Document:

exv4wxkyx4y

 

Exhibit 4(k)(4)

 

LAMAR ADVERTISING COMPANY

and

THE BANK OF NEW YORK TRUST COMPANY, N.A.,

as Trustee with respect to such series of Securities as shall

be designated from time to time pursuant to the terms hereof

 

SECOND SUPPLEMENTAL INDENTURE

Dated as of June [ ], 2007

 

Supplement to Indenture dated as of June 16, 2003

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE 1.
	 	 	 	 
	 
	 	 	 	 
	CREATION OF THE NOTES
	 	 	 	 
	 
	 	 	 	 
	Section 1.1 Designation of Series
	 	 	2	 
	Section 1.2 Form of Notes
	 	 	2	 
	Section 1.3 Limit on Amount of Series
	 	 	2	 
	Section 1.4 Interest
	 	 	2	 
	Section 1.5 Certificate of Authentication
	 	 	2	 
	Section 1.6 No Sinking Fund
	 	 	2	 
	Section 1.7 Issuance in Global Form
	 	 	3	 
	Section 1.8 Discharge of Indenture; Defeasance
	 	 	3	 
	Section 1.9 Other Terms of Notes
	 	 	3	 
	 
	 	 	 	 
	ARTICLE 2.
	 	 	 	 
	 
	 	 	 	 
	CONVERSION OF NOTES
	 	 	 	 
	 
	 	 	 	 
	Section 2.1 Conversion Right
	 	 	3	 
	Section 2.2 Conversion Consideration and Settlement
	 	 	4	 
	Section 2.3 Conversion Rate and Conversion Trigger Price
	 	 	6	 
	Section 2.4 Exercise of Conversion Right
	 	 	6	 
	Section 2.5 Fractions of Common Stock Shares
	 	 	7	 
	Section 2.6 Adjustment of Conversion Rate
	 	 	7	 
	Section 2.7 Notice of Adjustments of Conversion Rate
	 	 	16	 
	Section 2.8 Notice of Certain Corporate Action
	 	 	17	 
	Section 2.9 Company to Reserve Common Stock
	 	 	18	 
	Section 2.10 Taxes on Conversions
	 	 	18	 
	Section 2.11 Covenant as to Common Stock
	 	 	18	 
	Section 2.12 Cancellation of Converted Securities
	 	 	18	 
	Section 2.13 Provisions in Case Certain Corporate Transactions
	 	 	18	 
	Section 2.14 Right of Holders to Convert
	 	 	20	 
	Section 2.15 Certain Definitions
	 	 	20	 
	 
	 	 	 	 
	ARTICLE 3.
	 	 	 	 
	 
	 	 	 	 
	REPURCHASE OF NOTES AT THE OPTION OF THE
HOLDERS UPON A CHANGE OF CONTROL
	 	 	 	 
	 
	 	 	 	 
	Section 3.1 Repurchase at Option of Holders upon Change of Control
	 	 	23	 
	Section 3.2 Certain Definitions
	 	 	26	 

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	 	 	Page	 
	ARTICLE 4.
	 	 	 	 
	 
	 	 	 	 
	EVENTS OF DEFAULT
	 	 	 	 
	 
	 	 	 	 
	Section 4.1 Additional Events of Default
	 	 	28	 
	 
	 	 	 	 
	ARTICLE 5.
	 	 	 	 
	 
	 	 	 	 
	AMENDMENTS, SUPPLEMENTS AND WAIVERS
	 	 	 	 
	 
	 	 	 	 
	Section 5.1 With Consent of Holders
	 	 	28	 
	 
	 	 	 	 
	ARTICLE 6.
	 	 	 	 
	 
	 	 	 	 
	MISCELLANEOUS
	 	 	 	 
	 
	 	 	 	 
	Section 6.1 Application of Second Supplemental Indenture
	 	 	29	 
	Section 6.2 Effective Date
	 	 	29	 
	Section 6.3 Counterparts
	 	 	29	 

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     SECOND SUPPLEMENTAL INDENTURE, dated as of June [ ], 2007 by and between LAMAR ADVERTISING
COMPANY, a Delaware corporation, as issuer (the “Company”), and THE BANK OF NEW YORK TRUST COMPANY,
N.A., a trust company organized under the laws of Delaware, as Trustee under the Indenture (as
hereinafter defined) (the “Trustee”).

RECITALS

     WHEREAS, the Company and Wachovia Bank of Delaware, National Association, as prior trustee, as
of June 16, 2003 entered into an Indenture (as supplemented hereby, the “Indenture”, all
capitalized terms used and not otherwise defined herein shall have the meanings set forth in the
Indenture) providing for the issuance by the Company of Securities from time to time;

     WHEREAS, pursuant to Section 7.8 of the Indenture, the Trustee replaced Wachovia Bank of
Delaware, National Association as trustee under the Indenture;

     WHEREAS, the Company has previously issued under the Indenture a series of Securities,
designated as its 2-7/8% Convertible Notes due 2010 (the “Original Notes”), in an aggregate
principal amount of $287,500,000;

     WHEREAS, the Company desires to issue an additional Series of Securities under the Indenture,
and has duly authorized the creation and issuance of such securities and the execution and delivery
of this Second Supplemental Indenture to modify the Indenture and provide certain additional
provisions as hereinafter described;

     WHEREAS, the Company and the Trustee deem it advisable to enter into this Second Supplemental
Indenture for the purposes of establishing the terms of such Series of Securities;

     WHEREAS, Section 2.2 of the Indenture provides that a supplemental indenture may be entered
into by the Company to establish the form or terms of the issuance of any Securities within a
Series;

     WHEREAS, the execution and delivery of this Second Supplemental Indenture has been authorized
by a Board Resolution;

     WHEREAS, concurrent with the execution hereof, the Company has delivered a Board Resolution
and an Officers’ Certificate; and

     WHEREAS, all things necessary to make this Second Supplemental Indenture a valid agreement of
the Company in accordance with its terms have been done, and the execution and delivery thereof
have been in all respects duly authorized by the parties hereto.

     NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:

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

 

 

ARTICLE 1.

CREATION OF THE NOTES

     Section 1.1 Designation of Series.

     Pursuant to the terms hereof and Sections 2.1 and 2.2 of the Indenture, the Company hereby
creates a Series of Securities designated as the “2-7/8% Convertible Notes due 2010—Series B” (the
“Notes”), which Notes shall be deemed “Securities” for all purposes under the Indenture.

     Section 1.2 Form of Notes.

     The definitive form of the Notes shall be substantially in the form set forth in Exhibit A
attached hereto, which is incorporated herein and made part hereof. The Stated Maturity of the
Notes shall be December 31, 2010.

     Section 1.3 Limit on Amount of Series.

     The Notes shall not exceed U.S.$287,500,000 in aggregate principal amount, and may, upon the
execution and delivery of this Second Supplemental Indenture or from time to time thereafter, be
executed by the Company and delivered to the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Notes upon a Company Order and delivery of an Officers’
Certificate and Opinion of Counsel as contemplated by Section 2.3 of the Indenture.

     Section 1.4 Interest.

     The Notes shall bear interest at a rate of 2-7/8% per annum, payable semi-annually. The
Interest Payment Dates for the Notes shall be June 30 and December 31 of each year, commencing June
30, 2007, with interest payable in Dollars to Holders in whose names the Notes are registered at
the close of business on June 15 or December 15 of each year, as the case may be (each, a “Record
Date”), or, if such Record Date is not a Business Day, at the close of business of the immediately
succeeding Business Day.

     Section 1.5 Certificate of Authentication.

     The Trustee’s certificate of authentication to be borne on the Notes shall be substantially as
provided in the Form of Note attached hereto as Exhibit A.

     Section 1.6 No Sinking Fund.

     No sinking fund will be provided with respect to the Notes.

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     Section 1.7 Issuance in Global Form.

     The Notes shall be issued as one or more Global Securities, representing the aggregate
principal amount of the Notes, and shall be deposited with the Trustee as custodian for the
Depositary. The Notes shall be registered in the name of Cede & Co., or another nominee of the
Depositary.

     Section 1.8 Discharge of Indenture; Defeasance.

     The Notes shall not be subject to the provisions of Article 9 of the Indenture.

     Section 1.9 Other Terms of Notes.

     The other terms of the Notes shall be as expressly set forth in Articles 2, 3, 4, 5, 6 and 7
hereof and Exhibit A hereto.

     Section 1.10 Conversion Agent.

     The Company hereby appoints the Trustee as the conversion agent (the “Conversion
Agent”) for the Notes and authorizes the Conversion Agent, in such capacities, to take such
actions on its behalf and to exercise such powers as are delegated to the Conversion Agent, in such
capacities by the terms hereof, together with such actions and powers as are reasonably
incidental thereto.

     The words “herein”, “hereof” and “hereunder” and other words of similar import refer to this
Second Supplemental Indenture as a whole and not to any particular Article, Section or other
subdivision.

ARTICLE 2.

CONVERSION OF NOTES

     Section 2.1 Conversion Right.

     (a) Subject to and upon compliance with the provisions of this Article 2, at the option of the
Holder thereof, any Note or any portion of the principal amount thereof which is $1,000 or an
integral multiple of $1,000, and which has not previously been repurchased pursuant to Article 3
hereof, may be converted, as set forth in Section 2.2, only upon the following circumstances:

     (i) on any Business Day in any calendar quarter commencing at any time after September
30, 2007, but only during such calendar quarter, if the Closing Sale Price of the Common
Stock for at least 20 Trading Days in a period of 30 consecutive Trading Days ending on the
last Trading Day of the preceding calendar quarter is more than 160% of the Conversion Price
during such period (the “Closing Price Condition”);

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     (ii) on any Business Day during the five Business Day period after any five consecutive
Trading Day period in which the Trading Price per $1,000 principal amount of Notes for each
day of that period was less than 98% of the product of the Closing Sale Price of our Common
Stock and the then Conversion Rate (the “Trading Price Condition”);

     (iii) upon the occurrence of a specified corporate transaction set forth in Section
2.13 hereof; or

     (iv) at any time beginning ten Trading Days before the Stated Maturity and until the
close of business on the Business Day immediately preceding the Stated Maturity.

     (b) In the case of (i) the Closing Price Condition, the Conversion Agent shall determine at
the beginning of each calendar quarter commencing at any time after September 30, 2007, whether the
Notes are convertible as a result of the price of Common Stock and notify the Company and the
Trustee, to the extent the Trustee is not also serving as the Conversion Agent, and (ii) the
Trading Price Condition, the Trustee shall have no obligation to determine the Trading Price of the
Notes unless the Company has requested such determination; and the Company shall have no obligation
to make such request unless a Holder of the Notes provides the Company with reasonable evidence
that the Trading Price per $1,000 principal amount of Notes would be less than 98% of the product
of the Closing Sale Price of Common Stock and the then Conversion Rate; provided, however, at such
time, the Company shall instruct the Trustee to determine the Trading Price of the Notes beginning
on the next Trading Day and on each successive Trading Day until the Trading Price per $1,000
principal amount of Notes is greater than 98% of the product of the Closing Sale Price of Common
Stock and the Conversion Rate.

     (c) Such conversion right shall commence on the date of original issuance of the Notes, and
shall expire at the close of business on the Business Day immediately preceding the Stated
Maturity. A Note in respect of which a Holder has delivered a Repurchase Notice pursuant to
Section 3.1 hereof may be converted only if such notice is withdrawn in accordance with the terms
of such section, unless the Company defaults in the payment of the Change of Control Repurchase
Price.

     (d) If any of the events described in clause (a) hereof occurs, Holders may surrender any
Notes for conversion pursuant to Section 2.4 hereof. Upon determining that Holders of Notes are or
will be entitled to convert their Notes in accordance with this Section 2.1, the Company will
promptly issue a press release or otherwise publicly disclose this information and use its
reasonable efforts to post such information on the Company’s website.

     Section 2.2 Conversion Consideration and Settlement.

     (a) Upon surrendering any Notes for conversion, the Holder of such Notes shall receive, in
respect of each $1,000 principal amount of Notes, at the Company’s election:

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     (i) a number of shares of Class A Common Stock of the Company, $0.001 par value per
share (the “Common Stock”), equal to the Conversion Rate, in addition to cash in lieu of
fractional shares, if applicable;

     (ii) cash in an amount equal to the Conversion Value; or

     (iii) for all days of the Conversion Period, (A) a fixed amount in cash specified by us
divided by 20 or an amount in cash representing the percentage that the Company elects of
the Daily Conversion Value Amount (in each case, the “specified cash amount”), and (B) a
number of whole shares, in addition to cash in lieu of fractional shares, per $1,000
principal amount of Notes equal to the sum of the Daily Share Amounts for all of the Trading
Days in the Conversion Period;

     provided however, at any time on or prior to the 11th Trading Day preceding the
Stated Maturity, the Company may irrevocably elect to satisfy in cash its conversion obligation
with respect to the principal amount of the Notes to be converted after the date of such election,
with any remaining amount to be satisfied in shares of Common Stock (the “Cash Payment of Principal
Election”), for each $1,000 principal amount of Notes surrendered for conversion, as follows:

     (A) where the Conversion Value is less than or equal to $1,000, the settlement amount shall be
an amount in cash equal to such Conversion Value, or

     (B) where the Conversion Value is greater than $1,000, the settlement amount shall be computed
as if the Company had elected to settle a portion of its conversion obligation pursuant to
paragraph (a)(iii) of this Section 2.2, with a specified cash amount equal to $1,000.

     The Company shall treat all Holders converting on the same day in the same manner. The
Company shall not, however, have any obligation to settle its conversion obligations arising on
different days in the same manner.

     (b) (i) In the case of Sections 2.2 (a)(i) and (iii), the Company shall inform the Holders
through the Trustee of the method it chooses to satisfy its obligation upon conversion (x) in
respect of Notes tendered for conversion during the period beginning 10 Trading Days preceding the
Stated Maturity and ending one Trading Day preceding the Stated Maturity, 11 Trading Days preceding
the Stated Maturity, and if a Holder has complied with all the requirements hereunder for Notes so
surrendered, the Conversion Date with respect to such Notes shall be the Stated Maturity; and (y)
in all other cases, no later than two Trading Days following the Conversion Date.

     (ii) In the case of Sections 2.2 (a)(ii) and (iii), the Company shall specify the amount to be
satisfied in cash as a percentage of the conversion obligation or as a fixed dollar amount, and the
settlement shall occur on the third Trading Day following the final Trading Day of the Conversion
Period.

     (iii) In the case of Section 2.2 (a)(i), the settlement shall occur as soon reasonably
practicable after the third Trading Day following the Conversion Date.

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     (iv) In the case of a Cash Payment of Principal Election, the Company shall notify, by written
notice, the Trustee, the Conversion Agent and the Holders in the manner provided in Section 10.2 of
the Indenture.

     (c) Upon surrender of a Note for conversion, the Holder shall deliver to the Company cash
equal to the amount that the Company is required to deduct and withhold under applicable law in
connection with such conversion; provided, however, that if the Holder does not deliver such cash,
the Company may deduct and withhold from the consideration otherwise deliverable to such Holder the
amount required to be deducted and withheld under applicable law.

     Section 2.3 Conversion Rate and Conversion Trigger Price.

     The rate at which shares of Common Stock shall be delivered upon conversion (such rate as in
effect from time to time and on any date including any adjustments pursuant to Section 2.6 in
effect on such date, the “Conversion Rate”) shall be initially 20.4518 shares of Common Stock for
each $1,000 principal amount of Notes. The Conversion Rate shall be adjusted in certain instances
as provided in Section 2.6 hereof. All calculations under this Article 2 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.

     Section 2.4 Exercise of Conversion Right.

     To convert a Note, a Holder must (a) complete and manually sign the Conversion Notice or a
facsimile of the Conversion Notice on the back of the Note if certificated (or Holders may obtain
copies of the required form of the Conversion Notice from the Conversion Agent) and deliver such
notice to the Conversion Agent in accordance with the notice provisions set forth in Section 10.2
of the Indenture, (b) if the Notes are in certificated form, surrender the Note to the Conversion
Agent, (c) furnish appropriate endorsements and transfer documents if required by the Registrar or
the Conversion Agent, (d) pay any transfer or similar tax, if required, and (e) if required, pay
funds equal to the interest payable on the next Interest Payment Date or pursuant to Section
2.2(c). In the case of a Global Note, the Conversion Notice shall be completed by a Depositary
participant on behalf of the beneficial holder. Anything herein to the contrary notwithstanding,
in the case of Global Notes, Conversion Notices may be delivered and such Notes may be surrendered
for conversion in accordance with the applicable procedures of the Depositary as in effect from
time to time.

     Notes surrendered for conversion during the period from the close of business on any Record
Date immediately preceding any Interest Payment Date to the opening of business on such Interest
Payment Date shall be accompanied by payment in immediately available funds or other funds
acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date
on the principal amount of Notes being surrendered for conversion; provided, however, that no such
payment need be made if (1) we have specified a repurchase date following a Change of Control or a
Fundamental Change that is during such period or (2) only to the extent of overdue interest, any
overdue interest exists at the time of conversion with respect to such note. No payment or
adjustment shall be made upon any conversion on account of any interest accrued on the Notes
surrendered for conversion from the Interest Payment Date preceding

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the day of conversion, or on
account of any dividends on the Common Stock issued upon conversion. In addition, Holders shall
not be entitled to receive any dividends payable to holders of Common Stock as of any record date
before the close of business on the applicable conversion date. Notes shall be deemed to have been
converted immediately prior to the close of business on the day of surrender of such Notes for
conversion in accordance with the foregoing provisions and comply with the other foregoing
provisions, and at such time the rights of the Holders of such Notes as Holders shall cease, and
the Person or Persons entitled to receive the Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such Common Stock at such time. As
promptly as practicable on or after the conversion date, the Company shall issue and shall deliver
to the Trustee at its Corporate Trust Office and the Conversion Agent a certificate or certificates for the number of full
shares of Common Stock issuable upon conversion, together with payment in lieu of any fraction of a
share thereof, as provided in Section 2.5 hereof, and the Trustee shall forward such certificate or
certificates at the addresses set forth in the written notices sent to the Company by the Holders
electing to convert their Notes.

     Section 2.5 Fractions of Common Stock Shares.

     No fractional shares of Common Stock shall be issued upon conversion of the Notes. If more
than one Note shall be surrendered for conversion at one time by the same Holder, the
number of full shares which shall be issuable upon conversion thereof shall be computed on the
basis of the principal amount of the Notes so surrendered. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any Note or Notes, the Company
shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of
the Closing Sale Price on the Trading Day prior to the date of the date of the conversion of the
Notes (determined by the Company in accordance with the following paragraph) per share of Common
Stock.

     Section 2.6 Adjustment of Conversion Rate.

     (1) In case at any time after the date of the issuance of the Notes, the Company shall pay to
all holders of Common Stock a dividend or other distribution payable in shares of its Common Stock,
the Conversion Rate in effect at the opening of business on the day following the date fixed for
the determination of stockholders entitled to receive such dividend or other distribution shall be
increased by multiplying such Conversion Rate by a fraction of which:

     (i) the numerator shall be the sum of the number of shares of Common Stock outstanding
at the close of business on the date fixed for determining the stockholders entitled to
receive such dividend or other distribution, plus the number of shares of Common Stock
constituting such dividend or other distribution and

     (ii) the denominator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for determining the stockholders entitled to receive
such dividend or other distribution,

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such increase to become effective immediately after the opening of business on the day following
the date fixed for such determination. For the purposes of this paragraph (1), the number of
shares of Common Stock at any time outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the Company. If any dividend or
distribution of the type described in this paragraph (1) of Section 2.6 is declared but not so paid
or made, the Conversion Rate shall again be adjusted to the Conversion Rate that would then be in
effect if such dividend or distribution had not been declared.

     (2) Subject to paragraph 9 of this Section 2.6, in case at any time after the date of the
issuance of the Notes, the Company shall issue rights, options or warrants to all holders of its
Common Stock (other than any rights, options or warrants that by their terms will also be issued to
any Holder upon conversion of a Note into Common Stock without any action required by the Company
or any other person) entitling them (for a period ending within forty-five (45) days after the date
fixed for the determination of stockholders entitled to receive such rights or warrants) to
subscribe for or purchase shares of Common Stock at a price per share less than the then current
market price per share (determined as provided in paragraph (10) of this Section 2.6) of the
Common Stock on the date fixed for the determination of stockholders entitled to receive such
rights, options or warrants (other than pursuant to a dividend reinvestment plan), the Conversion
Rate in effect at the opening of business on the day following the date fixed for such
determination shall be increased by multiplying such Conversion Rate by a fraction of which:

     (i) the numerator shall be the sum of the number of shares of Common Stock outstanding
at the close of business on the date fixed for determining the stockholders entitled to
receive such rights, options or warrants, plus the number of shares of Common Stock so
offered for subscription or purchase and

     (ii) the denominator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for determining the stockholders entitled to receive
such rights, options or warrants plus the number of shares of Common Stock that the
aggregate of the offering price of all shares of Common Stock so offered for subscription or
purchase would purchase at the current market price.

     Such adjustment shall be successively made whenever any such rights or warrants are issued,
and shall become effective immediately after the opening of business on the day following the date
fixed for such determination. To the extent that all shares of Common Stock are not delivered
after the expiration of such rights, options or warrants, the Conversion Rate shall be readjusted
to the Conversion Rate that would then be in effect had the adjustments made upon the issuance of
such rights, options or warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. If such rights, options or warrants are not so issued, the
Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if
such date fixed for the determination of stockholders entitled to receive such rights, options or
warrants had not been fixed. In determining whether any rights or warrants entitle the holders to
subscribe for or purchase shares of Common Stock at less than such current market

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price, and in
determining the aggregate offering price of such shares of Common Stock, there shall be taken into
account any consideration received by the Company for such rights, options or warrants and any
amount payable on exercise or conversion thereof, the value of such consideration, if other than
cash, to be determined by the Board of Directors. For the purposes of this paragraph (2), the
number of shares of Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip certificates issued
in lieu of fractions of shares of Common Stock. The Company will not issue any rights, options or
warrants in respect of shares of Common Stock held in the treasury of the Company.

     (3) In case at any time after the date of the issuance of the Notes, outstanding shares of
Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion
Rate in effect at the opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and, conversely, in case outstanding shares
of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion
Rate in effect at the opening of business on the day following the day upon which such combination
becomes effective shall be proportionately reduced, such reduction or increase, as the case may be,
to become effective immediately after the opening of
business on the day following the day upon which such subdivision or combination becomes
effective.

     (4) In case at any time after the date of the issuance of the Notes, the Company shall, by
dividend or otherwise, distribute to all holders of its Common Stock, shares of any class of its
capital stock, evidences of its indebtedness or other assets (including securities, but excluding
any rights, options or warrants referred to in paragraph (2) of this Section 2.6, any dividend or
distribution paid exclusively in cash, any dividend or distribution referred to in paragraph (1) of
this Section 2.6 and distributions upon a Special Merger or Consolidation), the Conversion Rate
shall be adjusted by multiplying the Conversion Rate in effect immediately prior to the close of
business on the date fixed for the determination of stockholders entitled to receive such
distribution by a fraction of which:

     (i) the numerator shall be the current market price per share (determined as provided
in paragraph (10) of this Section 2.6) of the Common Stock on the date fixed for determining
the stockholders entitled to such distribution and

     (ii) the denominator shall be the current market price per share of Common Stock on the
date fixed for determining the stockholders entitled to such distribution minus the fair
market value (as determined by the Board of Directors) of the portion of such distribution
applicable to one share of Common Stock,

such adjustment to become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to receive such
distribution; provided, however, that if the then fair market value (as so determined) of the
portion of the shares of capital stock, assets or evidences of indebtedness so distributed
applicable to one share of Common Stock is equal to or greater than the current market price per
share (determined as

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provided in paragraph (10) of this Section 2.6) on the date fixed for the
determination of stockholders entitled to receive such distribution, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder shall have the right to receive
upon conversion the amount of shares of capital stock, assets or evidences of indebtedness such
Holder would have received had such Holder converted each Note on the date fixed for determination
of stockholders entitled to receive such distribution. If such dividend or distribution is not so
paid or made, the Conversion Rate shall again be adjusted to be the Conversion Rate that would then
be in effect if such dividend or distribution had not been declared if the Board of Directors
determines the fair market value of any distribution for purposes of this paragraph (4) by
reference to the actual or when issued trading market for any securities comprising such
distribution, it must in doing so consider the prices in such market over the same period used in
computing the current market price per share pursuant to paragraph (10) of this Section 2.6.

     Notwithstanding the foregoing, if the shares of capital stock, assets or evidences of
indebtedness distributed by the Company to all holders of its Common Stock consist of capital stock
of, or similar equity interests in, a Subsidiary or other business unit of the Company, the
Conversion Rate shall be increased so that the same shall be equal to the rate determined by multiplying the Conversion Rate in effect on the date fixed for determination of stockholders
entitled to receive such distribution with respect to such distribution by a fraction of which:

     (i) the numerator shall be the sum of (x) the average Closing Sale Price of one share
of Common Stock over the ten consecutive Trading Day period (the “Spinoff Valuation Period”)
commencing on and including the fifth Trading Day after the date on which “ex-dividend
trading” commences on the Common Stock on the Nasdaq National Market System or such other
national or regional exchange or market on which the Common Stock is then listed or quoted
and (y) the fair market value (as so determined by the Board of Directors) over the Spinoff
Valuation Period of the portion of shares of capital stock, assets or evidences of
indebtedness so distributed applicable to one share of Common Stock; and

     (ii) the denominator shall be the average Closing Sale Price of one share of Common
Stock over the Spinoff Valuation Period,

such adjustment to become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to receive such
distribution; provided, however, that the Company may in lieu of the foregoing adjustment make
adequate provision so that each Holder shall have the right to receive upon conversion the amount
of shares of capital stock, assets or evidences or indebtedness such Holder would have received had
such Holder converted each Note on the date fixed for determination of stockholders entitled to
receive such distribution.

     (5) In case the Company shall, by dividend or otherwise, distribute to all holders of its
Common Stock cash (excluding (x) any distribution in connection with the liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary, (y) any cash portions of
distributions referred to in paragraph (4) of this Section 2.6, and (z) cash distributions upon a

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Special Merger or Consolidation to which paragraph (7) of this Section 2.6 applies) then, in such
case, the Conversion Rate shall be increased so that the same shall equal the rate determined by
multiplying the Conversion Rate in effect immediately prior to the close of business on the record
date fixed for determination of stockholders entitled to receive such distribution by a fraction of
which,

     (i) the numerator shall be the sum of the average of the Closing Sale Price of the
 shares of Common Stock for the 10 consecutive Trading Days before the Business Day
immediately preceding the earlier of the record date or the day before the Ex-dividend Date
for such distribution, plus the amount in cash per share that the Company distributes to
Holders of its shares of Common Stock in respect of such fiscal period, and

     (ii) the denominator shall be the sum of the average of the Closing Sale Price of the
 shares of Common Stock for the 10 consecutive Trading Days before the Business Day
immediately preceding the earlier of the record date or the day before the Ex-dividend Date
for such distribution,

such adjustment to be effective immediately prior to the opening of business on the day following
such record date; provided, however, that if the portion of the cash so distributed applicable to
one share of Common Stock is equal to or greater than the current market price (determined as
provided in paragraph (10) of this Section 2.6) on such record date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder shall have the right to receive
upon conversion the amount of cash such Holder would have received had such Holder converted each
Note on such record date. If such distribution is not so paid or made, the Conversion Rate shall
again be adjusted to be the Conversion Rate that would then be in effect if such distribution had
not been declared. If any adjustment is required to be made as set forth in this paragraph (5) of
this Section 2.6 as a result of a distribution that is a quarterly dividend, such adjustment shall
be based upon the amount by which such distribution exceeds the amount of the quarterly cash
dividend permitted to be excluded pursuant hereto. If an adjustment is required to be made as set
forth in this paragraph (5) of this Section 2.6 as a result of a distribution that is not a
quarterly dividend, such adjustment shall be based upon the full amount of the distribution.
Notwithstanding the foregoing, in the event of an adjustment to the Conversion Rate pursuant to
this paragraph (5), in no event will the Conversion Rate exceed 28.6369 shares per $1,000 principal
amount of Notes. The cap on the adjustment to the Conversion Rate pursuant to this paragraph (5)
remains subject to adjustment pursuant to paragraphs (1), (2), (3) and (4) of this Section 2.6.

     (6) In case at any time after the date of the issuance of the Notes, a tender or exchange
offer made by the Company or any Subsidiary for all or any portion of the Common Stock shall expire
and such tender or exchange offer (as amended upon the expiration thereof) shall require the
payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the
tender or exchange offer) of Purchased Shares (as defined below)) of an aggregate consideration
having a fair market value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution filed with the Trustee) that combined together with:

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     (A) the aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board Resolution filed
with the Trustee), as of the expiration of such tender or exchange offer, of consideration
payable in respect of any other tender or exchange offer, by the Company or any Subsidiary
for all or any portion of the Common Stock expiring within the 12 months preceding the
expiration of such tender or exchange offer and in respect of which no adjustment pursuant
to this paragraph (6) has been made, and

     (B) the aggregate amount of any distributions to all holders of the Company’s Common
Stock made exclusively in cash within 12 months preceding the expiration of such tender or
exchange offer and in respect of which no adjustment pursuant to paragraph (5) of this
Section 2.6 has been made,

exceeds 10% of the product of (I) the current market price per share of the Common Stock
(determined as provided in paragraph (10) of this Section 2.6) as of the last time (the “Expiration
Time”) tenders or exchanges could have been made pursuant to such tender or exchange offer (as
it may be amended), times (II) the number of shares of Common Stock outstanding (including any
tendered or exchanged shares) on the Expiration Time, then, and in each such case, immediately
prior to the opening of business on the day after the date of the Expiration Time, the Conversion
Rate shall be increased so that the same shall equal the rate determined by multiplying the
Conversion Rate in effect immediately prior to the Expiration Time by a fraction,

     (i) the numerator of which shall be the sum of (x) the fair market value (as determined
by the Board of Directors, whose determination shall be conclusive and described in a Board
Resolution filed with the Trustee) of the aggregate consideration payable to stockholders
based on the acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration
Time (the shares deemed so accepted up to any such maximum, being referred to as the
“Purchased Shares”) and (y) the product of the number of shares of Common Stock outstanding
(less any Purchased Shares) at the Expiration Time and the Closing Sale Price of a share of
Common Stock on the trading day next succeeding the Expiration Time, and

     (ii) the denominator of which shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time multiplied by the
Closing Sale Price of a share of Common Stock on the Trading Day next succeeding the
Expiration Time,

such adjustment to become effective immediately prior to the opening of business on the day
following the Expiration Time. If the Company is obligated to purchase shares pursuant to any such
tender or exchange offer, but the Company is permanently prevented by applicable law from effecting
any such purchases or all such purchases are rescinded, the Conversion Rate shall again be adjusted
to be the Conversion Rate that would then be in effect if such tender or exchange offer had not
been made.

-12-

 

     To the extent the Company shall have in effect any shareholder rights plan, upon conversation
of its Notes, each Holder will receive in addition to shares of Class A Common Stock, cash or a
combination thereof, as provided in Section 2.2, the rights under such rights plan unless such
rights have been separated from the Class A Common Stock, subject to readjustment in the event of
the expiration, termination or redemption of such rights.

     (7) (a) In the event of a Special Merger or Consolidation, then, upon conversion of Notes, the
Holder will be entitled to receive the same type of consideration that such Holder would have been
entitled to receive if the Holder had converted its Notes into Common Stock immediately before any
Special Merger or Consolidation.

          (b) In the case of (i) a distribution of securities other than Common Stock to all Holders of
Common Stock, the effective date of such reclassification shall be deemed to be “the date fixed for
the determination of stockholders entitled to receive such distribution” and “the date fixed for
such determination” within the meaning of paragraph (4) of this Section 2.6, and (ii) a subdivision
or combination, as the case may be, the effective date of such reclassification shall be deemed to be “the day upon which such subdivision becomes effective” or “the day
upon which such combination becomes effective”, as the case may be, and “the day upon which such
subdivision or combination becomes effective” within the meaning of paragraph (3) of this Section
2.6.

     (8) In the case of a Fundamental Change, solely upon receipt by the Conversion Agent of any
Holder’s Conversion Notice pursuant to Section 2.4 hereof, from and including the day that is 30
Business Days before the anticipated Effective Date of the Fundamental Change up to and including
the Trading Day before the Effective Date of the Fundamental Change, the Company will increase the
Conversion Rate for the Notes surrendered for conversion by a number of additional shares of Common
Stock (the “Additional Fundamental Change Shares”) determined in accordance with this paragraph
(8); provided, however, that if the Holders of Common Stock receive only cash in the Fundamental
Change transaction, the stock price shall be the cash amount paid per share of Common Stock. The
following table sets forth the hypothetical increase in the Conversion Rate, expressed as a number
of Additional Fundamental Change Shares issuable per $1,000 principal amount of Notes as a result
of a Fundamental Change that occurs in the corresponding period:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Stock Price	 
	Effective date	 	$34.92	 	$40.00	 	$45.00	 	$50.00	 	$55.00	 	$60.00	 	$65.00	 	$70.00	 	$80.00	 	$90.00	 	$100.00	 	$110.00	 	$120.00	$130.00	 
	6/__/2007
	 	 	8.19	 	 	 	4.55	 	 	 	3.17	 	 	 	2.35	 	 	 	1.81	 	 	 	1.45	 	 	 	1.21	 	 	 	1.03	 	 	 	0.80	 	 	 	0.66	 	 	 	0.56	 	 	 	0.49	 	 	 	0.43	 	 	 	0.38	 
	12/31/2007
	 	 	8.19	 	 	 	4.55	 	 	 	3.01	 	 	 	2.16	 	 	 	1.62	 	 	 	1.27	 	 	 	1.04	 	 	 	0.88	 	 	 	0.68	 	 	 	0.56	 	 	 	0.48	 	 	 	0.41	 	 	 	0.36	 	 	 	0.32	 
	6/30/2008
	 	 	8.19	 	 	 	4.55	 	 	 	2.85	 	 	 	1.96	 	 	 	1.42	 	 	 	1.08	 	 	 	0.87	 	 	 	0.72	 	 	 	0.55	 	 	 	0.46	 	 	 	0.39	 	 	 	0.34	 	 	 	0.30	 	 	 	0.26	 
	12/31/2008
	 	 	8.19	 	 	 	4.55	 	 	 	2.66	 	 	 	1.74	 	 	 	1.19	 	 	 	0.87	 	 	 	0.67	 	 	 	0.55	 	 	 	0.42	 	 	 	0.35	 	 	 	0.30	 	 	 	0.26	 	 	 	0.23	 	 	 	0.20	 
	6/30/2009
	 	 	8.19	 	 	 	4.55	 	 	 	2.45	 	 	 	1.48	 	 	 	0.93	 	 	 	0.63	 	 	 	0.47	 	 	 	0.38	 	 	 	0.28	 	 	 	0.24	 	 	 	0.20	 	 	 	0.18	 	 	 	0.16	 	 	 	0.14	 
	12/31/2009
	 	 	8.19	 	 	 	4.55	 	 	 	2.21	 	 	 	1.16	 	 	 	0.62	 	 	 	0.36	 	 	 	0.24	 	 	 	0.19	 	 	 	0.14	 	 	 	0.12	 	 	 	0.11	 	 	 	0.09	 	 	 	0.08	 	 	 	0.07	 
	6/30/2010
	 	 	8.19	 	 	 	4.55	 	 	 	1.95	 	 	 	0.75	 	 	 	0.23	 	 	 	0.05	 	 	 	0.01	 	 	 	0.01	 	 	 	0.01	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 
	12/31/2010
	 	 	8.19	 	 	 	4.55	 	 	 	1.77	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 

The stock price paid per share of Common Stock in a Fundamental Change transaction (the “Stock
Price”) shall be the average of the Closing Sale Prices of Common Stock on the 10 con-

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secutive
Trading Days up to but excluding the date on which the Fundamental Change transaction becomes
effective (the “Effective Date”).

     The Stock Prices set forth in the first row of the table will be adjusted as of any date on
which the Conversion Rate of the Notes is adjusted. The adjusted Stock Prices will equal the Stock
Prices applicable immediately before such adjustment multiplied by a fraction, the numerator of
which is the Conversion Rate immediately before the adjustment giving rise to the Stock Price
adjustment, and the denominator of which is the Conversion Rate as so adjusted. In addition, the
number of additional fundamental change shares will be subject to adjustment pursuant to this
Section 2.6.

     The exact Stock Prices and Effective Dates may not be set forth in the table, in which case:

     (a) if the Stock Price is between two Stock Price amounts in the table or the
Effective Date is between two dates in the table, the additional fundamental change shares
will be determined by straight-line interpolation between the number of additional
fundamental change shares set forth for the higher and lower stock price amounts and the two
dates, as applicable, based on a 365-day year;

     (b) if the Stock Price is in excess of $130.00 per share of Common Stock (subject to
adjustment), no additional fundamental change shares will be issued upon conversion; and

     (c) if the Stock Price is less than $34.92 per share of Common Stock (subject to
adjustment), no additional fundamental change shares will be issued upon conversion.

     Notwithstanding the foregoing, in no event will the Conversion Rate exceed 28.6369 shares per
$1,000 principal amount of Notes. The cap on the adjustment to the Conversion Rate pursuant to a
Fundamental Change remains subject to adjustment pursuant to paragraphs (1), (2), (3) and (4) of
this Section 2.6.

     If the Fundamental Change is also a Public Acquirer Fundamental Change, then, in lieu of
increasing the Conversion Rate pursuant to this paragraph (8), the Company may elect to change the
Conversion Rate pursuant to paragraph (9).

     (9) If the Fundamental Change is a Public Acquirer Fundamental Change, the Company may, at its
sole option, elect to change the Conversion Rate pursuant to this paragraph (9), in lieu of
increasing the Conversion Rate applicable to Notes that are converted in connection with the Public
Acquirer Fundamental Change. If the Company makes this election, then the Conversion Rate will be
adjusted and the Company’s related conversion obligation such that, from and after the Effective
Date of the Public Acquirer Fundamental Change, the right to convert a Note pursuant to Section 2.2
(a) will be changed into a right to convert Notes into shares of Public Acquirer Common Stock still
subject to Section 2.2 (a), by adjusting the Conversion Rate in effect immediately before the
effective time by a fraction of which:

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     (i) the numerator is the fair market value (as determined in good faith by the Board of
Directors), as of the Effective Date of the Public Acquirer Fundamental Change, of the cash,
securities and other property paid or payable per share of Common Stock, and,

     (ii) the denominator is the average of the Closing Sale Prices per share of the Public
Acquirer Common Stock for the 10 consecutive Trading Days commencing on, and including, the
Trading Day immediately after the Effective Date of the Public Acquirer Fundamental Change.

     If the Company elects to change the Conversion Rate pursuant to this paragraph (9), the change
in the Conversion Rate will apply to all Holders from and after the Effective Date of the Public
Acquirer Fundamental Change, and not just those Holders, if any, that convert their Notes in
connection with the Public Acquirer Fundamental Change. If the Company elects to change
the Conversion Rate as described above in connection with a Public Acquirer Fundamental Change
that is not consummated, than the Company will not be obligated to effect such election.

     (10) For the purpose of any computation under paragraphs (2), (4), (5) or (6) of this Section
2.6, the current market price per share of Common Stock on any date shall be deemed to be the
average of the daily Closing Sale Prices of the Common Stock for the five consecutive Trading Days
selected by the Company commencing not more than ten Trading Days before, and ending not later than
the earlier of, the day in question and the day before the “ex” date with respect to the issuance
or distribution requiring such computation. For purposes of this paragraph, the term “ex” date,
when used with respect to any issuance or distribution, means the first date on which the Common
Stock trades regular way in the applicable securities market or on the applicable securities
exchange without the right to receive such issuance or distribution.

     (11) No adjustment in the Conversion Rate shall be required unless such adjustment (plus any
adjustments not previously made by reason of this paragraph (11)) would require an increase or
decrease of at least 1.0% in the Conversion Rate; provided, however, that any adjustments which by
reason of this paragraph (11) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this paragraph (11) shall be made to
the nearest whole cent.

     (12) The Company may make such increases in the Conversion Rate, in addition to those required
by this Section 2.6, as it considers to be advisable in order to avoid or diminish any income tax
to any holders of shares of Common Stock resulting from any dividend or distribution of stock or
issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes or for any other reasons. The Company shall have the power to resolve any
ambiguity or correct any error in this paragraph (12) and its actions in so doing shall be final
and conclusive.

     (13) To the extent permitted by applicable law, the Company from time to time may increase the
Conversion Rate by any amount for any period of time if the period is at least 20 days, the
increase is irrevocable during such period, and the Board of Directors shall have made

-15-

 

a
determination that such increase would be in the best interests of the Company, which determination
shall be conclusive. Whenever the Conversion Rate is increased pursuant to the preceding sentence,
the Company shall give notice of the increase to the Holders in the manner provided for in Section
10.2 of the Indenture at least 15 days prior to the date the increased Conversion Rate takes
effect, and such notice shall state the increased Conversion Rate and the period during which it
will be in effect.

     (14) In the event that this Article 2 requires adjustments to the Conversion Rate under more
than one of Sections 2.6(1), 2.6(2), 2.6(4) or 2.6(5) hereof, and the record dates for the
distributions giving rise to such adjustments shall occur on the same date, then such adjustments
shall be made by applying, first, the provisions of Section 2.6(4), second, the provisions of
Section 2.6(5), third, the provisions of Section 2.6(1) and, fourth, the provisions of Section
2.6(2). After an adjustment to the Conversion Rate under this Article 2, any subsequent event
requiring an adjustment under this Article 2 shall cause an adjustment to the Conversion Rate as so
adjusted. Whenever successive adjustments to the Conversion Rate are called for pursuant to
this Article 2, such adjustments shall be made to the provisions of Section 2.6(10) hereof as may
be necessary or appropriate to effectuate the intent of this Article 2 and to avoid unjust or
inequitable results as determined in good faith by the Board of Directors.

     Section 2.7 Notice of Adjustments of Conversion Rate.

     Whenever the Conversion Rate is adjusted as herein provided: (a) the Company shall compute the
adjusted Conversion Rate in accordance with Section 2.6 hereof and shall prepare an Officers’
Certificate, one of the signatories of which shall be the Treasurer or Chief Financial Officer of
the Company, setting forth the adjusted Conversion Rate (certified by the Company’s independent
public accountants or other certified public accountant) and showing in reasonable detail the facts
upon which such adjustment is based, and such certificate shall forthwith be filed with the Trustee
at each office or agency maintained for the purpose of conversion of Securities pursuant to Section
2.4 hereof; and (b) a notice stating that the Conversion Rate has been adjusted and setting forth
the adjusted Conversion Rate shall forthwith be required, and as soon as practicable after it is
required, such notice shall be given by the Company to the Trustee and all Holders in the manner
provided for in Section 10.2 of the Indenture. In the case of a Fundamental Change, or Public
Acquirer Fundamental Change, as the case may be, the Company shall notify Holders of the Notes and
the Conversion Agent at least 30 Business Days before the anticipated Effective Date of a
Fundamental Change (the “Fundamental Change Notice”) and indicate whether the election to increase
the Conversion Rate pursuant to Section 2.6 (8) or (9).

     The Trustee shall not be deemed to have notice of any change in the Conversion Rate unless and
until it receives the Officers’ Certificate provided for in the foregoing clause (a) setting forth
such change.

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     Section 2.8 Notice of Certain Corporate Action.

     In case:

     (a) the Company shall declare a dividend or make any other distribution that would
require any adjustment pursuant to Section 2.6 hereof;

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

     (c) of any reclassification of the Common Stock of the Company, or of any consolidation
or merger to which the Company is a party and for which approval of any stockholders of the
Company is required or that is otherwise subject to Section 2.13
hereof, or of the conveyance, lease, sale or transfer of all or substantially all of
the assets of the Company; or

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

then the Company shall cause to be filed at each office or agency maintained for the purpose of
conversion of Securities pursuant to Section 2.4 hereof, and shall cause to be mailed to all
Holders at their last addresses as they shall appear in the register for the Securities, at least
20 days prior to the applicable record or effective date hereinafter specified, a notice (which
notice shall also be sent by release to Reuters Economic Services and Bloomberg Business News as
set forth in Section 10.2 of the Indenture) stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, share exchange, conveyance, lease, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the date as of which it
is expected that holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon such reclassification,
consolidation, merger, share exchange, conveyance, lease, sale, transfer, dissolution, liquidation
or winding up. Neither the failure to give such notice nor any defect therein shall affect the
legality or validity of the proceedings described in clauses (a) through (d) of this Section 2.8.
If at the time the Trustee shall not be the Conversion Agent, a copy of such notice shall also
forthwith be filed by the Company with the Trustee. The Company shall cause to be filed at the
Corporate Trust Office and each office or agency maintained for the purpose of conversion of Notes
pursuant to Section 2.4 of the Indenture, and shall cause to be provided to all Holders in
accordance with Section 10.2 of the Indenture, notice of any tender offer by the Company or any
Subsidiary for all or any portion of the Common Stock at or about the time that such notice of
tender offer is provided to the public generally.

-17-

 

     Section 2.9 Company to Reserve Common Stock.

     The Company shall at all times reserve and keep available, free from preemptive rights, out of
its authorized but unissued Common Stock, for the purpose of effecting the conversion of Notes, the
full number of shares of Common Stock then issuable upon the conversion of all outstanding Notes.

     Section 2.10 Taxes on Conversions.

     The Company will pay any and all taxes that may be payable in respect of the issue or delivery
of shares of Common Stock on conversion of Notes pursuant hereto. The Company shall
not, however, be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares of Common Stock in a name other than that of the
Holder of the Note or Notes to be converted, and no such issue or delivery shall be made unless and
until the Person requesting such issue has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been paid.

     Section 2.11 Covenant as to Common Stock.

     The Company covenants that all shares of Common Stock which may be issued upon conversion of
Notes will upon issue be fully paid and nonassessable and, except as provided in Section 2.10
hereof, the Company will pay all taxes, liens and charges with respect to the issue thereof.

     The Company will endeavor promptly to comply with all Federal and state securities laws
regulating the issuance and delivery of shares of Common Stock upon conversion of Notes, if any,
and will use its best efforts to list or cause to have quoted all such shares of Common Stock on
each United States national securities exchange or over-the-counter or other domestic market on
which the Common Stock is then listed or quoted.

     Section 2.12 Cancellation of Converted Securities.

     All Notes delivered for conversion shall be delivered to the Trustee to be canceled by or at
the direction of the Trustee, which shall dispose of the same as provided in Section 2.13 of the
Indenture.

     Section 2.13 Provisions in Case Certain Corporate Transactions.

     (a) In the case of a Dividend Event, the Company shall deliver written notice of such Dividend
Event (a “Dividend Event Notice”) by first-class mail, postage prepaid, not later than the 20th day
prior to the Ex-dividend Date for such Dividend Event to the Trustee, the Conversation Agent and
the Holders in the manner provided in Section 10.2 of the Indenture;

     (b) In the case of any transaction or event other than a Fundamental Change (including, but
not limited to, any consolidation, merger or binding share exchange that does not constitute a
Fundamental Change, but excluding changes resulting from a subdivision or combination)

-18-

 

pursuant to
which all or substantially all shares of Common Stock would be converted into cash, securities or
other property, a Holder may surrender Notes for conversion at any time from and after the date
that is 15 days prior to the anticipated effective date of such transaction or event, until the
earlier of (i) 15 days after the actual date of such transaction or event, or (ii) the date that
the Company announces that such transaction or event will not take place; provided, however, Notes will not become convertible by reason of a merger, consolidation or other
transaction effected with one of the Company’s direct or indirect subsidiaries for the purpose of
changing its state of incorporation to any other state within the United States or the District of
Columbia. In the case of such transaction or event, the Company shall deliver notice as soon as
practicable following the public announcement of such transaction or event, but not later than the
15th day prior to the anticipated effective date of such transaction or event, to the Trustee, the
Conversion Agent and the Holders in the manner required by Section 10.2 of the Indenture; or

     (c) In the case of a Fundamental Change or a Change of Control, Holders may surrender Notes
for conversion at any time beginning 15 days before the anticipated effective date of a Fundamental
Change or Change of Control, until (i) the Trading Day prior to the Fundamental Change or Change of
Control Purchase Date or (ii) the date that the Company announces that such transaction will not
take place. In the case of a Fundamental Change or a Change of Control, the Company shall deliver
written notice by first-class mail, postage prepaid, not later than the 15th day prior to the
anticipated effective date of the Fundamental Change or Change of Control that the Company knows or
reasonably should know will occur, to the Trustee, the Conversion Agent and the Holders in the
manner required by Section 10.2 of the Indenture. If the notice delivered under this Section
2.13(c) contains all the information required to be delivered pursuant to Sections 2.7 in respect
of a Fundamental Change or in a Change of Control Notice then no additional notice under Section
2.7 or a Change of Control Notice shall be required.

     (d) With respect to conversions upon subsections (b) and (c) above, if the Company is a party
to a consolidation, merger or binding share exchange pursuant to which all shares of Common Stock
are exchanged for cash, securities or other property, then commencing with the effective time of
such transaction, any conversion of Notes and the Conversion Value will be based on the kind and
amount of cash, securities or other property that a Holder would have received if such Holder had
converted its Notes into Common Stock immediately prior to the effective time of the transaction.
For purposes of this Section 2.15(d), where a consolidation, merger or binding share exchange
involves a transaction that causes Common Stock to be converted into the right to receive more than
a single type of consideration based upon any form of shareholder election, such consideration will
be deemed to be the weighted average of the amounts and types of consideration that the holders of
Common Stock who affirmatively made such an election received in such transaction or as a result of
such event.

     If this Section 2.13 applies to any event or occurrence, paragraph (5) of Section 2.6 shall
not apply.

-19-

 

     Section 2.14 Right of Holders to Convert.

     The limitations set forth in Section 6.6 of the Indenture shall not apply to the right of a
Holder to bring a suit for the enforcement of such Holder’s right to convert Notes pursuant to this
Article 2.

     Section 2.15 Certain Definitions.

     For purposes of this Article 2:

     (1) the term “Closing Sale Price” of Common Stock on any date means the Closing Sale
Price per share (or if no Closing Sale Price is reported, the average of the average bid and
the average asked prices) on that date as reported by the NASDAQ Global Select Market or, if
Common Stock is not listed on the NASDAQ Global Select Market, as reported in composite
transactions for the principal U.S. securities exchange on which Common Stock is traded. In
the absence of such quotations, the Company shall be entitled to determine the Closing Sale
Price on the basis of such quotations as it considers appropriate. Closing Sale Price shall
be determined without reference to extended or after hours trading.

     (2) the term “Conversion Date”, with respect to a Note, means the date on which the
Holder of such Note complied with all requirements of this Indenture to convert such Note.

     (3) the term “Conversion Period” means the 20 consecutive trading-day period commencing
on the third Trading Day following the Conversion Date.

     (4) the term “Conversion Price” means, per share of Common Stock at any time,
$1,000 divided by the Conversion Rate.

     (5) the term “Conversion Value” for each $1,000 principal amount of Notes is equal to
the sum of the Daily Conversion Value Amounts for all of the Trading Days in the Conversion
Period.

     (6) the term “Daily Conversion Value Amount” for each $1,000 principal amount of Notes
and each Trading Day in the Conversion Period is the amount equal to the Closing Sale Price
of Common Stock on such Trading Day multiplied by the Conversion Rate in effect on such
Trading Day divided by 20.

     (7) the term “Daily Share Amount” means, for each $1,000 principal amount of Notes and
each Trading Day in the Conversion Period, a number of shares (but in no event less than
zero) determined by the following formula:

-20-

 

Daily Conversion Value Amount – specified cash amount

 

Closing Sale Price of Common Stock on such Trading Day

     (8) the term “Dividend Event” means if the Company elects to (a)
distribute to all Holders of Common Stock certain rights entitling them to purchase, for a
period expiring within 45 days of the date of issuance, Common Stock, or securities
convertible into Common Stock, at less than, or having a conversion price per share less
than, the Closing Sale Price of our Common Stock on the Trading Day immediately preceding
the declaration date for such distribution, or (b) distribute to all Holders of Common Stock
the Company’s assets, cash, debt securities or certain rights to purchase the Company’s
securities, which distribution has a per share value as determined by the Company’s Board of
Directors exceeding 15% of the Closing Sale Price of Common Stock on the Trading Day
immediately preceding the declaration date for such distribution.

     (9) the term “Ex-dividend Date” means the first date upon which a sale of the Common
Stock does not automatically transfer the right to receive the relevant distribution from
the seller of the Common Stock to its buyer.

     (10) a “Fundamental Change” will be deemed to have occurred at the time that any of the
following occurs:

     (A) consummation of any transaction or event (whether by means of a share exchange or
tender offer applicable to the Company’s shares of voting stock, a liquidation,
consolidation, recapitalization, reclassification, combination or merger of the Company or a
sale, lease or other transfer of all or substantially all of the consolidated assets of the
Company) or a series of related transactions or events pursuant to which all of the
outstanding shares of voting stock of the Company are exchanged for, converted into or
constitute solely the right to receive cash, securities or other property; provided,
however, that none of the following transactions shall be deemed to be a Fundamental Change:
(i) a transaction in which the holders of the Company’s voting stock immediately before
such transaction hold, directly or indirectly, more than 50% of the total voting power in
the aggregate of all classes of shares of beneficial interest of the Company then
outstanding entitled to vote generally in elections of directors immediately after such
transaction; (ii) a transaction that is effected solely to change the Company’s jurisdiction
of incorporation and results in a reclassification, conversion or exchange of our
outstanding voting stock solely into shares of voting stock of the surviving entity or a
direct or indirect parent of the surviving entity; (iii) a transaction that does not result
in a reclassification, conversion, exchange or cancellation of the Company’s outstanding
voting stock; or (iv) a consolidation, merger, conveyance, transfer sale, lease or other
disposition with or into any of the Company’s subsidiaries (so long as such transaction is
not part of a plan or series of transactions designed to or having the effect of merging or
consolidating with

-21-

 

     or conveying, transferring, selling, leasing or disposing all or
substantially all of the Company’s properties and assets to any other person);

     (B) any “person” or “group” (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable), other than any majority-owned
subsidiary of the Company, any employee benefit plan of the Company or such subsidiary or
any Permitted Holder (as defined in Section 3.2 hereof), is or
becomes the “beneficial owner,” directly or indirectly, of more than 50% of the total voting power
in the aggregate of all classes of shares of beneficial interest of the Company then
outstanding entitled to vote generally in elections of directors;

     (C) during any period of 24 consecutive months after the date of original issuance of
the Notes, persons who at the beginning of such 24 month period constituted the Board of
Directors, together with any new persons whose election was approved by a vote of a majority
of the persons then still comprising the Board of Directors who were either members of the
Board of Directors at the beginning of such period or whose election, designation or
nomination for election was previously so approved (either by a specific vote or by approval
of the proxy statement issued by the Company on behalf of the entire Board of Directors in
which such individual is named as a nominee for director), cease for any reason to
constitute a majority of the Board of Directors; or

     (D) the Common Stock (or other common stock into which the Notes are then convertible)
ceases to be listed on a national securities exchange or quoted on an established automated
over-the-counter trading market in the United States.

     However, a Fundamental Change will not be deemed to have occurred if at least 90% of the
consideration (excluding cash payments for fractional shares and cash payments made pursuant to
dissenters’ appraisal rights) in a merger, consolidation or other transaction otherwise
constituting a Fundamental Change consists of shares of common stock (or depositary receipts or
other certificates representing common equity interests) traded on a national securities exchange
or quoted on an established automated over-the-counter trading market in the United States (or will
be so traded or quoted immediately following such merger, consolidation or other transaction) and
as a result of the merger, consolidation or other transaction the Notes become convertible into
such shares of common stock (or depositary receipts or other certificates representing common
equity interests).

     (11) the term “person” includes any syndicate or group that would be deemed to be a
“person” under Section 13(d)(3) of the Exchange Act.

     (12) the term “Public Acquirer Common Stock” means a class of common stock of an
acquirer (or any entity that is a direct or indirect wholly owned subsidiary of the acquirer
or of which the acquirer is a direct or indirect wholly owned subsidiary) in a Public
Acquirer Fundamental Change, that is traded on a national securities exchange or that will
be so traded when issued or exchanged in connection with the Fundamental Change.

-22-

 

     (13) the term “Public Acquirer Fundamental Change” means an acquisition of the Company
pursuant to a Fundamental Change in which the acquirer (or any entity that is a direct or
indirect wholly owned subsidiary of the acquirer or of which the acquirer is a direct or
indirect wholly owned subsidiary) has a class of common stock that is traded on a national
securities exchange or that will be so traded when issued or exchanged in connection with
the Fundamental Change.

     (14) the term “Special Merger or Consolidation” means the occurrence of (i) any
reclassification of Common Stock; (ii) a consolidation, merger or combination involving the
Company; or (iii) a sale or conveyance to another person or entity of all or substantially
all of the Company’s property and assets, in which holders of Common Stock would be entitled
to receive stock, other securities, other property, assets or cash for their Common Stock,
which occurrence does not constitute a Fundamental Change.

     (15) “Trading Day” means, in respect of any securities exchange or securities
market, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which
securities are not traded on the applicable securities exchange or in the applicable
securities market.

     (16) the term “Trading Price” means, on any date of determination, the average of the
secondary market bid quotations obtained by the Trustee for $2,000,000 principal amount of
the Notes at approximately 3:30 p.m., New York City time, on such determination date from
three nationally recognized securities dealers selected by the Company; provided that if
three such bids cannot reasonably be obtained by the Trustee, but two such bids are
obtained, then the average of the two bids shall be used, and if only one such bid can
reasonably be obtained by the Trustee, that one bid shall be used. If the Trustee cannot
reasonably obtain at least one bid for $2,000,000 principal amount of the Notes from a
nationally recognized securities dealer, then the trading price per $1,000 principal amount
of Notes will be deemed to be less than 98% of the product of the Closing Sale Price of
Common Stock and the Conversion Rate.

ARTICLE 3.

REPURCHASE OF NOTES AT THE OPTION OF THE

HOLDERS UPON A CHANGE OF CONTROL

     Pursuant to Section 2.2(8) of the Indenture, so long as any of the Notes are outstanding, the
following provisions shall be applicable to the Notes:

     Section 3.1 Repurchase at Option of Holders upon Change of Control.

     (a) Upon the occurrence of a Change of Control (the date of such occurrence, the “Change of
Control Date”), the Company shall notify the Holders of the Notes in writing of such occurrence in
accordance with paragraph (b) below, and shall make an offer to purchase (a “Change of Control
Offer”), and shall purchase, on a Business Day (a “Change of Control Pur-

-23-

 

chase Date”) not more than
60 nor less than 30 days following the Change of Control Date all, but not less than all, of the
then outstanding Notes at a purchase price in cash equal to 100% of the principal amount thereof
plus accrued interest, if any, to the Change of Control Purchase Date (the “Change of Control
Purchase Price”).

     (b) Notice of a Change of Control Offer (a “Change of Control Notice”) shall be sent, by
first-class mail, postage prepaid, by the Company not later than the 30th day after the Change of
Control Date to the Holders of the Notes at their last registered addresses with a copy to the
Trustee and the Paying Agent (and shall also be given by release made to Reuters Economic Services
and Bloomberg Business News as provided in Section 10.2 of the Indenture). The Change of Control
Offer shall remain open from the time of mailing for at least 20 Business Days and until 5:00 p.m.,
New York City time, on the Business Day before the Change of Control Purchase Date. The Change of
Control Notice, which shall govern the terms of the Change of Control Offer, shall include such
disclosures as are required by law and shall state:

     (i) that the Change of Control Offer is being made pursuant to this Section 3.1 and
that any portion of the principal amount of Notes that is equal to $1,000 or an integral
multiple thereof, validly tendered into the Change of Control Offer and not withdrawn, will
be accepted for payment;

     (ii) the cash purchase price (including the amount of accrued interest, if any) for
each Note, the Change of Control Purchase Date and the date on which the Change of Control
Offer expires;

     (iii) that any Note not tendered for payment will continue to accrue interest in
accordance with the terms thereof;

     (iv) that, unless the Company shall default in the payment of the purchase price, any
Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Purchase Date;

     (v) that Holders electing to have Notes purchased pursuant to a Change of Control Offer
will be required to surrender their Notes to the Paying Agent at the address (in the Borough
of Manhattan, The City of New York) specified in the Change of Control Notice prior to 5:00
p.m., New York City time, on the Business Day prior to the Change of Control Purchase Date
and must complete any form of letter of transmittal proposed by the Company and reasonably
acceptable to the Trustee and the Paying Agent;

     (vi) that Holders of Notes will be entitled to withdraw their election if the Paying
Agent receives, not later than 5:00 p.m., New York City time, on the Business Day prior to
the Change of Control Purchase Date, a facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes the Holder delivered for purchase, the
Note certificate number (if any) and a statement that such Holder is withdrawing its
election to have such Notes purchased;

-24-

 

     (vii) that Holders whose Notes are purchased only in part will be issued Notes equal in
principal amount to the unpurchased portion of the Notes surrendered;

     (viii) the instructions that Holders must follow in order to tender their Notes; and

     (ix) information concerning the business of the Company, the most recent annual and
quarterly reports of the Company filed with the SEC pursuant to the Exchange Act (or, if the
Company is not then permitted to file any such reports with the SEC, the comparable reports
prepared pursuant to Section 4.2 of the Indenture), a description of material developments
in the Company’s business, information with respect to pro forma historical financial
information after giving effect to such Change of Control and such other information
concerning the circumstances and relevant facts regarding such Change of Control Offer as
would be material to a Holder of Notes in connection with the decision of such Holder as to
whether or not it should tender Notes pursuant to the Change of Control Offer.

     (c) To exercise a repurchase right pursuant to this Section 3.1, a Holder shall deliver to the
Trustee a written notice (a “Repurchase Notice”) of such Holder’s exercise of such right, in
accordance with the terms and conditions set forth in the Change of Control Notice. Upon receipt
by the Trustee of a Repurchase Notice, the Holder of the Note in respect of which such Repurchase
Notice was given shall (unless such Purchase Notice or Repurchase Notice is withdrawn) thereafter
be entitled to receive solely the Change of Control Purchase Price with respect to such Note.
Notes in respect of which a Repurchase Notice has been given by the Holder thereof may not be
converted into shares of Common Stock on or after the date of the delivery of such Repurchase
Notice, unless such Repurchase Notice has first been validly withdrawn in the manner provided for
in the foregoing paragraph (b)(vi) (unless the Company has defaulted in the payment of the Change
of Control Purchase Price).

     (d) On the Change of Control Purchase Date, the Company shall

     (i) accept for payment Notes or portions thereof validly tendered pursuant to the
Change of Control Offer,

     (ii) deposit with the Paying Agent (no later than 10:00 A.M. EST on the Change of
Control Purchase Date) money, in immediately available funds, sufficient to pay the purchase
price of all Notes or portions thereof so tendered and accepted, and

     (iii) deliver to the Trustee the Notes so accepted together with an Officers’
Certificate setting forth the Notes or portions thereof tendered to and accepted for payment
by the Company.

The Paying Agent shall promptly mail or deliver to the Holders of Notes so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver
to such Holders a new Note equal in principal amount to any unpurchased portion to the

-25-

 

Notes
surrendered; provided, however, that each such new Note shall be issued in an original principal
amount in denominations of $1,000 and integral multiples thereof. Any Notes not validly tendered
and not accepted by the Company shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company will publicly announce the results of the Change of Control Offer not later
than the first Business Day following the Change of Control Purchase Date.

     (e) In the event that a Change of Control occurs and the holders of Notes exercise their right
to require the Company to purchase Notes, if such purchase constitutes a “tender offer” for
purposes of Rule 14e-1 under the Exchange Act at that time, the Company will comply with the
requirements of Rule 14e-1 as then in effect with respect to such repurchase.

     Section 3.2 Certain Definitions.

     For purposes of this Article 3:

     (1) the term “Change of Control” means the occurrence of any of the following events:

     (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), excluding Permitted Holders, is or becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person or group shall be deemed to have “beneficial ownership” of all securities
that such person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of an
event or otherwise), directly or indirectly, of more than 35% of the total voting
power of all Voting Stock of the Company; provided, however, that the Permitted
Holders (i) “beneficially own” (as so defined) a lower percentage of such total
voting power with respect to the Voting Stock than such other person or “group” and
(ii) do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors of the Company;

     (b) the Company consolidates with, or merges with or into, another person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any person consolidates with, or
merges with or into, the Company, in any such event pursuant to a transaction in
which the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where (i) the
Voting Stock of the Company is converted into or exchanged for Voting Stock (other
than Disqualified Capital Stock) of the surviving or transferee corporation and (ii)
immediately after such transaction no “person” or “group” (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted Holders, is the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person or group shall be deemed to have

-26-

 

“beneficial ownership” of all
securities that such person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of an
event or otherwise), directly or indirectly, of more than 50% of the total voting
power of all Voting Stock of the surviving or transferee corporation;

     (c) at any time during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company (together
with any new directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Company was approved by a vote of at least
66-2/3% of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the Board of Directors
of the Company then in office; or

     (d) the Company is liquidated or dissolved or adopts a plan of liquidation;

     (2) the term “Permitted Holders” means:

     (a) any of Charles W. Lamar, III and Kevin P. Reilly, Sr., members of their
immediate families or any lineal descendant of any of those persons and the
immediate families of any lineal descendant of those persons;

     (b) any trust, to the extent it is for the benefit of any of the persons listed
under (a) above; or

     (c) any person, entity or group of persons controlled by any of the persons
listed under (a) or (b) above; and

     (3) the term “Voting Stock” means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof to vote under
ordinary circumstances in the election of members of the Board of Directors or other
governing body of such Person.

     (4) the term “Disqualified Capital Stock” means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, before the Stated Maturity of the
Notes, for cash or securities constituting Indebtedness.

-27-

 

ARTICLE 4.

EVENTS OF DEFAULT

     Section 4.1 Additional Events of Default.

     Pursuant to Sections 2.2 (18) and 6.1(8) of the Indenture, so long as any of the Notes are
outstanding, the following shall be an Event of Default with respect to the Notes, in addition to
the Events of Default contained in Section 6.1 of the Indenture:

     (1) The Company fails to give a Change of Control Notice in accordance with Section
3.1(b) hereof, or defaults in the payment of the Change of Control Purchase Price.

     (2) The Company fails to give a Fundamental Change Notice in accordance with Section
2.7 hereof.

     (3) The Company fails to convert, or deliver when due, any portion of the principal
amount or conversion value of a Note following the exercise by the Holder of such Note of
the right to convert such Note into Common Stock pursuant to and in accordance with Article
2 hereof.

ARTICLE 5.

AMENDMENTS, SUPPLEMENTS AND WAIVERS

     Section 5.1 With Consent of Holders.

     Pursuant to Sections 2.2 (and subject to Section 8.4) of the Indenture, so long as any of the
Notes are outstanding, without the consent of each Securityholder affected, an amendment,
supplement or waiver, including a waiver pursuant to Section 6.4 of the Indenture, may not (in
addition to the events described in paragraphs (1) through (9) of the Indenture):

     (1) make any change that impairs or adversely affects the right to convert any Security
into Common Stock;

     (2) impair or adversely affect the right of a Holder to institute suit for the
enforcement of any payment with respect to, or conversion of, the Notes;

     (3) make any change that adversely affects the right to require the Company to
repurchase the Notes upon a Change of Control pursuant to and in accordance with Article 3
hereof; or

     (4) reduce or impair or adversely affect the right of a Holder to receive the Change of
Control Purchase Price.

-28-

 

ARTICLE 6.

MISCELLANEOUS

     Section 6.1 Application of Second Supplemental Indenture.

     Each and every term and condition contained in the Second Supplemental Indenture that
modifies, amends or supplements the terms and conditions of the Indenture shall apply only to the
Notes created hereby and not to any future series of Notes established under the Indenture. Except
as specifically amended and supplemented by, or to the extent inconsistent with, this Second
Supplemental Indenture, the Indenture shall remain in full force and effect and is hereby ratified
and confirmed.

     Section 6.2 Effective Date.

     This Second Supplemental Indenture shall be effective as of the date first above written and
upon the execution and delivery hereof by each of the parties hereto.

     Section 6.3 Counterparts.

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

-29-

 

     IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be
duly executed by their respective officers hereunto duly authorized, all as of the day and year
first above written.

	 	 	 	 	 
	 	LAMAR ADVERTISING COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	Attest:
 	 
	 	 	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	THE BANK OF NEW YORK TRUST

COMPANY, N.A., as Trustee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	Attest:
 	 
	 	 	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

-30-

 

	 	 	 	 	 	 	 	 	 
	STATE OF NEW YORK

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	ss:
	 	 
	COUNTY OF NEW YORK

	 	 	)	 	 	 	 	 

     On the ___day of                     ,___, before me personally came                     , to me known,
who, being by me duly sworn, did depose and say that he is the                      of
                                        , one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation; and that he signed his name thereto by authority of the Board of Directors.

                                                            

-31-

 

Exhibit A

[FORM OF FACE OF NOTE]

     THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO
A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH A SUCCESSOR DEPOSITARY.

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

LAMAR ADVERTISING COMPANY

2-7/8% Convertible Note due 2010—Series B

			
	 	 	 
	No.                     
	 	$                    
	 	 	 

CUSIP No.

     LAMAR ADVERTISING COMPANY, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the “Company”, which term includes any successor Person under the
Indenture hereinafter defined), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of $___(                     Dollars) on December 31, 2010,
and to pay interest thereon from June [ ], 2007 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi annually on June 30 and December 31 in each
year, commencing June 30, 2007, at the rate of 2-7/8% per annum, until the principal hereof is paid
or made available for payment.

     The interest so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture, be paid to the Person in whose name this Note is
registered at the close of business on the regular record date for such interest, which shall be
the 15th of June or 15th of December, as the case may be, next preceding such Interest Payment Date
or, if such record date is not a Business Day, at the close of business of the immediately

 

 

succeeding Business Day. A “Business Day” shall mean any day other than a Saturday, Sunday, a
federally recognized holiday or a day on which banking institutions are not authorized or required
by law or executive order to be open in the State of New York. Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on such regular record
date and shall be paid to the Person in whose name this Note is registered at the close of business
on a subsequent special record date, which date shall be the fifteenth day next preceding the date
fixed by the Company for the payment of defaulted interest or the next succeeding Business Day if
such date is not a Business Day. At least 15 days before the special record date, the Company
shall mail or cause to be mailed to each Holder, with a copy to the Trustee, a notice that states
the special record date, the payment date, and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.

     Payments of principal of and interest on this Note and any additional payments due hereunder
shall be made at the office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, State of New York, in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and private debts.
Interest may, at the option of the Company, be paid either (i) by check mailed to the registered
address of the Person entitled thereto; provided, however, that a Holder of Notes with an aggregate
principal amount in excess of $2,000,000 shall, at the written election (timely made and containing
appropriate wire transfer information) of such Holder, be paid by wire transfer of immediately
available funds or (ii) by transfer to an account maintained by such Person located in the United
States; provided, however, that payment to the Depositary will be made by wire transfer of
immediately available funds to the account of the Depositary or its nominee.

     Reference is hereby made to the further provisions of this 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.

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

-2-

 

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed and delivered
under its corporate seal.

Dated:

	 	 	 	 	 
	 	LAMAR ADVERTISING COMPANY

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

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

Dated:

	 	 	 	 	 
	 	THE BANK OF NEW YORK TRUST

COMPANY, N.A., as Trustee

 	 
	 	By:  	 	 
	 	 	Authorized Signatory 	 
	 	 	 	 
	 

-3-

 

[FORM OF REVERSE OF NOTE]

     This Note is one of a duly authorized issue of securities of the Company (herein called the
“Notes”), issued and to be issued in one or more series under an Indenture, dated as of June 16,
2003 (as supplemented by a Second Supplemental Indenture, dated as of June [ ], 2007, the
“Indenture”), between the Company and The Bank of New York Trust Company, N.A., as Trustee (herein
called the “Trustee”, which term includes any successor trustee under the Indenture), and reference
is hereby made to the Indenture for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee, and the Holders of the Notes and of
the terms upon which the Notes are, and are to be, authenticated and delivered. This Note is one
of the series designated on the face hereof as “2-7/8% Convertible Notes due 2010—Series B”,
limited in aggregate principal amount to $287,500,000. All terms used in this Note which are
defined in the Indenture shall have the meanings assigned to them in the Indenture.

     No sinking fund is provided for the Notes.

     Subject to and upon compliance with the provisions of the Indenture, any Note (or any portion
of the principal amount thereof which is $1,000 or an integral multiple of $1,000) that has not
previously been repurchased, is convertible at the option of the Holder thereof, to the extent
permitted by Article 2 of the Second Supplemental Indenture into cash, shares of fully paid and
nonassessable shares of Class A common stock of the Company, $0.001 par value per share (the
“Common Stock”), or a combination of both as provided in Section 2.2 of the Second Supplemental
Indenture at an initial conversion rate (calculated to the nearest 1/100 of a share) of 20.4518
shares of Common Stock for each $1,000 principal amount of Note, or at the current adjusted
conversion rate if an adjustment has been made as provided in the Indenture. A Note or portion
thereof in respect of which the Holder has delivered a Repurchase Notice may be converted only if
such notice is withdrawn in accordance with the terms of the Indenture, unless the Company has
defaulted in the payment of the Change of Control Purchase Price. To convert this Note the Holder
must (a) complete and manually sign the Conversion Notice or a facsimile of the Conversion Notice
on the back of the Note and deliver such notice to the Conversion Agent, (b) surrender the Note to
a Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by the
Registrar or the Conversion Agent, (d) pay any transfer or similar tax, if required and (e) if
required, pay funds equal to the interest payable on the next interest payment date. In the case
of a Global Note, the Conversion Notice shall be completed by a DTC participant on behalf of the
beneficial holder. Notes surrendered for conversion during the period from the close of business
on any Record Date immediately preceding any Interest Payment Date to the opening of business on
such Interest Payment Date shall be accompanied by payment in immediately available funds or other
funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment
Date on the principal amount of Notes being surrendered for conversion; provided, however, that no
such payment need be made if (1) we have specified a repurchase date following a Change of Control
that is during such period or (2) only to the extent of overdue interest, any overdue interest
exists at the time of conversion with respect to such note. No payment or adjustment shall be made
upon any conversion on account of any interest accrued hereon from the Interest Payment Date
immediately preceding the day of

-4-

 

conversion, or on account of any dividends on the Common Stock issued on conversion hereof.
In addition, the Holders shall not be entitled to receive any dividends payable to holders of
Common Stock as of any record date before the close of business on the conversion date. No
fractional shares will be issued on conversion, but instead of any fractional interest (calculated
to the nearest 1/100th of a share) the Company shall pay a cash adjustment as provided in the
Indenture.

     The Indenture provides that in the event of (i) certain types of reclassification or changes
of the outstanding shares of Common Stock, (ii) any consolidation, merger or combination of the
Company with another Person as a result of which holders of Common Stock shall be entitled to
receive stock, other securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock, or (iii) any sale or conveyance of all or substantially all of the
properties and assets of the Company to any other Person as a result of which holders of Common
Stock shall be entitled to receive stock, other securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock, then the Company or the successor or
purchasing Person, as the case may be, shall execute with the Trustee a supplemental indenture
(which shall comply with the Trust Indenture Act as in force at the date of execution of such
supplemental indenture) providing that this Note shall be convertible into the kind and amount of
shares of stock, other securities or other property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance by a holder of a
number of shares of Common Stock issuable upon conversion of such Note (assuming, for such
purposes, a sufficient number of authorized shares of Common Stock are available to convert all
such Notes) immediately prior to such reclassification, change, consolidation, merger, combination,
sale or conveyance assuming such holder of Common Stock did not exercise his rights of election, if
any, as to the kind or amount of stock, other securities or other property or assets (including
cash) receivable upon such reclassification, change, consolidation, merger, combination, sale or
conveyance (provided, however, that, if the kind or amount of stock, other securities or other
property or assets (including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance is not the same for each share of Common Stock in respect
of which such rights of election shall not have been exercised (a “nonelecting share”), the kind
and amount of stock, other securities or other property or assets (including cash) receivable upon
such reclassification, change, consolidation, merger, combination, sale or conveyance for each
non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality
of the non-electing shares).

     Upon the occurrence of a Change of Control, the Company shall notify the Holders of the Notes
of such occurrence by delivering a Change of Control Notice, and shall make a Change of Control
Offer, and shall purchase, on a Business Day not more than 60 nor less than 30 days following the
Change of Control Date (a “Change of Control Purchase Date”) all, but not less than all, of the
then outstanding Notes at a purchase price in cash equal to 100% of the principal amount thereof
plus accrued interest, if any, to the Change of Control Purchase Date (the “Change of Control
Purchase Price”). The Change of Control Offer shall remain open from the time of mailing for at
least 20 Business Days and until 5:00 p.m., New York City time, on the Business Day prior to the
Change of Control Purchase Date. To exercise its repurchase right, a Holder shall deliver to the
Trustee a written a Repurchase Notice, in accordance with the terms

-5-

 

and conditions set forth in the Change of Control Notice. Upon receipt by the Trustee of a
Repurchase Notice, the Holder of the Note in respect of which such Repurchase Notice was given
shall (unless such Repurchase Notice is withdrawn) thereafter be entitled to receive solely the
Change of Control Purchase Price with respect to such Note and, unless the Company has defaulted in
the payment of the Change of Control Purchase Price, any Note accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of Control Purchase Date.
Holders of Notes will be entitled to withdraw their election if the Paying Agent receives, not
later than 5:00 p.m., New York City time, on the Business Day prior to the Change of Control
Purchase Date. Notes in respect of which a Repurchase Notice has been given by the Holder thereof
may not be converted into shares of Common Stock on or after the date of the delivery of such
Repurchase Notice, unless such Repurchase Notice has first been validly withdrawn in the manner
provided for in the Indenture (unless the Company has defaulted in the payment of the Change of
Control Purchase Price). Holders electing to have Notes purchased pursuant to a Change of Control
Offer will be required to surrender their Notes to the Paying Agent at the address (in the Borough
of Manhattan, The City of New York) specified in the Change of Control Notice prior to 5:00 p.m.,
New York City time, on the Business Day prior to the Change of Control Purchase Date and must
complete any form of letter of transmittal proposed by the Company and reasonably acceptable to the
Trustee and the Paying Agent. Any portion of the principal amount of Notes that is equal to $1,000
or an integral multiple thereof, validly tendered into the Change of Control Offer and not
withdrawn, will be accepted for payment.

     In the event of repurchase or conversion of this Note in part only, a new Note or Notes for
the unrepurchased or unconverted portion hereof will be issued in the name of the Holder hereof
upon the cancellation thereof.

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

     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Notes under the Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in principal amount of the Notes at the time outstanding. The
Indenture also contains provisions permitting the Holders of no less than a majority in principal
amount of the Notes at the time outstanding, on behalf of the Holders of all the Notes, to waive
compliance by the Company with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall
be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note
issued in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is
made upon this Note or such other Note.

     As provided in and subject to the provisions of the Indenture, the Holder of this Note shall
not have the right to institute any proceeding with respect to the Indenture or for the appointment
of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have
previously given the Trustee written notice of a continuing Event of Default, the Holders of

-6-

 

not less than 25% in principal amount of the outstanding Notes shall have made written request
to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered
the Trustee reasonable indemnity and the Trustee shall not have received from the Holders of a
majority in principal amount of the outstanding Notes a direction inconsistent with such request,
and shall have failed to institute any such proceeding, for 60 days after receipt of such notice,
request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder
of this Note for the enforcement of any payment of principal hereof or interest hereon on or after
the respective due dates expressed herein or for the enforcement of the right to convert this Note
as provided in the Indenture.

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

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

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

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

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

     A director, officer, employee, stockholder or incorporation, as such, of the Company shall not
have any liability (except in the case of bad faith or willful misconduct) for any obligations of
the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creations. Each Holder by accepting a Note waives and releases all
such liability. Such waiver and release are part of the consideration for the issuance of the
Notes.

-7-

 

     THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

-8-

 

ABBREVIATIONS

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

	 	 	 	 	 	 	 
	 

	 	TEN COM
	 	–
	 	as tenants in common
	 
	 	 	 	 	 	 
	 

	 	 TEN ENT
	 	–
	 	as tenants by the entireties (Cust)
	 
	 	 	 	 	 	 
	 

	 	JT TEN
	 	–
	 	as joint tenants with right of survivorship and not as tenants in common
	 
	 	 	 	 	 	 
	 

	 	UNIF GIFT MIN ACT
	 	–
	 	Uniform Gifts to Minors Act

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

-9-

 

ELECTION OF HOLDER TO REQUIRE REPURCHASE

UPON A CHANGE OF CONTROL

     (1) Pursuant to Article 3 of the Second Supplemental Indenture dated June [ ], 2007 to the
Indenture, the undersigned hereby acknowledges receipt of a notice from the Company of a Change of
Control Offer and requests and instructs the Company to repurchase this Note, or the portion hereof
(which is $1,000 in principal amount or an integral multiple of $1,000) below designated, as of the
Change of Control Purchase Date pursuant to the terms and conditions specified in such Article 3.

     (2) The undersigned hereby directs the Trustee or the Company to pay to the undersigned an
amount in cash equal to 100% of the principal amount to be repurchased (as set forth below), plus
interest accrued to the Change of Control Purchase Date, as provided in the Indenture.

     (3) The undersigned elects (check one):

     o      to withdraw this notice with respect to the following Notes:

     Principal amount:                                        

     Certificate numbers:                                        

     o      to receive cash in respect of the entire Change of Control Purchase Price with respect
to the Notes that are subject to this notice.

Notice: If the Holder fails to make an election, the Holder shall be deemed to have elected to
receive cash in respect of the entire Change of Control Purchase Price for all Notes subject to
this notice.

Dated:                                        

	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Signature(s)
	 
	 	 	 	 
	 

	 	 	 	Signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an approved
signature guarantee program pursuant to Rule 17Ad 15
under the Securities Exchange Act of 1934.
	 
	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Signature Guaranteed

-10-

 

	 	 	 	 	 
	 

	 	 	 	Security certificate number:
	 
	 	 	 	 
	 

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

	 	 	 	$                    
	 
	 	 	 	 
	 

	 	 	 	Remaining principal amount after repurchase:
	 

	 	 	 	$                    
	 
	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Social Security or Other Taxpayer

Identification Number

-11-

 

CONVERSION NOTICE

     The undersigned Holder of this Note hereby irrevocably exercises the option to convert this
Note, or any portion of the principal amount hereof (which is $1,000 in principal amount or an
integral multiple of $1,000), below designated, into cash, shares of fully paid and nonassessable
shares of Class A common stock of the Company, $0.001 par value per share (the “Common Stock”), or
a combination of both as provided in Section 2.2 of the Second Supplemental Indenture, in
accordance with the terms of the Indenture referred to in this Note, and directs that such shares,
together with a check in payment for any fractional share and any Notes representing any
unconverted principal amount hereof, be issued and delivered to and be registered in the name of
the undersigned unless a different name has been indicated below. If shares of Common Stock or any
portion of this Note not converted are to be registered in the name of a Person other than the
undersigned, (a) the undersigned will pay all transfer taxes payable with respect thereto and (b)
signature(s) must be guaranteed by an Eligible Guarantor Institution with membership in an approved
signature guarantee program pursuant to Rule 17Ad 15 under the Securities Exchange Act of 1934.

Dated:                                        

	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Signature(s)

If shares or Notes are to be registered in the name of a Person other than the Holder, please print
such Person’s name and address:

	 	 	 
	 	 	 
	Name

	 	 
	 
	 	 
	 	 	 
	Address
	 	 
	 
	 	 
	 	 	 
	Social Security or Other Taxpayer
Identification Number
	 	 
	 
	 	 
	 	 	 
	[Signature Guaranteed]
	 	 

-12-

 

If only a portion of the Notes is to be converted, please indicate:

     1. Principal amount to be converted:

          $                                        

     2. Principal amount and denomination of Notes representing unconverted principal amount to be
issued:

          $                                        

-13-

 

FORM OF ASSIGNMENT

     For value received                     hereby sell(s), assign(s) and transfer(s) unto
___[also insert social security or other identifying number of assignee] the within
Note, and hereby irrevocably constitutes and appoints                     as attorney to transfer
the said Note on the books of the Company, with full power of substitution in the premises.

Dated:                                        

	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Signature(s)
	 
	 	 	 	 
	 

	 	 	 	Signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an approved
signature guarantee program pursuant to Rule 17Ad 15
under the Securities Exchange Act
of 1934.

-14-ASSET PURCHASE AGREEMENT
	 

	 
		THIS ASSET PURCHASE AGREEMENT, made as of this 24th day of May, 2007
		(this “Agreement”), by and among G-III Leather Fashions, Inc.,
		a New York corporation (“Buyer”), G-III Apparel Group, Ltd., a
		Delaware corporation (“Parent”) (solely with respect to
		Section 10(m) hereof), Starlo Fashions Inc., a New York corporation
		(“Starlo”), Jessica Howard, Ltd., a New York corporation
		(“Jessica Howard”), Industrial Cotton,
		Inc., a New York corporation (“Industrial Cotton” and
		collectively with Starlo and Jessica Howard, “Sellers”), and
		Robert Glick and Mary Williams (each solely with respect to Section 10(e)
		hereof).
	 

	 
		W I T N E S S E
		T H:
	 

	 
		WHEREAS, Sellers manufacture and market, inter alia, women’s
		dresses and sportswear under brands owned by Sellers;
	 

	 
		WHEREAS, Sellers desire to sell, and Buyer desires to purchase, with
		certain exceptions, the assets owned and the businesses and operations
		conducted by Jessica Howard and Industrial Cotton, and the assets owned or
		licensed by Starlo and used or useful in the operations conducted by Jessica
		Howard and Industrial Cotton, including, without limitation, related to
		products sold under the Prime Industrial Cotton, Crafted Industrial
		Cotton, Nine Rivets, Jessica Howard, Elizabeth Howard,
		Eliza J. Howard and Eliza J labels (collectively, the
		“Business”), upon the terms and subject to the conditions set
		forth in this Agreement; and
	 

	 
		WHEREAS, Buyer intends to create new Divisions (as defined below) in
		which to use the Assets (as defined below) in connection with its business.
	 

	 
		NOW, THEREFORE, in consideration of the mutual premises and agreements
		contained herein, the parties hereto agree as follows:
	 

	 
		1.
	 

	 
		Definitions.  As used herein, the following terms shall have
		the following meanings:
	 

	 
		1.1
	 

	 
		Affiliates means, as to the Person in question, any Person that
		controls, is controlled by, or is under common control with, the Person in
		question; and the term “control” means possession of the power to
		direct or cause the direction of the management and policies of a Person
		whether through ownership of voting securities, by contract, or otherwise.
	 

	 
		1.2
	 

	 
		Assets means the tangible and intangible assets of Sellers used or
		useful in connection with the Business, as well as certain other enumerated
		assets, except for the “Excluded Assets” (as hereinafter defined).
		 Without limiting the generality of the foregoing, the Assets shall
		include the following:
	 

	 
		(a)
	 

	 
		all registered and unregistered trademarks, trade names, service marks,
		designs, franchises, licenses, permits, privileges and other proprietary
		rights, if any, including all applications, registrations and renewals in
		connection therewith, owned or held by
	 

	 
		
 

	 

	 
		 
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		Sellers and used by or useful to Sellers in connection with the Business
		including, without limitation, those set forth in Schedule 1.2(a)
		hereto;
	 

	 
		(b)
	 

	 
		all furniture, fixtures, improvements, office materials and supplies, and
		other tangible personal property of every kind and description owned or held by
		Sellers that are used or useful in connection with the Business;
	 

	 
		(c)
	 

	 
		all rights and benefits of (i) Sellers under lease agreements entered
		into by, or for the benefit of, Sellers with respect to the Leased Premises,
		and (ii) Sellers under all other Contracts entered into by, or for the benefit
		of, Sellers in connection with the Business, all of which (including, without
		limitation, Consent Contracts) are set forth on Schedule 1.2(c);
	 

	 
		(d)
	 

	 
		all warranties, rights and other intangible assets of Sellers with
		respect to the Business that are not Excluded Assets;
	 

	 
		(e)
	 

	 
		all records and files of Sellers, including, without limitation, customer
		and supplier lists, records, files and account statements, correspondence with
		customers or suppliers and potential customers or suppliers and all related
		documents, records of purchase and invoices recording purchases, customer
		orders, stockroom records, financial accounting and credit records, personnel
		records, general correspondence and any similar document or record related to
		or useful in the Business, but specifically excluding the minute books and
		records relating solely to the incorporation of Sellers; provided,
		however, that in the case of Starlo, if any of the foregoing relate
		primarily to businesses or operations of Starlo other than the Business, the
		Assets shall include a true, correct and complete copy of such records and
		files;
	 

	 
		(f)
	 

	 
		all purchase and sales orders with respect to the Business in process on
		the Closing Date (as defined in Section 1.5) to the extent merchandise
		thereunder has not been shipped to customers of Sellers and which are not,
		therefore, accounts receivable (“Orders-in-Process”) as are
		specified on Schedule 1.2(f);
	 

	 
		(g)
	 

	 
		all samples, patterns, drawings, creative designs, ideas, sketches, plans
		and other similar matters with respect to the Business owned by Sellers,
		however evidenced (including those in the possession of third parties, but
		which are the property of Sellers);
	 

	 
		(h)
	 

	 
		all of Sellers’ goodwill and going concern value in the Business;
		and
	 

	 
		(i)
	 

	 
		all inventory of Sellers with respect to the Business, including
		inventory relating to Orders-in-Process, set forth on Schedule 1.2(i)
		(the “Purchased Inventory”).
	 

	 
		1.3
	 

	 
		Base Purchase Price means $4,285,000.
	 

	 
		1.4
	 

	 
		Closing means the consummation, on the Closing Date and at the
		Closing Place, of the purchase, assignment, conveyance and sale of the Assets
		contemplated hereunder.
	 

	 
		
 

	 

	 
		2
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		1.5
	 

	 
		Closing Date means the date on which the Closing occurs, which
		shall be the date that this Agreement is executed and delivered by all the
		parties hereto or such other date as the parties hereto may agree.
	 

	 
		1.6
	 

	 
		Closing Place means the offices of Fulbright & Jaworski
		L.L.P., 666 Fifth Avenue, New York, New York, or such other place as the
		parties hereto may agree.
	 

	 
		1.7
	 

	 
		Code means the Internal Revenue Code of 1986, as amended.
	 

	 
		1.8
	 

	 
		Consent Contracts has the meaning assigned to such term in Section
		1.22.
	 

	 
		1.9
	 

	 
		Contracts means written or oral contracts, leases, licenses,
		agreements, arrangements, commitments, instruments or understandings.
	 

	 
		1.10
	 

	 
		Customer Allowances means allowances, chargebacks, credits,
		rebates, deductions, reductions or settlements given to any customer resulting
		from alleged markdowns and/or losses claimed by such customer with respect to
		sales of products.
	 

	 
		1.11
	 

	 
		Designer Brands Division means a new division of Buyer to be
		created to operate business relating to new designer brands and related private
		label product.
	 

	 
		1.12
	 

	 
		Divisions means the Jessica Howard Division, the Designer Brands
		Division and the Positive Attitude Division.
	 

	 
		1.13
	 

	 
		EBITA means the earnings before interest and taxes and
		amortization of intangibles of the applicable Division, which shall be equal to
		the net sales of such Division less (i) cost of sales, including royalties and
		license fees and (ii) the expenses set forth on Schedule 1.13 hereto,
		all as determined in accordance with the Buyer’s accounting and allocation
		procedures utilized in preparing internal financial statements for Buyer’s
		divisions.
	 

	 
		1.14
	 

	 
		EBITA Period means the (i) the period beginning upon the Effective
		Time and ending on January 31, 2008, (ii) the period beginning on February 1,
		2008 and ending on January 31, 2009, (iii) the period beginning on February 1,
		2009 and ending on January 31, 2010 and (iv) the period beginning on February
		1, 2010 and ending on January 31, 2011.
	 

	 
		1.15
	 

	 
		Effective Time means the close of business of the Business on the
		Closing Date.
	 

	 
		1.16
	 

	 
		Encumbrances means any mortgages, pledges, preemptive purchase
		rights, security interests, claims, liens, charges, or other encumbrances of
		any kind including, without limitation, any liens arising under Title IV of
		ERISA, Section 302 of ERISA or Section 412 of the Code.
	 

	 
		1.17
	 

	 
		ERISA means the Employee Retirement Income Security Act of 1974,
		as amended, or any successor law, and regulations and rules issued pursuant to
		such act or any successor law.
	 

	 
		1.18
	 

	 
		Escrow Agent means Fulbright & Jaworski L.L.P.
	 

	 
		
 

	 

	 
		3
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		1.19
	 

	 
		Escrow Agreement means that certain escrow agreement dated as of
		the Closing Date by and among Buyer, Sellers’ Representative and the
		Escrow Agent in the form attached hereto as Exhibit A.
	 

	 
		1.20
	 

	 
		Escrow Amount means Eight Hundred Thousand Dollars ($800,000).
	 

	 
		1.21
	 

	 
		Escrow Funds means cash held by the Escrow Agent from time to time
		pursuant to the terms of the Escrow Agreement.
	 

	 
		1.22
	 

	 
		Excluded Assets means (a) all cash and marketable securities of
		each Seller, whether on hand or in banks, held by or on behalf of or for such
		Seller and all bank accounts or accounts with other financial institutions held
		by or in the name of or on behalf of such Seller, (b) all prepaid expenses,
		accounts and notes receivable of each Seller, (c) any claims or causes of
		action of each Seller, (d) all rights and benefits of Sellers under lease
		agreements entered into by or for the benefit of Sellers with respect to room
		1401 located at 1385 Broadway, New York, New York and with respect to 2400 83rd
		Street, North Bergen, New Jersey (together, the “Excluded
		Premises”), (e) the lease agreements with respect to the Leased
		Premises, (f) all telephone systems used by Sellers at Leased Premises and/or
		the Excluded Premises, (g) all insurance policies of Sellers and all proceeds
		thereof, (h) any Contracts that cannot be assigned to Buyer without the consent
		of the counter-party or counter-parties thereto (the “Consent
		Contracts”), (i) all loan or factoring agreements and related documents by
		and between any of Sellers and their Affiliates, on the one hand, and one or
		more of The CIT Group/Commercial Services, Inc., JPMorgan Chase Bank, N.A. and
		Israel Discount Bank, on the other hand, and all amounts due thereunder to any
		Seller or its Affiliates, (j) that certain Settlement Agreement, dated as of
		August 24, 2006, by and between Levi Strauss & Co. and Industrial Cotton,
		(k) that certain Agreement dated June 13, 2006 by and between JV/China Ting,
		LLC and Jessica Howard and (l) the capital stock of Positive Attitude.
	 

	 
		1.23
	 

	 
		Glick means Robert Glick.
	 

	 
		1.24
	 

	 
		Government Entity means any United States or foreign, federal,
		state or local court or tribunal or administrative, governmental or regulatory
		body, agency, commission, division, department, board, bureau, public body,
		instrumentality or other authority.
	 

	 
		1.25
	 

	 
		Included Contracts means any and all Contracts included among the
		Assets and being assigned to Buyer hereunder.
	 

	 
		1.26
	 

	 
		Jessica Howard Division means a new division of Buyer to be
		created to operate the Business.
	 

	 
		1.27
	 

	 
		knowledge of Sellers or Sellers’ knowledge means the
		actual knowledge, after reasonable inquiry, of Glick and Jeff Elias.
	 

	 
		1.28
	 

	 
		Leased Premises means (i) the portion of the 10th floor at 1001
		Sixth Avenue, New York, New York which is the subject of the lease dated May
		18, 2005 between 1001 Sixth Associates and Alison Nicole, Inc.; (ii) the 17th
		floor at 1001 Sixth Avenue, New York, New York which is the subject of the
		lease dated April 22, 2005 between 1001 Sixth Associates and Jennifer Star,
		Inc.; and (iii) 14th floor, room 1407/1407A, located at 1385
	 

	 
		
 

	 

	 
		4
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		Broadway, New York, New York which is the subject of the lease dated
		April 10, 2006 between 1385 Broadway Company and JJ&J, Inc.
	 

	 
		1.29
	 

	 
		Permitted Liens mean (a) statutory liens for Taxes to the extent
		that the payment thereof is not past due or to the extent the taxpayer is
		contesting such Taxes in good faith through appropriate proceedings, (b)
		statutory or common law liens to secure landlords, lessors or renters under
		real or personal property leases or rental agreements to the extent that no
		payment or performance under any such lease or rental agreement is in default,
		arrears or is otherwise past due, (c) deposits or pledges made in connection
		with, or to secure payment of, workers’ compensation, unemployment
		insurance or old age pension programs mandated under applicable laws, (d)
		statutory or common law liens in favor of carriers, warehousemen, mechanics and
		materialmen, statutory or common law liens to secure claims for labor,
		materials or supplies and other like liens, which secure obligations to the
		extent the payment thereof is not in arrears or otherwise past due, (e) for any
		Asset with respect to which any Seller is a lessee or licensee, any residual
		right, title or interest in or to such Asset held by the lessor or licensor of
		such Asset, and (f) other imperfections of title and Encumbrances that do not
		and will not, individually or in the aggregate, impair, detract from or
		interfere with the continued use and operation of such Assets or the Business.
	 

	 
		1.30
	 

	 
		Person means and includes an individual, a partnership, a joint
		venture, an association, a corporation, a trust, an unincorporated
		organization, a limited liability company and a Government Entity.
	 

	 
		1.31
	 

	 
		Positive Attitude means Positive Attitude, Inc., a New York
		corporation.
	 

	 
		1.32
	 

	 
		Positive Attitude Division means a new division of Buyer to be
		created to operate business relating to the Positive Attitude brand and
		related private label product.
	 

	 
		1.33
	 

	 
		Tax or Taxes means any federal, state, local or foreign
		income, gross receipts, license, payroll, employment, excise, severance, stamp,
		occupation, premium, windfall profits, environmental (including taxes under
		Code §59A), customs duties, capital stock, franchise, profits,
		withholding, social security (or similar), unemployment, disability, real
		property, personal property, sales, use, transfer, registration, value added,
		alternative or add-on minimum, estimated or other tax of any kind whatsoever,
		whether computed on a separate or consolidated, unitary or combined basis or in
		any other manner, including any interest, penalty, or addition thereto, whether
		disputed or not and including any obligation to indemnify or otherwise assume
		or succeed to the Tax liability of any other Person.
	 

	 
		1.34
	 

	 
		Tax Return means any return, declaration, report, claim for refund
		or information return or statement relating to Taxes, including any schedule or
		attachment thereto and any amendment thereof.
	 

	 
		1.35
	 

	 
		Transition Services Agreement means that certain Transition
		Services Agreement dated as of the Closing Date by and among Buyer and Sellers
		in the form attached hereto as Exhibit B.
	 

	 
		1.36
	 

	 
		Williams means Mary Williams.
	 

	 
		
 

	 

	 
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		2.
	 

	 
		Purchase of Assets and Purchase Price.
	 

	 
		2.1
	 

	 
		Purchase of Assets.  Subject to the terms and upon
		satisfaction of the conditions contained in this Agreement, at the Closing,
		Sellers shall sell, assign, transfer, convey and deliver to Buyer, and Buyer
		shall purchase from Sellers, all right, title and interest of Sellers in and to
		the Assets (but not the Excluded Assets), free and clear of all Encumbrances
		(except for Permitted Liens) for the consideration specified in Section 2.4.
	 

	 
		2.2
	 

	 
		Non-Assumption of Liabilities.  Except as specifically set
		forth in this Section 2.2, Buyer expressly does not, and shall not, assume or
		be deemed to have assumed under this Agreement or by reason of any transaction
		contemplated hereunder, any debts, liabilities (contingent or otherwise) or
		obligations of any Seller of any nature whatsoever.  Buyer shall and
		hereby agrees to assume and discharge as of the Effective Time, (i) the
		obligations arising subsequent to the Effective Time under the Included
		Contracts and (ii) payment for the piece goods and inventory on order listed on
		Schedule 2.2 hereto (collectively, the “Assumed
		Obligations”); provided, however, that notwithstanding any
		other provision of this Agreement, the Assumed Obligations shall not include
		(i) any debts, liabilities (contingent or otherwise) or obligations of any
		Seller (including, without limitation, trade accounts payable and liabilities
		that should be accrued on the Financial Statements (as defined herein) in
		accordance with generally accepted accounting principles up to and including
		the Closing Date) with respect to those Assumed Obligations referred to in this
		Section, arising out of any Contract (a) required to be listed but not listed
		on Schedule 1.2(c) hereto (regardless of any knowledge thereof on the
		part of Buyer) and (b) the benefits of which are not
		validly assigned to Buyer, (ii) any liability or obligation for Taxes, whether
		or not accrued, assessed or currently due and payable (a) of any Seller,
		whether or not it relates to the operation of any Seller’s business, (b)
		arising from the operation of any Seller’s business or the ownership of
		the Assets on or prior to the Effective Time, or (c) arising out of the
		consummation of the transactions contemplated hereby (for purposes of this
		Section 2.2, all real property Taxes, personal property Taxes and similar ad
		valorem obligations levied with respect to the Assets for a Tax period that
		includes (but does not end on) the Closing Date shall be apportioned between
		Sellers and Buyer based upon the number of days of such period included in the
		Tax period before (and including) the Closing Date and the number of days of
		such Tax period after the Closing Date), or (iii) any liability or obligation
		of any Seller to or with respect to employees and other personnel (their
		spouses, dependents and beneficiaries) of any Seller or any Employee Plan (as
		defined in Section 3.13), unless and except to the extent such liability or
		obligation is specifically assumed by Buyer under this Agreement.
	 

	 
		2.3
	 

	 
		Transfer and Assumption Documents.
	 

	 
		(a)
	 

	 
		At the Closing, Sellers shall deliver to Buyer such deeds, bills of sale,
		endorsements, assignments and other instruments of sale, conveyance, transfer
		and assignment, satisfactory in form and substance to Buyer and its counsel, as
		may be reasonably requested by Buyer, in order to convey to Buyer good and
		valid title to the Assets, free and clear of all Encumbrances (other than
		Permitted Liens).
	 

	 
		(b)
	 

	 
		At the Closing, Sellers shall deliver to Buyer all written consents which
		are required under any Included Contract; provided, however, that as to
		any such Included Contract the assignment of which by its terms requires prior
		consent of the parties thereto, if
	 

	 
		
 

	 

	 
		6
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		such consent is not obtained prior to or on the Closing Date, Sellers
		shall deliver to Buyer written documentation setting forth arrangements for the
		transfer of the economic benefit of such Included Contracts to Buyer as of the
		Closing Date under terms and conditions reasonably acceptable to Buyer.
	 

	 
		(c)
	 

	 
		At the Closing, Buyer will deliver to Sellers such instruments and
		documents, satisfactory in form and substance to Sellers and their counsel, as
		may be reasonably requested by Sellers in order to effect the assumption of the
		Assumed Obligations by Buyer.
	 

	 
		2.4
	 

	 
		Purchase Price.  In consideration for the Assets, Buyer shall
		deliver to Sellers the following (which collectively comprise the
		“Consideration”) at the Closing:  (a) cash in an amount
		equal to the Base Purchase Price less the Escrow Amount and (b) cash in the
		amount set forth on Schedule 2.4 for the Purchased Inventory (subject to
		adjustment pursuant to Section 10(n)).
	 

	 
		2.5
	 

	 
		Escrow Amount.
	 

	 
		(a)
	 

	 
		A portion of the Base Purchase Price equal to the Escrow Amount shall be
		held and disbursed by the Escrow Agent in accordance with the terms of the
		Escrow Agreement and this Section 2.5.  If at any time, or from time to
		time, Buyer shall become entitled to receive one or more payments from Sellers
		under Section 9, Buyer shall, in accordance with the terms of the Escrow
		Agreement, receive a disbursement of the Escrow Funds in an amount equal to the
		lesser of (a) the full amount owed by Sellers to Buyer under Section 9 and (b)
		the full amount of the Escrow Funds then held by the
		Escrow Agent.  The obligation of Sellers to pay any amount under Section 9
		shall be reduced by the actual amount of any such disbursement received by
		Buyer.
	 

	 
		(b)
	 

	 
		On the six (6) month anniversary of the Closing Date, the Escrow Agent
		shall, in accordance with the terms of the Escrow Agreement, calculate the
		difference between (x) $200,000 and (y) the sum of any disbursements of Escrow
		Funds made to Buyer in accordance with Section 2.5(a) and the amounts of all
		outstanding claims by Buyer against Sellers under Section 9 through the close
		of business on such date.  If the difference so calculated is greater than
		$0, the Escrow Agent shall release such amount to Sellers in accordance with
		the terms of the Escrow Agreement.
	 

	 
		(c)
	 

	 
		On the first (1st) anniversary of the Closing Date, the Escrow Agent
		shall, in accordance with the terms of the Escrow Agreement, calculate the
		difference between (x) $400,000 and (y) the sum of (1) any disbursements of
		Escrow Funds made to Buyer in accordance with Section 2.5(a) and (2) the
		amounts of all outstanding claims by Buyer against Sellers under Section 9
		through the close of business on such date.  If the difference so
		calculated is greater than $0, the Escrow Agent shall release such amount to
		Sellers in accordance with the terms of the Escrow Agreement.
	 

	 
		(d)
	 

	 
		The Escrow Agent shall, in accordance with the terms of the Escrow
		Agreement, calculate the difference between the (x) the portion of the Escrow
		Amount not disbursed through the close of business on the date that is eighteen
		(18) months after the Closing Date and (y) the amount of all outstanding claims
		by Buyer against Sellers under Section
	 

	 
		
 

	 

	 
		7
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		9 through the close of business on such date.  Upon the final
		resolution of and payment of such outstanding claims, Sellers shall be entitled
		to the balance, if any, of the Escrow Funds.  The Escrow Agent shall
		release any such balance to Sellers in accordance with the terms of the Escrow
		Agreement.
	 

	 
		(e)
	 

	 
		For purposes of this Section 2.5, a claim shall be outstanding under
		Section 9 if Buyer shall have delivered a Notice of Claim to the Sellers’
		Representative in accordance with this Agreement and the claims referred to
		therein shall not have been finally resolved or any amounts due to Buyer with
		respect thereto shall not have been paid in full.  
	 

	 
		(f)
	 

	 
		Any portion of the Escrow Amount returned to Sellers pursuant to the
		Escrow Agreement shall constitute “Consideration.”
	 

	 
		2.6
	 

	 
		Allocation of Purchase Price.  Buyer and Sellers shall work
		together in good faith to determine promptly after the Closing, but in no event
		more than sixty (60) days after the Closing Date, the allocation of the
		Consideration (and all other capitalized costs) among the Assets in accordance
		with the applicable requirements of Section 1060 of the Code and the Treasury
		regulations thereunder (and any similar provision of state, local or foreign
		law, as appropriate).  Each of the parties hereto shall not, and shall not
		permit any of its Affiliates to, take a position (except as required pursuant
		to an order of any Governmental Entity) on any Tax Return (including Internal
		Revenue Service Form 8594) or before any Governmental Entity charged with the
		collection of any Tax, or in any judicial proceeding, that is in any way
		inconsistent with the allocation determined in accordance with this Section
		2.6, unless required to do so by applicable law.  If any Governmental
		Entity makes or proposes an allocation with respect to the Assets that differs
		materially from the allocation prepared pursuant to this Section 2.6, each of
		Buyer, on the one hand, and Sellers, on the other hand, shall have the right,
		at its or their election and expense, to contest such entity’s
		determination.  In the event of such a contest, the other party or parties
		hereto shall cooperate reasonably with the contesting party but shall have the
		right to file such protective claims or returns as may be reasonably required
		to protect its or their interests.
	 

	 
		3.
	 

	 
		Representations and Warranties of Sellers.  Sellers, jointly
		and severally, hereby represent, warrant and covenant to Buyer that:
	 

	 
		3.1
	 

	 
		Organization and Good Standing.  Each Seller is a corporation
		duly organized, validly existing and in good standing under the laws of the
		State of New York and has all requisite corporate power and authority to enter
		into and perform and do all things contemplated under this Agreement and all
		documents and agreements necessary to give effect to the provisions of this
		Agreement, to own and lease its assets and to carry on and operate its business
		and operations as now being conducted and as proposed to be conducted by it
		under existing agreements.  Each Seller is duly qualified to do business
		and is in good standing as a foreign corporation in every jurisdiction in which
		the nature of the business conducted by it requires such qualification, except
		for such failures to qualify and be authorized as would not, individually or in
		the aggregate, adversely affect the Assets or the Business in any material
		respect.  Schedule 3.1 sets forth, with respect to each Seller, a
		complete and accurate list of each jurisdiction in which such Seller is
		qualified to do business.  Except as set forth in Schedule 3.1,
	 

	 
		
 

	 

	 
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		no Seller has any ownership interest in any other limited liability
		company, corporation, partnership or other entity.
	 

	 
		3.2
	 

	 
		Organizational Documents.  A copy of the articles of
		incorporation as amended to the date hereof (certified by the Secretary of
		State of the State of New York) of each Seller and the bylaws of each Seller
		have been delivered to Buyer and such documents are complete and correct and
		represent the presently effective articles of incorporation and bylaws of each
		Seller.  The minutes of the meetings of the board of directors of each
		Seller authorizing the execution and delivery of this Agreement and the
		consummation of the transactions contemplated hereby (certified by the
		respective corporate secretaries of Sellers), copies of which have been
		delivered to Buyer, are true, accurate and complete as of the Closing Date.
	 

	 
		3.3
	 

	 
		Ownership of Sellers.  Schedule 3.3 lists the
		percentage equity ownership of each Seller and the names of the owners thereof,
		in each case as of the date hereof.
	 

	 
		3.4
	 

	 
		Authorization and Binding Obligations.  The execution,
		delivery and performance by each Seller of this Agreement have been duly and
		validly authorized by all necessary action, including approval of the entire
		transaction by the unanimous vote of the board of directors and shareholders of
		such Seller.  This Agreement has been duly executed and delivered by each
		Seller and constitutes a legal, valid and binding agreement of such Seller,
		enforceable in accordance with its terms, except as its enforceability may be
		limited by bankruptcy, insolvency, moratorium or other laws relating to or
		affecting creditors’ rights generally and the exercise of judicial
		discretion in accordance with general equitable principles.
	 

	 
		3.5
	 

	 
		No Contravention.  Except as set forth on Schedule
		3.5, the execution, delivery and performance of this Agreement, the
		consummation of the transactions contemplated hereby and the compliance with
		the provisions hereof by each Seller does not, and as of the Closing Date will
		not, (a) violate any provisions of the articles of incorporation or bylaws of
		such Seller, (b) conflict with, result in the breach of, or constitute (or
		with notice or lapse of time or both constitute) a default under, or result in
		the creation of any Encumbrances upon any of the Assets, or require any
		authorization, consent, approval, exemption or other action by or notice to any
		third party or Governmental Entity, under or with respect to any Contract to
		which such Seller is a party or by which any of the Assets is bound or affected
		or (c) violate any laws, regulations, orders or judgments writs, injunctions,
		awards, decrees or licenses applicable to such Seller with respect to any of
		the Assets.
	 

	 
		3.6
	 

	 
		Title to Assets.  Except as set forth on Schedule 3.6
		hereto, each Seller has good and valid title to all of the Assets to be
		transferred by it to Buyer hereunder, free and clear of any Encumbrances (other
		than Permitted Liens).  The bills of sale, assignments of leases,
		agreements, contracts and other arrangements, and other instruments delivered
		to Buyer by Sellers on the Closing Date will be in form and substance
		sufficient to vest in Buyer, and the transfer to Buyer by Sellers of the Assets
		on the Closing Date will convey to Buyer, good and valid title to the Assets,
		free and clear of any Encumbrances (other than Permitted Liens).  The
		Assets (i) are owned, licensed or leased by Sellers, as the case may be, and
		are in Sellers’ possession, (ii) constitute all assets currently used to
		conduct the Business as presently conducted, (iii) are in good operating
		condition and repair (taking into account the age of such
	 

	 
		
 

	 

	 
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		Assets) and (iv) are adequate for the uses and purposes for which they
		are being used.  No Person other than Sellers owns any asset used in the
		Business.
	 

	 
		3.7
	 

	 
		Financial Statements and Material Adverse Changes.
	 

	 
		(a)
	 

	 
		Schedule 3.7(a) contains true, correct and complete copies of the
		unaudited pro forma financial statements, including balance sheets and
		statements of income, retained earnings and cash flows of the Business as of,
		and for the year ended, December 31, 2006 (collectively, the “Financial
		Statements”).  Except as set forth on Schedule 3.7(a),
		each of the Financial Statements is true, complete and correct in all material
		respects, fairly presents results of operations, financial condition, assets,
		liabilities and cash flows of the Business for the periods specified.
		 Except as set forth on Schedule 3.7(a), all material liabilities
		and obligations of the Business, whether accrued, absolute, contingent, direct
		or indirect, perfected, inchoate, unliquidated or otherwise and whether due or
		to become due, have been disclosed in the Financial Statements or in any notes
		or narrative introduction thereto.  The statements of income included in
		the Financial Statements do not contain any material items of special or
		non-recurring income or other income not earned in the ordinary course of
		business except as expressly specified on Schedule 3.7(a).  All
		amounts billed to customers of the Business reflected on the Financial
		Statements and Schedule 3.7(a) are for the Business and not for any
		other business.  Sellers acknowledge and agree that Buyer is relying on
		the accuracy and completeness of the Financial Statements in making its
		determination as to whether it must file the Financial Statements, or any
		portion thereof, with the Securities and Exchange Commission.
	 

	 
		(b)
	 

	 
		Except as set forth on Schedule 3.7(b), there have been no
		material adverse changes, individually or in the aggregate, in the Assets,
		liabilities, business, prospects, revenues, expenses, results of operations or
		condition, financial or otherwise, of the Business since December 31, 2006.
	 

	 
		3.8
	 

	 
		Inventories.  Except as set forth on Schedule 3.8
		hereto, Purchased Inventory does not include in any material amount any items
		below standard quality, damaged or spoiled, obsolete or of a quality or
		quantity not usable or saleable in the normal course of the Business as
		currently conducted within normal inventory “turn” experience.
	 

	 
		3.9
	 

	 
		Leases.  No Seller owns any real property used for the
		conduct of the Business.  The Leased Premises and the Excluded Premises
		(collectively, the “Real Property”) constitute all of the real
		property leased by or for the benefit of Sellers in connection with the
		Business.  All operations of the Business as presently conducted are
		located on the Real Property.  None of Sellers or their Affiliates has
		received any written notice of default under any lease to which it is a party.
	 

	 
		3.10
	 

	 
		Licenses and Authorizations.  Schedule 1.2(a) contains
		a true and complete list of all licenses and authorizations of Sellers used by
		them in the operation of the Business.  Such licenses and authorizations
		are in full force and effect.  Each Seller has complied in all material
		respects with, and is now in compliance in all material respects with, all
		laws, rules, regulations, orders and decrees applicable to such Seller as they
		relate to the Business.
	 

	 
		
 

	 

	 
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		3.11
	 

	 
		Contracts.  Schedule 1.2(c) contains a true and
		complete list of all Contracts of every nature to which Jessica Howard or
		Industrial Cotton is a party or which relate to the Business (except for
		Contracts that are Excluded Assets other than Consent Contracts).  Each
		Seller has complied in all material respects (in accordance with their terms)
		with all of the provisions of such Contracts and with all of the provisions of
		the Orders-in-Process.  Except as set forth on Schedule 3.11, no
		default by any Seller or, to the knowledge of Sellers, by any other party
		thereto, has occurred and is continuing with respect to any of such Contracts
		or Orders-in-Process.  All such Contracts and Orders-in-Process are valid
		and binding in accordance with their terms.
	 

	 
		3.12
	 

	 
		Franchises, Trademarks and Trade Names.  Except as set forth
		on Schedule 3.12, all franchises, trademarks, trade names, service
		marks, copyrights, licenses, privileges and other proprietary rights held by
		any Seller that are used or useful in the Business, as described in Section
		1.2(a), are owned by such Seller or licensed for its use and are valid and in
		good standing, free and clear of any Encumbrances (other than Permitted Liens).
		 Each Seller has taken all necessary action to protect such proprietary
		rights.  Among the other trademarks set forth on Schedule 3.12,
		Prime Industrial Cotton, Crafted Industrial Cotton, Nine
		Rivets, Jessica Howard, Elizabeth Howard, Eliza J.
		Howard, Eliza J and Heavenly Jeans are either valid and/or
		enforceable trademarks, applications or registrations of Sellers and are
		transferable or otherwise licensable to Buyer.  The Business as conducted
		by Sellers does not infringe upon or conflict with any patent, trademark, trade
		name, service mark, copyright, license or other proprietary right of any third
		party, and, except as set forth on Schedule 3.12, no Seller has received
		any notice of infringement upon or conflict with the asserted rights of others.

	 

	 
		3.13
	 

	 
		Employees.  Except as set forth in Schedule 3.13,
		there are no collective bargaining agreements, professional or personal service
		contracts, incentive plans for salespeople, bonus plans and other compensatory
		agreements, plans, arrangements and practices including employee benefit plans
		within the meaning of 3(3) of ERISA (whether or not subject to ERISA), or
		employment agreements, incentive plans or arrangements or any other material
		plan, agreement or arrangement covering present or former employees or other
		personnel of any Seller who are engaged in the Business or with respect to
		which any Seller has any direct or indirect liability relating to the Business,
		whether in connection with the transactions contemplated by this Agreement or
		otherwise (the “Employee Plans”).  Schedule 3.13
		sets forth, with respect to the employees of the Business whose names are set
		forth therein (i) the compensation received by them in each of 2005 and 2006,
		their current annual salary and all other compensation and fringe benefits to
		which they are or may be entitled; and (ii) the amount of accrued bonuses,
		vacation, sick leave, family leave and other leave for such personnel.  No
		Seller is in default in any material respect with respect to any of the
		foregoing obligations (whether such obligations relate to the employees set
		forth on Schedule 3.13 or otherwise), and Sellers will bear full
		responsibility for any such obligation outstanding, or due, owing or accrued
		prior to the Effective Time.  No Seller is in default in any material
		respect with respect to any (a) contributions or material obligations under any
		Employee Plan or (b) withholding or other employment taxes or payments on
		behalf of any current or former employee for which it is obligated on the date
		hereof.  There are no labor controversies pending or, to Sellers’
		knowledge, threatened with respect to the employees of either Seller.  The
		employees of each Seller are not represented by any labor union and, to
		Sellers’ knowledge, no union organizational campaign is in progress with
		respect to such employees.
	 

	 
		
 

	 

	 
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		3.14
	 

	 
		Employee Plans.  Except as specifically set forth on
		Schedule 3.14, (i) no Seller maintains, contributes to (or has an
		obligation to contribute to) or has maintained, adopted or contributed to a
		pension plan (within the meaning of Section 3(2) of ERISA) which is subject to
		Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code, (ii)
		there has been no accumulated funding deficiency within the meaning of
		302(a)(2) of ERISA or Section 412 of the Code with respect to any funded
		pension plan which has resulted or could result in the imposition of an
		Encumbrance upon any of the Assets, and (iii) no Seller has incurred or will
		incur any liability, direct or indirect, contingent or otherwise under Title IV
		of ERISA.
	 

	 
		3.15
	 

	 
		Litigation.  Except as set forth in Schedule 3.15,
		there are no actions, suits, proceedings or investigations of any nature at law
		or in equity, pending or, to Sellers’ knowledge, threatened against or
		relating to any Seller or any of the Assets, which might reasonably result in
		an adverse effect upon the business or operations or condition, financial or
		otherwise, of the Business or the Assets, which seeks to enjoin, prohibit or
		otherwise challenge the transactions contemplated hereby or which might
		reasonably result in an adverse effect on the enjoyment and use by Buyer of any
		of the Assets to be acquired hereunder.  No unsatisfied judgment, award,
		order or decree has been rendered against or affecting Sellers or the Assets
		which might reasonably result in an adverse effect upon the business or
		operations or condition, financial or otherwise, of the Business or any of the
		Assets or which adversely affects the validity or enforceability of any of the
		Contracts or Orders-in-Process listed in the Schedules hereto.
	 

	 
		3.16
	 

	 
		Taxes.
	 

	 
		
	 

	 
		(a)
	 

	 
		Each Seller has timely filed all Tax Returns that it was required to
		file.  All such Tax Returns were correct and complete in all material
		respects and were prepared in substantial compliance with all applicable laws
		and regulations.  Each Seller has made available to Buyer copies of all
		Tax Returns with respect to the conduct of the Business and the ownership of
		the Assets filed by it during the three (3) year period prior hereto.
		 None of such Tax Returns has been audited or is currently the subject of
		audit.  No Seller currently is the beneficiary of any extension of time
		within which to file any Tax Return.  Each Seller has paid, or made
		provisions in accordance with generally accepted accounting principles for the
		payment of, all Taxes due (whether or not shown or required to be shown on any
		Tax Return) through and including the Closing Date, including, but not limited
		to, with respect to 2006.  Sufficient reserves have been established to
		cover any unpaid Taxes of any Seller.  There are no Encumbrances on any of
		the assets of Sellers that arose in connection with any failure (or alleged
		failure) to pay any Tax, other than Permitted Liens.  There is not
		currently pending any dispute or claim concerning any Tax liability with
		respect to the income, business, operations or property of any Seller either
		claimed or raised by any Taxing authority.  No claim has been made by a
		Taxing authority in a jurisdiction where a Seller does not file Tax Returns
		that it is or may be subject to Tax in that jurisdiction.
	 

	 
		
	 

	 
		(b)
	 

	 
		All Taxes which each Seller was required by law to withhold, deposit or
		collect in connection with any amount paid or owing to any employee,
		independent contractor, creditor, partner or other third party have been duly
		withheld, deposited and collected and, to the extent required, have been paid
		to the relevant Taxing authority, and all Forms W-2 and 1099 required with
		respect thereto have been properly completed and timely filed.
	 

	 
		
	 

	 
		
 

	 

	 
		12
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		(c)
	 

	 
		No Seller expects any authority to assess any additional Taxes for any
		period for which Tax Returns have been filed. There is no dispute or claim
		concerning any Tax liability of any Seller either (A) claimed or raised by any
		authority in writing or (B) as to which any director or officer (or other
		Person responsible for Taxes) of any Seller has knowledge based upon personal
		contact with any agent of such authority. Sellers have delivered to Buyer
		correct and complete copies of all Tax examination reports and statements of
		deficiencies assessed against or agreed to by any Seller since January 1, 2001.

	 

	 
		(d)
	 

	 
		None of the Assets is (i) “tax-exempt use property” within the
		meaning of Section 168(h)(1) of the Code or (ii) “tax-exempt bond financed
		property” within the meaning of Section 168(g) of the Code.
	 

	 
		
	 

	 
		(e)
	 

	 
		No Seller has waived any statute of limitations in respect of the
		assessment and collection of Taxes or agreed to any extension of time with
		respect to a Tax assessment or deficiency relating to the ownership of the
		Assets or the operation of the Business on or prior to the Closing Date.
		 No Seller is a party to any Tax allocation or sharing agreement.
	 

	 
		(f)
	 

	 
		None of the Assets is an interest in any Person that is treated as a
		partnership for U.S. federal income Tax purposes or would be treated as a
		pass-through or disregarded entity for any Tax purpose.
	 

	 
		(g)
	 

	 
		None of the Assets is a “United States real property interest”
		within the meaning of Section 897(c) of the Code.
	 

	 
		(h)
	 

	 
		None of the Assumed Obligations is an obligation to make a payment that
		is not deductible under Section 280G of the Code.  Each Seller has
		disclosed on its federal income Tax Returns all positions taken therein that
		could give rise to a substantial understatement of federal income Tax within
		the meaning of Section §6662 of the Code.  No Seller has any
		liability for the Taxes of any Person under Treas. Reg. §1.1502-6 (or any
		similar provision of state, local or foreign law), as a transferee or
		successor, by contract or otherwise.
	 

	 
		3.17
	 

	 
		Books of Account.  The books of account and other records of
		Sellers relating to their respective businesses and operations are complete and
		correct, and accurately present and reflect in all material respects all of the
		transactions relating to such businesses and operations to which they are
		parties or by which they are bound.  Schedule 3.17 includes, for
		each Seller, an accounts receivable trial balance as of the Closing Date for
		such Seller.
	 

	 
		3.18
	 

	 
		Suppliers and Customers.
	 

	 
		(a)
	 

	 
		Except as set forth therein, Schedule 3.18(a) sets forth, for the
		years ended December 31, 2005 and 2006 and for the period of three (3) months
		ended March 31, 2007, the names of (i) the top twenty (20) customers, as
		determined by revenue, of the Business, and the amount of revenues generated by
		each such customer in each such period and (ii) each supplier that accounted
		for more than $100,000 of the operating expenses of the Business during any
		such period.
	 

	 
		(b)
	 

	 
		No Seller has received any written or oral notice that any customer or
		supplier identified on Schedule 3.18(a) has canceled or otherwise
		terminated, or to Sellers’
	 

	 
		
 

	 

	 
		13
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		knowledge threatened to cancel or terminate, its relationship with any
		Seller, or to Sellers’ knowledge threatened to decrease or limit
		materially, its business done with any Seller, and, except as set forth on
		Schedule 3.18(b), no Seller has any reason to believe that any such
		customer, supplier or other Person would not continue its business relationship
		with Buyer following the Closing on substantially the same terms as such
		customer, supplier or other Person has heretofore done business with such
		Seller.
	 

	 
		3.19
	 

	 
		Conduct of the Business.  Each Seller has conducted its
		business and operations in the ordinary course consistent with past practices
		since December 31, 2006.
	 

	 
		3.20
	 

	 
		Insurance.  Each Seller has maintained valid and enforceable
		insurance policies on the Assets and its business and operations, including the
		Business during the period of three (3) consecutive years ending on the date
		hereof.  Schedule 3.20 contains a correct and complete description,
		including policy numbers, of such insurance policies.  Such policies are
		in full force and effect, and Sellers are not in default under any of them.
		 Such insurance is of the kind and in the amount not less than customarily
		obtained by companies engaged in the same or similar businesses and similarly
		situated.  No Seller has received any notice of non-renewal, cancellation
		or intent to cancel, not renew or increase premiums or deductibles with respect
		to such insurance policies nor, to the knowledge of Sellers, is there any basis
		for such action.  Schedule 3.20 also contains a list of all pending
		claims with any insurance company (other than health, medical and dental
		insurance claims of employees).
	 

	 
		3.21
	 

	 
		Related Transactions.  Since December 31, 2005, no current or
		former officer, director, partner, employee, shareholder, member or manager of
		any Seller (including their respective family members), (i) has engaged in any
		transaction with such Seller, or (ii) has been the direct or indirect owner of
		an interest in any Person which is a present competitor, supplier or customer
		of the Business, nor does any such officer, director, partner, employee,
		shareholder, manager or member receive income from any source other then the
		Business which relates to, or should properly accrue, to the Business.
	 

	 
		3.22
	 

	 
		Disclosure.  All disclosure provided herein to Buyer
		regarding the Business, the Assets, the Assumed Obligations and the
		transactions contemplated by this Agreement, including the Schedules to this
		Agreement, is true and correct in all material respects and does not contain
		any untrue statement of a material fact or omit to state a material fact
		necessary in order to make such disclosure, in light of the circumstances under
		which it was made, not misleading.
	 

	 
		4.
	 

	 
		Representations and Warranties of Buyer.  Buyer represents,
		warrants and covenants to Sellers that:
	 

	 
		4.1
	 

	 
		Organization and Standing.  Buyer is a corporation duly
		organized, validly existing and in good standing under the laws of the State of
		New York, with full corporate right, power and authority to enter into and
		perform and do all things contemplated under this Agreement and all documents
		and agreements necessary to give effect to the provisions of this Agreement.
	 

	 
		
 

	 

	 
		14
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		4.2
	 

	 
		Authorization and Binding Obligations.  The execution,
		delivery and performance of this Agreement have been duly and validly
		authorized by all necessary corporate action, including approval of the entire
		transaction by the requisite vote of the board of directors of Buyer.
		 This Agreement has been duly executed and delivered by Buyer and
		constitutes a valid and binding agreement of Buyer, enforceable in accordance
		with its terms, except as its enforceability may be limited by bankruptcy,
		insolvency, moratorium or other laws relating to or affecting creditors’
		rights generally and the exercise of judicial discretion in accordance with
		general equitable principles.
	 

	 
		4.3
	 

	 
		No Contravention.  The execution, delivery and performance of
		this Agreement, the consummation of the transactions contemplated hereby and
		the compliance with the provisions hereof by Buyer do not (i) violate any
		provisions of the articles of incorporation or by-laws of Buyer, (ii) conflict
		with, result in the breach of, or constitute a default under, or require any
		authorization, consent, approval, exemption or other action by or notice to any
		third party, court or other governmental or administrative body, under the
		provisions of any agreement or other instrument to which Buyer is a party or by
		which the property of Buyer is bound or affected that has not been obtained or
		(iii) violate any laws, regulations, orders or judgments applicable to Buyer.
	 

	 
		5.
	 

	 
		Conditions Precedent to the Obligations of the Parties.  The
		obligations of the parties hereto under this Agreement are subject to the
		satisfaction on or prior to the Closing Date of each of the following express
		conditions precedent, except such conditions as may be waived by the party
		hereto to which the obligation is owed.
	 

	 
		5.1
	 

	 
		Delivery of Instruments of Conveyance and Transfer.  Buyer
		shall have received the instruments and other documents required to be
		delivered to it pursuant to Sections 2.3(a) and (b) hereof.
	 

	 
		5.2
	 

	 
		Delivery of Instruments of Assumption.  Buyer shall have
		delivered to Sellers, in accordance with Section 2.3(c) hereof, instruments
		whereby Buyer assumes and agrees to perform the Assumed Obligations.
	 

	 
		5.3
	 

	 
		Accuracy of Representations and Warranties.  The
		representations and warranties made herein (and in any document, including any
		Schedules hereto, delivered in connection herewith) by each party shall be true
		and correct as of the Closing Date.
	 

	 
		5.4
	 

	 
		Compliance with Agreement.  All of the terms, covenants and
		conditions of this Agreement to be performed or complied with by Buyer and
		Sellers on or prior to the Closing Date shall have been duly performed or
		complied with.
	 

	 
		5.5
	 

	 
		No Obstructive Proceeding.  (i)  No action or proceeding
		shall have been instituted against any of the parties hereto before any
		Governmental Entity to restrain or prohibit, or to obtain substantial damages
		in respect of, this Agreement or the consummation of the transactions
		contemplated hereby; and (ii) no action or proceeding shall have been
		instituted against, and no order, decree or judgment of any Governmental Entity
		shall be existing against, any of the parties hereto which would render it
		unlawful, as of the Closing Date, to effect the
	 

	 
		
 

	 

	 
		15
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		transactions contemplated hereunder in accordance with the terms hereof
		or would affect, as of the Closing Date, the validity of this Agreement.
	 

	 
		5.6
	 

	 
		Consents.  Sellers shall have obtained and delivered to Buyer
		any necessary consents to the assignment to Buyer of all Included Contracts and
		Orders-in-Process listed on any schedule hereto, without change or modification
		of the terms thereof.  Sellers shall have also delivered to Buyer copies
		of any other third party consents or approvals which Sellers have obtained.
	 

	 
		5.7
	 

	 
		Authorization.  Each party hereto shall have received
		certified copies of all the respective actions taken by the other parties
		hereto authorizing and approving the execution and delivery of this Agreement,
		and the consummation of the transactions contemplated thereunder.
	 

	 
		5.8
	 

	 
		Opinion of Sellers’ Counsel.  Buyer shall have received
		the written opinion of Feder, Kaszovitz, Isaacson, Weber, Skala, Bass &
		Rhine LLP, counsel for Sellers, dated the Closing Date, in form and substance
		reasonably acceptable to Buyer.
	 

	 
		5.9
	 

	 
		Opinion of Buyer’s Counsel.  Seller shall have received
		the written opinion of Fulbright & Jaworski L.L.P., counsel for Buyer,
		dated the Closing Date, in form and substance reasonably acceptable to Sellers.

	 

	 
		5.10
	 

	 
		Employment Agreement.  Glick and Williams shall each have
		entered into an employment agreement with Buyer, substantially in the form of
		Exhibit C hereto (the “Employment Agreement”).
	 

	 
		5.11
	 

	 
		Lease Premises Agreements.  Buyer shall have entered into
		agreements in the form of Exhibit D-1, D-2 and D-3 hereto
		with respect to the Leased Premises (the “Leased Premises
		Agreements”).
	 

	 
		5.12
	 

	 
		Consent Contracts Agreement.  Buyer and Sellers shall have
		entered into the agreement in the form of Exhibit E hereto with respect
		to the Consent Contracts (the “Consent Contracts Agreement”).
	 

	 
		5.13
	 

	 
		License.  Buyer shall have entered into a license agreement,
		substantially in the form of Exhibit F hereto, with Positive Attitude
		(the “Positive Attitude License Agreement”).
	 

	 
		
 

	 

	 
		16
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		6.
	 

	 
		Customer Returns; Right of Buyer.  In the event that
		subsequent to the Effective Time, any customer of the Business returns any
		defective goods sold by any Seller related to the Business prior to the
		Effective Time, such Seller shall, within ten (10) days of receiving such
		returned defective goods, notify Buyer of such return including the amounts and
		style numbers of the returned defective goods.  Within ten (10) days of
		receiving such notice, Buyer shall have the right to submit an offer to
		purchase the returned defective goods from such Seller, which shall not be
		unreasonably rejected by such Seller.  If the parties hereto are unable to
		reach mutually agreeable terms with respect to Buyer’s offer to purchase
		the returned defective goods, such Seller shall have the right to sell the
		returned defective goods to a third party.
	 

	 
		7.
	 

	 
		Customer Allowances.  a) Buyer and Sellers shall be
		responsible for Customer Allowances with respect to specific product shipments
		as follows:  (i) terms discounts given to customers upon shipment,
		deductions for returned merchandise or deductions for shipping violations that
		are charged back from the retailer shall be the responsibility of the party
		that shipped the applicable goods, and (ii) price allowances granted after
		shipment of goods relating to specific styles will be deemed to be reductions
		made in connection with the initial shipment and shall be the responsibility of
		the party that shipped the applicable goods.  Customer Allowances with
		respect to specific product shipments made prior to the Effective Time shall be
		the responsibility of Sellers, and Customer Allowances with respect to specific
		product shipments made from and after the Effective Time shall be the
		responsibility of Buyer.
	 

	 
		(b)
	 

	 
		Any Customer Allowance requested by a customer with respect to a period
		specified by such customer that does not relate to, or cannot be attributed to,
		a specific product shipment shall be aggregated with other such Customer
		Allowances requested by such customer with respect to such period.  The
		aggregate of such Customer Allowances shall be allocated as between Buyer and
		Sellers on a pro rata basis after the Effective Time using a
		“settlement percentage” of sales for the time period specified by the
		customer as the adjustment period.  The settlement percentage of Buyer or
		Sellers, as the case may be, shall be calculated by aggregating the sales of
		Buyer or Sellers, as the case may be, during such period for such customer as
		the numerator and the total sales by Buyer and Sellers to such customer for the
		period in question as the denominator.  For the avoidance of doubt:
		 (i) settlements under this Section 7(b) that relate to any period ending
		on or prior to April 30, 2007 will all be the responsibility of Sellers,
		regardless of when the actual chargeback is issued by the retailer, but (ii)
		settlements under this Section 7(b) that relate to any period ending after
		April 30, 2007 will be aggregated for such period and the same settlement
		percentage shall be applied to sales prior to the Effective Time and after the
		Effective Time with respect to such period to determine the extent to which
		Sellers and Buyer are responsible for the settlement amount.
	 

	 
		
	 

	 
		(c)
	 

	 
		Buyer and Sellers acknowledge that Sellers are not permitted to agree to
		any Customer Allowance in excess of $250,000 for any customer without first
		obtaining the written consent of Sellers’ secured lenders.
	 

	 
		(d)
	 

	 
		Sellers will maintain their current Customer Allowance tracking system to
		document any authorized Customer Allowances.  At the time of any
		settlement of Customer Allowances, Buyer and Sellers will exchange cumulative
		sales data applicable to the Fiscal Quarter, and a calculation will be
		performed to determine the amount of settlement that applies to each respective
		party.  With respect to any settlement or other Customer Allowance for
	 

	 
		
 

	 

	 
		17
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		which Buyer and Sellers would share responsibility, Sellers’
		Representative shall have the right to determine the terms of the settlement,
		subject to Buyer’s approval, which approval shall not unreasonably be
		withheld.
	 

	 
		8.
	 

	 
		Brokers.  Each of Buyer on the one hand and Sellers on the
		other, represents and warrants to the other that it has not engaged a broker or
		finder in connection with this Agreement and the transactions contemplated
		herein or any aspect thereof.  Notwithstanding any other provision of this
		Agreement, the representations, warranties and covenants contained in this
		Section 8 shall survive the Closing Date without limitation.
	 

	 
		9.
	 

	 
		Survival and Indemnification.
	 

	 
		(a)
	 

	 
		Except as otherwise provided herein, the several representations,
		warranties, covenants, and agreements of the parties hereto contained in this
		Agreement (or in any document delivered pursuant to the terms hereof) shall be
		deemed to have been made on the Closing Date, shall be deemed to be material
		and to have been relied upon by Buyer and Sellers notwithstanding any
		investigation made by Buyer or Sellers, shall survive the Closing Date and
		shall remain operative and in full force and effect for a period of eighteen
		(18) months following the Closing Date, except as to any matters with respect
		to which a bona fide written claim has been made or an action at law or in
		equity shall have commenced before such date, in which event survival of the
		applicable representations and warranties shall continue (but only with respect
		to, and the extent of, such claim) until the final resolution of such claim or
		action including all applicable periods for appeal, provided, however,
		that the representations and warranties of Sellers contained in the first
		sentence of Section 3.6 and Sections 3.14 and 3.16 hereof shall survive until
		ninety (90) days following the expiration of all applicable statutes of
		limitations (including periods of extension, whether automatic or permissive)
		applicable to claims arising from such representations and warranties, and
		provided, further, that the respective covenants and agreements of Buyer
		and Sellers contained in Sections 7, 8 and 9 shall continue without any time
		limitation.
	 

	 
		(b)
	 

	 
		Sellers shall, jointly and severally, indemnify and hold Buyer and its
		Affiliates and their respective officers, directors, managers, members,
		stockholders, employees, agents and successors and assigns harmless from and
		against (i) any and all loss, cost, liability, damage and expense (including
		reasonable legal fees, expert costs and other expenses incident thereto) (each
		a “Loss” and, collectively, “Losses”) arising
		out of or resulting from any inaccuracy, misrepresentation or breach or
		non-fulfillment of any representation, warranty, covenant or agreement of any
		Seller under this Agreement or any document delivered pursuant to the terms
		hereof; (ii) other than Assumed Obligations, any and all liabilities and
		obligations of Sellers of any nature whatsoever, whether accrued, absolute,
		fixed, contingent, or otherwise known or unknown to Sellers, whether arising
		before or after the Closing, including, without limitation, any liability of
		Sellers deemed to have been assumed by Buyer by virtue of common law, statute
		or regulation or failure to comply therewith, which liability Buyer has not
		expressly agreed to assume hereunder, including without limitation, bulk
		transfer laws in effect in the State of New York; (iii) any liability or
		obligation for Taxes, whether or not accrued, assessed or currently due and
		payable (a) of Sellers, whether or not such Taxes relate to the operation of
		the Business, (b) arising from the operation of the Business or the ownership
		of the Assets on or prior to the Closing Date or (c) arising out of the
		consummation of the transactions
	 

	 
		
 

	 

	 
		18
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		contemplated hereby (for purposes of this Section 9(b), all real property
		Taxes, personal property Taxes and similar ad valorem obligations levied with
		respect to the Assets for a Tax period that includes (but does not end on) the
		Closing Date shall be apportioned between Sellers, on one hand, and Buyer, on
		the other hand, based upon the number of days of such period included in the
		Tax period before (and including) the Closing Date and the number of days of
		such Tax period after the Closing Date), (iv) Losses with respect to any
		Seller’s failure to obtain any third party consents required to effect the
		transactions contemplated by this Agreement, (v) any and all Losses
		arising out of workers compensation claims relating to periods on or prior to
		the Effective Time or any liabilities or obligations arising under any Employee
		Plan (as defined in Section 3.13), ERISA, or Section 4980B of the Code relating
		to periods on or prior to the Effective Time, (vi) Losses arising from claims
		by one or more shareholders of a Seller against Buyer or its Affiliates, Seller
		or other shareholders of any Seller; and (v) all claims, actions, suits,
		proceedings, demands, assessments, judgments, costs and expenses, including,
		without limitation, any legal fees and expenses, incident to any of the
		foregoing.
	 

	 
		
	 

	 
		(c)
	 

	 
		Buyer shall indemnify and hold Sellers, and each of their respective
		Affiliates, officers, directors, stockholders, members, managers, employees,
		agents and successors and assigns, harmless from and against (i) any and all
		Losses arising out of or resulting from any inaccuracy, misrepresentation or
		breach or non-fulfillment of any representation, warranty, covenant or
		agreement of Buyer under this Agreement or any document delivered by Buyer to
		Sellers in connection herewith, (ii) any and all Losses arising out of or in
		connection with the ownership or operation of the Assets with respect to
		periods after the Effective Time, (iii) the Assumed Obligations, (iv) any and
		all Losses of any Seller or any of its Affiliates arising out of or otherwise
		relating to, the Lease Premises Agreements (other than Losses arising out of
		any failure or defect in performance or breach by any Seller or any of its
		Affiliates of its obligations under any Leased Premises Agreement or Section
		10(o) of this Agreement), (v) any and all Losses of any Seller or any of its
		Affiliates arising out of or otherwise relating to, the Consent Contracts
		Agreement (other than Losses arising out of any failure or defect in
		performance or breach by any Seller or any of its Affiliates of its obligations
		under the Consent Contracts Agreement) and (vi) all claims, actions, suits,
		proceedings, demands, assessments, judgments, costs and expenses, including,
		without limitation, any legal fees and expenses, incident to any of the
		foregoing.
	 

	 
		
	 

	 
		(d)
	 

	 
		In the event of any breach of any representation or warranty contained in
		this Agreement, the Schedules and Exhibits hereto or in the documents delivered
		in accordance with the terms of this Agreement, the sole and exclusive right
		and remedy of the parties hereto for money damages shall be a claim for
		indemnification pursuant to this Section 9; provided, however, that this
		Section 9(d) shall not restrict the right of a party hereto to bring an action
		for fraud or to seek recovery with respect to Losses arising other than from
		the breach of a representation or warranty.
	 

	 
		
	 

	 
		(e)
	 

	 
		The following indemnification procedure shall apply to the foregoing
		agreements:
	 

	 
		
	 

	 
		(i)
	 

	 
		The party who is seeking indemnification (the
		“Claimant”) for a Loss shall give written notice (a
		“Notice of Claim”) to the party from whom indemnification is
		sought (the “Indemnitor”) promptly after the Claimant learns
		of the claim or
	 

	 
		
 

	 

	 
		19
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		proceeding, provided, that the failure to give such notice shall
		not relieve the Indemnitor of its obligations hereunder except to the extent it
		is actually damaged thereby.
	 

	 
		
	 

	 
		(ii)
	 

	 
		With respect to any third-party claims or proceedings as to which the
		Claimant is entitled to indemnification, the Indemnitor shall have the right to
		select and employ counsel of its own choosing to defend against any such claim
		or proceeding, to assume control of the defense of such claim or proceeding,
		and (subject to the last sentence of this Section 9(e)(ii)) to compromise,
		settle or otherwise dispose of the same, if the Indemnitor deems it advisable
		to do so, all at the expense of the Indemnitor.  The parties will fully
		cooperate in any such action, and shall make available to each other any books
		or records useful for the defense of any such claim or proceeding.  The
		Claimant may elect to participate in the defense of any such third party claim,
		and may, at its sole expense, retain separate counsel in connection therewith.
		 Notwithstanding the foregoing, (i) the Claimant shall not settle or
		compromise any such third party claim without the prior written consent of the
		Indemnitor and (ii) the Indemnitor shall not settle or compromise any such
		third party claim without the prior written consent of the Claimant,
		provided, that, in each case, consent shall not be unreasonably
		withheld.
	 

	 
		(f)
	 

	 
		The joint and several obligations of Sellers pursuant to the provisions
		of this Section 9 are subject to the following limitations:
	 

	 
		(i)
	 

	 
		Sellers shall not be liable to Buyer under this Section 9 until
		liabilities incurred exceed $25,000 in the aggregate and then only to the
		extent of such excess;
	 

	 
		(ii)
	 

	 
		Buyer shall not be entitled to recover from Sellers under this Section 9
		in excess of $800,000 in the aggregate, and any payment due to Buyer under this
		Section 9 shall be payable solely out of the Escrow Funds (if and to the extent
		they are available) in accordance with Section 2.5 and the Escrow Agreement;
		and
	 

	 
		(iii)
	 

	 
		the limitations of the liability of Sellers and restriction on source of
		recovery by Buyer set forth in clauses (i) and (ii) above shall not be
		applicable to (A) liabilities arising by reason of a breach of Sellers’
		representations, warranties and agreements contained in the first sentence
		Section 3.6, Section 3.14, Section 3.16 or Section 8 hereof, (B) any claims
		determined by a court of competent jurisdiction to arise from fraud by any
		Seller or (C) Losses arising other than from the breach of a representation or
		warranty.
	 

	 
		(g)
	 

	 
		Buyer’s obligations pursuant to the provisions of this Section 9 are
		subject to the following limitations:
	 

	 
		(i)
	 

	 
		Buyer shall not be liable to Sellers under this Section 9 until
		liabilities incurred exceed $25,000 in the aggregate and then only to the
		extent of such excess;
	 

	 
		(ii)
	 

	 
		Sellers shall not be entitled to recover from Buyer under this Section 9
		in excess of $800,000 in the aggregate; and
	 

	 
		(iii)
	 

	 
		The limitations of Buyer’s liability set forth in clauses (i) and
		(ii) above shall not be applicable to (A) any claims determined by a court of
		competent
	 

	 
		
 

	 

	 
		20
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		jurisdiction to arise from fraud by Buyer or (B) Losses arising other
		than from the breach of a representation or warranty.
	 

	 
		(h)
	 

	 
		Each Claimant shall take commercially reasonable actions to mitigate the
		amount of any claim for indemnification, including pursuing insurance claims
		and claims against third parties, and shall reasonably consult and cooperate
		with each Indemnitor with a view towards mitigating such amounts in connection
		with claims for which a Claimant seeks indemnification hereunder; provided,
		however, that any costs and expenses incurred by a Claimant in pursuing
		insurance claims and claims against third parties or otherwise pursuant to this
		Section 9(h) shall constitute indemnifiable Losses.
	 

	 
		10.
	 

	 
		Post-Closing Agreements.
	 

	 
		(a)
	 

	 
		Delivery of Property Received by Sellers or Buyer After Closing.
		 Sellers agree that they will transfer or deliver to Buyer, promptly after
		the receipt thereof, any property which Sellers receive after the Closing Date
		in respect of the Assets transferred or intended to be transferred to Buyer
		under this Agreement.  Buyer agrees that it will transfer or deliver to
		Sellers, promptly after the receipt thereof, any property which Buyer receives
		after the Closing Date in respect of the Excluded Assets.
	 

	 
		(b)
	 

	 
		Cooperation After the Closing.  The parties hereto shall, at
		any time, and from time to time, after the Closing Date, execute and deliver
		such further instruments of conveyance and transfer and take such additional
		action or may be reasonably necessary to effect, consummate, confirm or
		evidence the transactions contemplated by this Agreement including using their
		commercially reasonable efforts to obtain any third party consents not obtained
		as of the Closing Date.
	 

	 
		(c)
	 

	 
		Removal of Encumbrances.  Sellers agree to assist Buyer and
		shall act in good faith in assisting Buyer, all to the extent requested by
		Buyer, in the removal of any and all Encumbrances whatsoever on any Asset,
		including without limitation on any Orders-in-Process.
	 

	 
		(d)
	 

	 
		Insurance.  Sellers shall maintain general liability and
		product liability insurance policies with respect to their respective business
		and operations of a kind and in an amount existing prior to the Closing Date
		for a period of one (1) year after the Closing Date.
	 

	 
		(e)
	 

	 
		Covenant Not to Compete; No Solicitation.
	 

	 
		(i)
	 

	 
		Each of Glick and Williams (each, a “Restricted Person”)
		acknowledges that he or she has extensive knowledge and a unique understanding
		of the Business, has been directly involved with the establishment and
		continued development of the customer relations of the Business and has had
		access to all of the proprietary and confidential information used in the
		Business.  Each Restricted Person further acknowledges that if he or she
		were to compete with Buyer or its subsidiaries, including the Divisions (the
		“Buyer Group”) following the Closing, great harm would come to
		the Buyer Group, thereby destroying any value associated with the purchase of
		the Assets and the goodwill of the Business.  In furtherance of the sale
		of the Assets to Buyer hereunder by virtue of the transactions contemplated
		hereby and
	 

	 
		
 

	 

	 
		21
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		to more effectively protect the value of the Business so sold, each
		Restricted Person covenants and agrees that, for a period commencing on the
		Closing Date and continuing through January 31, 2011 (the “Restricted
		Period”), he or she shall not, whether for compensation or without
		compensation, directly or indirectly, as an owner, principal, partner, member,
		shareholder, independent contractor, consultant, joint venturer, investor,
		licensor, lender or in any other capacity whatsoever, alone, or in association
		with any other Person, carry on, be engaged or take part in, or render services
		(other than services which are generally offered to third parties) or advice
		to, own, share in the earnings of, invest in the stocks, bonds or other
		securities of, or otherwise become financially interested in, any Person
		engaged in the business of designing or manufacturing women’s dresses
		anywhere in the United States; provided, however, if any
		Restricted Person’s employment under his or her Employment Agreement is
		terminated by Buyer without “justifiable cause”, or by such
		Restricted Person for “good reason” (as such terms are defined in the
		Employment Agreements), the Restricted Period for such Restricted Person shall
		end on the date through which Buyer pays such Restricted Person the payments
		described in Section 7(g) of his or her Employment Agreement.  The record
		or beneficial ownership by any Restricted Person of less than one percent (1%)
		of the shares of any Person whose shares or interests are publicly traded on a
		national securities exchange or the OTC Bulletin Board shall not of itself
		constitute a breach hereunder.
	 

	 
		(ii)
	 

	 
		During the Restricted Period, no Restricted Person shall, whether for his
		or her own account or for the account of any Person, directly or indirectly,
		solicit to terminate the relationship, or otherwise interfere with the
		relationship of the Buyer Group with, any Person that (A) is employed by or
		otherwise engaged to perform services for the Buyer Group or (B) is a customer
		or client of, or subcontractor for, the Business.
	 

	 
		(iii)
	 

	 
		The restrictive covenants set forth in this Section 10(e) (the
		“Restrictive Covenants”) have been separately bargained for to
		protect the business or interest therein, including goodwill, of the Assets and
		Business being acquired by Buyer hereunder and to ensure that Buyer shall have
		the full benefit of the value thereof.  Each Restricted Person recognizes
		and acknowledges that the business and markets of the Buyer Group are national
		in scope, and that Buyer is investing substantial sums in purchasing the Assets
		and Business and in consideration for the Restrictive Covenants, that such
		Restrictive Covenants are necessary in order to protect and maintain the
		legitimate business interests of the Buyer Group and are reasonable in all
		respects, and that Buyer would not consummate the transactions contemplated
		hereby but for such Restrictive Covenants.  Each Restricted Person hereby
		waives any and all right to contest the validity of the Restrictive Covenants
		on the ground of the breadth of their geographic or product coverage or the
		length of their term.
	 

	 
		(iv)
	 

	 
		If any Restricted Person breaches, or threatens to commit a breach of,
		any of the Restrictive Covenants, Buyer shall have, in addition to, and not in
		lieu of, any other rights and remedies available to it under law or in equity,
		the right to seek to have the Restrictive Covenants specifically enforced by
		any court of competent jurisdiction, it being agreed that any breach or
		threatened breach of the Restrictive Covenants would cause irreparable injury
		to Buyer and that money damages would not provide an adequate remedy.
		 Each Restricted Person covenants and agrees not to oppose any demand for
		specific performance and injunctive and other equitable relief in case of any
		such breach or attempted breach.
	 

	 
		
 

	 

	 
		22
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		(v)
	 

	 
		The existence of any claim or cause of action by any Restricted Person
		against Buyer shall not constitute a defense to the enforcement by Buyer of the
		Restrictive Covenants, and any such claim or cause of action shall be litigated
		separately.
	 

	 
		(vi)
	 

	 
		In addition to the remedies Buyer may seek and obtain pursuant to Section
		10(e)(ii) hereof, the Restricted Period shall be extended by any and all
		periods during which a Restricted Person shall be found by a final
		non-appealable judgment of a court possessing personal jurisdiction over him or
		her to have been in violation of any Restrictive Covenant.
	 

	 
		(vii)
	 

	 
		Whenever possible, each provision of this Section 10(e) shall be
		interpreted in such manner as to be effective and valid under applicable law
		but if any provision of this Section 10(e) shall be prohibited by or invalid
		under applicable law, such provision shall be ineffective to the extent of such
		prohibition or invalidity, without invalidating the remainder of such provision
		or the remaining provisions of this Section 10(e).  If any provision of
		this Section 10(e) shall, for any reason, be judged by any court of competent
		jurisdiction to be invalid or unenforceable, such judgment shall not affect,
		impair or invalidate the remainder of this Section 10(e) but shall be confined
		in its operation to the provision of this Section 10(e) directly involved in
		the controversy in which such judgment shall have been rendered.  In the
		event that the provisions of this Section 10(e) should ever be deemed to exceed
		the time or geographic limitations permitted by applicable law, then such
		provision shall be reformed to the maximum time or geographic limitations
		permitted by applicable law.
	 

	 
		(f)
	 

	 
		Additional Financial Statements.  Sellers agree to prepare
		and deliver to Buyer no later than thirty (30) days from the Closing Date a pro
		forma unaudited balance sheet of the Business as of the Closing Date and a pro
		forma unaudited income statement of the Business for the period from January 1,
		2007 through March 31, 2007 and for the period from April 1, 2007 to the
		Closing Date.
	 

	 
		(g)
	 

	 
		Tax Matters.  Buyer and Sellers shall utilize the standard
		procedure set forth in Revenue Procedure 2004-53 with respect to wage
		reporting.
	 

	 
		(h)
	 

	 
		Change of Names.  Jessica Howard and Industrial Cotton agree,
		and Glick and Williams agree to cause Eliza J Limited, a New York corporation
		(“Eliza J”), to file a Certificate of Amendment to its
		Articles of Incorporation (to be filed with the Secretary of State of the State
		of New York immediately following the Closing) changing their respective
		corporation names to “JH-X”, “IC-X” and “EJ-X,”
		respectively.  Following the filing of such Certificate of Amendment with
		the Secretary of State of the State of New York, none of the Sellers will use
		the names Jessica Howard or Industrial Cotton or any derivative thereof; and
		Glick and Williams shall cause Eliza J not to do so; provided, however,
		that Buyer shall permit Sellers for a period of six (6) months from the Closing
		Date to use the names “Jessica Howard”, “Industrial
		Cotton”, and “Eliza J” to collect their accounts receivable,
		liquidate inventory that is not Purchased Inventory and liquidate all other
		Excluded Assets.
	 

	 
		(i)
	 

	 
		Sellers’ Representative.  Glick shall act, and Sellers
		hereby make, constitute and appoint Glick, as the representative of Sellers
		under this Agreement (in such capacity, the “Sellers’
		Representative”).  By its execution of this Agreement, each
		Seller hereby
	 

	 
		
 

	 

	 
		23
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		makes, constitutes and appoints the Sellers’ Representative as its
		attorney-in-fact and authorizes and empowers the Sellers’ Representative
		to act as such Seller’s representative with full authority, in the sole
		discretion of the Sellers’ Representative, to (a) cause to be prepared all
		Tax Returns with respect to all Tax periods ending on or before the Closing
		Date, and (b) take any other action that may be necessary or desirable on
		behalf of Sellers in connection with this Agreement.  Sellers shall have
		the right at any time to appoint a new Sellers’ Representative for such
		purposes by giving at least ten (10) business days’ written notice thereof
		and simultaneously furnishing a copy of a written instrument executed by
		Sellers and appointing a new Sellers’ Representative to Buyer and the
		Sellers’ Representative then so acting.  The Sellers’
		Representative shall have no duties or obligations other than those set forth
		above and will incur no liability with respect to any action or inaction taken
		by the Sellers’ Representative except with respect to his own gross
		negligence, bad faith or willful misconduct.  Each Seller shall reimburse
		the Sellers’ Representative for its proportionate share, determined in
		accordance with the allocation of Consideration among Sellers, of the
		reasonable and documented expenses of the Sellers’ Representative in
		carrying out his duties or obligations hereunder.
	 

	 
		
	 

	 
		(j)
	 

	 
		Cooperation of Independent Accountants.  From and after the
		Closing, Sellers shall use commercially reasonable efforts to cause Citrin
		Cooperman & Company, LLP, independent accountants for Sellers (the
		“Accountants”), to cooperate with Buyer and Buyer’s
		accountants in the preparation of such financial statements and schedules with
		respect to periods prior to the Closing Date as Buyer may reasonably require in
		connection with the satisfaction of its disclosure requirements under the U.S.
		securities laws.  Buyer shall pay all of the fees and expenses of the
		Accountants incurred pursuant to this Section 10(f).
	 

	 
		
	 

	 
		(k)
	 

	 
		Bonus Plans for the Divisions.  (i) As soon as practicable
		after the Closing, Buyer shall adopt employee bonus plans for employees of the
		Jessica Howard Division (the “Jessica Howard Division Bonus
		Plan”), the Designer Brands Division (the “Designer Brands
		Division Bonus Plan”) and the Positive Attitude Division (the
		“Positive Attitude Division Bonus Plan”).
	 

	 
		(ii)
	 

	 
		The Jessica Howard Division Bonus Plan shall provide for aggregate
		payments to the employees of the Jessica Howard Division in an amount equal to
		seven and one-half percent (7.5%) of the EBITA of the Jessica Howard Division
		(the “JHD Bonus Plan EBITA”) for each EBITA Period;
		provided, however, that no bonus will be payable with respect to the
		EBITA Period ending on January 31, 2008, 2009, 2010 or 2011 if the EBITA of the
		Jessica Howard Division does not exceed $0, $1.0 million, $1.75 million and
		$2.5 million, respectively, in such EBITA Period.  In no event shall
		bonuses awarded under the Jessica Howard Division Bonus Plan and payable
		pursuant to Section 3(b)(i) of the Employment Agreements of Glick and Williams
		collectively exceed an aggregate of $5,000,000 with respect to any EBITA
		Period.  To the extent that bonuses are payable under the Jessica Howard
		Division Bonus Plan as provided in this Section 10(k)(ii), 2.5% of JHD Bonus
		Plan EBITDA shall be allocated to each of David Nachman, Robert Metz and
		Mitchell Rodbell (each, a “Jessica Howard Division
		Employee”); provided, however, that if any of such Jessica
		Howard Division Employee ceases to be employed in the Jessica Howard Division
		during any EBITA Period, Glick and Williams shall determine, in their
		discretion, the extent to which such Jessica Howard Division Employee will be
		entitled to a pro rata portion of the applicable bonus for such EBITA
		Period and the extent to which any residual bonus amount, and bonus amounts for
		any
	 

	 
		
 

	 

	 
		24
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		subsequent EBITA Periods, are paid to other Jessica Howard Division
		Employees or other employees.  Notwithstanding the foregoing, if Glick and
		Williams determine, in their discretion and on the basis of the portion of the
		EBITA of the Jessica Howard Division for any EBITA Period derived from the
		Industrial Cotton business, to pay a bonus to Rory Nichols and Angela Da
		Francesa, each of Rory Nichols and Angela Da Francesca shall receive a bonus
		equal to 3% of the EBITA of the Jessica Howard Division derived from the
		Industrial Cotton business, and the amount of such bonuses shall be deducted on
		a pro rata basis from the bonuses of Glick and Williams payable pursuant
		to their Employment Agreements and the Jessica Howard Division Employees
		payable pursuant to this Section 10(k)(ii).
	 

	 
		(iii)
	 

	 
		The Designer Brands Division Bonus Plan shall provide for aggregate
		payments to the employees of the Designer Brands Division in an amount equal to
		fifteen percent (15%) of the EBITA of the Designer Brands Division (the
		“DBD Bonus Plan EBITA”) for each EBITA Period; provided,
		however, that no bonus will be payable with respect to the EBITA Period
		ending on January 31, 2008, 2009, 2010 or 2011 if the EBITA of the Designer
		Brands Division does not exceed $0, $0.5 million, $1.0 million and $1.5
		million, respectively, in such EBITA Period.  In no event shall bonuses
		awarded under the Designer Brands Division Bonus Plan and payable pursuant to
		Section 3(b)(ii) of the Employment Agreements of Glick and Williams
		collectively exceed an aggregate of $5,000,000 with respect to any EBITA
		Period.  To the extent that bonuses are payable under the Designer Brands
		Division Bonus Plan as provided in this Section 10(k)(iii), 9.0%, 1.5%, 1.5%
		and 3.0% of the DBD Bonus Plan EBITA shall be allocated to each of David
		Nachman, Robert Metz, Mitchell Rodbell and Gerry Corrigan, respectively (each,
		a “Designer Brands Division Employee”); provided,
		however, that if any of such Designer Brands Division Employee ceases to be
		employed in the Designer Brands Division during any EBITA Period, Glick and
		Williams shall determine, in their discretion, the extent to which such
		Designer Brands Division Employee will be entitled to a pro rata portion
		of the applicable bonus for such EBITA Period and the extent to which any
		residual bonus amount, and bonus amounts for any subsequent EBITA Periods, are
		paid to other Designer Brands Division Employees or other employees.
	 

	 
		(iv)
	 

	 
		The Positive Attitude Division Bonus Plan shall provide for aggregate
		payments to the employees of the Positive Attitude Division in an amount equal
		to twelve and one-half percent (12.5%) of the EBITA of the Positive Attitude
		Division (the “PAD Bonus Plan EBITA”) for each EBITA Period;
		provided, however, that no bonus will be payable with respect to the
		EBITA Period ending on January 31, 2008, 2009, 2010 or 2011 if the EBITA of the
		Positive Attitude Division does not exceed $0, $0.5 million, $0.75 million and
		$1.0 million, respectively, in such EBITA Period.  In no event shall
		bonuses awarded under the Positive Attitude Division Bonus Plan and payable
		pursuant to Section 3(b)(iii) of the Employment Agreements of Glick and
		Williams collectively exceed an aggregate of $5,000,000 with respect to any
		EBITA Period.  To the extent that bonuses are payable under the Positive
		Attitude Division Bonus Plan as provided in this Section 10(k)(iv), 6.25%,
		3.125% and 3.125% of the PAD Bonus Plan EBITDA shall be allocated to each of
		David Nachman, Robert Metz and Mitchell Rodbell, respectively (each, a
		“Positive Attitude Division Employee”); provided,
		however, that if any of such Positive Attitude Division Employee ceases to
		be employed in the Positive Attitude Division during any EBITA Period, Glick
		and Williams shall determine, in their discretion, the extent to which such
		Positive Attitude Division Employee will be entitled to a pro rata
		portion of the applicable bonus for such EBITA Period and the extent to which
		any
	 

	 
		
 

	 

	 
		25
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		residual bonus amount, and bonus amounts for any subsequent EBITA
		Periods, are paid to other Positive Attitude Division Employees or other
		employees.
	 

	 
		(l)
	 

	 
		Offers of Employment.  Contingent upon the Closing, Buyer
		shall, within five business days after the Closing, offer at-will employment to
		all of the employees of the Business listed on Schedule 10(l) who are in
		good standing on the Closing Date (each, a “Closing Date
		Employee”), for at least the same rate of base salary, wages and/or
		commissions and the same job position in effect immediately prior to the
		Closing.  Sellers shall cooperate with Buyer in connection with the
		foregoing.  A Closing Date Employee will become an employee of Buyer, if
		at all, on the later of the Effective Time or the first date on which such
		Closing Date Employee is actively at work.  Notwithstanding the foregoing,
		Buyer shall not be obligated to hire any Closing Date Employee who fails to
		provide Buyer documentation as required by applicable federal or state laws in
		connection with the commencement of such employment or who fails to pass any
		pre-employment background check required by Buyer, and Buyer may rescind an
		offer of employment before a Closing Date Employee accepts such offer and
		commences active employment with Buyer.  Sellers shall be responsible for
		the payment of all vacation pay of their employees that accrued prior to
		Closing, and acknowledge that the Base Purchase Price includes $126,000 with
		respect to such accrued vacation pay.  Within ten (10) days after repaying
		in full all indebtedness owed to their lenders after the sale of the Assets
		hereunder, Sellers shall reimburse Buyer the aggregate amount of all accrued
		vacation pay with respect to Closing Date Employees that accept offers of
		employment from Buyer.  Sellers agree that they shall not pay any dividend
		or otherwise make any distribution to any of their shareholders until their
		obligation to repay Buyer for such accrued vacation amounts has been satisfied.
		 Buyer shall continue to maintain a group health plan following the
		Closing and will be solely responsible for satisfying any COBRA obligations
		with respect to covered individuals who have a qualifying event before or as a
		result of the transactions contemplated by this Agreement, it being understood
		that Buyer will be responsible for providing COBRA coverage required with
		respect to Closing Date Employees who become employees of Buyer and who
		participate as active employees in Buyer’s group health plan.
	 

	 
		(m)
	 

	 
		Parent Guaranty.  Parent hereby guaranties the payment and
		performance of Buyer’s obligations under Sections 9 and 10(k) of this
		Agreement (the “Parent Guaranty”).  The Parent Guaranty
		is a guaranty of payment and performance and is not a guaranty of collection.
		 Parent hereby waives any requirement of law that Sellers must exhaust any
		remedy against Buyer before proceeding against Parent.
	 

	 
		(n)
	 

	 
		Purchased Inventory.  Buyer and Sellers acknowledge that the
		Consideration for the Purchased Inventory set forth in Section 2.4 is based
		upon a preliminary count of such Purchased Inventory taken prior to the
		execution of this Agreement, and that the actual cost of the items of Purchased
		Inventory set forth on Schedule 10(n) was estimated at the time such
		count was performed.  Within forty-five (45) days after the Closing, Buyer
		and Sellers shall cooperate in (i) performing a final inventory count of the
		Purchased Inventory and (ii) determining the actual cost of all items of
		Purchased Inventory, and shall calculate the actual Consideration payable with
		respect to such final count of Purchased Inventory.  In the event that the
		actual Consideration payable with respect to the Purchased Inventory exceeds
		the amount paid therefor at Closing, Buyer shall promptly pay to the
		Sellers’ Representative, on behalf of Sellers, such additional amount.
		 In the event that the actual Consideration payable with respect
	 

	 
		
 

	 

	 
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		to the Purchased Inventory is less than the amount paid therefor at
		Closing, the Sellers’ Representative shall cause Sellers to promptly repay
		to Buyer the amount of such overpayment.
	 

	 
		(o)
	 

	 
		Leased Premises Agreements.  Sellers shall cause their
		Affiliates that are parties to the Leased Premises Agreements to comply with
		their obligations under the Leased Premises Agreements and to use commercially
		reasonable efforts to maintain the leases to which the Leased Premises
		Agreements relate in full force and effect.  If the landlord under any
		such lease gives notice to an Affiliate of Seller that is the tenant under any
		such lease that the activities conducted at the applicable leased premises
		under the applicable Leased Premises Agreement constitute a breach of such
		tenant’s obligations under the lease, Sellers shall cause such Affiliate
		to cooperate in good faith with Buyer and the landlord to resolve the
		landlord’s complaint, through a sublease, assignment of the applicable
		lease, or otherwise.
	 

	 
		(p)
	 

	 
		Security Deposits.  Any security deposits relating to the
		Included Contracts and/or the Consent Contracts which were paid prior to the
		Closing Date shall remain in place until the applicable Included Contract
		and/or Consent Contract is assigned to Buyer, whereupon Buyer shall reimburse
		the amount of such security deposit to the applicable Seller.
	 

	 
		11.
	 

	 
		Costs, Expenses, etc.  Each of the parties
		hereto shall bear all costs and expenses incurred by it in connection with this
		Agreement and in the preparation for and consummation of the transactions
		provided for herein, and shall not be entitled to any reimbursement therefor
		from any other party hereto; provided, however, all transfer,
		documentary, sales, use, stamp, registration and other such Taxes and fees
		(including any penalties and interest) incurred in connection with this
		Agreement shall be paid by Sellers when due, and Sellers shall, at their
		expense, file all necessary Tax Returns and other documentation with respect to
		all such transfer, documentary, sales, use, stamp, registration and other Taxes
		and fees, and, if required by applicable law, Buyer shall join in the execution
		of any such Tax Returns and other documentation.
	 

	 
		12.
	 

	 
		Notice of Proceedings.  Buyer or Sellers, as the case may be,
		will promptly notify the other in writing upon becoming aware of any order or
		decree or any complaint praying for an order or decree restraining or enjoining
		the consummation of this Agreement or the transactions contemplated hereunder,
		or upon receiving any notice from any Governmental Entity of its intention to
		institute an investigation into, or institute a suit or proceeding to restrain
		or enjoin the consummation of this Agreement or the transactions contemplated
		hereby, or to nullify or render ineffective this Agreement or such transactions
		if consummated.
	 

	 
		13.
	 

	 
		Notices.  All notices, claims, demands and other
		communications hereunder shall be in writing and shall be deemed given:
		 (i) in the case of a facsimile transmission, upon confirmation of
		transmission, (ii) in the case of delivery by an overnight carrier of national
		reputation, upon the date of delivery indicated in the records of such carrier,
		(iii) in the case of delivery by hand, when delivered by hand, or (iv) in the
		case of delivery by first class mail, upon the expiration of five (5) business
		days after the date mailed by registered or certified mail (return receipt
		requested), or, if earlier, the date of delivery reflected in such return
		receipt, in any case addressed to the respective parties hereto at the
		addresses shown below.
	 

	 
		
 

	 

	 
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		(a)
	 

	 
		If to Buyer or Parent to:
	 

	 
		G-III Apparel Group, Ltd.
	 

	 
		512 Seventh Avenue
	 

	 
		New York, New York  10018
	 

	 
		Fax:
	 

	 
		(212) 719-0921
	 

	 
		Attn: Wayne Miller
	 

	 
		with a copy to:
	 

	 
		Neil Gold, Esq.
	 

	 
		Fulbright & Jaworski L.L.P.
	 

	 
		666 Fifth Avenue
	 

	 
		New York, New York  10103
	 

	 
		Fax:  (212) 318-3400
	 

	 
		(b)
	 

	 
		If to the Sellers’ Representative (or to any Seller, in care of the
		Sellers’ Representative):
	 

	 
		Mr. Robert Glick
	 

	 
		367 Pleasant Hill Road
	 

	 
		New City, New York 10956
	 

	 
		Fax:  (212) 575-2405
	 

	 
		with a copy to:
	 

	 
		Geoffrey A. Bass, Esq.
	 

	 
		Feder, Kaszovitz, Isaacson, Weber, Skala,
	 

	 
		    Bass & Rhine LLP
	 

	 
		750 Lexington Avenue
	 

	 
		New York, New York 10022
	 

	 
		Fax:  (212) 888-7776
	 

	 
		or at such other address as any party hereto shall specify by notice
		(delivered in accordance with this Section) to the other parties hereto.
	 

	 
		14.
	 

	 
		Headings and Entire Agreement.  The section and subsection
		headings do not constitute any part of this Agreement and are inserted herein
		for convenience of reference only.  This Agreement embodies the entire
		agreement between the parties hereto with respect to the subject matter hereof
		and supersedes and preempts all prior and contemporaneous oral and written
		understandings and agreements with respect to the subject matter hereof.
	 

	 
		15.
	 

	 
		Amendment.  No amendment of any provision of this Agreement
		shall be valid unless the same shall be in writing and signed by all parties
		hereto.
	 

	 
		16.
	 

	 
		Public Announcements.  None of the parties hereto shall make
		any press release or other public statement concerning the matters covered by
		this Agreement without the approval of the other parties hereto; provided,
		however, that if in the opinion of counsel to the party
	 

	 
		
 

	 

	 
		28
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		making any such release or statement, such release or statement is
		required by law or applicable regulation, such party may make such release or
		statement without the prior consent of the other parties hereto; provided,
		further that such party provides the other parties hereto with a reasonable
		opportunity to review and comment on such release or statement prior to its
		dissemination.  Notwithstanding the foregoing, Parent shall have no
		obligation to furnish the other parties hereto an opportunity to review and
		comment on any filing to be made with the Securities and Exchange Commission by
		Parent.
	 

	 
		17.
	 

	 
		Extension; Waiver.  No waiver by any party hereto of any
		default, misrepresentation or breach of warranty or covenant hereunder, whether
		intentional or not, shall be deemed to extend to any prior or subsequent
		default, misrepresentation or breach of warranty or covenant hereunder or
		affect in any way any rights rising by virtue of any prior or subsequent such
		occurrence.
	 

	 
		18.
	 

	 
		Binding Effect and Assignment.  This Agreement shall be
		binding upon and shall inure to the benefit of the parties hereto and their
		successors and assigns.  No party hereto may assign this Agreement and/or
		its rights and obligations hereunder without the prior written consent of the
		other parties hereto, other than any collateral assignment of the Sellers’
		rights under this Agreement and the other transaction documents described in
		this Agreement to Sellers’ secured lenders.
	 

	 
		19.
	 

	 
		Severability.  In the event that any provision of this
		Agreement, or the application thereof, becomes or is declared by a court of
		competent jurisdiction to be illegal, void or unenforceable, the remainder of
		this Agreement will continue in full force and effect and the application of
		such provision to other Persons or circumstances will be interpreted so as
		reasonably to effect the intent of the parties hereto.  The parties hereto
		further agree to use their best efforts to replace such void or unenforceable
		provision of this Agreement with a valid and enforceable provision that will
		achieve, to the extent possible, the economic, business and other purposes of
		such void or unenforceable provision.
	 

	 
		20.
	 

	 
		Specific Performance.  Each of the parties hereto
		acknowledges and agrees that the other parties hereto would be damaged
		irreparably in the event that the transactions contemplated by this Agreement
		are not consummated in accordance with the terms hereof.  Accordingly,
		each of the parties hereto agrees that the other parties hereto shall be
		entitled to seek to enforce specifically this Agreement and each other
		party’s obligation to consummate the transactions contemplated by this
		Agreement in accordance with the terms and provisions hereof in any action
		instituted in any court of the United States or any state thereof having
		jurisdiction over the parties hereto and the matter in addition to any other
		remedy to which they may be entitled at law or in equity.
	 

	 
		21.
	 

	 
		Remedies Cumulative.  Except as otherwise provided herein,
		any and all remedies herein expressly conferred upon any party hereto will be
		deemed cumulative with and not exclusive of any other remedy conferred hereby,
		or by law or equity upon such party, and the exercise by any party hereto of
		any one remedy will not preclude the exercise of any other remedy.
	 

	 
		
 

	 

	 
		29
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		22.
	 

	 
		Governing Law.  This Agreement shall be governed by and
		construed in accordance with the internal laws of the State of New York without
		regard to applicable principles of conflicts of law.
	 

	 
		23.
	 

	 
		Jurisdiction.  Any suit, action or proceeding seeking to
		enforce any provision of, or based on any matter arising out of or in
		connection with, this Agreement or the transactions contemplated hereby shall
		be brought exclusively in a New York State or United States Federal court
		sitting in New York County, and each of the parties hereto hereby expressly
		submits to such jurisdiction and venue of such court (and of the appropriate
		appellate courts therefrom) in any such suit, action or proceeding and
		irrevocably waives, to the fullest extent permitted by law, any objection that
		it may now or hereafter have to the laying of the venue of any such suit,
		action or proceeding in any such court or that any such suit, action or
		proceeding brought in any such court has been brought in an inconvenient forum.

	 

	 
		
	 

	 
		24.
	 

	 
		Effect of Due Diligence.  No investigation by or on behalf of
		Buyer into the business, operations, prospects, assets or condition (financial
		or otherwise) of the Business, the Assets or of Sellers shall diminish in any
		way the effect of any representations or warranties made by Sellers in this
		Agreement or shall relieve Sellers of any of their respective obligations under
		this Agreement.
	 

	 
		
	 

	 
		25.
	 

	 
		Counterparts.  This Agreement may be executed in one or more
		counterparts (including, without limitation, by facsimile), all of which shall
		be considered the same agreement and shall become effective when one or more
		counterparts have been signed by each of the parties hereto and delivered to
		the other parties hereto, it being understood that all parties hereto need not
		sign the same counterpart.
	 

	 
		
 

	 

	 
		30
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
		duly executed and delivered in its name and on its behalf, all as of the date
		and year first above written.
	 

	 
		G-III LEATHER FASHIONS, INC.
	 

	 
		

	 

	 
		

	 

	 
		By: /s/ Wayne S. Miller_______
	 

	 
		Name:  Wayne S. Miller
 Title:  Senior Vice President
	 

	 
		

	 

	 
		

	 

	 
		CONSENTED AND AGREED WITH RESPECT TO SECTION 10(m) ONLY:
	 

	 
		

	 

	 
		G-III APPAREL GROUP, LTD.
	 

	 
		

	 

	 
		

	 

	 
		By: /s/ Wayne S. Miller_______
	 

	 
		Name:  Wayne S. Miller
 Title:  Chief Operating Officer
	 

	 
		

	 

	 
		

	 

	 
		STARLO FASHIONS INC.
	 

	 
		

	 

	 
		

	 

	 
		By: /s/ Robert Glick__________
	 

	 
		       Name: Robert Glick
	 

	 
		       Title: President
	 

	 
		

	 

	 
		

	 

	 
		JESSICA HOWARD, LTD.
	 

	 
		

	 

	 
		

	 

	 
		By: /s/ Robert Glick__________
	 

	 
		       Name: Robert Glick
	 

	 
		       Title: President
	 

	 
		

	 

	 
		

	 

	 
		INDUSTRIAL COTTON, INC.
	 

	 
		

	 

	 
		

	 

	 
		By: /s/ Robert Glick__________
	 

	 
		       Name: Robert Glick
	 

	 
		       Title:  President
	 

	 
		

	 

	 
		

	 

	 
		
 

	 

	 
		 
	 

	 
		

	 

	 
 
	 
		

	 

	 
		

	 

	 
		CONSENTED AND AGREED WITH RESPECT TO SECTION 10(e) ONLY:
	 

	 
		

	 

	 
		

	 

	 
		/s/ Robert Glick________
	 

	 
		Robert Glick
	 

	 
		

	 

	 
		

	 

	 
		/s/ Mary Williams_______
	 

	 
		Mary Williams
	 

	 
		

	 

	 
		

	 

	 
		AS SELLERS’ REPRESENTATIVE:
	 

	 
		

	 

	 
		

	 

	 
		/s/ Robert Glick________
	 

	 
		Robert Glick
	 

	 
		

	 

	 
		

	 

	 
		
 

	 

	 
		2

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