASANCE AND COVENANT DEFEASANCE

SECTION 1201. Company's Option to Effect Defeasance or Covenant Defeasance.

      The Company may elect, at its option at any time, to have Section 1202 or
Section 1203 applied to any Securities upon compliance with the conditions set
forth below in this Article. Any such election shall be evidenced by a Board
Resolution.

SECTION 1202. Defeasance and Discharge.

      Upon the Company's exercise of its option to have this Section applied to
any Securities, the Company shall be deemed to have been discharged from its
obligations with respect to such Securities as provided in this Section on and
after the date the conditions set forth in Section 1204 are satisfied
(hereinafter called "Defeasance"). For this purpose, such Defeasance means that
the Company shall be deemed to have paid and discharged the entire Indebtedness
represented by such Securities and to have satisfied all its other obligations
under such Securities and this Indenture insofar as such Securities are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), subject to the following which shall
survive until otherwise terminated or discharged hereunder: (1) the rights of
Holders of such Securities to receive, solely from the trust fund described in
Section 1204 and as more fully set forth in such Section, payments in respect of
the principal of and any premium and interest on such Securities when payments
are due, (2) the Company's obligations with respect to such Securities under
Sections 304, 305, 306,1002 and 1003, (3) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and (4) this Article. Subject to compliance
with this Article, the Company may exercise its option to have this Section
applied to any Securities notwithstanding the prior exercise of its option to
have Section 1203 applied to such Securities.

SECTION 1203. Covenant Defeasance.

      Upon the Company's exercise of its option to have this Section applied to
any Securities, (1) the Company shall be released from its obligations under
Section 801(3), Section 1006, Section 1007, Section 1008, and any covenants
provided pursuant to Section 901(2) for the benefit of the Holders of such
Securities and (2) the occurrence of any event specified in Sections 501(3)
(with respect to any of Section 801(3), Sections 1006, 1007 and 1008, and any
such covenants provided pursuant to Section 901(2) shall be deemed not to be or
result in an Event of Default, in each case with respect to such Securities as
provided in this Section on and after the date the conditions set forth in
Section 1204 are satisfied (hereinafter called "Covenant Defeasance"). For this
purpose, such Covenant Defeasance means that, with respect to such Securities,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such specified Section (to
the extent so specified in the case of Section 501(3)), whether directly or
indirectly by reason of any reference elsewhere herein to any such Section or by
reason of any reference in any such Section to any other provision herein or in
any other document, but the remainder of this Indenture and such Securities
shall be unaffected thereby.

                                      -43-
<PAGE>
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.

    The following shall be the conditions to the application of Section 1202 or
Section 1203 to any Securities:

            (1) The Company shall irrevocably have deposited or caused to be
      deposited with the Trustee (or another trustee which satisfies the
      requirements contemplated by Section 609 and agrees to comply with the
      provisions of this Article applicable to it) as trust funds in trust for
      the purpose of making the following payments, specifically pledged as
      security for, and dedicated solely to, the benefits of the Holders of such
      Securities, (A) money in an amount, or (B) U.S. Government Obligations
      which through the scheduled payment of principal and interest in respect
      thereof in accordance with their terms will provide, not later than one
      day before the due date of any payment, money in an amount, or (C) a
      combination thereof, in each case sufficient, in the opinion of a
      nationally recognized firm of independent public accountants expressed in
      a written certification thereof delivered to the Trustee, to pay and
      discharge, and which shall be applied by the Trustee (or any such other
      qualifying trustee) to pay and discharge, the principal of and any premium
      and interest on such Securities on the respective Stated Maturities, in
      accordance with the terms of this Indenture and such Securities. As used
      herein, "U.S. Government Obligation" means (x) any security which is (i) a
      direct obligation of the United States of America for the payment of which
      the full faith and credit of the United States of America is pledged or
      (ii) an obligation of a Person controlled or supervised by and acting as
      an agency or instrumentality of the United States of America the payment
      of which is unconditionally guaranteed as a full faith and credit
      obligation by the United States of America, which, in either case (i) or
      (ii), is not callable or redeemable at the option of the issuer thereof,
      and (y) any depositary receipt issued by a bank (as defined in Section
      31(a)(2) of the Securities Act) as custodian with respect to any U.S.
      Government Obligation which is specified in Clause (x) above and held by
      such bank for the account of the holder of such depositary receipt, or
      with respect to any specific payment of principal of or interest on any
      U.S. Government Obligation which is so specified and held, provided that
      (except as required by law) such custodian is not authorized to make any
      deduction from the amount payable to the holder of such depositary receipt
      from any amount received by the custodian in respect of the U.S.
      Government Obligation or the specific payment of principal or interest
      evidenced by such depositary receipt.

            (2) In the event of an election to have Section 1202 apply to any
      Securities, the Company shall have delivered to the Trustee an Opinion of
      Counsel stating that (A) the Company has received from, or there has been
      published by, the Internal Revenue Service a ruling or (B) since the date
      of this instrument, there has been a change in the applicable Federal
      income tax law, in either case (A) or (B) to the effect that, and based
      thereon such opinion shall confirm that, the Holders of such Securities
      will not recognize gain or loss for Federal income tax purposes as a
      result of the deposit, Defeasance and discharge to be effected with
      respect to such Securities and will be subject to Federal income tax on
      the same amount, in the same manner and at the same times as would be the
      case if such deposit, Defeasance and discharge were not to occur.

            (3) In the event of an election to have Section 1203 apply to any
      Securities, the Company shall have delivered to the Trustee an Opinion of
      Counsel to the effect that the Holders of such Securities will not
      recognize gain or loss for Federal income tax purposes as a result of the
      deposit and Covenant Defeasance to be effected with respect to such
      Securities and will be subject to Federal income tax on the same amount,
      in the same manner and at the same times as would be the case if such
      deposit and Covenant Defeasance were not to occur.

                                      -44-
<PAGE>
            (4) The Company shall have delivered to the Trustee an Officer's
      Certificate to the effect that such Securities, if then listed on any
      securities exchange, will not be delisted as a result of such deposit.

            (5) No event which is, or after notice or lapse of time or both
      would become, an Event of Default with respect to such Securities or any
      other Securities shall have occurred and be continuing at the time of such
      deposit or, with regard to any such event specified in Sections 501(4) and
      (5), at any time on or prior to the 90th day after the date of such
      deposit (it being understood that this condition shall not be deemed
      satisfied until after such 90th day).

            (6) Such Defeasance or Covenant Defeasance shall not cause the
      Trustee to have a conflicting interest within the meaning of the Trust
      Indenture Act (assuming all Securities are in default within the meaning
      of such Act).

            (7) Such Defeasance or Covenant Defeasance shall not result in a
      breach or violation of, or constitute a default under, any other agreement
      or instrument to which the Company is a party or by which it is bound.

            (8) Such Defeasance or Covenant Defeasance shall not result in the
      trust arising from such deposit constituting an investment company within
      the meaning of the Investment Company Act unless such trust shall be
      registered under such Act or exempt from registration thereunder.

            (9) The Company shall have delivered to the Trustee an Officer's
      Certificate and an Opinion of Counsel, each stating that all conditions
      precedent with respect to such Defeasance or Covenant Defeasance have been
      complied with.

SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous Provisions.

      Subject to the provisions of the last paragraph of Section 1003, all money
and U.S. Government Obligations (including the proceeds thereof) deposited with
the Trustee or other qualifying trustee (solely for purposes of this Section and
Section 1206, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1204 in respect of any
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any such Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such
Securities, of all sums due and to become due thereon in respect of principal
and any premium and interest, but money so held in trust need not be segregated
from other funds except to the extent required by law.

      The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.

      Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1204 with
respect to any Securities which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would

                                      -45-
<PAGE>
then be required to be deposited to effect the Defeasance or Covenant
Defeasance, as the case may be, with respect to such Securities.

SECTION 1206. Reinstatement.

      If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 1202 or 1203 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to such
Securities, until such time as the Trustee or Paying Agent is permitted to apply
all money held in trust pursuant to Section 1205 with respect to such Securities
in accordance with this Article; provided, however, that if the Company makes
any payment of principal of or any premium or interest on any such Security
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to receive such payment
from the money so held in trust.

                                ARTICLE THIRTEEN

                           SUBORDINATION OF SECURITIES

SECTION 1301. Securities Subordinate to Senior Indebtedness.

      The Company covenants and agrees, and each Holder, by its acceptance
thereof, likewise covenants and agrees, that, to the extent and in the manner
hereinafter set forth in this Article (subject to the provisions of Article
Four), the indebtedness represented by the Securities and the payment of the
principal of, or interest (including Defaulted Interest, if any) on, each and
all of the Securities (including, but not limited to, the Redemption Price with
respect to Securities to be called for redemption in accordance with Article
Eleven), are hereby expressly made subordinate and subject in right of payment
to the prior payment in full of all Senior Indebtedness.

SECTION 1302. No Payment in Certain Circumstances, Payment over of Proceeds
upon Dissolution, Etc.

      No payment shall be made with respect to the principal of or interest
(including Defaulted Interest, if any) on the Securities (including, but not
limited to, the Redemption Price with respect to the Securities to be called for
redemption in accordance with Article Eleven), except payments and distributions
made by the Trustee as permitted by Section 1309, if:

            (i) a default in the payment of principal, premium, if any, or
interest (including a default under any repurchase or redemption obligation) or
other amounts with respect to any Senior Indebtedness occurs and is continuing
(or, in the case of Senior Indebtedness for which there is a period of grace, in
the event of such a default that continues beyond the period of grace, if any,
specified in the instrument or lease evidencing such Senior Indebtedness) unless
and until such default shall have been cured or waived or shall have ceased to
exist; or

            (ii) any other event of default occurs and is continuing with
respect to Senior Indebtedness that then permits holders of such Senior
Indebtedness to accelerate its maturity and the Trustee receives a notice of the
default (a "Payment Blockage Notice") from a representative or holder of Senior
Indebtedness or the Company.

                                      -46-
<PAGE>
      If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until (A) at least 365 days shall have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice, and (B) all scheduled payments of principal, premium, if any,
and interest on the Securities that have come due have been paid in full in
cash. No nonpayment default that exited or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, as
the basis for a subsequent Payment Blockage Notice.

      The Company may and shall resume payments on and distributions in respect
of the Securities upon the earlier of:

      (a) in the case of a default referred to in clause (i) above, the date
upon which the default is cured or waived or ceases to exist, or

      (b) in the case of default referred to in clause (ii) above, the date upon
which the default is cured or waived or ceases to exist or 179 days pass after
notice is received if the maturity of such Senior Indebtedness has not been
accelerated, unless this Article Thirteen otherwise prohibits the payment or
distribution at the time of such payment or distribution.

      In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of the Company, then and in any
such event the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due or to become due on or in respect of all
Senior Indebtedness in cash before the Holders of the Securities are entitled to
receive any payment on account of principal of (or premium, if any) or interest
on the Securities, and to that end the holders of Senior Indebtedness shall be
entitled to receive, for application to the payment thereof any payment or
distribution of any kind or character, whether in cash, property or securities,
which may be payable or deliverable in respect of the Securities in any such
case, proceeding, dissolution, liquidation or other winding up or event.

      In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, securities or other property, before all Senior Indebtedness is
paid in full, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.

      For purposes of this Article only, the words "cash, securities or other
property" shall not be deemed to include shares of Capital Stock of the Company
as reorganized or readjusted, or securities of the company or any other
corporation provided for by a plan of reorganization or readjustment, which
shares of stock or securities are subordinated in right of payment to all then
outstanding Senior Indebtedness to substantially the same extent as, or to a
greater extent than, the Securities are so subordinated as provided in this
Article. The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the

                                      -47-
<PAGE>
Company following the conveyance or transfer of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article Eight shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Section if the Person formed by such consolidation or into which the Company is
merged or which acquires by conveyance or transfer such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger conveyance or transfer, comply with the conditions set
forth in Article Eight.

      In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or Holder of any Security prohibited by the foregoing
provisions of this Section, and if such fact shall, at or prior to the time of
such payment, have been made know to the Trustee or, as the case may be, such
Holder, then and in such event such payment shall be paid over and delivered
forthwith to the Company, in the case of the Trustee, or the Trustee, in the
case of such Holder.

SECTION 1303. Prior Payment to Senior Indebtedness upon Acceleration of the
Securities.

      In the event of the acceleration of the Securities because of an Event of
Default, no payment or distribution shall be made to the Trustee or any holder
of Securities in respect of the principal of, premium, if any, or interest on
the Securities (including, but not limited to, the Redemption Price with respect
to the Securities called for redemption in accordance with Article Eleven),
except payments and distributions made by the Trustee as permitted by Section
1309, until all Senior Indebtedness has been paid in full in cash or other
payment satisfactory to the holders of Senior Indebtedness or such acceleration
is rescinded in accordance with the terms of this Indenture. If payment of the
Securities is accelerated because of an Event of Default, the Company shall
promptly notify holders of Senior Indebtedness of the acceleration.

SECTION 1304. Payment Permitted If No Default.

      Nothing contained in this Article or elsewhere in this Indenture or in the
Securities shall prevent (a) the Company, at any time except during the pendency
of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 1302, or during the
circumstances referred to in the first paragraph of Section 1301, or under the
conditions described in Section 1303, from making payments at any time of
principal of or interest on the Securities, or (b) the application by the
Trustee of any money deposited with it hereunder to the payment of or on account
of the principal of or interest on the Securities or the retention of such
payment by the Holders, if, at the time of such application by the Trustee, it
did not have knowledge that such payment would have been prohibited by the
provisions of this Article.

SECTION 1305. Subrogation to Rights of Holders of Senior Indebtedness.

      Subject to the payment in full of all Senior Indebtedness, the Holders of
the Securities 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 to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of and
interest on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders or the
Trustee would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article to the holders of
Senior Indebtedness by Holders or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders,

                                      -48-
<PAGE>
be deemed to be a payment or distribution by the Company to or on account of the
Senior Indebtedness.

SECTION 1306. Provisions Solely to Define Relative Rights.

      The provisions of this Article are and are intended solely for the purpose
of defining the relative rights of the Holders of the Securities on the one hand
and the holders of Senior Indebtedness on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (i) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders of the
Securities the principal of and interest on the Securities as and when the same
shall become due and payable in accordance with their terms; (ii) affect the
relative rights against the Company of the Holders of the Securities and
creditors of the Company other than the holders of Senior Indebtedness; or (iii)
prevent the Trustee or the Holder of any Debenture from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article of the holders payable or deliverable
to the Trustee or such Holder.

SECTION 1307. Trustee to Effectuate Subordination.

      Each Holder of a Security, by its acceptance thereof, authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee its attorney-in-fact for any and all such purposes.

SECTION 1308. No Waiver of Subordination Provisions.

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

      Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time, and from time to time, without
the consent of or notice to the Trustee or the Holders of the Securities,
without incurring responsibility to the Holders of the Securities and without
impairing or releasing the subordination provided in this Article or the
Indebtedness, 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, Senior
Indebtedness or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.

SECTION 1309. Notice to Trustee.

      The Company shall give prompt written notice to the Trustee of any fact
known to the Company that would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until a Responsible Officer of the Trustee shall have received written
notice thereof

                                      -49-
<PAGE>
from the Company or a representative or a holder of Senior Indebtedness and,
prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have received
the notice provided for in this Section 1309 at least two Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose (including Defaulted Interest, if any) on the Securities), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may received by it within one Business Day prior to
such date.

      Notwithstanding anything in this Article Thirteen to the contrary, nothing
shall prevent any payment by the Trustee to the Holders of monies deposited with
it pursuant to Section 401, and any such payment shall not be subject to the
provisions of Section 1302 or 1303.

      Subject to the provisions of Section 601, the Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
to be a representative or holder of Senior Indebtedness to establish that such
notice has been given by a Representative or a holder of Senior Indebtedness. 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 to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person as a holder of Senior Indebtedness
to participate in any payment or distribution pursuant to this reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of Trustee
may defer any payment to such Person pending judicial determination as to the
eight of such Person to receive such payment.

SECTION 1310. Reliance on Judicial Order or Certificate of Liquidating Agent.

      Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 601, and the
Holders of the Securities shall be entitled to rely upon an order or decree
entered by an court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy , receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payment thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.

SECTION 1311. Trustee Not Fiduciary for Holders of Senior Indebtedness.

      The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness and shall not be liable to any such holders if it shall
in good faith mistakenly pay over or distribute to Holders of Securities or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.

SECTION 1312. Reliance by Holders of Senior Indebtedness on Subordination
Provisions.

      Each Holder by accepting a Security acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Indebtedness, whether such
Senior Indebtedness was created or acquired

                                      -50-
<PAGE>
before or after the issuance of the Securities, to acquire and continue to hold,
or to continue to hold, such Senior Indebtedness and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness, and no amendment to modification of the provisions
contained herein shall diminish the rights of such holders of Senior
Indebtedness unless such holders shall have agreed in writing thereto.

SECTION 1313. Rights of Trustee as Holders of Senior Indebtedness;
Preservation of Trustee's Rights.

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

      Nothing in this Article shall apply to claim of, or payments to, the
Trustee under or pursuant to Section 607.

SECTION 1314. Article Applicable to Paying Agents.

            In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying
Agents were named in this Article in addition to or in place of the Trustee;
provided, however, that Section 1313 shall not apply to the Company or any
Affiliate of the Company if it or such Affiliate acts as Paying Agent.

                                      -51-
<PAGE>
This instrument may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.

    IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed as of the day and year first above written.

                                          CAREY INSTITUTION PROPERTIES
                                          INCORPORATED

                                          By:
                                             ---------------------------
                                          Name:
                                          Title:

                                          THE BANK OF NEW YORK

                                          By:
                                             ---------------------------
                                          Name:
                                          Title:

                                      -52-

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