Document:

<PAGE>

                                                                   EXHIBIT 10.47

THIS DEED OF SUBSTITUTED DEBENTURE made on February 7, 2003

BETWEEN:-

(1)      CONSOLIDATED WATER CO. LTD. incorporated under the laws of the Cayman
         Islands of P.O. Box 1114 G.T. Grand Cayman (the "Company", which
         expression shall include its successors and assigns); and

(2)      SCOTIABANK (CAYMAN ISLANDS) LTD. incorporated under the laws of and
         licensed to carry on banking business in the Cayman Islands of P.O.Box
         689 G.T. Grand Cayman (the "Bank", which expression shall include its
         successors, transferees and assigns);

WHEREAS

A.       The Royal Bank of Canada ("RBC") has made available to the Company a
         revolving loan facility in the amount of US$3,000,000.00 ("the RBC
         Facility").

B.       As security for the RBC Facility the Company entered into a Debenture
         dated 1st.June 1979 between,inter alia, the Company and RBC ("the RBC
         Debenture")( the same having been amended from time to time and stamped
         ad valorem to the full amount of the RBC Facility) together with
         certain collateral land charges over over various parcels of land owned
         by the Company ( as varied from time to time (together referred to as
         "the RBC Security").

C.       Pursuant to a Deed of Assignment of even date herewith and in
         consideration of the payment made thereunder by the Bank to RBC, RBC
         has assigned all of its rights, title and interest in the RBC Security
         to the Bank

D.       The Bank has, pursuant to a loan agreement ("the Loan Agreement")
         bearing even date herewith agreed to make available to the Company
         certain loans not exceeding US$39,100,000.00.

E.       The parties have agreed to substitute this Debenture for the RBC
         Debenture as security for the indebtedness of the Company to the Bank
         under the terms of the Loan Agreement.

F.       To further secure the loans made available to the Company by the Bank
         under the Loan Agreement and in addition to the RBC Security the Bank
         will take such additional security as agreed with the Company, such
         additional security to be supplemental and collateral hereto and in
         such form and on such terms as the Loan Agreement shall require or the
         parties shall otherwise agree.

<PAGE>

                                       2

WITNESSES as follows:-

1.       DEFINITIONS AND INTERPRETATION

1.1      In this Deed of Debenture, unless the contrary shall be expressed or
the context shall otherwise require:-

(1)      the following words and expressions shall have the following meanings,
         that is to say:-

"ACCOUNT BANK" means each of the Bank and any other bank or financial
institution for the time being and from time to time approved by the Bank in
writing as a bank or other financial institution with whom the Company may have
an account or accounts into which the Company may pay its Trading Debts. Such
approval may be given as well before as on or after the date hereof, provided
that it shall expressly refer to this Debenture.

"AGREEMENT" means the Loan Agreement and all other (if any) agreements (other
than these presents) for the time being and from time to time in force between
the Bank and the Company (and whether entered into before or after this
Debenture) regulating any business relationship between the Company and the
Bank.

"ASSETS" means assets of every kind, including, but without limitation, the
benefit of an agreement, a building or other fixture, a business, goods,
goodwill, immovable property, money, plant or other equipment, stock-in-trade,
the uncalled capital of a body corporate, an undertaking and work-in-progress
and any interest therein and, as the context shall require or admit, any part of
such assets.

"BANK ACCOUNTS" means all the Charged Assets in Clauses 3.1(3)(p) and (q) and
"Bank Account" shall be construed accordingly.

"CHARGED ASSETS" means all the assets of the Company for the time being and from
time to time the subject of or expressed to be the subject of any interest by
way of security created by the Company in favour of the Bank under or pursuant
to these presents or a Land Charge and, as the context shall require or admit,
any part of such assets. A reference to Charged Assets in a particular
Sub-clause or Sub-clauses of Clause 3.1 is a reference to the assets becoming or
being expressed to become the subject of such an interest by way of security as
a result of a reference to them being made in that Sub-clause or those
Sub-clauses, respectively.

"DELEGATE" means a delegate or sub-delegate of the Bank described in Clause
9(3).

"THIS DEBENTURE" means this Deed of Substituted Debenture.

<PAGE>

                                       3

"FINANCE LEASE" shall have the meaning given in the Statement of Standard
Accounting Practice number 21 issued by the Institute of Chartered Accountants
in England and Wales.

"GUARANTOR" means any person who shall for the time being and from time to time
guarantee to the Bank the payment or discharge of the Indebtedness, and
references to the "relevant guarantee" shall be construed accordingly.

"IMMOVEABLE PROPERTY" means any freehold, leasehold, heritable or other land or
buildings wheresoever situate and any estate or interest therein, and shall,
where the context shall admit, include any part thereof.

"IMMOVEABLE PROPERTY" means all the Charged Assets in Clauses 3.1(1) and 3.1(2)
and, as the context shall require or admit, any part of such Charged Assets.

"INDEBTEDNESS" means all monies, liabilities and other sums of whatsoever nature
covenanted to be paid and discharged by the Company to the Bank under Clause 2
and, as the context shall require or admit, any part of such monies, liabilities
and other sums.

"INTELLECTUAL PROPERTY" means all the Charged Assets in Clauses 3.1(3) (j) and
(k) and, as the context shall require or admit, any part of such Charged Assets.

"INTEREST BY WAY OF SECURITY" means any mortgage, pledge, lien, charge,
assignment by way of security, hypothecation, title retention, finance lease,
factoring or discounting of debts or any other agreement or arrangement for or
by way of security, including such as arises or is imposed by operation or
implication of applicable law and including any account with bankers earmarked
or designated for the use of making preferential payments pursuant to Section
162 of The Companies Law (2002 Revision) or any other provision of applicable
law having similar or substantially similar effect.

"LAND CHARGE" means a collateral land charge of Immoveable Property executed by
the Company in favour of the Bank pursuant to Clause 3.4, and "Land Charges"
shall be construed accordingly.

"LOAN AGREEMENT" means the Loan Agreement entered into between the Company and
the Bank bearing even date herewith setting out the terms and conditions of the
loan facility and shall be construed so as to include the Loan Agreement as the
same may for the time being and from time to time be modified amended or
supplemented

"NON-REALTY CHARGED ASSETS" means the Charged Assets excluding Immoveable
Property.

"NON-TRADING DEBTS" means all the Charged Assets in Clause 3.1(3)(d) and, as the
context shall require or admit, any part of such Charged Assets.

<PAGE>

                                       4

"PERSON" means an individual, a firm, a partnership (whether of not having
separate legal personality), an unincorporated body, a body corporate, a
corporation and a national or local government or governmental agency or body,
and, in each case, wheresoever resident, incorporated or formed.

"PLANNING LEGISLATION" means all applicable statutes for the time being and from
time to time in force in relation to the use or development of immoveable
property and all regulations then made or taking effect as if made thereunder.

"PROHIBITED SECURITY INTEREST" means any interest by way of security other
than:-

(a)      such as arises or is imposed by operation or implication of law and is
         not intended to arise for that purpose;

(b)      any agreement or arrangement for the retention of title to goods which
         is not entered into for the purpose of raising finance;

(c)      such as arises as a result of normal banking arrangements of the
         Company with an Account Bank in respect of the collection of cheques
         (including cheques expressed in a foreign currency) in respect of the
         collection of Trading Debts; and

(d)      the security hereby constituted.

"RECEIVER" includes any receiver or receiver and manager.

"RECEIVER" means any individual or individuals (who may be an employee or
employees of the Bank) for the time being and from time to time appointed by the
Bank to be a receiver or receivers (and, where more than one individual is
appointed jointly, they shall have the power to act severally, unless the Bank
shall specify to the contrary in their appointment) under these presents and,
where the context shall admit, any individual or individuals for the time being
and from time to time so appointed in substitution.

"SECURITY HEREBY CONSTITUTED" means the interests by way of security from the
time being and from time to time constituted by or in pursuance of these
presents and includes interests by way of collateral security and, as the
context shall require or admit, any such interests, but does not include Land
Charges.

"SPECIFICALLY CHARGED ASSETS" means all the Charged Assets in the Sub-clauses to
Clauses 3.1(1), (2) and (3) and, as the context shall require or admit, any part
of such Charged Assets.

"SPECIFICALLY CHARGED PLANT" means all the Charged Assets in Clauses 3.1(3)(a)
and (b) and, as the context shall require or admit, any part of such Charged
Assets.

<PAGE>

                                       5

"SPECIFICALLY CHARGED SECURITIES" means all the Charged Assets in Clauses
3.1(3)(e), (f) and (g) and, as the context shall require or admit, any part of
such Charged Assets.

"THESE PRESENTS" means this Debenture and any deed for the time being and from
time to time expressed to be supplemental hereto and any other deed or document
for the time being from time to time conferring rights upon the Bank or to which
it may be a party executed or entered into pursuant to this Debenture or any
deed for the time being and from time to time supplemental thereto, but does not
include Land Charges.

"TRADING DEBTS" means all the Charged Assets in Clause 3.1(3)(c) and, as the
context shall require or admit, any part of such Charged Assets.

(2)      words and expressions (including defined words and expressions)
         importing the singular number include the plural and vice versa and
         those importing the masculine gender include and feminine.

(3)      any reference to:-

         (a)      any law or legal provisions is to that law or provision as for
                  the time being and from time to time amended, extended or
                  substantially replaced or re-enacted, and shall include a
                  reference to any regulations made under the law or provision.

         (b)      fees, costs, charges and expenses shall include a reference to
                  any transactional tax or duty for the time being and from time
                  to time applicable to or chargeable in respect of those fees,
                  costs, charges and expenses.

         (c)      a Clause or Schedule is a clause in, or a schedule to, this
                  Debenture.

         (d)      a Sub-clause is to a sub-clause in the clause or sub-clause in
                  this Debenture in which that reference is made.

1.2      Underlinings, headings and descriptions of provisions of this Debenture
         are inserted for convenience only and shall be ignored in construing or
         interpreting this Debenture.

1.3      Reference to a "Law" shall include a reference to such Law and/or any
         provision thereof as from time to time re-enacted, amended, extended or
         replaced.

2.       MONIES SECURED

The Company will, on demand, pay and discharge to the Bank:-

(1)      Monies: all monies and other liabilities, whether principal, interest,
         commission, charges, costs, expenses or otherwise, which now are, or at
         any time hereafter may become, due or

<PAGE>

                                       6

         owing to the Bank by the Company either alone or jointly with any other
         person whether actual or contingent and whether as principal debtor,
         guarantor, surety or otherwise;

(2)      Costs: on a full and unlimited indemnity basis, all costs, stamp
         duties, recording fees, commission, charges, expenses and other sums
         for the time being and from time to time incurred by the Bank or by or
         through any Receiver or by or through any attorney, delegate,
         sub-delegate, substitute, agent or employee of the Bank or a Receiver,
         for any of the purposes described in these presents or a Land Charge or
         in or about the exercise of any power, authority or discretion
         conferred on the Bank or any Receiver by or pursuant to these presents
         or a Land Charge or by law or in relation to the security hereby
         constituted or a Land Charge or in or about the protection,
         realisation, enforcement, collection or recovery of monies for the time
         being and from time to time arising under the security hereby
         constituted or a Land Charge and all remuneration of any Receiver and
         any attorney, delegate, sub-delegate, substitute or agent of the Bank
         or a Receiver; and

(3)      Interest: interest, as well before as after judgment, on each amount
         due under Sub-clauses (1) and (2) until the same shall have been fully
         discharged at such rate as shall for the time being and from time to
         time be prescribed by the Agreement for that amount and, in the case of
         each such amount due under Sub-clause (2), such interest to accrue on a
         daily basis as from the date on which that amount was incurred (and
         whether or not that date shall have occurred prior to a demand for that
         amount under this Clause 2).

3.       THE CHARGES

3.1      Charging Provision

The Company, as beneficial owner and as continuing security for the
Indebtedness, hereby charges to the Bank:-

         Immoveable Property

(1)      by way of first specific equitable charge:-

         (a)      all (if any) the immoveable property described in Schedule 1;

         (b)      all other immoveable property belonging to the Company at the
                  date hereof; and

         (c)      all fixtures (including trade fixtures) and fixed plant and
                  machinery for the time being and from time to time on or in
                  any of the Immoveable Property in Sub-clause (a) and (b);

<PAGE>

                                       7

(2)      by way of first specific equitable charge:-

         (a)      all immoveable property (other than that (if any) described in
                  Schedule 1) now or at any time hereafter belonging to the
                  Company or in which the Company does now or shall at any time
                  hereafter have any interest by way of security; and

         (b)      all fixtures (including trade fixtures) and fixed plant and
                  machinery for the time being and from time to time on or in
                  any of the Immoveable Property in Sub-clause (a);

(3)      by way of first specific charge:-

         Specifically Charged Plant

         (a)      all (if any) the plant, machinery, chattels and other
                  equipment described in Schedule 2 and any part or parts
                  thereof or thereto;

         (b)      all additions, alterations, accessories, replacements and
                  renewals for the time being and from time to time to or of any
                  of the Charged Assets in Sub-clause (a);

         Trading Debts

         (c)      all debts, other than Non-Trading Debts, now or hereafter due
                  or owing or to become due or owing to the Company on any
                  account whatsoever and whether actual or contingent and
                  including cash at bank, as have arisen or shall arise in the
                  ordinary and usual course of trading of the Company and
                  whether or not the same would or shall be entered into the
                  books of the Company;

         Non-Trading Debts

         (d)      all debts now or hereafter due or owing or to become due or
                  owing to the Company on any account whatsoever and whether
                  actual or contingent as have arisen or shall arise (and
                  whether or not entered into the books of the Company):-

                  (i)      as an amount for the time being and from time to time
                           payable (including, but without limitation, any
                           consideration, premium, rent, royalty or fee) in
                           respect of any sale, lease, licence or other disposal
                           by the Company of any of the Immoveable Property, the
                           Specifically Charged Plant, the Specifically Charged
                           Securities, the goodwill of the Company both present
                           and future and the Intellectual Property;

<PAGE>

                                       8

                  (ii)     as a dividend, interest or other distribution for the
                           time being and from time to time declared and/or
                           payable in relation to the Specifically Charged
                           Securities;

                  (iii)    as an amount for the time being and from time to time
                           payable in respect of an obligation or representation
                           or a warranty described in Sub-clause (m) or
                           insurance or a guarantee or interest by way of
                           security described in Sub-clause (n); or

                  (iv)     as an amount for the time being and from time to time
                           payable in respect of any other transaction or matter
                           outside the ordinary and usual course of trading of
                           the Company;

         Specifically Charged Securities

         (e)      all the stocks, shares, bonds, debentures, loan stocks, notes,
                  warrants and other securities now or hereafter belonging to
                  the Company in the capital of, or issued by, any of the
                  Company's subsidiaries for the time being and from time to
                  time;

         (f)      all the stocks, shares, bonds, debentures, loan stocks, notes,
                  warrants and other securities now or hereafter belonging to
                  the Company, or, instead, such (if any) as are described in
                  Schedule 3, or, instead, if none shall be listed in that
                  Schedule, none, other than, in each such case, the Charged
                  Assets in Sub-clause (e);

         (g)      all stocks, shares, bonds, debentures, loan stocks, notes,
                  warrants and other securities and other assets now or
                  hereafter accruing or offered by way of rights, bonus, option
                  or otherwise in respect of any of the Charged Assets in
                  Sub-clauses (e) and (f) or in this Sub-clause (g) but so that
                  nothing in these presents shall be construed as imposing on
                  the Bank any liability whatsoever in respect of any calls,
                  instalments or other payments or contributions in respect of
                  or relating to any of the Charged Assets in Sub-clauses (e)
                  and (f) or in this Sub-clause (g);

         (h)      all dividends, interest and other distributions for the time
                  being and from time to time declared, payable paid or made in
                  respect of any of the Charged Assets in Sub-clauses (e), (f)
                  or (g), including any of the same for the time being and from
                  time to time placed to the credit of an account of the Company
                  with, and owed to the Company by, a bank or other financial
                  institution and/or being cash at bank belonging to the
                  Company;

         Goodwill and uncalled capital

         (i)      all the goodwill and uncalled capital of the Company, both
                  present and future;

         Intellectual Property

<PAGE>

                                       9

         (j)      all the knowhow (and rights therein) and other confidential
                  information (and rights therein) and all the copyrights,
                  patents (including applications, improvements, prolongations,
                  extensions and rights to apply therefor), registered designs,
                  trade marks (and rights therein), service marks (and rights
                  therein) and other intellectual property of the Company, both
                  present and future;

         (k)      the benefit of all licences for the time being and from time
                  to time granted to or acquired by the Company in respect of
                  assets of the kind described in Sub-clause (j);

         Ancillary assets

         (l)      the benefit of all agreements for the time being and from time
                  to time entered into by the Company for the maintenance and/or
                  improvement of any of the Charged Assets in any of the
                  foregoing Sub-clauses in this Clause 3.1;

         (m)      the benefit of all obligations and representations and
                  warranties for the time being and from time to time undertaken
                  or given to the Company (and whether by law, contract or
                  otherwise howsoever) by any person in relation to any of the
                  Charged Assets in any of the foregoing Sub-clauses of this
                  Clause 3.1;

         (n)      the benefit for the time being and from time to time of any
                  insurance for the time being and from time to time effected by
                  the Company in respect of, and the benefit and proceeds for
                  the time being and from time to time of any guarantees or
                  interests by way of security for the time being and from time
                  to time given, granted or arising in favour of the Company in
                  relation to any of the Charged Assets in any of the foregoing
                  Sub-clauses of this Clause 3.1;

         (o)      the proceeds including cash at bank for the time being and
                  from time to time received by the Company of a payment in
                  respect of, or a disposal, collection or other realisation of,
                  any of the Charged Assets in any of the foregoing Sub-clauses
                  of this Clause 3.1;

         Bank Accounts

         (p)      the full benefit for the time being and from time to time of,
                  and all the Company's rights, title and interest in and to,
                  all (if any) the bank accounts described in Schedule 4, and
                  the debts constituted and represented by the credit balances
                  for the time being and from time to time on such accounts,
                  together with all interest for the time being and from time to
                  time accrued thereon;

         (q)      the full benefit for the time being and from time to time of,
                  and all the Company's rights, title and interest in and to,
                  all other bank accounts of the Company at the date hereof, and
                  the debts constituted and represented by the credit balances
                  for the time

<PAGE>

                                       10

                  being and from time to time on such accounts, together with
                  all interest for the time being and from time to time accrued
                  thereon; and

         Other assets

(4)      by way of first floating charge:-

         (a)      the undertaking and all the other assets of the Company (other
                  than the Specifically Charged Assets), both present and
                  future; and

         (b)      all the Specifically Charged Assets if and to the extent that
                  any of the interests by way of security constituted by these
                  presents over the Specifically Charged Assets shall be or
                  become ineffective as specific charges.

3.2      Crystallisation of floating charge

The floating charge created by Clause 3.1(4) shall become a specific charge:-

         (1)      as regards any assets subject thereto as may from time to time
                  be specified in a notice from the Bank to the Company if the
                  Bank shall, in its absolute discretion, consider that those
                  assets shall be in danger of being seized or sold under any
                  form of distress or execution levied or threatened or to be
                  otherwise in jeopardy, forthwith upon the service of such
                  notice;

         (2)      as regards any assets subject thereto which shall become
                  subject to specific charges in favour of any person other than
                  the Bank or subject to a disposition or an agreement to make a
                  disposition contrary to Clause 5(21) (Disposal of Specifically
                  Charged Assets), forthwith upon such charge or disposition;
                  and

         (3)      in accordance with Clause 6 (Events of Default).

3.3      Negative pledge

Save with the prior written consent of the Bank (which may be given as well
before as after the date hereof, provided it shall expressly refer to this
Debenture), the Company shall not and shall not agree to create, give, grant or
permit to arise or subsist over any of its assets present and future any
Prohibited Security Interest ranking in point or security in priority to, pari
passu with or subsequent to any security constituted by these presents or any
Land Charge.

3.4      Land Charges

<PAGE>

                                       11

Without prejudice to Clause 5(2) (Further Charges), the Company shall forthwith
execute in favour of the Bank collateral land charges in such form and on such
terms as the Bank shall require of all the immoveable property described in
Schedule 1, and of any other Immoveable Property as the Bank may for the time
being and from time to time require.

4.       REPRESENTATIONS & WARRANTIES

The Company hereby represents and warrants to the Bank, as follows:-

(1)      The Company has the power to enter into and perform its obligations as
         expressed in this Debenture and each Land Charge and has taken all
         necessary action to authorise the granting of interests by way of
         security upon the terms and conditions of this Debenture and each Land
         Charge and to authorise the execution, delivery and performance of its
         obligations as expressed in this Debenture and each Land Charge in
         accordance with their respective terms.

(2)      The execution, delivery and performance by the Company of the terms of
         this Debenture and each Land Charge does not and will not violate,
         conflict with or result in a breach of, in any respect:-

         (a)      any provisions of any law or regulation or any order, decree,
                  permit or licence of any authority, agency or court binding on
                  the Company or on any of its assets; or

         (b)      the constitutional documents or resolutions of the Company; or

         (c)      any subsisting loan stock or debenture or other deed, contract
                  or other undertaking or instrument to which the Company is a
                  party or which is binding upon it or any of its assets.

(3)      The Company is the sole and absolute beneficial owner of all the
         Charged Assets free from all Prohibited Security Interests other than
         those permitted or consented to by the Bank in accordance with Clause
         3.3 (Negative pledge).

(4)      The Company has not created, given, granted or permitted to arise or
         subsist any Prohibited Security Interest over any of its assets present
         and future other than those permitted or consented to by the Bank in
         accordance with Clause 3.3, and has not agreed so to do.

(5)      In connection with any consent given by the Bank in accordance with
         Clause 3.3 on or prior to the date hereof, the Company did furnish to
         the Bank true, complete and up to date written details of the existing
         interest(s) by way of security to which such consent relates.

<PAGE>

                                       12

(6)      The details of (if any) the immoveable property and the other assets in
         Schedules 1, 2, 3 and 4, the interests of the Company (in that
         immoveable property) in Schedule 1, and the location of the
         Specifically Charged Plant in Schedule 2, and the details of the bank
         accounts in Schedule 4 are true and correct in every material
         particular.

5.       COVENANTS

The Company hereby covenants and agrees with the Bank, until the discharge and
release of this Debenture, as follows:-

(1)      Documents of title to Immoveable Property and Specifically Charged
         Plant and Securities

Subject to the rights of any prior mortgagee, the Company shall deposit with the
Bank and the Bank shall be entitled to hold and retain all deeds and documents
of title for the time being and from time to time relating to the Immoveable
Property, all invoices and documents of title for the time being and from time
to time relating to the Specifically Charged Plant, and all certificates, deeds
and documents of title for the time being and from time to time relating to the
Specifically Charged Securities.

(2)      Further charges

The Company shall forthwith from time to time, if and when called upon by the
Bank so to do, execute in favour of the Bank or as the Bank shall direct such
further interests by way of security (including, but without limitation,
assignments by way of security and collateral security) as the Bank shall
require (but the covenants no more onerous than already contained in the
security hereby constituted) over the Charged Assets as further and continuing
security for the Indebtedness, such further interest by way of security to be
prepared by or on behalf of the Bank at the cost of the Company and, in the
event of any consent thereto being required from any other person, the Company
shall use its best endeavours to obtain the same.

(3)      Future Immoveable Property, Specifically Charged Plant and Securities

The Company shall notify the Bank forthwith upon any proposal or contract for
the time being and from time to time being made by the Company to acquire any
immoveable property or other assets which, following their acquisition would
become Immoveable Property, Specifically Charged Plant or Specifically Charged
Securities (as the case may be) and, in the case of any such immoveable property
the Company shall notify the Bank of the title number(s) thereof and shall apply
to The Registrar of Lands for the registration of the Company as the registered
proprietor thereof.

(4)      Maintenance

<PAGE>

                                       13

The Company shall:-

(a)      keep all buildings, fixtures (including trade fixtures) and fixed plant
         and machinery for the time being and from time to time on or in any of
         the Immoveable Property and all plant, machinery, other fixtures and
         fittings, implements, tools and other effects thereon and therein in a
         good state of repair and good working order and condition and shall, as
         necessary, renew and replace the same to a similar quality, as and when
         the same shall be worn out or destroyed; and

(b)      keep the Specifically Charged Plant in a good state of repair and
         condition and perfect working order and replace any part or parts
         thereof as may for the time being and from time to time be or become
         worn out, damaged or destroyed with new parts of similar quality.

(5)      Insurance

The Company shall:-

(a)      insure and keep insured such of its assets as are of an insurable
         nature against loss or damage by fire, aircraft, things dropping from
         aircraft, explosion, tropical storm, storm, tempest, flood, burst
         pipes, hurricane, windstorm, riot and impact and such other risks as
         the Bank may, for the time being and from time to time, consider
         necessary, to the full reinstatement value thereof, together with
         additional amounts sufficient to cover architects' and surveyors' fees
         and the costs of demolition, site clearance and shoring up or in such
         other amount as the Bank may in writing from time to time approve, with
         such reputable insurers and generally in such manner as the Bank shall
         from time to time approve in writing. The Company shall cause notice of
         the interest of the Bank to be noted on the policies of such insurance
         which (subject to the rights of any prior mortgagee) shall, unless
         otherwise from time to time agreed by the Bank in writing, be delivered
         to and retained by the Bank. The Company shall duly pay the premiums
         and other sums of money for the time being and from time to time being
         payable in respect of any such insurance and, immediately after every
         such payment, produce the receipt for the same to the Bank. All monies
         which may at any time hereafter be received or receivable under any
         insurance for the time being and from time to time effected in respect
         of the Immoveable Property or the Specifically Charged Plant (and
         whether or not effected pursuant to the foregoing provisions of this
         Sub-clause (a)) shall be applied in replacing, restoring or reinstating
         the assets destroyed or damaged or (subject to the rights of any prior
         mortgagee) in such other manner as the Bank shall require;

(b)      effect and maintain or cause to be effected and maintained such other
         insurances as are normally for the time being and from time to time
         maintained by prudent companies carrying on businesses similar or
         approximately similar to those for the time being and from time to time
         carried on by the Company including but not limited to consequential
         loss and loss of profits; and

<PAGE>

                                       14

(c)      not in any manner or by any means cause any such insurance to be
         avoided or vitiated.

(6)      Registration under The Registered Land Law

The Company shall not, without the prior written consent of the Bank, register
any person or cause any person to be registered under The Registered Land Law
(1995 Revision) and any subsequent Registered Land Laws as the proprietor of the
Company's interest in any of the Immoveable Property or any part thereof.

(7)      Notices affecting Immoveable Property or Specifically Charged Plant

The Company shall, in the event of a notice, order, direction, requisition or
permission or a proposal for any of the foregoing being served, affecting or
likely to affect the Immoveable Property or the Specifically Charged Plant or in
the event of any proceedings being commenced affecting or likely to affect the
same, immediately give full particulars thereof to the Bank and without delay
and at the Company's own cost take all reasonable or necessary steps to comply
with the same and/or, if so requested by the Bank, at the Company's own cost
make or join with the Bank in making such objections or representations against
or in respect of any of the same as the Bank shall deem expedient.

(8)      Planning Legislation

The Company shall not carry out any development in or upon the Immoveable
Property within the meaning of the Planning Legislation without first obtaining
such permission as may be required under or by virtue of the Planning
Legislation and the Company shall use the Immoveable Property only for such
purpose or purposes as may for the time being and from time to time be
authorised as the permitted use or user thereof under or by virtue of the
Planning Legislation.

(9)      Other compliance with law

The Company shall, in relation to its business and other assets for the time
being and from time to time, comply with all obligations under any present or
future statute, regulation, order or instrument or under any bye-law, regulation
or requirement of any competent authority and shall not use or permit any of its
assets for the time being from time to time to be used in contravention of any
legislation or otherwise or in any way contrary to law and shall as and when the
same shall become payable pay all taxes, rates, duties, charges, assessments and
other outgoings whatsoever (whether governmental, parochial, local or of any
other description) which shall be assessed, charged or imposed upon or payable
in respect of its business and other assets for the time being and from time to
time.

(10)     Compliance with contracts

<PAGE>

                                       15

(a)      The Company shall duly and punctually perform and observe all the
         covenants, agreements and other stipulations whatsoever as are not
         inconsistent with its obligations under these presents and as shall for
         the time being and from time to time be binding upon it, its business
         or other assets for the time being and from time to time and shall not
         do or suffer to be done any act or thing whereby any lease or licence
         for the time being and from time to time granted to or held by the
         Company may become liable to forfeiture or otherwise be determined.

(b)      The Company shall indemnify and hold harmless the Bank in respect of
         any breach of any covenants, agreements or stipulations for the time
         being and from time to time affecting the Immoveable Property.

(11)     Leases or licences of Immoveable Property and Intellectual Property: as
         lessee or licensee

The Company shall not agree, accept, suffer or permit any alteration, variation
or addition to the terms of any lease or licence under which it is for the time
being and from time to time a lessee or licensee and which is for the time being
and from time to time part of the Immoveable Property or the Intellectual
Property, without the prior written consent of the Bank.

(12)     Leases or licenses of Immoveable Property and Intellectual Property: as
         lessor or licensor

(a)      Unless otherwise agreed from time to time in writing by the Bank, the
         Company shall enforce the due observance and performance of all the
         obligations on the part of the lessee or licensee under any lease or
         licence under which it is for the time being and from time to time the
         lessor or licensor and which is for the time being and from time to
         time part of the Immoveable Property or the Intellectual Property,
         shall not waive, release or vary or agree to waive, release or vary any
         of the terms of any such lease or licence, shall not exercise any power
         to determine or extend any such lease or licence and shall not grant
         any consents or licences as lessor or licensor under any such lease or
         licence.

(b)      The Company shall not, without the prior written consent of the Bank,
         grant or agree to grant any lease or licence of, or other right or
         interest to occupy, the Immoveable Property or the Intellectual
         Property.

(13)     Removal and severance

The Company shall not, without the prior written consent of the Bank, pull down
or remove or permit to be pulled down or removed any buildings or erection for
the time being and from time to time included in the Immoveable Property or pull
down, remove or sever or permit to be pulled down, removed or severed any
fixtures (including trade fixtures) and fixed plant and machinery for

<PAGE>

                                       16

the time being and from time to time thereon or therein, except in pursuance of
any obligation imposed on the Company under these presents or a Land Charge.

(14)     Specifically Charged Plant

(a)      Except as may be agreed in writing from time to time by the Bank, the
         Company shall keep the Specifically Charged Plant in its sole and
         exclusive possession and at the location (if any) specified in Schedule
         2 and shall not, in any event, take them out of Cayman Islands and
         shall not use or permit them to be used for any purpose for which they
         are not designed or reasonably suitable.

(b)      The Company shall affix to or engrave on the Specifically Charged Plant
         such labels, plates or markings as the Bank shall from time to time
         require and shall not allow to be disturbed any labels, plates or
         markings which may be affixed to or engraved on the Specifically
         Charged Plant as a means of identification by the manufacturers or
         suppliers thereof or by any other person and shall not obliterate,
         obscure or cover up the same.

(c)      The Company shall not at any time without the prior written consent of
         the Bank make or suffer to be made any alteration or addition of a
         substantial nature in or to the Specifically Charged Plant other than
         for the purpose of effecting repairs as required by Sub-clause (4)(b)
         (Maintenance).

(d)      The Company shall not, without the prior written consent of the Bank,
         hire, lease or part with or share possession of or suffer any distress
         or execution to be levied or lien to be created upon the Specifically
         Charged Plant.

(e)      If the Company has created, given, granted or permitted to arise or
         subsist, or shall at any time create, give, grant or permit to arise or
         subsist, an interest by way of security on any premises where the
         Specifically Charged Plant are located, the Company shall forthwith
         notify the Bank of the same and, if called upon so to do by the Bank,
         shall forthwith procure from any person for the time being and from
         time to time enjoying such interest by way of security or being
         interested in such premises a waiver in such form as the Bank may from
         time to time require of all rights to which such person might otherwise
         be entitled to claim in the Specifically Charged Plant.

(f)      The Company shall not annex the Specifically Charged Plant to the
         premises where the same are located if the results of such annexure
         would be that the Specifically Charged Plant might become a fixture or
         fixtures.

(g)      The Company shall indemnify and hold harmless the Bank against all
         claims made or all proceedings brought in respect of any loss or damage
         or injury whatsoever arising out of or in connection with the
         Specifically Charged Plant, their manufacture, selection, delivery,
         possession, use or operation.

(15)     Debts and Bank Accounts

<PAGE>

                                       17

(a)      The Company shall, subject to Sub-clauses (b), (c) and (d), get in and
         realise the Trading Debts and the Non-Trading Debts and shall not sell,
         assign, factor or discount the same in any way.

(b)      The Company shall pay into an account with an Account Bank the proceeds
         of the collection or other realisation for the time being and from time
         to time of the Trading Debts (other than debts owed by an Account Bank
         to the Company as its customer) and, subject to any rights of that
         Account Bank in respect thereof, shall pay or otherwise deal with such
         proceeds in accordance with any directions for the time being and from
         time to time given in writing by the Bank.

(c)      Unless for the time being and from time to time agreed by the Bank in
         writing but subject to the rights of any prior mortgagee, the Company
         shall pay into an account of the Company with the Bank the proceeds of
         the collection or other realisation for the time being and from time to
         time of the Non-Trading Debts and shall pay or otherwise deal with such
         proceeds in accordance with any directions for the time being and from
         time to time given in writing by the Bank.

(d)      The Company shall, if called upon from time to time by the Bank
         pursuant to any provision of these presents, execute a legal assignment
         in favour of the Bank of any of the Trading Debts or the Non-Trading
         Debts and shall, if the Bank shall for the time being and from time to
         time require, give notice thereof to the debtors from whom such Trading
         Debts or Non-Trading Debts are for the time being owing or incurred and
         take such other steps as the Bank may from time to time require to
         perfect such legal assignment.

(e)      The Company shall forthwith join with the Bank in giving notice of
         these presents to each bank or other financial institution specified in
         Schedule 4 at or with which a Bank Account is kept or maintained, and
         if the Bank shall for the time being and from time to time require, the
         Company shall join with the Bank in giving notice of these presents to
         all other banks or other financial institutions at or with which a Bank
         Account is kept or maintained.

(16)     Specifically Charged Securities

(a)      The Company shall, if called upon to do so by the Bank from time to
         time, execute all such transfers and other documents as may be
         necessary to enable the Bank or its nominee or nominees to be
         registered as the owners of, or otherwise obtain legal title to, any of
         the Specifically Charged Securities.

(b)      The Company shall, promptly upon receipt of any communication sent to
         it in its capacity as a holder of any Specifically Charged Security,
         deliver the original or a copy thereof to the Bank, and shall consult
         with the Bank, prior to the exercise of all voting and other rights and
         powers attached or relating to the Specifically Charged Securities and,
         if the Bank shall not for the time being and from time to time have
         notified the Company in writing to the

<PAGE>

                                       18

         contrary (and whether before, during or after such consultation), shall
         exercise all such rights and powers for all purposes not inconsistent
         with the terms of these presents.

(c)      In the event that the Bank shall for the time being and from time to
         time notify the Company in writing to the following effect, the Bank
         and any nominee of the Bank for the time being and from time to time
         registered as the holder of the Specifically Charged Securities shall
         thereafter have the immediate and sole and exclusive right to exercise
         all voting and other rights and powers attaching or relating thereto
         and may exercise such rights and powers in such manner as it shall in
         its sole discretion think fit, and the Company shall execute and
         deliver to the Bank all such proxies, mandates and other documents as
         may be necessary to enable the Bank or such nominee to exercise such
         rights and powers.

(d)      The Bank shall not be under any liability to the Company in respect of
         any failure to present any certificate of or coupon on the Specifically
         Charged Securities which may be called or drawn for repayment or
         redemption or for any failure to pay any call or instalment which may
         be payable on, or to accept any offer relating to, the Specifically
         Charged Securities or for any failure to notify the Company of any such
         matters whether or not any such failure is caused or contributed to by
         any negligence on the part of the Bank or any servant or agent of the
         Bank.

(e)      Upon the discharge of this Debenture, the Company shall, if the Bank so
         requires, accept, in place of any Specifically Charged Security, a
         security of the same class and denomination in the capital of, or
         issued by, the same person.

(17)     Uncalled capital

The Company shall, upon the written request of the Bank for the time being and
from time to time, call up any uncalled capital for the time being and from time
to time of the Company. The Company shall not call up any such uncalled capital
without the prior written consent of the Bank.

(18)     Secured loan capital

The Company shall not, without the prior written consent of the Bank, issue or
re-issue any bonds, debentures, loan stocks, notes or other debt securities for
the time being and from time to time secured by any interest by way of security
for the time being and from time to time ranking in point of priority to the
security hereby constituted or any Land Charge.

(19)     Intellectual Property

The Company shall make, effect and renew all such filings and registrations and
pay all such fees as for the time being and from time to time may be necessary
or advisable or as for the time being and from time to time shall be required by
the Bank to create, perfect or preserve the Intellectual Property and/or the
security hereby constituted thereover.

<PAGE>

                                       19

(20)     Information, inspection and remedy

(a)      The Company shall furnish to the Bank forthwith upon the same becoming
         available (and, in the case of audited accounts, in any event within 90
         days of the end of each of its financial years) a copy of the audited
         accounts of the Company and of each of its subsidiaries for the time
         being and from time to time certified by a Chartered Accountant
         approved by the Bank together with the trading accounts and the
         directors' and auditors' reports thereon and each other document for
         the time being and from time to time despatched to the members of the
         Company and each such subsidiary and the Company shall also furnish to
         the Bank within 10 days of the end of each quarter unadudited financial
         statements of the Company and of each of its subsidiaries for the time
         being and from time to time and the Company shall also furnish to the
         Bank, as the Bank may from time to time request, such other financial
         statements, information, valuations and certificates regarding the
         Company and/or such subsidiaries and their respective affairs,
         financial conditions, assets and liabilities.

(b)      The Company shall keep, and procure that its subsidiaries for the time
         being and from time to time shall keep, proper books and records at all
         times.

(c)      The Company shall, upon request from time to time by the Bank or its
         agents, permit the Bank and/or its agents and/or their respective
         advisers and employees to enter into and/or inspect the Charged Assets
         and to carry out, at the Company's cost, any obligation of the Company
         to the Bank under these presents which the Bank, in its absolute
         discretion, considers necessary or advisable for the purpose of
         preserving the value of the security hereby constituted without the
         Bank or any other such person becoming liable as mortgagee in
         possession and provided that the Bank shall not be obliged under these
         presents to have any such inspection or obligation carried out.

(d)      The Company hereby permits any Account Bank and any other bank or
         financial institution with whom the Company may for the time being and
         from time to time have a banker customer relationship to furnish
         directly to the Bank from time to time upon request full statements and
         particulars of all the Company's accounts with that Account Bank and
         such other information regarding the Company, its affairs, financial
         condition, assets and liabilities as may for the time being and from
         time to time be available to that Account Bank or such other bank or
         financial institution.

(21)     Disposal of Specifically Charged Assets and other Charged Assets

The Company shall not and shall not agree to, save with the prior written
consent of the Bank or in pursuance of any other obligation under or pursuant to
these presents, sell, transfer or otherwise dispose of any of the Specifically
Charged Assets or, save in the ordinary and usual course of its trade, the whole
or any material part of its business, undertaking or any of the other Charged
Assets (other than the Specifically Charged Assets).

<PAGE>

                                       20

(22)     Conduct of business

The Company shall carry on and conduct and procure that its subsidiaries for the
time being and from time to time shall carry on and conduct its and their
respective businesses and affairs in a proper and efficient manner and shall
not, without the prior written consent of the Bank, make any substantial
alteration in the nature of such businesses.

(23)     Insolvency

(a)      The Company shall give at least seven days' prior written notice to the
         Bank of:-

         (i)      any steps for the time being and from time to time taken with
                  regard to a proposal for a composition or scheme of
                  arrangement in respect of the Company;

         (ii)     any invitation for the time being and from time to time made
                  to any other mortgagee or chargee of the Charged Assets to
                  appoint a receiver;

         (iii)    any steps for the time being and from time to time taken with
                  regard to the winding-up of the Company; and

         (iv)     any event or circumstance analogous to or having substantially
                  similar effect to any of the events and circumstances
                  described in the foregoing Sub-clauses of this Sub-clause (a)
                  under the laws of any applicable jurisdictions.

(b)      The Company shall forthwith notify the Bank in writing of and supply
         the Bank with copies of all documentation and other details relating
         to:-

         (i)      any proposal or application described in Sub-clause (a)(i);

         (ii)     any demand for the time being and from time to time made for
                  payment or the appointment of a receiver by any other
                  mortgagee or chargee for the time being and from time to time
                  of the Charged Assets;

         (iii)    any petition for the time being and from time to time made for
                  the winding-up of the Company;

         (iv)     any demand for the time being and from time to time made on
                  the Company within the meaning of Section 95 of The Companies
                  Law (2002 Revision); and

         (v)      any event or circumstances analogous to or having
                  substantially similar effect to any of the events and
                  circumstances described in the foregoing Sub-clauses of this
                  Sub-clause (b) under the laws of any applicable jurisdictions.

6.       EVENTS OF DEFAULT

<PAGE>

                                       21

(1)      In respect of any Indebtedness by virtue of the Agreement to be paid or
         discharged otherwise than on demand, the Bank shall nevertheless be
         entitled by notice to the Company to demand the immediate payment and
         discharge thereof (or any part thereof) together with all interest then
         accrued thereon forthwith (or otherwise as the Bank may require) at any
         time after the happening of any of the events referred to in Section
         17.1 Events of Default in the Agreement which Events of Default shall
         constitute Events of Default hereunder.

(2)      If any of the events described in Sub-clause (1) shall occur, the Bank
         shall be under no obligation to advance any monies or provide or
         continue to provide any credit facility to the Company, unless the
         Agreement shall expressly refer to this Sub-clause (2) and expressly
         negative its effect.

(3)      Upon any demand being made for payment of the Indebtedness pursuant to
         Sub-clause (1), such Indebtedness shall become payable immediately and
         all rights of the Company to deal for any purpose whatsoever with the
         Charged Assets shall forthwith cease and any floating charge for the
         time being and from time to time included in the security hereby
         constituted shall forthwith crystallize and become a specific charge.

(4)      Notwithstanding the Agreement, the Indebtedness shall become
immediately payable (and without the necessity for any demand to be made by the
Bank) together with all interest then accrued thereon and all rights of the
Company to deal for any purpose whatsoever with any of the Charged Assets shall
forthwith cease and any floating charge for the time being and from time to time
included in the security hereby constituted shall forthwith crystallize and
become a specific charge, on the happening of any of the following events:-

         (a)      if a petition shall be presented (and shall not be dismissed
                  within seven days) to, or an order shall be made by, any court
                  of competent jurisdiction for, or an effective resolution
                  shall be passed for, or any other steps shall be taken by the
                  Company or a Guarantor or any other person entitled so to do,
                  for the liquidation, winding-up (other than a members'
                  voluntary winding-up) or dissolution of the Company or a
                  Guarantor or the appointment of a receiver, trustee or similar
                  officer of the Company or a Guarantor or any of their
                  respective assets for the time being and from time to time;

         (b)      if all or a substantial part of the operations of the Company
                  shall cease or be suspended or the Company shall threaten that
                  such shall occur;

         (c)      if the Company, without the prior written consent of the Bank
                  or otherwise than in pursuance of the Company's obligations
                  under or pursuant to, or as expressly permitted by, these
                  presents, shall sell, transfer, lease or otherwise dispose of
                  or deal with any of the Charged Assets or purport so to do; or

<PAGE>

                                       22

         (d)      if any event or circumstances shall occur analogous to or
                  having substantially similar effect to any of the events and
                  circumstances described in Sub-clause (a) under the laws of
                  any applicable jurisdictions.

7.       APPOINTMENT OF RECEIVER AND POWER OF SALE

(1)      Time

In the circumstances described in Clause 3.2(1) (assets in jeopardy) or at any
time after the Indebtedness shall have become payable in accordance with the
Agreement or these presents or at the request of the Company, the Bank may
without further notice (and whether or not the Company shall have been accorded
sufficient or any time in which to satisfy such Indebtedness) from time to time
appoint in writing (under the hand of any manager of the Bank) a Receiver of the
Non-Realty Charged Assets (but, in the circumstances described in Clause 3.2(1),
only over the Charged Assets specified in the notice referred to in that Clause)
upon such terms as the Bank may from time to time think fit.

(2)      Power of Sale and Enforcement

At any time after the Indebtedness shall have become payable in accordance with
the Agreement or these presents or the Bank shall have appointed a Receiver
(otherwise than in the circumstances described in Clause 3.2(1) (assets in
jeopardy)), the security hereby constituted shall become immediately enforceable
and the power of sale and other powers conferred by law as varied or extended by
these presents and all other powers conferred on the Bank by these presents
shall become immediately exercisable.

(3)      Removal of Receiver

The Bank may remove any Receiver for the time being appointed by it from the
Charged Assets in respect of which that Receiver shall have been appointed and
may from time to time appoint a new Receiver over those Charged Assets.

(4)      Receiver's Powers

Every Receiver shall be the agent of the Company (which shall be solely
responsible for his contracts, engagements, acts, defaults, omissions and
losses, for liabilities incurred by him, for his misconduct and for his
remuneration) unless and until a liquidator shall be appointed of the Company,
whereafter such Receiver shall act as principal but shall not become the agent
of the Bank, and, at all times, such Receiver shall have and be entitled to
exercise in relation to the Company all the powers conferred on receivers by law
and also (but without thereby limited those powers by law and without prejudice
to the Receiver's powers, authorities and discretions conferred

<PAGE>

                                       23

by these presents) such Receiver may, without further notice, exercise all or
any of the following powers:-

         (a)      to take immediate possession of, get in, and/or collect the
                  Non-Realty Charged Assets and, for that purpose, to enter upon
                  the Immoveable Property or any other premises at which the
                  Non-Realty Charged Assets are for the time being and from time
                  to time located and sever, dismantle or remove the same or any
                  fixtures for the time being and from time to time therefrom
                  without being liable for any loss or damage thereby
                  occasioned;

         (b)      to carry on, manage or concur in the carrying on or managing
                  of, the business for the time being and from time to time of
                  the Company in such manner as he may think fit, including (but
                  without limitation) power to perform, repudiate, rescind,
                  compromise, amend or vary any contract, instrument or
                  agreement to which the Company shall for the time being and
                  from time to time be a party;

         (c)      to sell, exchange or concur in the sale or exchange of the
                  Non-Realty Charged Assets;

         (d)      to grant, or concur in the grant of, any leases or licences of
                  the Non-Realty Charged Assets;

         (e)      to grant, or concur in the granting of, any renewals or
                  surrenders of, or to accept, or concur in the accepting of,
                  any surrenders of, any leases or licences for the time being
                  and from time to time of the Non-Realty Charged Assets;

         (f)      to promote, or concur in the promotion of, the formation of a
                  subsidiary and/or subsidiaries of the Company with a view to
                  the same purchasing, leasing, licensing or otherwise acquiring
                  all or any of the assets for the time being and from time to
                  time of the Company;

         (g)      to make and effect, and concur in the making and effecting of,
                  all such repairs, maintenance, decoration, provision of all
                  services (including, but without limitation, lighting, heating
                  and cleansing) structural and other alterations, improvements,
                  additions and development in or to the Non-Realty Charged
                  Assets and do anything else in connection with the Non-Realty
                  Charged Assets which he may think fit or which he may deem
                  proper for the efficient use or management of the Non-Realty
                  Charged Assets, as well as for the protection or for the
                  improvement of the Non-Realty Charged Assets or for the
                  protection of the security hereby constituted;

         (h)      to exercise or permit the Company or any nominee of the
                  Company to exercise any powers or rights incidental to the
                  ownership of the Non-Realty Charged Assets in such manner as
                  the Receiver may think fit and, in particular (as regards any
                  shares, stock or other securities for the time being and from
                  time to time included in the

<PAGE>

                                       24

                  Non-Realty Charged Assets) any rights for the time being and
                  from time to time attached thereto;

         (i)      to call up all or any portion of any uncalled capital for the
                  time being and from time to time of the Company;

         (j)      to redeem any interest by way of security for the time being
                  and from time to time ranking in point of security in priority
                  to any of the security hereby constituted and to settle and
                  prove the accounts of the holder of any such interest and any
                  monies paid by way of such redemption shall be an expense of
                  the Receiver's receivership;

         (k)      to settle, adjust, refer to arbitration and compromise any
                  claims, accounts, disputes, questions and demands for the time
                  being and from time to time with or by any person who for the
                  time being and from time to time is, or claims to be, a
                  creditor of the Company or relating in any way to the
                  Non-Realty Charged Assets;

         (l)      to bring, prosecute, enforce, defend and abandon any actions,
                  suits and proceedings in relation to the Company or the
                  Non-Realty Charged Assets;

         (m)      to appoint, hire or employ and to remunerate managers,
                  officers, agents, accountants, clerks, servants, workmen and
                  others on such terms and generally in such manner as the
                  Receiver shall think fit, either in connection with any
                  exercise by the Receiver of his powers by or pursuant to these
                  presents or otherwise for any purpose connected with the
                  Non-Realty Charged Assets, and to discharge any such person;

         (n)      to appoint a solicitor or accountant or other professionally
                  qualified person to advise or assist it in the exercise of any
                  of the powers, authorities and discretions by or pursuant to
                  these presents or otherwise for any purpose connected with the
                  Non-Realty Charged Assets, and to discharge any such person;

         (o)      for the purpose of exercising any of the powers, authorities
                  and discretions conferred on the Receiver by or pursuant to
                  these presents and/or defraying any costs, charges, losses or
                  expenses (including his remuneration) which shall for the time
                  being and from time to time be incurred by him in the exercise
                  thereof or for any other purpose, to make advances or to raise
                  or borrow money either unsecured or secured on the Non-Realty
                  Charged Assets ranking in point of security in priority to,
                  pari passu with, or subsequent to, the security hereby
                  constituted or otherwise and at such rate or rates of interest
                  and generally on such terms and conditions as the Receiver
                  may, in his absolute discretion, think fit;

         (p)      to give valid receipts for all monies and to execute all deeds
                  or documents (including, but without limitation, with full
                  power to convey any assets sold in the name of the Company) as
                  may be necessary or appropriate in the name of, or on

<PAGE>

                                       25

                  behalf of the Company for the purpose of exercising any of the
                  powers, authorities and discretions conferred on the Receiver
                  by or pursuant to these presents and to use the name of the
                  Company for all or any of such powers, authorities and
                  discretions, for which purpose the Company hereby irrevocably
                  appoints every such Receiver to be its attorney; and

         (q)      to do all such other acts, deeds and things as the Receiver
                  may consider necessary or desirable for the realisation of the
                  Non-Realty Charged Assets or as the Receiver may consider
                  incidental or conducive to any of the powers, authorities and
                  discretions conferred on him by or pursuant to these presents,
                  and to do and exercise, in relation to the Non-Realty Charged
                  Assets, all such acts, deeds and things and all such powers,
                  authorities and discretions as the Receiver would be capable
                  of doing and exercising if he were the absolute beneficial
                  owner of the Non-Realty Charged Assets.

(5)      Exercise of Receiver's powers

In the exercise of any of the powers, authorities and discretions conferred on a
Receiver by or pursuant to these presents in relation to any dealing whatsoever
with the Non-Realty Charged Assets, the Receiver:-

(a)      may agree such terms and conditions relating thereto and such
         consideration therefor; and

(b)      may dispose of the Non-Realty Charged Assets in such manner (including,
         but without limitation, by public auction, tender or private treaty)
         and with or without such advertisement and in such lot or lots and
         together or separately;

as the Receiver shall, in his absolute discretion, think fit.

(6)      Immoveable Property

The enforcement of the security constituted by a Land Charge shall be governed
by The Registered Land Law (1995 Revision) as varied and/or added to by the Land
Charge.

8.       RESPONSIBILITY FOR RECEIVER

(1)      Liability of Bank

The Bank shall not incur any liability, either to the Company or to any other
person whomsoever, in respect of any contracts, engagements, acts, omissions,
defaults or losses of any Receiver or for any liabilities incurred by him, for
any misconduct by him or for his remuneration, by reason of the Bank having
appointed him or of the Bank having made or given any direction, either
generally or

<PAGE>

                                       26

specifically, to him or having concurred in any such contract, engagement, act,
omission, default, loss or liability for any other reason whatsoever.

(2)      Remuneration

The Bank may, from time to time, fix the remuneration of any Receiver and direct
payment of the same out of monies accruing to him in the exercise of his powers,
authorities and discretions by or pursuant to these presents, but the Company
alone shall be liable for the payment of that remuneration.

9.       ADDITIONAL POWERS OF THE BANK

(1)      As Mortgagee

The powers, authorities and discretions conferred by or pursuant to these
presents in relation to the Non-Realty Charged Assets on the Bank or any
Receiver shall be in addition to, and not in substitution for, the powers
conferred on mortgagees or receivers by law and, where there is any ambiguity or
conflict between the powers, authorities and discretions conferred by law and
those conferred by or pursuant to these presents, the terms of these presents
shall prevail.

(2)      As Receiver

All or any of the powers, authorities and discretions conferred by or pursuant
to these presents, either expressly or impliedly, upon a Receiver, may be
exercised by the Bank in relation to the Non-Realty Charged Assets without the
Bank having to first appoint a Receiver and/or notwithstanding any such
appointment.

(3)      Delegation of Powers of the Bank

The Bank may, for the time being and from time to time, delegate by power of
attorney or in any other manner (including but without limitation, under the
hand of any manager of the Bank) to any person all or any of the powers,
authorities and discretions which are, for the time being, exercisable by the
Bank under or pursuant to these presents or by law in relation to the Charged
Assets and any such delegation may be made upon and subject to such terms and
conditions (including, but without limitation, the power to sub-delegate) as the
Bank may, in its absolute discretion, think fit and the Bank shall not be liable
or responsible to the Company or any other person for any loss or damage arising
from any act, default, omission or misconduct on the part of any such delegate
(or sub-delegate).

<PAGE>

                                       27

10.      APPROPRIATION

Any monies received by the Bank or a Receiver under or pursuant to these
presents shall, subject to payment of any claims for the time being having
priority to these presents, be applied for the following purposes and in the
following order of priority:-

FIRST: in or towards satisfaction of all the Indebtedness described in Clause
2(2) together with interest on the same as described in Clause 2(3), in such
order as the Bank in its absolute discretion shall decide;

SECOND: in or towards satisfaction of all the Indebtedness described in Clause
2(1), together with interest on the same as described in Clause 2(3), in such
order as the Bank in its absolute discretion shall decide; and

LAST: the surplus (if any) shall be paid to the person or persons for the time
being entitled thereto.

11.      LIABILITY OF THE BANK AND RECEIVER

(1)      General

If the Bank or any Receiver or Delegate shall enter into possession of the
Charged Assets, the Bank or any of them may, from time to time at will, go out
of such possession.

(2)      Exclusion of the Bank's liability

The Bank shall not, in any circumstances, either by reason of any entry by it
into, or taking by it of possession of, the Charged Assets or for any other
reason whatsoever and whether as mortgagee in possession or on any other basis
whatsoever, be liable to account to the Company for anything except the Bank's
own actual receipts or be liable to the Company or any other person for any loss
or damage arising from any realisation by the Bank of the Charged Assets or from
any act, default or omission of the Bank in relation to the Charged Assets or
from any exercise or non-exercise by the Bank of any power, authority or
discretion conferred upon it by or pursuant to these presents, any Land Charge
or by law.

(3)      Exclusion of Receiver's liability

All the provisions of Sub-clause (2) shall apply in respect of the liability of
any Receiver or Delegate in all respects as though every reference in that
Sub-clause to the Bank were also a reference to such Receiver or, as the case
may be, such Delegate.

<PAGE>

                                       28

(4)      Indemnity

The Bank and every Receiver and Delegate shall be entitled to be indemnified out
of the Non-Realty Charged Assets in respect of all liabilities and expenses for
the time being and from time to time incurred by any of them in the execution or
purported execution of any of the powers, authorities and discretions conferred
on them by or pursuant to these presents or by law and against all actions,
proceedings, costs, claims and demands in respect of any matter or thing done or
omitted in any way relating to the Charged Assets and the Bank and every
Receiver may retain and pay all sums in respect of the same out of any monies
received under such powers, authorities and discretions.

12.      POWER OF ATTORNEY

(1)      Appointment

The Company hereby, by way of security, irrevocably appoints the Bank and every
Receiver and Delegate severally to be its attorney and on its behalf and in its
name or otherwise to execute and do all such acts, deeds and things which the
Company ought to do under these presents and generally, on its behalf and in its
name, to exercise all or any of the powers, authorities and discretions
conferred by or pursuant to these presents or by law on the Bank or any Receiver
or Delegate.

(2)      Ratification

The Company hereby ratifies and confirms and agrees to ratify and confirm
whatever any attorney of the Company appointed by these presents shall do or
purport to do in the exercise or purported exercise of all or any of the powers,
authorities and discretions granted to such attorney by these presents.

13.      FURTHER ASSURANCE

The Company shall from time to time execute and do all such acts, deeds and
things as the Bank may reasonably require for perfecting or better perfecting or
protecting or better protecting the security hereby constituted or constituted
by any Land Charge and, after the Indebtedness shall have become payable, for
facilitating the realisation of the Charged Assets and for exercising all
powers, authorities and discretions conferred by or pursuant to these presents,
any Land Charges or by law on the Bank or any Receiver or Delegate or any
receiver under a Land Charge and shall, in particular (but without limitation)
execute and deliver all interests by way of security, transfers, conveyances,
assignments and assurances and give all notices and other communications which
the Bank shall for the time being, think expedient.

<PAGE>

                                       29

14.      PROTECTION FOR THIRD PARTY PURCHASERS

(1)      No purchaser, mortgagee or other person dealing with the Bank or any
         Receiver or Delegate shall be concerned to enquire whether the
         Indebtedness shall have become payable or whether any power, authority
         or discretion which the Bank or a Receiver or Delegate is purporting to
         exercise shall have become exercisable or shall be being properly
         exercised or to see to the application of any monies paid to the Bank
         or a Receiver or Delegate.

(2)      Without prejudice to Sub-clause (1) and in addition to all other
         protection for the time being afforded by law, any purchaser, mortgagee
         or other person dealing with the Bank or any Receiver or Delegate shall
         be entitled and bound to assume without enquiry that the security
         hereby constituted shall have become enforceable.

15.      CONTINUING SECURITY AND AVOIDANCE OF PAYMENTS

(1)      The Security hereby constituted shall be a continuing security and
         shall not be satisfied or discharged by any intermediate payment or
         satisfaction of the Indebtedness.

(2)      No assurance, security or payment which may be avoided under any
         enactment relating to bankruptcy or insolvency or under The Fraudulent
         Dispositions Law, (1996 Revision) (or similar legislation binding on
         the Company in a jurisdiction other than The Cayman Islands), and no
         release, settlement or discharge given or made by the Bank on the faith
         of any such assurance, security or payment, shall prejudice or affect
         the right of such persons to enforce the security hereby constituted or
         any Land Charge.

16.      ADDITIONAL SECURITY, SUSPENSE ACCOUNT AND CONSOLIDATION

(1)      The security hereby constituted shall be in addition to, and shall not
         prejudice, or be prejudiced by, any other interest by way of security,
         right or remedy which the Bank may for the time being and from time to
         time enjoy in respect of the Indebtedness.

(2)      The Bank may, in its absolute discretion, grant time or other
         indulgence or make or grant any other arrangement, variation or release
         to or with any person (and whether or not such person is jointly and/or
         severally liable to the Bank with the Company) in respect of the
         Indebtedness or in respect of any other interest by way of security or
         guarantee therefor, without prejudice either to the security hereby
         constituted or to the liability of the Company for the Indebtedness.

(3)      Any monies received under or pursuant to these presents may be placed
         and kept to the credit of one or more than one suspense accounts with
         the Bank for so long as the Bank may think fit and, notwithstanding the
         other provisions of these presents, without any obligation in the
         meantime to apply the same or any part thereof or interest accruing
         thereon in or

<PAGE>

                                       30

         towards discharge of any of the Indebtedness and, notwithstanding any
         such payment, in the event of any liquidation or winding-up of the
         Company, the Bank may prove for and agree to accept any dividend or
         composition in respect of the whole or any part of the Indebtedness as
         if this Debenture had not been executed and delivered.

(4)      The Bank shall have the right (but not the obligation) exercisable in
         its sole and absolute discretion to consolidate this Debenture with any
         collateral, additional or supplemental interests by way of security
         hereto notwithstanding any provision of any law to the contrary.

17.      NEW ACCOUNT

If the Bank receives notice (whether actual or otherwise) of any interest by way
of security (other than the security hereby constituted) affecting the Charged
Assets, the Bank may forthwith open a new account or accounts for the Company
and, if the Bank does not open a new account, the Bank shall nevertheless be
treated as if it had done so at the time of receipt of such notice and, as from
that time, all monies paid by the Company to the Bank or received by the Bank
for the account of the Company shall be credited and be treated as having been
credited to such new account and shall not operate to reduce the amount due to
the Bank by the Company at the time of receipt of such notice and, furthermore,
the Bank shall be under no obligation to advance any monies or provide or
continue to provide any credit facility to the Company.

18.      SET-OFF

Until this Debenture shall be discharged and notwithstanding any provision of
the Agreement to the contrary (unless the Agreement shall expressly refer to,
and shall negative the effect of, this Clause 18, and in addition to and without
prejudice to Clause 3.1(3) and the interests by way of security constituted
thereby,) it is and shall be a term of each contract relating to each debt
constituted by a credit balance for the time being and from time to time on any
account(s) for the time being and from time to time opened with the Bank at any
of its branches in the name of the Company or to which the Company is
beneficially entitled, together with interest for the time being and from time
to time accrued thereon (all such debts and interest being referred to in this
Clause 18 as the "Balances") or any part thereof shall not be payable or
repayable by the Bank to the Company to the extent that the aggregate amount of
the Balances at any time shall not exceed the Indebtedness, and the Bank may
(but shall not be obliged to) for the time being and from time to time, without
notice to the Company and in addition to any lien or other right to which the
Bank may for the time being be and from time to time entitled by law:-

         (1)      retain the Balances or any part thereof to the extent of the
                  Indebtedness;

         (2)      set off, transfer and/or apply the Balances or any part
                  thereof, together with other sums (if any) for the time being
                  and from time to time owing to the Company and in

<PAGE>

                                       31

                  the hands of the Bank, in or towards payment or satisfaction
                  of the Indebtedness and, if the Bank shall so decide, to
                  purchase out of the Balances such other currencies at the
                  Bank's usual spot rate for the time being as may be necessary
                  to effect such set-off, transfer or application;

         (3)      combine or consolidate all or any of the accounts of the
                  Company with the Bank at any of the branches of the Bank;
                  and/or;

         (4)      refuse payment of any cheque, bill, note, order or notice of
                  withdrawal drawn or made by the Company or upon which the Bank
                  may be otherwise liable and which if paid or complied with
                  would reduce the Balances (exclusive of interest accruing) to
                  less than the amount of the Indebtedness;

and the Bank shall not be liable for any loss to the Company by reason of the
exercise of its rights under this Clause 18 including, but without limitation,
any loss of interest on the Balances.

19.      AMALGAMATION OF BANK

These presents shall remain enforceable, valid and binding for all purposes
notwithstanding any change in the name of the Bank or its absorption of, or by,
or its amalgamation or consolidation with, any other person or any change in its
constitution or that its successors or assigns or the person by which the
business of the Bank may, for the time being and from time to time, be carried
on and shall be available to all such successors, assigns and persons.

20.      NOTICES

Any notice, demand or other communication by the Bank shall be in writing signed
by any manager of the Bank and may be served by delivering the same to the
Company or by post addressed to the Company at the Company's address last known
to the Bank or to the registered office for the time being and from time to time
of the Company and any such notice, demand or other communication so addressed
and posted shall be deemed to have been served at the expiration of forty-eight
hours after it has been posted and shall be effective notwithstanding that it be
returned as being undelivered.

21.      RIGHTS AND REMEDIES

The rights of the Bank under these presents are cumulative, may be exercised as
often as considered appropriate and are in addition to the general law and the
terms and conditions of the Agreement.

<PAGE>

                                       32

Such rights (whether arising hereunder or under the general law or the
Agreement) shall not be capable of being waived or varied otherwise than by an
express waiver or variation in writing and, in particular, any failure to
exercise or delay in exercising any of such rights shall not operate as a waiver
or variation of that or any other such right, any defective or partial exercise
of any such rights shall not preclude any other or further exercise of that or
any other such right, and no act or course of conduct or negotiation by the Bank
or on its behalf shall in any way preclude it from exercising any such right or
constitute a suspension or any variation of any such right. In the event that
there is a conflict between the terms and conditions of the Agreement and the
provisions of this Debenture, the terms and conditions of the Agreement shall
prevail, other than in respect of clause 6 (4) hereof.

22.      SEVERANCE

If at any time any one or more provisions of this Debenture is or becomes
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby.

23.      GOVERNING LAW

These presents shall be governed by, and construed in accordance with, the laws
of the Cayman Islands.

24.      JURISDICTION

The Company hereby irrevocably agrees that the courts of the Cayman Islands are
to have jurisdiction to settle any disputes which arise out of or in connection
with this Debenture and that, accordingly, any suit, action or other legal
proceedings so arising may be brought in such courts. The Company hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of the venue of any such legal proceedings in such courts and any claim
that any such legal proceedings have been brought in an inconvenient forum, and
further hereby irrevocably agrees that a judgment in any such legal proceedings
brought in such courts shall be conclusive and binding upon it and may be
enforced in the Courts of any other jurisdiction without re-examination of the
merits.

Nothing contained in this provision shall limit the right of the Bank to take
any such legal proceedings in any other court of competent jurisdiction; nor
shall the taking of any legal proceedings in one jurisdiction preclude the
taking of legal proceedings in another, whether concurrently or not. The Company
hereby agrees that the process by which any such legal proceedings are begun in
the Cayman Islands may be served on it by being delivered to the person (if any)
specified in Schedule 5.

<PAGE>

                                       33

25.      FURTHER ADVANCES

Each and every obligation (if any) for the time being and from time to time of
the Bank to make further advances to the Company under and in accordance with
the terms of the Agreement shall be deemed to be included in this Debenture as
if the same were set out herein in full.

26.      STAMPING

This Debenture shall at the Company's expense be impressed with stamp duty
initially to cover U.S.$ 22,000,000.00 of the Indebtedness and the Bank shall be
at liberty and is hereby empowered at any time or times hereafter (without any
such licence or consent on the part of the Company) to impress such additional
stamp duty hereon or on any collateral, supplemental or additional interests by
way of security to this Debenture all at the Company's own cost and expense as
is necessary to cover the Indebtedness.

IN WITNESS whereof this document has been executed as a deed and delivered the
day and year first above written.

                                   SCHEDULE 1

                     Description of the Immoveable Property
                         charged under Clause 3.1(1)(a)

                     West Bay Beach North Block 11D Parcels 8 and 40
                     West Bay North East Block 9A Parcels 8 and 469
                     West Bay Beach South Block 12D Parcel 79 REM 1/2

<PAGE>

                                       34

                                   SCHEDULE 2

                  Description and location of the Specifically
                                  Charged Plant

                  1.       Governor's Harbour Seawater Desalination Plant - WBBN
                                        Block 11D Parcels 8 and 40

         A seawater desalination plant constructed within a steel building ,
         utilizing reverse osmosis technology, capable of producing 1.2 million
         US gallons of potable water per day, whose primary components are :-

-        two positive displacement pumps with a pumping capacity of 410 US
         gallons per minute each;

-        two " back up " centrifugal pumps with a pumping capacity of 300 US
         gallons per minute each;

-        77 vessels (measuring approximately 265 inches in length and 8 inches
         in diameter) each housing six spiral wound seawater membranes
         (measuring approximately 40 inches in length and 8 inches in diameter);

-        a DWEER work exchanger energy recovery system;

-        an air scrubber to remove the hydrogen sulphide from the product water,
         which is capable of scrubbing approximately 800 US gallons of water per
         minute;

-        Paragon TNT v5.0 cintrol software on Gateway hardware with I/O System
         Opto 22 and Optomux interface controller to control the operations of
         the plant.

                  2.       West Bay Seawater Desalination Plant-WBNE Block 9A
                                           Parcels 8 and 469

         A seawater desalination plant constructed within a steel building,
         utilizing reverse osmosis technology, capable of producing 710,000 US
         gallons of potable water per day, whose primary components are:-

-        two positive displacement pumps with a pumping capacity of 386 US
         gallons per minute each;

<PAGE>

                                       35

-        43 vessels (measuring approximately 280 inches in length and 8 inches
         in diameter) each housing seven spiral wound seawater membranes
         (measuring approximately 40 inches in length and 8 inches in diameter);

-        one hydraulic turbo energy recovery system;

-        one DWEER work exchanger energy recovery system;

-        an air scrubber to remove the hydrogen sulphide from the product water,
         which is capable of scrubbing 1000 US gallons of water per minute; and

-        an Allen Bradley SLC500 Programmable Logic Controller (PLC) linked to
         a Compaq PC computer running Windows NT 4.0 and Wintelligent View
         interfaced with the PLC to control the operation of the plant.

                  3.       Britannia Seawater Desalination Plant - WBBS Block
                                         12D Parcel 79REM1/2

              A seawater desalination plant constructed within a steel building
              utilizing reverse osmosis technology, capable of producing 440,000
              US gallons of potable water per day, whose primary components
              are:-

-        four skid- mounted seawater RO plants with desalinated water production
         capacities of 110,000 US gallons per day each , and utilizing electric
         powered high pressure pumps and calder energy recovery devices;

-        one potable water ozonation system used to neutralize hydrogen sulphide
         and disinfect the product water;

-        one 840,000 US gallon bolted steel tank used to store potable water;

*        one high service pump station used to pump water from the bolted steel
tank to the distribution pipeline

                                   SCHEDULE 3

             Description of certain Specifically Charged Securities
                         charged under Clause 3.1(3)(f)

<PAGE>

                                       36

                                   SCHEDULE 4

           Description of Bank Accounts charged under Clause 3.1(3)(p)

                                   SCHEDULE 5

              Name and address of person (if any) to accept service
                       of process on behalf of the Company

The Common Seal of                    )          Consolidated Water Co. Ltd.
Consolidated Water Co. Ltd.  ]        )
was hereunto affixed                  )          By: /s/ Jeffrey M. Parker
By:                                   )              --------------------------
And by:                               )      And By: /s/ Frederick W. McTaggart
in the presence of:                   )              --------------------------

/s/ Richard L. Finlay
------------------------
Witness

                                             Scotiabank (Cayman Islands) Ltd.

Signed as a Deed by                   )          By: /s/ Alan Brodie
                                 by   )              --------------------------
By:                                   )      And By: /s/
On behalf of Scotiabank (Cayman       )              --------------------------
Islands) Ltd.
In the presence of                    )

[ILLEGIBLE]
------------------------
Witness                                     Scotiabank/Consolidated/Sub. Deb.

<PAGE>

                                   DATED    2003

                           CONSOLIDATED WATER CO. LTD.

                                   AS COMPANY

                                     - AND -

                        SCOTIABANK (CAYMAN ISLANDS ) LTD.

                                     AS BANK

                          DEED OF SUBSTITUTED DEBENTURE

<PAGE>

                                      (i)

                                      INDEX

CLAUSES

1.       DEFINITIONS AND INTERPRETATION

2.       MONIES SECURED

         (1)      Monies

         (2)      Costs

         (3)      Interest

3.       THE CHARGES

3.1      Charging provision

                  Immoveable Property

                  Specifically Charged Plant

                  Trading Debts

                  Non-Trading Debts

                  Specifically Charged Securities

                  Goodwill and uncalled capital

                  Intellectual Property

                  Ancillary assets

                  Bank Accounts

                  Other assets

3.2      Crystallisation of floating charge

3.3      Negative pledge

3.4      Land Charges

<PAGE>

                                      (ii)

4.       REPRESENTATIONS & WARRANTIES

5.       COVENANTS

         (1)      Documents of title to Immoveable Property and Specifically
                  Charged Plant and Securities

         (2)      Further charges

         (3)      Future Immoveable Property and Specifically Charged Plant and
                  Securities

         (4)      Maintenance

         (5)      Insurance

         (6)      Registration under The Registered Land Law

         (7)      Notices affecting Immoveable Property or Specifically Charged
                  Plant

         (8)      Planning Legislation

         (9)      Other compliance with law

         (10)     Compliance with contracts

         (11)     Leases or licences of Immoveable Property and Intellectual
                  Property: as lessee or Licensee

         (12)     Leases of licences of Immoveable Property and Intellectual
                  Property; as lessor or licensor

         (13)     Removal and severance

         (14)     Specifically Charged Plant

<PAGE>

                                     (iii)

         (15)     Debts and Bank Accounts

         (16)     Specifically Charged Securities

         (17)     Uncalled capital

         (18)     Secured loan capital

         (19)     Intellectual Property

         (20)     Information, inspection and remedy

         (21)     Disposal of Specifically Charged Assets and other Charged
                  Assets

         (22)     Conduct of business

         (23)     Insolvency

6.       EVENTS OF DEFAULT

7.       APPOINTMENT OF RECEIVER AND POWER OF SALE

         (1)      Time

         (2)      Power of Sale and Enforcement

         (3)      Removal of Receiver

         (4)      Receiver's Powers

         (5)      Exercise of Receiver's Powers

         (6)      Immoveable Property

8.       RESPONSIBILITY FOR RECEIVER

         (1)      Liability of Bank

         (2)      Remuneration

<PAGE>

                                      (iv)

9.       ADDITIONAL POWERS OF THE BANK

         (1)      As Mortgagee

         (2)      As Receiver

         (3)      Delegation of powers of the Bank

10.      APPROPRIATION

11.      LIABILITY OF THE BANK AND RECEIVER

         (1)      General

         (2)      Exclusion of the Bank's liability

         (3)      Exclusion of Receiver's liability

         (4)      Indemnity

12.      POWER OF ATTORNEY

         (1)      Appointment

         (2)      Ratification

13.      FURTHER ASSURANCE

14.      PROTECTION FOR THIRD PARTY PURCHASERS

15.      CONTINUING SECURITY AND AVOIDANCE OF PAYMENTS

16.      ADDITIONAL SECURITY, SUSPENSE ACCOUNT AND CONSOLIDATION

17.      NEW ACCOUNT

<PAGE>

                                      (v)

18.      SET-OFF

19.      AMALGAMATION OF BANK

20.      NOTICES

21.      RIGHTS AND REMEDIES

22.      SEVERANCE

23.      GOVERNING LAW

24.      JURISDICTION

25.      FURTHER ADVANCES

26.      STAMPING

SCHEDULE 1       Description of the Immovable
                 Property charged under Clause
                 3.1(1)(a)

SCHEDULE 2       Description and location
                 of Specifically Charged Plant

SCHEDULE 3       Description of certain
                 Specifically Charged Securities
                 charged under Clause 3.1(3)(f)

SCHEDULE 4       Description of the Bank Accounts charged under Clause 3.1(3)(p)

<PAGE>

                                      (vi)

SCHEDULE 5       Name and address of person (if
                 any) to accept service of process
                 on behalf of Company<PAGE>
                                                                    EXHIBIT 4.1

                                  GENESCO INC.

                              AMENDED AND RESTATED
                           1996 STOCK INCENTIVE PLAN

SECTION 1. PURPOSE; DEFINITIONS.

         The purpose of the Genesco Inc. 1996 Stock Incentive Plan (the "Plan")
is to enable Genesco Inc. (the "Corporation") to attract, retain and reward key
employees of and consultants to the Corporation and its Subsidiaries and
Affiliates, and directors who are not also employees of the Corporation, and
strengthen the mutuality of interests between such key employees, consultants
and directors by awarding such key employees, consultants and directors
performance-based stock incentives and/or other equity interests or
equity-based incentives in the Corporation, as well as performance-based
incentives payable in cash. The creation of the Plan shall not diminish or
prejudice other compensation programs approved from time to time by the Board.

         For purposes of the Plan, the following terms shall be defined as set
forth below:

         A.     "Affiliate" means any entity other than the Corporation and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Corporation directly or indirectly owns at least
20% of the combined voting power of all classes of stock of such entity or at
least 20% of the ownership interests in such entity.

         B.     "Board" means the Board of Directors of the Corporation.

         C.     "Common Stock" means the Corporation's Common Stock, par value
$1.00 per share.

         D.     "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.

         E.     "Committee" means the Committee referred to in Section 2 of the
Plan.

         F.     "Corporation" means Genesco Inc., a corporation organized under
the laws of the State of Tennessee or any successor corporation.

         G.     "Disability" means disability as determined under the
Corporation's long-term disability insurance plan, as it may be amended from
time to time.

         H.     "Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2)(i) as promulgated by the Securities and Exchange Commission
("Commission") under the Securities Exchange Act of 1934, as amended, or any
successor definition adopted by the Commission.

<PAGE>

         I.     "Early Retirement" means retirement, for purposes of this Plan
with the express consent of the Corporation at or before the time of such
retirement, from active employment with the Corporation and any Subsidiary or
Affiliate prior to age 65, in accordance with any applicable early retirement
policy of the Corporation then in effect or as may be approved by the
Committee.

         J.     "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.

         K.     "Fair Market Value" means with respect to the Stock, as of any
given date or dates, unless otherwise determined by the Committee in good
faith, the reported closing price of a share of such class of Stock on the New
York Stock Exchange ("NYSE") or such other exchange or market as is the
principal trading market for such class of Stock, or, if no such sale of a
share of such class of Stock is reported on the NYSE or other exchange or
principal trading market on such date, the fair market value of a share of such
class of Stock as determined by the Committee in good faith.

         L.     "Incentive Stock Option" means any Stock Option intended to be
and designated as an " Incentive Stock Option" within the meaning of Section
422 of the Code.

         M.     "Non-Qualified Stock Option" means any Stock Option that is not
an Incentive Stock Option.

         N.     "Normal Retirement" means retirement from active employment with
the Corporation and any Subsidiary or Affiliate on or after age 65.

         O.     "Other Stock-Based Award" means an award under Section 8 below
that is valued in whole or in part by reference to, or is otherwise based on,
Stock.

         P.     "Outside Director" means a member of the Board who is not an
officer or employee of the Corporation or any Subsidiary or Affiliate of the
Corporation.

         Q.     "Outside Director Restricted Stock" shall have the meaning
provided in Section 9.

         R.     "Plan" means this Genesco Inc. 1996 Stock Incentive Plan, as
amended from time to time.

         S.     "Restricted Stock" means an award of shares of Stock that is
subject to restrictions under Section 7 below.

         T.     "Restriction Period" shall have the meaning provided in Section
7.

         U.     "Retirement" means Normal or Early Retirement.

         V.     "Stock" means the Common Stock.

                                       2
<PAGE>

         W.     "Stock Appreciation Right" means the right pursuant to an award
granted under Section 6 below to surrender to the Corporation all (or a
portion) of a Stock Option in exchange for an amount equal to the difference
between (i) the Fair Market Value, as of the date such Stock Option (or such
portion thereof) is surrendered, of the shares of Stock covered by such Stock
Option (or such portion thereof), subject, where applicable, to the pricing
provisions in Section 6(b)(ii), and (ii) the aggregate exercise price of such
Stock Option (or such portion thereof).

         X.     "Stock Option" or "Option" means any option to purchase shares
of Stock (including Restricted Stock, if the Committee so determines) granted
pursuant to Section 5 below.

         Y.     "Subsidiary" means any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation if each of
the corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.

         In addition, the terms "Change in Control," "Potential Change in
Control" and" Change in Control Price" shall have the meanings set forth,
respectively in Sections 10(b), (c) and (d) below and the term "Cause" shall
have the meaning set forth in Section 5(j) below.

SECTION 2. ADMINISTRATION.

         The Plan shall be administered by a Committee of not less than two
Disinterested Persons, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. The functions of the Committee specified in the
Plan may be exercised by an existing Committee of the Board composed
exclusively of Disinterested Persons. The initial Committee shall be the
Compensation Committee of the Board.

         The Committee shall have authority to grant, pursuant to the terms of
the Plan, to officers, other key employees and consultants eligible under
Section 4: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted
Stock, and/or (iv) Other Stock-Based Awards.

         In particular, the Committee shall have the authority, consistent with
the terms of the Plan:

                  (a) to select the officers and other key employees of and
         consultants to the Corporation and its Subsidiaries and Affiliates to
         whom Stock Options, Stock Appreciation Rights, Restricted Stock,
         and/or Other Stock-Based Awards may from time to time be granted
         hereunder;

                  (b) to determine whether and to what extent Incentive Stock
         Options, Non-Qualified Stock Options, Stock Appreciation Rights,
         Restricted Stock, and/or Other Stock-Based Awards, or any combination
         thereof, are to be granted hereunder to one or more eligible
         employees;

                                       3
<PAGE>

                  (c) to determine the number of shares to be covered by each
         such award granted hereunder;

                  (d) to determine the terms and conditions, not inconsistent
         with the terms of the Plan, of any award granted hereunder (including,
         but not limited to, the share price and any restriction or limitation,
         or any vesting acceleration or waiver of forfeiture restrictions
         regarding any Stock Option or other award and/or the shares of Stock
         relating thereto, based in each case on such factors as the Committee
         shall determine, in its sole discretion); and to amend or waive any
         such terms and conditions to the extent permitted by Section 11
         hereof;

                  (e) to determine whether and under what circumstances a Stock
         Option may be settled in cash or Restricted Stock under Section 5(m)
         instead of Stock;

                  (f) to determine whether, to what extent and under what
         circumstances Option grants and/or other awards under the Plan are to
         be made, and operate, on a tandem basis vis-a-vis other awards under
         the Plan and/or cash awards made outside of the Plan;

                  (g) to determine whether, to what extent and under what
         circumstances Stock and other amounts payable with respect to an award
         under this Plan shall be deferred either automatically or at the
         election of the participant (including providing for and determining
         the amount and

                  (h) to determine whether to require payment withholding
         requirements in shares of Stock.

         The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.

         All decisions made by the Committee pursuant to the provisions of the
Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Corporation and Plan participants.

         Notwithstanding the foregoing, the Committee shall have no authority
to determine the terms or conditions of awards to Outside Directors, which
shall be governed solely by Section 9 hereof.

SECTION 3. SHARES OF STOCK SUBJECT TO PLAN.

         The aggregate number of shares of Stock reserved and available for
distribution under the Plan shall not exceed 4,400,000 shares, which includes
200,000 shares reserved for issuance pursuant to Section 9 hereof. Such shares
of Common Stock may consist, in whole or in part, of authorized and unissued
shares or of issued shares purchased and held by the Corporation.

                                       4
<PAGE>

         If any shares of Stock that have been optioned cease to be subject to
a Stock Option, or if any shares of Stock that are subject to any Restricted
Stock or Other Stock-Based Award granted hereunder are forfeited prior to the
payment of any dividends, if applicable, with respect to such shares of Stock,
or any such award otherwise terminates without a payment being made to the
participant in the form of Stock, such shares shall again be available for
distribution in connection with future awards under the Plan.

         In the event of any merger, reorganization, consolidation,
recapitalization, extraordinary cash dividend, Stock dividend, Stock split or
other change in corporate structure affecting the Stock, an appropriate
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding Options granted under the Plan, and in the number of
shares subject to other outstanding awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
Such adjusted option price shall also be used to determine the amount payable
by the Corporation upon the exercise of any Stock Appreciation Right associated
with any Stock Option. The maximum number of shares that may be awarded to any
participant under Section 4 of this Plan will be adjusted in the same manner as
the number of shares subject to outstanding Options.

SECTION 4. ELIGIBILITY.

         Officers and other key employees of and consultants to the Corporation
and its Subsidiaries and Affiliates (but excluding members of the Committee and
any person who serves only as a director, except as otherwise provided in
Section 9) who are responsible for or contribute to the management, growth
and/or profitability of the business of the Corporation and/or its Subsidiaries
and Affiliates are eligible to be granted awards under the Plan. No individual
employee, officer or consultant shall receive aggregate awards hereunder
amounting to more than 500,000 shares, subject to adjustment as provided in
Section 3.

SECTION 5. STOCK OPTIONS.

         Stock Options may be granted alone, in addition to or in tandem with
other awards granted under the Plan and/or cash awards made outside of the
Plan. Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

         Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. Incentive Stock
Options may be granted only to individuals who are employees of the Corporation
or any Subsidiary of the Corporation.

         The Committee shall have the authority to grant to any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights).

                                       5
<PAGE>

         Options granted to officers, key employees and consultants under the
Plan shall be subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent with the terms of the
Plan, as the Committee shall deem desirable.

                  (a) Option Price. The option price per share of Stock
         purchasable under a Stock Option shall be determined by the Committee
         at the time of grant but shall be not less than 100% (or, in the case
         of any employee who owns stock possessing more than 10% of the total
         combined voting power of all classes of stock of the Corporation or of
         any of its Subsidiaries, not less than 110%) of the Fair Market Value
         of the Stock at grant, in the case of Incentive Stock Options, and not
         less than 50% of the Fair Market Value of the Stock at grant, in the
         case of Non-Qualified Stock Options.

                  (b) Option Term. The term of each Stock Option shall be fixed
         by the Committee, but no Incentive Stock Option shall be exercisable
         more than ten years (or, in the case of an employee who owns stock
         possessing more than 10% of the total combined voting power of all
         classes of stock of the Corporation or any of its Subsidiaries or
         parent corporations, more than five years) after the date the Option
         is granted.

                  (c) Exercisability. Stock Options shall be exercisable at
         such time or times and subject to such terms and conditions as shall
         be determined by the Committee at or after grant; provided, however,
         that except as provided in Section 5(g) and (h) and Section 10, unless
         otherwise determined by the Committee at or after grant, no Stock
         Option shall be exercisable prior to the first anniversary date of the
         granting of the Option. The Committee may provide that a Stock Option
         shall vest over a period of future service at a rate specified at the
         time of grant, or that the Stock Option is exercisable only in
         installments. If the Committee provides, in its sole discretion, that
         any Stock Option is exercisable only in installments, the Committee
         may waive such installment exercise provisions at any time at or after
         grant in whole or in part, based on such factors as the Committee
         shall determine, in its sole discretion. The Committee may establish
         performance conditions or other conditions to the exercisability of
         any Stock Options, as determined by the Committee in its sole
         discretion, which conditions may be waived by the Committee in its
         sole discretion.

                  (d) Method of Exercise. Subject to whatever installment
         exercise restrictions apply under Section 5(c), Stock Options may be
         exercised in whole or in part at any time during the option period, by
         giving written notice of exercise to the Corporation specifying the
         number of shares to be purchased.

                      Such notice shall be accompanied by payment in full of the
         purchase price, either by check, note or such other instrument as the
         Committee may accept. As determined by the Committee, in its sole
         discretion, at or (except in the case of an Incentive Stock Option)
         after grant, payment in full or in part may also be made in the form
         of unrestricted Stock already owned by the optionee or, in the case of
         the exercise of a Non-Qualified Stock Option or Restricted Stock,
         subject to an award hereunder (valued at the Fair Market Value of the
         Stock on the date the option is exercised, as determined by the
         Committee). If payment of the exercise price is made in part or in
         full

                                       6
<PAGE>

         with Stock, the Committee may award to the employee a new Stock Option
         to replace the Stock which was surrendered.

                      If payment of the option exercise price of a Non-Qualified
         Stock Option is made in whole or in part in the form of Restricted
         Stock, such Restricted Stock (and any replacement shares relating
         thereto) shall remain (or be) restricted in accordance with the
         original terms of the Restricted Stock award in question, and any
         additional Stock received upon the exercise shall be subject to the
         same forfeiture restrictions, unless otherwise determined by the
         Committee, in its sole discretion, at or after grant.

                      No shares of Stock shall be issued until full payment
         therefor has been made. An optionee shall generally have the rights to
         dividends or other rights of a stockholder with respect to shares
         subject to the Option when the optionee has given written notice of
         exercise, has paid in full for such shares, and, if requested, has
         given the representation described in Section 13(a).

                  (e) Non-Transferability of Options. No Stock Option shall be
         transferable by the optionee otherwise than by will or by the laws of
         descent and distribution, and all Stock Options shall be exercisable,
         during the optionee's lifetime, only by the optionee.

                  (f) Bonus for Taxes. In the case of a Non-Qualified Stock
         Option, the Committee in its discretion may award at the time of grant
         or thereafter the right to receive upon exercise of such Stock Option
         a cash bonus calculated to pay part or all of the federal and state,
         if any, income tax incurred by the optionee upon such exercise.

                  (g) Termination by Death. Subject to Section 5(k), if an
         optionee's employment by the Corporation and any Subsidiary or (except
         in the case of an Incentive Stock Option) Affiliate terminates by
         reason of death, any Stock Option held by such optionee may thereafter
         be exercised, to the extent such option was exercisable at the time of
         death or (except in the case of an Incentive Stock Option) on such
         accelerated basis as the Committee may determine at or after grant (or
         except in the case of an Incentive Stock Option, as may be determined
         in accordance with procedures established by the Committee) by the
         legal representative of the estate or by the legatee of the optionee
         under the will of the optionee, for a period of one year (or such
         other period as the Committee may specify at or after grant) from the
         date of such death or until the expiration of the stated term of such
         Stock Option, whichever period is the shorter.

                  (h) Termination by Reason of Disability. Subject to Section
         5(k), if an optionee's employment by the Corporation and any
         Subsidiary or (except in the case of an Incentive Stock Option)
         Affiliate terminates by reason of Disability, any Stock Option held by
         such optionee may thereafter be exercised by the optionee, to the
         extent it was exercisable at the time of termination or (except in the
         case of an Incentive Stock Option) on such accelerated basis as the
         Committee may determine at or after grant (or, except in the case of
         an Incentive Stock Option, as may be determined in accordance with
         procedures established by the Committee), for a period of (i) three
         years (or such other period as the Committee may specify at or after
         grant) from the date of such termination

                                       7
<PAGE>

         of employment or until the expiration of the stated term of such Stock
         Option, whichever period is the shorter, in the case of a
         Non-Qualified Stock Option and (ii) one year from the date of
         termination of employment or until the expiration of the stated term
         of such Stock Option, whichever period is shorter, in the case of an
         Incentive Stock Option; provided however, that, if the optionee dies
         within the period specified in (i) above (or other such period as the
         committee shall specify at or after grant), any unexercised
         Non-Qualified Stock Option held by such optionee shall thereafter be
         exercisable to the extent to which it was exercisable at the time of
         death for a period of twelve months from the date of such death or
         until the expiration of the stated term of such Stock Option,
         whichever period is shorter. In the event of termination of employment
         by reason of Disability, if an Incentive Stock Option is exercised
         after the expiration of the exercise period applicable to Incentive
         Stock Options, but before the expiration of any period that would
         apply if such Stock Option were a Non-Qualified Stock Option, such
         Stock Option will thereafter be treated as a Non-Qualified Stock
         Option.

                  (i) Termination by Reason of Retirement. Subject to Section
         5(k), if an optionee's employment by the Corporation and any
         Subsidiary or (except in the case of an Incentive Stock Option)
         Affiliate terminates by reason of Normal or Early Retirement, any
         Stock Option held by such optionee may thereafter be exercised by the
         optionee, to the extent it was exercisable at the time of such
         Retirement or (except in the case of an Incentive Stock Option) on
         such accelerated basis as the Committee may determine at or after
         grant (or, except in the case of an Incentive Stock Option, as may be
         determined in accordance with procedures established by the
         Committee), for a period of (i) three years (or such other period as
         the Committee may specify at or after grant) from the date of such
         termination of employment or the expiration of the stated term of such
         Stock Option, whichever period is the shorter, in the case of a
         Non-Qualified Stock Option and (ii) three months from the date of such
         termination of employment or the expiration of the stated term of such
         Stock Option, whichever period is the shorter, in the event of an
         Incentive Stock Option; provided however, that, if the optionee dies
         within the period specified in (i) above (or other such period as the
         Committee shall specify at or after grant), any unexercised
         Non-Qualified Stock Option held by such optionee shall thereafter be
         exercisable to the extent to which it was exercisable at the time of
         death for a period of twelve months from the date of such death or
         until the expiration of the stated term of such Stock Option,
         whichever period is shorter. In the event of termination of employment
         by reason of Retirement, if an Incentive Stock Option is exercised
         after the expiration of the exercise period applicable to Incentive
         Stock Options, but before the expiration of the period that would
         apply if such Stock Option were a Non-Qualified Stock Option, the
         option will thereafter be treated as a Non-Qualified Stock Option.

                  (j) Other Termination. Subject to Section 5(k), unless
         otherwise determined by the Committee (or pursuant to procedures
         established by the Committee) at or (except in the case of an
         Incentive Stock Option) after grant, if an optionee's employment by
         the Corporation and any Subsidiary or (except in the case of an
         Incentive Stock Option) Affiliate is involuntarily terminated for any
         reason other than death, Disability or Normal or Early Retirement, the
         Stock Option shall thereupon terminate, except that such Stock Option
         may be exercised, to the extent otherwise then exercisable, for the
         lesser of three

                                       8
<PAGE>

         months or the balance of such Stock Option's term if the involuntary
         termination is without Cause. For purposes of this Plan, "Cause" means
         (i) a felony conviction of a participant or the failure of a
         participant to contest prosecution for a felony, or (ii) a
         participant's willful misconduct or dishonesty, which is directly and
         materially harmful to the business or reputation of the Corporation or
         any Subsidiary or Affiliate. If an optionee voluntarily terminates
         employment with the Corporation and any Subsidiary or (except in the
         case of an Incentive Stock Option) Affiliate (except for Disability,
         Normal or Early Retirement), the Stock Option shall thereupon
         terminate; provided, however, that the Committee at grant or (except
         in the case of an Incentive Stock Option) thereafter may extend the
         exercise period in this situation for the lesser of three months or
         the balance of such Stock Option's term.

                  (k) Incentive Stock Options. Anything in the Plan to the
         contrary notwithstanding, no term of this Plan relating to Incentive
         Stock Options shall be interpreted, amended or altered, nor shall any
         discretion or authority granted under the Plan be so exercised, so as
         to disqualify the Plan under Section 422 of the Code, or, without the
         consent of the optionee(s) affected, to disqualify any Incentive Stock
         Option under such Section 422.

                      No Incentive Stock Option shall be granted to any
         participant under the Plan if such grant would cause the aggregate
         Fair Market Value (as of the date the Incentive Stock Option is
         granted) of the Stock with respect to which all Incentive Stock
         Options issued after December 31, 1986 are exercisable for the first
         time by such participant during any calendar year (under all such
         plans of the Company and any Subsidiary) to exceed $100,000.

                      To the extent permitted under Section 422 of the Code or
         the applicable regulations thereunder or any applicable Internal
         Revenue Service pronouncement:

                      (i) if (x) a participant's employment is terminated by
                  reason of death, Disability or Retirement and (y) the portion
                  of any Incentive Stock Option that is otherwise exercisable
                  during the post-termination period specified under Section
                  5(g), (h) or (i), applied without regard to the $100,000
                  limitation contained in Section 422(d) of the Code, is
                  greater than the portion of such Option that is immediately
                  exercisable as an "Incentive Stock Option" during such
                  post-termination period under Section 422, such excess shall
                  be treated as a Non-Qualified Stock Option; and

                      (ii) if the exercise of an Incentive Stock Option is
                  accelerated by reason of a Change in Control, any portion of
                  such Option that is not exercisable as an Incentive Stock
                  Option by reason of the $100,000 limitation contained in
                  Section 422(d) of the Code shall be treated as a
                  Non-Qualified Stock Option.

                  (l) Buyout Provisions. The Committee may at any time offer to
         buy out for a payment in cash, Stock or Restricted Stock an Option
         previously granted, based on such

                                       9
<PAGE>

         terms and conditions as the Committee shall establish and communicate
         to the optionee at the time that such offer is made.

                  (m) Settlement Provisions. If the option agreement so
         provides at grant or (except in the case of an Incentive Stock Option)
         is amended after grant and prior to exercise to so provide (with the
         optionee's consent), the Committee may require that all or part of the
         shares to be issued with respect to the spread value of an exercised
         Option take the form of Restricted Stock, which shall be valued on the
         date of exercise on the basis of the Fair Market Value (as determined
         by the Committee) of such Restricted Stock determined without regards
         to the forfeiture restrictions involved.

                  (n) Performance and Other Conditions. The Committee may
         condition the exercise of any Option upon the attainment of specified
         performance goals or other factors as the Committee may determine, in
         its sole discretion. Unless specifically provided in the option
         agreement, any such conditional Option shall vest immediately prior to
         its expiration if the conditions to exercise have not theretofore been
         satisfied. The shares of Common Stock acquired pursuant to any
         conditional Option shall not be transferable by an Optionee subject to
         Section 16(a) of the Exchange Act within six months of the date such
         Option first becomes exercisable.

SECTION 6. STOCK APPRECIATION RIGHTS.

         (a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of the grant of such
Stock Option.

         A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, subject to such
provisions as the Committee may specify at grant where a Stock Appreciation
Right is granted with respect to less than the full number of shares covered by
a related Stock Option.

         A Stock Appreciation Right may be exercised by an optionee, subject to
Section 6(b), in accordance with the procedures established by the Committee
for such purpose. Upon such exercise, the optionee shall be entitled to receive
an amount determined in the manner prescribed in Section 6(b). Stock Options
relating to exercised Stock Appreciation Rights shall no longer be exercisable
to the extent that the related Stock Appreciation Rights have been exercised.

         (b) Terms and Conditions. Stock Appreciation Rights shall be subject
to such terms and conditions, not inconsistent with the provisions of the Plan,
as shall be determined from time to time by the Committee, including the
following:

             (i) Stock Appreciation Rights shall be exercisable only at such
         time or times and to the extent that the Stock Options to which they
         relate shall be exercisable in

                                      10
<PAGE>

         accordance with the provisions of Section 5 and this Section 6 of the
         Plan; provided, however, that any Stock Appreciation Right granted to
         an optionee subject to Section 16(a) of the Exchange Act subsequent to
         the grant of the related Stock Option shall not be exercisable during
         the first six months of its term. The exercise of Stock Appreciation
         Rights held by optionees who are subject to Section 16(a) of the
         Exchange Act shall comply with Rule 16b-3(e) thereunder, to the extent
         applicable. In particular, such Stock Appreciation Rights shall be
         exercisable only pursuant to an irrevocable election made at least six
         months prior to the date of exercise or within the applicable ten
         business day" window" periods specified in Rule 16b-3(e)(3).

             (ii) Upon the exercise of a Stock Appreciation Right, an optionee
         shall be entitled to receive an amount in cash and/or shares of Stock
         equal in value to the excess of the Fair Market Value of one share of
         Stock over the option price per share specified in the related Stock
         Option multiplied by the number of shares in respect of which the
         Stock Appreciation Right shall have been exercised, with the Committee
         having the right to determine the form of payment. When payment is to
         be made in shares, the number of shares to be paid shall be calculated
         on the basis of the Fair Market Value of the shares on the date of
         exercise. When payment is to be made in cash, such amount shall be
         calculated on the basis of the average of the highest and lowest
         quoted selling price, regular way, of the Stock on the New York Stock
         Exchange or such other exchange or market as is the principal trading
         market for the Stock, or, if no such sale of Stock is reported on such
         date, the fair market value of the Stock as determined by the
         Committee in good faith.

             (iii) Stock Appreciation Rights shall be transferable only when and
         to the extent that the underlying Stock Option would be transferable
         under Section 5(e) of the Plan.

             (iv) Upon the exercise of a Stock Appreciation Right, the Stock
         Option or part thereof to which such Stock Appreciation Right is
         related shall be deemed to have been exercised for the purpose of the
         limitation set forth in Section 3 of the Plan on the number of shares
         of Stock to be issued under the Plan.

             (v) The Committee, in its sole discretion, may also provide that,
         in the event of a Change in Control and/or a Potential Change in
         Control, the amount to be paid upon the exercise of a Stock
         Appreciation Right shall be based on the Change in Control Price,
         subject to such terms and conditions as the Committee may specify at
         grant.

             (vi) The Committee may condition the exercise of any Stock
         Appreciation Right upon the attainment of specified performance goals
         or other factors as the Committee may determine, in its sole
         discretion. Unless specifically provided in the applicable award
         agreement, any such conditional Stock Appreciation Right held by a
         grantee subject to Section 16(a) of the Exchange Act shall not be
         exercisable until the expiration of six months following the
         satisfaction of the condition giving rise to such Stock Appreciation
         Right.

                                      11
<PAGE>

SECTION 7. RESTRICTED STOCK.

         (a) Administration. Shares of Restricted Stock may be issued either
alone, in addition to or in tandem with other awards granted under the Plan
and/or cash awards made outside the Plan. The Committee shall determine the
eligible persons to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares of Restricted Stock to be awarded to
any person, the price (if any) to be paid by the recipient of Restricted Stock
(subject to Section 7(b)), the time or times within which such awards may be
subject to forfeiture, and the other terms, restrictions and conditions of the
awards in addition to those set forth in Section 7(c).

         The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion.

         The provisions of Restricted Stock awards need not be the same with
respect to each recipient.

         (b) Awards and Certificates. The prospective recipient of a Restricted
Stock award shall not have any rights with respect to such award, unless and
until such recipient has executed an agreement evidencing the award and has
delivered a fully executed copy thereof to the Corporation, and has otherwise
complied with the applicable terms and conditions of such award.

             (i) The purchase price for shares of Restricted Stock shall be
         established by the Committee and may be zero.

             (ii) Awards of Restricted Stock must be accepted within a period of
         60 days (or such shorter period as the Committee may specify at grant)
         after the award date, by executing a Restricted Stock Award Agreement
         and paying whatever price (if any) is required under Section 7(b)(i).

             (iii) Each participant receiving a Restricted Stock award shall be
         issued a stock certificate in respect of such shares of Restricted
         Stock. Such certificate shall be registered in the name of such
         participant, and shall bear an appropriate legend referring to the
         terms, conditions, and restrictions applicable to such award.

             (iv) The Committee shall require that the stock certificates
         evidencing such shares be held in custody by the Corporation until the
         restrictions thereon shall have lapsed, and that, as a condition of
         any Restricted Stock award, the participant shall have delivered a
         stock power, endorsed in blank, relating to the Stock covered by such
         award.

         (c) Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to this Section 7 shall be subject to the following
restrictions and conditions:

                                      12
<PAGE>

             (i) In accordance with the provisions of this Plan and the award
         agreement, during a period set by the Committee commencing with the
         date of such award (the "Restriction Period"), the participant shall
         not be permitted to sell, transfer, pledge, assign or otherwise
         encumber shares of Restricted Stock awarded under the Plan. Within
         these limits, the Committee, in its sole discretion, may provide for
         the lapse of such restrictions in installments and may accelerate or
         waive such restrictions in whole or in part, based on service,
         performance and/or such other factors or criteria as the Committee may
         determine, in its sole discretion.

             (ii) Except as provided in this paragraph (ii) and Section 7(c)(i),
         the participant shall have, with respect to the shares of Restricted
         Stock, all of the rights of a stockholder of the Corporation,
         including the right to vote the shares, and the right to receive any
         cash dividends. The Committee, in its sole discretion, as determined
         at the time of award, may permit or require the payment of cash
         dividends to be deferred and, if the Committee so determines,
         reinvested, subject to Section 14(e), in additional Restricted Stock
         to the extent shares are available under Section 3, or otherwise
         reinvested. Pursuant to Section 3 above, Stock dividends issued with
         respect to Restricted Stock shall be treated as additional shares of
         Restricted Stock that are subject to the same restrictions and other
         terms and conditions that apply to the shares with respect to which
         such dividends are issued. If the Committee so determines, the award
         agreement may also impose restrictions on the right to vote and the
         right to receive dividends.

             (iii) Subject to the applicable provisions of the award agreement
         and this Section 7, upon termination of a participant's employment
         with the Corporation and any Subsidiary or Affiliate for any reason
         during the Restriction Period, all shares still subject to restriction
         will vest, or be forfeited, in accordance with the terms and
         conditions established by the Committee at or after grant.

             (iv) If and when the Restriction Period expires without a prior
         forfeiture of the Restricted Stock subject to such Restriction Period,
         certificates for an appropriate number of unrestricted shares shall be
         delivered to the participant promptly.

         (d) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Corporation and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or Stock to the recipient of a restricted stock award, subject to such
performance, future service, deferral and other terms and conditions as may be
specified by the Committee.

SECTION 8. OTHER STOCK-BASED AWARDS.

         (a) Administration. Other Stock-Based Awards, including, without
limitation, performance shares, convertible preferred stock, convertible
debentures, exchangeable securities and Stock awards or options valued by
reference to earnings per share or Subsidiary performance, may be granted
either alone or in addition to or in tandem with Stock Options,

                                      13
<PAGE>

Stock Appreciation Rights or Restricted Stock granted under the Plan and/or
cash awards made outside of the Plan; provided that no such Other Stock-Based
Awards may be granted in tandem with Incentive Stock Options if that would
cause such Stock Options not to qualify as Incentive Stock Options pursuant to
Section 422 of the Code.

         Subject to the provisions of the Plan, the Committee shall have
authority to determine the persons to whom and the time or times at which such
awards shall be made, the number of shares of Stock to be awarded pursuant to
such awards, and all other conditions of the awards. The Committee may also
provide for the grant of Stock upon the completion of a specified performance
period.

         The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.

         (b) Terms and Conditions. Other Stock-Based Awards made pursuant to
this Section 8 shall be subject to the following terms and conditions:

             (i) Shares subject to awards under this Section 8 and the award
         agreement referred to in Section 8(b)(v) below, may not be sold,
         assigned, transferred, pledged or otherwise encumbered prior to the
         date on which the shares are issued, or, if later, the date on which
         any applicable restriction, performance or deferral period lapses.

             (ii) Subject to the provisions of this Plan and the award agreement
         and unless otherwise determined by the Committee at grant, the
         recipient of an award under this Section 8 shall be entitled to
         receive, currently or on a deferred basis, interest or dividends or
         interest or dividend equivalents with respect to the number of shares
         covered by the award, as determined at the time of the award by the
         Committee, in its sole discretion, and the Committee may provide that
         such amounts (if any) shall be deemed to have been reinvested in
         additional Stock or otherwise reinvested.

             (iii) Any award under Section 8 and any Stock covered by any such
         award shall vest or be forfeited to the extent so provided in the
         award agreement, as determined by the Committee, in its sole
         discretion.

             (iv) In the event of the participant's Retirement, Disability or
         death, or in cases of special circumstances, the Committee may, in its
         sole discretion, waive in whole or in part any or all of the remaining
         limitations imposed hereunder (if any) with respect to any or all of
         an award under this Section 8.

             (v) Each award under this Section 8 shall be confirmed by, and
         subject to the terms of, an agreement or other instrument by the
         Corporation and the participant.

             (vi) Stock (including securities convertible into Stock) issued on
         a bonus basis under this Section 8 may be issued for no cash
         consideration. Stock (including securities convertible into Stock)
         purchased pursuant to a purchase right awarded under this Section 8
         shall be priced at least 85% of the Fair Market Value of the Stock on
         the date of grant.

                                      14
<PAGE>

SECTION 9. AWARDS TO OUTSIDE DIRECTORS.

         (a) The provisions of this Section 9 shall apply only to awards to
Outside Directors in accordance with this Section 9. The Committee shall have
no authority to determine the timing, terms or conditions of any award under
this Section 9.

         (b) On the date of the Annual Meeting of Shareholders at which an
Outside Director is elected as an Outside Director for the first time, such
Outside Director will receive and on the date of the 1997 Annual Meeting of
Shareholders of the Corporation, each Outside Director will receive an
automatic grant of restricted stock pursuant to this Section 9 (the "Outside
Directors Restricted Stock") in a number of shares of stock which will be
determined by dividing:

             (i) $15,000 by

             (ii) the average of the daily closing prices of the Stock for the
         first five (5) trading days of the month in which the Annual Meeting
         is held (as reported in The Wall Street Journal), rounding up or down
         any fractional share of Stock to the nearest whole share.

         (c) The Outside Director Restricted Stock shall vest as follows:

             (i) At the first Annual Meeting of Shareholders following the
         Annual Meeting at which the Outside Director Restricted Stock was
         granted, if the grantee is still serving as a director of the
         Corporation, the Outside Director Restricted Stock shall vest with
         respect to one-third of the shares of the Outside Director Restricted
         Stock;

             (ii) At the second Annual Meeting of Shareholders following the
         Annual Meeting at which the Outside Director Restricted Stock was
         granted, if the director is still serving as a director of the
         Corporation, the Outside Director Restricted Stock shall vest with
         respect to one-half of the remaining shares of the Outside Director
         Restricted Stock; and

             (iii) At the third Annual Meeting of Shareholders following the
         Annual Meeting at which the Outside Director Restricted Stock was
         granted, if the director is still serving as a director of the
         Corporation, the Outside Director Restricted Stock shall vest with
         respect to the remaining shares of Outside Director Restricted Stock.

         (d) By written notice to the Secretary of the Corporation given at
least six months prior to the end of a fiscal year, an Outside Director may
elect irrevocably to receive all or a specified portion of his annual retainers
for board membership and any committee chairmanship for the following fiscal
year in a number of shares of restricted stock (the "Retainer Stock")
determined by dividing the total amount of retainer specified in the election
by 75% of the average of the daily closing prices of the Stock on the New York
Stock Exchange (as reported in The Wall Street Journal) for the last five
trading days of the fiscal year in which the election was made. Shares of the
Retainer Stock shall be granted as of the first business day of the fiscal year

                                      15
<PAGE>

as to which the election is effective, subject to forfeiture to the extent not
earned upon the Outside Director's ceasing to serve as a director or committee
chairman during such fiscal year.

         (e) Until the earlier of (i) five years from the date of grant and
(ii) the date on which the Outside Director ceases to serve as a director of
the Corporation (the " Outside Director Period of Restriction"), no Outside
Director Restricted Stock or Retainer Stock may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, otherwise than by will or by
the laws of descent and distribution.

         Each certificate representing Outside Director Restricted Stock and
Retainer Stock granted pursuant to this Section 9 shall bear the following
legend:

             "The sale or other transfer of the shares represented by this
             certificate, whether voluntary, involuntary, or by operation of
             law, is subject to certain restrictions on transfer set forth in
             the Genesco Inc. 1996 Stock Incentive Plan (the "Plan"), and rules
             of administration adopted pursuant to such Plan. A copy of the Plan
             and the rules of such Plan may be obtained from the Secretary of
             Genesco Inc."

Once the Outside Director Period of Restriction has lapsed, the grantee shall
be entitled to have the legend required by this Section 9 removed from such
stock certificate(s); provided however, that such certificate shall be subject
to any legend required by applicable state or federal law.

         (f) From the date on which the Outside Director Restricted Stock and
Retainer Stock is granted, grantees awarded such Stock may exercise full voting
rights with respect to the Outside Director Restricted Stock and Retainer
Stock.

         (g) Grantees holding Outside Director Restricted Stock or Retainer
Stock that has vested in accordance with Section 9(c) or (d) hereof shall be
entitled to receive all dividends and other distributions paid with respect to
such shares of Stock while they are so held. If any such dividends, or
distributions are paid in Stock, such shares of Stock shall be subject to the
same restrictions on transferability as the shares of Outside Director
Restricted Stock or Retainer Stock with respect to which they were paid.

         (h) Annually on the date of the Annual Meeting of Shareholders of the
Corporation, each Outside Director shall receive the automatic grant of options
(the "Outside Director Stock Options") to purchase 4,000 shares of Common Stock
at an exercise price equal to the Fair Market Value of the Common Stock on the
date of grant. The Outside Director Stock Options shall become exercisable six
months after their respective dates of grant, and shall expire at 11:59 p.m.
Nashville, Tennessee, time on the tenth anniversary of their respective dates
of grant. They may be exercised by giving written notice of exercise,
accompanied by payment in full of the exercise price, either by check or by
wire transfer of funds. The Outside Director Stock Options shall not be
transferable except by will or by the laws of descent and distribution. In the
event of the death of an Outside Director holding Outside Director Stock
Options, they may thereafter be exercised, to the extent they were exercisable
at the time of death, by the legal representative of the estate or by the
legatee under the will of the Outside Director, for a period

                                      16
<PAGE>

of one year after the date of death or until their earlier expiration,
whichever period is shorter. If an Outside Director ceases to serve on the
Board of Directors for any reason other than death, the Outside Director's
Outside Director Stock Options may thereafter be exercised, to the extent they
were exercisable at the date on which the holder's service terminated, for a
period of three months after such date or until their earlier expiration,
whichever period is shorter.

         (i) All restrictions imposed on the Outside Director Restricted Stock
and Retainer Stock shall expire and all Outside Director Stock Options shall
vest automatically upon a Change in Control, but the Outside Director
Restricted Stock, the Retainer Stock and the Outside Director Stock Options
shall not otherwise be subject to Section 10 hereof.

         (j) All shares of Outside Director Restricted Stock and Retainer Stock
and all Outside Director Stock Options which have not vested in accordance with
Section 9(c), (d) or (h), as applicable, at the time of a grantee's
resignation, removal or failure to be elected as a member of the Board of
Directors shall be forfeited and such forfeited shares shall again be available
for award hereunder.

         (k) The Board may not amend or alter this Section 9, except as
provided in Section 11, without the approval of the holders of a majority of
the issued and outstanding shares of Common Stock, and in no event shall this
Section 9 be amended more than once every six months, other than to comply with
changes in the Code or the Employee Retirement Income Security Act of 1974, as
amended, or the regulations thereunder.

SECTION 10.  CHANGE IN CONTROL PROVISIONS.

         (a) Impact of Event. In the event of:

             (1) a "Change in Control" as defined in Section 10(b) or

             (2) a "Potential Change in Control" as defined in Section 10(c),
         but only if and to the extent so determined by the Committee or the
         Board at or after grant (subject to any right of approval expressly
         reserved by the Committee or the Board at the time of such
         determination),

the following acceleration and valuation provisions shall apply if so
determined by the Board in its sole discretion:

             (i) Any Stock Appreciation Rights (including, without limitation,
         any Limited Stock Appreciation Rights) outstanding for at least six
         months and any Stock Option awarded under the Plan not previously
         exercisable and vested shall become fully exercisable and vested.

             (ii) The restrictions applicable to any Restricted Stock and Other
         Stock-Based Awards, in each case to the extent not already vested
         under the Plan, shall lapse and such shares and awards shall be deemed
         fully vested.

                                      17
<PAGE>

             (iii) Except as otherwise provided in Section 10(a)(iv) below, the
         value of all outstanding Stock Options, Stock Appreciation Rights,
         Restricted Stock and Other Stock-Based Awards, in each case to the
         extent vested, shall, unless otherwise determined by the Committee in
         its sole discretion at or (except in the case of an Incentive Stock
         Option) after grant but prior to any Change in Control, be cashed out
         on the basis of the "Change in Control Price" as defined in Section
         10(d) as of the date such Change in Control or such Potential Change
         in Control is determined to have occurred or such other date as the
         Committee may determine prior to the Change in Control.

             (iv) In the case of any Stock Options, Stock Appreciation Rights,
         Restricted Stock and Other Stock-Based Awards held by any person
         subject to Section 16(a) of the Exchange Act, the value of all such
         Stock Options, Stock Appreciation Rights, Restricted Stock or Other
         Stock-Based Awards, in each case to the extent that they are vested
         and have been held for at least six months, shall (unless otherwise
         determined by the Committee in its sole discretion) be cashed out on
         the basis of the "Change in Control Price" as defined in Section 10(d)
         as of the date of such Change in Control or such Potential Change in
         Control is determined to have occurred, but only if the Change in
         Control or Potential Change in Control is outside the control of the
         grantee for purposes of Rule 16b-3(e)(3) under the Exchange Act, or
         any successor provision promulgated by the Securities and Exchange
         Commission.

         (b) Definition of Change in Control. For purposes of Section 10(a), a
"Change in Control" means the happening of any of the following:

             (i) any person or entity, including a "group" as defined in Section
         13(d)(3) of the Exchange Act, other than the Corporation or a
         wholly-owned subsidiary thereof or any employee benefit plan of the
         Corporation or any of its Subsidiaries, becomes the beneficial owner
         of the Corporation's securities having 25% or more of the combined
         voting power of the then outstanding securities of the Corporation
         that may be cast for the election of directors of the Corporation
         (other than as a result of an issuance of securities initiated by the
         Corporation in the ordinary course of business); or

             (ii) as the result of, or in connection with, any cash tender or
         exchange offer, merger or other business combination, sales of assets
         or contested election, or any combination of the foregoing
         transactions, less than a majority of the combined voting power of the
         then outstanding securities of the Corporation or any successor
         corporation or entity entitled to vote generally in the election of
         the directors of the Corporation or such other corporation or entity
         after such transaction are held in the aggregate by the holders of the
         Corporation's securities entitled to vote generally in the election of
         directors of the Corporation immediately prior to such transaction; or

             (iii) during any period of two consecutive years, individuals who
         at the beginning of any such period constitute the Board cease for any
         reason to constitute at least a majority thereof, unless the election,
         or the nomination for election by the Corporation's stockholders, of
         each director of the Corporation first elected during such period was
         approved by a vote of at least two-thirds of the directors of the
         Corporation

                                      18
<PAGE>

         then still in office who were directors of the Corporation at the
         beginning of any such period.

         (c) Definition of Potential Change in Control. For purposes of Section
10(a), a "Potential Change in Control" means the happening of any one of the
following:

             (i) The approval by stockholders of an agreement by the
         Corporation, the consummation of which would result in a Change in
         Control of the Corporation as defined in Section 10(b); or

             (ii) The acquisition of beneficial ownership, directly or
         indirectly, by any entity, person or group (other than the Corporation
         or a Subsidiary or any Corporation employee benefit plan (including
         any trustee of such plan acting as such trustee)) of securities of the
         Corporation representing 5% or more of the combined voting power of
         the Corporation's outstanding securities and the adoption by the
         Committee of a resolution to the effect that a Potential Change in
         Control of the Corporation has occurred for purposes of this Plan.

         (d) Change in Control Price. For purposes of this Section 10, "Change
in Control Price" means the highest price per share paid in any transaction
reported on the New York Stock Exchange or such other exchange or market as is
the principal trading market for the Stock, or paid or offered in any bona fide
transaction related to a Potential or actual Change in Control of the
Corporation at any time during the 60 day period immediately preceding the
occurrence of the Change in Control (or, where applicable, the occurrence of
the Potential Change in Control event), in each case as determined by the
Committee except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the optionee
exercises such Stock Appreciation Rights or, where applicable, the date on
which a cash out occurs under Section 10(a)(iii).

SECTION 11. AMENDMENTS AND TERMINATION.

         The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of
an optionee or participant under a Stock Option, Stock Appreciation Right,
Restricted Stock, Other Stock-Based Award or Outside Director Restricted Stock
theretofore granted, without the optionee's or participant's consent or which,
without the approval of the Corporation's stockholders, would:

         (a) except as expressly provided in this Plan, increase the total
number of shares reserved for the purpose of the Plan;

         (b) materially increase the benefits accruing to participants under
the Plan; or

         (c) materially modify the requirements as to eligibility for
participation in the Plan.

                                      19
<PAGE>

         The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one for one or other basis), including
previously granted Stock Options having higher option exercise prices.

         Subject to the above provisions, the Board shall have broad authority
to amend the Plan to take into account changes in applicable securities and tax
laws and accounting rules, as well as other developments.

SECTION 12.  UNFUNDED STATUS OF PLAN.

         The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Corporation, nothing contained herein shall give
any such participant or optionee any rights that are greater than those of a
general creditor of the Corporation. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards hereunder; provided, however, that, unless the Committee otherwise
determines with the consent of the affected participant, the existence of such
trusts or other arrangements is consistent with the" unfunded" status of the
Plan.

SECTION 13.  GENERAL PROVISIONS.

         (a) The Committee may require each person purchasing shares pursuant
to a Stock Option or other award under the Plan to represent to and agree with
the Corporation in writing that the optionee or participant is acquiring the
shares without a view to distribution thereof. The certificates for such shares
may include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.

         All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission, any stock
exchange upon which the Stock is then listed, and any applicable Federal or
state securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.

         (b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.

         (c) The adoption of the Plan shall not confer upon any employee of the
Corporation or any Subsidiary or Affiliate any right to continued employment
with the Corporation or a Subsidiary or Affiliate, as the case may be, nor
shall it interfere in any way with the right of the

                                      20
<PAGE>

Corporation or a Subsidiary or Affiliate to terminate the employment of any of
its employees at any time.

         (d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Corporation, or make arrangements satisfactory to the Committee regarding
the payment of, any Federal, state, or local taxes of any kind required by law
to be withheld with respect to such amount. The Committee may require
withholding obligations to be settled with Stock, including Stock that is part
of the award that gives rise to the withholding requirement. The obligations of
the Corporation under the Plan shall be conditional on such payment or
arrangements and the Corporation and its Subsidiaries or Affiliates shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.

         (e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or other types of Plan awards) at
the time of any dividend payment shall only be permissible if sufficient shares
of Stock are available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options and other Plan awards).

         (f) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Tennessee.

         (g) The members of the Committee and the Board shall not be liable to
any employee or other person with respect to any determination made hereunder
in a manner that is not inconsistent with their legal obligations as members of
the Board. In addition to such other rights of indemnification as they may have
as directors or as members of the Committee, the members of the Committee shall
be indemnified by the Corporation against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Corporation) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such Committee member is
liable for negligence or misconduct in the performance of his duties; provided
that within 60 days after institution of any such action, suit or proceeding,
the Committee member shall in writing offer the Corporation the opportunity, at
its own expense, to handle and defend the same.

         (h) In addition to any other restrictions on transfer that may be
applicable under the terms of this Plan or the applicable award agreement, no
Option, Stock Appreciation Right, Restricted Stock award, or Other Stock-Based
Award or other right issued under this Plan is transferable by the participant
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined under the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended. The designation of
a beneficiary will not constitute a transfer.

                                      21
<PAGE>

SECTION 14.  EFFECTIVE DATE OF PLAN.

         The Plan shall be effective as of the date of approval of the Plan by
a majority of the votes cast on the question of the Plan's approval by the
holders of the Corporation's Stock.

SECTION 15.  TERM OF PLAN.

         No Stock Option, Stock Appreciation Right, Restricted Stock award,
Other Stock-Based Award or Outside Director Restricted Stock award shall be
granted pursuant to the Plan on or after the tenth anniversary of the date of
adoption by the Plan by the Board, but awards granted prior to such tenth
anniversary may be extended beyond that date.

                                      22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00051-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00051-of-00352.parquet"}]]