Document:

<PAGE>

                                                                     Exhibit 4.5

================================================================================

                             CHARMING SHOPPES, INC.
                                   as Company

                                   ----------

                 7 1/2% Convertible Subordinated Notes Due 2006

                                   ----------

                                    INDENTURE
                            Dated as of July 22, 1996

                                   ----------

                            FIRST UNION NATIONAL BANK
                                   as Trustee

================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                     Page
<S>                                                                                                   <C>
ARTICLE I             Definitions and Incorporation by Reference.......................................1

         SECTION 1.01.    Definitions..................................................................1
         SECTION 1.02.    Other Definitions............................................................5
         SECTION 1.03.    Incorporation by Reference of Trust Indenture Act............................6
         SECTION 1.04.    Rules of Construction........................................................6

ARTICLE II            The Notes........................................................................7

         SECTION 2.01.    Form and Dating..............................................................7
         SECTION 2.02.    Execution and Authentication.................................................8
         SECTION 2.03.    Registrar, Paying Agent and Conversion Agent.................................9
         SECTION 2.04.    Paying Agent To Hold Money in Trust..........................................9
         SECTION 2.05.    Noteholder Lists............................................................10
         SECTION 2.06.    Transfer and Exchange.......................................................10
         SECTION 2.07.    Replacement Notes...........................................................10
         SECTION 2.08.    Outstanding Notes...........................................................11
         SECTION 2.09.    Treasury Notes..............................................................11
         SECTION 2.10.    Temporary Notes.............................................................11
         SECTION 2.11.    Cancellation................................................................11
         SECTION 2.12.    Defaulted Interest..........................................................11
         SECTION 2.13.    CUSIP Numbers...............................................................12

ARTICLE III           Redemption......................................................................12

         SECTION 3.01.    Notices to Trustee..........................................................12
         SECTION 3.02.    Selection of Notes to be Redeemed...........................................12
         SECTION 3.03.    Notice of Redemption........................................................12
         SECTION 3.04.    Effect of Notice of Redemption..............................................13
         SECTION 3.05.    Deposit of Redemption Price.................................................13
         SECTION 3.06.    Notes Redeemed in Part......................................................13
         SECTION 3.07.    Optional Redemption.........................................................14
         SECTION 3.08.    Change of Control Offer.....................................................14

ARTICLE IV            Covenants.......................................................................15

         SECTION 4.01.    Payment of Notes............................................................15
         SECTION 4.02.    Reports by Company..........................................................16
         SECTION 4.03.    Stay, Extension and Usury Laws..............................................17
         SECTION 4.04.    Corporate Existence.........................................................17
         SECTION 4.05.    Taxes.......................................................................17
         SECTION 4.06.    Change of Control...........................................................17
</TABLE>

                                       -i-

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                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
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<S>                                                                                                   <C>
ARTICLE V             Conversion......................................................................18

         SECTION 5.01.    Conversion Privilege........................................................18
         SECTION 5.02.    Conversion Procedure........................................................18
         SECTION 5.03.    Fractional Shares...........................................................19
         SECTION 5.04.    Taxes on Conversion.........................................................19
         SECTION 5.05.    Company To Provide Stock....................................................20
         SECTION 5.06.    Adjustment of Conversion Price..............................................20
         SECTION 5.07.    No Adjustment...............................................................23
         SECTION 5.08.    Other Adjustments...........................................................23
         SECTION 5.09.    Adjustments for Tax Purposes................................................23
         SECTION 5.10.    Adjustments by the Company..................................................23
         SECTION 5.11.    Notice of Adjustment........................................................24
         SECTION 5.12.    Notice of Certain Transactions..............................................24
         SECTION 5.13.    Effect of Reclassifications, Consolidations, Mergers or Sales on
                          Conversion Privilege........................................................24
         SECTION 5.14.    Trustee's Disclaimer........................................................25

ARTICLE VI            Subordination...................................................................25

         SECTION 6.01.    Agreement To Subordinate....................................................25
         SECTION 6.02.    No Payment on Notes if Senior Debt in Default...............................26
         SECTION 6.03.    Distribution on Acceleration of Notes; Dissolution and
                          Reorganization; Subrogation of Notes........................................26
         SECTION 6.04.    Reliance by Senior Debt on Subordination Provisions.........................29
         SECTION 6.05.    No Waiver of Subordination Provisions.......................................29
         SECTION 6.06.    Trustee's Relation to Senior Debt...........................................30
         SECTION 6.07.    Other Provisions Subject Hereto.............................................30

ARTICLE VII           Consolidation, Merger, Conveyance, Transfer or Lease............................31

         SECTION 7.01.    Company May Consolidate, Etc., Only on Certain Terms........................31
         SECTION 7.02.    Successor Corporation Substituted...........................................31

ARTICLE VIII          Defaults and Remedies...........................................................32

         SECTION 8.01.    Events of Default...........................................................32
         SECTION 8.02.    Acceleration................................................................33
         SECTION 8.03.    Other Remedies..............................................................34
         SECTION 8.04.    Waiver of Past Defaults.....................................................34
         SECTION 8.05.    Control by Majority.........................................................34
         SECTION 8.06.    Limitation on Suits.........................................................34
         SECTION 8.07.    Rights of Noteholders To Receive Payment....................................35
         SECTION 8.08.    Collection Suit by Trustee..................................................35
         SECTION 8.09.    Trustee May File Proofs of Claim............................................35
</TABLE>

                                      -ii-

<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                                     Page
<S>                                                                                                   <C>
         SECTION 8.10.    Priorities..................................................................35
         SECTION 8.11.    Undertaking for Costs.......................................................36

ARTICLE IX            Trustee.........................................................................36

         SECTION 9.01.    Duties of Trustee...........................................................36
         SECTION 9.02.    Rights of Trustee...........................................................36
         SECTION 9.03.    Individual Rights of Trustee................................................37
         SECTION 9.04.    Trustee's Disclaimer........................................................37
         SECTION 9.05.    Notice of Defaults..........................................................37
         SECTION 9.06.    Reports by Trustee to Noteholders...........................................37
         SECTION 9.07.    Compensation and Indemnity..................................................38
         SECTION 9.08.    Replacement of Trustee......................................................38
         SECTION 9.09.    Successor Trustee by Merger, Etc............................................39
         SECTION 9.10.    Eligibility; Disqualification...............................................39
         SECTION 9.11.    Preferential Collection of Claims Against Company...........................40
         SECTION 9.12.    Sections Applicable to Registrar, Paying Agent and Conversion Agent.........40

ARTICLE X             Discharge of Indenture..........................................................40

         SECTION 10.01.   Termination of Company's Obligations........................................40
         SECTION 10.02.   Repayment to Company........................................................40

ARTICLE XI            Amendments, Supplements and Waivers.............................................40

         SECTION 11.01.   Without Consent of Noteholders..............................................40
         SECTION 11.02.   With Consent of Noteholders.................................................41
         SECTION 11.03.   Compliance with Trust Indenture Act.........................................42
         SECTION 11.04.   Revocation and Effect of Consents...........................................42
         SECTION 11.05.   Notation on or Exchange of Notes............................................43
         SECTION 11.06.   Trustee Protected...........................................................43

ARTICLE XII           Miscellaneous...................................................................43

         SECTION 12.01.   Trust Indenture Act Controls................................................43
         SECTION 12.02.   Notices.....................................................................43
         SECTION 12.03.   Communication by Noteholders with Other Noteholders.........................44
         SECTION 12.04.   Certificate and Opinion as to Conditions Precedent..........................44
         SECTION 12.05.   Statements Required in Certificate or Opinion...............................44
         SECTION 12.06.   Rules by Trustee and Agents.................................................44
         SECTION 12.07.   Legal Holidays..............................................................44
         SECTION 12.08.   Counterparts................................................................45
         SECTION 12.09.   Variable Provisions.........................................................45
</TABLE>

                                     -iii-

<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                                     Page
<S>                                                                                                   <C>
         SECTION 12.10.   GOVERNING LAW...............................................................45
         SECTION 12.11.   No Adverse Interpretation of Other Agreements...............................45
         SECTION 12.12.   Successors..................................................................46
         SECTION 12.13.   Severability................................................................46
         SECTION 12.14.   Table of Contents, Headings, Etc............................................46

SIGNATURES............................................................................................46

EXHIBIT A.........FORM OF CONVERTIBLE SUBORDINATED NOTE
</TABLE>

                                      -iv-

<PAGE>

                              CROSS-REFERENCE TABLE

<TABLE>
<CAPTION>
TIA                                                                                                       Indenture
Section                                                                                                    Section
-------                                                                                                   ---------
<S>                                                                                                   <C>
310 (a)(1)..................................................................................................9.10
    (a)(2)..................................................................................................9.10
    (a)(3)....................................................................................................NA
    (a)(4)....................................................................................................NA
    (b)...............................................................................................9.08; 9.10
    (c).......................................................................................................NA
311 (a).....................................................................................................9.11
    (b).....................................................................................................9.11
    (c).......................................................................................................NA
312 (a).....................................................................................................2.05
    (b)....................................................................................................12.03
    (c)....................................................................................................12.03
313 (a).....................................................................................................9.06
    (b)(1)....................................................................................................NA
    (b)(2)..................................................................................................9.06
    (c).....................................................................................................9.06
    (d).....................................................................................................9.06
314 (a).....................................................................................................4.02
    (b).......................................................................................................NA
    (c)(1).................................................................................................12.04
    (c)(2).................................................................................................12.04
    (c)(3)....................................................................................................NA
    (d).......................................................................................................NA
    (e)....................................................................................................12.05
    (f).......................................................................................................NA
315 (a).................................................................................................9.01 (b)
    (b).....................................................................................................9.05
    (c)..................................................................................................9.01(a)
    (d)..................................................................................................9.01(c)
    (e).....................................................................................................8.11
316 (a) last sentence.......................................................................................2.09
    (a)(1)(A)...............................................................................................6.05
    (a)(1)(B)...............................................................................................6.04
    (a)(2)....................................................................................................NA
    (b).....................................................................................................6.07
    (c).....................................................................................................1.04
(317(a)(1)..................................................................................................8.08
    (a)(2)..................................................................................................8.09
    (b).....................................................................................................2.04
 318(a).......................................................................................................NA
</TABLE>

                           NA means not applicable

----------
*This Cross-Reference Table is not part of the Indenture.

<PAGE>

          INDENTURE dated as of July 22, 1996 between Charming Shoppes, Inc., a
Pennsylvania corporation (the "Company") and First Union National Bank, a
National Banking Association, as trustee (the "Trustee").

          Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Noteholders of the Company's 7 1/2%
Convertible Subordinated Notes Due 2006 (the "Notes"):

                                    ARTICLE I

                   Definitions and Incorporation by Reference
                   ------------------------------------------

          SECTION 1.01. Definitions.
                        -----------

          "Affiliate" of any specified Person means any other Person directly or
           ---------
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities or by agreement or otherwise;
provided, however, that beneficial ownership of l0% or more of the voting
--------  -------
securities of a Person shall be deemed to be control.

          "Agent" means any Registrar, Paying Agent, Conversion Agent or
           -----
co-registrar.

          "Board of Directors" means the board of directors of the Company or
           ------------------
any authorized committee thereof.

          "Board Resolution" means a duly authorized resolution of the Board of
           ----------------
Directors.

          "Business Day" means any day that is not a Legal Holiday.
           ------------

          "Capital Stock" means, with respect to any Person, any and all shares,
           -------------
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any preferred stock, but excluding any debt securities convertible
into such equity.

          A "Change of Control" will be deemed to have occurred when: (i) any
             -----------------
"person" or "group" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act, other than the Company, any Subsidiary of the Company or any
employee benefit plan of the Company or any Subsidiary of the Company is or
becomes the "Beneficial Owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, including all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the total voting power of
the Voting Stock of the Company or (ii) the merger or consolidation of the
Company with or into another Person or the merger of another Person with or into
the Company, or the sale of all or substantially all the assets of the Company
to anot her Person (other than a Person that is controlled by the Company), and,
in the

<PAGE>

case of any such merger or consolidation, the securities of the Company that are
outstanding immediately prior to such transaction and which represent 100% of
the aggregate voting power of the Voting Stock of the Company are changed into
or exchanged for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in addition to
any other consideration, securities of the surviving corporation that represent,
immediately after such transaction, at least a majority of the aggregate voting
power of the Voting Stock of the surviving corporation.

          "Common Stock" means the common stock, par value $0.10 per share of
           ------------
the Company as the same exists at the date of the execution of this Indenture or
as such stock may be constituted from time to time.

          "Company" means the party named as such above until a successor
           -------
replaces it in accordance with Article VII and thereafter means the successor.

          "Daily Market Price" means the price of a share of Common Stock on the
           ------------------
relevant date, determined (a) on the basis of the last reported sale price
regular way of the Common Stock as reported on the Nasdaq National Market (the
"NNM"), or if the Common Stock is not then listed on the NNM, as reported on
such national securities exchange upon which the Common Stock is listed, or (b)
if there is no such reported sale on the day in question, on the basis of the
average of the closing bid and asked quotations regular way as so reported, or
(c) if the Common Stock is not listed on the NNM or on any national securities
exchange, on the basis of the average of the high bid and low asked quotations
regular way on the day in question in the over-the-counter market as reported by
The Nasdaq Stock Market, Inc.'s OTC Bulletin Board(R) Service, or if not so
quoted, as reported by National Quotation Bureau, Incorporated, or a similar
organization.

          "Default" means any event that is, or with the passage of time or the
           -------
giving of notice or both would be, an Event of Default.

          "Depository" means The Depository Trust Company, its nominees and
           ----------
their respective successors.

          "Excess Payment" means the excess of (a) the aggregate of the cash and
           --------------
fair market value of other consideration paid by the Company or any of its
Subsidiaries with respect to the shares acquired in a tender offer over (b) the
market value of such acquired shares after giving effect to the completion of
the tender offer.

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

          "Indenture" means this Indenture, as amended from time to time.
           ---------

          "Issuance Date" means the date on which the Notes are first
           -------------
authenticated and issued.

          "Material Subsidiary" means any Subsidiary of the Company, including
           -------------------
its Subsidiaries, which meets any of the following conditions:

                                       -2-

<PAGE>

          (1) The Company's and its other Subsidiaries' investments in and
     advances to the Subsidiary exceed 10 percent of the total assets of the
     Company and its Subsidiaries consolidated as of the end of the most
     recently completed fiscal year (for a proposed business combination to be
     accounted for as a pooling of interest, this condition is also met when the
     number of common shares exchanged or to be exchanged by the Company exceeds
     10 percent of its total common shares outstanding at the date the
     combination is initiated); or

          (2) The Company's and its other Subsidiaries' proportionate share of
     the total assets (after intercompany eliminations) of the Subsidiary
     exceeds 10 percent of the total assets of the Company's and its
     Subsidiaries consolidated as of the end of the most recently completed
     fiscal year; or

          (3) The Company's and its other Subsidiaries' equity in the income
     from continuing operations before income taxes, extraordinary items and
     cumulative effect of a change in accounting principle of the Subsidiary
     exceeds 10 percent of such income of the Company and its Subsidiaries
     consolidated for the most recently completed fiscal year; or

          (4) Except in the case of an Event of Default specified in clauses (g)
     and (h) of Section 8.01 hereof in which case this clause (4) shall not
     apply, the total revenues of the Subsidiary exceed 5 percent of total
     revenues of the Company and its Subsidiaries consolidated as of the end of
     the most recently completed fiscal year.

For purposes of making the prescribed income test set forth above, the following
guidance should be applied:

          (1) When a loss has been incurred by either the Company and its
     Subsidiaries consolidated or the tested Subsidiary, but not both, the
     equity in the income or loss of the tested Subsidiary should be excluded
     from the income of the Company and its Subsidiaries consolidated for
     purposes of the computation.

          (2) If income of the Company and its Subsidiaries consolidated for the
     most recent fiscal year is at least 10 percent lower than the average of
     the income for the last five fiscal years, such average income should be
     substituted for purposes of the computation. Any loss years should be
     omitted for purposes of computing average income.

          "Noteholder" or "holder" means a Person in whose name a Note is
           ----------      ------
registered.

          "Notes" means the Notes described above issued, authenticated and
           -----
delivered under this Indenture.

          "Officers' Certificate" means a certificate signed by two Officers,
           ---------------------
one of whom must be the Chairman of the Board, the President, the Treasurer or a
Vice-President.

                                       -3-

<PAGE>

          "Opinion of Counsel" means a written opinion from legal counsel who is
           ------------------
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.

          "Person" means any individual, corporation, limited liability company,
           ------
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

          "principal" of a debt security means the principal of the security
           ---------
plus the premium, if any, on the security.

          "Representative" means the trustee, agent or representative (if any)
           --------------
for an issue of Senior Debt.

          "SEC" means the Securities and Exchange Commission.
           ---

          "Senior Debt" means (a) all indebtedness of the Company, including the
           -----------
principal of, premium, if any, and interest on such indebtedness whether
outstanding on the date of the Indenture or thereafter created (including
interest accruing after the filing of a petition in bankruptcy whether or not
allowed as a claim in bankruptcy), and all reasonable fees, costs, expenses and
indemnity payments in connection therewith (i) for borrowed money, (ii)
constituting purchase money indebtedness for the payment of which the Company is
directly or contingently liable, (iii) constituting reimbursement obligations
under bank letters of credit, (iv) under interest rate and currency swaps, caps,
floors, collars or similar agreements or arrangements intended to protect the
Company against fluctuations in interest or currency exchange rates, (v) for
commitment, standby and other fees due and payable to financial institutions
with respect to credit facilities available to the Company, (vi) constituting
customary obligations arising in connection with the sale or other transfer of
credit card accounts receivable originated by the Company or its Subsidiaries in
the ordinary course of business, (vii) under any lease of any real or personal
property, whether outstanding on the date of execution of the Indenture or
thereafter created, incurred or assumed, which obligations are (x) capitalized
on the books of the Company in accordance with generally accepted accounting
principles or (y) made as part of any sale and leaseback transaction, (viii)
indebtedness or obligations of others of the kinds described in the preceding
clauses (i)-(vii) that the Company has guaranteed the payment thereof, or (ix)
constituting indebtedness or obligations of others (of the kind described in the
preceding clauses (i)-(vii)) secured in whole or in part by a lien on any of the
Company's property, unless, in any such case, by the terms of the instrument
creating or evidencing such indebtedness it is provided that such indebtedness
is not superior in right of payment to the Notes or to other indebtedness which
is pari passu with, or subordinated to, the Notes, and (b) any modifications,
   ---- -----
refundings, deferrals, renewals or extensions of any such Senior Debt, or
securities, notes or other evidences of indebtedness issued in exchange for such
Senior Debt. As used in the preceding sentence the term "purchase money
indebtedness" shall mean indebtedness incurred, issued or given in connection
with the acquisition of any business, properties or assets of any kind acquired
by the Company or any Subsidiary; provided, however, that, without limiting the
                                  --------  -------
generality of the foregoing, such term shall not include any account payable.

                                       -4-

<PAGE>

          "Subsidiary" means any corporation, association or other business
           ----------
entity of which more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.

          "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
           ---
77aaa-77bbbb) as in effect on the date of execution of this Indenture, except as
provided in Section 11.03.

          "Trading Day" shall mean (A) if the applicable security is listed or
           -----------
admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or another
national securities exchange is open for business, (B) if the applicable
security is quoted on the NNM, a day on which trades may be made thereon or (C)
if the applicable security is not so listed, admitted for trading or quoted, any
day other than a Saturday or Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law or executive order to
close.

          "Trustee" means the party named as such above until a successor
           -------
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.

          "Trust Officer", when used with respect to the Trustee, means any
           -------------
officer of the Trustee customarily performing trust functions, and also means,
with respect to a particular corporate trust matter, any officer to whom such
corporate trust matter is referred because of his knowledge of and familiarity
with the particular subject.

          "Underwriters" means Lazard Freres & Co. LLC and Bear, Stearns & Co.
           ------------
Inc.

          "Voting Stock" of a Person means all classes of Capital Stock or other
           ------------
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.

          SECTION 1.02. Other Definitions.
                        -----------------

                                                                      Defined in
Term                                                                    Section
----                                                                  ----------
"Agent Members"..........................................................2.01
"Bankruptcy Law".........................................................8.01
"Certificated Notes".....................................................2.01
"Change of Control Offer"................................................4.06
"Change of Control Payment"..............................................4.06
"Change of Control Payment Date".........................................3.08
"Commencement Date"......................................................3.08
"Company Notice".........................................................3.08
"Conversion Agent".......................................................2.03
"Conversion Date"........................................................5.02

                                       -5-

<PAGE>

"Conversion Price".......................................................5.01
"Conversion Shares"......................................................5.06
"Custodian"..............................................................8.01
"Distribution Date" .....................................................5.06
"Distribution Record Date"...............................................5.06
"Event of Default".......................................................8.01
"Global Note"............................................................2.01
"Legal Holiday".........................................................12.07
"NNM"....................................................................1.02
"Offer Amount"...........................................................3.08
"Officer"...............................................................12.09
"Paying Agent"...........................................................2.03
"Payment Default"........................................................8.01
"Purchase Date"..........................................................5.06
"Registrar"..............................................................2.03
"Rights".................................................................5.06

          SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
                        -------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this indenture.

          The following TIA terms have the following meanings as applied to this
Indenture:

          "indenture securities" means the Notes;
           --------------------

          "indenture security holder" means a Noteholder;
           -------------------------

          "indenture to be qualified" means this Indenture;
           -------------------------

          "indenture trustee" or "institutional trustee" means the Trustee; and
           -----------------      ---------------------

          "obligor" on the Notes means the Company or any other obligor on the
           -------
Notes.

          All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.

          SECTION 1.04. Rules of Construction. Unless the context otherwise
                        ---------------------
requires:

          (a) a term has the meaning assigned to it;

          (b) an accounting term not otherwise defined has the meaning assigned
     to it in accordance with generally accepted accounting principles as of the
     date hereof consistently applied;

          (c) "or" is not exclusive;

                                       -6-

<PAGE>

          (d) words in the singular include the plural, and words the plural
     include the singular; and

          (e) provisions apply to successive events and transactions.

                                   ARTICLE II

                                    The Notes
                                    ---------

          SECTION 2.01. Form and Dating. The Notes and the Trustee's certificate
                        ---------------
of authentication shall be substantially in the form of Exhibit A which is
hereby incorporated in and expressly made a part of this Indenture. The Notes
may have notations, legends or endorsements required by law, stock exchange
rule, agreements to which the Company is subject, if any, or usage (provided
that any such notation, legend or endorsement is in a form acceptable to the
Company). The Company shall furnish any such legend not contained in Exhibit A
to the Trustee in writing. Each Note shall be dated the date of its
authentication. The terms and provisions of the Notes set forth in Exhibit A are
part of the terms of this Indenture and to the extent applicable, the Company
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby.

          (a) Global Notes. The Notes shall be issued in the form of one or more
              ------------
global Notes in fully registered form without interest coupons with the Global
Notes Legend set forth in Exhibit A hereto (each, a "Global Note"). The
aggregate principal amount of the Global Note may from time to time be increased
or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee as hereinafter provided.

          (b) Book-Entry Provisions. This Section 2.01(b) shall apply only to a
              ---------------------
Global Note deposited with or on behalf of the Depositary.

          The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(b), authenticate and deliver initially one or more Global
Notes that (a) shall be registered in the name of Cede & Co. or other nominee of
such Depositary and (b) shall be delivered by the Trustee to such Depositary or
pursuant to such Depositary's instructions or held by the Trustee as custodian
for the Depositary pursuant to a FAST Balance Certificate Agreement between the
Depositary and the Trustee.

          Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Note, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such Global Note for all purposes whatsoever. Nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices of such Depositary governing the
exercise of the rights of a holder of a beneficial interest in any Global Note.
Except as provided in subparagraph (c) below, owners of a beneficial interest in
a

                                       -7-

<PAGE>

Global Note will not be entitled to have Notes registered in their names, will
not receive or be entitled to receive Notes in definitive registered form and
will not be considered owners or holders thereof under this Indenture.

          (c) Certificated Notes. Except as provided in this subparagraph (c),
              ------------------
Notes will not be issued in definitive registered form. If at any time the
Depositary notifies the Company that it is unwilling or unable to continue as
depositary for the Global Notes or if at any time the Depositary ceases to be a
clearing agency registered under the Exchange Act, or otherwise ceases to be
eligible to be a depositary, the Company shall appoint a successor depositary
with respect to the Global Notes. If a successor depositary for the Global Notes
is not appointed by the Company within 90 days after the Company receives such
notice or becomes aware of such ineligibility, the Company shall execute Notes
in definitive registered form without coupons ("Certificated Notes") and the
Trustee, upon receipt thereof, shall authenticate and deliver such Certificated
Notes, in denominations of U.S.$1,000 and integral multiples thereof, in an
aggregate principal amount equal to the aggregate principal amount of such
Global Notes as of the exchange date. Upon the exchange of the Global Notes for
Certificated Notes, the Trustee shall cancel such Global Notes. In addition, if
there is an Event of Default under the Notes or the Indenture, the Depositary
will, if the Trustee so requests, exchange the Global Notes for Certificated
Notes, which will be distributed to its participants.

          In the event of the occurrence of either of the events specified in
this Section 2.01(c), the Company will promptly make available to the Trustee a
reasonable supply of Certificated Notes.

          SECTION 2.02. Execution and Authentication. The Notes shall be signed
                        ----------------------------
on behalf of the Company by the Chairman of its Board of Directors, any Vice
Chairman of its Board of Directors, its Chief Executive Officer, its President,
any Executive Vice President, or any Vice President, under its corporate seal.
Such signatures may be the manual or facsimile signatures of the present or any
future such officers. The seal of the Company may be in the form of a facsimile
thereof and may be impressed, affixed, imprinted or otherwise reproduced on the
Notes and shall be attested by the Secretary or an Assistant Secretary of the
Company. Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Note that has been duly authenticated and delivered by the
Trustee.

          In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Note so signed shall be
authenticated and delivered by the Trustee or disposed of by the Company, such
Note nevertheless may be authenticated and delivered or disposed of as though
the Person who signed such Note had not ceased to be such officer of the
Company; and any Note may be signed on behalf of the Company by such Persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution and delivery of this
Indenture any such Person was not such an officer.

                                       -8-

<PAGE>

          A Note shall not be valid until authenticated by the manual signature
of an authorized signatory of the Trustee. The signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.

          Upon a written order of the Company signed by two Officers, the
Trustee shall authenticate the Notes for original issue up to an aggregate
principal amount of $120,000,000 (plus up to $18,000,000 aggregate principal
amount of Notes that may be sold by the Company pursuant to the over-allotment
option granted to the Underwriters pursuant to the Underwriting Agreement dated
July 16, 1996 between the Company and the Underwriters). The aggregate principal
amount of Notes outstanding at any time shall not exceed such amount except as
provided in Section 2.07.

          The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.

          SECTION 2.03. Registrar, Paying Agent and Conversion Agent. The
                        --------------------------------------------
Company shall maintain (i) an office or agency where Notes may be presented for
registration of transfer or for exchange, (ii) an office or agency where Notes
may be presented for payment and (iii) an office or agency where Notes may be
presented for conversion. The Trustee is hereby appointed (i) "Registrar" for
the purpose of registering Notes and transfers of Notes as herein provided, (ii)
"Paying Agent" for the purpose of making payments on the Notes as herein
provided and (iii) "Conversion Agent" for the purpose of effecting conversion of
the Notes as herein provided. The Registrar shall keep a register of the Notes
and of their transfer and exchange. The Company may appoint one or more
co-registrars, one or more additional paying agents and one or more additional
conversion agents in such other locations as it shall determine. The term
"Paying Agent" includes any additional paying agent and the term "Conversion
Agent" includes any additional conversion agent. The Company may change any
Paying Agent, Registrar, co-registrar or Conversion Agent without prior notice
to any Noteholder. The Company shall notify the Trustee of the name and address
of any Agent not a party to this Indenture. If the Company fails to appoint or
maintain another entity as Registrar, Paying Agent or Conversion Agent, the
Trustee shall act as such. The Company or any of its Affiliates may act as
Paying Agent, Registrar, co-registrar or Conversion Agent.

          SECTION 2.04. Paying Agent To Hold Money in Trust. The Company shall
                        -----------------------------------
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Noteholders or the Trustee
all money held by the Paying Agent for the payment of principal or interest on
the Notes, and will notify the Trustee of any default by the Company in making
any such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee and to
account for any money disbursed by it. Upon payment over to the Trustee, the
Paying Agent (if other than the Company or an Affiliate of the Company) shall
have no further liability for the money. If the

                                       -9-

<PAGE>

Company or an Affiliate of the Company acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Noteholders all money
held by it as Paying Agent.

          SECTION 2.05. Noteholder Lists. The Trustee shall preserve in as
                        ----------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Noteholders. If the Trustee is not the Registrar,
the Company shall furnish to the Trustee on or before each interest payment date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of Noteholders.

          SECTION 2.06. Transfer and Exchange. Where Notes are presented to the
                        ---------------------
Registrar or a co-registrar with a request to register a transfer or to exchange
them for an equal principal amount of Notes of other denominations, the
Registrar shall register the transfer or make the exchange if its requirements
for such transactions are met. To permit registrations of transfers and
exchanges, the Company shall issue and the Trustee shall authenticate Notes at
the Registrar's request. No service charge shall be made for any registration of
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Sections 2.10, 3.06 or 11.05 hereof).

          In the event of a partial redemption, the Company shall not be
required (i) to issue, register the transfer of, or exchange Notes during a
period beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and ending at the
close of business on the day of selection, or (ii) to exchange or register the
transfer of any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.

          Except as otherwise permitted pursuant to Section 2.01(c), so long as
a Global Note remains outstanding and is held by or on behalf of the Depositary,
transfers of a Global Note shall be limited to transfers of such Global Note in
whole, but not in part, to nominees of the Depositary or to a successor of the
Depositary or such successor's nominee.

          SECTION 2.07. Replacement Notes. If the holder of a Note claims that
                        -----------------
the Note has been lost, destroyed or wrongfully taken or if such Note is
mutilated and is surrendered to the Trustee, the Company shall issue and the
Trustee shall authenticate a replacement Note if the Trustee's and the Company's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be provided by the holder which is sufficient in the judgment of both
to protect the Company, the Trustee, any Agent or any authenticating agent from
any loss which any of them may suffer if a Note is replaced. The Company may
charge for its expenses in replacing a Note.

          In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, or is about to be purchased by the
Company pursuant to Article III hereof, the Company in its discretion may,
instead of issuing a new Note, pay or purchase such Note, as the case may be.

                                      -10-

<PAGE>

          Every replacement Note is an additional obligation of the Company.

          SECTION 2.08. Outstanding Notes. The Notes outstanding at any time are
                        -----------------
all the Notes authenticated by the Trustee except for those cancelled by it,
those delivered to it for cancellation, and those described in this Section as
not outstanding.

          If a Note is replaced, paid or purchased pursuant to Section 2.07
hereof, it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced, paid or purchased Note is held by a bona
fide purchaser.

          If Notes are considered paid under Section 4.01 hereof, they cease to
be outstanding and interest on them ceases to accrue.

          A Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note.

          SECTION 2.09. Treasury Notes. In determining whether the Noteholders
                        --------------
of the required principal amount of Notes have concurred in any direction,
waiver or consent, Notes owned by the Company or an Affiliate of the Company
shall be considered as though they are not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes which a Trust Officer of the
Trustee actually knows are so owned shall be so disregarded.

          SECTION 2.10. Temporary Notes. Until definitive Notes are ready for
                        ---------------
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company considers appropriate for temporary
Notes. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.

          SECTION 2.11. Cancellation. The Company at any time may deliver Notes
                        ------------
to the Trustee for cancellation. The Registrar, Paying Agent and Conversion
Agent shall forward to the Trustee any Notes surrendered to them for
registration of transfer, redemption, conversion, exchange or payment. The
Trustee shall promptly cancel all Notes surrendered for registration of
transfer, redemption, conversion, exchange, payment, replacement or cancellation
and shall return all cancelled Notes to the Company. The Company may not issue
new Notes to replace Notes that it has paid or that have been delivered to the
Trustee for cancellation or that any holder has converted pursuant to Article V.
All Notes that are redeemed or purchased by the Company or any of its
Subsidiaries will forthwith be cancelled and accordingly may not be reissued or
resold.

          SECTION 2.12. Defaulted Interest. If the Company fails to make a
                        ------------------
payment of interest on the Notes, it shall pay such defaulted interest plus any
interest payable on the defaulted interest, in any lawful manner. It may pay
such defaulted interest, plus any such interest payable on it, to the Persons
who are Noteholders on a subsequent special record date. The Company shall fix
any such record date and payment date. At least 15 days before any such record
date, the Company shall mail to Noteholders a notice that states the record
date, payment date, and amount of such interest to be paid.

                                      -11-

<PAGE>

          SECTION 2.13. CUSIP Numbers. The Company in issuing Notes may use
                        -------------
"CUSIP" numbers (if then generally in use) in addition to serial numbers; if so,
the Trustee shall use such "CUSIP" numbers in addition to serial numbers in
notices of redemption and repurchase as a convenience to holders; provided,
                                                                  --------
however, that any such notice may state that no representation is made as to the
-------
correctness of such CUSIP number either as printed on the Notes or as contained
in any notice of a redemption or repurchase and that reliance may be placed only
on the serial or other identification numbers printed on the Notes, and any such
redemption or repurchase shall not be affected by any defect in or omission of
such CUSIP number. The Company shall promptly notify the Trustee of any change
in the CUSIP number.

                                   ARTICLE III

                                   Redemption
                                   ----------

          SECTION 3.01. Notices to Trustee. If the Company elects to redeem
                        ------------------
Notes pursuant to the optional redemption provision of Section 3.07 hereof, it
shall notify the Trustee of the redemption date and the principal amount of
Notes to be redeemed. The Company shall give each notice provided for in this
Section 3.01 at least 45 days before the redemption date.

          SECTION 3.02. Selection of Notes to be Redeemed. If less than all the
                        ---------------------------------
Notes are to be redeemed, the Trustee shall select the Notes to be redeemed by
lot provided that no Notes of $1,000 or less shall be redeemed in part. The
Trustee shall make the selection not more than 60 days and not less than 30 days
before the redemption date from Notes outstanding not previously called for
redemption. Notes and portions of them selected for redemption shall be in
amounts of $1,000 or integral multiples thereof. Provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes called
for redemption. The Trustee shall notify the Company promptly of the Notes or
portions of Notes to be called for redemption.

          If any Note selected for partial redemption is converted in part after
such selection, the converted portion of such Note shall be deemed (so far as
may be) to be the portion to be selected for redemption. The Notes (or portions
thereof) so selected shall be deemed duly selected for redemption for all
purposes hereof, notwithstanding that any such Note is converted in whole or in
part before the mailing of the notice of redemption. Upon any redemption of less
than all the Notes, the Company and the Trustee may treat as outstanding any
Notes surrendered for conversion during the period 15 days next preceding the
mailing of a notice of redemption and need not treat as outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.

          SECTION 3.03. Notice of Redemption. At least 30 days but not more than
                        --------------------
60 days before a redemption date, the Company shall mail a notice of redemption
to each holder whose Notes are to be redeemed at such holder's registered
address.

          The notice shall identify the Notes (including CUSIP number and, if
appropriate, serial numbers) to be redeemed and shall state:

          (a) the redemption date;

                                      -12-

<PAGE>

          (b) the redemption price;

          (c) if any Note is being redeemed in part, (i) the portion of the
     principal amount of such Note to be redeemed (ii) the last date on which
     exchanges or registration of transfers of Notes may be made pursuant to
     Section 2.06 hereof and (iii) that, after the redemption date, upon
     cancellation of such Note, a new Note or Notes in principal amount equal to
     the unredeemed portion will be issued in the name of the holder thereof;

          (d) in the case of partial redemption of Notes, the aggregate
     principal amount of Notes to be redeemed and the aggregate principal amount
     of the Notes which will be outstanding after such partial redemption; and

          (e) the name and address of the Paying Agent;

          (f) that Notes called for redemption must be surrendered to the Paying
     Agent to collect the redemption price plus accrued interest;

          (g) that, unless the Company defaults in making such redemption
     payment or the Paying Agent is prohibited from making such payment pursuant
     to the terms of this Indenture, interest on Notes called for redemption
     ceases to accrue or and after the redemption date; and

          (h) the paragraph of the Notes pursuant to which the Notes called for
     redemption are being redeemed.

          Such notice shall also state the current Conversion Price and the date
on which the right to convert such Notes or portions thereof into Common Stock
of the Company will expire.

          At the Company's request, the Trustee shall give notice of redemption
in the Company's name and at its expense.

          SECTION 3.04. Effect of Notice of Redemption. Once notice of
                        ------------------------------
redemption is mailed, Notes called for redemption become due and payable on the
redemption date at the price set forth in the Note.

          SECTION 3.05. Deposit of Redemption Price. On or before the redemption
                        ---------------------------
date, the Company shall deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption price of and accrued interest up to but not
including the redemption date on all Notes to be redeemed on that date (subject
to the right of holders of record on the relevant record date to receive
interest due on an interest payment date) unless theretofore converted into
Common Stock pursuant to the provisions hereof. The Trustee or the Paying Agent
shall return to the Company any money not required for that purpose.

          SECTION 3.06. Notes Redeemed in Part. Upon cancellation of a Note that
                        ----------------------
is redeemed in part, the Company shall issue and the Trustee shall authenticate
for the holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.

                                      -13-

<PAGE>

          SECTION 3.07. Optional Redemption. The Company may redeem all or any
                        -------------------
portion of the Notes, upon the terms and at the redemption prices set forth in
each of the Notes. Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.

          SECTION 3.08. Change of Control Offer. (a) In the event that, pursuant
                        -----------------------
to Section 4.06 hereof, the Company shall commence a Change of Control Offer,
the Company shall follow the procedures in this Section 3.08.

          (b) The Change of Control Offer shall remain open for 30 calendar days
following the date of the Company Notice provided pursuant to Section 3.08(e)
(the "Commencement Date"), except to the extent that a longer period is required
by applicable law. On the date that is 45 days after the date of the Company
Notice (the "Change of Control Payment Date"), except to the extent that a
longer period is required by applicable law, the Company shall purchase the
principal amount of Notes required to be purchased pursuant to Section 4.06
hereof (the "Offer Amount").

          (c) If the Change of Control Payment Date is on or after an interest
payment record date and on or before the related interest payment date, any
accrued interest will be paid to the Person in whose name a Note is registered
at the close of business on such record date, and no additional interest will be
payable to Noteholders who tender Notes pursuant to the Change of Control Offer.

          (d) The Company shall provide the Trustee with notice of the Change of
Control Offer at least 10 Business Days before the Commencement Date.

          (e) Within 30 days after the occurrence of a Change of Control, the
Company or the Trustee (at the request and expense of the Company) shall send,
by first class mail, a notice (the "Company Notice") to each of the Noteholders,
which shall govern the terms of the Change of Control Offer and shall state:

          (i) that the Change of Control Offer is being made pursuant to this
     Section 3.08 and Section 4.06 hereof and that all Notes tendered will be
     accepted for payment;

          (ii) the Offer Amount, the purchase price (as determined in accordance
     with Section 4.06 hereof) the length of time the Change of Control Offer
     will remain open and the Change of Control Payment Date;

          (iii) that any Note or portion thereof not tendered or accepted for
     payment will continue to accrue interest;

          (iv) that, unless the Company defaults in the payment of the Change of
     Control Payment, any Note or portion thereof accepted for payment pursuant
     to the Change of Control Offer shall cease to accrue interest after the
     Change of Control Payment Date;

          (v) that Noteholders electing to have a Note or portion thereof
     purchased pursuant to any Change of Control Offer will be required to
     surrender the Note, with the

                                      -14-

<PAGE>

     form entitled "Option of Noteholder To Elect Purchase" on the reverse of
     the Note completed, to the Paying Agent at the address specified in the
     Company Notice prior to the close of business on the 30th day after the
     Commencement Date;

          (vi) that, unless the Company defaults in the payment of the Change of
     Control Payment, an election pursuant to Clause (v) above shall be
     irrevocable, and that the right of the holder to convert the Notes with
     respect to which the repurchase right is being exercised shall expire upon
     submission of such Notes; and

          (vii) that Noteholders whose Notes are being purchased only in part
     will be issued new Notes equal in principal amount to the unpurchased
     portion of the Notes surrendered, which unpurchased portion must be equal
     to $1,000 in principal amount or an integral multiple thereof.

          In addition, the notice shall contain all instructions and materials
that the Company shall reasonably deem necessary to enable such Noteholders to
tender Notes pursuant to the Change of Control Offer.

          (f) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) irrevocably deposit with the Trustee or the Paying Agent in
immediately available funds an amount equal to the Offer Amount plus accrued
interest on such Notes or portions thereof, (ii) accept for payment the Notes or
portions thereof tendered pursuant to the Change of Control Offer, (iii) deliver
or cause to be delivered to the Trustee Notes so accepted and (iv) deliver to
the Trustee an Officers' Certificate stating such Notes or portions thereof have
been accepted for payment by the Company in accordance with the terms of this
Section 3.08. The Paying Agent shall promptly (but in any case not later than
ten (10) calendar days after the Change of Control Payment Date) mail or deliver
to each tendering Noteholder an amount equal to the purchase price of the Notes
tendered by such Noteholder plus accrued interest thereon, and the Trustee shall
promptly authenticate and mail or deliver to each such Noteholder a new Note
equal in principal amount to any unpurchased portion of the Note surrendered, if
any; provided, however, that each new Note shall be in a principal amount of
     --------  -------
$1,000 or an integral multiple thereof. Any Notes not so accepted shall be
promptly mailed or delivered by or on behalf of the Company to the holder
thereof. The Company will publicly announce the results of the Change of Control
offer on, or as soon as practicable after, the Change of Control Payment Date.

          (g) The Company will comply with the requirements of Rules 13e-4 and
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes in connection with a Change of Control.

                                   ARTICLE IV

                                    Covenants
                                    ---------

          SECTION 4.01. Payment of Notes. The Company shall pay the principal of
                        ----------------
and interest on the Notes on the dates and in the manner provided in the Notes.
Principal and interest

                                      -15-

<PAGE>

shall be considered paid on the date due if the Paying Agent (other than the
Company or an Affiliate of the Company) holds on that date money designated for
and sufficient to pay all principal and interest then due and such Paying Agent
is not prohibited from paying such money to the Noteholders on that date
pursuant to the terms of this Indenture. To the extent lawful, the Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the rate borne by the Notes, compounded
semiannually.

          SECTION 4.02. Reports by Company.
                        ------------------

          The Company shall:

          (1) file with the Trustee, within 15 days after the Company is
     required to file the same with the SEC, copies of the annual reports and of
     the information, documents and other reports (or copies of such portions of
     any of the foregoing as the SEC may from time to time by rules and
     regulations prescribe) which the Company may be required to file with the
     SEC pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the
     Company is not required to file information, documents or reports pursuant
     to either of said Sections, then it shall file with the Trustee and the
     SEC, in accordance with rules and regulations prescribed from time to time
     by the SEC, such of the supplementary and periodic information, documents
     and reports which may be required pursuant to Section 13 of the Exchange
     Act in respect of a security listed and registered on a national securities
     exchange as may be prescribed from time to time in such rules and
     regulations;

          (2) file with the Trustee and the SEC, in accordance with rules and
     regulations prescribed from time to time by the SEC, such additional
     information, documents and reports with respect to compliance by the
     Company with the conditions and covenants of this Indenture as may be
     required from time to time by such rules and regulations; and

          (3) transmit by mail to all Holders, as their names and addresses
     appear in the register maintained by the Registrar, within 30 days after
     the filing thereof with the Trustee, such summaries of any information,
     documents and reports required to be filed by the Company pursuant to
     paragraphs (1) and (2) of this Section 4.02 as may be required by rules and
     regulations prescribed from time to time by the SEC.

          (4) deliver to the Trustee, within 120 days after the end of each
     fiscal year of the Company, an Officers' Certificate stating that a review
     of the activities of the Company and its Subsidiaries during the preceding
     fiscal year has been made under the supervision of the signing Officers
     with a view to determining whether the Company has kept, observed,
     performed and fulfilled its obligations under, and complied with the
     covenants and conditions contained in, this Indenture, and further stating,
     as to each such Officer signing such certificate, that to the best of his
     knowledge the Company has kept, observed, performed and fulfilled each and
     every covenant, and complied with the covenants and conditions contained in
     this Indenture and is not in default in the performance or observance of
     any of the terms, provisions and conditions hereof (or, if a Default or
     Event of Default shall have occurred, describing all such Defaults or
     Events of

                                      -16-

<PAGE>

     Default of which he may have knowledge) and that to the best of his
     knowledge no event has occurred and remains in existence by reason of which
     payments on account of the principal of or interest, if any, on the Notes
     are prohibited.

          One of the Officers signing such Officers' Certificate shall be either
the Company's principal executive officer, principal financial officer or
principal accounting officer.

          The Company will, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon becoming aware of any Default or Event of Default
an Officers' Certificate specifying such Default or Event of Default.

          SECTION 4.03. Stay, Extension and Usury Laws. The Company covenants
                        ------------------------------
(to the extent that it may lawfully do so) that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.

          SECTION 4.04. Corporate Existence. Subject to Article VII hereof, the
                        -------------------
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the corporate rights (charter
and statutory), corporate licenses and corporate franchises of the Company;
provided, however, that the Company shall not be required to preserve any such
--------  -------
right, license or franchise, if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and that the loss thereof is not adverse in any
material respect to the Noteholders.

          SECTION 4.05. Taxes. The Company shall, and shall cause each of its
                        -----
Subsidiaries to, pay prior to delinquency all taxes, assessments and
governmental levies, (i) except for such taxes, assessments and governmental
levies, the nonpayment of which is not reasonably likely to result in a material
adverse change in the financial condition, results of operations or business of
the Company and its subsidiaries, considered as a whole or (ii) except as
contested in good faith and by appropriate proceedings.

          SECTION 4.06. Change of Control. (a) Upon the occurrence of a Change
                        -----------------
of Control, each holder of Notes shall have the right, in accordance with this
Section 4.06 and Section 3.08 hereof, to require the Company to repurchase all
or any part (equal to $1,000 or an integral multiple thereof) of such holder's
Notes pursuant to the terms of Section 3.08 (the "Change of Control Offer") at a
purchase price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the Change of Control Payment Date (the
"Change of Control Payment").

                                      -17-

<PAGE>

          (b) Within 30 days following any Change of Control, the Company shall
mail to each holder the Company Notice provided by Section 3.08(e).

                                    ARTICLE V

                                   Conversion
                                   ----------

          SECTION 5.01. Conversion Privilege. A holder of a Note may convert the
                        --------------------
principal amount thereof (or any portion thereof that is an integral multiple of
$1,000) into fully paid and nonassessable shares of Common Stock of the Company
at any time prior to the close of business (New York time) on the date of the
Note's maturity at the Conversion Price in effect on the Conversion Date (the
"Conversion Price"), except that, with respect to any Note called for
redemption, such conversion right shall terminate at the close of business on
the Business Day immediately preceding the redemption date, and except that if a
Note is submitted pursuant to the exercise of a repurchase right pursuant to
Section 3.08 and Section 4.06 hereof, the right to convert such Note will expire
upon submission (unless the Company shall default in making the redemption
payment or the Change of Control Payment, as the case may be when it becomes
due, in which case the conversion right shall terminate on the date such default
is cured). The number of shares of Common Stock issuable upon conversion of a
Note is determined by dividing the principal amount of the Note converted by the
Conversion Price.

          The initial Conversion Price is stated in Section 10 of the Notes and
is subject to adjustment as provided in this Article V.

          Provisions of this Indenture that apply to conversion of all of a Note
also apply to conversion of a portion of it. A holder of Notes is not entitled
to any rights of a holder of Common Stock until such holder of Notes has
converted such Notes into Common Stock, and only to the extent that such Notes
are deemed to have been converted into Common Stock under this Article V.

          SECTION 5.02. Conversion Procedure. To convert a Note, a holder must
                        --------------------
satisfy the requirements in Section 10 of the Notes. The date on which the
holder satisfies all of those requirements is the conversion date (the
"Conversion Date"). As soon as practicable after the Conversion Date, the
Company shall deliver to the holder through the Conversion Agent a certificate
for the number of whole shares of Common Stock issuable upon the conversion and
a check for any fractional share determined pursuant to Section 5.03. The Person
in whose name the certificate is registered shall become the stockholder of
record on the Conversion Date and, as of such date, such Person's rights as a
Noteholder shall cease; provided, however, that no surrender of a Note on any
                        --------  -------
date when the stock transfer books of the Company shall be closed shall be
effective to constitute the Person entitled to receive the shares of Common
Stock upon such conversion as the stockholder of record of such shares of Common
Stock on such date, but such surrender shall be effective to constitute the
Person entitled to receive such shares of Common Stock as the stockholder of
record thereof for all purposes at the close of business on the next succeeding
day on which such stock transfer books are open; provided further, however, that
                                                 -------- -------  -------
such conversion shall be at the Conversion Price in effect on the date that such
Note shall

                                      -18-

<PAGE>

have been surrendered for conversion, as if the stock transfer books of the
Company had not been closed.

          No payment or adjustment will be made for accrued and unpaid interest
on a converted Note or for dividends or distributions on shares of Common Stock
issued upon conversion of a Note. If any holder surrenders a Note for conversion
after the close of business on the record date for the payment of an installment
of interest and prior to the opening of business on the next interest payment
date, then, notwithstanding such conversion, the interest payable on such
interest payment date shall be paid to the holder of such Note on such record
date. In such event, such Note, when surrendered for conversion, must be
accompanied by payment in funds acceptable to the Company of an amount equal to
the interest payable on such interest payment date on the portion so converted.
The interest payment with respect to a Note called for redemption on a date
during the period from the close of business on or after any record date to the
opening of business on the business day following the corresponding interest
payment date will be payable on the corresponding interest payment date to the
holder of such Note on such record date (notwithstanding the conversion of such
Note before the corresponding interest payment date) and a holder who elects to
convert need not include funds equal to the interest payment.

          If a holder converts more than one Note at the same time, the number
of whole shares of Common Stock issuable upon the conversion shall be based on
the total principal amount of Notes converted.

          Upon surrender of a Note that is converted in part, the Trustee shall
authenticate for the holder a new Note equal in principal amount to the
unconverted portion of the Note surrendered.

          SECTION 5.03. Fractional Shares. The Company will not issue fractional
                        -----------------
shares of Common Stock upon conversion of a Note. In lieu thereof, the Company
will pay an amount in cash based upon the Daily Market Price of the Common Stock
on the trading day prior to the Conversion Date. The value of a fraction of a
share of Common Stock shall be determined by multiplying the Daily Market Price
of a full share of Common Stock by a fraction equaling the fraction of the share
of Common Stock which would otherwise be issued and rounding the amount to the
nearest cent.

          SECTION 5.04. Taxes on Conversion. The issuance of certificates for
                        -------------------
shares of Common Stock upon the conversion of any Note shall be made without
charge to the converting Noteholder for such certificates or for any tax in
respect of the issuance of such certificates, and such certificates shall be
issued in the respective names of, or in such names as may be directed by, the
holder or holders of the converted Note; provided, however, that in the event
                                         --------  -------
that certificates for shares of Common Stock are to be issued in a name other
than the name of the holder of the Note converted, such Note, when surrendered
for conversion, shall be accompanied by an instrument of transfer, in form
satisfactory to the Company, duly executed by the registered holder thereof or
his duly authorized attorney; and provided, further, however, that the Company
                                  --------  -------  -------
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificates in a
name other than that of the

                                      -19-

<PAGE>

holder of the converted Note, and the Company shall not be required to issue or
deliver such certificates unless or until the Person or Persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid
or is not applicable.

          SECTION 5.05. Company To Provide Stock. The Company shall at all times
                        ------------------------
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Common Stock, solely for the purpose of issuance upon conversion of
Notes as herein provided, a sufficient number of shares of Common Stock to
permit the conversion of all outstanding Notes for shares of Common Stock.

          All shares of Common Stock which may be issued upon conversion of the
Notes shall be duly authorized, validly issued, fully paid and nonassessable
when so issued.

          SECTION 5.06. Adjustment of Conversion Price. The Conversion Price
                        ------------------------------
shall be subject to adjustment from time to time as follows:

          (a) In case the Company shall (1) pay a dividend in shares of Common
Stock to holders of Common Stock, (2) make a distribution in shares of Common
Stock to holders of Common Stock, (3) subdivide its outstanding shares of Common
Stock into a greater number of shares of Common Stock or (4) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, the Conversion Price in effect immediately prior to such action shall be
adjusted so that the holder of any Note thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock which he would
have owned immediately following such action had such Notes been converted
immediately prior thereto. Any adjustment made pursuant to this subsection (a)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.

          (b) In case the Company shall issue rights or warrants to all holders
of Common Stock entitling them (for a period commencing no earlier than the
record date for the determination of holders of Common Stock entitled to receive
such rights or warrants and expiring not more than 45 days after such record
date) to subscribe for or purchase shares of Common Stock (or securities
convertible into Common Stock) at a price per share less than the current market
price (as determined pursuant to subsection (f) below) of the Common Stock on
such record date, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding on such record date, plus
the number of shares of Common Stock which the aggregate offering price of the
offered shares of Common Stock (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current market price,
and of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of Common
Stock offered (or into which the convertible securities so offered are
convertible). Such adjustments shall become effective immediately after such
record date. If such rights or warrants are not so issued, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in effect
if such

                                      -20-

<PAGE>

date fixed for the determination of stockholders entitled to receive such rights
or warrants had not been fixed.

          (c) In case the Company shall distribute to all holders of Common
Stock shares of any class of Capital Stock of the Company other than Common
Stock, evidences of indebtedness or other assets (other than cash), or shall
distribute to all holders of Common Stock rights or warrants to subscribe for
securities or other assets (other than those securities referred to in
subsection (b) above), then in each such case the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such distribution by
a fraction of which the numerator shall be the current market price (determined
as provided in subsection (f) below) of the Common Stock on the record date
mentioned below less the then fair market value (as determined by the Board of
Directors, whose determination shall be conclusive evidence of such fair market
value and described in a Board Resolution) of the portion of the assets so
distributed or of such subscription rights or warrants applicable to one share
of Common Stock, and of which the denominator shall be such current market price
of the Common Stock. Such adjustment shall become effective immediately after
the record date for the determination of the holders of Common Stock entitled to
receive such distribution. Notwithstanding the foregoing, in the event that the
Company shall distribute rights or warrants to subscribe for additional shares
of the Company's Capital Stock (other than the Common Stock referred to in
subsection (b) above) ("Rights") pro rata to holders of Common Stock, the
Company may, in lieu of making any adjustment pursuant to this Section 5.06,
make proper provision so that each holder of a Note who converts such Note (or
any portion thereof) after the record date for such distribution and prior to
the expiration or redemption of the Rights shall be entitled to receive upon
such conversion, in addition to the shares of Common Stock issuable upon such
conversion (the "Conversion Shares"), a number of Rights to be determined as
follows: (i) if such conversion occurs or prior to the date for the distribution
to the holders of Rights of separate certificates evidencing such Rights (the
"Distribution Date"), the same number of Rights to which a holder of a number of
shares of Common Stock equal to the number of Conversion Shares is entitled at
the time of such conversion in accordance with the terms and provisions of and
applicable to the Rights; and (ii) if such conversion occurs after the
Distribution Date, the same number of Rights to which a holder of the number of
shares of Common Stock into which the principal amount of the Note so converted
was convertible immediately prior to the Distribution Date would have been
entitled on the Distribution Date in accordance with the terms and provisions of
and applicable to the Rights. If such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed.

          (d) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (including any distributions
of cash out of current or retained earnings of the Company) in an aggregate
amount that, together with the sum of (x) the aggregate amount of any other
distributions to all holders of its Common Stock made in cash plus (y) all
Excess Payments, in each case made within the 12 months preceding the date fixed
for determining the stockholders entitled to such distribution (the
"Distribution Record Date") and in respect of which no Conversion Price
adjustment pursuant to paragraph (e) of this Section or this paragraph (d) has
been made, exceeds 10% of the product of the current market price per

                                      -21-

<PAGE>

share (determined as provided in paragraph (f) of this Section) of the Common
Stock on the Distribution Record Date times the number of shares of Common Stock
outstanding on the Distribution Record Date (excluding shares held in the
treasury of the Company), the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying such Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price reduction
contemplated by this paragraph (d) by a fraction of which the numerator shall be
(x) the current market price per share (determined as provided in paragraph (f)
of this Section) of the Common Stock on the Distribution Record Date less (y)
the amount determined by dividing the aggregate amount of such cash and other
consideration (including any Excess Payments) so distributed in excess of the
10% referred to above by the shares of Common Stock outstanding on the
Distribution Record Date, and the denominator shall be such current market price
per share (determined as provided in paragraph (f) of this Section) of the
Common Stock on the Distribution Record Date, such reduction to become effective
immediately prior to the opening of business on the day following the
Distribution Record Date.

          (e) In case a tender offer made by the Company or any Subsidiary of
the Company for all or any portion of the Common Stock shall be consummated, if
an Excess Payment is made in respect of such tender offer and the amount of such
Excess Payment, together with the sum of (x) the aggregate amount of all Excess
Payments plus (y) the aggregate amount of all distributions to all holders of
the Common Stock made in cash (specifically including distributions of cash out
of current or retained earnings), in each case made within the 12 months
preceding the expiration of such current tender offer, (the "Purchase Date"),
and as to which no adjustment pursuant to paragraph (d) of this Section or this
paragraph (e) has been made, exceeds 10% of the product of the current market
price per share (determined as provided in paragraph (f) of this Section) of the
Common Stock on the Purchase Date times the number of shares of Common Stock
outstanding (including any tendered shares but excluding any shares held in the
treasury of the Company) on the Purchase Date, the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying such
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this paragraph (e) by a fraction of
which the numerator shall be (x) the current market price per share (determined
as provided in paragraph (f) of this Section) of the Common Stock on the
Purchase Date less (y) the amount determined by dividing the aggregate amount of
such Excess Payments and such cash distributions, if any, in excess of the 10%
amount referred to above by the shares of Common Stock outstanding on the
Purchase Date, and the denominator shall be such current market price per share
(determined as provided in paragraph (f) of this Section) of the Common Stock on
the Purchase Date, such reduction to become effective immediately prior to the
opening of business on the day following the Purchase Date.

          (f) The current market price per share of Common Stock on any date
shall be deemed to be the average of the Daily Market Prices for the shorter of
(i) 30 consecutive Trading Days ending on the last full trading day on the
exchange or market referred to in determining such Daily Market Prices prior to
the time of determination or (ii) the period commencing on the date next
succeeding the first public announcement of the issuance of such rights or such
warrants or such other distribution or such Excess Payment through such last
full trading day on the exchange or market referred to in determining such Daily
Market Prices prior to the time of determination.

                                      -22-

<PAGE>

          (g) In any case in which this Section 5.06 shall require that an
adjustment be made immediately following a record date for an event, the Company
may elect to defer, until such event, issuing to the holder of any Note
converted after such record date the shares of Common Stock and other Capital
Stock of the Company issuable upon such conversion over and above the shares of
Common Stock and other Capital Stock of the Company issuable upon such
conversion only on the basis of the Conversion Price prior to adjustment; and,
in lieu of the shares the issuance of which is so deferred, the Company shall
issue or cause its transfer agents to issue due bills or other appropriate
evidence of the right to receive such shares.

          SECTION 5.07. No Adjustment. No adjustment in the Conversion Price
                        -------------
shall be required until cumulative adjustments amount to 1% or more of the
Conversion Price as last adjusted; provided, however, that any adjustments which
                                   --------  -------
by reason of this Section 5.07 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article V shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. No adjustment need be made for
rights to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest. No adjustment need be made for a change in the par value
or no par value of the Common Stock.

          SECTION 5.08. Other Adjustments. (a) In the event that, as a result of
                        -----------------
an adjustment made pursuant to Section 5.06 above, the holder of any Note
thereafter surrendered for conversion shall become entitled to receive any
shares of Capital Stock of the Company other than shares of its Common Stock,
thereafter the Conversion Price of such other shares so receivable upon
conversion of any Notes shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Article V.

          (b) In the event that shares of Common Stock are not delivered after
the expiration of any of the rights or warrants referred to in Section 5.06(b)
and Section 5.06(c) hereof, the conversion Price shall be readjusted to the
Conversion Price which would otherwise be in effect had the adjustment made upon
the issuance of such rights or warrants been made on the basis of delivery of
only the number of shares of Common Stock actually delivered.

          SECTION 5.09. Adjustments for Tax Purposes. The Company may, at its
                        ----------------------------
option, make such reductions in the Conversion Price, in addition to those
required by Section 5.06 above, as the Board of Directors determines to be
advisable in order that any stock dividend, subdivision of shares, distribution
of rights to purchase stock or securities or distribution of securities
convertible into or exchangeable for stock made by the Company to its
stockholders will not be taxable to the recipients thereof.

          SECTION 5.10. Adjustments by the Company. The Company from time to
                        --------------------------
time may, to the extent permitted by law, reduce the Conversion Price by any
amount for any period of at least 20 days, in which case the Company shall give
at least 15 days' notice of such reduction in accordance with Section 5.11, if
the Board of Directors has made a determination that such reduction would be in
the best interests of the Company, which determination shall be conclusive.

                                      -23-

<PAGE>

          SECTION 5.11. Notice of Adjustment. Whenever the Conversion Price is
                        --------------------
adjusted, the Company shall promptly mail to Noteholders at the addresses
appearing on the Registrar's books a notice of the adjustment and file with the
Trustee an Officers' Certificate briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence of the correctness of such adjustment.

          SECTION 5.12. Notice of Certain Transactions. In the event that:
                        ------------------------------

          (1) the Company takes any action which would require an adjustment in
the Conversion Price;

          (2) the Company takes any action that would require a supplemental
indenture pursuant to Section 5.13; or

          (3) there is a dissolution or liquidation of the Company;

a holder of a Note may wish to convert such Note into shares of Common Stock
prior to the record date for or the effective date of the transaction so that he
may receive the rights, warrants, securities or assets which a holder of shares
of Common Stock on that date may receive. Therefore, the Company shall mail to
Noteholders at the addresses appearing on the Registrar's books and the Trustee
a notice stating the proposed record or effective date, as the case may be. The
Company shall mail the notice at least 15 days before such date; however,
failure to mail such notice or any defect therein shall not affect the validity
of any transaction referred to in clause (1), (2) or (3) of this Section 5.12.

          SECTION 5.13. Effect of Reclassifications, Consolidations, Mergers or
                        -------------------------------------------------------
Sales on Conversion Privilege. If any of the following shall occur, namely: (i)
-----------------------------
any reclassification or change of outstanding shares of Common Stock issuable
upon conversion of Notes (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), (ii) any consolidation or merger to which the Company is a
party other than a merger in which the Company is the continuing corporation and
which does not result in any reclassification of, or change (other than a change
in name, or par value, or from par value to no par value, or from no par value
to par value or as a result of a subdivision or combination) in, outstanding
shares of Common Stock or (iii) any sale or conveyance of all or substantially
all of the property or business of the Company as an entirety, then the Company,
or such successor or purchasing corporation, as the case may be, shall, as a
condition precedent to such reclassification, change, consolidation, merger,
sale or conveyance, execute and deliver to the Trustee a supplemental indenture
in form satisfactory to the Trustee providing that the holder of each Note then
outstanding shall have the right to convert such Note into the kind and amount
of shares of stock and other securities and property (including cash) receivable
upon such reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of shares of Common Stock deliverable upon conversion of
such Note immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance. Such supplemental indenture shall provide for
adjustments of the Conversion Price which shall be as nearly equivalent as may
be practicable to the adjustments of the Conversion Price provided for in this
Article V. The foregoing, however, shall not in any way affect the right a
holder of a Note may

                                      -24-

<PAGE>

otherwise have, pursuant to clause (ii) of the last sentence of subsection (c)
of Section 5.06, to receive Rights upon conversion of a Note. If, in the case of
any such consolidation, merger, sale or conveyance, the stock or other
securities and property (including cash) receivable thereupon by a holder of
Common Stock includes shares of stock or other securities and property of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, sale or conveyance, then such supplemental
indenture shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the holders of the Notes
as the Board of Directors of the Company shall reasonably consider necessary by
reason of the foregoing. The provision of this Section 5.13 shall similarly
apply to successive consolidations, mergers, sales or conveyances.

          In the event the Company shall execute a supplemental indenture
pursuant to this Section 5.13, the Company shall promptly file with the Trustee
an Officers' Certificate briefly stating the reasons therefor, the kind or
amount of shares of stock or securities or property (including cash) receivable
by holders of the Notes upon the conversion of their Notes after any such
reclassification, change, consolidation, merger, sale or conveyance and any
adjustment to be made with respect thereto. Neither the Trustee nor any
Conversion Agent shall have any duty whatsoever to determine whether a
supplemental indenture under this Section 5.13 is required or what the
provisions of such supplemental indenture should be.

          SECTION 5.14. Trustee's Disclaimer. The Trustee has no duty to
                        --------------------
determine when an adjustment under this Article V should be made, how it should
be made or what such adjustment should be, but may accept as conclusive evidence
of the correctness of any such adjustment, and shall be protected in relying
upon the Officers' Certificate with respect thereto which the Company is
obligated to file with the Trustee pursuant to Section 5.11. The Trustee makes
no representation as to the validity or value of any securities or assets issued
upon conversion of Notes, and the Trustee shall not be responsible for the
Company's failure to comply with any provisions of this Article V.

          The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 5.13, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 5.13.

                                   ARTICLE VI

                                  Subordination
                                  -------------

          SECTION 6.01. Agreement To Subordinate. The Company, for itself and
                        ------------------------
its successors, and each Noteholder, by his acceptance of Notes, agree that the
payment of the principal of or interest or any other amounts due on the Notes is
subordinated in right of payment, to the extent and in the manner stated in this
Article VI, to the prior payment in full of all existing and future Senior Debt.

                                      -25-

<PAGE>

          SECTION 6.02. No Payment on Notes if Senior Debt in Default. Anything
                        ---------------------------------------------
in this Indenture to the contrary notwithstanding, no payment on account of
principal, or interest on, or redemption, repurchase or other amounts due on the
Notes, and no redemption, purchase, or other acquisition of the Notes, shall be
made by or on behalf of the Company (i) unless full payment of amounts then due
for principal and interest or other amounts then due on all Senior Debt has been
made or duly provided for pursuant to the terms of the instrument governing such
Senior Debt or (ii) if there shall have occurred an event of default (other than
a default in the payment of principal, sinking funds or interest or other
amounts) with respect to any Senior Debt, as defined therein or in the
instrument under which the same is outstanding, permitting the holders thereof
to accelerate the maturity thereof and written notice of such occurrence shall
have been given to the Company and to the Trustee under this Indenture by any
holder or holders of such Senior Debt and such event of default shall not have
been cured or waived or shall not have ceased to exist.

          In the event that, notwithstanding the provisions of this Section
6.02, payments are made by or on behalf of the Company in contravention of the
provisions of this Section 6.02, such payments shall be held by the Trustee, any
Paying Agent or the holders, as applicable, in trust for the benefit of, and
shall be paid over to and delivered to, the Representative of the holders of
Senior Debt or the trustee under the indenture or other agreement (if any),
pursuant to which any instruments evidencing any Senior Debt may have been
issued for application to the payment of all Senior Debt ratably according to
the aggregate amounts remaining unpaid to the extent necessary to pay all Senior
Debt in full in accordance with the terms of such Senior Debt, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.

          The Company shall give prompt written notice to the Trustee and any
Paying Agent of any default or event of default under any Senior Debt or under
any agreement pursuant to which any Senior Debt may have been issued.

          SECTION 6.03. Distribution on Acceleration of Notes; Dissolution and
                        ------------------------------------------------------
Reorganization; Subrogation of Notes. (a) If the Notes are declared due and
------------------------------------
payable because of the occurrence of an Event of Default, the Company shall give
prompt written notice to the holders of all Senior Debt or to the trustee(s) or
other Representative for such Senior Debt of such acceleration. The Company may
not pay the principal of, interest or any other amounts due on the Notes until
five days after such holders or trustee(s) of Senior Debt receive such notice
and, thereafter, the Company may pay the principal of, interest or any other
amounts due on the Notes only if the provisions of this Article VI permit such
payment.

          (b) Upon (i) any acceleration of the principal amount due on the Notes
because of an Event of Default or (ii) any distribution of assets of the Company
upon any dissolution, winding up, liquidation or reorganization of the Company
(whether in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or any other dissolution, winding up,
liquidation or reorganization of the Company):

               (1) the holders of all Senior Debt shall first be entitled to
receive payment in full of the principal thereof, the interest thereon and any
other amounts due thereon

                                      -26-

<PAGE>

before the Noteholders are entitled to receive payment on account of the
principal of or interest on or any other amounts due on the Notes;

               (2) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted or securities of the
Company or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this Article with respect to the Notes, to the payment in full
without diminution or modification by such plan of all Senior Debt), to which
the holders or the Trustee would be entitled except for the provisions of this
Article, shall be paid by the liquidating trustee or agent or other Person
making such a payment or distribution, directly to the holders of Senior Debt
(or their Representatives(s) or trustee(s) acting on their behalf), ratably
according to the aggregate amounts remaining unpaid on account of the principal
of, interest and other amounts due on the Senior Debt held or represented by
each, to the extent necessary to make payment in full of all Senior Debt
remaining unpaid, after giving effect to any concurrent payment or distribution
to the holders of such Senior Debt; and

               (3) in the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities (other than securities of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in this Article with respect to the
Notes, to the payment in full without diminution or modification by such plan of
Senior Debt), shall be received by the Trustee or the Noteholders before all
Senior Debt is paid in full, such payment or distribution shall be held in trust
for the benefit of, and be paid over to upon written request by a holder of the
Senior Debt, the holders of the Senior Debt remaining unpaid (or their
Representatives) or trustee(s) acting on their behalf, ratably as aforesaid, for
application to the payment of such Senior Debt until all such Senior Debt shall
have been paid in full, after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.

          Subject to the payment in full of all Senior Debt, the Noteholders
shall be subrogated to the rights of the holders of Senior Debt to receive
payments or distributions of cash, property or securities of the Company
applicable to the Senior Debt until the principal of and interest on the Notes
shall be paid in full and, for purposes of such subrogation, no such payments or
distributions to the holders of Senior Debt of cash, property or securities
which otherwise would have been payable or distributable to Noteholders shall,
as between the Company, its creditors other than the holders of Senior Debt, and
the Noteholders, be deemed to be a payment by the Company to or on account of
the Senior Debt, it being understood that the provisions of this Article are and
are intended solely for the purpose of defining the relative rights of the
Noteholders, on the one hand, and the holders of Senior Debt, on the other hand.

          Nothing contained in this Article or elsewhere in this Indenture or in
the Notes is intended to or shall (i) impair, as between the Company and its
creditors other than the holders of Senior Debt, the obligation of the Company,
which is absolute and unconditional, to pay to the Noteholders the principal of
and interest on the Notes as and when the same shall become due and payable in
accordance with the terms of the Notes, (ii) affect the relative rights of the

                                      -27-

<PAGE>

Noteholders and creditors of the Company other than holders of Senior Debt or,
as between the Company and the Trustee, the obligations of the Company to the
Trustee, or (iii) prevent the Trustee or the holders from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article of the holders of
Senior Debt in respect of cash, property and securities of the Company received
upon the exercise of any such remedy.

          Upon distribution of assets of the Company referred to in this
Article, the Trustee, subject to the provisions of Section 9.01 hereof, and the
Noteholders shall be entitled to rely upon a certificate of the liquidating
trustee or agent or other Person making any distribution to the Trustee or to
the Noteholders for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of the Senior Debt and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article. The Trustee, however, shall not be deemed to owe any fiduciary
duty to the holders of Senior Debt. Nothing contained in this Article or
elsewhere in this Indenture, or in any of the Notes, shall prevent the good
faith application by the Trustee of any moneys which were deposited with it
hereunder, prior to its receipt of written notice of facts which would prohibit
such application, for the purpose of the payment of or on account of the
principal of or interest on the Notes unless, prior to the date on which such
application is made by the Trustee, the Trustee shall have received at the
address specified in Section 12.09 hereof written notice in accordance with
Section 6.03(d) hereof of the facts which would prohibit the making of such
application.

          (c) The provisions of this Article shall not be applicable to any
cash, properties or securities received by the Trustee or by any holder when
received as a holder of Senior Debt and nothing in Section 9.11 hereof or
elsewhere in this Indenture shall deprive the Trustee or such holder of any of
its rights as such holder.

          (d) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment of
money to or by the Trustee in respect of the Notes pursuant to the provisions of
this Article. Notwithstanding the provisions of this Article or any other
provisions of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any fact which would prohibit the making of any payment of
moneys to or by the Trustee in respect of the Notes pursuant to the provisions
in this Article, unless and until three Business Days after the Trustee shall
have received written notice thereof at the address specified in Section 12.09
hereof from the Company or any holder or holders of Senior Debt or from any
trustee therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Section 9.01 hereof, shall be entitled in
all respects conclusively to assume that no such facts exist; provided, however,
                                                              --------  -------
that if on a date not less than three Business Days immediately preceding the
date upon which, by the terms hereof, any such moneys may become payable for any
purpose (including, without limitation, the principal of or interest on any
Note), the Trustee shall not have received with respect to such moneys the
notice provided for in this Section 6.03(d), then anything herein contained to
the contrary notwithstanding, the Trustee shall have full power and authority to
receive such moneys and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such prior date.

                                      -28-

<PAGE>

          The Trustee shall be entitled to conclusively rely on the delivery to
it of a written notice by a Person representing himself to be a holder of Senior
Debt (or a trustee on behalf of such holder) to establish that such notice has
been given by a holder of Senior Debt (or a trustee on behalf of any such holder
or holders). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article, and, if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment; nor shall the Trustee be charged
with knowledge of the curing or waiving of any default of the character
specified in Section 6.02 hereof or that any event or any condition preventing
any payment in respect of the Notes shall have ceased to exist, unless and until
the Trustee shall have received written notice to such effect.

          (e) The provisions of this Section 6.03 applicable to the Trustee
shall (unless the context requires otherwise) also apply to any Paying Agent for
the Company.

          SECTION 6.04. Reliance by Senior Debt on Subordination Provisions.
                        ---------------------------------------------------
Each Noteholder by his acceptance thereof acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration for each holder of any Senior Debt, whether such Senior Debt
was created or acquired before or after the issuance of the Notes, to acquire
and continue to hold, or to continue to hold, such Senior Debt, and such holder
of Senior Debt shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Debt. Notice of any default in the payment of any Senior Debt, except as
expressly stated in this Article, and notice of acceptance of the provisions
hereof are hereby expressly waived. Except as otherwise expressly provided
herein, no waiver, forbearance or release by any holder of Senior Debt under
such Senior Debt or under this Article shall constitute a release of any of the
obligations or liabilities of the Trustee or holders of the Notes provided in
this Article.

          SECTION 6.05. No Waiver of Subordination Provisions. Except as
                        -------------------------------------
otherwise expressly provided herein, no right of any present or future holder of
any Senior Debt to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.

          Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of, or notice to, the Trustee or the holders of the Notes, without
incurring responsibility to the holders of the Notes and without impairing or
releasing the subordination provided in this Article VI or the obligations
hereunder of the holders of the Notes to the holders of Senior Debt, do any one
or more of the following: (i) change the manner, place or terms of payment of,
or renew or alter,

                                      -29-

<PAGE>

Senior Debt, or otherwise amend or supplement in any manner Senior Debt or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding; (ii) sell, exchange, release or otherwise dispose of any property
pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person
liable in any manner for the collection of Senior Debt; and (iv) exercise or
refrain from exercising any rights against the Company or any other Person.

          SECTION 6.06. Trustee's Relation to Senior Debt. The Trustee in its
                        ---------------------------------
individual capacity shall be entitled to all the rights set forth in this
Article in respect of any Senior Debt at any time held by it, to the same extent
as any holder of Senior Debt, and nothing in Section 9.11 hereof or elsewhere in
this Indenture shall deprive the Trustee of any of its rights as such holder.

          With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations, as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Debt shall be read into this Indenture
against the Trustee. The Trustee shall not owe any fiduciary duty to the holders
of Senior Debt but shall have only such obligations to such holders as are
expressly set forth in this Article.

          Each Noteholder by his acceptance thereof authorizes and directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination provided in this Article and appoints the Trustee
his attorney-in-fact for any and all such purposes, including, in the event of
any dissolution, winding up or liquidation or reorganization under any
applicable bankruptcy law of the Company (whether in bankruptcy, insolvency or
receivership proceedings or otherwise), the timely filing of a claim for the
unpaid balance of such Noteholder's Notes in the form required in such
proceedings and the causing of such claim to be approved. If the Trustee does
not file a claim or proof of debt in the form required in such proceedings prior
to 30 days before the expiration of the time to file such claims or proofs, then
any holder or holders of Senior Debt or their representative or representatives
shall have the right to demand, sue for, collect, receive and receipt for the
payments and distributions in respect of the Notes which are required to be paid
or delivered to the holders of Senior Debt as provided in this Article and to
file and prove all claims therefor and to take all such other action in the name
of the holders or otherwise, as such holders of Senior Debt or representative
thereof may determine to be necessary or appropriate for the enforcement of the
provisions of this Article.

          SECTION 6.07. Other Provisions Subject Hereto. Expect as expressly
                        -------------------------------
stated in this Article, notwithstanding anything contained in this Indenture to
the contrary, all the provisions of this Indenture and the Notes are subject to
the provisions of this Article. However, nothing in this Article shall apply to
or adversely affect the claims of, or payment to, the Trustee pursuant to
Section 9.07. Notwithstanding the foregoing, the failure to make a payment on
account of principal of or interest on the Notes by reason of any provision of
this Article VI shall not be construed as preventing the occurrence of an Event
of Default under Section 8.01.

                                      -30-

<PAGE>

                                   ARTICLE VII

              Consolidation, Merger, Conveyance, Transfer or Lease
              ----------------------------------------------------

          SECTION 7.01. Company May Consolidate, Etc., Only on Certain Terms.
                        ----------------------------------------------------
The Company may not consolidate or merge with or into any Person (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets unless:

          (a) the Company is the surviving or continuing corporation or the
     Person formed by or surviving any such consolidation or merger (if other
     than the Company) or the Person which acquires by sale, assignment,
     transfer, lease, conveyance or other disposition the properties and assets
     of the Company, is a corporation organized or existing under the laws of
     the United States, any state thereof or the District of Columbia;

          (b) the entity or Person formed by or surviving any such consolidation
     or merger (if other than the Company) assumes all the obligations of the
     Company, pursuant to a supplemental indenture in a form reasonably
     satisfactory to the Trustee, under the Notes and this Indenture;

          (c) such sale, assignment, transfer, lease, conveyance or other
     disposition of all or substantially all of the Company's properties or
     assets shall be as an entirety or virtually as an entirety to one Person
     and such Person shall have assumed all the obligations of the Company,
     pursuant to a supplemental indenture in a form reasonably satisfactory to
     the Trustee, under the Notes and this Indenture;

          (d) immediately after such transaction no Default or Event of Default
     exists; and

          (e) the Company or such Person shall have delivered to the Trustee an
     Officers' Certificate and an Opinion of Counsel, each stating that such
     transaction and the supplemental indenture comply with this Indenture and
     that all conditions precedent in this Indenture relating to such
     transaction have been satisfied.

          SECTION 7.02. Successor Corporation Substituted. Upon any
                        ---------------------------------
consolidation or merger, or any sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 7.01 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person has been named as the Company herein; provided, however, that the
                                             --------  -------
predecessor Company in the case of a sale, assignment, transfer, lease,
conveyance or other disposition shall not be released from the obligations under
this Indenture and the Notes.

                                      -31-

<PAGE>

                                  ARTICLE VIII

                              Defaults and Remedies
                              ---------------------

          SECTION 8.01. Events of Default. An "Event of Default" occurs if:
                        -----------------

          (a) the Company defaults in the payment of interest on any Note when
     the same becomes due and payable, whether or not such payments shall be
     prohibited by Article VI, and the Default continues for a period of 30 days
     after such date;

          (b) the Company defaults in the payment of the principal on any Note
     when the same becomes due and payable at maturity, upon redemption, upon
     required repurchase or otherwise, whether or not such payment shall be
     prohibited by Article VI;

          (c) failure by the Company to make a payment with respect to
     repurchase of Notes in accordance with the provisions contained in Section
     4.06 hereof, whether or not such purchase shall be prohibited by Article
     VI;

          (d) the Company fails to observe or perform any other covenant or
     agreement contained in this Indenture or the Notes, required by it to be
     performed, and the Default continues for a period of 60 days after the
     receipt of written notice from the Trustee to the Company or from the
     holders of 25% in aggregate principal amount of the then outstanding Notes
     to the Company and the Trustee stating that such notice is a "Notice of
     Default";

          (e) there is a default under any mortgage, indenture or instrument
     under which there may be issued or by which there may be secured or
     evidenced any indebtedness for money borrowed by the Company or any
     Subsidiary of the Company (or the payment of which is guaranteed by the
     Company or any Subsidiary of the Company), whether such indebtedness or
     guarantee now exists or is created after the Issuance Date, which default
     (i) is caused by a failure to pay when due principal of or interest on such
     indebtedness within the grace period provided for in such indebtedness
     (which failure continues beyond any applicable grace period) (a "Payment
     Default") or (ii) results in the acceleration of such indebtedness prior to
     its express maturity and, in each case, the principal amount of any such
     indebtedness, together with the principal amount of any other such
     indebtedness under which there has been a Payment Default which is
     continuing or the maturity of which has been so accelerated, aggregates $15
     million or more; provided, however, that no such default by a Subsidiary
                      --------  -------
     shall be covered by this clause (e) unless such Subsidiary alone or
     together with all other Subsidiaries which are then in default as described
     by subclauses (i) or (ii) in this clause (e), would, in the aggregate,
     constitute a Material Subsidiary;

          (f) failure by the Company or any Subsidiary of the Company to pay
     final judgments (other than any judgment as to which a reputable insurance
     company has accepted full liability) aggregating in excess of $15 million,
     which judgments are not stayed within 60 days after their entry; provided,
                                                                      --------
     however, that no such default by a
     -------

                                      -32-

<PAGE>

     Subsidiary shall be covered by this subsection (f) unless such Subsidiary
     alone or together with all other Subsidiaries which then have such final
     judgments outstanding, would, in the aggregate, constitute a Material
     Subsidiary;

          (g) the Company or any Material Subsidiary pursuant to or within the
     meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii)
     consents to the entry of an order for relief against it in an involuntary
     case in which it is the debtor, (iii) consents to the appointment of a
     Custodian of it or for all or substantially all of its property, (iv) makes
     a general assignment for the benefit of its creditors, or (v) makes the
     admission in writing that it generally is unable to pay its debts as the
     same become due; or

          (h) a court of competent jurisdiction enters an order or decree under
     any Bankruptcy Law that: (i) is for relief against the Company or any
     Material Subsidiary of the Company in an involuntary case, (ii) appoints a
     Custodian of the Company or any Material Subsidiary of the Company or for
     all or substantially all of its property, and the order or decree remains
     unstayed and in effect for 60 days, or (iii) orders the liquidation of the
     Company or any Material Subsidiary of the Company, and the order or decree
     remains unstayed and in effect for 60 days.

          The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.

          SECTION 8.02. Acceleration. If any Event of Default (other than an
                        ------------
Event of Default specified in clauses (g) and (h) of Section 8.01 hereof) occurs
and is continuing, the Trustee by notice to the Company, or the Noteholders of
at least 25% in principal amount of the then outstanding Notes by notice to the
Company and the Trustee, may declare all the Notes to be due and payable. Upon
such declaration, the principal of and accrued and unpaid interest on the Notes
shall be due and payable immediately. If an Event of Default specified in clause
(g) or (h) of Section 8.01 hereof occurs, the principal of and accrued and
unpaid interest on the Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Noteholder. In the event of a declaration of acceleration hereunder because an
Event of Default set forth in paragraph (e) of Section 8.01 has occurred and is
continuing, such declaration of acceleration will be automatically annulled if
the holders of the indebtedness which is the subject of such Event of Default
have waived such Payment Default or rescinded their declaration of acceleration
in respect of such indebtedness or if such Payment Default has been cured within
30 days thereof and no other Event of Default has occurred during such 30-day
period which has not been cured or waived. The Noteholders of a majority in
aggregate principal amount of the then outstanding Notes, by written notice to
the Trustee, may rescind and annul an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration.

                                      -33-

<PAGE>

          SECTION 8.03. Other Remedies. If an Event of Default occurs and is
                        --------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal or interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.

          The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.

          SECTION 8.04. Waiver of Past Defaults. Subject to Section 11.02, the
                        -----------------------
Noteholders of a majority in aggregate principal amount of the then outstanding
Notes by notice to the Trustee may on behalf of all the holders waive an
existing Default or Event of Default and its consequences. When a Default or
Event of Default is waived, it is cured and ceases; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.

          SECTION 8.05. Control by Majority. The Noteholders of a majority in
                        -------------------
principal amount of the then outstanding Notes may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture, is unduly
prejudicial to the rights of other Noteholders, or would involve the Trustee in
personal liability.

          SECTION 8.06. Limitation on Suits. A Noteholder may pursue a remedy
                        -------------------
with respect to this Indenture or the Notes only if:

          (a) the Noteholder gives to the Trustee notice of a continuing Event
     of Default;

          (b) the Noteholders of at least 25% in principal amount of the then
     outstanding Notes make a request to the Trustee to pursue the remedy;

          (c) such Noteholder or Noteholders offer to the Trustee indemnity
     satisfactory to the Trustee against any loss, liability or expense;

          (d) the Trustee does not comply with the request within 60 days after
     receipt of the request and the offer of indemnity; and

          (e) during such 60-day period the Noteholders of a majority in
     principal amount of the then outstanding Notes do not give the Trustee a
     direction inconsistent with the request.

          A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.

                                      -34-

<PAGE>

          SECTION 8.07. Rights of Noteholders To Receive Payment.
                        ----------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Noteholder to convert such Noteholder's Note and to receive payment of principal
and interest on such Noteholder's Note, on or after the respective due dates
expressed in such Note, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of the Noteholder made pursuant to this Section.

          SECTION 8.08. Collection Suit by Trustee. If an Event of Default
                        --------------------------
specified in Section 8.01(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount of principal and interest remaining unpaid on the
Notes and interest on overdue principal and interest and such further amount as
shall be sufficient to cover the costs and, to the extent lawful, expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.

          SECTION 8.09. Trustee May File Proofs of Claim. The Trustee may file
                        --------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Noteholders allowed
in any judicial proceedings relative to the Company, its creditors omits
property. Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Noteholder thereof, or to authorize the Trustee to vote in
respect of the claim of any Noteholder in any such proceeding.

          SECTION 8.10. Priorities. If the Trustee collects any money pursuant
                        ----------
to this Article, it shall pay out the money in the following order:

          First: to the Trustee for amounts due under Section 9.07 hereof;
          -----

          Second: to the holders of Senior Debt to the extent required by
          ------
     Article VI;

          Third: to Noteholders for amounts due and unpaid on the Notes for
          -----
     principal and interest ratably, without preference or priority of any kind,
     according to the amounts due and payable on the Notes for principal and
     interest respectively; and

          Fourth: to the Company.
          ------

          Except as otherwise provided in Section 2.12 hereof, the Trustee may
fix a record date and payment date for any payment to Noteholders made pursuant
to this Section.

          SECTION 8.11. Undertaking for Costs. In any suit for the enforcement
                        ---------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an undertaking to
pay the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a holder pursuant to

                                      -35-

<PAGE>

Section 8.07 hereof, or a suit by Noteholders of more than 25% in principal
amount of the then outstanding Notes.

                                   ARTICLE IX

                                     Trustee
                                     -------

          SECTION 9.01. Duties of Trustee. (a) If an Event of Default has
                        -----------------
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.

          (b) Except during the continuance of an Event of Default: (i) the
Trustee need perform only those duties that are specifically set forth in this
Indenture and no others and (ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.

          (c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that: (i) this paragraph does not limit the effect of
paragraph (b) of this Section 9.01; (ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts and (iii) the
Trustee shall not be liable with respect to any action it takes or omits to take
in good faith in accordance with a direction received by it pursuant to Section
8.05 hereof.

          (d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 9.01. No
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.

          (e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.

          (f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.

          SECTION 9.02. Rights of Trustee. (a) The Trustee may rely on any
                        -----------------
document reasonably believed by it to be genuine and to have been signed or
presented by the proper Person. The Trustee need not investigate any fact or
matter stated in the document.

                                      -36-

<PAGE>

          (b) Before the Trustee acts or refrains from acting, it (unless other
evidence be herein specifically prescribed) may require an Officers' Certificate
or an Opinion of Counsel, or both. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.

          (c) The Trustee shall not be liable for any action that it takes or
omits to take in good faith, without negligence or willful misconduct, and that
it reasonably believes to be authorized or within its rights or powers.

          (d) The Trustee shall not be charged with knowledge of any Event of
Default under subsection (c), (d), (e) or (f) of Section 8.01 or of the identity
of any Material Subsidiary unless either (1) a Trust Officer assigned to its
corporate trust department shall have actual knowledge thereof, or (2) the
Trustee shall have received notice thereof in accordance with Section 12.02
hereof from the Company or any holder.

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

          (f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.

          SECTION 9.03. Individual Rights of Trustee. The Trustee in its
                        ----------------------------
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company or an Affiliate of the Company with the same
rights it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to Sections 9.10 and 9.11 hereof.

          SECTION 9.04. Trustee's Disclaimer. The Trustee makes no
                        --------------------
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from any Notes
authenticated and delivered by the Trustee in conformity with the provisions of
this Indenture, and it shall not be responsible for any statement of the Company
in the Indenture or any statement in the Notes other than its authentication.

          SECTION 9.05. Notice of Defaults. If a Default or Event of Default
                        ------------------
occurs and is continuing and if it is actually known to the Trustee, the Trustee
shall mail to Noteholders a notice of the Default or Event of Default within 90
days after it occurs. Except in the case of a Default or Event of Default in
payment of principal or interest on any Note, the Trustee may withhold the
notice if and so long as a committee of its Trust officers in good faith
determines that withholding the notice is in the interests of Noteholders.

          SECTION 9.06. Reports by Trustee to Noteholders. Within 60 days after
                        ---------------------------------
the reporting date stated in Section 12.09, the Trustee shall mail to
Noteholders a brief report dated as of such reporting date that complies with
TIA Section 313(a) if and to the extent required by such Section

                                      -37-

<PAGE>

313(a). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee
shall also transmit by mail all reports as required by TIA Section 313(c).

          A copy of each report at the time of its mailing to Noteholders shall
be filed with the SEC and each stock exchange on which the Notes are listed. The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.

          SECTION 9.07. Compensation and Indemnity. The Company shall pay to the
                        --------------------------
Trustee from time to time such compensation for its services hereunder as shall
be agreed to in writing between the Company and the Trustee. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable and duly documented disbursements, expenses and advances incurred or
made by it. Such disbursements and expenses may include the reasonable and duly
documented disbursements, compensation and expenses of the Trustee's agents and
counsel.

          The Company shall indemnify each of the Trustee or any predecessor
Trustee and its officers, directors, employees and all other agents against any
and all loss, damage, claim, expense, including taxes (other than taxes based on
the income of the Trustee) or liability incurred by it except as set forth in
the next paragraph. The Trustee shall notify the Company promptly of any claim
for which it may seek indemnity. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
and the Company shall pay the reasonable and duly documented fees, disbursements
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.

          The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith.

          To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, except money or property held in trust to pay
principal and interest on particular Notes.

          When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 8.01(g) or (h) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

          The provisions of this Section 9.07 shall survive the termination of
this Indenture, as provided by Section 10.01 hereof.

          SECTION 9.08. Replacement of Trustee. A resignation or removal of the
                        ----------------------
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section.

          The Trustee may resign by so notifying the Company. The Noteholders of
a majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:

                                      -38-

<PAGE>

          (a) the Trustee fails to comply with Section 9.10 hereof, unless the
     Trustee's duty to resign is stayed as provided in TIA Section 310(b);

          (b) the Trustee is adjudged a bankrupt or an insolvent or an order for
     relief is entered with respect to the Trustee under any Bankruptcy Law;

          (c) a Custodian or public officer takes charge of the Trustee or its
     property; or

          (d) the Trustee becomes incapable of acting.

          If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the
Noteholders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.

          If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Noteholders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.

          If the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any
Noteholder who has been a bona fide holder of a Note for at least six months may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.

          A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, the
Company shall promptly pay all amounts due and payable to the retiring Trustee
pursuant to Section 9.07 hereof and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. The successor
Trustee shall mail a notice of its succession to Noteholders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in Section 9.07 hereof.
Notwithstanding replacement of the Trustee pursuant to this Section 9.08, the
Company's obligations under Section 9.07 hereof shall continue for the benefit
of the retiring trustee with respect to expenses and liabilities incurred by it
prior to such replacement.

          SECTION 9.09. Successor Trustee by Merger, Etc. If the Trustee
                        --------------------------------
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.

          SECTION 9.10. Eligibility; Disqualification. This Indenture shall
                        -----------------------------
always have a Trustee who satisfies the requirements of TIA Section 310(a)(1)
and (5). The Trustee shall always have a combined capital and surplus as stated
in Section 12.09 hereof. The Trustee is subject to TIA Section 310(b).

                                      -39-

<PAGE>

          SECTION 9.11. Preferential Collection of Claims Against Company. The
                        -------------------------------------------------
Trustee is subject to TIA Section 311(a), excluding any creditor relationship
listed in TIA Section 311(b). A Trustee who has resigned or been removed shall
be subject to TIA Section 311(a) to the extent indicated therein.

          SECTION 9.12. Sections Applicable to Registrar, Paying Agent and
                        --------------------------------------------------
Conversion Agent. The term "Trustee" as used in Sections 9.01, 9.02, 9.03, 9.04
----------------
and 9.07 hereof shall (unless the context requires otherwise) be construed as
extending to and including the Trustee acting in its capacity, if any, as
Registrar, Paying Agent and Conversion Agent.

                                   ARTICLE X

                             Discharge of Indenture
                             ----------------------

          SECTION 10.01. Termination of Company's Obligations. This Indenture
                         ------------------------------------
shall cease to be of further effect (except that obligations under Sections 9.07
and 10.02 hereof shall survive) when all outstanding Notes theretofore
authenticated and issued have been delivered to the Trustee for cancellation and
the Company has paid all sums payable hereunder.

          Thereupon, the Trustee, upon written request of the Company, shall
acknowledge in writing the discharge of the Company's obligations under this
Indenture, except for those surviving obligations specified above.

          SECTION 10.02. Repayment to Company. The Trustee and the Paying Agent
                         --------------------
shall promptly pay to the Company upon written request any excess money or
securities held by them at any time.

          The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal or interest that
remains unclaimed for two years after the date upon which such payment shall
have become due; provided, however, that the Company shall have first caused
                 --------  -------
notice of such payment to the Company to be mailed to each Noteholder entitled
thereto no less than 30 days prior to such payment. After payment to the
Company, the Trustee and the Paying Agent shall have no further liability with
respect to such money and Noteholders entitled to the money must look to the
Company for payment as general creditors unless any applicable abandoned
property law designates another Person.

                                   ARTICLE XI

                       Amendments, Supplements and Waivers
                       -----------------------------------

          SECTION 11.01. Without Consent of Noteholders. The Company and the
                         ------------------------------
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Noteholder:

          (a) to cure any ambiguity, defect or inconsistency;

          (b) to comply with Sections 5.13 and 7.01 hereof;

                                      -40-

<PAGE>

          (c) to provide for uncertificated Notes in addition to certificated
     Notes;

          (d) to make any change that does not adversely affect the legal rights
     hereunder of any Noteholder;

          (e) to comply with the requirements of the SEC in order to maintain
     the qualification of the Indenture under the TIA; or

          (f) to make any change that provides any additional rights or benefits
     to the holders of Notes.

          An amendment under this Section may not make any change that adversely
affects the rights under Article VI of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to give a consent) consent to such change.

          SECTION 11.02. With Consent of Noteholders. Subject to Section 8.07
                         ---------------------------
hereof, the Company and the Trustee may amend or supplement this Indenture or
the Notes with the written consent (including consents obtained in connection
with any tender offer or exchange offer for Notes) of the Noteholders of at
least a majority in principal amount of the then outstanding Notes. Subject to
Sections 8.04 and 8.07 hereof, the Noteholders of a majority in principal amount
of the Notes then outstanding may also by their written consent (including
consents obtained in connection with any tender offer or exchange offer for
Notes) waive any existing Default or Event of Default as provided in Section
8.04 or waive compliance in a particular instance by the Company with any
provision of this Indenture or the Notes. However, without the consent of each
Noteholder affected, an amendment, supplement or waiver under this Section may
not (with respect to any Notes held by a nonconsenting Noteholder):

          (a) reduce the amount of Notes whose Noteholders must consent to an
     amendment, supplement or waiver;

          (b) reduce the rate of or change the time for payment of interest on
     any Note;

          (c) reduce the principal of or change the fixed maturity of any Note
     or alter the redemption provisions with respect thereto;

          (d) make any Note payable in money other than that stated in the Note;

          (e) make any change in Section 8.04, 8.07 or 11.02 hereof;

          (f) waive a default in the payment of the principal of, or interest
     on, any Note (except a rescission of acceleration of the Notes by the
     Noteholders of at least a majority in aggregate principal amount of the
     then outstanding Notes and the waiver of the payment default that resulted
     from such acceleration);

          (g) waive a redemption payment payable on any Note;

                                      -41-

<PAGE>

          (h) impair the right of Noteholders to convert Notes into Common Stock
     of the Company or waive or otherwise adversely affect the rights of any
     Noteholders under Section 4.06; or

          (i) modify Articles V or VI hereof in a manner adverse to the
     Noteholders.

          To secure a consent of the Noteholders under this Section 11.02, it
shall not be necessary for the Noteholders to approve the particular form of any
proposed amendment, supplement or waiver, but it shall be sufficient if such
consent approves the substance thereof.

          An amendment under this Section may not make any change that adversely
affects the rights under Article VI of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to give a consent) consent to such change.

          After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to Noteholders a notice briefly describing the
amendment or waiver.

          SECTION 11.03. Compliance with Trust Indenture Act. Every amendment to
                         -----------------------------------
this Indenture or the Notes shall be set forth in a supplemental indenture that
complies with the TIA as then in effect.

          SECTION 11.04. Revocation and Effect of Consents. Until an amendment,
                         ---------------------------------
supplement or waiver becomes effective, a consent to it by a Noteholder of a
Note is a continuing consent by the Noteholder and every subsequent Noteholder
of a Note or portion of a Note that evidences the same debt as the consenting
Noteholder's Note, even if notation of the consent is not made on any Note.
However, any such Noteholder or subsequent Noteholder may revoke the consent as
to such Noteholder's Note or portion of a Note if the Trustee receives the
written notice of revocation at least one business day before the date on which
the Trustee receives an Officers' Certificate certifying that the Noteholders of
the requisite principal amount of Notes have consented to the amendment,
supplement or waiver.

          The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Noteholders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Noteholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not such Persons
continue to be Noteholders after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Noteholders of the principal amount of Notes required hereunder for such
amendment or waiver to be effective shall have also been given and not revoked
within such 90-day period.

          After an amendment, supplement or waiver becomes effective it shall
bind every Noteholder, unless it is of the type described in any of clauses (a)
through (i) of Section 11.02 hereof. In such case, the amendment or waiver shall
bind each Noteholder who has consented to

                                      -42-

<PAGE>

it and every subsequent Noteholder that evidences the same debt as the
consenting Noteholder's Note.

          SECTION 11.05. Notation on or Exchange of Notes. The Trustee shall,
                         --------------------------------
upon the written request and expense of the Company, place an appropriate
notation about an amendment or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall authenticate
new Notes that reflect the amendment or waiver.

          SECTION 11.06. Trustee Protected. The Trustee shall sign all
                         -----------------
supplemental indentures, except that the Trustee may, but need not, sign any
supplemental indenture that adversely affects its rights. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modification thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this indenture.

                                  ARTICLE XII

                                  Miscellaneous
                                  -------------

          SECTION 12.01. Trust Indenture Act Controls. If any provision of this
                         ----------------------------
Indenture limits, qualifies, or conflicts with another provision which is
automatically deemed to be incorporated in this Indenture by the TIA, the
incorporated provision shall control.

          SECTION 12.02. Notices. Any notice or communication by the Company or
                         -------
the Trustee to the other is duly given if in writing and delivered in person or
mailed by first-class mail to the other's address stated in Section 12.09
hereof. The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.

          Any notice or communication to a Noteholder shall be mailed by
first-class mail to his address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or any defect in it
shall not affect its sufficiency with respect to other Noteholders.

          If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.

          If the Company mails a notice or communication to Noteholders, it
shall mail a copy to the Trustee and each Agent at the same time.

          All other notices or communications shall also be in writing.

          In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by the Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.

                                      -43-

<PAGE>

          SECTION 12.03. Communication by Noteholders with Other Noteholders.
                         ---------------------------------------------------
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).

          SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
                         --------------------------------------------------
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:

          (a) an Officers' Certificate stating that, in the opinion of the
     signers, all conditions precedent, if any, provided for in this Indenture
     relating to the proposed action have been complied with; and

          (b) an Opinion of Counsel stating that, in the opinion of such
     counsel, all such conditions precedent have been complied with.

          SECTION 12.05. Statements Required in Certificate or Opinion. Each
                         ---------------------------------------------
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than pursuant to Section 4.02) shall
include:

          (a) a statement that the person signing such certificate or rendering
     such opinion has read such covenant or condition;

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

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

          (d) a statement as to whether or not, in the opinion of such person,
     such condition or covenant has been complied with.

          SECTION 12.06. Rules by Trustee and Agents. The Trustee may make
                         ---------------------------
reasonable rules for action by, or a meeting of, Noteholders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.

          SECTION 12.07. Legal Holidays. A "Legal Holiday" is a Saturday, a
                         --------------
Sunday or a day on which banking institutions in the State of New York or a
place of payment are not required to be open. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If any other operative date for purposes of this Indenture
shall occur on a Legal Holiday then for all purposes the next succeeding day
that is not a Legal Holiday shall be such operative date.

                                      -44-

<PAGE>

          SECTION 12.08. Counterparts. This Indenture may be executed in any
                         ------------
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

          SECTION 12.09. Variable Provisions. "Officer" means the Chairman of
                         -------------------
the Board, the President, any Executive Vice-President, any Vice-President, the
Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of
the Company.

          The first certificate pursuant to Section 4.02 hereof shall be for the
fiscal year ending on February 1, 1997.

          The reporting date for Section 9.06 hereof is May 15 of each year. The
first reporting date is May 15, 1997.

          The Trustee shall always have a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition.

The Company's address is:  Charming Shoppes, Inc.
                           450 Winks Lane
                           Bensalem, Pennsylvania  19020
                           Attention:  Chief Financial Officer
                           Telephone number:(215) 245-9100
                           Telefax number:  (215) 985-7321

with a copy to:            Charming Shoppes, Inc.
                           450 Winks Lane
                           Bensalem, Pennsylvania  19020
                           Attention:  General Counsel
                           Telephone number:(215) 245-9100
                           Telefax number:  (215) 638-6648

The Trustee's address is:  First Union National Bank
                           123 South Broad Street
                           12th Floor
                           Philadelphia, Pennsylvania  19109
                           Attention:  Corporate Trust Administration
                           Telephone Number:(215) 985-7321
                           Telefax Number   (215) 985-7290

          SECTION 12.10. GOVERNING LAW. THIS INDENTURE AND EACH NOTE SHALL BE
                         -------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.

          SECTION 12.11. No Adverse Interpretation of Other Agreements. This
                         ---------------------------------------------
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company

                                      -45-

<PAGE>

or an Affiliate. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.

          SECTION 12.12. Successors. All agreements of the Company in this
                         ----------
Indenture and the Notes shall bind its successor. All agreements of the Trustee
in this Indenture shall bind its successor.

          SECTION 12.13. Severability. In case any provision in this Indenture
                         ------------
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

          SECTION 12.14. Table of Contents, Headings, Etc. The Table of
                         --------------------------------
Contents, Cross-Reference Table, and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.

          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.

                                     CHARMING SHOPPES, INC.,
                                              as Company

                                              By:
                                                 ------------------------------
                                                  Name: Eric M. Specter
                                                  Title: Vice President

                                     FIRST UNION NATIONAL BANK,
                                              as Trustee

                                              By:
                                                 ------------------------------
                                                  Name: John Cusumano
                                                  Title: Vice President

                                      -46-

<PAGE>

                                                                       EXHIBIT A

                             [FORM OF FACE OF NOTE]

                              [Global Note Legend]

          UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

          TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.

<PAGE>

No.                                                                 $
    ---------                                                        -----------

                                              CUSIP No. 161133 AA 1

                             CHARMING SHOPPES, INC.
                      7 1/2% CONVERTIBLE SUBORDINATED NOTE
                                    DUE 2006

                             CHARMING SHOPPES, INC.

          Charming Shoppes, Inc., a Pennsylvania corporation (the "Company"),
promises to pay to
                   ------------------------------------------------------------
                                    or registered assigns, the principal sum of
-----------------------------------
         Dollars [if this is a Global Note, insert -- or such other principal
--------
sum as is shown on the register maintained by the Registrar] on July 15, 2006.

Interest Payment Dates: January 15 and July 15 of each year, commencing
                        January 15, 1997

Record Dates: January 1 and July 1

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

                                      -2-

<PAGE>

          IN WITNESS WHEREOF, Charming Shoppes, Inc. has caused this Convertible
Note to be signed manually or by facsimile by its duly authorized officers and a
facsimile of its corporate seal to be affixed hereto or imprinted hereon.

                                           CHARMING SHOPPES, INC.,

                                           By:
                                              ----------------------------------
[SEAL]
                                           ATTEST
                                                 -------------------------------
Dated:
      ----------------

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

This is one of the 7 1/2%
Convertible Subordinated Notes
Due 2006 described in the
within-mentioned Indenture.

FIRST UNION NATIONAL BANK,
as Trustee,

By:
   -----------------------------
       Authorized Signatory

                                      -3-

<PAGE>

                             CHARMING SHOPPES, INC.

                  7 1/2% Convertible Subordinated Note Due 2006

     1. Interest. CHARMING SHOPPES, INC., a Pennsylvania corporation (the
        --------
"Company"), is the issuer of this 7 1/2% Convertible Subordinated Note Due 2006
(the "Convertible Note"). The Company promises to pay interest on the
Convertible Notes at the rate per annum shown above, in cash semiannually on
each January 15 and July 15, commencing on January 15, 1997, to holders of
record on the immediately preceding January 1 or July 1, as the case may be.

     Interest on the Convertible Notes will accrue from the most recent date to
which interest has been paid, or if no interest has been paid, from July 22,
1996. Interest will be computed on the basis of a 360-day year of 12 30-day
months. To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
rate borne by the Convertible Notes, compounded semi-annually.

     2. Method of Payment. The Company will pay interest on the Convertible
        -----------------
Notes (except defaulted interest) to the persons who are registered holders of
the Convertible Notes at the close of business on the record date for the next
interest payment date even though Convertible Notes are cancelled after the
record date and on or before the interest payment date. To collect principal
payments, the Noteholder hereof must surrender this Convertible Notes to the
office or agency of the Company maintained for that purpose. The Company will
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. The Company may
pay principal by check payable in such money or by wire transfer to a dollar
account maintained by the holder (if the holder of the Convertible Notes holds
an aggregate principal amount of Convertible Notes in excess of $5,000,000). The
Company may pay interest by mailing a dollar check to a holder's registered
address or, upon application by the holder hereof to the Registrar, not later
than the applicable record date, by wire transfer to a dollar account maintained
by the holder (if the holder of the Convertible Notes holds an aggregate
principal amount of Convertible Notes in excess of $5,000,000).

     3. Paying Agent, Registrar and Conversion Agent. The Trustee will initially
        --------------------------------------------
act as Paying Agent, Registrar and Conversion Agent. The Company may change any
Paying Agent, Registrar, co-registrar or Conversion Agent without prior notice.
The Company or any of its Affiliates may act in any such capacity.

     4. Indenture. The Company issued the Convertible Notes under an indenture,
        ---------
dated as of July 22, 1996 (the "Indenture"), between the Company and First Union
National Bank, as Trustee. The terms of the Convertible Notes include those
stated in the Indenture and those made part of the Indenture by the Trust
Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the
date of the Indenture. The Convertible Notes are subject to, and qualified by,
all such terms, certain of which are summarized hereon, and Noteholders are
referred to the Indenture and such Act for a statement of such terms. The
Convertible Notes are unsecured

                                      -4-

<PAGE>

obligations of the Company limited to (except as otherwise provided in the
Indenture) an aggregate principal amount of $120,000,000 (plus up to $18,000,000
aggregate principal amount of Convertible Notes that may be sold by the Company
pursuant to the over-allotment option granted pursuant to the Underwriting
Agreement dated July 16, 1996 between the Company and the Underwriters), and are
subordinated in right of payment to all existing and future Senior Debt of the
Company as provided in the Indenture. Any holder of this Convertible Note shall
be deemed to have agreed to and be bound by all the terms and conditions
contained in the Indenture applicable to a holder of a Convertible Note.

     5. Optional Redemption. The Convertible Notes are not subject to redemption
        -------------------
at the Company's option prior to July 15, 1999. On such date and thereafter, the
Convertible Notes will be subject to redemption at the option of the Company, in
whole or in part (in any integral multiple of $1,000), upon not less than 30 nor
more than 60 days prior notice by mail at the following redemption prices
(expressed as percentages of the principal amount), if redeemed during the
12-month period beginning July 15 of the years indicated:

                             Redemption
Year                            Price
----                         ----------
1999......................    103.750%
2000......................    103.125
2001......................    102.500
2002......................    101.875
2003......................    101.250
2004......................    100.625

and, at July 15, 2005 and thereafter, 100%, in each case together with accrued
interest up to but not including the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on an
interest payment date). If less than all Convertible Notes are to be redeemed,
the Trustee will select the Convertible Notes to be redeemed by lot. On or after
the redemption date, interest will cease to accrue on the Convertible Notes, or
portion thereof, called for redemption unless the Company defaults in making
such redemption.

     6. Notice of Redemption. Notice of intention to redeem Convertible Notes
        --------------------
will be mailed at least 30 days but not more than 60 days prior to the
redemption date to each holder of the Convertible Notes to be redeemed at his
address of record. The Convertible Notes in denominations larger than $1,000 may
be redeemed in part but only in integral multiples of $1,000. In the event of a
redemption of less than all of the Convertible Notes, the Convertible Notes will
be chosen for redemption by the Trustee in accordance with the Indenture. Unless
the Company defaults in making such redemption payment, or the Paying Agent is
prohibited from making such payment pursuant to the Indenture, interest ceases
to accrue on the Convertible Notes or portions of them called for redemption on
and after the redemption date.

     If this Convertible Note is redeemed subsequent to a record date with
respect to any interest payment date specified above and on or prior to such
interest payment date, then any

                                      -5-

<PAGE>

accrued interest will be paid to the person in whose name this Convertible Note
is registered at the close of business on such record date.

     7. Mandatory Redemption. The Company will not be required to make mandatory
        --------------------
redemption payments with respect to the Convertible Notes. There are no sinking
fund payments with respect to the Convertible Notes.

     8. Repurchase at Option of Holder. If there is a Change of Control, the
        ------------------------------
Company shall be required to offer to purchase on the Change of Control Payment
Date all outstanding Convertible Notes at a purchase price equal to 100% of the
principal amount thereof on the date of purchase, plus accrued and unpaid
interest to the Change of Control Payment Date; provided, however, that if a
                                                --------  -------
Change of Control Payment Date is on or after a record date and on or before the
related interest payment date, any accrued interest shall be payable to the
registered holder hereof at the close of business on the relevant record date.
Holders of Convertible Notes that are subject to an offer to purchase will
receive a Change of Control Offer from the Company prior to any related Change
of Control Payment Date and may elect, pursuant to the terms of the Indenture,
to have such Convertible Notes or portions thereof in authorized denominations
purchased by completing the form entitled "Option of Noteholder To Elect
Purchase" appearing below.

     9. Subordination. The payment of the principal of, interest on or any other
        -------------
amounts due on the Convertible Notes is subordinated in right of payment to the
prior payment in full of all existing and future Senior Debt of the Company, as
described in the Indenture. Each Noteholder, by accepting a Convertible Note,
agrees to such subordination and authorizes and directs the Trustee on its
behalf to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee as its attorney-in-fact for
such purpose.

     10. Conversion. The holder of any Convertible Note has the right,
         ----------
exercisable at any time prior to the close of business (New York time) on the
date of the Convertible Note's maturity, to convert the principal amount thereof
(or any portion thereof that is an integral multiple of $1,000) into shares of
Common Stock at the initial Conversion Price of $7.46 per share, subject to
adjustment under certain circumstances, except (i) that if a Convertible Note is
called for redemption, the conversion right will terminate at the close of
business on the Business Day immediately preceding the date fixed for redemption
and (ii) if a Convertible Note is submitted for repurchase in connection with a
Change of Control, the conversion right will terminate with respect to the
portion submitted for repurchase upon such submission.

          To convert a Convertible Note, a holder must (1) complete and sign a
notice of election to convert substantially in the form set forth below (unless
the holder is The Depository Trust Company ("DTC") or its nominee, in which case
DTC's customary operational arrangements will apply), (2) surrender the
Convertible Note to a Conversion Agent, (3) furnish appropriate endorsements or
transfer documents if required by the Registrar or Conversion Agent and (4) pay
any transfer or similar tax, if required. Upon conversion, no adjustment or
payment will be made for interest or dividends, but if any Noteholder surrenders
a Convertible Note for conversion after the close of business on the record date
for the payment of an installment of

                                      -6-

<PAGE>

interest and prior to the opening of business on the next interest payment date,
then, notwithstanding such conversion, the interest payable on such interest
payment date will be paid to the registered holder of such Convertible Note on
such record date. In such event, such Convertible Note, when surrendered for
conversion, must be accompanied by payment in funds acceptable to the Company of
an amount equal to the interest payable on such interest payment date on the
principal amount so converted. The interest payment with respect to a
Convertible Note called for redemption on a date during the period from the
close of business on or after any record date to the opening of business on the
business day following the corresponding interest payment date will be payable
on the corresponding interest payment date to the holder of such Convertible
Note on such record date (notwithstanding the conversion of such Convertible
Note before the corresponding interest payment date) and a holder who elects to
convert need not include funds equal to the interest payment. The number of
shares of Common Stock issuable upon conversion of a Convertible Note is
determined by dividing the principal amount of the Convertible Note converted by
the Conversion Price in effect on the Conversion Date. No fractional shares will
be issued upon conversion but a cash adjustment will be made for any fractional
interest.

     11. Denominations, Transfer, Exchange. The Convertible Notes are in
         ---------------------------------
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. The transfer of Convertible Notes may be registered, and
Convertible Notes may be exchanged, as provided in the Indenture. The Registrar
may require a Noteholder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Convertible Note or portion of a Convertible Note selected
for redemption (except the unredeemed portion of any Convertible Note being
redeemed in part). Also, it need not exchange or register the transfer of any
Convertible Note for a period of 15 days before a selection of Convertible Notes
to be redeemed.

     12. Persons Deemed Owners. Except as provided in paragraph 2 of this
         ---------------------
Convertible Note, the registered Noteholder of a Convertible Note may be treated
as its owner for all purposes.

     13. Unclaimed Money. If money for the payment of principal or interest
         ---------------
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, Noteholders of
Convertible Notes entitled to the money must look only to the Company for
payment unless an abandoned property law designates another person and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.

     14. Defaults and Remedies. The Convertible Notes shall have the Events of
         ---------------------
Default as set forth in Section 8.01 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee by notice to the Company or the Noteholders of at least 25% in
aggregate principal amount of the then outstanding Convertible Notes by notice
to the Company and the Trustee may declare all the Convertible Notes to be due
and payable immediately, except that in the case of an Event of Default arising
from certain events of bankruptcy or insolvency with respect to the Company or
any Material Subsidiary, all

                                      -7-

<PAGE>

unpaid principal and interest accrued on the Convertible Notes shall become due
and payable immediately without further action or notice. Upon acceleration as
described in either of the preceding sentences, the subordination provisions of
the Indenture preclude any payment being made to Noteholders for at least 5 days
except as otherwise provided in the Indenture.

          The Noteholders of a majority in aggregate principal amount of the
Convertible Notes then outstanding by written notice to the Trustee may rescind
and annul an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all Events of Default have been
cured or waived except nonpayment of principal or interest that has become due
solely because of the acceleration. Noteholders may not enforce the Indenture or
the Convertible Notes except as provided in the Indenture. Subject to certain
limitations, Noteholders of a majority in principal amount of the then
outstanding Convertible Notes issued under the Indenture may direct the Trustee
in its exercise of any trust or power. The Company must furnish compliance
certificates to the Trustee annually. The above description of Events of Default
and remedies is qualified by reference to, and subject in its entirety by, the
more complete description thereof contained in the Indenture.

     15. Amendments, Supplements and Waivers. Subject to certain exceptions, the
         -----------------------------------
Indenture or the Convertible Notes may be amended or supplemented with the
consent of the Noteholders of at least a majority in principal amount of the
then outstanding Convertible Notes (including consents obtained in connection
with a tender offer or exchange offer for Convertible Notes), and any existing
default or compliance with any provision of the Indenture or the Convertible
Notes may be waived with the consent of the Noteholders of a majority in
principal amount of the then outstanding Convertible Notes including consents
obtained in connection with a tender offer or exchange offer for Convertible
Notes. Without the consent of any Noteholder, the Indenture or the Convertible
Notes may be amended, among other things, to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company's obligations to
Noteholders, to make any change that does not adversely affect the rights of any
Noteholder and to comply with the requirements of the SEC in order to maintain
the qualification of the Indenture under the TIA.

     16. Trustee Dealings with the Company. The Trustee, in its individual or
         ---------------------------------
any other capacity, may become the owner or pledgee of Convertible Notes and may
otherwise deal with the Company or an Affiliate with the same rights it would
have if it were not Trustee, subject to certain limitations provided for in the
Indenture and in the TIA. Any Agent may do the same with like rights.

     17. Governing Law. THIS CONVERTIBLE NOTE SHALL BE GOVERNED BY AND CONSTRUED
         -------------
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.

     18. Authentication. The Convertible Notes shall not be valid until
         --------------
authenticated by the manual signature of an authorized signatory of the Trustee
or an authenticating agent.

     19. Abbreviations. Customary abbreviations may be used in the name of a
         -------------
Noteholder or an assignee, such as: TEN COM (for tenants in common), TEN ENT
(for tenants

                                      -8-

<PAGE>

by the entireties), JT TEN (for joint tenants with right of survivorship and not
as tenants in common), CUST (for Custodian), and U/G/M/A (for Uniform Gifts to
Minors Act).

          The Company will furnish to any Noteholder of the Convertible Notes
upon written request and without charge a copy of the Indenture. Request may be
made to:

                Bernard Brodsky, Treasurer
                Charming Shoppes, Inc.
                450 Winks Lane
                Bensalem, Pennsylvania  19020

     20. Definitions. Capitalized terms not defined in this Convertible Note
         -----------
have the meaning given to them in the Indenture.

                                      -9-

<PAGE>

                     OPTION OF NOTEHOLDER TO ELECT PURCHASE

          If you want to elect to have this Convertible Note or a portion
thereof repurchased by the Company pursuant to Section 3.08 and 4.06 of the
Indenture, check the box: [ ]

          If the purchase is in part, indicate the portion (in denominations of
$1,000 or any integral multiple thereof) to be purchased:
                                                          -----------------

     Your Signature:

                    ----------------------------------------------
                    (Sign exactly as your name appears on the other side
                    of this Convertible Note)

     Date:
           ------------------

     Signature Guarantee:
                          -------------------------

                                      -10-

<PAGE>

                               ELECTION TO CONVERT

To Charming Shoppes, Inc.:

     The undersigned owner of this Convertible Note hereby irrevocably exercises
the option to convert this Convertible Note, or the portion below designated,
into Common Stock of Charming Shoppes, Inc. in accordance with the terms of the
Indenture referred to in this Convertible Note, and directs that the shares
issuable and deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the undersigned,
unless a different name has been indicated in the assignment below. If shares
are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto.

Date:

     in whole _      Portions of Convertible Note to be converted ($1,000 or
                     integral multiples thereof):
                     $
                      -------------------

--------------------------------------------------------------------------------
                   Signature (for conversion only)

                     Please Print or Typewrite Name and Address, Including Zip
                     Code, and Social Security or Other Identifying Number

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

                     Signature Guarantee:

                     If Shares are to be Issued in the Name of a Person
                     other than the Undersigned, Insert Name and
                     Address, Including Zip Code, and Social Security
                     or Other Identifying Number:

                                      -11-<PAGE>

                                                                  Exhibit 10.1.4

                                                                  EXECUTION COPY

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                         RECEIVABLES PURCHASE AGREEMENT

                            Dated as of May 28, 1999

                                      Among

                          CHARMING SHOPPES STREET, INC.

                                    as Seller
                                    ---------

                                       and

                             SPIRIT OF AMERICA, INC.

                                   as Servicer
                                   -----------

                                       and

                         CLIPPER RECEIVABLES CORPORATION

                                  as Purchaser
                                  ------------

                                       and

                        STATE STREET CAPITAL CORPORATION

                                as Administrator
                                ----------------

                                       and

                        STATE STREET BANK & TRUST COMPANY

                              as Relationship Bank
                              --------------------

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

                                      TABLE OF CONTENTS

                                         ARTICLE I
                                 PURCHASES AND REINVESTMENTS
<TABLE>
<CAPTION>
<S>     <C>    <C>                                                                                    <C>

SECTION 1.01.  Commitments to Purchase; Limits on Purchaser's Obligations                               2
SECTION 1.02.  Purchase Procedures; Assignment of Purchaser's Interests                                 2
SECTION 1.03.  Reinvestments of Certain Collections; Payment of Remaining Collections                   2
SECTION 1.04.  Asset Interest                                                                           4

                                        ARTICLE II
                                   COMPUTATIONAL RULES

SECTION 2.01.  Computation of Purchaser's Total Investment                                              4
SECTION 2.02.  Computation of Earned Discount                                                           5
SECTION 2.03.  Estimates of Earned Discount Rate, Fees, etc.                                            5

                                        ARTICLE III
                                        SETTLEMENTS

SECTION 3.01.  Settlement Procedures                                                                    5
SECTION 3.02.  Deemed Collections; Reduction of Purchaser's Total Investment, Etc.                      8
SECTION 3.03.  Payments and Computations, Etc.                                                         10
SECTION 3.04.  Treatment of Collections and Deemed Collections                                         10

                                        ARTICLE IV
                                 FEES AND YIELD PROTECTION

SECTION 4.01.  Fees                                                                                    12
SECTION 4.02.  Yield Protection                                                                        12

                                         ARTICLE V
                                  CONDITIONS OF PURCHASES

SECTION 5.01.  Conditions Precedent to Initial Purchase                                                14
SECTION 5.02.  Conditions Precedent to All Purchases and Reinvestments                                 16

                                         ARTICLE VI
                               REPRESENTATIONS AND WARRANTIES

SECTION 6.01.  Representations and Warranties of Seller                                                17
SECTION 6.02.  Representations and Warranties of Servicer                                              20

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>     <C>      <C>                                                                          <C>

                                    ARTICLE VII
                    GENERAL COVENANTS OF SELLER AND SERVICER

SECTION 7.01.  Affirmative Covenants of Seller and Servicer                             22
SECTION 7.02.  Reporting Requirements of Seller                                         23
SECTION 7.03.  Negative Covenants of Seller                                             24

                                   ARTICLE VIII
                         ADMINISTRATION AND COLLECTION

SECTION 8.01.  Designation of Servicer                                                  28
SECTION 8.02.  Duties of Servicer                                                       29
SECTION 8.03.  Rights of the Administrator                                              30
SECTION 8.04.  Responsibilities of Seller                                               31
SECTION 8.05.  Further Action Evidencing Purchases and Reinvestments                    31
SECTION 8.06.  Application of Collections                                               32

                                    ARTICLE IX
                                SECURITY INTEREST

SECTION 9.01.  Grant of Security Interest                                               32
SECTION 9.02.  Further Assurances                                                       33
SECTION 9.03.  Remedies                                                                 33

                                    ARTICLE X
                               LIQUIDATION EVENTS

SECTION 10.01. Liquidation Events                                                       33
SECTION 10.02. Remedies                                                                 35

                                   ARTICLE XI
                      THE ADMINISTRATOR; RELATIONSHIP BANK

SECTION 11.01. Authorization and Action                                                 36
SECTION 11.02. Administrator's and Relationship Bank's Reliance, Etc.                   36
SECTION 11.03. State Street Capital and State Street Bank and Affiliates                36

                                  ARTICLE XII
                     ASSIGNMENT OF PURCHASER'S INTEREST

SECTION 12.01. Restrictions on Assignments                                              37
SECTION 12.02. Rights of Assignee                                                       38
SECTION 12.03. Evidence of Assignment                                                   38

</TABLE>

                                     -ii-

<PAGE>

<TABLE>
<CAPTION>
<S>     <C>    <C>                                                                   <C>

SECTION 12.04.  Rights of the Banks and Collateral Agent                              38

                               ARTICLE XIII
                             INDEMNIFICATION

SECTION 13.01.  Indemnities by Seller                                                 38

                               ARTICLE XIV
                              MISCELLANEOUS

SECTION 14.01.  Amendments, Etc.                                                      40
SECTION 14.02.  Notices, Etc.                                                         41
SECTION 14.03.  No Waiver; Remedies                                                   41
SECTION 14.04.  Binding Effect; Survival                                              41
SECTION 14.05.  Costs, Expenses and Taxes                                             42
SECTION 14.06.  No Proceedings                                                        42
SECTION 14.07.  Confidentiality of Program Information                                42
SECTION 14.08.  Confidentiality of Seller Information                                 44
SECTION 14.09.  Captions and Cross References                                         45
SECTION 14.10.  Integration                                                           45
SECTION 14.11.  Governing Law                                                         45
SECTION 14.12.  Waiver Of Jury Trial                                                  46
SECTION 14.13.  Consent To Jurisdiction; Waiver Of Immunities                         46
SECTION 14.14.  Execution in Counterparts                                             46
SECTION 14.15.  No Recourse Against Other Parties                                     46
SECTION 14.16.  State Street Business Combination                                     47

</TABLE>

                                      -iii-

<PAGE>

                                APPENDICES

APPENDIX A      Definitions
<TABLE>
<CAPTION>
<S>       <C>       <C>

                                 SCHEDULES

SCHEDULE 5.01(h)  Description of Opinions

SCHEDULE 6.01(j)  Description of Litigation

SCHEDULE 6.01(n)  List of Offices of Seller where Records Are Kept

SCHEDULE 7.01(g)  Description of Credit and Collection Policy

                                  EXHIBITS

EXHIBIT 3.01(a)   Information Package to be Provided as of Cut-Off Date

EXHIBIT 14.02     Addresses

</TABLE>

                                   -iv-

<PAGE>

                         RECEIVABLES PURCHASE AGREEMENT

                            Dated as of May 28, 1999

         THIS IS A RECEIVABLES PURCHASE AGREEMENT, among CHARMING SHOPPES
STREET, INC., a Delaware corporation ("Seller"), SPIRIT OF AMERICA, INC., a
                                       ------
Delaware corporation as Servicer ("Servicer") CLIPPER RECEIVABLES CORPORATION, a
                                   --------
Delaware corporation ("Purchaser"), STATE STREET CAPITAL CORPORATION, a
                       ---------
Massachusetts corporation ("State Street Capital"), as administrator for
                            --------------------
Purchaser under the Program Administration Agreement (in such capacity, the
"Administrator") and STATE STREET BANK & TRUST COMPANY, a national banking
 -------------
association, as a referral agent for Purchaser under the Relationship Bank
Agreement (in such capacity, together with any successors thereto in such
capacity, the "Relationship Bank" and in its individual capacity, "State Street
               -----------------                                   ------------
Bank"). Unless otherwise indicated, capitalized terms used in this Agreement are
----
defined in Appendix A.
           ----------

                                   Background
                                   ----------

         1. Seller is engaged in the business of purchasing receivables
originated by Spirit of America National Bank under Mastercard* and VISA(r)*
cards.

         2. Seller has, and expects to have, Pool Receivables in which Seller
intends to sell an undivided interest. Seller has requested Purchaser, and
Purchaser has agreed, subject to the terms and conditions contained in this
Agreement, to purchase such undivided interest, referred to herein as the Asset
Interest, from Seller from time to time during the term of this Agreement.

         3. Seller and Purchaser desire that, subject to the terms and
conditions of this Agreement, certain of the daily Collections in respect of the
Asset Interest be reinvested in Pool Receivables, which reinvestment shall
constitute part of the Asset Interest.

         4. State Street Capital has been requested, and is willing, to act as
the Administrator.

         5. State Street Bank has been requested, and is willing, to act as the
Relationship Bank.

-------------------------
*Mastercard is a registered trademark of Mastercard International, Incorporated
and VISA is a registered trademark of VISA USA, Inc.

<PAGE>

         NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto, intending to be legally bound
hereby, agree as follows:

                                    ARTICLE I

                           PURCHASES AND REINVESTMENTS

         SECTION 1.01. Commitments to Purchase; Limits on Purchaser's
                       ----------------------------------------------
Obligations. Upon the terms and subject to the conditions of this Agreement,
-----------
from time to time prior to the Termination Date, Seller may request that
Purchaser purchase from Seller ownership interests in the Pool Assets (each
being a "Purchase") and Purchaser shall make such Purchase; provided that no
         --------
Purchase shall be made by Purchaser to the extent that, after giving effect
thereto, either (a) the then Purchaser's Total Investment would exceed the
lesser of (i) the Utilization Cap Amount, or (ii) $20,000,000 or such larger
amount as may be mutually agreed to in writing by the parties hereto (the
"Purchase Limit"), or (b) the Asset Interest would exceed the Allocation Limit;
 --------------
and provided further that each Purchase made pursuant to this Section 1.01 shall
    ----------------                                          ------------
have a Purchase Price of at least $100,000 and shall be in integral multiples of
$100,000.

         SECTION 1.02. Purchase Procedures; Assignment of Purchaser's Interests.
                       --------------------------------------------------------
         (a) Notice of Purchase. Each Purchase from Seller by Purchaser shall be
             ------------------
made on notice from Seller to the Administrator received by the Administrator
not later than 11:00 a.m. (New York City time) on the Business Day before the
date of such proposed Purchase. Each such notice of a proposed Purchase shall
specify the desired amount and date of such Purchase. The "Purchase Price" for
each Purchase shall be the lesser of (i) the amount requested by Seller pursuant
to this Section 1.02(a) and (ii) the amount permitted pursuant to Section 1.01.

         (b) Funding of Purchase. On the date of each Purchase, Purchaser shall,
             -------------------
upon satisfaction of the applicable conditions set forth in Article V, make
                                                            ---------
available to the Administrator at the Administrator's Office (or to such account
as designated by the Administrator) the amount of its Purchase in same day
funds, and after receipt by the Administrator of such funds, the Administrator
will make such funds immediately available to Seller at such office or to such
account as Seller shall designate in writing to the Administrator on or prior to
the date hereof (or such other office or account as Seller shall designate from
time to time).

         (c) Assignment of Asset Interests. Seller hereby sells, assigns and
             -----------------------------
transfers to Purchaser, effective on and as of the date of each Purchase by the
Purchaser hereunder, the Asset Interest in the Pool Assets.

         SECTION 1.03. Reinvestments of Certain Collections; Payment of
                       ------------------------------------------------
Remaining Collections. (a) On the close of business on each Business Day during
---------------------
the period from the date
                                       -2-

<PAGE>

hereof to the Final Payout Date, Servicer shall, out of all Collections received
on such day from Pool Receivables:

                  (i) determine the portion of such Collections attributable on
         such day to the Asset Interest by multiplying (x) the amount of such
         Collections times (y) the Asset Interest (expressed as a percentage of
                     -----
         Net Pool Balance);

                  (ii) out of the portion of such Collections allocated to the
         Asset Interest pursuant to clause (i), set aside and hold in trust for
                                    ----------
         Purchaser an amount at least equal to the sum of the estimated amount
         of Earned Discount accrued in respect of the Purchaser's Total
         Investment (based on rate information provided by the Administrator
         pursuant to Section 2.03), all other amounts due to Purchaser, the
                     ------------
         Administrator or the Relationship Bank hereunder and the Servicer's Fee
         (in each case, accrued through such day) and an amount equal to any
         Cash Collateral Shortfall and any Spread Account Shortfall not so
         previously set aside; provided that unless the Administrator or the
                               --------
         Relationship Bank shall request it to do so in writing (which writing
         shall set forth the reason for such request), Servicer shall not be
         required to hold Collections that have been set aside in a separate
         deposit account containing only such Collections but shall, to the
         extent any amount is set aside for any Cash Collateral Shortfall or any
         Spread Account Shortfall deposit such amount in the RPA Cash Collateral
         Account or Spread Account, as applicable;

                  (iii) apply the Collections allocated to the Asset Interest
         pursuant to clause (i) and not required to be set aside pursuant to
                     ----------
         clause (ii) to the purchase from Seller of ownership interests in Pool
         -----------
         Assets (each such purchase being a "Reinvestment"); provided that (A)
                                             ------------
         if the then Asset Interest, expressed as a percentage of Net Pool
         Balance, would exceed the Allocation Limit, then, Servicer shall not
         reinvest, but shall set aside and hold for the benefit of Purchaser, a
         portion of such Collections which, together with other Collections
         previously set aside and then so held, shall equal the amount necessary
         to reduce the Asset Interest to the Allocation Limit; (B) if the
         conditions precedent to Reinvestment in Section 5.02 are not satisfied
                                                 ------------
         then Servicer shall not reinvest, but shall set aside and hold for the
         benefit of Purchaser, any of such remaining Collections; and (C) if the
         Seller shall have requested a reduction in the Purchaser's Total
         Investment, then, during the times specified in Section 3.02(b)(ii),
                                                         -------------------
         Servicer shall not reinvest, but shall set aside and hold for the
         benefit of Purchaser, a portion of such Collections until the amount
         thereof not so reinvested shall equal the amount of such reduction; and

                  (iv) pay to Seller (A) the portion of such Collections not
         allocated to the Asset Interest pursuant to clause (i) and (B) the
                                                     ----------
         Collections applied to Reinvestment pursuant to clause (iii).
                                                         ------------
         (b) Unreinvested Collections. Servicer shall set aside and hold in
             ------------------------
trust for the benefit of Purchaser all Collections which pursuant to clause
(iii) of Section 1.03(a), may not be                                 ------
-----    ---------------

                                       -3-

<PAGE>

reinvested in Pool Assets; provided that unless the Administrator or the
                           --------
Relationship Bank shall request it to do so in writing (which writing shall set
forth the reason for such request), Servicer shall not be required to hold
Collections that have been set aside in a separate deposit account containing
only such Collections. If, prior to the date when such Collections are required
to be paid to the Administrator for the benefit of Purchaser pursuant to Section
                                                                         -------
3.01, the amount of Collections so set aside exceeds the amount, if any,
----
necessary to reduce the Asset Interest to the Allocation Limit, and the
conditions precedent to Reinvestment set forth in Section 5.02 are satisfied,
                                                  ------------
then the Servicer shall apply such Collections (or, if less, a portion of such
Collections equal to the amount of such excess) to the making of a Reinvestment.

         (c) Reduction of Purchaser's Total Investment. The Purchaser's Total
             -----------------------------------------
Investment shall not be reduced by the amount of Collections set aside pursuant
to this Section unless and until such Collections are actually delivered to the
Administrator pursuant hereto.

         SECTION 1.04. Asset Interest.(a) Components of Asset Interest.
                       --------------     ----------------------------
On any date the Asset Interest will represent Purchaser's combined undivided
percentage ownership interest in (i) all then outstanding Pool Receivables, (ii)
related Contracts, (iii) all Related Security with respect to such Pool
Receivables, (iv) the Accounts, (v) all Collections with respect to, and other
proceeds of, such Pool Receivables, Contracts and Related Security as at such
date, (vi) all rights of Seller (directly or as assignee of Parent) under the
First Tier Agreement, the Second Tier Agreement, the ES Agreement and the Cap
Agreements, (vii) all books and records evidencing or related to the foregoing,
and (viii) all proceeds of the foregoing (collectively, the "Pool Assets").
                                                             -----------

         (b) Computation of Asset Interest. On any date, the Asset Interest
             -----------------------------
shall be equal to a fraction (expressed as a percentage), the numerator of which
is the Purchaser's Total Investment and the denominator of which is the Net Pool
Balance, each as of such day; provided, however, that during the Liquidation
                              --------  -------
Period, the Asset Interest shall be the Asset Interest computed as of the day
immediately preceding the commencement of the Liquidation Period; provided,
                                                                  --------
further, that the Asset Interest shall not exceed 100%.
-------
         (c) Frequency of Computation. The Asset Interest shall be computed as
             ------------------------
of the Cut-Off Date for each Settlement Period. In addition, the Administrator
may require Servicer to provide an Information Package for purposes of computing
the Asset Interest as of any other date, utilizing the then most recently
available information, and the Servicer agrees to do so within three Business
Days of its receipt of the Administrator's written request.

                                   ARTICLE II

                               COMPUTATIONAL RULES

         SECTION 2.01. Computation of Purchaser's Total Investment. In making
                       -------------------------------------------
any determination of Purchaser's Total Investment, the following rules shall
apply:

                                       -4-

<PAGE>

         (a) Purchaser's Total Investment shall not be considered reduced by any
allocation, setting aside or distribution of any portion of Collections unless
such Collections shall have been actually delivered to the Administrator
pursuant hereto; and

         (b) Purchaser's Total Investment shall not be considered reduced by any
distribution of any portion of Collections if at any time such distribution is
rescinded or otherwise returned for any reason.

         SECTION 2.02. Computation of Earned Discount. In making any
                       ------------------------------
determination of Earned Discount, the following rules shall apply:

         (a) the Administrator shall determine the Earned Discount accruing with
respect to the Purchaser's Total Investment, in accordance with the definition
of Earned Discount;

         (b) no provision of this Agreement shall require the payment or permit
the collection of Earned Discount in excess of the maximum permitted by
applicable law; and

         (c) Earned Discount shall not be considered paid by any distribution if
at any time such distribution is rescinded or otherwise returned for any reason.

         SECTION 2.03. Estimates of Earned Discount Rate, Fees, etc. For
                       --------------------------------------------
purposes of determining the amounts required to be set aside by Servicer
pursuant to Section 1.03, the Administrator shall notify Servicer from time to
            ------------
time of the Earned Discount Rate applicable to the Purchaser's Total Investment
and the rates at which fees and other amounts are accruing hereunder. It is
understood and agreed that (i) the Earned Discount Rate may change from time to
time, (ii) certain rate information provided by the Administrator to Servicer
shall be based upon the Administrator's good faith estimate, (iii) the amount of
Earned Discount actually accrued with respect to any Settlement Period may
exceed, or be less than, the amount set aside with respect thereto by Servicer,
and (iv) the amount of fees or other payables accrued hereunder with respect to
any Settlement Period may exceed, or be less than, the amount set aside with
respect thereto by Servicer. Failure to set aside any amount so accrued shall
not relieve Servicer of its obligation to remit Collections to the Administrator
with respect to such accrued amount, as and to the extent provided in Section
3.01. ------- ---- ARTICLE III

                                   SETTLEMENTS

         SECTION 3.01. Settlement Procedures.
                       ---------------------

The parties hereto will take the following actions with respect to each
Settlement Period:

                                       -5-

<PAGE>

         (a) Information Package. On the seventh Business Day following the
             -------------------
Cut-Off Date for such Settlement Period or as otherwise may be requested
pursuant to Section 1.04(c), Servicer shall deliver to the Relationship Bank and
            ---------------
the Administrator a diskette containing the information described in Exhibit
3.01(a) (each, an "Information Package").                            -------
-------            -------------------

         (b) Earned Discount; Other Amounts Due. On the first Business Day
             ----------------------------------
following such Cut-Off Date, the Administrator shall notify Servicer of (i) the
amount of Earned Discount that will have accrued in respect of the Purchaser's
Total Investment during such Settlement Period, and (ii) all fees and other
amounts accrued and payable by Seller under this Agreement (other than
Purchaser's Total Investment).

         (c) Settlement Date Procedure - Reinvestment Period. On the fifteenth
             -----------------------------------------------
day of each month, or if such day is not a Business Day, the next succeeding
Business Day (each, a "Settlement Date") prior to the Termination Date, the
                       ---------------
Servicer shall distribute, from Available Funds for such Settlement Date, the
following amounts in the following order:

                  (1) to the Administrator, an amount equal to the Earned
         Discount accrued during such Settlement Period, plus any previously
         accrued Earned Discount not paid on a prior Settlement Date, which
         amount shall be distributed by the Administrator to the Purchaser for
         application to such Earned Discount;

                  (2) to the Administrator, an amount equal to the Program Fee
         and the Commitment Fee accrued during such Settlement Period, plus any
         previously accrued Program Fee and Commitment Fee not paid on a prior
         Settlement Date;

                  (3) to the Servicer, if the Servicer is not Seller or one of
         its Affiliates, an amount equal to the Servicer's Fee accrued during
         such Settlement Period, to the extent that such Servicer's Fee does not
         exceed the Servicer's Fee that would have accrued if such Servicer's
         Fee had been calculated using a Servicer's Fee Rate of 2%;

                  (4) to the Administrator, an amount equal to the amount, if
         any, necessary to reduce the Asset Interest to the Allocation Limit and
         to reduce the Purchaser's Total Investment in accordance with Section
                                                                       -------
         3.02(b), which amount shall be distributed by the Administrator to the
         -------
         Purchaser for application to the Purchaser's Total Investment;

                  (5) to the Administrator, all other amounts then due under
         this Agreement to the Administrator, the Relationship Bank, the
         Purchaser, the Affected Parties or the Indemnified Parties;

                                       -6-

<PAGE>

                  (6) to the Servicer, an amount equal to the Servicer's Fee
         accrued during such Settlement Period to the extent not paid pursuant
         to subparagraph (3) above, plus any previously accrued Servicer's Fee
            ----------------
         not paid on a prior Settlement Date;

                  (7) to the RPA Cash Collateral Account, to the extent
         necessary to cause funds on deposit therein to equal the RPA Required
         Cash Collateral Amount;

                  (8) to the Spread Account, to the extent required under the
         terms of the Spread Account Agreement; and

                  (9) to the Seller, any remaining amounts; provided, however,
                                                            --------  -------
         that if the Seller shall so instruct the Administrator, funds that
         would otherwise be paid to the Seller under this clause shall be
         deposited in the RPA Cash Collateral Account.

         (d) Settlement Date Procedure - Liquidation Period. On each Settlement
             ----------------------------------------------
Date during the Liquidation Period, the Servicer shall distribute, from
Available Funds for such Settlement Date, the following amounts in the following
order:

                  (1) to the Administrator, an amount equal to the Earned
         Discount accrued during such Settlement Period, plus any previously
         accrued Earned Discount not paid on a prior Settlement Date, which
         amount shall be distributed by the Administrator to the Purchaser for
         application to such Earned Discount;

                  (2) to the Administrator, an amount equal to the Program Fee
         and Commitment Fee accrued during such Settlement Period, plus any
         previously accrued Program Fee and Commitment Fee not paid on a prior
         Settlement Date;

                  (3) to the Servicer, if the Servicer is not Seller or one of
         its Affiliates, an amount equal to the Servicer's Fee accrued during
         such preceding Settlement Period, to the extent that such Servicer's
         Fee does not exceed the Servicer's Fee that would have accrued if such
         Servicer's Fee had been calculated using a Servicer's Fee Rate of 2%;

                  (4) to the Administrator, an amount equal to any remaining
         Purchaser's Share of Collections until the Purchaser's Total Investment
         is reduced to zero, which amount shall be distributed by the
         Administrator to the Purchaser for application to the Purchaser's Total
         Investment;

                  (5) to the Administrator, all other amounts then due under
         this Agreement to the Administrator, the Relationship Bank, the
         Purchaser, the Affected Parties or the Indemnified Parties;

                                       -7-

<PAGE>

               (6) to the Servicer, an amount equal to the Servicer's Fee
          accrued during such Settlement Period, to the extent not paid pursuant
          to subparagraph (3) above, plus any previously accrued Servicer's Fee
             ----------------
          not paid on a prior Settlement Date; and

               (7) to the Seller, any remaining amounts.

         (e)   Order of Application of Purchaser's Total Investment. Upon
             ----------------------------------------------------
receipt by the Administrator of funds distributed pursuant to this Section 3.01
                                                                   ------------
with respect to any Settlement Period on account of Purchaser's Total
Investment, the Administrator shall apply them to the items specified in the
subclauses below, in the order of priority of such subclauses:

               (i) to that portion of the Purchaser's Total Investment funded by
          Liquidity Fundings until such portion has been reduced to zero;

               (ii) to that portion of the Purchaser's Total Investment funded
          by Commercial Paper Notes until such portion has been reduced to zero;
          and

               (iii) to the remaining portion of the Purchaser's Total
          Investment until the Purchaser's Total Investment has been reduced to
          zero.

         (f) Non-Distribution of Servicer's Fee. Unless the Administrator gives
             ----------------------------------
written notice to the contrary to Servicer (which notice may be given at any
time), from and after the date on which the amounts (if any) set aside pursuant
to Section 1.03 for any Settlement Period in respect of payments required to be
   ------------
made prior to the payment of the Servicer's Fee on the related Settlement Date
are sufficient to make such payments, the amounts (if any) set aside pursuant to
Section 1.03 in respect of the Servicer's Fee may be paid to Servicer, in which
------------
case no distribution shall be made in respect of Servicer's Fee pursuant to
clause (c) or (d) above.
----------    ---

         (g) Delayed Payment. If on any day described in this Section 3.01
                                                              ------------
because Collections during the relevant Settlement Period were less than the
aggregate amounts payable, Servicer shall not make any payment otherwise
required, the next available Collections in respect of the Asset Interest shall
be applied to such payment, and no Reinvestment shall be permitted hereunder
until such amount payable has been paid in full.

         SECTION 3.02. Deemed Collections; Reduction of Purchaser's Total
Investment, Etc.       --------------------------------------------------
---------------

         (a) Deemed Collections. If on any day
             ------------------

                                       -8-

<PAGE>

         (i) the Unpaid Balance of any Pool Receivable is

               (A) reduced as a result of any defective, rejected or returned
          merchandise or services, any cash discount, or any incorrect billing
          or other adjustment by Seller or any Affiliate of Seller,

               (B) reduced or canceled as a result of a setoff in respect of any
          claim by the Obligor thereof against Seller or any Affiliate of Seller
          or any other Person (whether such claim arises out of the same or a
          related or an unrelated transaction), or

               (C) reduced on account of the obligation of Seller to pay to the
          related Obligor any rebate or refund, or

               (D) less than the amount included in calculating the Net Pool
          Balance for purposes of any Information Package, or

         (ii) any of the representations or warranties of Seller set forth in
     Section 6.01(l) or (p) were not true when made with respect to any Pool
     ---------------    ---
     Receivable, or any of the representations or warranties of Seller set forth
     in Section 6.01(l) are no longer true with respect to any Pool Receivable,
                -------

then, on such day, Seller shall be deemed to have received a Collection of such
Pool Receivable

               (I) in the case of clause (i) above, in the amount of such
                                  ----------
          reduction or cancellation or the difference between the actual Unpaid
          Balance and the amount included in calculating such Net Pool Balance,
          as applicable; and

               (II) in the case of clause (ii) above, in the amount of the
                                   -----------
          Unpaid Balance of such Pool Receivable.

      (b) Seller's Optional Reduction of Purchaser's Total Investment. Seller
          -----------------------------------------------------------
may at any time elect to reduce the Purchaser's Total Investment as follows:

         (i) Seller shall give the Administrator at least three Business Days'
     prior written notice of such reduction (including the amount of such
     proposed reduction and the proposed date on which such reduction will
     commence),

         (ii) on the proposed date of commencement of such reduction and on each
     day thereafter, Servicer shall refrain from reinvesting Collections
     pursuant to Section 1.03 until the amount thereof not so reinvested shall
                 ------------
     equal the amount of such reduction, and

                                       -9-

<PAGE>

         (iii) Servicer shall hold such Collections in trust for Purchaser,
     pending payment to the Administrator, as provided in Section 3.01;
                                                          ------------
provided that,
--------

                    (A) the amount of any such reduction shall be not less than
         $100,000 and the Purchaser's Total Investment after giving effect to
         such reduction shall be not less than $100,000 (unless such reduction
         reduces Purchaser's Total Investment to zero), and

                    (B) Seller shall use reasonable efforts to attempt to choose
         a reduction amount, and the date of commencement thereof, so that such
         reduction shall commence and conclude in the same Settlement Period to
         the extent possible.

         SECTION 3.03. Payments and Computations, Etc.
                       ------------------------------

         (a) Payments. All amounts to be paid or deposited by Seller or Servicer
             --------
to the Administrator or any other Person hereunder (other than amounts payable
under Section 4.02) shall be paid or deposited in accordance with the terms
      ------------
hereof no later than 11:00 a.m. (New York City time) on the day when due in
lawful money of the United States of America in same day funds (i) in the case
of amounts to be paid or deposited in respect of accrued and unpaid Earned
Discount or in reduction of Purchaser's Total Investment, to the Collateral
Agent at First National Bank of Chicago, Chicago, Illinois, for credit to such
account as the Administrator shall specify and (ii) in the case of all fees,
expenses and other amounts (other than amounts payable under Section 4.02), to
                                                             ------------
the Administrator at State Street Bank, Boston, Massachusetts, for credit to
such account as the Administrator shall specify.

         (b) Late Payments. Seller or Servicer, as applicable, shall, to the
             -------------
extent permitted by law, pay to Purchaser interest on all amounts not paid or
deposited when due hereunder at 1% per annum above the Alternate Base Rate,
                                   ---------
payable on demand, provided, however, that such interest rate shall not at any
                   --------  -------
time exceed the maximum rate permitted by applicable law.

         (c) Method of Computation. All computations of interest, Earned
             ---------------------
Discount, any fees payable under Sections 4.01(a) and (b) and any other fees
                                 ----------------     ---
payable by Seller to Purchaser, the Administrator or the Relationship Bank in
connection with Purchases or the Asset Interest hereunder shall be made on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) elapsed.

         SECTION 3.04. Treatment of Collections and Deemed Collections. Seller
                       -----------------------------------------------
shall forthwith deliver to Servicer all Collections deemed received by Seller
pursuant to Section 3.02(a), and Servicer shall hold or distribute such
            ---------------
Collections as Earned Discount, accrued Servicer's Fee, repayment of Purchaser's
Total Investment, etc. to the same extent as if such Collections had actually
been received on the date of such delivery to Servicer. If Collections are

8285314.23 50202 1039C 96242151

                                      -10-

<PAGE>

then being paid to the Collateral Agent, or lock boxes or accounts directly or
indirectly owned or controlled by the Collateral Agent, Servicer shall forthwith
cause such deemed Collections to be paid to the Collateral Agent or to such lock
boxes or accounts, as applicable, or as the Collateral Agent shall request in
writing. So long as Seller shall hold any Collections or deemed Collections
required to be paid to Servicer, the Administrator or Collateral Agent, it shall
hold such Collections in trust and shall clearly mark its records to reflect
such trust; provided that unless the Administrator or the Relationship Bank
shall request it to do so in writing, Seller shall not be required to hold such
Collections in a separate deposit account containing only such Collections.

         SECTION 3.05. Establishment of RPA Cash Collateral Account.
                       --------------------------------------------

         (a) The Administrator, for the benefit of the Purchaser and the
Liquidity Banks, shall establish and maintain an account (the "RPA Cash
                                                               --------
Collateral Account"). The RPA Cash Collateral Account shall be under the sole
------------------
dominion and control of the Administrator. The Servicer shall from time to time
deposit in the RPA Cash Collateral Account (i) a portion of the proceeds of
fundings under this Agreement, and (ii) funds otherwise payable to the Seller
under Section 3.01(c) (7) and (9).
      ---------------------------

         (b) Funds on deposit in the RPA Cash Collateral Account shall be
 invested by the Administrator in Permitted Investments at the direction of
 Seller. Such investments made at any time will mature so that funds will be
 available for withdrawal no later than the following Settlement Date. All
 earnings on such investment during any such Settlement Period shall be deemed
 to be Collections for such Settlement Period.

         (c) The Administrator shall maintain investments in the RPA Cash
 Collateral Account in such manner as will maintain the perfection and priority
 of the Administrator's lien thereon.

         (d) If on any Settlement Date, a Shortfall shall exist, the
 Administrator shall withdraw from the RPA Cash Collateral Account (in an amount
 equal to the lesser of such Shortfall or the amount on deposit in the RPA Cash
 Collateral Account) and apply such withdrawing funds in the same manner as
 Collections pursuant to Section 3.01.
                         ------------

         (e) If on any Settlement Date the funds on deposit in the RPA Cash
 Collateral Account (exclusive of earnings on the investment of such funds)
 shall exceed the RPA Required Cash Collateral Amount, the Administrator shall
 withdraw such excess and pay such excess to Seller.

         SECTION 3.06. Spread Account. If, on any Settlement Date, a Shortfall
                       --------------
shall remain after giving effect to any applications from the RPA Cash
Collateral Account pursuant to Section 3.05(d), the Servicer shall cause funds
                               ---------------
to be withdrawn from the Spread Account (to the

                                      -11-

<PAGE>

extent available under the terms of the Spread Account Agreement) in the amount
of such remaining Shortfall and applied in the same manner as Collections
pursuant to Section 3.01.
            ------------

                                   ARTICLE IV

                            FEES AND YIELD PROTECTION

         SECTION 4.01. Fees.
                       ----

         (a) Arrangement Fee. Seller shall pay to the Relationship Bank, an
             ---------------
arrangement fee ("Arrangement Fee") payable on such dates and in such amounts as
                  ---------------
are set forth in the letter dated the date hereof from the Relationship Bank to
Seller.

         (b) Other Fees. Seller shall pay to Purchaser certain fees, payable on
             ----------
such dates and in such amounts as are set forth in the letter dated the date
hereof from the Relationship Bank to Seller (as amended from time to time, the
"Fee Letter").
 ----------

         SECTION 4.02. Yield Protection.
                       ----------------

         (a) If (i) Regulation D or (ii) any Regulatory Change occurring after
the date hereof:

                  (A) shall impose, modify or deem applicable any reserve
         (including, without limitation, any reserve imposed by the Federal
         Reserve Board, but excluding any reserve included in the determination
         of Earned Discount), special deposit or similar requirement against
         assets of any Affected Party, deposits or obligations with or for the
         account of any Affected Party or with or for the account of any
         affiliate (or entity deemed by the Federal Reserve Board to be an
         affiliate) of any Affected Party, or credit extended by any Affected
         Party; or

                  (B)      shall change the amount of capital maintained or
         required or requested or directed to be maintained by any Affected
         Party;

                  (C) shall impose any other condition affecting any Asset
         Interest owned or funded in whole or in part by any Affected Party, or
         its obligations or rights, if any, to make Purchases or Reinvestments
         or to provide funding therefor; or

                  (D) shall change the rate for, or the manner in which the
         Federal Deposit Insurance Corporation (or a successor thereto)
         assesses, deposit insurance premiums or similar charges;

and the result of any of the foregoing is or would be:

8285314.23 50202 1039C 96242151

                                      -12-

<PAGE>

                  (x) to increase the cost to (or in the case of Regulation D
         referred to above, to impose a cost on) an Affected Party funding or
         making or maintaining any Purchases or Reinvestments, any purchases,
         reinvestments, or loans or other extensions of credit under the
         Liquidity Agreement, or any Credit Draw, or any commitment of such
         Affected Party with respect to any of the foregoing,

                  (y) to reduce the amount of any sum received or receivable by
         an Affected Party under this Agreement, or under the Liquidity
         Agreement or the Credit Agreement with respect thereto, or

                  (z) in the reasonable determination of such Affected Party, to
         reduce the rate of return on the capital of an Affected Party as a
         consequence of its obligations hereunder or arising in connection
         herewith to a level below that which such Affected Party could
         otherwise have achieved but for Regulation D or such Regulatory Change,

then within thirty days after demand by such Affected Party (which demand shall
be accompanied by a statement setting forth the basis of such demand), Seller
shall pay directly to such Affected Party such additional amount or amounts as
will compensate such Affected Party for such additional or increased cost or
such reduction. This Section 4.02(a) shall not apply to taxes.
                     ---------------

         (b) Each Affected Party will promptly notify Seller and the
Administrator of any event of which it has knowledge which will entitle such
Affected Party to compensation pursuant to this Section 4.02; provided, however,
                                                ------------  --------  -------
no failure to give or delay in giving such notification shall adversely affect
the rights of any Affected Party to such compensation.

         (c) In determining any amount provided for or referred to in this
Section 4.02, an Affected Party may use any reasonable averaging and attribution
------------
methods that it (in its sole discretion) shall deem applicable. Any Affected
Party when making a claim under this Section 4.02 shall submit to Seller a
                                     ------------
statement as to such increased cost or reduced return (including calculation
thereof in reasonable detail), which statement shall, in the absence of
demonstrable error, be conclusive and binding upon Seller.

         (d) Purchaser agrees that it shall use its reasonable best efforts to
take any action that will avoid the need to pay, or reduce the amount of, any
increased amounts referred to in paragraph (a); provided that Purchaser shall
                                 -------------  --------
not be obligated to take any actions that would, in the reasonable opinion of
Purchaser, be disadvantageous to Purchaser.

         (e) Subject to Section 4.02(g), any and all payments made under this
                        ---------------
Agreement shall be made free and clear of, and without deduction for, any and
all present or future Taxes. If any amount of Taxes shall be required by law to
be deducted from or in respect of any sum payable hereunder to any Foreign
assignee or participant of Purchaser, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions

                                      -13-

<PAGE>

applicable to additional sums payable under this Section 4.02(e)), such Foreign
                                                 ----------------
assignee or participant of Purchaser, as the case may be, receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
Seller shall make such deductions and (iii) Seller shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.

     (f) Each Foreign assignee or participant of Purchaser, on or prior to the
date pursuant to which it becomes an assignee or participant of Purchaser, and
from time to time thereafter if requested in writing by Seller (unless such
Foreign assignee or participant of Purchaser can no longer lawfully do so due to
a change in law subsequent to the date it became an assignee or participant of
Purchaser hereunder), shall provide Seller with Internal Revenue Service Form
1001 or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Foreign assignee or participant of
Purchaser is entitled to benefits under an income tax treaty to which the United
States is a party which reduces the rate of withholding tax on payments of
interest to zero or certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a trade or business in
the United States.

     (g) For any period with respect to which a Foreign assignee or participant
of Purchaser has failed to provide the Seller with the appropriate form
described in Section 4.02(f) (other than if such failure is due to a change in
             ---------------
law occurring subsequent to the date on which a form originally was required to
be provided), such Foreign assignee or participant of Purchaser shall not be
entitled to payments of additional amounts under Section 4.02(e).
                                                 ---------------
     SECTION 4.03. Funding Losses. In the event that the Purchaser or any
                   --------------
Liquidity Bank shall incur any loss or expense (including any loss or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by the Purchaser or such Liquidity Bank to make any Purchase or
Liquidity Funding or maintain any Purchase or Liquidity Funding) as a result of
(i) any settlement with respect to any portion of Purchaser's Total Investment
being made on any day other than a Settlement Date, or (ii) any Purchase not
being made in accordance with a request therefore under Section 1.02 (other than
                                                        ------------
by reason of (a) a default by the Purchaser or such Liquidity Bank, (b)
Purchaser's failure to make available to the Administrator the required funds as
set forth in Section 1.02(b) or (c) the Administrator's failure to make
             ---------------
available the required funds to Seller as set forth in Section 1.02(b)), then,
                                                       ----------------
upon written notice from the Administrator to Seller and Servicer, Seller shall
pay to Servicer, and Servicer shall pay to the Administrator for the account of
the Purchaser or such Liquidity Bank, the amount of such loss or expense. Such
written notice (which shall include calculations in reasonable detail) shall, in
the absence of manifest error, be conclusive and binding upon the Seller and
Servicer.

                                      -14-

<PAGE>

                                    ARTICLE V

                             CONDITIONS OF PURCHASES

         SECTION 5.01. Conditions Precedent to Initial Purchase. The initial
                       ----------------------------------------
Purchase hereunder is subject to the condition precedent that the Administrator
shall have received, on or before the Initial Funding Date, the following, each
(unless otherwise indicated) dated such date and in form and substance
satisfactory to the Administrator:

                  (a) A copy of the resolutions of the Board of Directors of
         each Transferor approving the Transaction Documents to be delivered by
         it and the transactions contemplated thereby, certified by its
         Secretary or Assistant Secretary;

                  (b) A good standing certificate for each Transferor issued by
         the jurisdiction of its formation.

                  (c) A certificate of the Secretary or Assistant Secretary of
         each Transferor certifying the names and true signatures of the
         officers authorized on its behalf to sign the Transaction Documents to
         be delivered by it (on which certificate the Administrator and
         Purchaser may conclusively rely until such time as the Administrator
         shall receive from Seller a revised certificate meeting the
         requirements of this subsection (c));
                              ---------------

                  (d) The organizational documents of each Transferor, duly
         certified by its Secretary or Assistant Secretary;

                  (e) Such proper financing statements (Form UCC-1), to be filed
         against the Transferors, as may be necessary or, in the opinion of the
         Administrator, desirable under the UCC or any comparable law of all
         appropriate jurisdictions to perfect Purchaser's interests in the Pool
         Assets;

                  (f) A search report provided in writing to the Administrator,
         listing all effective financing statements that name a Transferor as
         debtor and that are filed in the jurisdictions in which filings were
         made pursuant to subsection (e) above and in such other jurisdictions
                          --------------
         that Administrator shall reasonably request, together with copies of
         such financing statements (none of which shall cover any Pool Assets);

                  (g) A list of the Lock-Box Banks, and duly executed copies of
         Lock-Box Agreements with each of the Lock-Box Banks;

                  (h) Favorable opinions of counsel to the Transferors, in form
         and substance reasonably satisfactory to the Administrator and with
         respect to such matters as are set forth in Schedule 5.01(h);

                                      -15-

<PAGE>

                  (i) Such powers of attorney as the Administrator shall
         reasonably request to enable the Administrator to collect all amounts
         due under any and all Pool Receivables;

                  (j) A pro forma Information Package, prepared in respect of
                        --- -----
         the proposed initial Purchase, assuming a Cut-Off Date of no more than
         3 Business Days prior to the Initial Funding Date;

                  (k) Fully executed copies of the First Tier Agreement, the
         Second Tier Agreement, the Spread Account Agreement, the ES Agreement,
         the SA Bank Security Agreement and the Specified Supplement, each of
         which agreements shall be in form and substance reasonably satisfactory
         to the Administrator;

                  (l) The Liquidity Agreements, each duly executed by Purchaser,
         the Liquidity Agent and each Liquidity Bank;

                  (m) Written approval by the Credit Bank of this Agreement and
         the transactions contemplated hereby;

                  (n) Letters from the rating agencies then rating the
         Commercial Paper Notes, confirming in effect that the existing ratings
         of the Commercial Paper Notes will remain in effect after giving effect
         to the transactions contemplated hereby; and

                  (o) The Fee Letter, duly executed by Seller.

         SECTION 5.02. Conditions Precedent to All Purchases and Reinvestments.
                       -------------------------------------------------------
Each Purchase (including the initial Purchase) and each Reinvestment hereunder
shall be subject to the further conditions precedent that on the date of such
Purchase or Reinvestment the following statements shall be true (and Seller by
accepting the amount of such Purchase or by receiving the proceeds of such
Reinvestment shall be deemed to have certified that):

                  (a) the representations and warranties contained in Section
                                                                      -------
         6.01 are correct in all material respects on and as of such day as
         ----
         though made on and as of such day and shall be deemed to have been made
         on such day,

                  (b) no event has occurred and is continuing, or would result
         from such Purchase or Reinvestment, that constitutes a Liquidation
         Event or Unmatured Liquidation Event,

                  (c) after giving effect to each proposed Purchase or
         Reinvestment, (i) Purchaser's Total Investment will not exceed the
         Purchase Limit, and (ii) the Asset Interest, expressed as a percentage
         of Net Pool Balance, will not exceed the Allocation Limit,

                                      -16-

<PAGE>

                  (d) the Termination Date shall not have occurred,

                  (e) the aggregate amount on deposit in the RPA Cash Collateral
         Account (after giving effect to such Purchase or Reinvestment and any
         deposit to the RPA Cash Collateral Account but excluding any earnings
         on the investment of such amount), shall not be less than the RPA
         Required Cash Collateral Amount; and

                  (f) the Spread Account Amount (after giving effect to such
         Purchase or Reinvestment and any deposit to the Spread Account Amount)
         shall not be less than the Required Spread Account Amount,

provided, however, the absence of the occurrence and continuance of an Unmatured
--------  -------
Liquidation Event shall not be a condition precedent to any Reinvestment or any
Purchase which does not cause the Purchaser's Total Investment, after giving
effect to such Reinvestment or Purchase, to exceed the Purchaser's Total
Investment as of the opening of business of the day of such Reinvestment or
Purchase.

                                   ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES

         SECTION 6.01. Representations and Warranties of Seller. Seller
                       ----------------------------------------
represents and warrants as follows:

                  (a) Organization and Good Standing. Seller has been duly
                      ------------------------------
         organized and is validly existing as a corporation in good standing
         under the laws of Delaware, with power and authority to own its
         properties and to conduct its business as such properties are presently
         owned and such business is presently conducted, and had at all relevant
         times, and now has, all necessary power, authority, and legal right to
         acquire and own the Pool Receivables.

                  (b) Due Qualification. Seller is duly qualified to do business
                      -----------------
         as a foreign corporation in good standing, and has obtained all
         necessary licenses and approvals, in all jurisdictions in which the
         failure to so qualify or obtain such licenses or approvals would have a
         Material Adverse Effect.

                  (c) Power and Authority; Due Authorization. Seller (i) has all
                      --------------------------------------
         necessary power, authority and legal right to (A) execute and deliver
         the Transaction Documents to which it is a party, (B) carry out the
         terms of the Transaction Documents to which it is a party, and (C) sell
         and assign the Asset Interest on the terms and conditions herein
         provided and (ii) has duly authorized by all necessary corporate action
         the execution,

                                      -17-

<PAGE>

         delivery and performance of the Transaction Documents to which it is a
         party and the sale and assignment of the Asset Interest on the terms
         and conditions herein provided.

                  (d) Valid Sale; Binding Obligations. This Agreement
                      -------------------------------
         constitutes a valid sale, transfer, and assignment of the Asset
         Interest to Purchaser, enforceable against creditors of, and purchasers
         from, Seller; and this Agreement constitutes, and each other
         Transaction Document to be executed by Seller when duly executed and
         delivered will constitute, a legal, valid and binding obligation of
         Seller enforceable in accordance with its terms, except as
         enforceability may be limited by bankruptcy, insolvency,
         reorganization, or other similar laws affecting the enforcement of
         creditors' rights generally and by general principles of equity,
         regardless of whether such enforceability is considered in a proceeding
         in equity or at law.

                  (e) No Violation. The consummation of the transactions
                      ------------
         contemplated by the Transaction Documents and the fulfillment of the
         terms thereof will not (i) conflict with, result in any breach of any
         of the terms and provisions of, or constitute (with or without notice
         or lapse of time or both) a default under, (A) the articles of
         incorporation or bylaws of Seller, or (B) in any material respect, any
         indenture, loan agreement, receivables purchase agreement, mortgage,
         deed of trust, or other agreement or instrument to which Seller is a
         party or by which it or any of its properties is bound, (ii) result in
         the creation or imposition of any Lien upon any of Seller's properties
         pursuant to the terms of any such indenture, loan agreement,
         receivables purchase agreement, mortgage, deed of trust, or other
         agreement or instrument, other than the Transaction Documents, or (iii)
         violate any law or any order, rule, or regulation applicable to Seller
         of any court or of any federal or state regulatory body, administrative
         agency, or other governmental instrumentality having jurisdiction over
         Seller or any of its properties.

                  (f) No Proceedings. There are no proceedings or investigations
                      --------------
         pending, or, to Seller's knowledge, threatened, before any court,
         regulatory body, administrative agency, or other tribunal or
         governmental instrumentality (i) asserting the invalidity of any
         Transaction Document to which Seller is a party, (ii) seeking to
         prevent the sale and assignment of any Asset Interest or the
         consummation of any of the other transactions contemplated by any
         Transaction Document to which Seller is a party, or (iii) seeking any
         determination or ruling that might have a Material Adverse Effect.

                  (g) Bulk Sales Act. No transaction contemplated hereby
                      --------------
         requires compliance with any bulk sales act or similar law.

                  (h) Government Approvals. No authorization or approval or
                      --------------------
         other action by, and no notice to or filing with, any governmental
         authority or regulatory body is required for the due execution,
         delivery and performance by Seller of this Agreement or any other
         Transaction Document, except for the filing of the UCC financing
                               ------
         statements referred to

                                      -18-

<PAGE>

         in Article V, all of which, at the time required in Article V, shall
            ---------                                        ---------
         have been duly made and shall be in full force and effect.

                  (i) Financial Condition. (x) The pro forma balance sheets of
                      -------------------
         Seller prepared as of the month end prior to the Closing Date, a copy
         of which has been furnished to the Administrator, fairly present the
         consolidated financial condition of Seller as at such date in
         accordance with generally accepted accounting principles.

                  (j) Litigation. No injunction, decree or other decision has
                      ----------
         been issued or made by any court, governmental agency or
         instrumentality thereof that prevents, and no threat by any person has
         been made to attempt to obtain any such decision that would prevent,
         Seller from conducting a material part of its business operations,
         except as described in Schedule 6.01(j).

                  (k) Margin Regulations. The use of all funds obtained by
                      ------------------
         Seller under this Agreement will not conflict with or contravene any of
         Regulations G, T, U and X promulgated by the Board of Governors of the
         Federal Reserve System from time to time.

                  (l) Quality of Title. Each Pool Receivable, together with each
                      ----------------
         other Pool Asset, is owned by Seller free and clear of any Lien (other
         than any Lien arising solely as the result of any action taken by
         Purchaser (or any assignee thereof) or by the Administrator); when
         Purchaser makes a Purchase or Reinvestment, it shall have acquired and
         shall at all times thereafter continuously maintain a valid and
         perfected first priority undivided percentage ownership interest to the
         extent of the Asset Interest in each Pool Receivable, and each other
         Pool Asset, free and clear of any Lien (other than any Lien arising
         solely as the result of any action taken by Purchaser (or any assignee
         thereof) or by the Administrator); and no financing statement or other
         instrument similar in effect covering any Pool Receivable, or any other
         Pool Asset is on file in any recording office except such as may be
         filed (i) in favor of Purchaser or the Administrator in accordance with
         this Agreement or in connection with any Lien arising solely as the
         result of any action taken by Purchaser (or any assignee thereof) or by
         the Administrator, or (ii) in favor of the Collateral Agent.

                  (m) Accurate Reports. No Information Package (if prepared by
                      ----------------
         Seller or its Affiliate, or to the extent information therein was
         supplied by Seller or its Affiliate) or other information, exhibit,
         financial statement, document, book, record or report furnished or to
         be furnished by or on behalf of Seller or its Affiliates to the
         Administrator, Purchaser or the Relationship Bank in connection with
         this Agreement was or will be inaccurate in any material respect as of
         the date it was or will be dated or (except as otherwise disclosed to
         the Administrator, Purchaser, and the Relationship Bank at such time)
         as of the date so furnished, or contained or will contain any material
         misstatement of fact or omitted or will omit to state a material fact
         or any fact necessary to make the statements contained therein not
         materially misleading.

                                      -19-

<PAGE>

                  (n) Offices. The chief place of business and chief executive
                      -------
         office of Seller are located at the address of Seller referred to in
         Section 14.02, and the offices where Seller keeps all its books,
         -------------
         records and documents evidencing Pool Receivables, the related Accounts
         and Contracts and all other agreements related to such Pool Receivables
         are located at the addresses specified in Schedule 6.01(n) (or at such
                                                   ----------------
         other locations, notified to the Administrator in accordance with
         Section 7.01(f), in jurisdictions where all action required by Section
         ---------------                                                -------
         8.05 has been taken and completed).
         ----

                  (o) Lock-Box Accounts. The names and addresses of all the
                      -----------------
         Lock-Box Banks, together with the account numbers of the lock-box
         accounts of Seller at such Lock-Box Banks, have been notified to the
         Administrator and the Relationship Bank on the Initial Funding Date, or
         later, in accordance with Section 7.03(d)).
                                   ---------------

                  (p) Eligible Receivables. Each Receivable included in the Net
                      --------------------
         Pool Balance as an Eligible Receivable on the date of any Purchase,
         Reinvestment or other calculation of the Net Pool Balance shall be an
         Eligible Receivable on such date.

                  (q) Servicing Programs. No license or approval is required for
                      ------------------
         the Administrator's use of any Software program used by Servicer in the
         servicing of the Receivables, other than those which have been obtained
         and are in full force and effect.

         SECTION 6.02. Representations and Warranties of Servicer. Servicer
                       ------------------------------------------
represents and warrants as follows:

                  (a) Organization and Good Standing. Servicer has been duly
                      ------------------------------
         organized and is validly existing as a corporation in good standing
         under the laws of Delaware, with power and authority to own its
         properties and to conduct its business as such properties are presently
         owned and such business is presently conducted, and had at all relevant
         times, and now has, all necessary power, authority, and legal right to
         service the Pool Receivables.

                  (b) Due Qualification. Servicer is duly qualified to do
                      -----------------
         business as a foreign corporation in good standing, and has obtained
         all necessary licenses and approvals, in all jurisdictions in which the
         failure to so qualify or obtain such licenses or approvals would have a
         Material Adverse Effect.

                  (c) Power and Authority; Due Authorization. Servicer (i) has
                      --------------------------------------
         all necessary power, authority and legal right to (A) execute and
         deliver the Transaction Documents to which it is a party, and (B) carry
         out the terms of the Transaction Documents to which it is a party and
         (ii) has duly authorized by all necessary corporate action the
         execution, delivery and performance of the Transaction Documents to
         which it is a party.

                                      -20-

<PAGE>

                  (d) Valid Sale; Binding Obligations. This Agreement and each
                      -------------------------------
         other Transaction Document to be executed by Servicer when duly
         executed and delivered will constitute, a legal, valid and binding
         obligation of Servicer enforceable in accordance with its terms, except
         as enforceability may be limited by bankruptcy, insolvency,
         reorganization, or other similar laws affecting the enforcement of
         creditors' rights generally and by general principles of equity,
         regardless of whether such enforceability is considered in a proceeding
         in equity or at law.

                  (e) No Violation. The consummation of the transactions
                      ------------
         contemplated by the Transaction Documents and the fulfillment of the
         terms thereof will not (i) conflict with, result in any breach of any
         of the terms and provisions of, or constitute (with or without notice
         or lapse of time or both) a default under, (A) the articles of
         incorporation or bylaws of Servicer, or (B) in any material respect,
         any indenture, loan agreement, receivables purchase agreement,
         mortgage, deed of trust, or other agreement or instrument to which
         Servicer is a party or by which it or any of its properties is bound,
         (ii) result in the creation or imposition of any Lien upon any of
         Servicer's properties pursuant to the terms of any such indenture, loan
         agreement, receivables purchase agreement, mortgage, deed of trust, or
         other agreement or instrument, other than the Transaction Documents, or
         (iii) violate any law or any order, rule, or regulation applicable to
         Servicer of any court or of any federal or state regulatory body,
         administrative agency, or other governmental instrumentality having
         jurisdiction over Servicer or any of its properties.

                  (f) No Proceedings. There are no proceedings or investigations
                      --------------
         pending, or, to Servicer's knowledge, threatened, before any court,
         regulatory body, administrative agency, or other tribunal or
         governmental instrumentality (i) asserting the invalidity of any
         Transaction Document to which Servicer is a party or (ii) seeking any
         determination or ruling that might have a Material Adverse Effect.

                  (g) Government Approvals. No authorization or approval or
                      --------------------
         other action by, and no notice to or filing with, any governmental
         authority or regulatory body is required for the due execution,
         delivery and performance by Servicer of this Agreement or any other
         Transaction Document;

                  (h) Litigation. No injunction, decree or other decision has
                      ----------
         been issued or made by any court, governmental agency or
         instrumentality thereof that prevents, and no threat by any person has
         been made to attempt to obtain any such decision that would prevent,
         Servicer from conducting a material part of its business operations,
         except as described in Schedule 6.01(j).
                                ----------------

                  (i) Accurate Reports. No Information Package (if prepared by
                      ----------------
         Servicer or its Affiliate, or to the extent information therein was
         supplied by Servicer or its Affiliate) or other information, exhibit,
         financial statement, document, book, record or report

                                      -21-

<PAGE>

         furnished or to be furnished by or on behalf of Servicer or its
         Affiliates to the Administrator, Purchaser or the Relationship Bank in
         connection with this Agreement was or will be inaccurate in any
         material respect as of the date it was or will be dated or (except as
         otherwise disclosed to the Administrator, Purchaser, and the
         Relationship Bank at such time) as of the date so furnished, or
         contained or will contain any material misstatement of fact or omitted
         or will omit to state a material fact or any fact necessary to make the
         statements contained therein not materially misleading.

                  (j) Servicing Programs. No license or approval is required for
                      ------------------
         Administrator's use of any software program used by Servicer in the
         servicing of the Receivables, other than those which have been obtained
         and are in full force and effect.

                                   ARTICLE VII

                    GENERAL COVENANTS OF SELLER AND SERVICER

         SECTION 7.01. Affirmative Covenants of Seller and Servicer. From the
                       --------------------------------------------
date hereof until the Final Payout Date, Seller and Servicer will, unless the
Administrator shall otherwise consent in writing:

                  (a) Compliance with Laws, Etc. Comply in all material respects
                      -------------------------
         with all applicable laws, rules, regulations and orders, including
         those with respect to the Pool Receivables and related Accounts and
         Contracts.

                  (b) Preservation of Corporate Existence. Preserve and maintain
                      -----------------------------------
         its corporate existence, rights, franchises and privileges in the
         jurisdiction of its incorporation, and qualify and remain qualified in
         good standing as a foreign corporation in each jurisdiction where the
         failure to preserve and maintain such existence, rights, franchises,
         privileges and qualification would have a Material Adverse Effect.

                  (c) Audits. (i) At any time and from time to time during
                      ------
         regular business hours, permit the Administrator, the Relationship Bank
         or any of their agents or representatives, upon at least two Business
         Days' prior notice (A) to examine and make copies of and abstracts from
         all books, records and documents (including, without limitation,
         computer tapes and disks) in the possession or under the control of
         Seller or of Servicer relating to Pool Receivables, including, without
         limitation, the related Accounts and Contracts and other agreements,
         and (B) to visit the offices and properties of Seller or of Servicer
         for the purpose of examining such materials described in clause (i)(A)
                                                                  -------------
         next above, and to discuss matters relating to Pool Receivables or
         Seller's or Servicer's performance hereunder with any of the officers
         or employees of Seller or of Servicer having knowledge of such matters;
         and (ii) without limiting the provisions of clause (i) next above, from
                                                     ----------
         time to time on request of Administrator or the Relationship Bank,
         permit internal auditors or other employees of the Relationship Bank to
         conduct a review

                                      -22-

<PAGE>

         of Seller's or of Servicer's books and records; provided, however,
                                                         --------  -------
         that, unless a Liquidation Event is continuing, no more than one such
         review shall be conducted during each fiscal year of Seller and the
         cost thereof payable by Seller and Servicer in connection therewith
         shall not exceed $20,000.

                  (d) Keeping of Records and Books of Account. Maintain and
                      ---------------------------------------
         implement administrative and operating procedures (including, without
         limitation, an ability to recreate records evidencing Pool Receivables
         in the event of the destruction of the originals thereof), and keep and
         maintain all documents, books, records and other information reasonably
         necessary or advisable for the collection of all Pool Receivables
         (including, without limitation, records adequate to permit the daily
         identification of each new Pool Receivable and all Collections of and
         adjustments to each existing Pool Receivable).

                  (e) Performance and Compliance with Receivables and Contracts.
                      ---------------------------------------------------------
         At its expense timely and fully perform and comply with all provisions,
         covenants and other promises required to be observed by it under the
         Contracts related to the Pool Receivables and all other agreements
         related to such Pool Receivables, except insofar as the failure to
         perform and comply would not materially and adversely affect the rights
         of Purchaser hereunder or the collectibility of such Pool Receivables.

                  (f) Location of Records. Keep its chief place of business and
                      -------------------
         chief executive office, and the offices where it keeps its records
         concerning the Pool Receivables, all related Accounts and Contracts and
         all other agreements related to such Pool Receivables (and all original
         documents relating thereto), at the address(es) of Seller referred to
         in Section 6.01(n) or, upon 30 days' prior written notice to the
            ---------------
         Administrator, at such other locations in jurisdictions where all
         action required by Section 8.05 shall have been taken and completed.
                            ------------

                  (g) Credit and Collection Policies. Comply in all material
                      ------------------------------
         respects with its Credit and Collection Policy in regard to each Pool
         Receivable and the related Contract.

                  (h) Collections. Instruct all Obligors to cause all payments
                      -----------
         with respect to Pool Receivables to be deposited directly with a
         Lock-Box Bank. From and after the occurrence of a Liquidation Event,
         deposit all collections received in stores of an Affiliate of the
         Seller or otherwise received by Seller into an account at a Lock-Box
         Bank within two Business Days of receipt.

         SECTION 7.02. Reporting Requirements of Seller. From the date hereof
                       --------------------------------
until the Final Payout Date, Seller shall, unless the Administrator and the
Relationship Bank shall otherwise consent in writing, furnish to the
Administrator and the Relationship Bank:

                                      -23-

<PAGE>

                  (a) Quarterly Financial Statements. As soon as available and
                      ------------------------------
         in any event within 75 days after the end of each of the first three
         quarters of each fiscal year of Charming Shoppes, copies of the
         financial statements of Charming Shoppes and its Subsidiaries, and of
         Seller, prepared on a consolidated basis in conformity with generally
         accepted accounting principles, duly certified by the chief financial
         officer of Charming Shoppes;

                  (b) Annual Financial Statements. As soon as available and in
                      ---------------------------
         any event within 120 days after the end of each fiscal year of Charming
         Shoppes, copies of the financial statements (i) of Charming Shoppes and
         its Subsidiaries, prepared on a consolidated basis in conformity with
         generally accepted accounting principles and duly certified by
         independent certified public accountants of recognized standing
         selected by Charming Shoppes and (ii) of Seller, prepared in conformity
         with generally accepted accounting principles and duly certified by an
         officer of the Seller;

                  (c) Liquidation Events. As soon as possible and in any event
                      ------------------
         within three Business Days after the occurrence of each Liquidation
         Event and each Unmatured Liquidation Event, a written statement of the
         Chairman, President, Treasurer or any Vice President of Seller setting
         forth details of such event and the action that Seller proposes to take
         with respect thereto;

                  (d) Litigation. As soon as possible and in any event within
                      ----------
         three Business Days of Seller's knowledge thereof, notice of (i) any
         litigation, investigation or proceeding which could have a Material
         Adverse Effect and (ii) any material adverse development in previously
         disclosed litigation;

                  (e) Change in Credit and Collection Policy. Prior to its
                      --------------------------------------
         effective date, notice of (i) any material change in the character of
         Seller's business or (ii) any material change in the Credit and
         Collection Policy; and

                  (f) Other. Promptly, from time to time, such other
                      -----
         information, documents, records or reports respecting the Receivables
         or the condition or operations, financial or otherwise, of the
         Transferors as the Administrator or the Relationship Bank may from time
         to time reasonably request in order to protect the interests of the
         Administrator or Purchaser under this Agreement.

         SECTION 7.03. Negative Covenants of Seller. From the date hereof until
                       ----------------------------
the Final Payout Date, Seller shall not, without the prior written consent of
the Administrator:

                  (a) Sales, Liens, Etc. Except as otherwise provided herein,
                      -----------------
         sell, assign (by operation of law or otherwise) or otherwise dispose
         of, or create or suffer to exist any Lien upon or with respect to, any
         Pool Receivable or related Account or Contract or Related Security, or
         any interest therein, or any lock-box account to which any

                                      -24-

<PAGE>

         Collections of any Pool Receivable are sent, or any right to receive
         income or proceeds from or in respect of any of the foregoing.

                  (b) Extension or Amendment of Pool Receivables. Except as
                      ------------------------------------------
         otherwise permitted in Section 8.02 or as ordered by a court of
         competent jurisdiction, extend, amend or otherwise modify the terms of
         any Pool Receivable, or amend, modify or waive any term or condition of
         any Contract related thereto.

                  (c) Change in Business or Credit and Collection Policy. Make
                      --------------------------------------------------
         any change in the character of its business or in the Credit and
         Collection Policy, which change would, in either case, materially
         impair the collectibility of any Pool Receivable or otherwise
         materially and adversely affect the interests or remedies of Purchaser
         under this Agreement or any other Transaction Document.

                  (d) Change in Payment Instructions to Obligors. Add or
                      ------------------------------------------
         terminate any bank as a Lock-Box Bank from the list provided to the
         Administrator and the Relationship Bank on the Initial Funding Date or
         make any change in its instructions to Obligors regarding payments to
         be made to Seller or Servicer or payments to be made to any Lock-Box
         Bank, unless the Administrator and the Relationship Bank shall have
         received notice of such addition, termination or change and duly
         executed copies of Lock-Box Agreements with each new Lock-Box Bank and
         shall have consented the identity of such Lock-Box Bank (which consent
         shall not be unreasonably withheld).

                  (e) Mergers, Sales, Etc. Be a party to any merger or
                      --------------------
         consolidation, or, except in the ordinary course of its business, sell,
         transfer, convey or lease all or substantially all of its assets, or
         sell or assign with or without recourse any Pool Receivables or any
         interest therein (other than pursuant hereto).

                  (f) Deposits to Special Accounts. Deposit or otherwise credit,
                      ----------------------------
         or cause or permit to be so deposited or credited, to any Lock-Box
         Account cash or cash proceeds other than Collections.

         SECTION 7.04. Negative Covenants of the Servicer. From the date hereof
                       ----------------------------------
until the Final Payout Date, Servicer shall not, without the prior written
consent of the Administrator:

                  (a) Extension or Amendment of Pool Receivables. Except as
                      ------------------------------------------
         otherwise permitted in Section 8.02 or as ordered by a court of
                                ------------
         competent jurisdiction, extend, amend or otherwise modify the terms of
         any Pool Receivable, or amend, modify or waive any term or condition of
         any Contract related thereto.

                  (b) Change in Business or Credit and Collection Policy. Make
                      --------------------------------------------------
         any change in the character of its business or in the Credit and
         Collection Policy, which change would, in either case, materially
         impair the collectibility of any Pool Receivable or otherwise

                                      -25-

<PAGE>

         materially and adversely affect the interests or remedies of Purchaser
         under this Agreement or any other Transaction Document.

                  (c) Change in Payment Instructions to Obligors. Add or
                      ------------------------------------------
         terminate any bank as a Lock-Box Bank from the list provided to the
         Administrator and the Relationship Bank on the Initial Funding Date or
         make any change in its instructions to Obligors regarding payments to
         be made to Seller or Servicer or payments to be made to any Lock-Box
         Bank, unless the Administrator and the Relationship Bank shall have
         received notice of such addition, termination or change and duly
         executed copies of Lock-Box Agreements with each new Lock-Box Bank and
         shall have consented the identity of such Lock-Box Bank (which consent
         shall not be unreasonably withheld).

                  (d) Mergers, Sales, Etc. Be a party to any merger or
                      -------------------
         consolidation, or, except in the ordinary course of its business, sell,
         transfer, convey or lease all or substantially all of its assets, or
         sell or assign with or without recourse any Pool Receivables or any
         interest therein (other than pursuant hereto).

                  (e) Deposits to Special Accounts. Deposit or otherwise credit,
                      ----------------------------
         or cause or permit to be so deposited or credited, to any Lock-Box
         Account cash or cash proceeds other than Collections.

         SECTION 7.05. Separate Corporate Existence. Seller hereby acknowledges
                       ----------------------------
that Purchaser, the Liquidity Banks and the Administrator, are entering into the
transactions contemplated by the Transaction Documents in reliance upon Seller's
identity as a legal entity separate from Parent. Therefore, from and after the
date hereof, Seller shall take all steps specifically required by this Agreement
or by the Purchaser or Administrator to continue Seller's identity as a separate
legal entity and to make it apparent to third Persons that Seller is an entity
with assets and liabilities distinct from those of Parent and any other Person,
and is not a division of Parent or any other Person. Without limiting the
generality of the foregoing and in addition to and consistent with the other
covenants set forth herein, Seller shall take such actions as shall be required
in order that:

                  (a) Seller will be a limited purpose corporation whose primary
         activities are restricted in its certificate of incorporation to
         purchasing or otherwise acquiring from Parent, and owning, holding,
         granting security interests, or selling interests, in Pool Assets,
         entering into agreements for the servicing and financing of Pool
         Assets, entering into interest rate agreements, spread account
         agreements and similar documents and conducting such other activities
         as it deems necessary or appropriate to carry out its primary
         activities.

                  (b) Not less than one member of Seller's Board of Directors
         (the "Independent Director") shall be an individual who is not a
               --------------------
         direct, indirect or beneficial stockholder, officer, director,
         employee, affiliate, associate, or supplier of Seller or any of its

                                      -26-

<PAGE>

         Affiliates, except that the Independent Director may be an independent
         director on the Board of Directors of a direct or indirect "bankruptcy
         remote" subsidiary of Charming Shoppes. The certificate of
         incorporation of Seller shall provide that (i) Seller's Board of
         Directors shall not approve, or take any other action to cause the
         filing of, a voluntary bankruptcy petition with respect to Seller
         unless the Independent Director shall approve the taking of such action
         in writing prior to the taking of such action and (ii) such provision
         cannot be amended without the prior written consent of the Independent
         Director.

                  (c) The Independent Director shall not at any time serve as a
         trustee in bankruptcy for Seller, Parent or any Affiliate thereof.

                  (d) Any employee, consultant or agent of Seller will be
         compensated from Seller's funds for services provided to Seller. Seller
         will engage no agents other than its attorneys, auditors and other
         professionals, and a servicer for Pool Assets, which servicer will be
         fully compensated for its services by payment of the Servicer's Fee.

                  (e) Seller will contract with Servicer to perform for Seller
         all operations required on a daily basis to service the Pool Assets.
         Seller will pay Servicer the Servicer's Fee pursuant hereto. Seller
         will not incur any material indirect or overhead expenses for items
         shared between Seller and Parent (or any other Affiliate thereof) which
         are not reflected in the Servicer's Fee. To the extent, if any, that
         Seller and Parent (or any other Affiliate thereof) share items of
         expenses not reflected in the Servicer's Fee, such as legal, auditing
         and other professional services, such expenses will be allocated to the
         extent practical on the basis of actual use or the value of services
         rendered, and otherwise on a basis reasonably related to the actual use
         or the value of services rendered, it being understood that Parent
         shall pay all expenses relating to the preparation, negotiation,
         execution and delivery of the Transaction Documents, including, without
         limitation, legal, agency and other fees.

                  (f) Seller will pay its own operating expenses.

                  (g) Seller will have its own separate post office box and
         stationery.

                  (h) Seller's books and records will be maintained separately
         from those of Parent and any other Affiliate thereof.

                  (i) All financial statements of Parent or any Affiliate
         thereof that are consolidated to include Seller will contain detailed
         notes clearly stating that (A) all of Seller's assets are owned by
         Seller, and (B) Seller is a separate corporate entity with creditors
         who have received security interests in Seller's assets.

                                      -27-

<PAGE>

                  (j) Seller's assets will be maintained in a manner that
         facilitates their identification and segregation from those of Parent
         or any Affiliate thereof.

                  (k) Seller will strictly observe corporate formalities in its
         dealings with Parent or any Affiliate thereof, and funds or other
         assets of Seller will not be commingled with those of Parent or any
         Affiliate thereof. Seller shall not maintain joint bank accounts or
         other depository accounts to which Parent or any Affiliate thereof
         (other than Parent in its capacity as Servicer) has independent access.

                  (l) Seller will maintain arm's-length relationships with
         Parent (and any Affiliate thereof). Any Person that renders or
         otherwise furnishes services to Seller will be compensated by Seller at
         market rates for such services it renders or otherwise furnishes to
         Seller. Except as contemplated in the Transaction Documents neither
         Seller nor Parent will be or will hold itself out to be responsible for
         the debts of the other or the decisions or actions respecting the daily
         business and affairs of the other.

         SECTION 7.06. Transaction Documents. Neither Seller nor Servicer shall
                       ---------------------
amend, modify, waive or provide consent under the provisions of any agreement
expressly referenced in the definition of "Transaction Document" to which it is
a party unless (x) the Administrator shall have given its prior written consent,
and (y) for any amendment which may reasonably be expected to adversely affect
the interests of the Commercial Paper Holders, the Rating Agency Condition is
satisfied.

                                  ARTICLE VIII

                          ADMINISTRATION AND COLLECTION

         SECTION 8.01. Designation of Servicer.
                       -----------------------

         (a) Appointment of Servicer. The servicing, administering and
             -----------------------
collection of the Pool Receivables shall be conducted by the Person designated
as Servicer hereunder ("Servicer") from time to time in accordance with this
                        --------
Section 8.01. Until the Administrator or the Relationship Bank gives to Seller
------------
and to Servicer a Successor Notice (as defined in Section 8.01(b)), Spirit of
                                                  ---------------
America, Inc. is hereby designated as, and hereby agrees to perform the duties
and obligations of, Servicer pursuant to the terms hereof.

         (b) Successor Notice; Liquidation Events. Upon Servicer's receipt of a
             ------------------------------------
notice from the Administrator or Relationship Bank of the Administrator's or
Relationship Bank's designation of a new Servicer (a "Successor Notice"),
                                                      ----------------
Servicer agrees that it will terminate its activities as Servicer hereunder in a
manner that the Administrator reasonably believes will facilitate the transition
of the performance of such activities to the new Servicer, and the Administrator
(or its designee) shall assume each and all of Seller's obligations to service
and administer such Receivables, on the terms and subject to the conditions
herein set forth, and Servicer shall use its

                                      -28-

<PAGE>

best efforts to assist the Administrator (or its designee) in assuming such
obligations. The Administrator and Relationship Bank agree not to give Servicer
a Successor Notice until after the occurrence of a Replacement Event, in which
case such Successor Notice may be given at any time in the Administrator's or
the Relationship Bank's discretion. If Servicer disputes the occurrence of a
Liquidation Event, Servicer may take appropriate action to resolve such dispute;
provided that Servicer must terminate its activities hereunder as Servicer and
--------
allow the newly designated Servicer to perform such activities on the date
provided by the Administrator or Relationship Bank as described above,
notwithstanding the commencement or continuation of any proceeding to resolve
the aforementioned dispute; provided, further that in the event that such
                            --------  -------
dispute is resolved in favor of Servicer and no other Liquidation Event has
occurred and is continuing, at Seller's written request, Servicer shall be
reinstated as Servicer.

         (c) Subcontracts. Servicer may, with the prior consent of the
             ------------
Administrator, subcontract with any other person for servicing, administering or
collecting the Pool Receivables, provided that (i) Servicer shall remain liable
for the performance of the duties and obligations of Servicer pursuant to the
terms hereof and (ii) such subcontract provides for termination upon the
occurrence of a Liquidation Event. The Administrator hereby acknowledges and
consents to the continuation of Total Systems Services, Inc. as the
Administrative Servicer.

         (d) Servicer's Fee. Seller shall be responsible for the payment of
             --------------
(and, if paid by Purchaser or Administrator, shall on demand reimburse Purchaser
or the Administrator for) Seller's Portion of the Servicing Fee. "Seller's
                                                                  --------
Portion of the Servicing Fee" for any Settlement Period means an amount equal to
----------------------------
(i) the Servicer's Fee Rate times (ii) (x) the aggregate Unpaid Balance of the
                            -----
Pool Receivables as of the first day of such Settlement Period minus (y) the
Purchaser's Total Investment on that Settlement Date times (iii) 1/360 times
                                                     -----             -----
(iv) the number of days in such Settlement Period.

         SECTION 8.02. Duties of Servicer.
                       ------------------

         (a) Appointment; Duties in General. Each of Seller, Purchaser and the
             ------------------------------
Administrator hereby appoints as its agent Servicer, as from time to time
designated pursuant to Section 8.01, to enforce its rights and interests in and
                       ------------
under the Pool Receivables, the Related Security and the related Contracts.
Servicer shall take or cause to be taken all such actions as may be necessary or
advisable to collect each Pool Receivable from time to time, all in accordance
with applicable laws, rules and regulations, with reasonable care and diligence,
and in accordance with the Credit and Collection Policy.

         (b) Allocation of Collections; Segregation. Servicer shall set aside
             -------------------------
for the account of Seller and Purchaser their respective allocable shares of the
Collections of Pool Receivables in accordance with Section 1.03 but shall not be
                                                   ------------
required (unless otherwise requested by the Administrator or the Relationship
Bank) to segregate the funds constituting such portions of such Collections
prior to the remittance thereof in accordance with said Section. If instructed
by the Administrator or the Relationship Bank, Servicer shall segregate and
deposit with a bank

                                      -29-

<PAGE>

designated by the Relationship Bank, with the approval of the Administrator,
Purchaser's Share of Collections of Pool Receivables, set aside for Purchaser on
the first Business Day following receipt by Servicer of such Collections in
immediately available funds.

         (c) Modification of Receivables. So long as no Liquidation Event or
             ---------------------------
Unmatured Liquidation Event shall have occurred and be continuing, Servicer,
may, in accordance with the Credit and Collection Policy, (i) extend the
maturity or adjust the Unpaid Balance of, or defer payment of, or otherwise
modify the terms of any Receivable as Seller may determine to be appropriate to
maximize Collections thereof; provided that, after giving effect to such
                              -------- ----
extension of maturity or such adjustment, the Asset Interest, expressed as a
percentage of Net Pool Balance, will not exceed the Allocation Limit, and (ii)
adjust the Unpaid Balance of any Receivable to reflect the reductions or
cancellations described in the first sentence of Section 3.02(a).
                                                 ---------------

         (d) Documents and Records. Seller shall deliver to Servicer, and
             ---------------------
Servicer shall hold in trust for Seller and Purchaser in accordance with their
respective interests, all documents, instruments and records (including, without
limitation, computer tapes or disks) that evidence or relate to Pool
Receivables.

         (e) Certain Duties to Seller. Servicer shall, as soon as practicable
             ------------------------
following receipt, turn over to Seller (i) that portion of Collections of Pool
Receivables representing Seller's undivided interest therein, and (ii) the
Collections of any Receivable which is not a Pool Receivable. Servicer, if other
than Seller, shall, as soon as practicable upon demand, deliver to Seller all
documents, instruments and records in its possession that evidence or relate to
Receivables of Seller other than Pool Receivables, and copies of documents,
instruments and records in its possession that evidence or relate to Pool
Receivables.

         (f) Termination. the Final Payout Date. Servicer's authorization under
             -----------
this Agreement shall terminate upon

         (g) Power of Attorney. Seller hereby grants to Servicer an irrevocable
             -----------------
power of attorney, with full power of substitution, coupled with an interest, to
take in the name of Seller all steps which are necessary or advisable to
endorse, negotiate or otherwise realize on any writing or other right of any
kind held or transmitted by Seller or transmitted or received by Purchaser
(whether or not from Seller) in connection with any Receivable.

         SECTION 8.03. Rights of the Administrator.
                       ---------------------------

         (a) Notice to Obligors. At any time during the continuance of a
             ------------------
Liquidation Event, the Administrator may notify the Obligors of Pool
Receivables, or any of them, of the ownership of Asset Interests by Purchaser.

         (b) Notice to Lock-Box Banks. At any time following the earliest to
             ------------------------
occur of (i) the occurrence of a Liquidation Event, (ii) the commencement of the
Liquidation Period, and (iii) the

                                      -30-

<PAGE>

warranty in Section 6.01(i) shall no longer be true, the Administrator is hereby
            ---------------
authorized to give notice to the Lock-Box Banks, as provided in the Lock-Box
Agreements, of the transfer to the Administrator of dominion and control over
the lock-boxes and related accounts to which the Obligors of Pool Receivables
make payments. Seller hereby transfers to the Administrator, effective when the
Administrator shall give notice to the Lock-Box Banks as provided in the
Lock-Box Agreements, the exclusive dominion and control over such lock-boxes and
accounts, and shall take any further action that the Administrator may
reasonably request to assist with such transfer.

         (c) Rights on Liquidation Event. At any time following the designation
             ---------------------------
of a Servicer other than Seller pursuant to Section 8.01:
                                            ------------

                  (i) The Administrator may direct the Obligors of Pool
         Receivables, or any of them, to pay all amounts payable under any Pool
         Receivable directly to the Collateral Agent.

                  (ii) Seller shall, at the Administrator's or Relationship
         Bank's request and at Seller's expense, give notice of the ownership of
         the Pool Receivables by Purchaser to each said Obligor and direct that
         payments be made directly to the Collateral Agent.

                  (iii) Seller shall, at the Administrator's or Relationship
         Bank's request, (A) assemble all of the documents, instruments and
         other records (including, without limitation, computer programs, tapes
         and disks) which evidence the Pool Receivables, and the related
         Accounts and Contracts and Related Security, or which are otherwise
         reasonably necessary or desirable to service such Pool Receivables, and
         make the same available to the Administrator at a place selected by the
         Administrator or the Relationship Bank, and (B) segregate all cash,
         checks and other instruments received by it from time to time
         constituting Collections of Pool Receivables in a manner reasonably
         acceptable to the Administrator and promptly upon receipt, remit all
         such cash, checks and instruments, duly endorsed or with duly executed
         instruments of transfer, to the Collateral Agent.

                  (iv) Each of Seller and Purchaser hereby authorizes the
         Administrator, and grants to the Administrator an irrevocable power of
         attorney, to take any and all steps in Seller's name and on behalf of
         Seller and Purchaser which are reasonably necessary or desirable, in
         the determination of the Administrator, to collect all amounts due
         under any and all Pool Receivables, including, without limitation,
         endorsing Seller's name on checks and other instruments representing
         Collections and enforcing such Pool Receivables and the related
         Contracts; provided that the Administrator shall not exercise its
                    --------
         rights under such Power of Attorney unless a Liquidation Event shall
         have occurred and be continuing.

         SECTION 8.04. Responsibilities of Seller. notwithstanding: Anything
                       --------------------------
herein to the contrary

                                      -31-

<PAGE>

         (a) Contracts. Seller shall perform all of its obligations under the
             ---------
Contracts related to the Pool Receivables and under other agreements related
thereto to the same extent as if the Asset Interest had not been sold hereunder,
and the exercise by the Administrator or its designee of its rights hereunder
shall not relieve Seller from such obligations.

         (b) Limitation of Liability. The Administrator, the Relationship Bank
             -----------------------
and Purchaser shall not have any obligation or liability with respect to any
Pool Receivables, Contracts or Accounts related thereto or any other related
agreements, nor shall any of them be obligated to perform any of the obligations
of Seller thereunder.

         SECTION 8.05. Further Action Evidencing Purchases and Reinvestments.
                       -----------------------------------------------------

         (a) Further Assurances. Seller agrees to mark its master data
             ------------------
processing records evidencing such Pool Receivables and the related Contracts
with a legend, acceptable to the Administrator, evidencing that the Asset
Interest has been sold in accordance with this Agreement. Seller agrees that
from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action that the
Administrator or its designee may reasonably request in order to perfect,
protect or more fully evidence the Purchases hereunder and the resulting Asset
Interest, or to enable Purchaser or the Administrator or its designee to
exercise or enforce any of their respective rights hereunder or under any
Transaction Document. Without limiting the generality of the foregoing, Seller
will upon the request of the Administrator or its designee execute and file such
financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate.

         (b) Additional Financing Statements; Performance by Administrator.
             -------------------------------------------------------------
Seller hereby authorizes the Administrator or its designee to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Pool Assets now existing or hereafter
arising in the name of Seller. If Seller fails to perform any of its agreements
or obligations under this Agreement, the Administrator or its designee may (but
shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the reasonable expenses of the Administrator or its
designee incurred in connection therewith shall be payable by Seller as provided
in Section 14.05.
   -------------

         (c) Continuation Statements; Opinion. Without limiting the generality
             --------------------------------
of subsection (a), Seller shall, not earlier than six (6) months and not later
   --------------
than three (3) months prior to the fifth anniversary of the date of filing of
the financing statement referred to in Section 5.01(e) or any other financing
                                       ---------------
statement filed pursuant to this Agreement or in connection with any Purchase
hereunder, unless the Final Payout Date shall have occurred:

                  (i) execute and deliver and file or cause to be filed an
         appropriate continuation statement with respect to such financing
         statement; and

                                      -32-

<PAGE>

                  (ii) deliver or cause to be delivered to the Administrator an
         opinion of the counsel for Seller referred to in Section 5.01(h) (or
                                                          ---------------
         other counsel for Seller reasonably satisfactory to the Administrator),
         in form and substance reasonably satisfactory to the Administrator,
         confirming and updating the opinion delivered pursuant to Section
                                                                   -------
         5.01(h) to the effect that Purchaser's Total Interest hereunder
         -------
         continues to be a valid and perfected ownership or security interest,
         subject to no other Liens of record except as provided herein or
         otherwise permitted hereunder.

         SECTION 8.06. Application of Collections. Any payment by an Obligor in
                       --------------------------
respect of any indebtedness owed by it to Seller shall, except as otherwise
specified by such Obligor, as required by the underlying Contract or law or
unless the Administrator instructs otherwise, be applied, first, as a Collection
of any Pool Receivable or Receivables then outstanding of such Obligor in the
order of the age of such Pool Receivables, starting with the oldest of such Pool
Receivable and, second, to any other indebtedness of such Obligor.

                                   ARTICLE IX

                                SECURITY INTEREST

         SECTION 9.01. Grant of Security Interest. To secure all obligations of
                       --------------------------
Seller and Servicer arising in connection with this Agreement and each other
Transaction Document to which either of them is a party, whether now or
hereafter existing, due or to become due, direct or indirect, or absolute or
contingent, including, without limitation, all Indemnified Amounts, payments on
account of Collections and fees, in each case pro rata according to the
                                              --- ----
respective amounts thereof, Seller hereby assigns and grants to Purchaser, for
the benefit of the Secured Parties, a security interest in all of Seller's
right, title and interest (including specifically any undivided interest
retained by Seller hereunder) now or hereafter existing in, to and under all the
Pool Assets and proceeds thereof.

         SECTION 9.02. Further Assurances. The provisions of Section 8.05 shall
                       ------------------                    ------------
apply to the security interest granted under Section 9.01 as well as to the
                                             ------------
Purchases, Reinvestments and all the Asset Interests hereunder.

         SECTION 9.03. Remedies. Upon the occurrence of a Liquidation Event,
                       --------
Purchaser shall have, with respect to the collateral granted pursuant to Section
                                                                         -------
9.01, and in addition to all other rights and remedies available to Purchaser or
----
the Administrator under this Agreement or other applicable law, all the rights
and remedies of a secured party upon default under the UCC.

                                    ARTICLE X

                               LIQUIDATION EVENTS

                                      -33-

<PAGE>

         SECTION 10.01. Liquidation Events. The following events shall be
                        ------------------
"Liquidation Events" hereunder:
 ------------------

                  (a) (i) Servicer (if Seller or its Affiliate is Servicer)
         shall fail to deliver to Administrator an Information Package for any
         Settlement Period on or before 12:00, noon (New York City time) of the
         related Settlement Date or (ii) Servicer (if Seller or its Affiliate is
         Servicer) shall fail to perform or observe in any material respect any
         other term, covenant or agreement that is an obligation of Servicer
         hereunder (other than as referred to in clause (iii) next following)
                                                 ------------
         and such failure shall remain unremedied for five Business Days after
         (1) written notice thereof shall have been given by the Administrator
         to Seller or (2) Seller has actual knowledge thereof or (iii) Servicer
         (if Seller or its Affiliate is Servicer) shall fail to make any payment
         or deposit to be made by it hereunder when due and such failure shall
         remain unremedied for more than three Business Days; or

                  (b) Any representation or warranty made or deemed to be made
         by a Transferor or the Servicer, if Seller or its Affiliate is
         Servicer, (or any of their officers) under a Transaction Document or
         Information Package or other information or report delivered pursuant
         hereto shall prove to have been incorrect in any material respect when
         made and shall continue to be incorrect for a period of thirty-five
         days (or, with respect to Section 6.01(l), fifteen Business Days) after
                                   ---------------
         (i) written notice thereof shall have been given by the Administrator
         to the Seller or the Servicer (if Seller or its Affiliate is Servicer)
         or (ii) Seller or the Servicer (if Seller or its Affiliate is Servicer)
         has actual knowledge thereof; provided, that with respect to the breach
                                       --------
         of the representations or warranties set forth in Section 6.01(l) or
                                                           ---------------
         (p), compliance by Seller with the provisions of Section 3.02 in
         ---                                              ------------
         respect thereof shall be deemed to cure such breach; or

                  (c) A Transferor shall fail to perform or observe in any
         material respect any other term, covenant or agreement contained in any
         of the Transaction Documents to which it is a party on its part to be
         performed or observed and any such failure shall remain unremedied for
         thirty days after (i) written notice thereof shall have been given by
         the Administrator to Seller or (ii) Seller has actual knowledge
         thereof; or

                  (d) (i) A default shall have occurred and be continuing under
         any Credit Facility of Charming Shoppes or any of its Affiliates with
         respect to a payment of principal of or premium or interest in excess
         of $1,000,000 (or $5,000,000, in the case of Charming Shoppes), which
         default if unremedied, uncured, or unwaived (with or without the
         passage of time or the giving of notice or both) would permit
         acceleration of the maturity of such indebtedness and such default
         shall have continued unremedied, uncured or unwaived for a period long
         enough to permit such acceleration, and (x) any notice of default
         required to permit acceleration shall have been given and ten days
         shall have passed without such default having been cured or waived or
         (y) an acceleration shall have occurred; or (ii) any default under any
         agreement or instrument relating to the purchase of

                                      -34-

<PAGE>

         receivables of Seller or any other Transferor shall occur and shall
         continue after the applicable grace period, if any, specified in such
         agreement or instrument, if the effect of such default is to permit the
         termination of the commitment of any party to such agreement or
         instrument to purchase receivables or the right of Seller to reinvest
         in receivables the principal amount paid by any party to such agreement
         or instrument for interest in receivables (provided that such default
         is not related to failure of the obligors on such purchased receivables
         to pay due to credit problems of such obligors or other portfolio tests
         with respect to such receivables), and (x) any notice of such event
         required to permit such termination shall have been delivered and ten
         days shall have passed without such default having been cured or waived
         or (y) termination shall have occurred; or

                  (e) An Event of Bankruptcy shall have occurred and remain
         continuing with respect to a Transferor, Servicer, Charming Shoppes or
         CSRC; or

                  (f) (i) Any litigation (including, without limitation,
         derivative actions), arbitration proceedings or governmental
         proceedings not disclosed in writing by Seller to the Administrator and
         Purchaser prior to the date of execution and delivery of this Agreement
         is pending against a Transferor, Servicer, Charming Shoppes or CSRC, or
         (ii) any material development not so disclosed has occurred in any
         litigation (including, without limitation, derivative actions),
         arbitration proceedings or governmental proceedings so disclosed,
         which, in the case of clause (i) or (ii), in the reasonable opinion of
                               ----------    ----
         the Administrator, has a reasonable likelihood of having a Material
         Adverse Effect; or

                  (g) The funds on deposit in the RPA Cash Collateral Account
         shall be less than the RPA Required Cash Collateral Amount, and such
         condition shall continue for ten days; or any amount required to be
         deposited in the Spread Account under the terms of the Spread Account
         Agreement shall not have been so deposited and such condition shall
         continue for ten days;

                  (h) On any Settlement Date, after giving effect to the
         payments made under Section 3.01(c), the Asset Interest exceeds the
                             ---------------
         Allocation Limit or the Purchaser's Total Investment exceeds the
         Purchase Limit; or

                  (i) An "Early Amortization Event" has occurred under the
         Specified Supplement and is continuing; or

                  (j) A Transferor, Servicer (if Servicer is Seller or its
         Affiliate) or Charming Shoppes is subject to a Change in Control; or

                  (k) The Internal Revenue Service shall file notice of a lien
         pursuant to Section 6323 of the Internal Revenue Code with regard to
         any of the assets of Seller and such lien shall not have been released
         within 5 Business Days, or the Pension Benefit Guaranty

                                      -35-

<PAGE>

         Corporation shall, or shall indicate its intention to, file notice of a
         lien pursuant to Section 4068 of ERISA with regard to any of the assets
         of Seller or any of its Affiliates; or

                  (l) Fashion Service Corp. shall fail to perform its
         obligations under the Cap Agreements, and such failure shall continue
         for three Business Days; or a Termination Event (as defined in the Cap
         Agreements) shall occur with respect to Fashion Service Corp.; or

                  (m) The CB Excess Yield Percentage is less than 0% for three
         consecutive Settlement Periods.

                  SECTION 10.02. Remedies.
                                 --------

         (a) Optional Liquidation. Upon the occurrence of a Liquidation Event
             --------------------
(other than a Liquidation Event described in subsection (e), (g), (h), (l) or
                                             --------------  ---  ---  ---
(m) of Section 10.01), the Administrator shall, at the request, or may with the
---    --------------
consent, of Purchaser, by notice to Seller declare the Purchase Termination Date
to have occurred and the Liquidation Period to have commenced.

         (b) Automatic Liquidation. Upon the occurrence of a Liquidation Event
             ---------------------
described in subsection (e), (g), (h), (l) or (m) of Section 10.01, the Purchase
             --------------  ---  ---  ---    ---    -------------
Termination Date shall occur and the Liquidation Period shall commence
automatically.

         (c) Additional Remedies. Upon any Purchase Termination Date pursuant to
             -------------------
this Section 10.02, no Purchases or Reinvestments thereafter will be made, and
     -------------
the Administrator, Purchaser and the Relationship Bank shall have, in addition
to all other rights and remedies under this Agreement or otherwise, all other
rights and remedies provided under the UCC of each applicable jurisdiction and
other applicable laws, which rights shall be cumulative.

                                   ARTICLE XI

                      THE ADMINISTRATOR; RELATIONSHIP BANK

         SECTION 11.01. Authorization and Action. Pursuant to the Program
                        ------------------------
Administration Agreement and the Relationship Bank Agreement, Purchaser has
appointed and authorized the Administrator and the Relationship Bank (or their
respective designees) to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Administrator or the
Relationship Bank by the terms hereof, together with such powers as are
reasonably incidental thereto.

         SECTION 11.02. Administrator's and Relationship Bank's Reliance, Etc.
                        -----------------------------------------------------
The Administrator, the Relationship Bank and their directors, officers, agents
or employees shall not

                                      -36-

<PAGE>

be liable for any action taken or omitted to be taken by it or them under or in
connection with the Transaction Documents (including, without limitation, the
servicing, administering or collecting of Pool Receivables as Servicer pursuant
to Section 8.01), except for its or their own gross negligence or willful
   ------------
misconduct. Without limiting the generality of the foregoing, each of the
Administrator and the Relationship Bank: (a) may consult with legal counsel
(including counsel for Seller), independent certified public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (b) makes no warranty or representation to
Purchaser or any other holder of any interest in Pool Receivables and shall not
be responsible to Purchaser or any such other holder for any statements,
warranties or representations made in or in connection with any Transaction
Document; (c) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Transaction Document on the part of Seller or to inspect the property (including
the books and records) of Seller; (d) shall not be responsible to Purchaser or
any other holder of any interest in Pool Receivables for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Transaction Document; and (e) shall incur no liability under or in respect of
this Agreement by acting upon any notice (including notice by telephone),
consent, certificate or other instrument or writing (which may be by facsimile
or telex) reasonably believed by it to be genuine and signed or sent by the
proper party or parties.

         SECTION 11.03. State Street Capital and State Street Bank and
                        ----------------------------------------------
Affiliates. State Street Capital and State Street Bank and any of their
----------
respective Affiliates may generally engage in any kind of business with Seller
or any Obligor, any of their respective Affiliates and any Person who may do
business with or own securities of Seller or any Obligor or any of their
respective Affiliates, all as if State Street Capital and State Street Bank were
not the Administrator and the Relationship Bank, respectively, and without any
duty to account therefor to Purchaser or any other holder of an interest in Pool
Receivables.

                                   ARTICLE XII

                       ASSIGNMENT OF PURCHASER'S INTEREST

         SECTION 12.01. Restrictions on Assignments.
                        ---------------------------

         (a) Except as provided in the next sentence, none of Seller, Servicer
or State Street Bank, individually or as the Relationship Bank (except as
otherwise provided in the Relationship Bank Agreement), may assign its rights,
or delegate its duties hereunder or any interest herein without the prior
written consent of the Administrator. Servicer may assign its rights as Servicer
under this Agreement to any of its Affiliates without prior written consent of
the Administrator, provided that Servicer shall have given the Administrator ten
                   --------
days' prior written notice thereof. Purchaser may not assign its rights
hereunder (although it may delegate its duties hereunder as expressly indicated
herein) or the Asset Interest (or any portion thereof) to any Person without

                                      -37-

<PAGE>

the prior written consent of Seller, which shall not be unreasonably withheld
(it being recognized and understood by all parties hereto that all parties
hereto shall deem it reasonable for Seller to withhold such consent if any such
proposed assignment would, in the reasonable determination of Seller, cause
Seller to be required to pay to any Affected Party any of the amounts referred
to in Section 4.02); provided, however, that
      ------------   --------  -------

                  (i) Purchaser may assign all of its rights and interests in
         the Transaction Documents, together with all its interest in the Asset
         Interest, to State Street Capital or State Street Bank, or both, or any
         Affiliate of either of them, or to any "bankruptcy remote" special
         purpose entity, the business of which is administered by State Street
         Capital or any Affiliate of State Street Capital provided, that such
                                                          --------
         assignment shall not cause a material increase in the Earned Discount
         Rate; and

                  (ii) Purchaser may assign and grant a security interest in all
         of its rights in the Transaction Documents, together with all of its
         rights and interest in the Asset Interest, to the Collateral Agent, to
         secure Purchaser's obligations under or in connection with the
         Commercial Paper Notes, the Liquidity Agreement, the Credit Agreement
         and any letter of credit issued thereunder, and certain other
         obligations of Purchaser incurred in connection with the funding of the
         Purchases and Reinvestments hereunder, which assignment and grant of a
         security interest (and any subsequent assignment by the Collateral
         Agent) shall not be considered an "assignment" for purposes of this
         Section 12.01 or, prior to the enforcement of such security interest,
         -------------
         for purposes of any other provision of this Agreement.

         (b) Seller agrees to advise the Administrator within five Business Days
after notice to Seller of any proposed assignment by Purchaser of the Asset
Interest (or any portion thereof), not otherwise permitted under subsection (a),
                                                                 --------------
of Seller's consent or non-consent to such assignment and, if it does not
consent, the reasons therefor. If Seller does not consent to such assignment,
Purchaser may immediately assign such Asset Interest (or portion thereof) to
State Street Capital, State Street Bank or any Affiliate of State Street Capital
or State Street Bank. All of the aforementioned assignments shall be upon such
terms and conditions as Purchaser and the assignee may mutually agree.

         SECTION 12.02.  Rights of Assignee. Upon the assignment by Purchaser in
                         ------------------
accordance with this Article XII, the assignee receiving such assignment shall
                     -----------
have all of the rights of Purchaser with respect to the Transaction Documents
and the Asset Interest (or such portion thereof as has been assigned).

         SECTION 12.03.  Evidence of Assignment. Any assignment of the Asset
                         ----------------------
Interest (or any portion thereof) to any Person may be evidenced by such
instrument(s) or document(s) as may be reasonably satisfactory to Purchaser, the
Administrator and the assignee.

                                      -38-

<PAGE>

         SECTION 12.04.  Rights of the Banks and Collateral Agent. Seller hereby
                         ----------------------------------------
agrees that, upon notice to Seller, the Collateral Agent may exercise all the
rights of the Administrator hereunder, with respect to the Asset Interest (or
any portions thereof), and Collections with respect thereto, which are owned by
Purchaser, and all other rights and interests of Purchaser in, to or under this
Agreement or any other Transaction Document. Without limiting the foregoing,
upon such notice Collateral Agent may request Servicer to segregate Purchaser's
allocable shares of Collections from Seller's allocable share, may give a
Successor Notice pursuant to Section 8.01(a), may give or require the
                             ---------------
Administrator or Relationship Bank to give notice to the Lock-Box Banks as
referred to in Section 8.03(b) and may direct the Obligors of Pool Receivables
               ---------------
to make payments in respect thereof directly to an account designated by them,
in each case, to the same extent as the Administrator might have done.

                              ARTICLE XIII

                            INDEMNIFICATION

         SECTION 13.01.  Indemnities by Seller.
                         ---------------------

         (a) General Indemnity. Without limiting any other rights which any such
             -----------------
Person may have hereunder or under applicable law, Seller hereby agrees to
indemnify each of the Administrator, Purchaser, the Liquidity Banks, the Credit
Bank, the Relationship Bank, the Liquidity Agent, each of their respective
Affiliates, and all successors, transferees, participants and assigns and all
officers, directors, shareholders, controlling persons, employees and agents of
any of the foregoing (each an "Indemnified Party"), forthwith on demand, from
                               -----------------
and against any and all damages, losses, claims, liabilities and related costs
and expenses, including reasonable attorneys' fees and disbursements (all of the
foregoing being collectively referred to as "Indemnified Amounts") awarded
                                             -------------------
against or incurred by any of them arising out of or relating to the Transaction
Documents or the ownership or funding of the Asset Interest or in respect of any
Receivable or Account or any Contract, excluding, however, (a) Indemnified
                                       ---------  -------
Amounts to the extent resulting from gross negligence or willful misconduct on
the part of any such Indemnified Party, (b) recourse (except as otherwise
specifically provided in this Agreement) for any Receivable that is not paid as
a result of credit related issues and (c) any tax based upon or measured by net
income. Without limiting the foregoing, Seller shall indemnify each Indemnified
Party for Indemnified Amounts arising out of or relating to:

                  (i) the transfer by Seller of any interest in any Receivable
         other than the transfer of an Asset Interest to Purchaser pursuant to
         this Agreement and the grant of a security interest to Purchaser
         pursuant to Section 9.01;
                     ------------

                  (ii) any representation or warranty made by Seller or Servicer
         (or any of its officers) under or in connection with any Transaction
         Document, any Information Package or any other information or report
         delivered by or on behalf of Seller pursuant

                                      -39-

<PAGE>

hereto, which shall have been false, incorrect or misleading in any material
respect when made or deemed made;

         (iii) the failure by Seller or Servicer to comply with any applicable
 law, rule or regulation with respect to any Pool Receivable or the related
 Account or Contract, or the nonconformity of any Pool Receivable or the related
 Contract with any such applicable law, rule or regulation;

         (iv) the failure to vest and maintain vested in Purchaser an undivided
 percentage ownership interest, to the extent of the Asset Interest, in the
 Receivables in, or purporting to be in, the Receivables Pool, free and clear of
 any Lien, other than a Lien arising solely as a result of an act of Purchaser,
 the Administrator or the Relationship Bank, whether existing at the time of any
 Purchase or Reinvestment of such Asset Interest or at any time thereafter,
 unless such failure is the result of the failure of Purchaser to execute any
 necessary financing statements;

         (v) the failure to file, or any delay in filing, financing statements
 or other similar instruments or documents under the UCC of any applicable
 jurisdiction or other applicable laws with respect to any Receivables in, or
 purporting to be in, the Receivables Pool, whether at the time of any Purchase
 or Reinvestment or at any time thereafter;

         (vi) any dispute, claim, offset or defense (other than discharge in
 bankruptcy of the Obligor) of the Obligor to the payment of any Receivable in,
 or purporting to be in, the Receivables Pool (including, without limitation, a
 defense based on such Receivable's or the related Contract's not being a legal,
 valid and binding obligation of such Obligor enforceable against it in
 accordance with its terms), or any other claim resulting from the sale of the
 merchandise or services related to such Receivable or the furnishing or failure
 to furnish such merchandise or services;

         (vii) any failure of Seller or Servicer to perform its duties or
obligations in accordance with the provisions of Article VIII;
                                                 ------------

         (viii) any products liability claim arising out of or in connection
with merchandise or services that are the subject of any Pool Receivable; or

         (ix) any tax or governmental fee or charge (but not including taxes
upon or measured by net income), all interest and penalties thereon or with
respect thereto, and all out-of-pocket costs and expenses, including the
reasonable fees and expenses of counsel in defending against the same, which
may arise by reason of the purchase or ownership of any Asset Interest, or any
other interest in the Pool Receivables or in any goods which secure any such
Pool Receivables.

                                      -40-

<PAGE>

         (b) Contest of Tax Claim; After-Tax Basis. If any Indemnified Party
             -------------------------------------
shall have notice of any attempt to impose or collect any tax or governmental
fee or charge for which indemnification will be sought from Seller under Section
                                                                         -------
13.01(a)(ix), such Indemnified Party shall give prompt and timely notice of such
------------
attempt to Seller and Seller shall have the right, at its expense, to
participate in any proceedings resisting or objecting to the imposition or
collection of any such tax, governmental fee or charge. Indemnification
hereunder shall be in an amount necessary to make the Indemnified Party whole
after taking into account any tax consequences to the Indemnified Party of the
payment of any of the aforesaid taxes and the receipt of the indemnity provided
hereunder or of any refund of any such tax previously indemnified hereunder,
including the effect of such tax or refund on the amount of tax measured by net
income or profits which is or was payable by the Indemnified Party.

         (c) Contribution. If for any reason the indemnification provided above
             ------------
in this Section 13.01 is unavailable to an Indemnified Party or is insufficient
        -------------
to hold an Indemnified Party harmless, then Seller shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by such Indemnified Party on the one hand
and Seller on the other hand but also the relative fault of such Indemnified
Party as well as any other relevant equitable considerations.

                              ARTICLE XIV

                             MISCELLANEOUS

         SECTION 14.01. Amendments, Etc. No amendment or waiver of any provision
                        ---------------
of this Agreement nor consent to any departure by Seller therefrom shall in any
event be effective unless the same shall be in writing and signed by (a) Seller,
the Administrator and Purchaser (with respect to an amendment), provided that no
                                                                --------
amendment shall become effective without the signature of the Relationship Bank,
if such amendment materially increases the obligations or liabilities of the
Relationship Bank, in either its individual or agent capacity hereunder, or
materially reduces any amount payable to it hereunder or (b) the Administrator
and Purchaser (with respect to a waiver or consent by them) or Seller (with
respect to a waiver or consent by it), as the case may be, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given. The parties acknowledge that, before entering into such
an amendment or granting such a waiver or consent, Purchaser may also be
required to obtain the approval of some or all of the Liquidity Banks or the
Credit Bank or to satisfy the Rating Agency Condition with respect to such
amendment, waiver or consent. The parties acknowledge that the effect of any
waiver of a Liquidation Event hereunder shall be to negate any effect of the
continuation of such Liquidation Event under the Spread Account Agreement.

                                      -41-

<PAGE>

         SECTION 14.02. Notices, Etc. All notices and other communications
                        ------------
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
express mail or courier or by certified mail, postage prepaid, or by facsimile,
to the intended party at the address or facsimile number of such party set forth
in Exhibit 14.02 or at such other address or facsimile number as shall be
   -------------
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective, (a) if personally delivered
or sent by express mail or courier or if sent by certified mail, when received,
and (b) if transmitted by facsimile, when sent, receipt confirmed by telephone
or electronic means.

         SECTION 14.03. No Waiver; Remedies. No failure on the part of the
                        -------------------
Administrator, the Relationship Bank, any Affected Party, any Indemnified Party,
Purchaser or any other holder of the Asset Interest (or any portion thereof) to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law. Without limiting the foregoing, each of State Street
Capital, individually and as Administrator, State Street Bank, individually and
as Relationship Bank, the Collateral Agent, the Credit Bank and each Liquidity
Bank is hereby authorized by Seller at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by State Street Capital, the Collateral
Agent and such Liquidity Bank to or for the credit or the account of Seller, now
or hereafter existing under this Agreement, to the Administrator, any Affected
Party, any Indemnified Party or Purchaser, or their respective successors and
assigns.

        SECTION 14.04. Binding Effect; Survival. This Agreement shall be binding
                        ------------------------
upon and inure to the benefit of Seller, the Administrator, the Relationship
Bank, Purchaser and their respective successors and assigns, and the provisions
of Section 4.02 and Article XIII shall inure to the benefit of the Affected
   ------------     ------------
Parties and the Indemnified Parties, respectively, and their respective
successors and assigns; provided, however, nothing in the foregoing shall be
                        --------  -------
deemed to authorize any assignment not permitted by Section 12.01. This
                                                    -------------
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until the Final Payout Date. The rights and remedies with respect to any breach
of any representation and warranty made by Seller pursuant to Article VI and the
                                                              ----------
indemnification and payment provisions of Article XIII and Sections 4.02, 14.05,
                                          ------------     -------------  -----
14.06, 14.07, 14.08 and 14.15 shall be continuing and shall survive any
-----  -----  -----     -----
termination of this Agreement.

         SECTION 14.05. Costs, Expenses and Taxes. In addition to its
                        -------------------------
obligations under Article XIII, Seller agrees to pay on demand:
                  ------------

                  (a) all reasonable costs and expenses incurred by the
         Administrator, the Relationship Bank, the Credit Bank, the Collateral
         Agent and the Purchaser and their

                                      -42-

<PAGE>

respective Affiliates in connection with the negotiation, preparation, execution
and delivery, the administration (including periodic auditing) or the
enforcement of, or any actual or claimed breach of, this Agreement and the other
Transaction Documents, including, without limitation (i) the reasonable fees and
expenses of counsel to any of such Persons incurred in connection with any of
the foregoing or in advising such Persons as to their respective rights and
remedies under any of the Transaction Documents, and (ii) all reasonable
out-of-pocket expenses (including reasonable fees and expenses of independent
accountants), incurred in connection with any review of Seller's books and
records either prior to the execution and delivery hereof or pursuant to Section
                                                                         -------
7.01(c); and
-------

         (b) all stamp and other taxes and fees payable or determined to be
 payable in connection with the execution, delivery, filing and recording of
 this Agreement or the other Transaction Documents, and agrees to indemnify each
 Indemnified Party against any liabilities with respect to or resulting from any
 delay in paying or omission to pay such taxes and fees.

         SECTION 14.06. No Proceedings. Seller, Servicer, State Street Capital
                        --------------
(individually and as Administrator) and State Street Bank (individually and as
Relationship Bank) each hereby agrees that it will not institute against
Purchaser, or join any other Person in instituting against Purchaser, any
insolvency proceeding (namely, any proceeding of the type referred to in the
definition of Event of Bankruptcy) so long as any Commercial Paper Notes issued
by Purchaser shall be outstanding or there shall not have elapsed one year plus
one day since the last day on which any such Commercial Paper Notes shall have
been outstanding. The foregoing shall not limit Seller's right to file any claim
in or otherwise take any action with respect to any insolvency proceeding that
was instituted by any Person other than Seller.

         SECTION 14.07. Confidentiality of Program Information.
                        --------------------------------------

                  (a) Confidential Information. Each party hereto acknowledges
                      ------------------------
         that State Street Capital regards the structure of the transactions
         contemplated by this Agreement to be proprietary, and each such party
         severally agrees that:

                  (i) it will not disclose without the prior written consent of
         State Street Capital (other than to the directors, employees, auditors,
         counsel or affiliates (collectively, "representatives" of such party,
         each of whom shall be informed by such party of the confidential nature
         of the Program Information (as defined below) and of the terms of this
         Section 14.07), (A) any information regarding the pricing in, or copies
         -------------
         of, this Agreement or any transaction contemplated hereby, (B) any
         information regarding the organization, business or operations of
         Purchaser generally or the services performed by the Administrator or
         the Relationship Bank for Purchaser, or (C) any information which is
         furnished by State Street Capital to such party and which is designated
         by State Street Capital to such party as confidential or not otherwise
         available to the general public (the

                                      -43-

<PAGE>

         information referred to in clauses (A), (B) and (C) is collectively
                                    ----------------     ---
         referred to as the "Program Information"); provided, however, that such
                             -------------------    --------  -------
         party may disclose any such Program Information (I) to any other party
         to this Agreement for the purposes contemplated hereby, (II) as may be
         required by any municipal, state, federal or other regulatory body
         having or claiming to have jurisdiction over such party, (III) in order
         to comply with any law, order, regulation, regulatory request or ruling
         applicable to such party, (IV) subject to subsection (c), in the event
                                                   --------------
         such party is legally compelled (by interrogatories, requests for
         information or copies, subpoena, civil investigative demand or similar
         process) to disclose any such Program Information; or (V) specifically,
         Seller or one of its affiliates may file this executed agreement as an
         exhibit to any annual or quarterly report it files with the United
         States Securities and Exchange Commission; and

          (ii) it will use the Program Information solely for the purposes of
     evaluating, administering and enforcing the transactions contemplated by
     this Agreement and making any necessary business judgments with respect
     thereto;

         (b) Availability of Confidential Information. This Section 14.07 shall
             ----------------------------------------       -------------
be inoperative as to such portions of the Program Information which are or
become generally available to the public or such party on a nonconfidential
basis from a source other than State Street Capital or were known to such party
on a nonconfidential basis prior to its disclosure by State Street Capital.

         (c) Legal Compulsion to Disclose. In the event that any party or anyone
             ----------------------------
to whom such party or its representatives transmits the Program Information is
requested or becomes legally compelled (by interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any of the Program Information, such party will:

                  (i) provide State Street Capital with prompt written notice so
         that State Street Capital may seek a protective order or other
         appropriate remedy and/or waive compliance with the provisions of this
         Section 14.07; and
         -------------

                  (ii) unless State Street Capital waives compliance by such
         party with the provisions of this Section 14.07, make a timely
                                           -------------
         objection to the request or confirmation to provide such Program
         Information on the basis that such Program Information is confidential
         and subject to the agreements contained in this Section 14.07.
                                                         -------------

In the event that such protective order or other remedy is not obtained, or
State Street Capital waives compliance with the provisions of this Section
                                                                   -------
14.07, such party will furnish only that portion of the Program Information
-----
which (in such party's good faith judgment) is legally required to be furnished
and will exercise reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded the Program Information.

                                      -44-

<PAGE>

         (d) Survival. This Section 14.07 shall survive termination of this
             --------       -------------
Agreement.

     SECTION 14.08. Confidentiality of Seller Information.
                    -------------------------------------

         (a) Confidential Information. Each party hereto acknowledges that
             ------------------------
Seller regards certain financial and portfolio information to be confidential,
and each such party severally agrees that:

                  (i) it will not disclose without the prior written consent of
         Seller (other than to the directors, employees, auditors, counsel or
         affiliates (collectively, "representatives" of such party, each of whom
         shall be informed by such party of the confidential nature of the
         Seller Information (as defined below) and of the terms of this Section
                                                                        -------
         14.08), (A) any financial information regarding Seller, (B) any pricing
         -----
         information of Seller, or (C) any information which is furnished by
         Seller to such party and which is designated by Seller to such party as
         confidential or not otherwise available to the general public (the
         information referred to in clauses (A), (B) and (C) is collectively
                                    ----------------     ---
         referred to as the "Seller Information"); provided, however, that such
                             ------------------    --------  -------
         party may disclose any such Seller Information (I) to any other party
         to this Agreement for the purposes contemplated hereby, (II) as may be
         required by any municipal, state, federal or other regulatory body
         having or claiming to have jurisdiction over such party, (III) in order
         to comply with any law, order, regulation, regulatory request or ruling
         applicable to such party, (IV) subject to subsection (c), in the event
                                                   --------------
         such party is legally compelled (by interrogatories, requests for
         information or copies, subpoena, civil investigative demand or similar
         process) to disclose any such Seller Information, and (V) to the Credit
         Bank, the Liquidity Banks, any assignee or participant or potential
         assignee or participant of the Credit Bank or any Liquidity Bank, the
         rating agencies rating the Commercial Paper Notes, and the investors in
         and dealers of the Commercial Paper Notes; and

                  (ii) it will use the Seller Information solely for the
         purposes of evaluating, administering and enforcing the transactions
         contemplated by this Agreement and making any necessary business
         judgments with respect thereto.

         (b) Availability of Confidential Information. This Section 14.08 shall
             ----------------------------------------       -------------
be inoperative as to such portions of the Seller Information which are or become
generally available to the public or such party on a nonconfidential basis from
a source other than Seller or were known to such party on a nonconfidential
basis prior to its disclosure by Seller.

         (c) Legal Compulsion to Disclose. In the event that any party or anyone
             ----------------------------
to whom such party or its representatives transmits the Seller Information is
requested or becomes legally compelled (by interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any of the Seller Information, such party will

                  (i) provide Seller with prompt written notice so that Seller
         may seek a protective order or other appropriate remedy and/or waive
         compliance with the provisions of this Section 14.08; and
                                                -------------

                                      -45-

<PAGE>

                  (ii) unless Seller waives compliance by such party with the
         provisions of this Section 14.08, make a timely objection to the
                            -------------
         request or confirmation to provide such Seller Information on the basis
         that such Seller Information is confidential and subject to the
         agreements contained in this Section 14.08.
                                      -------------

In the event that such protective order or other remedy is not obtained, or
Seller waives compliance with the provisions of this Section 14.08, such party
                                                     -------------
will furnish only that portion of the Seller Information which (in such party's
good faith judgment) is legally required to be furnished and will exercise
reasonable efforts to obtain reliable assurance that confidential treatment will
be accorded the Seller Information.

         (d) Survival. This Section 14.08 shall survive termination of this
             --------       -------------
Agreement.

         SECTION 14.09. Captions and Cross References. The various captions
                        -----------------------------
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. Unless otherwise indicated,
references in this Agreement to any Section, Appendix, Schedule or Exhibit are
to such Section of or Appendix, Schedule or Exhibit to this Agreement, as the
case may be, and references in any Section, subsection, or clause to any
subsection, clause or subclause are to such subsection, clause or subclause of
such Section, subsection or clause.

         SECTION 14.10. Integration. This Agreement, together with the letter
                        -----------
 referenced in Section 4.01(a), contains a final and complete integration of all
               ---------------
 prior expressions by the parties hereto with respect to the subject matter
 hereof and shall constitute the entire understanding among the parties hereto
 with respect to the subject matter hereof, superseding all prior oral or
 written understandings.

         SECTION 14.11. Governing Law. THIS AGREEMENT, INCLUDING THE RIGHTS AND
                        -------------
 DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
 WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
 PERFECTION OF THE INTERESTS OF PURCHASER IN THE RECEIVABLES IS GOVERNED BY THE
 LAWS OF THE JURISDICTION OTHER THAN THE STATE OF NEW YORK.

         SECTION 14.12. Waiver Of Jury Trial. EACH OF THE PARTIES HERETO
                        --------------------
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER TRANSACTION
DOCUMENT OR ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING OR OTHER
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT A JURY TRIAL.

                                      -46-

<PAGE>

     SECTION 14.13. Consent To Jurisdiction; Waiver Of Immunities. EACH OF THE
                    ---------------------------------------------
PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IT IRREVOCABLY (i) SUBMITS TO THE
JURISDICTION, FIRST, OF ANY UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL
JURISDICTION IS NOT AVAILABLE, OF ANY NEW YORK STATE COURT, IN EITHER CASE
SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, (ii) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED ONLY IN SUCH NEW YORK STATE OR
FEDERAL COURT AND NOT IN ANY OTHER COURT, AND (iii) WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING.

     SECTION 14.14. Execution in Counterparts. This Agreement may be executed in
                    -------------------------
any number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
Agreement.

     SECTION 14.15. No Recourse Against Other Parties. No recourse under any
                    ---------------------------------
obligation, covenant or agreement of any of the Securitization Entities
contained in this Agreement shall be had against any incorporator, stockholder,
officer, director or employee of such Securitization Entity, by the enforcement
of any assessment or by any legal or equitable proceeding, by virtue of any
statute or otherwise; it being expressly agreed and understood that this
Agreement is solely a corporate obligation of Purchaser, and that no personal
liability whatever shall attach to or be incurred by the incorporators,
stockholders, officers, directors or employees of such Securitization Entity, or
any of them under or by reason of any of the obligations, covenants or
agreements of such Securitization Entity contained in this Agreement, or implied
therefrom, and that any and all personal liability for breaches by such
Securitization Entity of any of such obligations, covenants or agreements either
at common law or at equity, or by statute or constitution, of every such
incorporator, stockholder, officer, director or employee is hereby expressly
waived as a condition of and in consideration for the execution of this
Agreement; provided, however, that nothing in this Section 14.15 shall relieve
           --------  -------
any of the foregoing persons or entities from any liability arising from his,
her or its willful misconduct or intentional misrepresentations.

         SECTION 14.16. State Street Business Combination. The parties hereto
                        ---------------------------------
recognize that State Street Capital is contemplating a business combination
whereby State Street Capital is to be combined with State Street Capital
Markets, L.L.C. ("SSCM"). Upon consummation of the transaction, SSCM shall
automatically become a party hereto, effective immediately upon such
combination. References herein to State Street Capital shall be deemed to
include references to SSCM.

                                      -47-

<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                                   CHARMING SHOPPES STREET, INC.
                                   as Seller

                                   By:__________________________________________
                                   Name:________________________________________
                                   Title:_______________________________________

                                   SPIRIT OF AMERICA, INC., as Servicer

                                   By:__________________________________________
                                   Name:________________________________________
                                   Title:_______________________________________

                                   CLIPPER RECEIVABLES CORPORATION, as Purchaser

                                   By:__________________________________________
                                   Name:________________________________________
                                   Title:_______________________________________

                                   STATE STREET CAPITAL CORPORATION,
                                   as Administrator

                                   By:__________________________________________
                                   Name:________________________________________
                                   Title:_______________________________________

                                       S-1

<PAGE>

                                       S-2

<PAGE>

                                              STATE STREET BANK & TRUST COMPANY,
                                              as Relationship Bank

                                              By:_______________________________
                                              Name:_____________________________
                                              Title:____________________________

                                       S-3

<PAGE>

                                                                Schedule 5.01(h)
                                               to Receivables Purchase Agreement

                Opinions to be Delivered Prior to Initial Funding

         1. Opinions of Mayer, Brown & Platt ("MBP"), as special counsel to the
Transferors, substantially in the form attached to this Schedule.

         2. Opinion of Colin Stern, Executive Vice President and General Counsel
of Charming Shoppes, with respect to (i) the organization of the Transferors,
(ii) the authorization by the Transferors of the Transaction Documents, (iii)
the absence of conflict with each Transferor's organizational documents,
material agreements and orders of courts and regulatory bodies having
jurisdiction over the Transferors, and (iv) litigation matters. Such opinion
shall be subject to such exceptions and qualifications as are set forth in the
opinion delivered by Mr. Stern on November 25, 1997 in connection with the
issuance of Series 1997-1.

                                     Sched-1

<PAGE>

                                                                Schedule 6.01(j)
                                               to Receivables Purchase Agreement

                            Description of Litigation

                                      NONE

                                     Sched-2

<PAGE>

                                                                Schedule 6.01(n)
                                               to Receivables Purchase Agreement

                  List of Offices Where Seller Records are Kept

3411 Silverside Road
Wilmington, Delaware 19810

450 Winks Lane
Bensalem, Pennsylvania 19020

                                     Sched-3

<PAGE>

                                                                Schedule 7.01(g)
                                               to Receivables Purchase Agreement

                   Description of Credit and Collection Policy

     To be delivered by Servicer prior to the initial funding.

                                     Sched-4

<PAGE>

                                                                 EXHIBIT 3.01(a)

                               Information Package

                                      Exh-1

<PAGE>

                                                                   Exhibit 14.02

                              Addresses for Notices

Clipper Receivables Corporation
c/o State Street Capital Corporation,
  as Administrator
225 Franklin Street, 18th Floor
Boston, Massachusetts 02110

State Street Capital Corporation,
  as Administrator
225 Franklin Street, 18th Floor
Boston, Massachusetts 02110

State Street Bank & Trust Company,
  as Relationship Bank
225 Franklin Street, 18th Floor
Boston, Massachusetts 02110

Spirit of America, Inc.
c/o Spirit of American National Bank
1103 Allen Drive
Milford, Ohio 45150

Charming Shoppes Street, Inc.
c/o Fashion Service Corp.
450 Winks Lane
Bensalem, Pennsylvania 19020

                                      Exh-2

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