Document:

<Page>

                                                                   Exhibit 10.2

$4,250,000.00                                                     April 1, 2002

                            UNITED STATES OF AMERICA
                            COMMONWEALTH OF VIRGINIA

         INDUSTRIAL DEVELOPMENT AUTHORITY OF ALBEMARLE COUNTY, VIRGINIA

                       INDUSTRIAL DEVELOPMENT REVENUE BOND
                                (BIOTAGE PROJECT)
                                   SERIES 2002

     THE INDUSTRIAL DEVELOPMENT AUTHORITY OF ALBEMARLE COUNTY, VIRGINIA, a body
politic and corporate constituting a political subdivision of the Commonwealth
of Virginia, organized and existing under and by virtue of the laws of the
Commonwealth of Virginia (hereinafter called the Authority), acknowledges itself
indebted and for value received hereby promises to pay, solely from the source
and as hereinafter provided, to VIRGINIA NATIONAL BANK, Charlottesville,
Virginia (hereinafter called the Bank), or registered assigns, the principal sum
of FOUR MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($4,250,000), or so much
thereof as may be disbursed from time to time, and interest on such principal
amount from the date hereof as follows:

     Interest on this Bond shall accrue beginning as of the date of issuance of
this Bond (the "Closing Date"), and on the first day of each and every month
thereafter until payment of this Bond in full, the Authority shall pay, solely
from the source and as hereinafter provided, interest on the outstanding
principal balance hereof at an annual rate equal to either the Tax-Exempt Rate,
the Taxable Rate or the Default Rate (each as hereinafter defined). Interest
hereon shall be computed on the basis of actual number of days elapsed over a
year of 360 days. From the date hereof through the date that interest and
principal on this Bond is paid in full, or until the effective date of a
Determination of Taxability or an Event of Default, if any, each as defined in
the Loan Agreement dated as of April 1, 2002 (the "Loan Agreement") by and
between the Authority, Biotage Real Estate, LLC, a Virginia limited liability
company (the "Company"), and Biotage, Inc., a Delaware corporation (the
"Lessee"), the rate shall be the Tax-Exempt Rate, which shall be computed as
follows (capitalized terms not otherwise defined herein shall have the meaning
given such term in the Loan Agreement):

     The Tax-Exempt Rate shall be (i) 5.83% per annum from the Closing Date
through February 28, 2007, and (ii) for each subsequent five (5) year period,
commencing April 1, 2007, the percentage equal to the published, annualized
interest rate on the five-year U.S. Treasury Note based on the most recent
weekly average yield, adjusted to a constant maturity of five years, as made
available by the Federal Reserve Board, in effect on the April 1 commencing such
five year period, plus 1.58% per annum. For the six (6) month period following
an Event of Deposit Shortfall (as hereafter defined)(each such six (6) month
period shall be referred to as an "Event of Deposit Shortfall Period"), if any,
the Tax-Exempt Rate shall be increased by an additional (i) 0.16% for an

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Event of Deposit Shortfall less than or equal to $50,000, and (ii) 0.32% for an
Event of Deposit Shortfall ranging from $50,001 to $100,000, plus an additional
0.13% for each $50,000 increment in excess of $100,000.

     Upon the occurrence of a Determination of Taxability, the interest rate on
this Bond shall be adjusted immediately to the Taxable Rate, which shall be
computed as follows:

     The Taxable Rate shall mean (i) 7.00% per annum upon the occurrence of any
Determination of Taxability occurring on or before February 28, 2007, and (ii)
the percentage equal to the published, annualized interest rate for the
five-year U.S. Treasury Note based on the most recent weekly average yield,
adjusted to a constant maturity, as made available by the Federal Reserve Board,
in effect at the time of, and effective upon, the occurrence of any
Determination of Taxability occurring after April 1, 2007, plus 2.75%, and (iii)
in each case to be adjusted in accordance with this definition every five years
after the occurrence of any such Determination of Taxability. For the six (6)
month period following an Event of Deposit Shortfall, if any, the Taxable Rate
shall be increased by an additional (i) 0.25% for an Event of Deposit Shortfall
less than or equal to $50,000, and (ii) 0.50 % for an Event of Deposit Shortfall
ranging from $50,001 to $100,000, plus an additional 0.20% for each $50,000
increment in excess of $100,000.

     "Event of Deposit Shortfall" shall mean a failure by the Company and the
Lessee at any time during the term of this Bond to maintain in the aggregate an
average noninterest-bearing deposit account balance at the Bank in an amount
greater than or equal to $750,000, determined by the Bank on a semi-annual basis
commencing on the six month anniversary of the Closing Date.

     Upon the occurrence and continuance of an Event of Default, the interest
rate on this Bond shall be adjusted to the Default Rate, which shall mean a per
annum rate equal to the interest rate on this Bond in effect at the time of an
Event of Default (the Tax-Exempt or the Taxable Rate) plus 1%.

     Disbursements of principal of this Bond shall be made by the Bank from time
to time pursuant to requisitions submitted by the Company pursuant to the
provisions of the Loan Agreement. The Bank shall keep detailed records of each
disbursement of principal hereunder, and such records shall be conclusive and
binding upon the Authority and the Company, absent manifest error.

     On August 1, 2003, and on the first day of each and every month thereafter
to and including August 1, 2023, the Authority shall pay, solely from the source
and as hereinafter provided, monthly payments of principal as set forth for each
such month in an amortization schedule of 20 years to be completed by the Bank
and attached hereto and made a part hereof; subject, however, to earlier
prepayment as hereinafter provided. On August 1, 2023, this Bond shall mature
and all unpaid principal of and interest accrued on this Bond shall be finally
due and payable.

     If the Authority fails to pay any amount due hereunder within fifteen (15)
days of the due date thereof, the Authority shall pay to the holder of this
Bond, solely from the source and as hereinafter provided, interest on such
overdue payment from the due date thereof at a rate equal to the Default Rate.

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     The Authority or the Company, for and in the place and stead of the
Authority, its successors and assigns, shall have the right to prepay this Bond,
in whole or in part (but if in part, in multiples of $1,000), at any time or
times, upon payment of the (i) applicable principal amount being prepaid, (ii)
accrued interest on this Bond, (iii) all amounts that would have otherwise been
due and payable by the Company during the remainder of any Event of Deposit
Shortfall Period, if applicable, and (iv) any other amounts then due and payable
by the Company under the Bond Documents (as defined in the Loan Agreement).

     The Authority or the Company, for and in the place and stead of the
Authority, its successors and assigns, shall pay a prepayment premium (payable
whether such prepayment is undertaken voluntarily or by reason of default,
acceleration or otherwise) determined in accordance with the following
prepayment schedule (expressed as a percentage of the principal amount being
prepaid):

<Table>
     <S>                                       <C>
     Before April 1, 2003                      5%
     April 1, 2003 - March 31, 2004            4%
     April 1, 2004 - March 31, 2005            3%
     April 1, 2005 - March 31, 2006            2%
     April 1, 2006 - March 31, 2007            1%
     April 1, 2007 and thereafter              0%
</Table>

Any prepayment of this Bond, in whole or in part, shall be applied first to the
payment of interest accrued to the prepayment date and then to the reduction of
principal. Any prepayment of this Bond in part shall be applied to principal in
inverse chronological order and shall not reduce the amount of any annual
installment set forth above, except as otherwise agreed to by the Bank.

     Payment of the principal of and interest on this Bond shall be made to the
holder hereof at the offices of the Bank located at 1580 Seminole Trail, P.O.
Box 2853, Charlottesville, VA 22902-2853, or at such other place as shall be
designated by the holder of this Bond. The principal of and interest on this
Bond shall be payable in lawful money of the United States of America.

     This Bond is issued pursuant to the Virginia Industrial Development and
Revenue Bond Act, Title 15.2, Chapter 49, Code of Virginia of 1950, as amended,
a Bond Resolution duly adopted by the Authority on March 7, 2002 (hereinafter
called the "Resolution"), and a Bond Purchase Agreement dated as of April 1,
2002 (the "Bond Purchase Agreement"), among the Authority, the Bank, the Company
and the Lessee to assist the Company in financing the acquisition of
approximately 7.1 acres of land constituting Parcel F-1A in the University of
Virginia Research Park at North Fork in Albemarle County, Virginia, the
construction of an approximately 50,000 square foot manufacturing facility
thereon and the acquisition and installation of manufacturing equipment therefor
(the "Project"), to be owned by the Company, leased by the Lessee, and used in
the Lessee's business of manufacturing drug purification equipment, and to pay
certain costs of issuance of this Bond, all as more fully detailed in the Bond
Purchase Agreement.

     This Bond is secured by an assignment to the Bank of (i) all of the
Authority's rights, title and interest (except for certain rights to notice,
indemnification and payment of fees and expenses) in and to the Loan Agreement,
wherein the Authority has loaned the proceeds of the Bond to the Company

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to provide funds for a portion of the cost of constructing, acquiring and
installing the Project, and (ii) the Company's promissory note, dated as of the
Closing Date, and payable to the Authority in the principal amount of $4,250,000
(the "Company's Note"), given to the Authority pursuant to the Loan Agreement as
security for any and all amounts payable by the Company under the Loan Agreement
and the other Bond Documents. The Company's Note is further secured, among other
things, by a Credit Line Deed of Trust, Assignment and Security Agreement (the
"Deed of Trust") granted by the Company in favor of the Bank dated as of April
1, 2002, conveying certain real property more particularly described therein,
located in the County of Albemarle, Virginia, and granting security interests in
certain personal property, together with the Guaranty Agreements and the Letters
of Credit, each as defined in the Loan Agreement. Executed counterparts or
copies of the Resolution, Bond Purchase Agreement, Loan Agreement, Deed of
Trust, Company's Note, Guaranty Agreements and Letters of Credit are on file at
the offices of the Authority and the Bank and are referred to herein for a
description of the property pledged and assigned and the provisions, among
others, with respect to the nature and extent of the security for this Bond, the
rights, duties and obligations of the Authority and the Bank and the rights of
the holder of this Bond with respect thereto.

     The obligations of the Authority hereunder are not general obligations of
the Authority but are limited obligations of the Authority, the principal,
interest and premium (if any) of which are payable solely from and secured by
the security described herein, including the payments to be made by the Company
under the Company's Note and pursuant to the Loan Agreement. The obligations of
the Authority hereunder shall not be deemed to constitute a debt or a pledge of
the faith and credit of the Commonwealth of Virginia or any political
subdivision thereof, including the Authority and the County of Albemarle.
Neither the Commonwealth of Virginia nor any political subdivision thereof,
including the Authority and the County of Albemarle, shall be obligated to pay
the obligations hereunder or other costs incident thereto except from the
revenues and receipts pledged therefor, and neither the faith and credit nor the
taxing power of the Commonwealth of Virginia or any political subdivision
thereof, including the Authority and the County of Albemarle, is pledged to the
payment of the obligations hereunder. The Authority has no taxing power.

     Upon failure to pay principal of and interest on this Bond within fifteen
(15) days of when due, or the occurrence of an Event of Default, as defined in
the Bond Purchase Agreement, each of which failure or occurrence shall be a
default hereunder, the holder hereof at its option may thereupon by written
notice to the Authority and the Company declare to be immediately due and
payable the entire principal balance and all accrued interest hereon and any
other amounts due and payable under the Bond Documents.

     This Bond may not be modified, renewed or extended without the prior
written approval of the Authority, the Company and the holder.

     This Bond shall not be transferred by the registered holder hereof except
upon (i) execution by such registered holder of the form of assignment appearing
at the foot of this Bond, (ii) delivery hereof to such assignee and (iii)
notification of such assignment to the Authority, which shall thereupon be
deemed to be a registration of the new holder hereof by the Authority.

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     IN WITNESS WHEREOF, the INDUSTRIAL DEVELOPMENT AUTHORITY OF ALBEMARLE
COUNTY, VIRGINIA, has caused this Bond to be executed in its name by the manual
signature of its Chairman or Vice Chairman, and its corporate seal to be
hereunto affixed, impressed, imprinted or otherwise reproduced hereon, and
attested by the manual signature of its Secretary or Assistant Secretary, all as
of the date first above written.

                               INDUSTRIAL DEVELOPMENT AUTHORITY OF ALBEMARLE
                               COUNTY, VIRGINIA

                               By: /s/ John C. Lowry
                                   ---------------------------------------
                                       Vice Chairman

(SEAL)

Attest:

/s/ Ellora Young
------------------------------------
         Assistant Secretary

<Page>

ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned registered holder of the foregoing
$4,250,000 principal amount Industrial Development Authority of Albemarle
County, Virginia, Industrial Development Revenue Bond (Biotage Project), Series
2002, does hereby assign, bargain, sell, transfer and convey such Bond to the
below-named assignee:

<Table>
<Caption>
                                         SIGNATURE OF
  ASSIGNEE AND NEW                      PRIOR REGISTERED
  REGISTERED HOLDER                    HOLDER AND ASSIGNOR                        DATE
-----------------------             -----------------------------               ----------
<S>                                 <C>                                         <C>

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

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

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

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

-----------------------             -----------------------------               ----------
</Table>

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                                                                      SCHEDULE A

                                   $4,250,000
         INDUSTRIAL DEVELOPMENT AUTHORITY OF ALBEMARLE COUNTY, VIRGINIA
                       INDUSTRIAL DEVELOPMENT REVENUE BOND
                                (BIOTAGE PROJECT)
                                   SERIES 2002

                           MONTHLY PRINCIPAL PAYMENTS

     The principal amounts shown below are due on the first day of each month
during the periods shown below:

<Table>
<Caption>
                  PERIOD                              MONTHLY AMOUNT
                  ------                              --------------
                  <S>                                 <C>

           [To be completed by Bank as provided in the attached Bond.]
</Table>

<Page>

     THIS BOND PURCHASE AGREEMENT, made as of the 1st day of April, 2002, by and
among the INDUSTRIAL DEVELOPMENT AUTHORITY OF ALBEMARLE COUNTY, VIRGINIA, a
political subdivision of the Commonwealth of Virginia (the "Authority"),
VIRGINIA NATIONAL BANK, a national banking organization (the "Bank"), BIOTAGE
REAL ESTATE, LLC, a Virginia limited liability company (the "Company"), and
BIOTAGE, INC., a Delaware corporation (the "Lessee").

W I T N E S S E T H:

     WHEREAS, the Authority intends to issue and sell to the Bank its Industrial
Development Revenue Bond (Biotage Project), Series 2002, in the principal amount
of Four Million Two Hundred Fifty Thousand Dollars ($4,250,000) (the "Bond"), to
assist the Company in financing the acquisition of approximately 7.1 acres of
land constituting Parcel F-1A in the University of Virginia Research Park at
North Fork in Albemarle County, Virginia, the construction of an approximately
50,000 square foot manufacturing facility thereon and the acquisition and
installation of manufacturing equipment therefor (the "Project"), to be owned by
the Company and leased to the Lessee, and used in the Lessee's business of
manufacturing drug purification equipment, and to pay certain costs of issuance
of the Bond.

     WHEREAS, the Authority has determined to lend the proceeds of the Bond to
the Company pursuant to a Loan Agreement, dated as of April 1, 2002 (the "Loan
Agreement"), between the Authority, the Company and the Lessee, to pay the cost,
in part, of the construction, acquisition and installation of the Project;

     WHEREAS, the Authority intends to assign to the Bank, as security for the
Bond, the Authority's rights (except for certain rights to notices,
indemnification and payment of its fees and expenses) under the Loan Agreement,
together with the Company's promissory note, dated as of the Closing Date, in
the principal amount of $4,250,000 (the "Company's Note"), given to the
Authority pursuant to the Loan Agreement;

     WHEREAS, the payment of the Company's Note is secured by a Credit Line Deed
of Trust, Assignment and Security Agreement, dated as of April 1, 2002 (the
"Deed of Trust"), from the Company to certain individual trustees and to the
Bank, mortgaging the Company's interest in the Real Estate (as hereafter
defined), assigning all leases of the Real Estate and all rents, revenues and
profits therefrom and creating security interests in certain personal property
of the Company, together with the Guaranty Agreements and the Letters of Credit
(each as hereafter defined) all as security for the payment of the Company's
Note;

     WHEREAS, the Authority, the Bank, the Company and the Lessee desire to set
forth the terms and conditions with respect to the issuance of the Bond and the
construction, acquisition and installation of the Project;

     NOW, THEREFORE, the parties hereto agree as follows:

<Page>

     Section 1. DEFINITIONS. In addition to other terms defined elsewhere in
this Agreement, the following terms shall have the following meanings in this
Agreement unless the context otherwise requires:

     "Act" shall mean the Virginia Industrial Development and Revenue Bond Act,
Title 15.2, Chapter 49, Code of Virginia of 1950, as amended.

     "Act of Bankruptcy" shall mean the Company's (1) application for or consent
to the appointment of a receiver, trustee, liquidator or custodian or the like
of itself or of its property, or (2) admission in writing its inability to pay
its debts generally as they become due, or (3) making a general assignment for
the benefit of creditors, or (4) adjudication as a bankrupt or insolvent, or (5)
commencement of a voluntary case under the United States Bankruptcy Code, or
filing of a voluntary petition or answer seeking reorganization, an arrangement
with creditors or an order for relief, or seeking to take advantage of any
insolvency law or filing of an answer admitting the material allegations of a
petition filed against it in any bankruptcy, reorganization, or insolvency
proceeding, or taking action for the purpose of effecting any of the foregoing,
or (6) suffering, without the application, approval or consent of the Company,
the institution of a proceeding in any court of competent jurisdiction, under
any law relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking in respect of the Company an order for relief or any adjudication in
bankruptcy, reorganization, dissolution, winding up, liquidation, a composition
or arrangement with creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or the like of the Company or of all
or any substantial part of its assets, or other like relief thereof under any
bankruptcy or insolvency law, and, if such proceeding is being contested by the
Company in good faith, the same shall (A) result in the entry of an order for
relief or any such adjudication or appointment or (B) remain unvacated,
undismissed and undischarged for a period of sixty (60) days.

     "Authorized Company Representative" shall mean David B. Patteson, Manager
of Biotage Real Estate, LLC, or such other person or persons as may be
designated to act on behalf of the Company by certificate signed by David B.
Patteson or all of the members of the Company and filed with the Authority and
the Bank.

     "Authorized Lessee Representative" shall mean David B. Patteson, President
of the Lessee, or such other person or persons as may be designated to act on
behalf of the Lessee by certificate signed by David B. Patteson or all of the
directors of the Lessee and filed with the Authority and the Bank.

     "Bond Documents" shall mean this Agreement, the Bond, the Loan Agreement
and the Company's Note and the assignments thereof to the Bank, the Deed of
Trust, the Guaranty Agreements and the Letters of Credit.

     "Building" shall mean all structures now existing or hereafter erected on
the Real Estate.

     "Closing Date" shall mean the date of issuance and delivery of the Bond.

     "Commonwealth" shall mean the Commonwealth of Virginia.

     "Event of Default" shall mean any of the events defined as such in
Section 9.

<Page>

     "Guaranty Agreements" shall mean the Guaranty Agreements from Dyax Corp.,
and Biotage, Inc. executed in favor of the Bank securing the entire principal
of, premium, if any, interest on the Bond, and all other amounts payable by the
Company under the Bond Documents, in form and substance acceptable to the Bank.

     "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended.

     "Land" shall mean the Land, as defined in the Deed Of Trust.

     "Letters of Credit" shall mean the (i) $300,000 letter of credit secured by
Stephen T. McLean and the (ii) $300,000 letter of credit secured by David P.
Turner, in each case in form and substance acceptable to the Bank, issued by
institutions acceptable to the Bank, and issued in favor of the Bank as security
for repayment of the Bond and any other amounts payable by the Company under the
Bond Documents.

     "Real Estate" shall mean the Land and the Building, all as they may at any
time exist.

     "Virginia Code" shall mean the Code of Virginia of 1950, as amended.

     Section 2. REPRESENTATIONS AND FINDINGS BY AUTHORITY. The Authority makes
the following representations as the basis for its undertakings hereunder:

             (a) The Authority is duly organized as a political subdivision, a
body politic and corporate, under the Act, has the power to enter into the
transactions contemplated by this Agreement and to carry out its obligations
hereunder and by proper corporate action has duly authorized the execution and
delivery of, and the performance under, this Agreement.

             (b) The Authority has the power to construct, acquire and install
the Project from the proceeds of the sale of the Bond, such construction,
acquisition and installation being in furtherance of the purposes for which the
Authority was organized.

             (c) The Authority has the power to enter into this Agreement and
the Loan Agreement, to assign the Company's Note and its rights under the Loan
Agreement to the Bank, and to carry out its obligations hereunder and
thereunder; by proper corporate action has duly authorized the execution and
delivery of this Agreement and the Loan Agreement, the assignment of the
Company's Note and its rights under the Loan Agreement to the Bank and the
performance of its obligations hereunder and thereunder and the issuance of the
Bond; and, simultaneously with the execution and delivery of this Agreement, has
duly executed and delivered the Loan Agreement, assigned the Company's Note and
the Authority's rights under the Loan Agreement to the Bank and issued and sold
the Bond.

             (d) The Authority finds that the construction, acquisition and
installation of the Project and the leasing thereof to the Lessee will serve the
purposes of the Act.

<Page>

     Section 3. REPRESENTATIONS AND AGREEMENTS BY COMPANY. The Company makes the
following representations as the basis for its undertakings hereunder and agrees
with the Authority and the Bank as follows:

             (a) The Company is a limited liability company duly organized and
validly existing under the laws of the Commonwealth of Virginia, has the power
to enter into this Agreement, the Loan Agreement, the Company's Note and the
Deed of Trust and the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder, and by proper action has duly
authorized the execution and delivery of this Agreement, the Loan Agreement, the
Company's Note the Deed of Trust and the performance of its obligations
hereunder and thereunder.

             (b) This Agreement and the other Bond Documents executed and
delivered by the Company have been duly authorized, executed and delivered by
the Company, constitute the valid and legally binding obligations of the
Company, and are enforceable against the Company in accordance with their
respective terms; except to the extent that enforceability may be affected by
any bankruptcy or insolvency proceeding filed by or against the Company and
subject to the exercise of judicial discretion in accordance with general
principles of equity.

             (c) There is no litigation at law or in equity or any proceeding
before any governmental agency involving the Company pending, or to the
knowledge of the Company threatened, in which any liability of the Company is
not adequately covered by insurance or in which any judgment or order would have
a material adverse effect upon the business or assets of the Company, the
Company's ability to do business, the operation of the Project, the validity of
any of the Bond Documents or the performance of the Company's obligations
thereunder.

             (d) There is (i) no provision of the Company's articles of
organization, operating agreement or other organizational documents, (ii) no
provision of any existing mortgage, indenture, contract or agreement binding on
the Company or affecting the Company's property (except for certain rights
contained in the Permitted Encumbrances as defined in the Bond Documents), and
(iii) to the knowledge of the Company, no provision of law or order of any court
binding on the Company or affecting any of the Company's property (except for
certain rights contained in the Permitted Encumbrances as defined in the Bond
Documents), which would conflict with or in any way prevent the execution,
delivery, or performance of the terms of this Agreement or any of the other Bond
Documents executed and delivered by the Company, or which would be in default or
violated as a result of such execution, delivery or performance, or for which
adequate consents or waivers have not been obtained.

             (e) The Company presently intends to operate the Project, or to
cause it to be operated, as a manufacturing facility for drug purification
equipment until the payment in full of the Bond.

             (f) The Company is not in default under or in default under or in
violation of, and the execution and delivery of the Bond Documents, the
performance by the Company of its obligations hereunder and thereunder and the
consummation of the transactions herein and therein

<Page>

contemplated will not conflict with or constitute a breach or result in a
violation of, the Company's articles of organization or operating agreement, any
agreement or instrument to which the Company is a party or by which it is bound
or any constitutional or statutory provision or order, rule, regulation, decree
or ordinance of any court, government or governmental authority having
jurisdiction over the Company or its property, and no event has occurred and is
continuing which would, with the lapse of time or giving of notice or both,
constitute or result in such a default or violation.

             (g) Neither this Agreement, the Loan Agreement, the Company's Note,
the Deed of Trust nor any information (financial or otherwise) furnished by or
on behalf of the Company in connection with the negotiation of the sale of the
Bond to the Bank contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading. There is no fact that the Company has not disclosed in writing to
the Bank that materially affects adversely or, so far as the Company can now
foresee, based on facts known to it and based on opinions concerning such facts,
will materially affect adversely the properties, business, prospects, profits or
condition (financial or otherwise) of the Company or the ability of the Company
to perform its obligations under the Bond Documents.

             (h) To the best of the Company's knowledge, no person or entity
has, or as a result of any action of or by the Company in connection with the
transactions contemplated hereby and by the other Bond Documents will have, any
right, interest or valid claim against or on the Bank or the Authority for any
commission, fee or other compensation as a broker or finder, or in any similar
capacity (other than a fee to the Bank and an issuance fee to the Authority,
which fees are the obligations solely of the Company). The Company shall pay any
and all such fees, commissions or other compensation and shall indemnify the
Bank and the Authority against any claimed fee, commission or other compensation
arising from or in connection with the transactions contemplated hereby or by
the Bond Documents.

             (i) The Company represents that it has not used or allowed the use
of, and agrees that, barring circumstances unforeseen on the Closing Date and to
the extent within its control, it will not use or permit the use of the proceeds
of the Bonds in a manner other than as described in the Non-Arbitrage
Certificate of the Authority delivered at the Closing.

             (j) The Company hereby represents and warrants that the information
contained in the certificates, agreements or letters of representation of the
Company with respect to the compliance with the requirements of Sections 141 -
150 of the Internal Revenue Code, including the information in Internal Revenue
Service Form 8038 (excluding the issue number and the employer identification
number of the Authority), filed by the Authority with respect to the Bond and
the Project, and in the Company's Tax Information Certificate and Agreement
delivered on the Closing Date, is true and correct in all material respects.

     Section 4. REPRESENTATIONS AND AGREEMENTS BY LESSEE. The Lessee makes the
following representations as the basis for its undertakings hereunder and agrees
with the Authority and the Bank as follows:

<Page>

             (a) The Lessee is a corporation duly incorporated and validly
existing under the laws of the State of Delaware, has the power to enter into
this Agreement, the Loan Agreement and the transactions contemplated hereby and
thereunder, and to perform its obligations hereunder and thereunder, and by
proper action has duly authorized the execution and delivery of this Agreement
and the Loan Agreement and the performance of its obligations hereunder and
thereunder.

             (b) This Agreement, the Loan Agreement and the other Bond Documents
executed and delivered by the Lessee have been duly authorized, executed and
delivered by the Lessee, constitute the valid and legally binding obligations of
the Lessee, and are enforceable against the Lessee in accordance with their
respective terms; except to the extent that enforceability may be affected by
any bankruptcy or insolvency proceeding filed by or against the Lessee and
subject to the exercise of judicial discretion in accordance with general
principles of equity.

             (c) There is no litigation at law or in equity or any proceeding
before any governmental agency involving the Lessee pending, or to the knowledge
of the Lessee threatened, in which any liability of the Lessee is not adequately
covered by insurance or in which any judgment or order would have a material
adverse effect upon the business or assets of the Lessee, the Lessee's ability
to do business, the operation of the Project, the validity of any of the Bond
Documents or the performance of the Lessee's obligations thereunder.

             (d) There is (i) no provision of the Lessee's articles of
incorporation, by-laws or other incorporating documents, (ii) no provision of
any existing mortgage, indenture, contract or agreement binding on Lessee or
affecting the Lessee's property, and (iii) to the knowledge of the Lessee, no
provision of law or order of any court binding on the Lessee or affecting any of
the Lessee's property, which would conflict with or in any way prevent the
execution, delivery, or performance of the terms of this Agreement, the Loan
Agreement or any of the other Bond Documents executed and delivered by the
Lessee, or which would be in default or violated as a result of such execution,
delivery or performance, or for which adequate consents or waivers have not been
obtained.

             (e) The Lessee presently intends to operate the Project, or to
cause it to be operated, as a manufacturing facility for drug purification
equipment until the payment in full of the Bond.

             (f) The Lessee is not in default under or in default under or in
violation of, and the execution and delivery of the Bond Documents, the
performance by the Lessee of its obligations hereunder and thereunder and the
consummation of the transactions herein and therein contemplated will not
conflict with or constitute a breach or result in a violation of, the Lessee's
articles of incorporation or by-laws, any agreement or instrument to which the
Lessee is a party or by which it is bound or any constitutional or statutory
provision or order, rule, regulation, decree or ordinance of any court,
government or governmental authority having jurisdiction over the Lessee or its
property, and no event has occurred and is continuing which would, with the
lapse of time or giving of notice or both, constitute or result in such a
default or violation.

<Page>

             (g) Neither this Agreement, the Loan Agreement nor any information
(financial or otherwise) furnished by or on behalf of the Lessee in connection
with the negotiation of the sale of the Bond to the Bank contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein not misleading. There is no fact that the
Lessee has not disclosed in writing to the Bank that materially affects
adversely or, so far as the Lessee can now foresee, based on facts known to it
and based on opinions concerning such facts, will materially affect adversely
the properties, business, prospects, profits or condition (financial or
otherwise) of the Lessee or the ability of the Lessee to perform its obligations
under the Bond Documents.

             (h) To the best of the Lessee's knowledge, no person or entity has,
or as a result of any action of or by the Lessee in connection with the
transactions contemplated hereby and by the other Bond Documents will have, any
right, interest or valid claim against or on the Bank or the Authority for any
commission, fee or other compensation as a broker or finder, or in any similar
capacity (other than a fee to the Bank and an issuance fee to the Authority,
which fees are the obligations solely of the Company ). The Lessee shall pay or
Lessee shall cause the Company to pay any and all such fees, commissions or
other compensation and shall indemnify the Bank and the Authority against any
claimed fee, commission or other compensation arising from or in connection with
the transactions contemplated hereby or by the other Bond Documents.

             (i) The Lessee represents that it has not used or allowed the use
of, and agrees that, barring circumstances unforeseen on the Closing Date and to
the extent within its control, it will not use or permit the use of the proceeds
of the Bonds in a manner other than as described in the Non-Arbitrage
Certificate of the Authority delivered at the Closing.

             (j) The Lessee hereby represents and warrants that the information
contained in any certificates, agreements or letters of representation of the
Lessee with respect to the compliance with the requirements of Sections 141 -
150 of the Internal Revenue Code, including the information in Internal Revenue
Service Form 8038 (excluding the issue number and the employer identification
number of the Authority), filed by the Authority with respect to the Bond and
the Project, and, if applicable, in the Lessee's Tax Information Certificate and
Agreement delivered on the Closing Date, is true and correct in all material
respects.

     Section 5. SALE AND PURCHASE OF BOND; REPRESENTATIONS OF BANK; LIMITATION
OF LIABILITY OF AUTHORITY. The Authority shall issue and sell the Bond, in the
form attached hereto as Exhibit A, to the Bank and secure the Bond by assigning
to the Bank the Company's Note and the rights of the Authority under the Loan
Agreement pursuant to Section 4.2 of the Loan Agreement, and the Bank shall
purchase the Bond at the principal amount thereof by accepting the Bond and its
obligations to make disbursement of the principal thereof, including an initial
disbursement on the Closing Date, to pay the costs of the Project according to
the procedures set forth in the Loan Agreement, all upon the terms and
conditions set forth herein and in the Loan Agreement.

     The Bank represents the following in connection with its purchase of the
Bond:

<Page>

             (a) It understands that the Bond (i) is not being registered under
the Securities Act of 1933 and is not being registered or otherwise qualified
for sale under the "Blue Sky" laws and regulations of any state, (ii) will carry
no rating from any rating service and (iii) may not be readily marketable, and
it acknowledges that as purchaser of the Bond it may have to bear the economic
risk of the investment for an indefinite period of time because the Bond has not
been registered under the Securities Act of 1933 and, therefore, cannot be sold
unless it is subsequently registered under such Act or an exemption from such
registration is available. It will not offer the Bond nor any participation
therein for sale in any state of the United States of America except in
accordance with all applicable federal and state securities laws and will
provide the Authority with an opinion of counsel prior to any such offer that no
registration is necessary because of an exemption.

             (b) It acknowledges that it is familiar with the operations and
financial condition of the Company and the Lessee based upon information
provided by the Company and that it has made such inquiries as it deems
appropriate in connection with the purchase of the Bond; it is capable of
evaluating the merits and risks of the purchase of the Bond, and it is able to
bear the economic risks of the investment represented by its purchase of the
Bond.

             (c) It understands that (i) the Bond is not a general obligation of
the Authority or of the Commonwealth of Virginia or any political subdivision
thereof, (ii) the Bond constitutes a special, limited obligation of the
Authority, (iii) the Bond does not constitute a debt or pledge of the faith and
credit or the revenues, except from the Loan Agreement and the Company's Note,
or the taxing power of the Authority or of the Commonwealth of Virginia or any
political subdivision thereof, and (iv) the payment of interest on and the
premium, if any, and principal of the Bond depends upon the general credit of
the Company and the security provided by the Deed of Trust, the Loan Agreement,
and the Company's Note;

             (d) It understands that no offering statement, prospectus, offering
circular, disclosure document or other comprehensive offering statement
containing material information with respect to the Authority, the Company, or
the Lessee is being issued, and it expressly waives the right to receive any
information (including financial information) relating to the Authority, the
Company and the Lessee, and their affairs from the Authority and relieves the
Authority of any liability for failure to provide such information.

     It is specifically understood and agreed that the Authority makes no
representation, covenant or agreement as to the financial position or business
condition of the Company or the Lessee and does not represent or warrant as to
any statements, materials, representations or certifications furnished by the
Company or the Lessee in connection with the sale of the Bond, or as to the
correctness, completeness or accuracy thereof.

     Section 6. CONDITIONS PRECEDENT TO DELIVERY OF BOND. The Bank shall accept
delivery of and pay for the Bond only upon delivery to it, all in form and
substance satisfactory to it, of the items described in Sections 3.12(a)-(e) of
the Loan Agreement and of the following:

<Page>

             (a) BOND DOCUMENTS. Executed copies of this Agreement, the Loan
Agreement, the Deed of Trust and the Company's Note (duly assigned to the Bank),
together with evidence of their authorization, execution, delivery and, if
required, recordation.

             (b) TITLE INSURANCE. Mortgagee title insurance policies naming the
Bank as insured on ALTA Standard Policy - Revised Coverage in an amount equal to
$4,250,000, issued by a title insurance company acceptable to the Bank, insuring
that the Deed of Trust is a valid lien and that the real property is insured
without exception for any mechanics' liens, materialmen's liens, or any other
liens, easements, restrictions or other encumbrances of any kind whatsoever
(other than such liens and exceptions from coverage as are acceptable to the
Bank), and otherwise in form and substance acceptable to the Bank.

             (c) LIABILITY INSURANCE. Evidence of public liability insurance,
workmen's compensation and hazard insurance for the greater of (i) the full
amount of the Bond or (ii) 100% of the insurable value of the Project, with
fire, extended coverage, vandalism and malicious mischief protection, and
subject to a standard mortgagee's endorsement in favor of the Bank and 30 days'
notice to the Bank prior to cancellation, issued by an insurance company
acceptable to the Bank, and otherwise in accordance with the requirements of the
Deed of Trust.

             (d) ENVIRONMENTAL SURVEY REPORT. Evidence that the site of the
Project has not been used for handling, storage, transportation, disposal or
other use of any hazardous or toxic waste materials other than in full
compliance with all applicable laws and that there is no evidence of the
presence or use of any toxic material or hazardous waste on the site. The Bank
reserves the right to require an environmental audit acceptable to the Bank, at
the Company's expense.

             (e) SURVEY. A current plat of survey prepared by a certified state
engineer or certified land surveyor designating (i) the perimeter of the Real
Estate, (ii) all easements, right-of-ways, set-back lines, etc., (iii) the
location of the improvements and (iv) such other matters as may be required by
the Bank, together with a legal description of the Real Estate certified to the
Bank and, at the Bank's option, the title insurer.

             (f) PERMITS, ETC. Evidence that the Project satisfies all
governmental laws, ordinances, rules, charters, bylaws, regulations,
restrictions and environmental matters affecting the Real Estate together with
copies of all building permits and all other permits necessary for the Project.

             (g) ORGANIZATIONAL DOCUMENTATION. Copies of the organizational
documents for the Company for the Bank's review and approval, together with
evidence of existence and good standing of the Company in all relevant
jurisdictions, together with certified resolutions at closing, authorizing the
indebtedness evidenced by the Company's Note and the obligations of the Company
under the Bond Documents and specifying the party authorized to sign all
documents on behalf of the Company.

<Page>

             (h) SPECIAL FLOOD HAZARD. Evidence in a form satisfactory to the
Bank conclusively demonstrating that the Project is not located within a Special
Flood Hazard area as defined by the U.S. Department of Housing and Urban
Development.

             (i) OTHER. Any and all other documents, instruments, opinions,
approvals and assurances customary in financing of a type similar to the Bond,
as such may be required pursuant to the Bank Commitment Letter or otherwise
reasonably required by the Authority or the Bank.

             (j) COMPANY'S OPINION. A written opinion of counsel to the Company
in form and substance satisfactory to the Bank stating that the Company is a
limited liability company duly organized and validly existing under the laws of
the Commonwealth of Virginia, has full power and authority to construct, acquire
and install the Project, to enter into, execute and deliver this Agreement, the
Loan Agreement, the Company's Note and the Deed of Trust and to perform its
obligations hereunder and thereunder, that the execution and delivery of this
Agreement, the Loan Agreement, the Company's Note and the Deed of Trust will not
violate the articles of organization or operating agreement of the Company or,
to the knowledge of such counsel, any contract or agreement to which the Company
is a party or by which it or any of its properties is bound, that this
Agreement, the Loan Agreement, the Company's Note and the Deed of Trust are each
valid, legal and binding obligations of the Company enforceable in accordance
with their terms.

             (k) LESSEE'S OPINION. A written opinion of counsel to the Lessee in
form and substance satisfactory to the Bank stating that the Lessee is a
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware, has full power and authority to construct, acquire and
install the Project, to enter into, execute and deliver this Agreement and the
Loan Agreement, and to perform its obligations hereunder and thereunder, that
the execution and delivery of this Agreement or the Loan Agreement will not
violate the articles of incorporation or by-laws of the Lessee or, to the
knowledge of such counsel, any contract or agreement to which the Lessee is a
party or by which it or any of its properties is bound, that this Agreement and
the Loan Agreement are each valid, legal and binding obligations of the Lessee
enforceable in accordance with its terms.

             (l) GUARANTY AGREEMENTS AND LETTERS OF CREDIT OPINIONS. Such legal
opinions, certificates and other documents as the Bank may require with respect
to the validity, legality and binding nature of the Guaranty Agreements and the
Letters of Credit and the accuracy of the representations, warranties and other
information set forth therein, in each case in form and substance acceptable to
the Bank.

             (m) BOND COUNSEL OPINION. The written opinion of Williams, Mullen,
Clark & Dobbins, P.C., Richmond, Virginia, Bond Counsel, that the Authority is a
duly constituted political subdivision established under the Act, that the Bond
has been duly authorized, executed and delivered, that this Agreement, the Bond,
the Loan Agreement and the assignments of the Loan Agreement and the Company's
Note to the Bank are valid and binding obligations of the Authority, and that
under existing statutes, regulations, rulings and case law, subject to customary
exceptions, interest on the Bond is not includable in the gross income of the
holder thereof for purposes of

<Page>

Federal income taxation and is exempt from all taxation by the Commonwealth of
Virginia and that no registration is required under the Securities Act of 1933
with respect to the Bond.

             (n) FILING. Evidence satisfactory to the Bank of the filing in all
proper offices of financing statements showing the Bank as secured party and
sufficient to perfect the security interests granted in the Deed of Trust.

             (o) COMMITMENT LETTER. Evidence satisfactory to the Bank that all
conditions to its purchase of the Bond set forth in its commitment letter
addressed to the Lessee for the benefit of the Company, dated December 13, 2001,
as revised on December 21, 2001 (the "Commitment Letter"), have been satisfied.

             (p) FEES AND EXPENSES. Payment by the Borrower to the Bank for all
reasonable costs and expenses incurred by the Bank and its counsel up to the
Closing Date, plus payment for all disbursements and out of pocket expenses
incurred by the Bank and its counsel up to Closing Date.

             (q) OTHER. Such other documentation and certificates as may be
required by the Bank or its counsel.

     Section 7. DISBURSEMENT OF BOND PROCEEDS. Disbursement of the proceeds of
the sale of the Bond shall be made by the Bank in payment for the Bond through
periodic disbursements to pay (or reimburse the Company for its payment of) the
cost of the Project as provided in the Loan Agreement.

     Section 8. COVENANTS OF THE COMPANY AND THE LESSEE. Until the termination
of this Agreement, unless the prior written consent to do otherwise is obtained
from the Bank and the Authority, the Company and the Lessee shall satisfy the
following covenants:

             (a) TAXES AND CLAIMS. The Company and the Lessee shall each pay and
discharge or cause to be paid and discharged all taxes imposed upon it or its
income or properties prior to the date on which penalties attach thereto, and
all lawful claims which, if unpaid, might become a lien or charge upon any of
its properties prior to the date on which penalties attach thereto. The Company
and the Lessee shall have the right to contest the validity of any such taxes by
timely and appropriate proceedings, provided that the Company or the Lessee, as
applicable, shall (a) give the Bank and the Authority written notice of its
intention to contest, (b) diligently prosecute such contest, (c) at all times
effectively stay or prevent any official or judicial sale of the Project or any
part thereof by reason of nonpayment of any such taxes, and (d) establish
reasonable reserves for such liabilities being contested if the Bank reasonably
determines such reserves to be necessary.

             (b) COMPLIANCE WITH LAWS. The Company and the Lessee shall each
comply with all applicable federal, state, and local laws, rules and
regulations.

     Section 9. ARBITRAGE AND REBATE. (a) The Company hereby covenants with, and
certifies to, and for the benefit of, the holder of the Bond and the Authority
that so long as the Bond remains outstanding, moneys on deposit in any fund or
account established, maintained or permitted to be established or maintained
under any of the Bond Documents in connection with the Bond, whether or

<Page>

not such moneys were derived from the proceeds of the sale of the Bond or from
any other source, will not be used or invested in a manner which will cause the
Bond to be classified as "arbitrage bonds" within the meaning of Section 148(a)
of the Internal Revenue Code. The Company obligates itself to comply with the
requirements of Section 148 of the Internal Revenue Code and any regulations,
whether temporary or final, promulgated thereunder or relating thereto,
including but not limited to Treasury Regulation Sections 1.148-0 through
1.148-11 (such Section 148 and such regulations hereinafter referred to as the
"Arbitrage Rules").

             (b) Except with respect to earnings on funds and accounts
qualifying for an exception to the rebate requirement of Section 148 of the
Internal Revenue Code, the Company will compute and pay to the United States of
America the amount, if any, required by Section 148(f)(2) of the Internal
Revenue Code (the "Rebate Amount"), as provided in the following subsections of
this section.

             (c) The Authority, at the direction of the Company, selects April 1
as the end of each bond year with respect to the Bond. The fifth April 1
following the issuance of the Bond will be the initial installment computation
date for the Bond pursuant to Treasury Regulations Section 1.148-3(e) (the
"Initial Installment Computation Date"), unless the Authority, at the direction
of the Company, delivers to the Bank a certificate, signed by an authorized
Authority officer, selecting another date to be the installment computation date
prior to the date on which any amount with respect to the Bond is paid or
required to be paid to the United States of America as required by Section 148
of the Internal Revenue Code.

             (d) Within 30 days after the Initial Installment Computation Date,
unless such date is changed by the Authority pursuant to paragraph (c), and at
least once every five years thereafter, the Company will cause the Rebate Amount
with respect to the Bond to be computed and will deliver a copy of such
computation (the "Rebate Amount Certificate") to the Bank. Prior to any payment
of the Rebate Amount with respect to the Bond to the United States of America as
required by Section 148 of the Internal Revenue Code, the Rebate Amount
Certificate setting forth such Rebate Amount shall be prepared or approved by
(i) an independent certified public accountant, (ii) any recognized, independent
arbitrage rebate calculation service acceptable to the Bank or the Authority or
(iii) Bond Counsel.

             (e) Not later than 60 days after the Initial Installment
Computation Date, the Company, on behalf of the Authority, shall pay to the
United States of America 90% of the Rebate Amount with respect to the Bond as
set forth in the Rebate Amount Certificate prepared with respect to the Initial
Installment Computation Date. At least once on or before 60 days after the
installment computa-tion date that is the fifth anniversary of the Initial
Installment Computation Date and on or before 60 days after every fifth
anniversary date thereafter until payment in full of the Bond, the Company, on
behalf of the Authority, shall pay to the United States of America the amount,
if any, by which 90% of the Rebate Amount with respect to the Bond set forth in
the most recent Rebate Amount Certificate exceeds the aggregate of all such
payments theretofore made to the United States of America pursuant to this
section. On or before 60 days after payment in full of the Bond, the Company, on
behalf of the Authority, shall pay to the United States of America the amount,
if any, by which 100% of the Rebate Amount with respect to the Bond set forth in
the Rebate Amount

<Page>

Certificate for the date of payment of the Bond exceeds the aggregate of all
payments theretofore made pursuant to this Section.

             (f) Notwithstanding anything contained herein to the contrary, no
such payment will be made if the Company receives and delivers to the Authority
and the Bank an opinion of Bond Counsel that such payment is not required under
the Code to prevent the Bond from becoming "arbitrage bonds" within the meaning
of Section 148 of the Internal Revenue Code.

             (g) The Authority shall not be liable to the Company by way of
contribution, indemnification, counterclaim, set-off or otherwise for any
payment made or expense incurred by the Company pursuant to this Section,
notwithstanding that payments to the Authority pursuant to this Section or
investment by the Bank of such payments may result in whole or in part in the
Company's liability for such payment or expense.

             (h) Within sixty (60) days after the date of payment of the Bond,
the Company shall take all necessary steps to comply with the rebate
requirements of Section 148(f) of the Internal Revenue Code and the Treasury
Regulations thereunder, with respect to the Bond.

     NOTHING CONTAINED HEREIN SHALL BE INTERPRETED OR CONSTRUED TO REQUIRE THE
AUTHORITY OR THE BANK TO CALCULATE OR TO PAY THE "REBATE AMOUNT," SAME BEING THE
SOLE AND EXCLUSIVE RESPONSIBILITY AND OBLIGATION OF THE COMPANY.

     Section 10. EVENTS OF DEFAULT; REMEDIES OF BANK. Each of the following
shall constitute an Event of Default by the Company or the Lessee, as
applicable, under this Agreement:

             (a) An Event of Default under any of the Bond Documents;

             (b) Any representation or warranty made herein or any statement or
representation made in any certificate, report or opinion (including legal
opinions), financial statement or other instrument furnished in connection with
this Agreement or any of the other Bond Documents, proves to have been incorrect
in any material respect when made;

             (c) The Company or the Lessee fails to duly and promptly perform,
comply with or observe any term, covenant, condition or agreement contained in
this Agreement within a period of thirty (30) days after notice of such failure
is given by the Authority or the Bank to the Company and the Lessee (unless the
Company, the Lessee and the Bank shall agree in writing to an extension of such
time prior to its expiration) specifying such failure and requesting that it be
remedied, or in the case of any such default which cannot with due diligence be
cured within such 30-day period, failure of the Company or the Lessee to proceed
promptly to cure the same and thereafter prosecute the curing of the same with
due diligence; and

             (d) An Act of Bankruptcy occurs with respect to the Company or the
Lessee (and in the case of an involuntary petition in bankruptcy or similar
proceeding, such petition or proceeding is not discharged, subject to no further
appeals, within sixty days of the date of filing), or the Company or the Lessee
becomes generally unable to pay its debts as they become due.

<Page>

     Upon the occurrence and continuation of an Event of Default hereunder, the
Bank may upon written notice to the Company enter into possession of the Project
and exercise any other remedy under the Bond, the Deed of Trust, the Loan
Agreement or the Company's Note.

     Section 11. AUTHORITY, DIRECTORS, OFFICERS, AGENTS, ATTORNEYS AND EMPLOYEES
OF AUTHORITY NOT LIABLE. To the extent permitted by law, no recourse shall be
had for the enforcement of any obligation, promise or agreement of the Authority
contained herein or in the other Bond Documents to which the Authority is a
party or for any claim based hereon or thereon or otherwise in respect hereof or
thereof against the Authority, any director, officer, agent, attorney or
employee, as such, in his/her individual capacity, past, present or future, of
the Authority or of any successor entity, either directly or through the
Authority, whether by virtue of any constitutional provision, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise. No
personal liability whatsoever shall attach to, or be incurred by, any director,
officer, agent, attorney or employee, as such, in his/her individual capacity,
past, present or future, of the Authority or of any successor entity, either
directly or through the Authority or any successor entity, under or by reason of
any of the obligations, promises or agreements entered into between the
Authority and the Company, whether herein contained or to be implied herefrom as
being supplemental hereto; and all personal liability of that character against
every such director, officer, agent, attorney or employee is, by the execution
of this Agreement and as a condition of, and as part of the consideration for,
the execution of this Agreement, expressly waived and released.

     Notwithstanding any other provision of this Agreement, the Authority shall
not be liable to the Company or the Bank or any other person for any failure of
the Authority to take action required of it under this Agreement unless the
Authority (a) is requested in writing by an appropriate person to take such
action, (b) is assured of payment of, or reimbursement for, any reasonable
expenses in such action, and (c) is afforded, under the existing circumstances,
a reasonable period to take such action. In acting under this Agreement, or in
refraining from acting under this Agreement, the Authority may conclusively rely
on the advice of its counsel.

     Section 12. NO LIABILITY OF AUTHORITY; NO CHARGE AGAINST AUTHORITY'S
CREDIT.

             (a) No covenant, agreement or obligation contained in this
Agreement shall be deemed to be a covenant, agreement or obligation of any
present or future director, officer, employee or agent of the Authority in his
individual capacity, and neither the directors of the Authority nor any officer
thereof executing the Bond shall be liable personally on the Bond or be subject
to any personal liability or accountability by reason of the issuance thereof.
No director, officer, employee or agent of the Authority shall incur any
personal liability with respect to any other action taken by him pursuant to
this Agreement, the Bond, the Loan Agreement or the Act, provided he does not
act in bad faith.

             (b) The obligations of the Authority under this Agreement are not
general obligations of the Authority but are limited obligations of the
Authority, the principal, interest and premium (if any) of which are payable
solely from and secured by the security described in the Bond Documents. The
obligations of the Authority hereunder shall not be deemed to constitute a debt
or a pledge of the faith and credit of the Commonwealth of Virginia or any
political subdivision thereof,

<Page>

including the Authority and the County of Albemarle. Neither the Commonwealth of
Virginia nor any political subdivision thereof, including the Authority and the
County of Albemarle, shall be obligated to pay the obligations hereunder or
other costs incident thereto except from the revenues and receipts pledged
therefor, and neither the faith and credit nor the taxing power of the
Commonwealth of Virginia or any political subdivision thereof, including the
Authority and the County of Albemarle, is pledged to the payment of the
obligations hereunder. The Authority has no taxing power.

     Section 13. INDEMNIFICATION BY COMPANY AND LESSEE. The Company and the
Lessee, jointly and severally, agree to indemnify and hold harmless the
Authority, any director, officer, official or employee of the Authority, the
Bank, any director, officer or employee of the Bank, and any person who
"controls" the Bank within the meaning of Section 15 of the Securities Act of
1933, as amended, and any other owner or holder of all or a portion of the Bonds
(collectively, the "Indemnified Parties"), against any and all losses, claims,
damages or liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in information submitted to the Authority
or to the Bank by the Company or the Lessee with respect to the issuance and
purchase of the Bond or caused by any omission or alleged omission of any
material fact necessary to be stated therein in order to make such statements to
the Authority and the Bank not misleading or incomplete. The obligation to
indemnify the Authority and the Bank undertaken in this section shall be in
addition to and shall not limit the obligation undertaken in Section 5.2 of the
Loan Agreement.

     If any action is brought against any Indemnified Party in respect of which
indemnity may be sought from the Company or the Lessee, such Indemnified Party
shall promptly notify the Company or the Lessee in writing, and the Company or
the Lessee shall assume the defense thereof, including the employment of
counsel, the payment of all expenses and the right to negotiate and consent to
settlement. Each Indemnified Party has the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel will be at the expense of such Indemnified Party unless
the employment of such counsel has been specifically authorized by the Company
or the Lessee, which authorization shall not be unreasonably withheld by the
Company or the Lessee. Neither the Company nor the Lessee will be liable for any
settlement of any such action made without its consent, but if settled with the
consent of the Company or the Lessee, as applicable, or if there be a final
judgment for the plaintiff in any such action, the Company or the Lessee, as
applicable, agrees to indemnify and hold harmless the Indemnified Parties from
and against any loss or liability by reason of such settlement or judgment.

     Section 14. NOTICES, ETC. Except as otherwise provided in this Agreement,
any request, demand, authorization, direction, notice, consent, waiver or other
document provided or permitted by this Agreement shall be sufficient for any
purpose under this Agreement and shall be deemed given when mailed by certified
mail, return receipt requested, postage prepaid (with a copy to the other
parties) at the following addresses (or such other address as may be provided by
any party by notice):

To the Authority:            Industrial Development Authority
                               of Albemarle County, Virginia
                             County Office Building, 4th Floor
                             401 McIntire Road

<Page>

                             Charlottesville, VA 22901-4596
                             Attention: Chairman

To the Company:              Biotage Real Estate, LLC
                             2020 Avon Court
                             P.O. Box 8006
                             Charlottesville, Virginia 22902
                             Attention: Mr. David B. Patteson, Manager

With a copy to:              Stephen T. McLean
                             2164 Orchard House Road
                             Charlottesville, Virginia 22903

With a copy to:              David P. Turner
                             500 Loblolly Lane
                             Charlottesville, Virginia 22903

To the Lessee:               Biotage, Inc.
                             2020 Avon Court
                             P.O. Box 8006
                             Charlottesville, Virginia 22902
                             Attention: Mr. David B. Patteson, President

To the Bank:                 Virginia National Bank
                             1580 Seminole Trail
                             P.O. Box 2853
                             Charlottesville, VA 22902-2853
                             Attention: David J. Mellen

With a copy to:              LeClair Ryan, A Professional Corporation
                             123 East Main Street, 8th Floor
                             Charlottesville, VA 22902
                             Attention: Steven W. Blaine, Esq.

     Section 15. MISCELLANEOUS. (a) The Company shall also pay when due and
payable (i) to the Bank, its reasonable costs, fees and expenses, including
attorneys fees, incurred in connection with its ownership of the Bonds and the
enforcement of any of its rights and remedies under the Bond Documents, and (ii)
to the Authority, its reasonable costs, fees and expenses directly related to
the Bond and the Project, including the reasonable fees and expenses of its
counsel, and, if in the future the Authority imposes an annual fee on all
industrial development bonds issued by it, an annual fee, due and payable
without notice or billing upon the issuance of the Bond and thereafter on each
anniversary date thereof until payment of the Bond in full, calculated on the
same basis as the fees imposed on all of the other bonds of the Authority
(provided, however, that such amount shall not equal or exceed an amount which
would cause the "yield" on the Company's Note, the Loan

<Page>

Agreement, this Agreement or any other "acquired purpose obligation" to be
"materially higher" than the "yield" on the Bond, as such terms are defined in
the Internal Revenue Code).

             (b) As to (i) the existence or non-existence of any fact or (ii)
the sufficiency, authenticity or validity of any notice, requisition, consent,
permit, certificate, authorization, order, instrument, paper, document or
proceeding or (iii) the accuracy, completeness, sufficiency or adequacy of any
statement, opinion or conclusion contained in any certificate, requisition,
request, document or other paper, the Authority shall be entitled to rely
conclusively on a certificate, requisition, request, document or other paper
signed on behalf of the Company by an Authorized Company Representative.

             (c) The Bank agrees to furnish to the Authority on request such
information with respect to the Bond as the Authority or its auditors may
reasonably request in connection with any audit of the Authority records or any
reports required to be filed by the Authority.

             (d) All accounting terms used herein which are not otherwise
expressly defined in this Agreement shall have the meanings respectively given
to them in accordance with generally accepted accounting principles. Except as
otherwise expressly provided herein, all financial computations made pursuant to
this Agreement shall be made in accordance with generally accepted accounting
principles consistently applied and all balance sheets and other financial
statements shall be prepared in accordance with generally accepted accounting
principles consistently applied.

             (e) This Agreement shall be binding upon, inure to the benefit of
and be enforceable by the parties hereto and the subsequent holders of the Bond
and their respective successors and assigns. The representations, covenants and
agreements contained herein shall continue notwithstanding the delivery of the
Bond to the Bank and the disbursement of the proceeds of the Bond to or for the
benefit of the Authority, the Company and the Lessee.

             (f) If any provision of this Agreement shall be held invalid by any
court of competent jurisdiction, such holding shall not invalidate any other
provision hereof.

             (g) This Agreement shall be governed by the applicable laws of the
Commonwealth. The Bond Documents express the entire understanding and all
agreements among the parties and may not be modified except in writing signed by
the respective parties thereto or their successors in interest thereto.

             (h) This Agreement may be executed in several counterparts, each of
which shall be an original, and all of which together shall constitute but one
and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this BOND PURCHASE
AGREEMENT to be executed in their respective names all as of the date first
above written.

                                      INDUSTRIAL DEVELOPMENT AUTHORITY
                                      OF ALBEMARLE COUNTY, VIRGINIA

<Page>

                                      By:  /s/ John C. Lowry
                                           ---------------------------------
                                               Vice Chairman

                                      VIRGINIA NATIONAL BANK

                                      By:  /s/ David J. Mellen
                                           ---------------------------------
                                      Its: Managing Officer
                                           ---------------------------------

                                      BIOTAGE REAL ESTATE, LLC

                                      By:  /s/ David B. Patteson
                                           ---------------------------------
                                      Its: Manager
                                           ---------------------------------

                                      BIOTAGE, INC.

                                      By:  /s/ David B. Patteson
                                           ---------------------------------
                                      Its: President
                                           ---------------------------------

<Page>

                                 LOAN AGREEMENT

                                  BY AND AMONG

                        INDUSTRIAL DEVELOPMENT AUTHORITY

                          OF ALBEMARLE COUNTY, VIRGINIA

                                       AND

                            BIOTAGE REAL ESTATE, LLC

                                       AND

                                  BIOTAGE, INC.

                            DATED AS OF APRIL 1, 2002

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

             THIS LOAN AGREEMENT HAS BEEN ASSIGNED TO, AND IS SUBJECT TO A
             SECURITY INTEREST IN FAVOR OF, VIRGINIA NATIONAL BANK, AS HOLDER OF
             THE INDUSTRIAL DEVELOPMENT AUTHORITY OF ALBEMARLE COUNTY, VIRGINIA,
             INDUSTRIAL DEVELOPMENT REVENUE BOND (BIOTAGE PROJECT), SERIES 2002.
             INFORMATION CONCERNING SUCH SECURITY INTEREST MAY BE OBTAINED FROM
             VIRGINIA NATIONAL BANK AT ITS OFFICES IN CHARLOTTESVILLE, VIRGINIA.

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

<Page>

                                TABLE OF CONTENTS
<Table>
<S>                                                                            <C>
ARTICLE I                                                                      1

DEFINITIONS AND RULES OF CONSTRUCTION                                          1

Section 1.1.   Definitions                                                     1

Section 1.2.   Rules of Construction                                           7

Section 1.3.   UCC                                                             8

Section 1.4.   References                                                      8

Section 1.5.   GAAP.                                                           8

ARTICLE II                                                                     8

REPRESENTATIONS                                                                8

Section 2.1.   Representations by Authority                                    8

Section 2.2.   Representations by Company                                      9

ARTICLE III                                                                    10

LOAN OF BOND PROCEEDS                                                          10

Section 3.1.   Loan of Proceeds                                                10

Section 3.2.   Agreement to Issue Bond                                         10

Section 3.3.   Authority of the Bank                                           10

Section 3.4.   Limitation of Authority's Liability                             11

Section 3.5.   Disbursement Procedure                                          11

Section 3.6.   Direct Advances                                                 13

Section 3.7.   Supervision and Inspection                                      13

Section 3.8.   Material Change Orders                                          13

Section 3.9.   Representations and Warranties Regarding Project Work.          14

Section 3.10.  Additional Information                                          14

<Page>

Section 3.11.  Delivery of Funds                                               14

Section 3.12.  Conditions Precedent to Bank's Obligation to Make the
Initial Advance for Project Costs                                              14

Section 3.13.  Conditions Precedent to Bank's Continuing Obligation to
Make Advances                                                                  15

Section 3.14.  Obligation to Advance                                           16

Section 3.15.  Required Delivery                                               16

ARTICLE IV                                                                     16

PAYMENTS ON BOND                                                               16

Section 4.1.   Amounts Payable                                                 16

Section 4.2.   Payments and Rights Assigned                                    17

Section 4.3.   Default in Payments.                                            17

Section 4.4.   Obligation of Company Unconditional                             17

ARTICLE V                                                                      18

SPECIAL COVENANTS                                                              18

Section 5.1.   Inspection of Project                                           18

Section 5.2.   Indemnification by Company                                      18

Section 5.3.   Use of Proceeds                                                 19

Section 5.4.   Completion of Project.                                          20

Section 5.5.   Restrictions on Mortgage, Sale or Assignment                    20

Section 5.6.   Notification Upon Event of Default.                             21

Section 5.7.   Notification of Event of Bankruptcy                             21

Section 5.8.   Expenses of Operation and Maintenance                           21

Section 5.9.   Compliance with Laws                                            21

Section 5.10.  Reference to Bond Ineffective After Bond Paid and Other
Obligations Satisfied                                                          21

<Page>

Section 5.11.  Reports and Notices.                                            21

Section 5.12.  Fees; Additional Payments                                       22

Section 5.13.  Access and Promotion                                            23

Section 5.14.  Updated Valuations.                                             23

ARTICLE VI                                                                     23

FINANCIAL COVENANTS                                                            23

Section 6.1.   Maintain Existence                                              23

Section 6.2.   Financial and Other Information                                 23

Section 6.3.   [Reserved].                                                     24

Section 6.4.   Indebtedness.                                                   24

Section 6.5.   Books and Records.                                              24

Section 6.6    Notice of Loss.                                                 24

Section 6.7.   Accrual and Payment of Taxes and Other Charges.                 24

Section 6.8.   Certificate                                                     25

Section 6.9.   Banking Relationship.                                           25

Section 6.10.  Other Acts.                                                     25

Section 6.11.  Negative Covenants                                              25

ARTICLE VII                                                                    26

EVENTS OF DEFAULT AND REMEDIES                                                 26

Section 7.1.   Event of Default Defined                                        26

Section 7.2.   Remedies on Default                                             28

Section 7.3.   No Remedy Exclusive.                                            28

Section 7.4.   Attorneys' Fees and Other Expenses                              28

Section 7.5.   No Additional Waiver Implied by One Waiver                      29

<Page>

ARTICLE VIII                                                                   29

PREPAYMENT                                                                     29

Section 8.1.   Prepayment.                                                     29

ARTICLE IX                                                                     29

MISCELLANEOUS                                                                  29

Section 9.1.   Term of Agreement.                                              29

Section 9.2.   Notices, etc.                                                   29

Section 9.3.   Amendments to Agreement and Company's Note                      30

Section 9.4.   Successors and Assigns                                          30

Section 9.5.   Severability                                                    30

Section 9.6.   Applicable Law; Entire Understanding                            30

Section 9.7.   Counterparts                                                    30

Section 9.8.   Construction of Provisions of this Agreement                    30

Section 9.9.   Publicity                                                       30

Section 9.10.  Controlling Law                                                 30

Section 9.11.  Waiver of Jury Trial.                                           31

Exhibit A - Form of Note

Exhibit B - Form of Requisition
</Table>

<Page>

     THIS LOAN AGREEMENT, made as of the 1st day of April, 2002, by and between
the INDUSTRIAL DEVELOPMENT AUTHORITY OF ALBEMARLE COUNTY, VIRGINIA (the
"Authority"), BIOTAGE REAL ESTATE, LLC, a Virginia limited liability company
(the "Company"), and BIOTAGE, INC., a Delaware Corporation (the "Lessee")
provides;

                              W I T N E S S E T H:

     WHEREAS, the Virginia Industrial Development and Revenue Bond Act, Title
15.2, Chapter 49, Code of Virginia of 1950, as amended (the "Act"), authorizes
the creation of the Authority and empowers it to acquire, own, lease and dispose
of properties to the end that the Authority may be able to promote industry and
develop trade; and further authorizes the Authority to lease or sell to others
any or all of its facilities, to issue bonds for the purposes of carrying out
any of its powers, to lend the proceeds of its bonds for such purposes, to
mortgage and pledge any or all of its facilities as security for the payment of
principal of and interest on such bonds and any agreements made in connection
therewith, to pledge the revenues and receipts from such facilities or from any
other source to the payment of such bonds and to issue its refunding bond or
bonds to refund any bond or bonds previously issued by it; and

     WHEREAS, at the request of the Company, the Authority intends to issue and
sell to the Bank (hereinafter defined) its Industrial Development Revenue Bond
(Biotage Project), Series 2002, in the principal amount of Four Million Two
Hundred Fifty Thousand Dollars ($4,250,000) (the "Bond") to assist the Company
in financing the acquisition of approximately 7.1 acres of land constituting
Parcel F-1A in the University of Virginia Research Park at North Fork in
Albemarle County, Virginia, the construction of an approximately 50,000 square
foot manufacturing facility thereon and the acquisition and installation of
manufacturing equipment therefor (the "Project"), to be owned by the Company,
and leased to the Lessee, and used in the Lessee's business of manufacturing
drug purification equipment, and to pay certain costs of issuance of the Bond;
and

     WHEREAS, the Authority proposes to lend the proceeds of the Bond to the
Company, to be used to pay a portion of the costs of the Project; and

     WHEREAS, the Authority will assign this Agreement and the Company's Note to
Virginia National Bank (the "Bank") as security and source of payment for the
Bond.

     NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto covenant and agree as
follows:

                                    ARTICLE I

                      DEFINITIONS AND RULES OF CONSTRUCTION

     SECTION 1.1. DEFINITIONS. All words and terms defined in the Bond Purchase
Agreement dated as of April 1, 2002 (the "Bond Purchase Agreement"), among the
Authority, the Company, the Bank and the Lessee, shall have the same meanings
when such words and terms are used in this

<Page>

Agreement. In addition, the following words and terms shall have the following
meanings, unless the context otherwise requires:

     "ACCEPTABLE RETAINAGE" means the amount of retainage required by the Bank
for the construction contract, and shall be equal to ten percent (10%) of all
hard costs of construction until such time as the Project is complete, final
unconditional certificates of occupancy have been issued, an as-built survey and
a final title insurance date-down endorsement have been submitted to and
approved by the Bank and the Bank has received such lien waivers and affidavits
as it may request from the General Contractor and others supplying labor and
materials to the Project.

     "ADVANCES" means the periodic disbursements of the Loan applicable to the
Project, which Advances shall be made in accordance with the provisions of
Article III hereof.

     "AGREEMENT" shall mean this Loan Agreement between the Authority, the
Company and the Lessee, as the same may be from time to time amended or
supplemented in accordance with the provisions hereof.

     "APPLICABLE ENVIRONMENTAL LAWS" means any applicable laws, rules or
regulations pertaining to the environment, or petroleum products, or radon
radiation, or oil or hazardous substances, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), and the Resource Conservation and Recovery Act of 1976, as
amended ("RCRA"). The terms "hazardous substance" and "release" shall have the
meanings specified in CERCLA, and the terms "solid waste," disposal," "dispose,"
and "disposed" shall have the meanings specified in RCRA, except that if such
acts are amended to broaden the meanings thereof, the broader meaning shall
apply herein prospectively from and after the date of such amendments;
notwithstanding the foregoing, provided, to the extent that the laws of the
Commonwealth of Virginia establish a meaning for "hazardous substance" or
"release" which is broader than that specified in CERCLA, as CERCLA may be
amended from time to time, or a meaning for "solid waste," "disposal," and
"disposed" which is broader than specified in RCRA, as RCRA may be amended from
time to time, such broader meanings under said state law shall apply.

     "ASSIGNMENTS" means the Assignments of Leases, Contracts and Other Rights
to be executed by the Company as a condition to the purchase of the Bond and in
a form acceptable to the Bank.

     "BANK" shall mean Virginia National Bank, as the initial purchaser and
holder of the Bond, and any successor or other holder of the Bond.

     "BANK COMMITMENT LETTER" means the Bank's letter addressed to the Lessee
for the benefit of the Company dated December 13, 2001, as revised on December
21, 2001, wherein the Bank agreed to acquire the Bond under certain conditions.

     "BOND COUNSEL" shall mean a law firm, appointed by the Company, having a
national reputation in the field of municipal law whose opinions are generally
accepted by purchasers of municipal bonds. The firms of Williams, Mullen, Clark
& Dobbins, Richmond, Virginia, and LeClair Ryan, a Professional Corporation,
Richmond, Virginia shall be deemed acceptable as Bond Counsel.

<Page>

     "BOND DOCUMENTS" shall mean this Agreement, the Bond Purchase Agreement,
the Bond, the Company's Note, the Deed of Trust, the assignments of the
Authority's rights under this Agreement, the Guaranty Agreements, and the
Letters of Credit.

     "BUSINESS DAY" means a day (other than Saturday, Sunday and legal holidays)
when the Bank is open for business.

     "CLOSING DATE" shall mean the date of the issuance and delivery of the
Bond.

     "COLLATERAL" means the collateral as defined in the Deed of Trust.

     "COMPANY" shall mean Biotage Real Estate, LLC, a Virginia limited liability
company, and any successor to the Company.

     "COMPANY'S NOTE" shall mean the promissory note of the Company in the
principal amount of $4,250,000, dated as of the Closing Date, and delivered to
the Authority pursuant to this Agreement.

     "CONSTRUCTION CONTRACT" shall mean the contract dated January 4, 2002
between the Company and the General Contractor for the construction of the
Project, as amended from time to time.

     "COST(S) OF THE PROJECT" means all costs and allowances which the Authority
or the Company may properly pay or accrue for the Project under the Act and
which, under GAAP are chargeable to the capital account of the Project or could
be so charged either with a proper election to capitalize such costs or, but for
a proper election, to expense such costs, including (without limitation) the
following costs:

             (a) fees and expenses incurred in preparing the plans and
specifications for the Project (including any preliminary study or planning or
any aspect thereof); any labor, services, materials and supplies used or
furnished in site improvement and construction; any equipment for the Project;
and any acquisition necessary to provide utility services or other services,
roadways, and parking lots; and all real and tangible personal property deemed
necessary by the Company and acquired in connection with the Project;

             (b) fees for architectural, engineering, supervisory and consulting
services;

             (c) any fees and expenses incurred in connection with perfecting
and protecting title to the Project and any fees and expenses incurred in
connection with preparing, recording or filing such documents, instruments or
financing statements as either the Authority or the Bank may deem desirable to
perfect or protect the rights of the Authority or the Bank under the Bond
Documents;

             (d) any legal, accounting or financial advisory fees and expenses,
including, without limitation, fees and expenses of Bond Counsel and counsel to
the Authority, the Company or the Bank, any fees and expenses of the Authority
or the Bank, filing fees, and printing and engraving costs, incurred in
connection with the authorization, issuance, sale and purchase of the Bond, and
the

<Page>

preparation of the Bond Documents and all other documents in connection with
the authorization, issuance and sale of the Bond;

             (e) interest to accrue on the portion of the Bond attributable to
construction costs during construction of the Project;

             (f) any administrative or other fees charged by the Authority or
reimbursement thereto of expenses in connection with the Project until the
completion date; and

             (g) any other costs and expenses relating to the Project which
could constitute costs or expenses for which the Authority may expend Bond
proceeds under the Act; provided, however, that Costs of the Project shall not
include issuance costs (including counsel fees and Authority fees and costs) in
excess of an amount equal to 2% of the principal amount of the Bond.

     "DEED OF TRUST" shall mean the Credit Line Deed of Trust, Assignment and
Security Agreement, dated as of April 1, 2002, granted by the Company to the
trustees named therein to secure the Company's Note.

     "DEFAULT RATE" means a per annum rate equal to the interest rate on the
Bonds in effect at the time of an Event of Default (the Tax-Exempt or the
Taxable Rate) plus 4%.

     "DETERMINATION OF TAXABILITY" means a determination that the interest
income on the Bonds does not qualify as interest that is excludable from the
gross income of the Holder(s) thereof for purposes of federal income taxation
("exempt interest") under Section 103 of the Code, which determination shall be
deemed to have been made, upon the occurrence of the first to occur of the
following events (each an "Event of Taxability"):

             (a) the date on which the Bank determines that the interest income
on any Bonds does not qualify as exempt interest, if such determination is
supported by an opinion of Bond Counsel to that effect;

             (b) the date on which (i) any change in law or regulation becomes
effective, (ii) the Internal Revenue Service has issued any private ruling,
technical advice or any other written communication, or (iii) there is a
non-appealable final judgment or determination by the Internal Revenue Service
or a court of competent jurisdiction, in each case to the effect that the
interest income on the Bonds does not qualify as exempt interest;

             (c) the date on which the Company receives notice from the Bank or
the Escrow Agent in writing indicating that the Internal Revenue Service has
issued a thirty-day letter or other notice which asserts that the interest on
such Bonds does not qualify as exempt interest;

             (d) the date when the Company files any statement, supplemental
statement, or other tax schedule, return or document, which discloses that an
Event of Taxability has occurred; or

             (e) the date whereupon any act, failure to act or use of the
proceeds of the Loan, a change in use of the Project or any misrepresentation or
inaccuracy in any of the representations,

<Page>

warranties or covenants contained in this Agreement, the Company's Tax
Information Certificate and Agreement delivered on the Closing Date, or any
other Bond Document causes a Determination of Taxability as described above.

     "EVENT OF DEPOSIT SHORTFALL" shall mean a failure by the Company and the
Lessee at any time during the term of the Bond to maintain in the aggregate an
average, noninterest-bearing deposit account balance at the Bank in an amount
greater than or equal to $750,000, determined by the Bank on a semi-annual basis
commencing on the six month anniversary of the Closing Date.

     "EVENT OF DEPOSIT SHORTFALL PERIOD" shall mean the six (6) month period
following an Event of Deposit Shortfall.

     "EVENT OF DEFAULT" shall mean any event defined as such in Section 7.1.

     "EVENT OF TAXABILITY" shall have the meaning given such term under the
definition of "Determination of Taxability" provided herein.

     "EQUIPMENT" means all furniture, fixtures and equipment owned by the
Company located on, attached to or used or useful in connection with the
Project, provided, however, that with respect to any items which are leased and
not owned by the Company, the Equipment shall include the leasehold interest
with any options to purchase any of said items and any additional or greater
right such items hereafter acquired by the Company (but nothing herein shall
permit the leasing of any Equipment except as otherwise expressly permitted
herein unless the Bank's written consent is first obtained).

     "GAAP" means, as in effect from time to time, generally accepted accounting
principles consistently applied as promulgated by the American Institute of
Certified Public Accountants.

     "GENERAL CONTRACTOR" means the Class A, Virginia licensed general
contractor for the Project, the choice of which shall be approved by the Bank.

     "GUARANTY AGREEMENTS" means the Guaranty Agreements from Dyax Corp., and
the Lessee, executed in favor of the Bank securing entire principal of, premium,
if any, and interest on the Bond and any all other amounts payable by the
Company under the Bond Documents, in form and substance acceptable to the Bank.

     "IMPROVEMENTS" means all buildings, structures and improvements of every
nature whatsoever now or hereafter situated on the Property, including, but not
limited to, all gas and electric fixtures, radiators, heaters, engines and
machinery, boilers, ranges, elevators and motors, plumbing and heating fixtures,
air conditioning equipment, carpeting and other floor coverings, water heaters,
awnings and storm sashes, cleaning apparatus, signs, landscaping and printing
areas, which are or shall be attached to the Property or said buildings,
structures or improvements.

     "INDEBTEDNESS" means any (i) obligations for borrowed money, (ii)
obligations representing the deferred purchase price of property other than
accounts payable arising in connection with the purchase of inventory customary
in the trade, (iii) obligations, whether or not assumed, secured by

<Page>

liens or payable out of the proceeds or production from property now or
hereafter owned or acquired and (iv) the amount of any other obligation
(including obligations under financing leases) which would be shown as a
liability on a balance sheet prepared in accordance with GAAP.

     "INSPECTING ARCHITECT" means nbj Architecture, PLC.

     "LETTERS OF CREDIT" shall mean the (i) $300,000 letter of credit secured by
Stephen T. McLean and the (ii) $300,000 letter of credit secured by David P.
Turner, in each case in form and substance acceptable to the Bank, issued by
institutions acceptable to the Bank, and issued in favor of the Bank as security
for repayment of the Bond and any other amounts payable by the Company under the
Bond Documents.

     "MATERIAL CHANGE ORDERS" shall mean any amendments to the Plans and
Specifications or the Construction Contract, resulting in an increase or
decrease in the project costs from that shown in the attached Project Budget in
an amount greater than $50,000 in any one instance, or $200,000 in the
aggregate.

     "NET INSURANCE PROCEEDS" shall have the same meaning as in the Deed of
Trust.

     "PAYMENT OF THE BOND" shall mean the payment in full of principal of and
interest on the Bond or provisions for such payment sufficient to discharge this
Agreement as provided herein.

     "PLANS AND SPECIFICATIONS" means the final working plans, drawings and
specifications for the Project, as approved by the Company, the Bank and all
governmental authorities having jurisdiction over the Project.

     "PROPERTY" means the real estate constituting Parcel F-1A in the University
of Virginia Research Park at North Fork in Albemarle County, Virginia, and all
Improvements thereon including, but not limited to, the Project.

     "TAXABLE RATE" shall mean (i) 7.00% per annum upon the occurrence of any
Determination of Taxability occurring on or before February 28, 2007, and (ii)
the percentage equal to the published, annualized interest rate for the
five-year U.S. Treasury Note based on the most recent weekly average yield,
adjusted to a constant maturity of five years, as made available by the Federal
Reserve Board in effect at the time of, and effective upon, the occurrence of
any Determination of Taxability occurring after April 1, 2007, plus 2.75%, and
(iii) in each case to be adjusted in accordance with this definition every five
years after any such Determination of Taxability. For the six (6) month period
following an Event of Deposit Shortfall, if any, the Taxable Rate shall be
increased by an additional (i) 0.25% for an Event of Deposit Shortfall less than
or equal to $50,000, and (ii) 0.50% for an Event of Deposit Shortfall ranging
from $50,001 to $100,000, plus an additional 0.20% for each $50,000 increment in
excess of $100,000.

     In addition to the foregoing, the Taxable Rate shall include the obligation
of the Company to pay to the Bank (or any other previous or current holder of
the Bond) an amount equal to any tax liability, penalties, interest or other
charges assessed against the Bank for failure to include interest on the Bonds
in its gross income, together with any and all attorneys' fees, court costs, or
other out-of-

<Page>

pocket costs incurred by the Bank in connection therewith. The obligations of
the Company with respect to the Taxable Rate shall survive the termination of
this Agreement and the payment and performance of all the Company's other
obligations under the Bond Documents.

     "TAX EXEMPT RATE" shall mean (i) 5.83% per annum from the Closing Date
through February 28, 2007, and (ii) for each subsequent five (5) year period,
commencing April 1, 2007, the percentage equal to the published, annualized
interest rate on the five-year U.S. Treasury Note based on the most recent
weekly average yield, adjusted to a constant maturity of five years, as made
available by the Federal Reserve Board in effect on the April 1 commencing such
five year period, plus 1.58% per annum. For the six (6) month period following
an Event of Deposit Shortfall, if any, the Tax-Exempt Rate shall be increased by
an additional (i) 0.16% for an Event of Deposit Shortfall less than or equal to
$50,000, and (ii) 0.32% for an Event of Deposit Shortfall ranging from $50,001
to $100,000, plus an additional 0.13% for each $50,000 increment in excess of
$100,000.

     SECTION 1.2. RULES OF CONSTRUCTION. The following rules shall apply to the
construction of this Agreement, unless the context otherwise requires:

             (a) Words importing the singular number shall include the plural
number and vice versa.

             (b) Words importing the redemption or calling for redemption of
Bond shall not be deemed to refer to or connote the payment of Bond at its
stated maturity.

             (c) All references herein to particular articles or sections are
references to articles or sections of this Agreement.

             (d) The headings herein are solely for convenience of reference and
shall not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.

     SECTION 1.3. UCC. Terms contained in this Agreement shall, unless otherwise
defined herein or unless the context otherwise indicates, have the meanings, if
any, assigned to them by Uniform Commercial Code in effect in the applicable
state in which Collateral is located.

     SECTION 1.4. REFERENCES. All references to other documents or instruments
shall be deemed to refer to such documents or instruments as they may hereafter
be extended, renewed, modified or amended and all replacements and substitutions
therefor.

     SECTION 1.5. GAAP. All accounting terms used in this Agreement shall be
construed in accordance with GAAP, except as otherwise defined.

                                   ARTICLE II

                                 REPRESENTATIONS

     SECTION 2.1. REPRESENTATIONS BY AUTHORITY. The Authority makes the
following representations as the basis for its undertakings hereunder:

<Page>

             (a) The Authority is not (1) in violation of the Act or any
existing law, rule or regulation applicable to it or (2) to the best of its
knowledge, in default under any indenture, mortgage, deed of trust, lien, lease,
contract, note, bond, order, judgment, decree or other agreement, instrument or
restriction of any kind to which any of its assets are subject and which would
affect the validity or enforceability of the Bond Documents.

             (b) To the best of its knowledge, no further approval, consent or
withholding of objection on the part of any regulatory body, federal, state or
local, is required in connection with (1) the issuance and delivery of the Bond
by the Authority, (2) the execution or delivery of or compliance by the
Authority with the terms and conditions of the Bond Documents to which it is a
party, or (3) the assignment by the Authority of its rights under this Agreement
and the Company's Note (except for the right of the Authority to
indemnification, notice and payment of fees and expenses) and the performance by
the Authority of its obligations in the manner and under the terms and
conditions as provided herein will comply with all applicable federal, state and
local laws and, to the best of its knowledge, any rules and regulations
promulgated thereunder by any regulatory authority or agency.

             (c) No litigation, inquiry or investigation of any kind in or by
any judicial or administrative court or agency is pending or, to its knowledge,
threatened against the Authority with respect to (1) the organization and
existence of the Authority, (2) its authority to execute or deliver the Bond
Documents to which it is a party, (3) the validity or enforceability of any of
such instruments or the transactions contemplated hereby or thereby, (4) the
title of any officer of the Authority who executed such instruments, or (5) any
authority or proceedings related to the execution or delivery of such
instruments on behalf of the Authority, and no such authority or proceedings
have been repealed, revoked, rescinded or amended but are in full force and
effect. The foregoing representation does not include any litigation that may
have been filed, but not served, against the Authority and of which Authority
has no knowledge.

     SECTION 2.2. REPRESENTATIONS BY COMPANY. The Company and the Lessee each
make the following representations as the basis for their undertakings
hereunder:

             (a) Neither the Company nor the Lessee is in default in the payment
of the principal of or interest on any of its indebtedness for borrowed money
and neither the Company nor the Lessee is in default in any material respect
under any instrument under and subject to which any indebtedness has been
incurred, and no event has occurred and is continuing under the provisions of
any such agreement that, with the lapse of time or the giving of notice, or
both, would constitute an event of default thereunder.

             (b) The Company and the Lessee have obtained all consents,
approvals, authorizations and orders of any governmental or regulatory authority
that are required to be obtained by the Company and/or the Lessee as a condition
precedent to the issuance of the Bond or the execution and delivery of the Bond
Documents to which it is a party or the performance by the Company or the Lessee
of its respective obligations hereunder or thereunder.

<Page>

             (c) There are no actions, suits or proceedings pending or, to the
best of the Company's or the Lessee's knowledge, threatened, which might
adversely affect the financial condition of the Company or the Lessee, or which
might impair the value of any Collateral. The Company and the Lessee are not in
violation of any agreement the violation of which might reasonably be expected
to have a materially adverse effect on the Company's or the Lessee's business or
assets, and neither the Company nor the Lessee is in violation of any order,
judgment or decree of any court, or any statute or governmental regulation to
which it is subject. Neither the execution nor the performance of this Agreement
or the other Bond Documents will result in any breach of any deed of trust,
lease, credit or loan agreement or any other instrument which binds or affects
the Company or the Lessee.

             (d) All financial statements of the Company and the Lessee
heretofore given and hereafter to be given to the Bank are and will be true and
complete in all material respects as of their respective dates, and fairly
represent and will fairly represent the financial conditions of the business or
persons to which they pertain. No materially adverse change has occurred in the
financial conditions reflected in the financial statements most recently
submitted to the Bank since the date thereof. All financial statements of the
Company and the Lessee have been and will be prepared in accordance with GAAP.

             (e) The Property will comply at all times, both during construction
and upon completion thereof, with all applicable covenants and restrictions of
record and all laws, ordinances, rules and regulations, including, without
limitation, the Americans with Disabilities Act and regulations thereunder, and
laws, ordinances, rules and regulations relating to zoning, health, building
codes, setback requirements, and Applicable Environmental Laws. All necessary
and appropriate action will be taken to permit the construction of the Project
according to the Plans and Specifications therefor as approved by the Bank, and
full use of such Improvements for their intended purpose under applicable laws,
ordinances and regulations, including, without limitation, zoning, subdivision
regulations and Applicable Environmental Laws. The Company and the Lessee each
agree to indemnify and hold the Bank harmless from any fines or penalties
assessed or any corrective costs incurred by the Bank if the Improvements or the
Property, or any part thereof, is hereafter determined to be in violation of any
covenants or restrictions of record or any applicable laws, ordinances, rules or
regulations, and such indemnity shall survive any foreclosure or deed in lieu of
foreclosure.

             (f) The Deed of Trust, when duly executed, delivered and recorded,
will constitute a first priority security lien against the Company's fee simple
interest in the Property, prior to all other liens and encumbrances, including
those which may hereafter accrue, except for such matters as shall have been set
forth in the Deed of Trust as a permitted encumbrance.

             (g) All documents furnished to the Bank by or on behalf of the
Company and the Lessee and as part of or in support of the Loan application or
pursuant to the Bank Commitment Letter or this Agreement are true, correct,
complete, and accurately represent the matters to which they pertain as of the
date hereof.

                                   ARTICLE III

<Page>

                              LOAN OF BOND PROCEEDS

     SECTION 3.1. LOAN OF PROCEEDS. The Authority hereby lends the proceeds from
the sale of the Bond pursuant to this Loan Agreement to the Company, and the
Company hereby borrows the same from the Authority as evidenced by this Loan
Agreement and the issuance and delivery of the Company's Note to the Authority.
As each Advance is made by the Bank pursuant hereto, the amount of such Advance
shall constitute a portion of the Bank's payment for the purchase of the Bond.
The Company covenants to use the proceeds from the sale of the Bond to pay,
together with other funds available to the Company, the cost of the acquisition,
construction and equipping of the Project.

     SECTION 3.2. AGREEMENT TO ISSUE BOND. In order to provide funds for payment
of all or a portion of the cost of the acquisition, construction and equipping
of the Project, the Authority shall simultaneously with the execution and
delivery hereof proceed with the issuance and sale of the Bond bearing interest,
maturing and having the other terms and provisions set forth therein.

     SECTION 3.3. AUTHORITY OF THE BANK. In accordance with the Bank's agreement
to purchase the Bond pursuant to the Bond Purchase Agreement, the Authority
hereby agrees that the Bank shall oversee the construction of the Project and
approve the making of each Advance under the Bond.

     SECTION 3.4. LIMITATION OF AUTHORITY'S LIABILITY.

             (a) No covenant, agreement or obligation contained herein or in the
Bond or the Bond Purchase Agreement shall be deemed to be a covenant, agreement
or obligation of any present or future director, officer, employee or agent of
the Authority in his individual capacity, and neither the directors of the
Authority nor any officer thereof executing the Bond shall be liable personally
on the Bond or be subject to any personal liability or accountability by reason
of the issuance thereof. No director, officer, employee or agent of the
Authority shall incur any personal liability with respect to any other action
taken by him pursuant to this Agreement or the Act provided he does not act in
bad faith.

     The obligations of the Authority hereunder are not general obligations of
the Authority but are limited obligations payable solely from the revenues and
receipts derived from the loan of the proceeds of the Bond described in this
Agreement, including without limitation all payments under this Agreement and
the Company's Note and from the security therefor. The obligations of the
Authority hereunder shall not be deemed to constitute a debt or a pledge of the
faith and credit of the Commonwealth of Virginia or any political subdivision
thereof, including the Authority and Albemarle County. Neither the Commonwealth
of Virginia nor any political subdivision thereof, including the Authority and
Albemarle County, shall be obligated to pay the obligations hereunder or under
the Bond or other costs incident thereto except from the revenues and receipts
pledged therefor, and neither the faith and credit nor the taxing power of the
Commonwealth of Virginia or any political subdivision thereof, including the
Authority and Albemarle County, is pledged to the payment of the obligations
hereunder.

<Page>

     SECTION 3.5. DISBURSEMENT PROCEDURE. Subject to compliance with all of the
provisions of this Agreement, and subject to the terms of this Agreement, the
Loan shall be disbursed from the proceeds of the Bank's purchase of the Bond in
several Advances at such time and in such amounts as the Bank shall determine in
accordance with Section 3.3 and in accordance with the following procedures:

             (a) Not less than five (5) Business Days before the date on which
the Company desires an Advance of the Loan, the Company shall submit to the Bank
a requisition for the payment of the Costs of the Project in the form of Exhibit
B to this Agreement, reviewed and approved by the Inspecting Architect, and
otherwise satisfactory to the Bank which shall include, in addition to any other
items set forth in the form of requisition attached hereto as Exhibit B, (a) the
current, updated Project Budget setting forth the original Project Budget, the
proposed revisions thereto (if any), previous amounts advanced, amounts paid
from funds other than the Loan, the amounts requested with the current
requisition and the amounts remaining to be advanced, all itemized under the
line items of the Project Budget, (b) the itemized schedule of values for the
construction work and all costs incurred for construction pursuant to each
category of the schedule of values, (c) a separate itemization of costs not
included in the foregoing general construction contract for equipment,
construction and non-construction expenses in connection with the Project
pursuant to the general construction contract with the General Contractor, an
AIA G702/703 form signed by the General Contractor and the Company, with copies
of invoices for all non hard cost construction items and (d) the percentage of
completion of each line item on the Project Budget and schedule of values. The
accuracy of the costs and percentage of completion shall be certified to the
Bank by the Company and by the General Contractor. The Company hereby appoints
David P. Turner and John W. Hulburt, either of whom may act, as its agent to
make Advance requests. The Company may hereafter by written notice to the Bank
appoint one or more other agents or change agents to make Advance requests,
provided any such notice is not effective until actually received by the Bank.
If the Company appoints more than one agent to make Advance requests, any one
may sign the request, unless notice otherwise is received by the Bank ten (10)
days prior to the Bank's receipt of such request.

             (b) The completed progress with respect to the Project must be
reviewed by the Bank as a condition to the Advance. The Bank will determine the
percentage of completion, continuing compliance with the Plans and
Specifications and the maximum allowable Advance, which shall be determined in
accordance with SECTION 3.5(c) below.

             (c) The maximum allowable Advance of the Loan will be equal to the
allowable non-construction expenses actually incurred within the amounts set
forth in the Project Budget, plus the lesser of (a) the actual cost of the
completed portion of the Project or (b) the Bank-approved scheduled value of
each completed portion of the Project (as set forth in the Project Budget and
schedule of values prepared by the General Contractor and approved by the Bank),
with no advances for duplication of work for which Loan funds were previously
advanced, work that does not conform to the Plans and Specifications, or work
that is unsatisfactory in the opinion of the Bank. The Advance to be made will
equal the maximum allowable Advance, less: (1) the Acceptable Retainage (except
in the case of the final Advance of the Loan) and (2) the amounts previously
advanced hereunder. The Acceptable Retainage shall be advanced to the Company
only after satisfactory

<Page>

completion of all construction work and the furnishing to the Bank of evidence
satisfactory to the Bank that such completion is free of all mechanics' and
materialmen's liens and that appropriate governmental authorities have approved
the Improvements in their entirety for permanent occupancy.

             (d) Advances shall be made for costs on each line item shown in the
Project Budget only up to the amount set forth in the Project Budget for such
line item, provided, however, that the Bank agrees that cost savings in any line
item may be re-allocated to other line items in the Company's sole discretion.
The timing of Advances for development fees, overhead or similar charges or
other amounts to the Company or any person or entity affiliated with (other than
for actual construction costs incurred for completed work) shall be in the
Bank's reasonable discretion and the percentage of such category advanced shall
not exceed the percentages of completion of the Project except in the Bank's
sole discretion; provided, however, such Advance shall be made not later than
the final Advance so long as there has not been an Event of Default and
undisbursed Loan proceeds in such categories remain available. No Advance will
be made for materials to be stored for future construction, except in the Bank's
sole discretion. Notwithstanding the foregoing, the Company agrees not to
request any Advance for stored materials unless (i) the Company specifies in
such request that it includes a specified amount for stored materials, which
stored materials are set forth in a detailed listing; (ii) such stored materials
are to be used in the Project within sixty (60) days of the requested Advance
and (iii) such stored materials are fully insured, are subject to the lien and
security interest of the Bank only and are either stored in a bonded warehouse
approved by the Bank and available for inspection by the Bank or stored on the
Property in a locked and secure storage arrangement approved by the Bank.

             (e) Notwithstanding the foregoing, the Bank shall not be required
to make an Advance more than once each month, and the Bank reserves the right to
limit the total amount advanced on the Loan at any time to an amount which, when
deducted from the total amount of the Loan, leaves a balance to be advanced
equal to or greater than the cost of completion of the Project, plus all
remaining non-construction expenses and the Acceptable Retainage, each as set
forth in the Project Budget and as determined by the Bank from time to time. The
Bank shall be entitled to retain at all times as undisbursed Loan funds an
amount sufficient to pay all construction and non-construction costs relating to
the Project, as reasonably estimated by the Bank, including, but not limited to,
amounts to become due pursuant to construction contracts and equipment purchase
contracts, amounts to complete the Project but not yet included in any such
contract, estimated interest costs in excess of anticipated cash flow for the
period that the Loan is outstanding, estimated post-closing fees and expenses of
Authority, the Bank and their counsel, estimated permit and license fees,
estimated architectural and engineering fees of the Company and of any
inspecting consultant hired by the Bank, and estimated recording and title
insurance costs, all to the extent reasonably anticipated to be incurred after
the Closing Date.

     SECTION 3.6. DIRECT ADVANCES. Regardless of whether the Company has
submitted a requisition therefor, upon an Event of Default and upon three (3)
Business Days prior written notice to the Company, the Bank may from time to
time advance amounts which become due for costs of insurance, title insurance,
fees and expenses of Authority's and the Bank's legal counsel and amounts due
the Bank for payments of principal, interest and fees and other amounts due
pursuant to the Note or others for construction and non-construction expenses
for which the Company is responsible for

<Page>

payment. To the extent such Advances are for costs or items which are not part
of the Costs of the Project, any such Advances shall be made from the Bank's own
funds and not from proceeds of the Bond. Such Advances may be made directly to
parties to whom such amounts are due or to Authority or the Bank to reimburse
Authority or the Bank for sums due to them. The Bank will notify the Company
immediately either by mail or telephone of such Advances to parties other than
the Company. All such Advances, including advances to parties other than the
Company, shall be deemed Advances to the Company hereunder and shall be secured
by the Bond Documents to the same extent as if they were made directly to the
Company.

     SECTION 3.7. SUPERVISION AND INSPECTION. The Bank and the Inspecting
Architect shall have the right to monitor the Company's progress on construction
of the Project monthly (or at such additional times as the Bank, in its
reasonable discretion, may require) in order to confirm that work is in place
and materials furnished for each Advance request.

     SECTION 3.8. MATERIAL CHANGE ORDERS. The Company shall not enter into any
Material Change Order except with the prior written consent of the Bank.

     SECTION 3.9. REPRESENTATIONS AND WARRANTIES REGARDING PROJECT WORK. Each
submission by the Company to the Bank of a requisition for an Advance shall
constitute the Company's representation and warranty to Authority and the Bank
that: (a) each item of cost included therein constitutes a Cost of the Project,
(b) completed construction work in connection with the Project is in accordance
with the Plans and Specifications and (c) all construction and non-construction
costs for the payment of which the Bank has previously advanced funds have in
fact been paid.

     SECTION 3.10. ADDITIONAL INFORMATION. If the Bank or the title insurance
company insuring the Deed of Trust shall so require, the Company will submit
with its requisitions for Advances estoppel certificates, in form satisfactory
to the Bank and the title insurance company, showing amounts paid and amounts
due to all parties furnishing labor, materials or equipment in connection with
the Project and evidence that the Company has paid all costs designated in the
Project Budget for payment by the Company from its separate funds.

     SECTION 3.11. DELIVERY OF FUNDS. Except as otherwise provided herein,
Advances of the Loan will be made by depositing the same to the Company's
deposit account with the Bank. The Bank's approval of any Advance shall not
constitute the Bank's approval or acceptance of the construction theretofore
completed. The Bank's inspection and approval of the Plans and Specifications,
the Project or the workmanship and materials used therein shall impose no
liability of any kind on the Bank, the sole obligation of the Bank as the result
of such inspection and approval being to approve the making of the Advances if,
and to the extent, required by this Agreement.

     SECTION 3.12. CONDITIONS PRECEDENT TO BANK'S OBLIGATION TO MAKE THE INITIAL
ADVANCE FOR PROJECT COSTS. The Bank's obligation to make an Advance for the
Costs of the Project shall be effective only upon fulfillment of the following
conditions which shall be in addition to the conditions described in Section 5
of the Bond Purchase agreement:

<Page>

             (a) PROJECT BUDGET. The Bank has received and approved the Project
Budget and a complete trade breakdown and a detailed final total
cost schedule for the Project.

             (b) CONSTRUCTION CONTRACT. The Bank has received and approved
copies of a construction contract with the General Contractor for completion of
the Project in the amount allocated for construction not to exceed the Project
Budget (including the Acceptable Retainage), and payment and performance bonds
on standard AIA Forms with the Bank named as dual obligee on such bonds. If the
construction contract does not require that General Contractor to assume such
risk of loss, the Company shall also provide evidence that builder's risk
insurance has been obtained for the Project.

             (c) CONTINUING PERFORMANCE. The Bank has received assignments in
form acceptable to it of the construction contract and the Plans and
Specifications and the right to their use, together with a letter from the
General Contractor stating that upon an Event of Default by the Company, the
General Contractor shall continue performance under the construction contract
and the Plans and Specifications to complete the Project for the benefit of the
Authority and the Bank at no additional cost.

             (d) PLANS AND SPECIFICATIONS. The Bank has received and approved
the Plans and Specifications, together with all subsequent material
modifications or amendments thereto, which amendments and modifications must be
approved in writing by the Bank, together with a certificate of General
Contractor certifying that the Plans and Specifications have been approved by
all governmental authorities having jurisdiction over the Project.

             (e) APPRAISAL. An updated appraisal of the Property, from an
appraiser acceptable to the Bank and otherwise in form and substance acceptable
to the Bank, showing that the aggregate outstanding amount of the Bond (assuming
the Bond has been fully advanced) shall not exceed the lower of (i) seventy
percent (70%) of the "as completed" fair market value of the Project or (ii)
seventy percent (70%) of the actual construction costs of the Project, including
site development costs and the cost of acquiring the land upon which the Project
will be located.

             (f) COMPANY'S EQUITY CONTRIBUTION. The Bank has received evidence
to its satisfaction that the Company has contributed at least $1,250,000 towards
the construction of the Project, all in accordance with the Plans and
Specifications, in addition to the costs incurred by the Company in connection
with the purchase of the land upon which the Project will be located.

     SECTION 3.13. CONDITIONS PRECEDENT TO BANK'S CONTINUING OBLIGATION TO MAKE
ADVANCES. The Bank's obligation to make any Advance shall be effective only upon
fulfillment of the following continuing conditions:

             (a) The Bank has received and approved all items required to be
provided to and approved by the Bank under the terms of the Bank Commitment
Letter and this Agreement.

             (b) The Company has paid all fees and expenses then due as required
by this Agreement and the Bank Commitment Letter.

<Page>

             (c) The Company has executed, delivered, recorded or filed, as the
case may be, all documents required by this Agreement, all in form and content
satisfactory to the Bank.

             (d) The Bank has received an endorsement to the title policy or
other evidence satisfactory to the Bank, increasing the amount of applicable
coverage to include any and all prior draws, removing any survey exceptions and
showing that there has been no change in the status of the title to the
Property, creation of any new encumbrance thereon, or occurrence of any event
that could in the Bank's sole opinion impair the priority of the lien of the
Deed of Trust as of the time of each Advance.

             (e) The Bank has received a current plat of survey prepared by a
certified state engineer or certified land surveyor designating (i) the
perimeter of the Property, (ii) all easements, right-of-ways, set-back lines,
etc., (iii) the location of the improvements and (iv) such other matters as may
be required by the Bank, together with a legal description of the Property
certified to the Bank and, at the Bank's option, the title insurer.

     SECTION 3.14. OBLIGATION TO ADVANCE. In the event the Bank, at its sole
option, elects to approve the making of one or more Advances prior to receipt
and approval of all items required by this Article, such election shall not
obligate the Bank to approve or to make any subsequent Advance.

     SECTION 3.15. REQUIRED DELIVERY. Except as otherwise specifically provided
in this Agreement, the Bank Commitment Letter or any other Bond Document, all
documents, exhibits, instruments, etc. required to be provided to the Bank, or
the Bank's counsel by this Article III, and such other documentation and matters
as the Bank or its counsel may reasonably require in the documentation of the
Loan, shall be in form and content acceptable to the Bank, and submitted in
writing to the Bank and the Bank's counsel, as the case may be, for its approval
at least five (5) Business Days prior to the date on which action is desired.

                                   ARTICLE IV

                                PAYMENTS ON BOND

     SECTION 4.1. AMOUNTS PAYABLE. (a) The Company shall pay to the Bank, for
the account of the Authority, an amount equal to the aggregate principal amount
of the Bond and, as interest on its obligation to pay such amount, an amount
equal to interest on the Bond computed in accordance with the terms of this
Agreement and the Bond, such amounts to be paid in installments due on the
dates, in the amounts and in the manner provided in the Bond, for the payment of
the principal of and interest on the Bond, whether at maturity, upon redemption
or acceleration. Any overdue payment will bear interest at a rate equal to the
Default Rate until payment is made in full. The Company shall provide for the
payment of the principal of the Bond, upon maturity, redemption or acceleration,
and provide for payment of the interest on the Bond, by the delivery of the
Company's Note, in substantially the form thereof attached hereto as Exhibit A,
to the Authority, and the Authority shall assign the Company's Note, without
recourse, to the Bank, simultaneously with the original issuance and delivery of
the Bond. The obligations of the Company under this Section 4.1 are evidenced by
the Company's Note.

<Page>

             (b) The Company shall pay such other amounts as are described in
Sections 7, 8, 12 and 14 of the Bond Purchase Agreement.

             (c) Upon the occurrence of a Determination of Taxability, the
Company shall immediately pay all amounts due as a result of the Determination
of Taxability or otherwise due under the definition of the Taxable Rate, and
with respect to future interest payments, begin making such interest payments
calculated at the Taxable Rate, all in accordance with the terms of this
Agreement.

             (d) Upon the occurrence and continuation of an Event of Default,
the entire outstanding principal amount of the Company's Note and the Bonds
shall accrue interest at the Default Rate.

     SECTION 4.2. PAYMENTS AND RIGHTS ASSIGNED. It is understood and agreed that
all payments hereon, as well as the Authority's other rights under this
Agreement and the Bond (except its rights to indemnification, to receive notices
and be paid and reimbursed its fees and expenses) are being hereby assigned by
the Authority to the Bank. The Company consents to such assignment and agrees to
pay to the Bank all amounts payable by the Company that are so assigned.

     SECTION 4.3. DEFAULT IN PAYMENTS. If the Company should fail to make
payments required by the Bond or this Agreement when due, the Company, to the
extent permitted by law, shall pay interest with respect to the payments thereon
at the Default Rate from the due date until paid.

     SECTION 4.4. OBLIGATION OF COMPANY UNCONDITIONAL. The obligation of the
Company to make the payments to the Bank and to perform and observe all other
covenants, conditions and agreements hereunder shall be absolute and
unconditional, irrespective of any defense or any rights of setoff, recoupment
or counterclaim it might otherwise have against the Authority or the Bank.
Subject to prepayment of the Bond in full and termination as provided herein,
the Company shall not suspend or discontinue any such payment hereunder or fail
to observe and perform any of its other covenants, conditions and agreements
hereunder for any cause, including, without limitation, any acts or
circumstances that may constitute an eviction or constructive eviction, failure
of consideration, failure of title to any part or all of the Project, or
commercial frustration of purpose, or any damage to or destruction or
condemnation of all or any part of the Project, or any change in the tax or
other laws of the United States of America, the State or any political
subdivision of either, or any failure of the Authority or the Bank to observe
and perform any covenant, condition or agreement, whether express or implied, or
any duty, liability or obligation arising out of or in connection with the Bond
Purchase Agreement or this Agreement. Notwithstanding the foregoing or any other
provision of this Agreement, the Company does not waive, and shall not be
prevented from otherwise enforcing, any rights it may have against the Authority
or the Bank. The Company may, after giving to the Authority and the Bank 10
days' notice of its intention to do so, at its own expense and in its own name
or, with the consent of the Authority, which consent shall not be unreasonably
withheld, in the name of the Authority, prosecute or defend any action or
proceeding or take any other action involving third persons which the Company
deems reasonably necessary in order to secure or protect any of its rights
hereunder or the rights of the Authority under the Bond Purchase Agreement, and,
in such event, the Authority shall cooperate fully with the Company and take all
action reasonably necessary to effect the substitution of the Company for the
Authority in any such action or

<Page>

proceeding if the Company shall so request.

                                    ARTICLE V

                                SPECIAL COVENANTS

     SECTION 5.1. INSPECTION OF PROJECT. The Authority, the Bank and their duly
authorized agents shall have the right, at all reasonable times and upon
reasonable notice, (a) to enter upon and to examine and inspect any part of the
Project, and (b) to examine the books and records of the Company insofar as such
books and records relate to the operation and maintenance of the Project.

     SECTION 5.2. INDEMNIFICATION BY COMPANY. The Company shall at all times
protect, indemnify and save harmless the Authority and the Bank from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and expenses (including, without limitation, reasonable counsel fees and
expenses) imposed upon or incurred by or asserted against the Authority or the
Bank on account of (a) any failure of the Company to comply with any of the
terms of this Agreement, or (b) any loss or damage to property or any injury to
or death of any person that may be occasioned by any cause whatsoever pertaining
to the Project or the use thereof, and shall further indemnify and save harmless
the Authority and the Bank and their respective officers, directors, employees
and agents (collectively, the "Indemnitees") from and against all liabilities,
obligations, claims, damages, penalties, fines, losses, reasonable costs and
expenses (the "Damages"), including, without limitation:

             (i)   all amounts paid in settlement of any litigation commenced or
threatened against the Indemnitees, if such settlement is effected with the
written consent of the Company;

             (ii)  all expenses reasonably incurred in the investigation of,
preparation for or defense of any litigation, proceeding or investigation of any
nature whatsoever, commenced or threatened against the Company, the Project or
the Indemnitees;

             (iii) any judgments, penalties, fines, damages, assessments,
indemnities or contributions; and

             (iv)  the reasonable fees of attorneys, auditors and consultants;
provided that the Damages arise out of:

             (1)   any failure by the Company or its officers, directors,
employees or agents to comply with the terms of the Bond Documents or any
document executed by the Company in connection with the issuance and sale of the
Bond (collectively, the Bond Documents) and any agreements, covenants,
obligations, or prohibitions set forth herein or therein;

             (2)   any action, suit, claim or demand contesting or affecting the
title of the Project;

<Page>

             (3)   any breach of any representation or warranty of the Company
set forth in the Bond Documents or any certificate or any letter of
representation delivered by the Company pursuant thereto, and any claim that any
statement, representation or warranty of the Company contains or contained any
untrue or misleading statement of material fact or omits or omitted to state any
material facts necessary to make the statements made therein not misleading in
light of the circumstances under which they were made;

             (4)   any action, suit, claim, proceeding or investigation of a
judicial, legislative, administrative or regulatory nature arising from or in
connection with the ownership, operation, construction, occupation or use of the
Project; or

             (5)   any suit, action, administrative proceeding, enforcement
action, or governmental or private action, of any kind whatsoever (herein
referred to as an "Action"), commenced against the Company, the Project or the
Indemnitees which might adversely affect the validity or enforceability of the
Bond or any of the Bond Documents, the tax-exempt status of interest on the Bond
or the performance by the Company or the Indemnitees of any of their respective
obligations under the Bond Documents; provided that such indemnity shall be
effective only to the extent of any loss that may be sustained by any Indemnitee
in excess of the Net Proceeds received by it or them from insurance, if any,
required under the Deed of Trust with respect to such loss and provided further,
that the benefits of this section shall not inure to any person other than the
Indemnitees and their successors and assigns. Nothing contained herein shall
require the Company to indemnify any Indemnitee for any claim or liability
resulting from (i) in the case of the Authority, the gross negligence or
willful, wrongful acts of the Authority; (ii) in the case of any other
Indemnitee, the negligence or willful, wrongful acts of such Indemnitee; or
(iii) failure of such Indemnitee to act or any action on the part of such
Indemnitee, in either case, in a manner that was not in accordance with the
requirements imposed upon it by the Bond Documents.

     If any action, suit or proceeding is brought against any Indemnitee for any
loss or damage for which the Company is required to provide indemnification
under this Section 5.2, such Indemnitee shall promptly notify the Company, and
the Company shall have the right to, upon request, at its expense, resist and
defend such action, suit or proceeding or cause the same to be resisted and
defended by counsel designated by the Company and approved by the Indemnitee,
which approval shall not be unreasonably withheld; provided that such approval
shall not be required in the case of defense by counsel designated by any
insurance company undertaking such defense pursuant to any applicable policy of
insurance. The obligations of the Company under this Section 5.2 shall survive
any termination of this Agreement. The Company shall have full power to
litigate, to compromise or settle the same in its sole discretion.

     SECTION 5.3. USE OF PROCEEDS. Neither the Authority knowingly nor the
Company shall cause any proceeds of the Bond to be expended except pursuant to
the Bond Purchase Agreement and this Agreement. The Company shall use Advances
solely and exclusively for the purposes contemplated hereby and to pay such
fees, closing costs and other non-construction expenses relating to the Loan,
the Project or the discharge of the Company's obligations under this Agreement
as the Bank has approved or may from time to time approve.

<Page>

     SECTION 5.4. COMPLETION OF PROJECT. The Company shall cause the Project to
be completed substantially in accordance with the Plans and Specifications and
in compliance with all applicable regulations including zoning and setback
requirements, and so as not to encroach upon or overhang into any easement or
right-of-way; to cause the Project to proceed continuously beginning on or about
April 1, 2002, and to complete the Project on or before July 1, 2003 and obtain
a certificate of occupancy or other final governmental approval of the Project
for its intended use; to permit no cessation of work on the Project for any
period of twenty (20) consecutive days at any time after the April 1, 2002
commencement date; provided, however, that any delays caused by acts of God,
acts of war, whether declared or not, acts of terror, casualties or events or
circumstances beyond the Company's control shall extend the required twenty (20)
consecutive days pro tanto.

     SECTION 5.5. LEASE TO LESSEE; RESTRICTIONS ON FURTHER MORTGAGE, SALE OR
ASSIGNMENT.

             (a) The Company shall, at all times when the Bond is outstanding,
lease the Project as a whole to the Lessee for use in the Lessee's business of
manufacturing drug purification equipment and shall not, without the prior
consent of the Authority and the Bank, terminate such lease or allow it to
expire.

             (b) Other than the Company's lease to the Lessee, neither the
Authority knowingly nor the Company shall sell, mortgage, lease, assign,
transfer, convey or otherwise encumber (such sale, mortgage, lease, assignment,
transfer, conveyance or other encumbrance hereinafter in this Section referred
to as a Transfer, and the transferee in any such Transfer hereinafter in this
Section 5.5 referred to as the Transferee) the Property or any of its interest
hereunder, except to the Bank, unless there is delivered to the Bank (a)
agreement by the Transferee that it shall be bound by the terms of the Bond
Documents, (b) the written agreement thereto of the Bank unless the transfer is
to any affiliate of the Company in which the Lessee or Dyax Corp. own a majority
of the voting interest, and (c) a written opinion of Bond Counsel that such
Transfer will have no adverse effect on the continued exemption from Federal
income taxation of the interest on the Bond. Nothing contained in this section
shall prevent the consolidation of the Authority with, or the merger of the
Authority into, any public corporation whose property and income are not subject
to taxation and which has corporate authority to carry on the business of
financing facilities of the nature of the Project; provided, however, that any
surviving, resulting or transferee entity shall agree in writing to assume the
liability of the Authority to pay the Bond and to observe and perform all
covenants, conditions and agreements of the Authority under this Agreement and
the Bond Purchase Agreement.

             (c) The Company shall keep the Property and all other assets of the
Company free from all liens and encumbrances except for the Deed of Trust or
those contemplated by this Agreement or as shown in the Deed of Trust as a
permitted encumbrance; pay promptly all persons or entities supplying work or
materials for the Project where the Company is not in good faith contesting such
work or materials; discharge or make other arrangements acceptable to the Bank
with respect to (including, without limitation, bonding off or insuring over any
such lien) any mechanic's or other lien filed against any of the Property or the
Company, within thirty (30) days of the date the Company receives notice of the
filing of such lien.

<Page>

     SECTION 5.6. NOTIFICATION UPON EVENT OF DEFAULT. The Company shall notify
the Authority and the Bank immediately upon the occurrence of any Event of
Default.

     SECTION 5.7. NOTIFICATION OF EVENT OF BANKRUPTCY. The Company shall notify
the Bank in writing within two Business Days if a petition in bankruptcy is
filed by or against the Company or the Authority as debtor under the Federal
bankruptcy laws or other proceedings are commenced with respect to the Company
or the Authority under other applicable bankruptcy, reorganization or insolvency
laws, as now or hereafter constituted.

     SECTION 5.8. EXPENSES OF OPERATION AND MAINTENANCE. The Company shall pay,
or cause the Lessee to pay, all expenses of the operation and maintenance of the
Project, including, but without limitation, adequate insurance thereon and
insurance against all liability for injury to persons or property arising from
the operation thereof and all taxes and installments of special assessments
levied upon or with respect to the Project and payable during the term of this
Agreement.

     SECTION 5.9. COMPLIANCE WITH LAWS. The Company shall comply, and shall
require the Lessee to comply, with all applicable covenants and restrictions of
record and all laws, ordinances, rules and regulations and to keep the Property
and the Project in compliance with all applicable laws, ordinances, rules and
regulations, including, without limitation, the Americans with Disabilities Act
and regulations thereunder, and laws, ordinances, rules and regulations relating
to zoning, health, building codes, setback requirements and Applicable
Environmental Laws.

     SECTION 5.10. REFERENCE TO BOND INEFFECTIVE AFTER BOND PAID AND OTHER
OBLIGATIONS SATISFIED. Upon the discharge of the Bond Purchase Agreement, upon
satisfaction of the rights of the Bank and the Authority under the Bond Purchase
Agreement, and upon payment of all obligations under this Agreement and the
Bond, all references in this Agreement to the Bond shall be ineffective, and the
holder of the Bond shall thereafter have no rights hereunder except as provided
in Section 5.2 and except for such rights as may have theretofore vested or
arisen from the Company's obligations hereunder.

     SECTION 5.11. REPORTS AND NOTICES. The Company shall furnish promptly to
the Bank and Authority such information relating to the Property and the Project
as Authority or the Bank may reasonably require concerning costs, progress of
construction, and such other factors as Authority or the Bank may require;
notify the Bank and Authority promptly of any material action, suit, audit or
proceedings at law, in equity or before any governmental entity instituted or
threatened against the Company, any deficiencies asserted or liens filed by the
Internal Revenue Service against the Company or the Property; any audits of any
Federal or State tax return of the Company, and the results of any such audit;
notify the Bank promptly of any condemnation or similar proceedings with respect
to any of the Property, any proceeding seeking to enjoin the intended use of the
Property, and of all changes in governmental requirements pertaining to the
Property, utility availability, anticipated costs of completion and any other
matters which could reasonably be expected adversely to affect the Company's
ability to perform the obligations under any of the Bond Documents or the
tax-exempt status of interest on the Bond.

<Page>

     SECTION 5.12. FEES; ADDITIONAL PAYMENTS. The Company shall pay loan and
inspection fees of Authority and the Bank as described herein, and all
reasonable expenses involved in perfecting the lien status or its priority with
respect to the Collateral and all other out-of-pocket expenses of Authority and
the Bank directly related to the Loan or the protection and preservation of the
Property or Improvements or the enforcement of any provision of this Agreement,
including, without limitation, recording fees and taxes, tax, title and lien
search charges, title insurance charges, architects', engineers' and reasonable
attorneys' fees (including reasonable attorneys' fees at trial and on any appeal
by any of the Company, the Bank or Authority), real property taxes and insurance
premiums, and to indemnify against, and hold Authority and the Bank and any
participant (as described in Section 5.2 hereof) harmless from any loss or
liability on account of any claim by any party arising out of the Loan,
including, but not limited to, those related to any environmental concern
relating to the Project and use and construction of the Improvements, or the
Bank's or any participant's interest in or lien upon the Collateral, except for
any loss or liability caused or incurred by the gross negligence of the
Authority, the Bank or any loan participant.

     The Company shall pay to the Authority or to the Bank, as appropriate such
other amounts as described in this Agreement and the other Bond Documents as may
be incurred by the Bank or the Authority after the Closing Date in connection
with the performance or enforcement of this Agreement or the other Bond
Documents, the financing of the Project, and the issuance and ongoing ownership
of the Bonds, including but not limited to: if any; (a) indemnification payments
pursuant to the terms of this Agreement, all taxes and assessments of any type
or character charged to the Authority or the in any way arising due to the
transactions contemplated hereby (including taxes and assessments assessed or
levied by any public agency or governmental authority of whatsoever character
having power to levy taxes or assessments), but excluding franchise taxes based
upon the capital and/or income of Authority or the Bank and taxes based upon or
measured by the net income of Authority or the Bank; (b) the fees and expenses
of such accountants, auditors, consultants, inspectors, engineers, attorneys and
other experts as may be engaged by Authority or the Bank to prepare audits,
financial statements, reports or opinions or to provide services in connection
with this Agreement, or otherwise in connection with the Bond Documents or the
issuance or ongoing ownership of the Bonds; (c) insurance premiums not otherwise
paid hereunder; and (d) all other reasonable, direct and necessary
administrative costs of the Bank and such other charges required to be paid in
order to comply with the terms of, or to enforce its rights under, this
Agreement or the other Bond Documents. Such Additional Payments shall be billed
to the Company by or on behalf of the Bank or Authority, as the case may be,
from time to time, together with a statement certifying that the amount so
billed has been paid for one or more of the items described, or that such amount
is then payable for such items. Amounts so billed shall be due and payable by
Company within 15 days after receipt of the bill by Company, and shall
thereafter accrue interest at the Default Rate.

     SECTION 5.13. ACCESS AND PROMOTION. The Company shall permit the Bank and
its agents to have access to the Property and Improvements at reasonable times
and upon reasonable notice, and to permit the Bank to erect a sign on the
Property indicating the Bank as the source of financing for the Project.

<Page>

     SECTION 5.14. UPDATED VALUATIONS. At any time prior to payment in full of
the Loan, the Bank may have any of the Property re-evaluated. The Company agrees
to cooperate with such re-evaluations and to pay all costs associated therewith.

     SECTION 5.15. RELEASE OF LETTERS OF CREDIT. The Letters of Credit shall be
released on the five year anniversary of the date of this Loan Agreement (April
1, 2007) provided that all of the conditions for release of the Letters of
Credit set forth in the Bank Commitment Letter have been fully satisfied by the
Company, the Lessee and Dyax Corp. If the conditions for release are not
satisfied by the five year anniversary of this Deed of Trust, the letters of
credit shall be released on April 1 of the next calendar year provided that all
conditions for release set forth in the Bank Commitment Letter have been fully
satisfied by the Company, the Lessee and Dyax Corp. If the conditions for
release are not satisfied at such time, the letters of credit, until released,
shall be released on the April 1 of each subsequent calendar year provided that
all conditions for release set forth in the Bank Commitment Letter have been
fully satisfied by the Company, the Lessee and Dyax Corp.

                                   ARTICLE VI

                               FINANCIAL COVENANTS

     SECTION 6.1. MAINTAIN EXISTENCE. The Company agrees to maintain its
existence as a Virginia limited liability company and to permit no changes to
such existence without the Bank's prior written approval; and not to make any
loans or advances to any other person or entity, except extensions of credit in
the normal course of business.

     SECTION 6.2. FINANCIAL AND OTHER INFORMATION. In addition to any and all
financial information required to be delivered pursuant to the terms and
conditions of the Guaranty Agreements, the Company shall provide the Bank with
the following financial statements and information regarding the Company on a
continuing basis during the term of the Bond:

             (a) Within ninety (90) days after the end of each fiscal year of
the Company, financial statements of the Company, which statements shall be
prepared in accordance with GAAP; shall include a balance sheet, a statement of
income and expenses for the fiscal year then ended and a statement of cash
flows, and the financial statements of the Company shall represent the financial
results included in the audited financial statements required to be provided by
Dyax Corp under this Agreement and the Guaranty Agreements;

             (b) Within thirty (30) days after the end of each calendar quarter,
internally prepared, unaudited financial statements of the Company's operations,
which statements shall be prepared in accordance with GAAP and shall include a
balance sheet and statement of income and expenses for the month then ended and
for the fiscal year to date, and shall be certified by the Company to be true
and correct in all material respects;

             (c) Within thirty (30) days after the end of each calendar month,
an internally prepared, unaudited accounting of the Company's cash expenditures
on the Project for the month then past and for the fiscal year to date, relative
to the Project Budget; and

<Page>

             (d) Within ninety (90) days after the end of each calendar year,
the Company shall deliver or cause to be delivered to the Bank, (i) a
consolidated audited income statement, a consolidated audited balance sheet and
a consolidated federal tax return of Dyax Corp. that includes the Company and
the Lessee, and (ii) an income statement and balance sheet of the Lessee that
represents the financial statements included in the audited results for Dyax
Corp.

     The Bank reserves the right to require such other financial information
(including tax returns, detailed cash flow information and contingent liability
information) of the Company, all at such times as the Bank shall deem necessary,
and the Company agrees promptly to provide such information to the Bank. All
financial statements must be in the form and detail as the Bank shall from time
to time reasonably request.

     SECTION 6.3. [RESERVED].

     SECTION 6.4. INDEBTEDNESS. The Company agrees to duly and promptly pay all
of its indebtedness to the Bank according to the terms of this Agreement and the
other Bond Documents, and, except for the Company's Note, to incur no other
indebtedness in any manner whatsoever for so long as the Advances under the Loan
are available or any amounts are outstanding under the Loan.

     SECTION 6.5. BOOKS AND RECORDS. The Company shall permit parties designated
by the Bank to inspect the books and records of the Company, and the Project and
to discuss the affairs of the Company, and the Project with officers of the
Company, as designated by the Bank, all at such times as the Bank shall
reasonably request.

     SECTION 6.6 NOTICE OF LOSS. The Company shall notify the Bank immediately
of any event causing a loss or depreciation in value of the Company's assets in
excess of $100,000 and the amount of such loss or depreciation.

     SECTION 6.7. ACCRUAL AND PAYMENT OF TAXES AND OTHER CHARGES. The Company
shall pay all taxes, assessments, charges, claims for labor, supplies, rent and
other obligations which, if unpaid, might give rise to a lien against property
of the Company, except liens to the extent permitted by this Agreement or
permitted encumbrances under the Deed of Trust. During each fiscal year, to
accrue all current tax liabilities of all kinds (including, without limitation,
federal and state income taxes, franchise taxes and payroll taxes, if any), all
required withholding of income taxes of employees, all required old-age and
unemployment contributions and all required payments to employee benefit plans,
and pay the same when they become due.

     SECTION 6.8. CERTIFICATE. Upon the Bank's written request, the Company
shall furnish the Bank with a certificate stating that the Company has complied
with and is in compliance with all terms, covenants and conditions of the Bond
Documents to which it is a party and that there exists no Default or Event of
Default or, if such is not the case, that one or more specified events have
occurred and the steps being taken to cure the same, and that the
representations and warranties contained herein are true with the same effect as
though made on the date of such certificate.

<Page>

     SECTION 6.9. BANKING RELATIONSHIP. The Company shall maintain the Company's
primary banking relationships with the Bank, including all deposit accounts,
until the payment in full of the Company's Note and all other amounts due and
payable under the Bond Documents.

     SECTION 6.10. OTHER ACTS. At the Bank's request, the Company shall execute
and deliver to the Bank all further documents and perform all other acts which
the Bank reasonably deems necessary or appropriate to perfect or protect its
security for the Bond.

     SECTION 6.11. NEGATIVE COVENANTS. Until the Bond has been paid in full, the
Company shall not:

             (a) ASSESSMENT OF LICENSES AND PERMITS. Assign or transfer, or
permit the assignment or transfer of, any interest in any license or permit
(including rights to payment thereunder), or assign, transfer or remove or
permit any other person to assign, transfer or remove any records pertaining to
the Project, without the Bank's prior written consent, which consent may be
granted or refused in the Bank's sole discretion.

             (b) DISPOSITION OF ASSETS. Without the prior written consent of the
Bank, which may be withheld in the Bank's sole discretion but shall not be
required in the event of a sale, assignment or transfer to a transferee of the
Company in which the Lessee or Dyax Corp. owns a majority of the voting
interest, sell, assign, lease, transfer or otherwise dispose of any material
portion of all or substantially all of its assets, whether in one transaction or
in a series of transactions and whether such assets are now or hereafter
acquired, unless any such disposition shall be in the ordinary course of
business for a full and fair consideration, which in no event shall include a
transfer for full or partial satisfaction of a pre-existing debt.

             (c) CHANGE IN BUSINESS. Make any material change in the nature of
its business as is proposed to be conducted as of the date hereof.

             (d) CHANGES IN ACCOUNTING. Change its methods of accounting, unless
such change is permitted by GAAP, and provided such change does not have the
effect of curing or preventing what would otherwise be a Default or an Event of
Default had such change not taken place.

             (e) CHANGE IN CONTROL. Neither the Company nor the Lessee shall
make or permit a material change in its management or in the voting control of
its membership interests without the prior written consent of the Bank until
payment in full of any and all amounts payable by the Company under this
Agreement, the Company's Note and the other Bond Documents.

             (f) ERISA FUNDING AND TERMINATION. Permit (a) the funding
requirements of ERISA with respect to any employee plan to be less than the
minimum required by ERISA at any time or (b) any employee plan to be subject to
involuntary termination proceedings at any time.

             (g) TRANSACTIONS WITH AFFILIATES. Enter into any transaction with
any person affiliated with the Company other than in the ordinary course of its
business and on fair and

<Page>

reasonable terms no less favorable to the Company than those that would obtain
in a comparable arms-length transaction with a person not an affiliate.

             (h) DIVIDENDS. The Company shall not pay dividends or any other
cash or noncash distributions to its members during the term of the Bonds
without the prior written consent of the Bank.

                                   ARTICLE VII

                         EVENTS OF DEFAULT AND REMEDIES

     SECTION 7.1. EVENT OF DEFAULT DEFINED. Each of the following events shall
be an Event of Default, provided that the events described in subparagraphs (b),
(c) and (e) below shall not constitute Events of Default unless the Bank
consents thereto:

             (a) Failure of the Company to make any payment on the Company's
Note or under this Agreement or any other Bond Document within 15 days after the
same becomes due and payable;

             (b) Failure by the Company to observe and perform any other
covenant, condition or agreement on its part under this Agreement for a period
of 30 days after notice (unless the Company and the Bank shall agree in writing
to an extension of such time prior to its expiration) specifying such failure
and requesting that it be remedied, given by the Authority or the Bank to the
Company;

             (c) Abandonment of the Project by the Company for a period of more
than 30 days;

             (d) If any warranty, representation or other statement by or on
behalf of the Company contained in this Agreement, the Bond Purchase Agreement,
in any other Bond Document or in any instrument furnished in connection with the
issuance or sale of the Bond was false or misleading in any material respect at
the time it was made or delivered;

             (e) An Event of Default under any of the other Bond Documents.

             (f) The Company shall default (i) in the payment of any
indebtedness to the Bank when and as the same shall become due and payable
whether at stated or scheduled maturity, by acceleration or otherwise or (ii) in
the payment of any other indebtedness in an amount, individually or in the
aggregate, in excess of $25,000 when and as the same shall become due and
payable if such default permits or causes acceleration of the maturity of such
indebtedness.

             (g) The Company shall be or become insolvent, or admit in writing
its inability to pay its debts as they mature, or make an assignment for the
benefit of creditors, or the Company shall apply for or consent to the
appointment of any receiver, trustee or similar officer for it or for all or any
substantial part of its property; or such receiver, trustee or similar officer
shall be appointed without the application or consent of the Company; or the
Company shall institute (by petition, application,

<Page>

answer, consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding relating to it under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise) against
Company; or any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
the Company;

     Notwithstanding the provisions of Section 7.1, if by reason of force
majeure either party hereto shall be unable in whole in part to carry out its
obligations under this Agreement and if such party shall give notice and full
particulars of such force majeure in writing to the other party and to the Bank,
within a reasonable time after the occurrence of the event or cause relied upon,
the obligations under this Agreement of the party giving such notice, so far as
they are directly affected by, and unable to be performed as a result of, such
force majeure, shall be suspended during the continuance of the inability, which
shall include a reasonable time for the removal of the effect thereof. The
suspension of such obligations for such period shall not be deemed an Event of
Default under this Section. Notwithstanding anything to the contrary in this
subsection, an event of force majeure shall not excuse, delay or in any way
diminish any payment or indemnification obligations of the Company under this
Agreement or any other Bond Document. The term "force majeure" as used herein
shall include, without limitation, acts of God, acts of war, whether or not
declared, acts of terror, strikes, lockouts or other industrial disturbances,
acts of public enemies, orders of any kind of the government of the United
States of America or of the Commonwealth of Virginia or any of their
departments, agencies, governmental subdivisions or officials, or any civil or
military authority, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fire, hurricanes, storms, floods, washouts, droughts, arrests,
restraint of government and people, civil disturbances, explosions, breakage or
accident to machinery, transmission pipes or canals, partial or entire failure
of utilities, or any other cause or event not reasonably within the control of
the party claiming such inability. It is agreed that the settlement of strikes,
lockouts and other industrial disturbances shall be entirely within the
discretion of the party having difficulty, and the party having difficulty shall
not be required to settle any strikes, lockouts and other industrial
disturbances by acceding to the demands of the opposing party or parties.

     SECTION 7.2. REMEDIES ON DEFAULT. Whenever an Event of Default shall have
occurred and be continuing, interest on the entire outstanding principal amount
of the Company's Note and the Bonds shall accrue at the Default Rate. Whenever
an Event of Default shall have happened and be continuing, the Bank shall have
the option to declare all amounts due hereunder and under the Company's Note to
be due and payable, and upon notice to the Company of such declaration, such
amounts shall thereupon become forthwith due and payable. Upon the occurrence
and continuation of an Event of Default resulting in the Bond becoming due and
payable, the Bank may:

             (a) Declare all payments on the Company's Note to be immediately
due and payable, whereupon the same shall become immediately due and payable;

             (b) Exercise any remedy afforded a secured party under the Uniform
Commercial Code of Virginia;

<Page>

             (c) Take whatever action at law or in equity may appear necessary
or desirable to collect the payments then due and thereafter to become due or to
enforce observance or performance of any covenant, condition or agreement of the
Company under this Agreement or the Company's Note;

             (d) Inspect, examine and make copies of the books, records and
accounts of the Company pertaining to the Project; or

             (e) Exercise any remedies provided in the Bond Purchase Agreement,
the Deed of Trust and any other Bond Document.

     If the Bank as the assignee of the Authority exercises any of its rights or
remedies under this section, it shall give notice of such exercise to the
Company (1) in the manner provided in Section 9.2 and (2) by telephone or
telegram; provided, however, that failure to give such notice by telephone or
facsimile shall not affect the validity of the exercise of any right or remedy
under this section.

     SECTION 7.3. NO REMEDY EXCLUSIVE. No remedy set forth in Section 7.2 is
intended to be exclusive of any other remedy, and every remedy shall be
cumulative and in addition to every other remedy herein or now or hereafter
existing at law, in equity or by statute. No delay or failure to exercise any
right or power accruing upon an Event of Default shall impair any such right or
power or shall be construed to be a waiver thereof, and any such right or power
may be exercised from time to time and as often as may be deemed expedient.

     SECTION 7.4. ATTORNEYS' FEES AND OTHER EXPENSES. The Company shall on
demand pay to the Authority and the Bank the reasonable fees of attorneys and
other reasonable expenses incurred by either of them in connection with the
issuance and ongoing ownership of the Bonds, the collection of payments due on
the Bond, this Agreement or any other Bond Document, or the enforcement of any
other obligation of the Company upon an Event of Default.

     SECTION 7.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. If either party or
its assignee waives a default by the other party under any covenant, condition
or agreement herein, such waiver shall be limited to the particular breach so
waived and shall not be deemed to waive any other breach hereunder.

                                  ARTICLE VIII

                                   PREPAYMENT

     SECTION 8.1. PREPAYMENT. The Bond and the Company's Note may be prepaid by
the Company in whole or in part at any time in the manner and at the times set
forth in the Bond and the Company's Note, and upon payment of the (i) applicable
principal amount being prepaid, (ii) accrued interest on the Bond, (iii) all
amounts that would have otherwise been due and payable by the Company during the
remainder of any Event of Deposit Shortfall Period, if applicable, (iv) any
other amounts then due and payable by the Company under the Bond Documents, and
a (v) a prepayment

<Page>

premium (payable whether such prepayment is undertaken voluntarily or by reason
of default, acceleration or otherwise) determined in accordance with the
following prepayment schedule (expressed as a percentage of the principal amount
being prepaid):

<Table>
             <S>                                            <C>
             Before April 1, 2003                           5%

             April 1, 2003 - March 31, 2004                 4%

             April 1, 2004 - March 31, 2005                 3%

             April 1, 2005 - March 31, 2006                 2%

             April 1, 2006 - March 31, 2007                 1%

             April 1, 2007 and thereafter                   0%
</Table>

                                   ARTICLE IX

                                  MISCELLANEOUS

     SECTION 9.1. TERM OF AGREEMENT. This Agreement shall remain in full force
and effect from the date hereof until Payment of the Bond and all other
obligations of the Company under the Bond Documents have been paid or
discharged.

     SECTION 9.2. NOTICES, ETC. Unless otherwise provided herein, all demands,
notices, approvals, consents, requests and other communications hereunder shall
be given as provided in the Bond Purchase Agreement.

     SECTION 9.3. AMENDMENTS TO AGREEMENT AND COMPANY'S NOTE. Neither this
Agreement nor the Company's Note shall be amended or supplemented subsequent to
the issuance of the Bond and before Payment of the Bond, except as provided in
the Bond Purchase Agreement.

     SECTION 9.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns, including the Bank.

     SECTION 9.5. SEVERABILITY. If any provision of this Agreement shall be
held invalid by any court of competent jurisdiction, such holding shall not
invalidate any other provision hereof.

     SECTION 9.6. APPLICABLE LAW; ENTIRE UNDERSTANDING. This Agreement and the
other Bond Documents express the entire understanding of the parties, and none
of the agreements between the parties may be modified except in writing signed
by the parties.

     SECTION 9.7. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which together shall
constitute but one and the same

<Page>

instrument; except that to the extent, if any, that this Agreement shall
constitute personal property under the Uniform Commercial Code of Virginia, no
security interest in this Agreement may be created or perfected through the
transfer or possession of any counterpart of this Agreement other than the
original counterpart, which shall be the counterpart containing the receipt
therefor executed by the Bank following the signatures to this Agreement.

     SECTION 9.8. CONSTRUCTION OF PROVISIONS OF THIS AGREEMENT. The Bank has not
agreed to accept assignment of any loan other than that specifically described
herein. All requirements herein shall be deemed material to the Bank. Except as
specified herein, all conditions and requirements must be satisfied by the
Company prior to the Closing Date. Whenever this Agreement refers to a matter
being "satisfactory" to the Bank, subject to the Bank's "approval" or "consent,"
at the Bank's "option," at the Bank's "determination," "required" by the Bank,
at the Bank's "request," as the Bank shall "deem necessary," or similar
terminology, it is deemed that each of the aforesaid shall be in the sole
discretion of the Bank, and if any term or condition requires the Bank's
approval, consent or satisfaction ("the Bank's Approval"), the Bank's Approval
shall not be implied, but shall be evidenced only by a written notice from the
Bank specifically addressed to the particular requirement or condition and
expressing the Bank's Approval.

     SECTION 9.9. PUBLICITY. The Bank shall have the right to advertise
(including, without limitation, photographs of the Property and other print
media) this Loan in industry periodicals and other industry media from time to
time, and the Company hereby consents to such advertising.

     SECTION 9.10. CONTROLLING LAW. THE VALIDITY, INTERPRETATION, ENFORCEMENT
AND EFFECT OF THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA.

     SECTION 9.11. WAIVER OF JURY TRIAL. THE COMPANY HEREBY WAIVES ANY RIGHT TO
A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, THE BOND
DOCUMENTS OR THE LOAN OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED
TO OR INCIDENTAL TO ANY DEALINGS OF AUTHORITY, BANK AND/OR COMPANY WITH RESPECT
TO THE BOND DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE OF
ANY PARTY'S RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE
CONDUCT OR THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES
WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE. THE COMPANY AGREES THAT AUTHORITY AND BANK MAY FILE A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND
BARGAINED AGREEMENT OF COMPANY IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY
AS AN INDUCEMENT OF AUTHORITY TO MAKE THE LOAN AND TO BANK TO ACCEPT ITS
ASSIGNMENT, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR
CONTROVERSY WHATSOEVER (WHETHER OR NOT MODIFIED HEREIN) BETWEEN

<Page>

THE COMPANY, THE AUTHORITY AND THE BANK SHALL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY. THE COMPANY CONSENTS
THAT ANY LEGAL ACTION OR PROCEEDING ARISING HEREUNDER, UNDER ANY OF THE BOND
DOCUMENTS, OR UNDER ANY OTHER MATTER OR INSTRUMENT TO WHICH THIS AGREEMENT
RELATES, MAY BE BROUGHT IN THE CIRCUIT COURT OF THE COUNTY OF ALBEMARLE,
VIRGINIA, OR IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF
VIRGINIA AND ASSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY SUCH COURT
IN ANY ACTION OR PROCEEDING INVOLVING SUCH DOCUMENTS, MATTERS, OR INSTRUMENTS.
NOTHING HEREIN SHALL LIMIT THE JURISDICTION OF ANY OTHER COURT.

     IN WITNESS WHEREOF, the Authority and the Company have caused this
Agreement to be executed in their respective names by their duly authorized
representatives all as of the date first above written.

                                   INDUSTRIAL DEVELOPMENT AUTHORITY OF
                                   ALBEMARLE COUNTY, VIRGINIA

                                   By:  /s/ John C. Lowry
                                        ------------------------------
                                   Its: Vice Chairman
                                        ------------------------------

                                   BIOTAGE REAL ESTATE, LLC

                                   By:  /s/ David B. Patteson
                                        ------------------------------
                                   Its: Manager
                                        ------------------------------

                                   BIOTAGE, INC.

                                   By:  /s/ David B. Patteson
                                        ------------------------------
                                   Its: President
                                        ------------------------------

     The undersigned authorized representative of the Bank executes this Loan
Agreement to evidence its receipt of the original counterpart thereof.

<Page>

                                   VIRGINIA NATIONAL BANK

                                   By:  /s/ David J. Mellen
                                        ------------------------------
                                   Its: Managing Officer
                                        ------------------------------

<Page>

                                    EXHIBIT A

                                 PROMISSORY NOTE

$4,250,000.00                                          Charlottesville, Virginia

                                                                 April ___, 2002

     FOR VALUE RECEIVED, BIOTAGE REAL ESTATE, LLC, a Virginia limited liability
company (the "Company"), hereby promises to pay to the order of the INDUSTRIAL
DEVELOPMENT AUTHORITY OF ALBEMARLE COUNTY, VIRGINIA, a political subdivision of
the Commonwealth of Virginia (the "Authority"), or its assigns, the principal
sum of FOUR MILLION TWO HUNDRED FIFTY THOUSAND and 00/100 DOLLARS
($4,250,000.00), or so much thereof as may be advanced and outstanding hereon,
as hereinafter provided, together with interest thereon from the date of
advancement thereof, as hereinafter set forth, such payments hereunder to be
made at all such times and in all such amounts as shall be sufficient to pay all
sums, including principal and interest and all costs of collection, including
reasonable attorneys' fees, and any other amounts owing under the "Bond"
hereinafter described, when the sums are due and payable in accordance with the
terms of the Bond and related Loan Agreement, dated as of April 1, 2002, between
the Company, the Authority and the Lessee (the "Agreement").

     This Promissory Note is issued and delivered by the Company in accordance
with, and shall be governed by, the provisions of the Agreement, the terms of
which Agreement are incorporated herein by reference.

     This Promissory Note is in an original principal amount corresponding to
the aggregate original principal amount of the Authority's Industrial
Development Revenue Bond (Biotage Project), Series 2002 (the "Bond"), issued
pursuant to a Bond Purchase Agreement, dated as of April 1, 2002 (the "Bond
Purchase Agreement"), among the Authority, the Company, the Lessee, and Virginia
National Bank (the "Bank"). As principal advances of the proceeds of the sale of
the Bond to the Bank are made in accordance with the Agreement, the amount of
such principal advances shall be added to the outstanding principal balance
hereof, up to the stated principal amount hereof. Payments due hereunder at all
times shall be sufficient to satisfy, when and as the same shall be due and
payable, all sums owing under said Bond or any note, bond or bonds from time to
time delivered to the holder of the Bond in replacement thereof, whether by
exchange, renewal, substitution for or consolidation of such Bond, and all other
amounts due and payable by the Company under the Agreement and the other Bond
Documents, as defined therein.

     This Promissory Note is secured, among other things, by a Credit Line Deed
of Trust, Assignment and Security Agreement granted by the Company in favor of
the Bank dated as of April 1, 2002, conveying certain real property more
particularly described therein, located in the County of

<Page>

Albemarle, Virginia, and granting security interests in certain personal
property, together with the Guaranty Agreements and the Letters of Credit, each
as defined in the Agreement.

     All payments under this Promissory Note shall be made in lawful money of
the United States directly to the Bank or its assigns as specified in the
assignment below. Such payments shall be made in immediately available funds,
with information sufficient to identify the source and application of funds.

     This Promissory Note may be prepaid, and shall be prepaid, under certain
circumstances pursuant to the same terms governing prepayment of the Bond
contained therein.

     Upon the occurrence of an Event of Default (as defined in the Loan
Agreement), the entire balance of principal with all interest then accrued,
together with any other amounts payable by the Company under the Agreement and
the other Bond Documents, may, and under certain circumstances shall, be
declared immediately due and payable, whereupon the same shall become
immediately due and payable, and shall accrue interest thereafter at the Default
Rate, as defined in the Agreement.

     IN WITNESS WHEREOF, the Company has caused this Promissory Note to be duly
executed by its duly authorized officer, all as of the date first above written.

                                   BIOTAGE REAL ESTATE, LLC

                                   a Virginia limited liability company

                                   By:
                                      ------------------------------------------

                                   Its:-----------------------------------------

<Page>

                                   ASSIGNMENT

     The Industrial Development Authority of Albemarle County, Virginia (the
"Authority") hereby irrevocably assigns the foregoing Promissory Note to
Virginia National Bank (the "Bank") and hereby directs Biotage Real Estate, LLC,
as maker of the Promissory Note to make all payments of principal and interest
hereon directly to said Bank at its main office in Charlottesville, Virginia, or
such other place as the holder hereof may designate in writing. This assignment
is made without recourse as security for the payment of the Authority's Bond
described in the foregoing Promissory Note.

                                   INDUSTRIAL DEVELOPMENT AUTHORITY OF
                                   ALBEMARLE COUNTY, VIRGINIA

                                   By:
                                      --------------------------------

                                   Its:        Vice Chairman

<Page>

                                    EXHIBIT B

$__________                                                               No. __

REQUISITION AND CERTIFICATE

__________

Virginia National Bank
1580 Seminole Trail
P.O. Box 2853
Charlottesville, Virginia 22902-2853
Attention:  _____________

Ladies and Gentlemen:

     On behalf of Biotage Real Estate, LLC, a Virginia limited liability company
(the "Company"), I hereby requisition from the funds representing the proceeds
of the sale of the Industrial Development Revenue Bond (Biotage Project), Series
2002, issued by the Industrial Development Authority of Albemarle County,
Virginia (the "Authority") in the principal amount of Four Million Two Hundred
Fifty Thousand Dollars ($4,250,000) and dated as of April 1, 2002 (the "Bond"),
which funds are held by you in accordance with the Loan Agreement dated as of
April 1, 2002 (the "Agreement") between you, the Company and Biotage Inc., a
Delaware corporation (the "Lessee"), the sum of $__________ to be paid to the
person or persons indicated below (capitalized terms not otherwise defined
herein shall have the meaning given such terms in the Agreement):

         (1)        $__________________ for ________________________________
         _______________________________________________________________________
         payable to _________________________________, and

         (2)        $__________________ for ________________________________
         _______________________________________________________________________
         payable to ____________________________________.

     I hereby certify that (a) the obligation to make such payment was incurred
by the Authority or the Company in connection with the Project and is a proper
charge against the Costs of the Project, and has not been the basis for any
prior requisition which has been paid; (b) neither the Company nor, to the best
of the Company's knowledge, the Authority has received written notice of any
lien, right to lien or attachment upon, or claim affecting the right of such
payee to receive payment of, any of the money payable under this requisition to
any of the persons, firms or corporations named herein, or if any notice of any
such lien, attachment or claim has been received such lien, attachment or claim
has been released or discharged or will be released or discharged upon payment
of this requisition; (c) this requisition contains no items representing payment
on account of any retained percentages

<Page>

which the Authority or the Company is entitled to retain at this date; (d) the
payment of this requisition will not result in less than substantially all (95%
or more) of the proceeds of the Bonds to be expended under this requisition and
under all prior requisitions having been used for the acquisition and
installation of real property or property of a character subject to the
allowance for depreciation under the Internal Revenue Code of 1986, as amended;
(e) no "Event of Default" (as defined in the Agreement), or event which after
notice or lapse of time or both would constitute such an "Event of Default" has
occurred and not been waived.

     Attached hereto is (a) the current, updated Project Budget setting forth
the original Project Budget, the proposed revisions thereto (if any), previous
amounts advanced, amounts paid from funds other than the Loan, the amounts
requested with the current requisition and the amounts remaining to be advanced,
all itemized under the line items of the Project Budget, (b) the itemized
schedule of values for the construction work and all costs incurred for
construction pursuant to each category of the schedule of values, (c) a separate
itemization of costs not included in the foregoing general construction contract
for equipment, construction and non-construction expenses in connection with the
Project pursuant to the general construction contract with the General
Contractor, an AIA G702/703 form signed by the General Contractor and the
Company, with copies of invoices for all non hard cost construction items, (d)
the percentage of completion of each line item on the Project Budget and
schedule of values, (e) such other vendor invoice(s) and/or bill(s) of sale
evidencing and acknowledging the Company's acceptance, approval and receipt in
good condition, as applicable, of particular services rendered and equipment or
other property improvements received in connection with the construction,
renovation, equipping and installation of the Project, all in forms and amounts
acceptable to the Bank, and (f) any other information required pursuant to
Article III of the Agreement as a condition precedent to disbursement.

     The following paragraph is to be completed when any requisition and
certificate includes any item for payment for labor or to contractors, builders
or materialmen.

     I hereby certify that insofar as the amount covered by the above
requisition includes payments to be made for labor or to contractors, builders
or materialmen, including materials or supplies, in connection with the
Acquisition of the Project, (i) all obligations to make such payment have been
properly incurred, (ii) any such labor was actually performed and any such
materials or supplies were actually furnished or installed in or about the
Project and are a proper charge against the Costs of the Project, and (iii) such
materials or supplies either are not subject to any lien or security interest
or, if the same are so subject, such lien or security interest will be released
or discharged upon payment of this requisition.

                      ------------------------------------
                             Company Representative

<Page>

Approved:

INSPECTING ARCHITECT

By:
     ---------------------------

Its:
     ---------------------------

VIRGINIA NATIONAL BANK

By:
      ---------------------------

Name:
      ---------------------------

Title:
      ---------------------------

<Page>

                                 PROMISSORY NOTE

$4,250,000.00Charlottesville,                                           Virginia
                                                                April 1, 2002

     FOR VALUE RECEIVED, BIOTAGE REAL ESTATE, LLC, a Virginia limited liability
company (the "Company"), hereby promises to pay to the order of the INDUSTRIAL
DEVELOPMENT AUTHORITY OF ALBEMARLE COUNTY, VIRGINIA, a political subdivision of
the Commonwealth of Virginia (the "Authority"), or its assigns, the principal
sum of FOUR MILLION TWO HUNDRED FIFTY THOUSAND and 00/100 DOLLARS
($4,250,000.00), or so much thereof as may be advanced and outstanding hereon,
as hereinafter provided, together with interest thereon from the date of
advancement thereof, as hereinafter set forth, such payments hereunder to be
made at all such times and in all such amounts as shall be sufficient to pay all
sums, including principal and interest and all costs of collection, including
reasonable attorneys' fees, and any other amounts owing under the "Bond"
hereinafter described, when the sums are due and payable in accordance with the
terms of the Bond and related Loan Agreement, dated as of April 1, 2002, between
the Company, the Authority and the Lessee (the "Agreement").

     This Promissory Note is issued and delivered by the Company in accordance
with, and shall be governed by, the provisions of the Agreement, the terms of
which Agreement are incorporated herein by reference.

     This Promissory Note is in an original principal amount corresponding to
the aggregate original principal amount of the Authority's Industrial
Development Revenue Bond (Biotage Project), Series 2002 (the "Bond"), issued
pursuant to a Bond Purchase Agreement, dated as of April 1, 2002 (the "Bond
Purchase Agreement"), among the Authority, the Company, the Lessee, and Virginia
National Bank (the "Bank"). As principal advances of the proceeds of the sale of
the Bond to the Bank are made in accordance with the Agreement, the amount of
such principal advances shall be added to the outstanding principal balance
hereof, up to the stated principal amount hereof. Payments due hereunder at all
times shall be sufficient to satisfy, when and as the same shall be due and
payable, all sums owing under said Bond or any note, bond or bonds from time to
time delivered to the holder of the Bond in replacement thereof, whether by
exchange, renewal, substitution for or consolidation of such Bond, and all other
amounts due and payable by the Company under the Agreement and the other Bond
Documents, as defined therein.

     This Promissory Note is secured, among other things, by a Credit Line Deed
of Trust, Assignment and Security Agreement granted by the Company in favor of
the Bank dated as of April 1, 2002, conveying certain real property more
particularly described therein, located in the County of Albemarle, Virginia,
and granting security interests in certain personal property, together with the
Guaranty Agreements and the Letters of Credit, each as defined in the Agreement.

     All payments under this Promissory Note shall be made in lawful money of
the United States directly to the Bank or its assigns as specified in the
assignment below. Such payments shall be made

<Page>

in immediately available funds, with information sufficient to identify the
source and application of funds.

     This Promissory Note may be prepaid, and shall be prepaid, under certain
circumstances pursuant to the same terms governing prepayment of the Bond
contained therein.

     Upon the occurrence of an Event of Default (as defined in the Loan
Agreement), the entire balance of principal with all interest then accrued,
together with any other amounts payable by the Company under the Agreement and
the other Bond Documents, may, and under certain circumstances shall, be
declared immediately due and payable, whereupon the same shall become
immediately due and payable, and shall accrue interest thereafter at the Default
Rate, as defined in the Agreement.

     IN WITNESS WHEREOF, the Company has caused this Promissory Note to be duly
executed by its duly authorized officer, all as of the date first above written.

                                   BIOTAGE REAL ESTATE, LLC

                                   a Virginia limited liability company

                                   By:  /s/ David B. Patteson
                                        -----------------------------------

                                   Its: Manager
                                        -----------------------------------

<Page>

                                   ASSIGNMENT

     The Industrial Development Authority of Albemarle County, Virginia (the
"Authority") hereby irrevocably assigns the foregoing Promissory Note to
Virginia National Bank (the "Bank") and hereby directs Biotage Real Estate, LLC,
as maker of the Promissory Note to make all payments of principal and interest
hereon directly to said Bank at its main office in Charlottesville, Virginia, or
such other place as the holder hereof may designate in writing. This assignment
is made without recourse as security for the payment of the Authority's Bond
described in the foregoing Promissory Note.

                                   INDUSTRIAL DEVELOPMENT AUTHORITY OF
                                   ALBEMARLE COUNTY, VIRGINIA

                                   By:  /s/ John C. Lowry
                                        ------------------------------

                                   Its:     Vice Chairman

<Page>

NOTICE: THE FOLLOWING IS PROVIDED SOLELY TO COMPLY WITH THE PROVISIONS OF
SECTION 55-58.2 OF THE CODE OF VIRGINIA OF 1950, AS AMENDED:

                      THIS IS A CREDIT LINE DEED OF TRUST.

The name of the beneficiary secured hereby is Virginia National Bank. The
address to which communications to the beneficiary are to be sent is 1580
Seminole Trail, P.O. Box 2853, Charlottesville, VA 22902-2853, Attention: David
J. Mellen. The maximum aggregate amount of principal to be secured hereby at any
one time is Four Million Two Hundred Fifty Thousand Dollars ($4,250,000).

                           CREDIT LINE DEED OF TRUST,

                        ASSIGNMENT AND SECURITY AGREEMENT

                            Dated as of April 1, 2002

                                      from

                            BIOTAGE REAL ESTATE, LLC

                                       to

                       J.D. Miller, Jr. and Mark T. Giles

                                   as trustees

                                 Relating to the

                                   $4,250,000

         Industrial Development Authority of Albemarle County, Virginia

                       Industrial Development Revenue Bond

                                (Biotage Project)

                                   Series 2002

<Page>

                                TABLE OF CONTENTS

<Table>
<S>                                                                                                          <C>
Recitals......................................................................................................1

ARTICLE I
     SECTION 1.01.  Definitions...............................................................................6
     SECTION 1.02.  Rules of Construction.....................................................................6

ARTICLE II
     SECTION 2.01.  Grant....................................................................................11
     SECTION 2.02.  Grantor's Obligations....................................................................11
     SECTION 2.03.  Quiet Possession.........................................................................12
     SECTION 2.04.  Condition of Grant.......................................................................12

ARTICLE III
     SECTION 3.01.  Title to Land; Validity of Deed of Trust.................................................12
     SECTION 3.02.  Use of the Land..........................................................................13
     SECTION 3.03.  Utilities; Hazardous Materials............................................................9
     SECTION 3.04.  Separate Lot..............................................................................9
     SECTION 3.05.  Payment and Performance of Note and Indebtedness..........................................9
     SECTION 3.06.  Taxes, Liens and Other Charges...........................................................10
     SECTION 3.07.  Insurance................................................................................10
     SECTION 3.08.  Monthly Deposits.........................................................................12
     SECTION 3.09.  Condemnation.............................................................................13
     SECTION 3.10.  Damage and Destruction; Condemnation; Application of Net Proceeds....................... 13
     SECTION 3.11.  Care of Project..........................................................................14
     SECTION 3.12.  Further Assurances: After-Acquired Property..............................................15
     SECTION 3.13.  Expenses.................................................................................16
     SECTION 3.14.  Subrogation..............................................................................16
     SECTION 3.15.  Right to Cure............................................................................16
     SECTION 3.16.  Indemnification..........................................................................17

ARTICLE IV
     SECTION 4.01.  Security Interest: Financing Statements..................................................17

ARTICLE V
     SECTION 5.01.  Leases and Rents.........................................................................19

<Page>

ARTICLE VI
     [RESERVED]..............................................................................................21

ARTICLE VII
     SECTION 7.01.  Events of Default........................................................................21
     SECTION 7.02.  Acceleration of Maturity.................................................................22
     SECTION 7.03.  Remedies Upon an Event of Default........................................................22
     SECTION 7.04.  Receiver.................................................................................24
     SECTION 7.05.  Enforcement..............................................................................24
     SECTION 7.06.  Purchase by Beneficiary..................................................................24
     SECTION 7.07.  Application of Proceeds of Sale..........................................................25
     SECTION 7.08.  Tenant Holding Over......................................................................25
     SECTION 7.09.  Leases...................................................................................25
     SECTION 7.10.  Discontinuance of Proceeds...............................................................25
     SECTION 7.11.  Remedies Cumulative......................................................................25
     SECTION 7.12.  Suits to Protect the Security Property...................................................26
     SECTION 7.13.  Marshalling..............................................................................26
     SECTION 7.14.  Security Deposits........................................................................26
     SECTION 7.15.  Waiver of Appraisement; Valuation........................................................26
     SECTION 7.16.  Waiver of Trial by Jury..................................................................26

ARTICLE VIII
     SECTION 8.01.  Successors and Assigns...................................................................27
     SECTION 8.02.  Severability.............................................................................27
     SECTION 8.03.  Applicable Law...........................................................................27
     SECTION 8.04.  Notices, Demands and Requests............................................................27
     SECTION 8.05.  Consents and Approvals...................................................................27
     SECTION 8.06.  Waiver...................................................................................28
     SECTION 8.07.  Execution Counterparts...................................................................29
     SECTION 8.08.  Time of the Essence......................................................................29
     SECTION 8.09.  Attorneys' Fees..........................................................................29
     SECTION 8.10.  No Liability.............................................................................29
     SECTION 8.11.  Incorporation of Statutory Provisions....................................................29
     SECTION 8.12.  Debt Secured Subject to Call.............................................................29

<Page>

ARTICLE IX
     SECTION 9.01.  Performance of Duties; Liability; Compensation...........................................30
     SECTION 9.02.  Resignation..............................................................................30
     SECTION 9.03.  Removal and Substitution.................................................................30
     SECTION 9.04.  Any Trustee May Act......................................................................30
     SECTION 9.05.  Trustees' Expenses and Indemnity.........................................................30

ERROR! NO TABLE OF CONTENTS ENTRIES FOUND.

Signatures..............................................................................................31 & 32

Exhibit A     -     Description of the Improved Land
</Table>

<Page>

     THIS CREDIT LINE DEED OF TRUST, ASSIGNMENT AND SECURITY AGREEMENT, dated as
of the 1st day of April, 2002, from BIOTAGE REAL ESTATE, LLC, a Virginia limited
liability company (the "Grantor"), to J. D. MILLER, Jr., a resident of
Albemarle County, Virginia, having a business address of 222 East Main Street,
Charlottesville, Virginia 22902, and Mark T. GILES, a resident of Albemarle
County, Virginia, having a business address of 222 East Main Street,
Charlottesville, Virginia, 22902, as trustees (together with their successors
and assigns as trustees hereunder, the "Trustees"), recites and provides:

RECITALS

     The Industrial Development Authority of Albemarle County, Virginia, a
political subdivision of the Commonwealth of Virginia (the "Issuer"), has
determined to issue and sell its $4,250,000 Industrial Development Revenue Bond
(Biotage Project), Series 2002 (the "Tax-Exempt Bond"), to Virginia National
Bank (the "Beneficiary"), to assist the Grantor in financing the acquisition of
approximately 7.1 acres of land constituting Parcel F-1A in the University of
Virginia Research Park at North Fork in Albemarle County, Virginia, the
construction of an approximately 50,000 square foot manufacturing, research and
office facility thereon and the acquisition and installation of manufacturing
and research equipment therefor (the "Project"), to be owned by the Grantor and
leased by the Grantor to the Grantor's affiliate, Biotage, Inc., a Delaware
corporation (the "Lessee"), and used in the Lessee's business of manufacturing
drug purification equipment, and to pay certain costs of issuance of the Bond.
In order to secure the Tax-Exempt Bond, the Issuer has assigned to the
Beneficiary substantially all of the Issuer's right, title and interest in and
to the Loan Agreement dated as of April 1, 2002 (the "Loan Agreement"), between
the Issuer, Biotage, Inc., and the Grantor, and the Grantor's $4,250,000
promissory note, dated as of the Closing Date, issued pursuant to the Loan
Agreement and payable to the Issuer. As a condition to its purchase of the
Tax-Exempt Bond, Beneficiary has required the execution and delivery of this
Deed of Trust by Grantor to secure the Grantor's Obligations (hereinafter
defined). Grantor wishes and intends by the execution and delivery of this Deed
of Trust to secure the full and punctual payment and performance of the
Indebtedness up to a maximum principal amount of $4,250,000. Accordingly,
Grantor agrees as follows:

                                    ARTICLE I

DEFINITIONS: RULES OF CONSTRUCTION

     SECTION 1.01. DEFINITIONS. As used in this Deed of Trust (including the
Recitals set forth above), the terms listed below shall have the indicated
meanings unless otherwise required by the context:

     "ACT" shall have the meaning given that term in the Bond Purchase
Agreement.

     "AGREEMENT" shall mean the Loan Agreement dated as of April 1, 2002 between
Grantor, Biotage, Inc., and the Issuer, as the same may be amended, modified or
supplemented from time to time.

     "BENEFICIARY" shall mean Virginia National Bank and its successors and
assigns.

     "BOND COUNSEL" shall have the meaning given that term in the Loan
Agreement.

<Page>

     "BOND DOCUMENTS" shall have the same meaning given that term as in the Bond
Purchase Agreement.

     "BOND PURCHASE AGREEMENT" shall mean the Bond Purchase Agreement dated as
of April 1, 2002, among the Issuer, the Grantor, Biotage, Inc., and the
Beneficiary.

     "CLOSING DATE" means the date of issuance and delivery of the Tax-Exempt
Bond to the Beneficiary.

     "DEED OF TRUST" shall mean this Credit Line Deed of Trust, Assignment and
Security Agreement as it may be amended, modified or supplemented from time to
time as permitted hereby.

     "DEFAULT" shall mean any act or occurrence which with notice, lapse of time
or both would constitute an Event of Default.

     "DEFAULT RATE" shall have the meaning given such term in the Loan
Agreement.

     "EQUIPMENT" shall mean all appliances, apparatus, equipment, machinery,
fixtures, materials and all other items of tangible personal property of Grantor
or any leasehold interests of Grantor therein now or hereafter located on or
used or held in connection with the Project.

     "EVENT OF DEFAULT" shall mean any of the events or circumstances described
as such in Section 7.01.

     "GRANTOR'S OBLIGATIONS" shall mean the obligations of the Grantor set forth
in Section 2.02.

     "HAZARDOUS MATERIALS" shall mean (a) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. 6901 et seq.), as
amended from time to time, and regulations promulgated thereunder; (b) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.), as amended from
time to time, and regulations promulgated thereunder; (c) any substance the
presence of which on the Security Property or any part thereof is prohibited by
any federal, state or local law, regulation or ordinance similar to those set
forth in this definition; and (d) any other substance which by law requires
special handling in its collection, storage, treatment, or disposal.

     "HAZARDOUS MATERIALS CONTAMINATION" shall mean the contamination (whether
presently existing or occurring after the date of this Deed of Trust) of the
Improvements, facilities, soil, ground water, air or other elements on, or of,
the Security Property or any part thereof by Hazardous Materials, or the
contamination of the buildings, facilities, soil, ground water, air or other
elements on, or of, any other property as a result of Hazardous Materials at any
time (whether before or after the date of this Deed of Trust) emanating from the
Security Property or any part thereof.

<Page>

     "IMPOSITIONS" shall mean all (a) taxes, levies, fees, water and sewer
rents, assessments and all other governmental charges and all charges for
utility or communications services which may at any time be assessed, levied or
imposed upon Grantor, the Security Property, this Deed of Trust or the
Indebtedness or which may arise in connection with the ownership, use, occupancy
or operation of the Security Property, (b) all income, excess profits, sales,
gross receipts and other taxes, duties or imposts assessed, levied or imposed by
any governmental authority on Grantor or the Security Property, (c) all lawful
claims and demands of mechanics, materialmen and others which, if unpaid, might
create a lien on the Security Property, and (d) insurance premiums and similar
charges with respect to the ownership, use, occupancy or operation of the
Security Property.

     "IMPROVEMENTS" shall mean all structures, buildings or other improvements,
and substitutions or replacements thereof and additions or accessions thereto,
now or hereafter standing upon the Land, including all furnaces, boilers,
radiators, piping, plumbing and bathroom fixtures, refrigeration, air
conditioning and sprinkler systems, elevators and motors, building materials,
building equipment, machinery and fixtures of every kind and nature on the Land
or forming part of such structures, buildings or other improvements.

     "INCOME" shall mean all income, rents, receipts, royalties, benefits,
revenues, issues and profits of any nature whatsoever now or hereafter due or to
which Grantor may now or hereafter become entitled or may demand or claim,
arising from or out of the Security Property or any part thereof, or from the
ownership or leasing of the Security Property or any part thereof, whether or
not yet earned by performance including, without limitation, all proceeds
payable under any policy of insurance covering loss of rents resulting from
untenantability caused by destruction or damage to the Security Property or any
part thereof and any deposits of cash, securities and property that may be held
at any time and from time to time under the terms of the Leases.

     "INDEBTEDNESS" shall mean all indebtedness and obligations of Grantor to
Beneficiary arising under or out of the Bond Documents.

     "ISSUER" shall mean the Industrial Development Authority of Albemarle
County, Virginia, a political subdivision of the Commonwealth of Virginia, and
any successor thereto.

     "JURISDICTION" shall mean the County of Albemarle, Virginia.

     "LAND" shall mean those certain tracts of real estate situated in the
Jurisdiction and more particularly described in EXHIBIT A, including all of the
tenements, hereditaments, rights of way, easements, rights, privileges,
remainders, reversions and appurtenances thereunto belonging or in any way
appertaining, and all of the estate, right, title, interest, claim or demand
whatsoever of Grantor therein and in the streets and ways adjacent thereto and
in any gores or strips of land adjacent thereto, either in law or in equity, in
possession or expectancy, now existing or hereafter acquired.

     "LEASE" shall mean any and all leases and agreements, written or oral, now
in existence or hereafter arising, for the use or occupancy of all or any
portion of the Security Property, together with all the right, power and
authority of Grantor to alter, modify or change the terms of such leases and
agreements, to surrender, cancel or terminate such leases and agreements or to

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exercise any other right of the lessor under such leases and agreements, further
together with any and all extensions and renewals thereof and any and all
further leases and agreements, including subleases, of all or any part of the
Security Property and further together with all of the right, title and interest
of Grantor as beneficiary of any guaranties of such leases and agreements.

     "NET PROCEEDS" shall mean when used with respect to any condemnation award
or insurance proceeds allocable to the Security Property or any part thereof,
the gross proceeds from condemnation or insurance so allocable to which Grantor
may be entitled under the Lease or otherwise, remaining after payment of all
expenses (including reasonable attorneys' fees and any expenses of the Trustees
or Beneficiary) incurred in the collection of such gross proceeds.

     "NOTE" shall mean the promissory note in the principal amount of the
Tax-Exempt Bond issued by Grantor to the Issuer in accordance with the
provisions of the Loan Agreement.

     "PERMITS" shall mean all licenses, permits and approvals issued by any
governmental or quasi-governmental authorities and obtained by Grantor in
connection with the construction, ownership, occupancy, use or operation of the
Security Property or any part thereof.

     "PERMITTED ENCUMBRANCES" or "PERMITTED LIENS" shall mean:

     (a) Those easements, rights of way, servitudes, utility, access and other
similar reservations, rights and restrictions and other minor defects and
irregularities in title to the Security Property, and zoning laws and land use
regulations, which do not materially lessen the value of the Security Property
or materially impair the use thereof for the purposes contemplated in the Bond
Documents;

     (b) The right reserved to or vested in any municipality or public authority
to condemn, appropriate, recapture or designate a purchaser of all or any part
of the Security Property;

     (c) Any liens for taxes, assessments and other governmental charges and any
liens of mechanics, materialmen and laborers for work or services performed or
materials furnished in connection with the Security Property which are not due
and payable or the amount or validity of which is being contested at the time by
appropriate legal proceedings which shall operate to prevent the collection
thereof or other realization thereon and the sale or forfeiture of the Security
Property or any part thereof or interest therein to satisfy the same, provided
that Grantor shall have complied with this Deed of Trust dealing with the
contest of any such tax, assessment or other governmental charge or lien;

     (d) The easements, rights of way, encumbrances and other title matters
listed in the title insurance commitment approved by Beneficiary in connection
with its purchase of the Tax-Exempt Bond;

     (e) The lien hereof and any rights granted hereby;

     (f) Any Leases, so long as the same are subject and subordinate to the lien
hereof;

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     (g) Any prior deeds of trust or liens granted by the Grantor for the
benefit of the Beneficiary; and

     (h) A lien or deed of trust granted by the Grantor for the benefit of
Stephen T. McLean ("McLean") and David P. Turner ("Turner") to secure certain
reimbursement obligations of the Grantor under letters of credit issued by
McLean and Turner in connection with the Agreement in a principal amount not to
exceed $800,000, together with interest thereon, provided that such lien or deed
of trust is at all times subordinate to the liens, assignments and security
interests provided to Beneficiary under this Deed of Trust or any other document
executed in connection with the Agreement.

     "RELATED PERSONAL PROPERTY" shall mean architectural and engineering plans
and specifications for the Security Property or any portion thereof, any funds,
escrow accounts, insurance policies and unclassified business records related to
the Security Property or any portion thereof, letters of credit or other
property which are now or hereafter provided by Grantor to assure the payment of
the Indebtedness and performance and observance of the other obligations secured
hereby, and warranties and guaranties by manufacturers, suppliers and installers
pertaining to the condition of the Improvements and the Equipment.

     "SECURITY PROPERTY" shall mean any and all of the property of Grantor
referred to in Article II.

     "STATE" shall mean the Commonwealth of Virginia.

     "THE LIEN HEREOF" or similar words shall mean the liens, assignments and
security interests created under this Deed of Trust.

     "UCC" shall mean the Uniform Commercial Code as adopted in the State as of
the date hereof, together with any amendments thereto which do not limit the
rights hereunder of Trustees or Beneficiary or the obligations hereunder of
Grantor.

     "UCC PROPERTY" shall mean all components of the Security Property in which
a security interest may be created pursuant to the UCC.

     "VIRGINIA CODE" shall mean the Code of Virginia of 1950, as amended.

     SECTION 1.02. RULES OF CONSTRUCTION. The following rules shall apply to the
construction of this Deed of Trust unless otherwise required by the context:

     Singular words shall connote the plural as well as the singular, and vice
versa.

     (a) All references herein to particular articles, sections or exhibits are
references to articles, sections or exhibits of this Deed of Trust.

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     (b) The headings and table of contents hereof are solely for convenience of
reference and shall neither constitute a part of this Deed of Trust nor affect
its meaning, construction or effect.

                                   ARTICLE II

GRANTING CLAUSE

     SECTION 2.01. GRANT. For and in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor hereby grants, bargains, sells, conveys, mortgages,
assigns, transfers, pledges, grants a security interest in and sets over unto
Trustees in trust as to items (a) through (c) below, and unto the Beneficiary as
to items (d) through (h) below, the following property:

     (a) the Grantor's fee and leasehold interests in the Land;

     (b) the Improvements;

     (c) subject to the grant unto the Beneficiary as to items (d) through (i)
below, all rents, income, revenues, issues, awards, proceeds, and profits from
and in respect of the Land and the Improvements;

     (d) the Equipment;

     (e) the Leases and the Income;

     (f) the Related Personal Property;

     (g) any and all monies and other property which may now or hereafter become
subject to the lien hereof or which may come into the control of Beneficiary
pursuant to this Deed of Trust or any Bond Document; and

     (h) all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims including, without limitation, proceeds
of insurance and condemnation awards.

     SECTION 2.02. GRANTOR'S OBLIGATIONS. This Deed of Trust is given to secure
the payment or performance, as the case may be, of all the following:

     (a) The Indebtedness, plus interest thereon, fees due with respect to such
Indebtedness, and all costs incurred by Beneficiary or Trustees to enforce this
Deed of Trust;

     (b) Any and all additional advances made by Beneficiary to protect or
preserve the Security Property or any part thereof or the liens, assignments or
security interests created hereby on the Security Property or any part thereof,
or for Impositions as hereinafter provided, or for performance of any of the
obligations of Grantor hereunder or under the Bond Documents or under the Lease,
or for any other purpose provided herein (whether or not the original Grantor

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remains the owner of the Security Property at the time of such advances);
provided, however, nothing herein shall be deemed to obligate Beneficiary to
make any such advances;

     (c) The due and punctual performance by Grantor of Grantor's obligations
hereunder; and

     (d) All costs of collection of the Indebtedness, including reasonable
attorneys' fees if collected by or through an attorney-at-law or under the
advice thereof or if such an attorney is consulted with respect to any Default
or Event of Default.

     SECTION 2.03. QUIET POSSESSION. Until the occurrence of an Event of Default
hereunder, and subject to any provision hereof to the contrary, Grantor shall
have the right to remain in quiet and peaceful possession of the Security
Property and to collect, receive and retain the Income.

     SECTION 2.04. CONDITION OF GRANT. If Grantor shall pay or cause to be paid
to Beneficiary the Indebtedness in full in the manner stated in this Deed of
Trust and the other Bond Documents at any time before the sale provided for
herein, and shall well and truly perform, comply with and observe each and all
of the obligations of Grantor hereunder, then these presents and the estate
granted hereby shall cease, determine and become void, and upon proof of the
foregoing given to the Trustees to their satisfaction, the Trustees shall (upon
the receipt of the written request of Beneficiary and at the expense of Grantor)
release and discharge this Deed of Trust and the liens, security interests and
assignments created hereby.

                                   ARTICLE III

GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTOR

     SECTION 3.01. TITLE TO LAND; VALIDITY OF DEED OF TRUST. Grantor represents,
warrants, covenants and agrees that:

     (a) Grantor is the owner of a fee interest in the Land and the
Improvements, as described on Exhibit A subject to no lien, charge or
encumbrance other than the Permitted Encumbrances and will preserve such title
and will warrant generally and defend the same to Trustees and Beneficiary
against all claims and demands by any person claiming by, through or under
Grantor;

     (b) Grantor has the necessary power, authority and right to execute this
Deed of Trust and encumber the Security Property now or hereafter owned by
Grantor, all as provided herein, and this Deed of Trust constitutes a lien on
the Security Property prior to all other liens other than the Permitted
Encumbrances (excluding for purposes of this subsection, the Lease from
"Permitted Encumbrances");

     (c) This Deed of Trust has been duly authorized, executed and delivered by
Grantor and constitutes the legal, valid and binding obligation of Grantor,
enforceable against Grantor in

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accordance with its terms, subject to bankruptcy and insolvency laws and general
principles of equity; and

     (d) Grantor at its expense will generally warrant and defend the validity
and priority of the liens, security interests and assignments granted and made
by Grantor herein against the claims of any and all persons and parties claiming
by, through or under Grantor.

     SECTION 3.02. USE OF THE LAND. Grantor represents, warrants, covenants and
agrees that, without regard to any property other than the Land, the proposed
use of the Land for the Project is permitted as a matter of right as a principal
use and not a nonconforming use under all applicable zoning and subdivision
ordinances and other land use regulations, and the Land and the Project and such
use and all future uses thereof in all other material respects now and will
comply and in all material respects, with all applicable zoning ordinances, land
use regulations, restrictive covenants and all laws, ordinances, orders, rules
and regulations of all governmental and quasigovernmental authorities.

     SECTION 3.03. UTILITIES; HAZARDOUS MATERIALS.

     (a) Grantor represents, warrants and covenants that all utility services
and facilities necessary for the complete ownership, operation, occupancy and
use of the Land and the Project as described in the Bond Documents, including
without limitation public water, storm and sanitary sewer facilities, and gas,
electric and telephone facilities, are available at the boundaries of the Land,
are adequate for such purposes, and have been properly constructed and
installed, are fully operational and are adequate to serve the Land.

     (b) Grantor represents and warrants that, to the best of Grantor's
knowledge based upon due inquiry, no Hazardous Materials are located on the
Security Property.

     (c) Grantor agrees to (i) give notice to the Beneficiary immediately upon
the Grantor's acquiring knowledge of the presence of any Hazardous Materials on
the Security Property or of any Hazardous Materials Contamination, with a full
description thereof; (ii) promptly comply with any laws requiring the removal,
treatment or disposal of such Hazardous Materials or Hazardous Materials
Contamination and provide the Beneficiary with satisfactory evidence of such
compliance; (iii) provide the Beneficiary, within thirty (30) days after a
demand by the Beneficiary, with a bond, letter of credit or similar financial
assurance evidencing to the Beneficiary's satisfaction that the necessary funds
are available to pay the cost of removing, treating and disposing of such
Hazardous Materials or Hazardous Materials Contamination and discharging any
encumbrance or lien which may be established on the Security Property as a
result thereof; and (iv) indemnify and hold harmless Beneficiary and the
Trustees from any and all claims which may now or in the future (whether before
or after the release of this Deed of Trust) be asserted as a result of the
presence of any Hazardous Materials on the Security Property or any Hazardous
Materials Contamination.

     (d) Grantor shall not place, manufacture or store, or permit to be placed,
manufactured or stored, on the Security Property any Hazardous Materials, except
in accordance with applicable laws, ordinances and regulations.

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     SECTION 3.04. SEPARATE LOT. Grantor represents and warrants that (a) each
parcel comprising the Land is a legally subdivided lot; and (b) the Land and the
Improvements are assessed for purposes of taxes as separate and distinct parcels
from any other real property so that the Land and Improvements shall never
become subject to the lien of any taxes levied or assessed against any real
property other than the Land and Improvements.

     SECTION 3.05. PAYMENT AND PERFORMANCE OF NOTE AND INDEBTEDNESS. Grantor
agrees that it will: (a) punctually pay the principal of, premium, if any, and
interest on the Bond according to the terms of the Bond and the Loan Agreement,
as and when the same shall become due and payable; (b) punctually pay to
Beneficiary all Indebtedness, including amounts required to be paid to
Beneficiary pursuant to the terms of the Bond Documents, as and when the same
shall become due and payable; and (c) punctually keep and perform each and all
other of the obligations of Grantor under the Bond Documents.

     SECTION 3.06. TAXES, LIENS AND OTHER CHARGES.

     (a) Grantor shall pay or cause to be paid, before the date on which
penalties attach thereto, all Impositions, and shall submit to Beneficiary such
evidence of the due and punctual payment thereof as Beneficiary may require.

     (b) Grantor shall permit no mechanic's, materialman's, laborer's, statutory
or other lien (other than Permitted Encumbrances) to be created, filed of record
or remain outstanding upon all or any part of the Security Property.

     (c) Should Grantor fail to pay, or cause to be paid any Imposition at the
time or in the manner provided in this Section, the Beneficiary, may, at its
option (but without being under any obligation to do so), pay such Imposition,
and Grantor shall pay to the Beneficiary the amount of any such amount so paid,
with interest thereon at the Default Rate.

     (d) Notwithstanding the foregoing provisions of this Section 3.06, Grantor
shall have the right to contest the validity or amount of any such Impositions
or liens in appropriate proceedings, provided that Grantor shall (i) give
Beneficiary written notice of its intention to contest, (ii) diligently
prosecute such contest, (iii) at all times effectively stay or prevent any
official or judicial sale of the Security Property or any part thereof relating
to such Impositions or liens, and (iv) establish or post such reserves, bonds or
security for the liabilities relating to such Impositions or liens as may be
reasonably required by Beneficiary.

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     SECTION 3.07. INSURANCE.

     (a) Grantor shall, at its expense, procure for, deliver to and maintain for
the benefit of Beneficiary until the Indebtedness is fully repaid, original,
fully paid insurance policies providing the coverages described below, issued by
such insurance companies, in such amounts, in such form and content, payable at
such times and with expiration dates as are reasonably approved by Beneficiary.
Such policies shall provide that the insurer shall give Beneficiary at least
thirty (30) days' prior written notice of cancellation or termination thereof,
provide that no act or thing done by the insured shall invalidate or diminish
the insurance provided to Beneficiary and, except for liability policies,
contain noncontributing "mortgagee" or "loss payable" clauses satisfactory to
Beneficiary.

     (b) Grantor will keep the Improvements and the Equipment insured against
loss or damage from (i) the perils of fire and hazards ordinarily included under
standard extended coverage endorsements in amounts necessary to prevent the
application of any co-insurance provisions of the applicable policies up to the
full replacement cost of the Improvements and Equipment without deduction for
depreciation; and (ii) boiler or pressure vessel explosion (if there are boilers
or pressure vessels located on the Security Property) in an amount customarily
carried in the case of similar operations. The term "full replacement cost" as
used above means the cost of replacing all such Improvements and Equipment. Such
replacement cost shall be determined from time to time at the request of
Beneficiary (but not more frequently than once in every 12 months) by an
architect, engineer or insurer selected by the Grantor and approved by
Beneficiary. Each policy shall contain a "replacement cost endorsement" and an
"agreed amount" endorsement satisfactory to Beneficiary.

     (c) Grantor shall maintain or cause to be maintained (i) general public
liability insurance and workmen's compensation insurance in amounts usually
carried by similar operations against claims for bodily injury or death
occurring upon, in or about the Security Property, with such insurance (other
than workmen's compensation insurance) to afford protection to the limit of not
less than $1,000,000 in respect of bodily injury or death for any one occurrence
and to the limit of not less than $3,000,000 for the aggregate of all
occurrences during any given annual policy period, and (ii) property damage
insurance against claims for damage to property (including loss of use)
occurring upon, in or about the Security Property with such insurance to afford
protection to the limit of not less than $500,000 in respect of damage to
property for any one occurrence and $1,000,000 for the aggregate of all
occurrences during any given annual policy period.

     (d) If at any time the Land is located in an area that has been identified
by the Federal Insurance Administration as having special flood and mudslide
hazards, and in which the sale of flood insurance has been made available under
the National Flood Insurance Act of 1968, Grantor shall purchase and maintain a
flood insurance policy in the amount of the Stated Amount, or the maximum limit
of coverage available on the Security Property, whichever is less. In the event
that the Security Property is not in an area having special flood and mudslide
hazards, Grantor shall deliver to the Beneficiary on the Closing Date and
thereafter upon request, a certificate or letter issued by Grantor's insurance
company or by a certified land surveyor stating that the Security Property is
not in such a flood or mudslide area.

<Page>

     (e) Grantor will keep the Security Property insured against any other risk
insured against by persons operating like properties in the locality of the
Land, in such amounts as are insured against by such persons, or as may be from
time to time reasonably required by Beneficiary (until the expiration of the
Loan Agreement). Grantor will obtain and keep in force such other and further
insurance as may be required from time to time by Beneficiary.

     (f) Grantor shall promptly notify Beneficiary of any loss covered by such
insurance and agrees that if an Event of Default shall have occurred and be
continuing, Beneficiary is hereby authorized and empowered, at its option, to
adjust, compromise or settle any loss under any insurance policies maintained
pursuant hereto, and to collect and receive the proceeds from any policy or
policies, subject to the provisions set forth herein. Each insurance company is
hereby authorized and directed to make payment for all such losses directly to
Beneficiary, instead of to Grantor and Beneficiary jointly if an Event of
Default shall have occurred and be continuing. In the event any insurance
company fails to disburse directly and solely to Beneficiary but disburses
instead either solely to Grantor or to Grantor and Beneficiary jointly, Grantor
agrees immediately to endorse and transfer such proceeds to Beneficiary to be
applied as set forth herein. Upon any failure of Grantor to so endorse and
transfer such proceeds, Beneficiary may execute such endorsements or transfers
for and in the name of Grantor, and Grantor hereby irrevocably appoints
Beneficiary as its agent and attorney-in-fact to do so.

     (g) Prior to the expiration date of each policy maintained pursuant to this
Section, a renewal or replacement thereof reasonably satisfactory to Beneficiary
shall be delivered to Beneficiary. Grantor shall deliver to Beneficiary receipts
evidencing the full payment of premiums when and as due for all such insurance
policies and renewals or replacements. The delivery of any insurance policies
hereunder shall constitute an assignment of all unearned premiums as further
security hereunder. In the event of the foreclosure of this Deed of Trust or any
other transfer of title to all or part of the Security Property in
extinguishment or partial extinguishment of the Indebtedness, all right, title
and interest of Grantor in and to all insurance policies maintained pursuant to
this Section then in force shall belong to the purchaser as its interests may
appear, and Beneficiary is hereby irrevocably appointed by Grantor as
attorney-in-fact for Grantor to assign any such policy to such purchaser, as its
interests may appear, without accounting to Grantor for any unearned premiums
therefor.

     (h) So long as an Event of Default has not occurred and is continuing and
Grantor may collect, adjust and compromise any losses or claims under any such
insurance policies arising with respect to the Security Property or the use and
operation thereof; provided, however, Beneficiary must approve any adjustment or
compromise by Grantor in excess of $25,000. If an Event of Default has occurred
and is continuing, Beneficiary shall collect, adjust and compromise any losses
or claims under any such insurance policies arising with respect to the Security
Property or the use or operation thereof. The Net Proceeds of such insurance,
whether collected by Beneficiary or Grantor, shall be held in trust to be
applied only as set forth in Section 3.10 hereof.

     SECTION 3.08. MONTHLY DEPOSITS. If any Event of Default shall occur and be
continuing, Grantor shall deposit with Beneficiary, monthly, until the
Indebtedness is fully repaid, such sums determined by Beneficiary in its sole
discretion to be sufficient to pay, at least ten (10) days before the date
penalties attach thereto, all Impositions. Such deposits shall be held

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by Beneficiary free of any liens or claims on the part of creditors of Grantor
to be used by Beneficiary to pay the Impositions as the same accrue and are
payable. Such deposits may be commingled with the general funds of Beneficiary
and no interest shall be payable thereon. If such funds are insufficient to pay
the Impositions in full, as the same become payable, Grantor will deposit with
Beneficiary upon demand such additional sums as may be required. Nothing
contained herein shall obligate Beneficiary to pay any amounts in excess of the
amount of funds deposited with Beneficiary pursuant to this Section. Should
Grantor fail to deposit with Beneficiary sums sufficient to pay in full all
Impositions at least ten (10) days before the date penalties attach thereto,
Beneficiary, at Beneficiary's election, but without any obligation to do so, may
advance any amounts required to make up the deficiency, and any amounts so
advanced shall be deemed to be part of the Indebtedness. Upon the occurrence of
an Event of Default, Beneficiary may, at its option, apply any money in the fund
resulting from such deposits to the payment of the Indebtedness in such manner
as it may elect. In the event of a foreclosure of this Deed of Trust or deed in
lieu thereof or sale under power of sale, the purchaser of the Security Property
shall succeed to all the rights of Grantor in and to such deposits. The
collection of such deposits by Beneficiary shall not relieve Grantor of any of
its obligations under this Section, or any other provision of this Deed of
Trust, and under no circumstances shall Beneficiary be liable for failure to
make any payment on behalf of Grantor for any Impositions.

     SECTION 3.09. CONDEMNATION. Promptly upon learning of the institution or
the proposed, contemplated or threatened institution of any condemnation
proceeding (which term when used in this Deed of Trust shall include any damage
or taking by any governmental or quasi-governmental authority and any transfer
by private sale in lieu or under threat thereof), Grantor will notify
Beneficiary and Trustees of the pendency of such proceedings. So long as an
Event of Default has not occurred and is continuing and Grantor shall be
entitled to commence, appear in and prosecute, in its own name, any action or
proceeding relating to any condemnation of the Security Property or any part
thereof, or sale in lieu of condemnation, and to settle or compromise any claim
in connection therewith; provided, however, that, Beneficiary must approve any
such settlement or compromise in excess of $25,000. If an Event of Default has
occurred and is continuing, or if Grantor shall not take any action as described
in the preceding sentence, Beneficiary is hereby authorized, at its option, to
commence, appear in and prosecute, in its own name or in the name of Grantor,
any action or proceeding relating to any condemnation, and to settle or
compromise any claim in connection therewith. All such compensation, awards,
damages, claims, rights of action and proceeds and the right thereto are hereby
assigned by Grantor to Beneficiary, and the Net Proceeds thereof, whether
collected by Beneficiary or Grantor, shall be held in trust to be applied only
as set forth in Section 3.10 hereof. Grantor agrees to execute such further
assignment of any compensation, awards, damages, claims, rights of action and
proceeds as Beneficiary may require. If, prior to the receipt by Beneficiary of
such award or proceeds, the Security Property or any part thereof shall have
been sold by the foreclosure of this Deed of Trust, or as a result of other
legal action relating to this Deed of Trust, Beneficiary shall have the right to
receive such award or proceeds to the extent of any unpaid Indebtedness
following such sale, with legal interest thereon, whether or not a deficiency
judgment on this Deed of Trust shall have been sought or recovered, and to the
extent of attorneys' fees, costs and disbursements incurred by Beneficiary in
connection with the collection of such award or proceeds.

     SECTION 3.10. DAMAGE AND DESTRUCTION; CONDEMNATION; APPLICATION OF NET
PROCEEDS.

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     (a) If the Security Property or any part thereof is damaged or destroyed by
fire or other casualty in whole or in part, or, if title to, or the use of, the
Security Property or any part thereof, or the interest of Grantor in the
Security Property or any part thereof, shall be taken under the exercise of the
power of eminent domain by any governmental body or by any person, firm or
corporation acting under governmental authority, either temporarily or
permanently, the Net Proceeds resulting from any such event described in this
Section will be deposited in a trust fund with Beneficiary (the "Net Proceeds
Escrow Fund").

     (b) The Net Proceeds arising out of any casualty loss or condemnation award
shall, at Beneficiary's option, be released from the Net Proceeds Escrow Fund to
Grantor in whole or in part upon conditions satisfactory to Beneficiary for the
restoration or repair of the Security Property damaged, or applied to the
prepayment of the Bond in accordance with the Bond Documents.

     (c) Notwithstanding the provisions of this Section 3.10, in the event the
Net Proceeds are less than $25,000, and if no Default or Event of Default has
occurred and is continuing, such Net Proceeds shall be paid directly to Grantor
to be used solely to repair or restore the Security Property or to prepay the
Bond, whichever Grantor shall elect.

     (d) In the event the Net Proceeds are not sufficient to pay in full the
costs of repairing, rebuilding, altering and restoring the Security Property as
provided in this Section, whether such determination shall be made at the time
Grantor and Beneficiary mutually agree to repair, rebuild, restore or alter the
Security Property or at any time thereafter, Grantor will nonetheless complete
the work thereof and pay that portion of the costs thereof in excess of the
amount of such Net Proceeds and Beneficiary may, as a condition precedent to
approving the disbursement of any Net Proceeds, require that Grantor deposit
monies with Beneficiary or furnish to Beneficiary an irrevocable letter of
credit or a surety bond satisfactory to Beneficiary, in either case in an amount
sufficient to pay the costs of repairing, rebuilding, altering and restoring the
Security Property in excess of the Net Proceeds available for such purposes.
Grantor shall not, by reason of the payment of any costs in excess of the amount
of such Net Proceeds (whether by direct payment thereof or payment to the
Beneficiary therefor), be entitled to any reimbursement from Beneficiary or any
abatement or diminution of the payments payable under the Bond Documents.

     (e) If any work required to be performed under this Section involves an
estimated expenditure of more than $25,000, no such work will be undertaken
until plans and specifications therefor, prepared by an architect or engineer
satisfactory to Beneficiary, have been submitted to and approved by Beneficiary.

     SECTION 3.11 CARE OF PROJECT.

     (a) Grantor shall keep the Security Property in good condition and repair
(ordinary wear and tear excepted), shall not commit or suffer any waste and
shall not do or suffer to be done anything which would or could increase the
risk of fire or other hazard to the Security Property or any part thereof or
which would or could result in the cancellation of any insurance policy carried
with respect to the Security Property.

<Page>

     (b) Grantor shall have the right, without the consent of Beneficiary, to
make alterations, additions or improvements to the Security Property provided
the cost of the work involved does not exceed $100,000.

     (c) Except as is otherwise specifically provided in subsection (b) above or
in Section 3.10, Grantor shall not remove, demolish or materially alter, enlarge
or change any of the Improvements without Beneficiary's consent, nor shall any
new Improvements be constructed on the Land without Beneficiary's consent.
Except as otherwise provided herein, Grantor shall not remove or permit to be
removed from the Land any Equipment without the consent of Beneficiary, except
where appropriate replacements are immediately made which are free of any lien,
security interest or claim superior to that of this Deed of Trust and which have
a value and utility at least equal to the value and utility of the items
removed, which shall, without further action, become subject to the lien of this
Deed of Trust.

     (d) Beneficiary and its representatives are hereby authorized to enter upon
and inspect the Security Property whenever Beneficiary deems such inspection to
be necessary, at reasonable times and with prior notice; provided, however, that
after the occurrence of an Event of Default, Beneficiary and its representatives
may so enter whenever Beneficiary may deem it necessary or desirable without
prior notice.

     (e) Grantor shall promptly comply, in all material respects, with all
present and future laws, ordinances, rules and regulations of any governmental
authority affecting the Security Property or any part thereof.

     (f) Grantor shall not initiate, join in or consent to any change in any
private restrictive covenant, zoning ordinance, easement or other public or
private restriction limiting or defining the uses which may be made of the
Security Property or any part thereof without Beneficiary's consent.

     SECTION 3.12. FURTHER ASSURANCES: AFTER-ACQUIRED PROPERTY. At any time and
from time to time, upon request by Beneficiary, Grantor shall make, execute and
deliver or cause to be made, executed and delivered, to Beneficiary and, where
appropriate, cause to be recorded or filed in such offices and places as shall
be deemed desirable by Beneficiary, any and all such other and further deeds to
secure debt, mortgages, deeds of trust, security agreements, financing
statements, continuation statements, instruments of further assurance,
certificates and other documents as may, in the reasonable opinion of
Beneficiary, be necessary or desirable in order to effectuate, complete or
perfect, or to continue and preserve, (a) the obligations of Grantor under this
Deed of Trust and (b) the lien of this Deed of Trust as a lien upon, assignment
of and security interest in and to all of the Security Property, whether now
owned or hereafter acquired by Grantor, subject only to Permitted Encumbrances,
and (c) the Indebtedness. Upon any failure by Grantor to do so, Beneficiary may
make, execute, record and file any and all such deeds to secure debt, mortgages,
deeds of trust, security agreements, financing statements, continuation
statements, instruments, certificates and documents for and in the name of
Grantor, and Grantor hereby irrevocably appoints Beneficiary the agent and
attorney-in-fact of Grantor to do so. Unless otherwise agreed by Beneficiary,
the lien hereof shall automatically attach, without further act, to all
improvements, alterations, substitutions, restorations and replacements of, and
all additions and appurtenances to, the Security Property released to or
acquired by Grantor with

<Page>

the same effect as if such afteracquired property had been owned by Grantor as
of the date hereof and had been specifically described in the granting clauses
in Article II, to the extent permitted by law.

     SECTION 3.13. EXPENSES. Grantor shall pay or reimburse Beneficiary and
Trustees, upon demand therefor, for all reasonable attorneys' fees, costs and
expenses incurred by Beneficiary or Trustees in any suit, action, legal
proceeding or dispute of any kind in which Beneficiary or Trustees, or any one
or more of them, are made a party or appear as a party plaintiff or defendant,
affecting the Indebtedness, this Deed of Trust or the Security Property,
including, without limitation, any foreclosure proceedings, any condemnation
action involving the Security Property or any part thereof, any federal
bankruptcy or state insolvency proceeding involving Grantor, any Guarantor or
the Security Property and any such amounts paid by Beneficiary or Trustees shall
be added to the Indebtedness and shall bear interest from and after the date
when paid at the Default Rate.

     SECTION 3.14. SUBROGATION. To the full extent of the Indebtedness,
Beneficiary is hereby subrogated to the liens, claims, demands and other
encumbrances, and to the rights of the owners and holders of each lien, claim,
demand and other encumbrance on the Security Property which is paid or
satisfied, in whole or in part, from proceeds of the Indebtedness, and the
respective liens, claims, demands and other encumbrances shall be, and each of
them is hereby, preserved and shall pass to and be held by Beneficiary as
additional collateral and further security for the Indebtedness, to the same
extent they would have been preserved and would have been passed to and held by
Beneficiary had they been duly and legally assigned, transferred, set over and
delivered unto Beneficiary by assignment, notwithstanding the fact that any
instrument providing public notice of the same may be satisfied and cancelled of
record.

     SECTION 3.15. RIGHT TO CURE. Grantor agrees that upon its failure to
perform or observe any provision of any Bond Document, Beneficiary, at its
option and without any obligation to do so, may, perform or observe or cause the
performance or observance of the same, and all payments made or reasonable costs
incurred by Beneficiary in connection therewith shall be secured hereby and
shall be, without demand, immediately repaid by Grantor to Beneficiary with
interest thereon at the Default Rate from the date such payment is made or
expense is incurred by Beneficiary, to the date Beneficiary is reimbursed
therefor. Beneficiary shall be the sole judge of the necessity for any such
actions and of any amounts necessary to be paid in connection therewith.
Beneficiary is hereby empowered to enter and to authorize others to enter upon
the Security Property or any part thereof for the purpose of such performance or
observance without thereby becoming liable to Grantor or any person in
possession of any portion of the Security Property holding under Grantor.
Grantor expressly acknowledges and agrees, however, that notwithstanding
anything contained in this Section 3.15 to the contrary, Beneficiary shall not
be obligated under this Section to incur any expense or to perform any act
whatsoever.

     SECTION 3.16. INDEMNIFICATION. Grantor shall at all times protect,
indemnify and save harmless Trustees and Beneficiary from and against all
liabilities, losses, damages, claims, obligations, penalties, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) imposed
upon, incurred by or asserted against Trustees or Beneficiary on account of (a)
any failure of Grantor to comply with any of the terms of this Deed of Trust,
(b) any loss or damage to property or any injury to or death of any person that
may be occasioned by

<Page>

any cause whatsoever pertaining to the Security Property or the use thereof, (c)
any breach of any material representation or warranty of Grantor set forth
herein, or (d) any action, suit, claim, demand, administrative proceeding,
enforcement action or governmental or private action contesting or affecting
title to the Security Property, or arising from or in connection with the
financing, acquisition, construction, equipping, ownership, use or operation of
the Security Property; provided, however that the foregoing indemnity shall not
be applicable with respect to the gross negligence or willful misconduct of the
parties to be indemnified. The foregoing shall be equally applicable to the
respective officers, directors, employees and agents of Beneficiary or Trustees.

                                   ARTICLE IV

SECURITY AGREEMENT

     SECTION 4.01. SECURITY INTEREST: FINANCING STATEMENTS.

     (a) This Deed of Trust constitutes a security agreement from Grantor to
Beneficiary under the UCC. Grantor hereby agrees to execute and deliver on
demand, and hereby irrevocably constitutes and appoints Beneficiary as the
attorney-in-fact of Grantor, to execute, deliver and, if appropriate, to file
with the appropriate filing office or offices, such financing statements or
other instruments as Beneficiary may request or require in order to perfect the
security interest granted hereby or continue the effectiveness of the same.
Beneficiary shall have all of the rights and remedies of a secured party under
the UCC. Beneficiary shall not be liable for any loss to any Security Property
in Beneficiary's possession, nor shall such loss diminish the amount of the
Indebtedness.  Grantor shall also execute, deliver and file financing
statements with respect to such purchased Equipment that will constitute
collateral which is to be leased by Grantor to any third party, naming such
third party as the debtor, Grantor as the secured party, and Beneficiary as the
assignee of the secured party.

     (b) Grantor represents and warrants that: (i) except as previously
disclosed to Beneficiary no financing statement covering any part of the UCC
Property is on file in any public office except pursuant hereto, (ii) the chief
executive office of Grantor within the meaning of the UCC is located within the
Jurisdiction, (iii) all tangible UCC Property will be located on the Land, (iv)
Grantor has not changed Grantor's name or identity during the five-year period
preceding the date of this Deed of Trust, and (v) the UCC Property is to be used
solely for business purposes. Grantor agrees that it will furnish Beneficiary
with notice of any change in the matters addressed by clauses (i) through (v)
above within thirty (30) days after the effective date of any such change, and
Grantor will promptly execute any financing statements or other instruments
deemed necessary by Beneficiary to prevent any filed financing statement from
becoming misleading or to continue the perfection of the security interest
granted hereby.

     (c) Some of the items of UCC Property are goods that are or are to become
fixtures related to the real estate described herein, and it is intended that,
as to those goods, this Deed of Trust shall be effective as a financing
statement filed as a fixture filing from the date of its filing for record in
the real estate records of the Jurisdiction.

<Page>

     (d) Upon the occurrence of an Event of Default, Beneficiary shall have the
remedies of a secured party under the UCC including, without limitation, the
right to take immediate and exclusive possession of the UCC Property or any part
thereof, and for that purpose may enter upon any place where the UCC Property or
any part thereof may be situated and remove the same therefrom, and Beneficiary
shall be entitled to hold, maintain, preserve and prepare the UCC Property for
sale until disposed of, or may retain such property subject to the right of
redemption of Grantor, if any, in satisfaction of the obligations of Grantor,
all as provided in the UCC. Beneficiary, without removal, may dispose of the UCC
Property at the Land or the Project. Beneficiary may require Grantor to assemble
the UCC Property and make it available to Beneficiary for its possession at a
place to be designated by Beneficiary which is reasonably convenient to the
parties. Beneficiary will give Grantor at least fifteen (15) days' notice of the
time and place of any public sale thereof or of the time after which any private
sale or any other intended disposition thereof is to be made. The requirements
of reasonable notice shall be met if such notice is provided in accordance with
the provisions hereof at least fifteen (15) days before the time of the sale or
disposition. Beneficiary may buy at any public sale and if the collateral is of
a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, Beneficiary may buy at
private sale. Any such sale may be held as part of and in conjunction with any
judicial foreclosure sale or Trustees' sale of the real estate comprising the
Security Property and the UCC Property and any remaining Security Property may
be sold as one lot if Beneficiary so elects. The net proceeds realized upon any
such disposition after deduction for the expenses of retaking, holding,
preparing for sale, selling and the like and the reasonable attorneys' fees and
legal expenses incurred by Beneficiary shall be applied in satisfaction of the
Indebtedness hereby secured. Beneficiary will account to Grantor for any surplus
realized on such disposition.

     (e) The remedies of Beneficiary hereunder are cumulative and the exercise
of any one or more of the remedies provided herein or under the UCC shall not be
construed as a waiver of any other remedies of Beneficiary or Trustees,
including having the UCC Property deemed part of the realty upon any judicial
foreclosure or Trustees' sale thereof so long as any part of the Indebtedness
hereby secured remains unsatisfied.

     (f) Grantor agrees that a photographic or other reproduction of this Deed
of Trust may be filed as a financing statement.

     (g) The terms and provisions contained in this Section shall, unless the
context otherwise requires, have the meanings and be construed as provided in
the UCC.

                                    ARTICLE V

ASSIGNMENT OF LEASES AND RENTS

     SECTION 5.01. LEASES AND RENTS.

     (a) Grantor agrees to execute and deliver to Beneficiary such additional
instruments, in form and substance satisfactory to Beneficiary, as may hereafter
be reasonably requested by Beneficiary to further evidence and confirm the
assignment to Beneficiary and Trustees of the Leases and the Income made in
Article II; provided, however, that acceptance of this assignment

<Page>

shall not be construed as a consent by Beneficiary to any Lease, or to impose
upon Beneficiary any obligation with respect thereto; and provided further, that
permission is hereby given to Grantor, unless and until an Event of Default
shall have occurred, to collect the Income as it becomes due and payable but not
in advance, except as provided below. Grantor represents and warrants that no
Leases are in existence on the date hereof except the Lease and except as
previously disclosed to Beneficiary. Grantor agrees that it shall not execute or
enter into any other Leases without first obtaining the consent of Beneficiary
to the form, substance and terms of such Lease and the creditworthiness of the
tenant. Without first obtaining on each occasion the approval of Beneficiary,
which approval may be withheld in the sole discretion of Beneficiary, Grantor
shall not (i) cancel or permit the cancellation of any Lease or modify, renew,
surrender or terminate, either orally or in writing, any of the Leases, the
effect of any of which would be to result in (A) the creation of rights in any
tenant greater than those of Beneficiary or (B) the reduction of any of the
rights of Beneficiary under this Deed of Trust, or (ii) accept, or permit to be
made, any prepayment of any installment of rent or other income thereunder
(except for security deposits) more than one (1) month in advance of the date
when due. Grantor shall faithfully perform, or cause to be performed, all of the
obligations contained in each of the Leases, now or hereafter existing, on the
part of Grantor to be performed and shall at all times do all things necessary
to compel performance by each other party to the Leases of all obligations by
such other party to be performed thereunder. Grantor shall also notify
Beneficiary promptly of any default (of which Grantor has knowledge) on the part
of any other party to the Leases in the performance of that party's obligations
under any of the Leases. This Deed of Trust constitutes an absolute, present and
irrevocable assignment of the Income, subject, however, to the conditional
permission given to Grantor to collect the same as provided above. The foregoing
assignment shall be fully operative without any further action on the part of
any party hereto and, specifically, Beneficiary shall be entitled, at its option
upon the occurrence of any Event of Default, without notice or demand of any
kind to Grantor, to collect and retain all the Income, whether or not
Beneficiary takes possession of the Security Property. Exercise by Beneficiary
of its rights under this Section and application of any Income to the
Indebtedness shall not cure or waive any Event of Default hereunder or
invalidate any act done pursuant hereto, but shall be cumulative of all other
rights and remedies.

     (b) Except in connection with any approved subordinate financing expressly
permitted by Beneficiary, Grantor shall not, without the prior written consent
of Beneficiary, which consent may be withheld in Beneficiary's sole and absolute
discretion, further assign the Income or any part thereof and any such purported
assignment without the express written consent of Beneficiary shall be void as
against Beneficiary. Beneficiary consents to an assignment by Grantor of any
Income to McLean and Turner for the sole purpose of securing reimbursement
obligations to McLean and Turner in a principal amount not to exceed $800,000,
together with interest thereon pursuant to letters of credit provided by McLean
and Turner in connection with the Agreement, provided that such assignment is at
all times subordinate to the liens, assignments of Income and security interests
provided to Beneficiary under this Deed of Trust or any other document executed
in connection with the Agreement.

     (c) Grantor shall furnish to Beneficiary, within ten (10) days after each
request by Beneficiary to do so, a written affidavit sworn to and signed by
Grantor setting forth the names of all tenants under the Leases, the terms of
their respective Leases, the space occupied, and the

<Page>

rentals payable thereunder, and stating whether any defaults, offsets or
defenses have been asserted under or in connection with any of the Leases. All
Leases shall provide for the giving by the tenants thereunder of certificates
with respect to the status of the Leases and Grantor shall exercise Grantor's
right to request such certificates within five (5) days after any demand
therefor by Beneficiary.

     (d) Each Lease shall provide (or if any Lease does not so provide, shall be
deemed to provide, to the extent permitted by applicable law) that, in the event
of the enforcement by Beneficiary of the remedies provided it by law or by this
Deed of Trust, the tenant thereunder will, upon request of Beneficiary or any
other person or entity succeeding to the interest of Beneficiary as a result of
such enforcement, automatically become the tenant of Beneficiary or said
successor in interest, without change in the terms or other provisions of its
Lease; provided, however, that neither Beneficiary nor any such successor in
interest shall be (i) bound by any payment of rental, additional rental or other
Income for more than one (1) month in advance, (ii) bound by any amendment or
modification of such Lease, the effect of any of which would be to result in (A)
the creation of rights in any tenant greater than those of Beneficiary or (B)
the reduction of any of the rights of Beneficiary under this Deed of Trust, made
without the express written consent of Beneficiary or such successor in
interest, (iii) liable for any act or omission of any prior landlord (including
Grantor), (iv) liable for the return of any security deposit not paid over to
Beneficiary, or (v) subject to any offsets or defenses which the tenant might
have against any prior landlord (including Grantor). Each Lease shall also
provide (or if such Lease does not so provide, shall be deemed to provide, to
the extent permitted by applicable law) that, upon request by such successor in
interest, the tenant thereunder shall deliver an instrument confirming such
attornment.

     (e) Notwithstanding any other provisions of this Deed of Trust, Grantor
shall not hereafter enter into any new Lease, or amend or extend any existing
Lease the effect of which amendment would be to result in (i) the creation of
rights in any tenant greater than those of Beneficiary or (ii) the reduction of
any of the rights of Beneficiary under this Deed of Trust, without the prior
written consent of Beneficiary, which consent may be granted or withheld in
Beneficiary's sole discretion.

                                   ARTICLE VI

[RESERVED]

                                   ARTICLE VII

EVENTS OF DEFAULT; REMEDIES

     SECTION 7.01. EVENTS OF DEFAULT.

     Each of the following shall be an Event of Default hereunder:

<Page>

     (a) Failure by Grantor to pay any installment or other portion of the
Indebtedness or any other sum that may be due and payable under any of the Bond
Documents when due and payable and the expiration of all applicable grace
periods;

     (b) Any Event of Default, as that term is defined in Section 9 of the Bond
Purchase Agreement shall occur or any event shall occur which under the terms of
any Bond Document shall give Beneficiary the option to accelerate the maturity
of the Indebtedness;

     (c) Failure by Grantor to observe or perform any term, covenant, condition
or agreement of this Deed of Trust (other than any failure resulting in any
other Event of Default described herein) for a period of 30 days after notice
specifying such failure and requesting that it be remedied, given by the
Beneficiary to the Grantor, or in the case of any such default which cannot with
due diligence be cured within such 30-day period, failure of the Grantor to
proceed promptly to cure the same and thereafter prosecute the curing of the
same with due diligence but in no event longer than ninety (90) days after the
date of Beneficiary's notice;

     (d) The fact that any material representation or warranty of Grantor
contained in this Deed of Trust or in any other Bond Document proves to be
untrue or misleading in any material respect as of the time made;

     (e) An Act of Bankruptcy, as defined in the Bond Purchase Agreement;

     (f) The filing by any person or entity of any claim in any legal or
equitable proceeding challenging the priority of the lien of this Deed of Trust,
subject only to the Permitted Encumbrances (other than the Leases), and the
failure of Grantor to have such proceeding dismissed or bonded against within
thirty (30) days thereafter;

     (g) Any event of default under any of the instruments and other documents
evidencing and securing any subordinate indebtedness secured by a lien on the
Security Property that is expressly permitted by Beneficiary and remains uncured
beyond any cure period provided for in the applicable instrument or document;

     (h) The rezoning of the Land so as to have a material adverse effect on the
security provided by this Deed of Trust;

     (i) The dissolution of Grantor;

     (j) Any event of default under the Lease that remains uncured beyond any
applicable cure period provided to the Grantor.

     SECTION 7.02. ACCELERATION OF MATURITY. If an Event of Default shall have
occurred, then Beneficiary shall have the right to accelerate the maturities of
the Tax-Exempt Bond and the Note, and the entire Indebtedness shall, at the
option of Beneficiary, become immediately due and payable without notice or
demand, which are hereby expressly waived, time being of the essence as to this
Deed of Trust. No delay or omission on the part of Beneficiary to exercise such
option when entitled to do so shall be construed as a waiver of such right.

     SECTION 7.03. REMEDIES UPON AN EVENT OF DEFAULT.

<Page>

     (a) If an Event of Default shall have occurred, Grantor, upon demand of
Beneficiary, shall forthwith surrender to Beneficiary or Trustees, or their
agents or attorneys, the actual possession of the Security Property and if, and
to the extent, permitted by law, Beneficiary itself, Trustees or by such
officers or agents as they may appoint, may enter and take possession of the
Security Property without the appointment of a receiver or an application
therefor, and may exclude Grantor and its agents and employees wholly therefrom,
and may have joint access with Grantor to the books, papers and accounts of
Grantor.

     (b) If Grantor shall for any reason fail to surrender or deliver the
Security Property or any part thereof after such demand by Beneficiary,
Beneficiary or Trustees may obtain a judgment or decree conferring upon
Beneficiary or Trustees the right to immediate possession or requiring Grantor
to deliver immediate possession of the Security Property to Beneficiary or
Trustees. Grantor shall pay to Beneficiary and Trustees, upon demand, all
expenses of obtaining such judgment or decree, including reasonable compensation
to Beneficiary, Trustees and their attorneys and agents, and all such expenses
and compensation shall, until paid, be secured by the lien of this Deed of
Trust.

     (c) Upon every such entering upon or taking of possession, Beneficiary or
Trustees may hold, store, use, operate, manage and control the Security Property
and, from time to time (i) make all necessary and proper maintenance, repairs,
renewals, replacements, additions, betterments and improvements thereto and
thereon, and purchase or otherwise acquire additional fixtures, personalty and
other property, (ii) insure or keep the Security Property insured, (iii) enter
into any and all agreements with respect to the exercise by others of any of the
powers herein granted Beneficiary and Trustees, and (iv) perform all acts
required of Grantor as landlord under the Lease all as Beneficiary or Trustees
may from time to time determine to be to their best advantage. Beneficiary or
Trustees may collect and receive all the Income, whether past due or thereafter
accruing, and after deducting (i) all expenses of taking, holding, managing and
operating the Security Property (including compensation for the services of all
persons employed for such purposes), (ii) the cost of all such maintenance,
repairs, renewals, replacements, additions, betterments, improvements, purchases
and acquisitions, (iii) the cost of such insurance, (iv) such Impositions as
Beneficiary or Trustees may at their option pay, (v) other proper charges upon
the Security Property or any part thereof, and (vi) the compensation, expenses
and disbursements of the attorneys and agents of Beneficiary and Trustees,
Beneficiary and Trustees shall apply the remainder of the monies and proceeds so
received by Beneficiary and Trustees to the payment of the Indebtedness in
whatever manner Beneficiary may elect, and the balance, if any, shall be turned
over to Grantor or to such other person or entity as may be lawfully entitled
thereto. Anything in this Section to the contrary notwithstanding, Beneficiary
and Trustees shall not be obligated to discharge or perform the duties of a
landlord to any tenant or incur any liability as the result of any exercise by
Beneficiary or Trustees of their rights under this Deed of Trust, and
Beneficiary and Trustees shall be liable to account only for the Income actually
received by Beneficiary or Trustees and shall in no manner be deemed
fiduciaries.

     (d) For the purpose of carrying out the provisions of this Section, Grantor
hereby irrevocably constitutes and appoints Beneficiary and Trustees, either of
whom may act, the true and lawful attorneys-in-fact of Grantor to do and
perform, from time to time, any and all actions necessary and incidental to such
purpose, and by these presents ratifies and confirms any and all actions of such
attorney-in-fact.

<Page>

     (e) In the event that all the Indebtedness and all other amounts due under
the Bond Documents shall have been paid and all Events of Default cured and
satisfied, and as a result thereof, Beneficiary and Trustees surrender
possession of the Security Property to Grantor, the same right to taking
possession shall exist if any subsequent Event of Default shall occur.

     SECTION 7.04. RECEIVER. If an Event of Default shall have occurred,
Beneficiary, upon application to a court of competent jurisdiction, shall be
entitled as a matter of strict right without notice and without regard to the
sufficiency or value of any security for the Indebtedness or the solvency of any
party bound for its payment, to the appointment of a receiver to take possession
of and to operate the Security Property and to collect and apply the Income. The
receiver shall have all of the rights and powers permitted under the laws of the
State. Grantor shall pay to Beneficiary or Trustees upon demand all expenses,
including receiver's fees, reasonable attorneys' fees, costs and agent's
compensation incurred pursuant to the provisions of this Section, and all such
expenses shall be secured by the lien of this Deed of Trust.

     SECTION 7.05. ENFORCEMENT.

     (a) If an Event of Default shall have occurred, Beneficiary, at its option,
may effect the foreclosure of this Deed of Trust by directing Trustees to sell
the Security Property, or any interest therein or any part thereof, at public
sale conducted according to applicable law, at such time and place, and upon
such terms and conditions, as Beneficiary may deem expedient or as may be
required or permitted by applicable law. Trustees shall first give notice prior
to the sale of the Security Property as to the time, place and terms of sale in
a manner required by applicable law, and Grantor agrees that such advertising
shall be inserted in a newspaper published or having a general circulation in
the jurisdiction not less than once a week for two consecutive weeks. Such
advertisement shall set forth a description of the property to be sold and shall
identify the property by street address, if any, or if none, shall give the
general location of the property with reference to streets, routes or known
landmarks. The Trustees shall also give written notice of such sale to Grantor
at its last known address as it appears in the records of Beneficiary. In the
event of any sale under the terms of this Deed of Trust, Grantor shall pay a
reasonable fee to Trustees which shall not exceed the maximum fee allowed by
applicable law, reasonable attorneys' fees and all expenses incurred in
obtaining or continuing abstracts of title for the purpose of any such sale.

     (b) Beneficiary shall have the right from time to time to enforce any legal
or equitable remedy against Grantor including, without limitation, suing for any
portion of the Indebtedness, any Impositions or any other sums required to be
paid under the terms of this Deed of Trust, as the same become due, without
regard to whether or not all of the Indebtedness shall then be due, and without
prejudice to the right of Beneficiary thereafter to enforce any other remedy
including, without limitation, an action of foreclosure, whether or not such
other remedy is based upon an Event of Default which existed at the time of
commencement of an earlier or pending action, and whether or not such other
remedy is based upon the same Event of Default upon which an earlier or pending
action is based.

     SECTION 7.06. PURCHASE BY BENEFICIARY. Upon any foreclosure sale,
Beneficiary may bid for and purchase the Security Property or any part thereof
and shall be entitled to apply all or any part of the Indebtedness as a credit
to the purchase price.

<Page>

     SECTION 7.07. APPLICATION OF PROCEEDS OF SALE. In the event of a
foreclosure sale of all or any portion of the Security Property, the proceeds of
said sale shall be applied in the manner prescribed by Beneficiary, subject to
applicable law, with any surplus being paid to Grantor or any other person or
entity who may be lawfully entitled thereto.

     SECTION 7.08. TENANT HOLDING OVER. In the event of any such foreclosure
sale by Trustees, Grantor shall be deemed a tenant holding over and shall
forthwith deliver possession to the purchaser or purchasers at such sale or be
summarily dispossessed according to the provisions of law applicable to tenants
holding over.

     SECTION 7.09. LEASES. Beneficiary and Trustees, at their option, are
authorized to foreclose this Deed of Trust subject to the rights of any tenants
in the Security Property, if any, and the failure to make any such tenants
parties to any such foreclosure proceedings and to foreclose their rights will
not be, nor be asserted to be by Grantor, a defense to any proceedings
instituted by Beneficiary to collect the Indebtedness.

     SECTION 7.10. DISCONTINUANCE OF PROCEEDS. In case Beneficiary or Trustees
shall have proceeded to enforce any right, power or remedy under this Deed of
Trust by foreclosure, entry or otherwise, and such proceeding shall have been
withdrawn, discontinued or abandoned for any reason, or shall have been
determined adverse to Beneficiary or Trustees, then in every such case (a)
Grantor, Beneficiary and Trustees shall be restored to their former positions
and rights, (b) all rights, powers and remedies of Beneficiary and Trustees
shall continue as if no such proceeding had been taken, (c) each and every Event
of Default declared or occurring prior or subsequent to such withdrawal,
discontinuance or abandonment shall be or shall be deemed to be a continuing
Event of Default unless otherwise expressly agreed in writing by the Grantor and
the Beneficiary and (d) neither this Deed of Trust, the Indebtedness nor any
other of the Bond Documents shall be or shall be deemed to have been reinstated
or otherwise affected by such withdrawal, discontinuance or abandonment unless
otherwise expressly agreed in writing by the Grantor and the Beneficiary.

     SECTION 7.11. REMEDIES CUMULATIVE. No right, power or remedy conferred upon
or reserved to Beneficiary or Trustees by this Deed of Trust is intended to be
exclusive of any other right, power or remedy, but each and every such right,
power and remedy set forth in this Article VII or elsewhere in this Deed of
Trust shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder or now or hereafter existing at law, in
equity or by statute.

     SECTION 7.12. SUITS TO PROTECT THE SECURITY PROPERTY. Beneficiary shall
have the power (a) to institute and maintain such suits and proceedings as it
may deem expedient to prevent any impairment of the Security Property by any
acts which may be unlawful or any violation of this Deed of Trust, (b) to
preserve and protect its interest in the Security Property and in the Income
arising therefrom, and (c) to restrain the enforcement of or compliance with any
legislation or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of or compliance with
such enactment, rule or order would impair the security hereunder or be
prejudicial to the interest of Beneficiary.

<Page>

     SECTION 7.13. MARSHALLING. At any foreclosure sale, the Security Property
may, at Beneficiary's option, be offered for sale for one total price and the
proceeds of such sale accounted for in one account without distinction between
the items of security or without assigning to them any proportion of such
proceeds, Grantor hereby waiving the application of any doctrine of marshalling.
In case Beneficiary and Trustees, in the exercise of the power of sale herein
given, elect to sell the Security Property in parts or parcels, such sales may
be held from time to time, and the power shall not be fully executed until all
of the Security Property not previously sold shall have been sold.

     SECTION 7.14. SECURITY DEPOSITS. If Grantor shall obtain from any tenant or
subtenant under any Lease, a deposit to secure such tenant's or subtenant's
obligations, such funds, following any Event of Default under this Deed of
Trust, shall be deposited with Beneficiary in accounts maintained by Beneficiary
in its name, but any such deposits shall be returned to Grantor when required by
the terms of any such Lease, to be paid over to the tenant or subtenant. Grantor
represents that the provisions of any applicable laws relating to security
deposits have been satisfied with respect to each existing tenant, subtenant or
occupant of the Security Property and agrees that they will be satisfied with
respect to each new tenant, subtenant, or occupant of the Security Property.
Grantor will furnish details of such satisfaction from time to time upon the
request of Beneficiary in such detail as Beneficiary may require.

     SECTION 7.15. WAIVER OF APPRAISEMENT; VALUATION. Unless Grantor or anyone
on its behalf shall have tendered payment of the full amount necessary to
satisfy all sums due hereunder at any time prior to foreclosure, Grantor agrees,
to the fullest extent permitted by law, that in case of an Event of Default,
neither Grantor nor anyone claiming through or under Grantor will set up, claim
or seek to take advantage of any moratorium, reinstatement, forbearance,
appraisement, valuation, stay, extension, homestead, exemption or redemption
laws now or hereafter in force in order to prevent or hinder the enforcement or
foreclosure of this Deed of Trust or any term, condition, covenant or agreement
of any of the other Documents, or the absolute sale of the Security Property or
the delivery of possession thereof immediately after such sale to the purchaser
at such sale Grantor, for itself and all who may at any time claim through or
under it, hereby waives to the full extent that it may lawfully so do, the
benefit of all such laws, and any and all right to have the assets subject to
the lien of this Deed of Trust marshalled upon any foreclosure.

     SECTION 7.16. WAIVER OF TRIAL BY JURY. Grantor hereby waives, to the
fullest extent permitted by law, the right to trial by jury in any action,
proceeding or counterclaim, whether in contract, tort or otherwise, relating
directly or indirectly to the loan evidenced by the Note, the application for
the loan evidenced by the Note, the Note, this Deed of Trust or the other
security documents or any acts or omissions of the Beneficiary, its officers,
employees, directors or agents in connection therewith.

                                  ARTICLE VIII

MISCELLANEOUS PROVISIONS

<Page>

     SECTION 8.01. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
restricting assignments by the parties hereto, this Deed of Trust shall inure to
the benefit of and be binding upon Grantor, Beneficiary and Trustees, and their
respective legal representatives, successors and assigns.

     SECTION 8.02. SEVERABILITY. If any provision of this Deed of Trust or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Deed of Trust and the
application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforceable to the greatest extent permitted by
law.

     SECTION 8.03. APPLICABLE LAW. This Deed of Trust shall be interpreted,
construed and enforced according to the laws of the Commonwealth of Virginia,
without reference to conflicts of laws principles.

     SECTION 8.04. NOTICES, DEMANDS AND REQUESTS. All notices, demands or
requests provided for or permitted to be given pursuant to this Deed of Trust
shall be in writing and shall be delivered in person or sent by registered or
certified United States mail, postage prepaid, return receipt requested, or by
express courier to Beneficiary, Trustees, and Grantor at their respective
addresses set forth in the Bond Purchase Agreement or this Deed of Trust or to
such other addresses as are specified by no less than ten (10) days' prior
written notice delivered in accordance herewith. All such notices, demands and
requests shall be deemed effectively given and delivered on the postmark date of
mailing, or, if delivered personally, when received. Rejection or other refusal
to accept or the inability to deliver because of a changed address of which no
notice was given shall be deemed to be receipt of the notice, demand or request
sent.

     SECTION 8.05. CONSENTS AND APPROVALS. All approvals and consents hereunder
shall be in writing and no approval or consent shall be deemed to have been
given hereunder unless evidenced in a writing signed by the party from whom the
approval or consent is sought.

     SECTION 8.06. WAIVER. No delay or omission of Beneficiary to exercise any
right, power or remedy accruing upon any Event of Default shall exhaust or
impair any such right, power or remedy or shall be construed to be a waiver of
any such Event of Default or any acquiescence therein, and every right, power
and remedy given by this Deed of Trust to Beneficiary and Trustees may be
exercised from time to time and as often as may be deemed expedient by
Beneficiary and Trustees. No consent or waiver, express or implied, by
Beneficiary to or of any Event of Default by Grantor in the performance of its
obligations hereunder shall be deemed or construed to be a consent or waiver to
or of any other Event of Default in the performance of the same or any other
obligations of Grantor hereunder. Failure on the part of Beneficiary to complain
of any act or failure to act or to declare an Event of Default, irrespective of
how long such failure continues, shall not constitute a waiver by Beneficiary of
its rights hereunder or impair any rights, powers or remedies consequent on any
breach or default by Grantor. By accepting payment after the due date of any
amount payable under this Deed of Trust or under any of the other Bond
Documents, Beneficiary or the Trustees shall not be deemed to waive the right
either to require prompt payment when due of all other amounts payable under
this Deed of Trust or under any of the other Bond Documents, or to declare an
Event of Default for failure to effect such prompt payment of any such other
amount. Neither

<Page>

the Grantor nor any other person now or hereafter obligated for the payment of
the whole or any part of the Indebtedness now or hereafter secured by this Deed
of Trust shall be relieved of such obligation by reason of the failure of
Beneficiary to comply with any request of Grantor or of any other person so
obligated to take action to foreclose this Deed of Trust or otherwise enforce
any of the provisions of this Deed of Trust or of any obligations secured by
this Deed of Trust, or by reason of any agreement or stipulation between any
subsequent owner or owners of the Security Property or any part thereof, or by
Beneficiary extending the time of payment or modifying the terms of this Deed of
Trust or the other Bond Documents without first having obtained the consent of
Grantor or such other person, and in the latter event, Grantor and all such
other persons shall continue to be liable to make such payments according to the
terms of any such agreement or extension or modification unless expressly
released and discharged in writing by Beneficiary. Regardless of consideration,
and without the necessity for any notice to or consent by the holder of any
subordinate lien on the Security Property, Beneficiary may release the
obligation of any person at any time liable for any of the Indebtedness secured
by this Deed of Trust or any part of the security held for the Indebtedness and
may extend the time of payment or otherwise modify the terms of this Deed of
Trust or the other Bond Documents without, as to the security or the remainder
thereof, in anyway impairing or affecting the lien or security interest of this
Deed of Trust or the priority of such lien or security interest, as security for
the payment of the Indebtedness as it may be so extended or modified, over any
subordinate lien. The holder of any subordinate lien shall have no right to
terminate any Lease whether or not such Lease be subordinate to this Deed of
Trust. Beneficiary may resort for the payment of the Indebtedness secured hereby
to the Security Property or to any other security or collateral therefor held by
the Beneficiary in such order and manner as the Beneficiary may elect.

     SECTION 8.07. EXECUTION COUNTERPARTS. This Deed of Trust may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original and all such counterparts shall together constitute
but one and the same Deed of Trust.

     SECTION 8.08. TIME OF THE ESSENCE. TIME IS OF THE ESSENCE with respect to
each and every covenant, agreement and obligation of Grantor under this Deed of
Trust.

     SECTION 8.09. ATTORNEYS' FEES. The meaning of the terms "legal fees" or
"attorneys' fees" or any other reference to the fees of attorneys or counsel,
wherever used in this Deed of Trust, shall be deemed to include, without
limitation, all reasonable legal fees relating to litigation or appeals at any
and all levels of courts and administrative tribunals.

     SECTION 8.10. NO LIABILITY. No grant, conveyance, assignment, mortgage,
security interest or other right created in the Security Property pursuant to
Article II or any other provision of this Deed of Trust shall in any way impair
or diminish the obligations of Grantor under or with respect to any of the
Security Property or impose any of such obligations on Beneficiary or Trustees.

     SECTION 8.11. INCORPORATION OF STATUTORY PROVISIONS. To the extent not
otherwise explicitly stated herein, this Deed of Trust shall be construed to
impose and confer upon the parties hereto, and the beneficiaries hereunder, all
duties, rights and obligations prescribed in Section 55-59 and Sections 55-59.1
through 55-59.4 of the Virginia Code, and to incorporate the following by short
form reference to Sections 55-59.2 and 55-60 of the Virginia Code:

<Page>

     Exemptions waived

     Advertisement required: once a week for two weeks

     Subject to all (call) upon default

     Renewal, extension or reinstatement permitted

     Any Trustee may act

     Substitution of any or all of the Trustees may be made at the discretion of
     Beneficiary for any reason whatsoever.

     Section 8.12. DEBT SECURED SUBJECT TO CALL. THE DEBT SECURED HEREBY IS
SUBJECT TO CALL IN FULL OR THE TERMS THEREOF BEING MODIFIED IN THE EVENT OF SALE
OR CONVEYANCE OF THE PROPERTY HEREBY CONVEYED.

                                   ARTICLE IX

TRUSTEES

     SECTION 9.01. PERFORMANCE OF DUTIES; LIABILITY; COMPENSATION. Trustees, by
their acceptance hereof, covenant to perform and fulfill faithfully the trusts
herein created, being liable, however, only for willful misconduct or gross
negligence, and hereby waive any statutory fee and agree to accept reasonable
compensation in lieu thereof for any services rendered by them in accordance
with the terms hereof.

     SECTION 9.02. RESIGNATION. Trustees may resign at any time upon giving
thirty (30) days' prior notice in writing to Grantor and to Beneficiary.

     SECTION 9.03. REMOVAL AND SUBSTITUTION. Beneficiary may remove either or
both Trustees at any time or from time to time and select a successor trustee or
trustees. In the event of the death, removal, resignation, refusal to act, or
inability to act of either or both Trustees, or in its sole discretion for any
reason whatsoever, Beneficiary may, without notice, without specifying any
reason therefor and without applying to any court, select and appoint a
successor Trustee or Trustees, and all powers, rights, duties and authority of
Trustees shall thereupon become vested in the successors. The substitute
trustees shall not be required to give bond for the faithful performance of
their duties unless required by Beneficiary.

     SECTION 9.04. ANY TRUSTEE MAY ACT. All rights granted to and all powers
conferred upon Trustees hereunder may be exercised by both or either of
Trustees.

     SECTION 9.05. TRUSTEES' EXPENSES AND INDEMNITY. Grantor shall pay the fees
and expenses of the Trustees for acting as trustees under this Deed of Trust,
including but not limited to the reasonable fees and expenses of counsel
employed by the Trustees. Before taking any action under this Deed of Trust, the
Trustees may require that satisfactory indemnity be furnished to them for the
reimbursement of all expenses to which they may be put and to protect

<Page>

them against all liability by reason of any action so taken, except liability
which is adjudicated to have resulted from their gross negligence or willful
default.

<Page>

     IN WITNESS WHEREOF, Grantor has executed this Deed of Trust, as of the day
and year first written above.

                                      BIOTAGE REAL ESTATE, LLC,
                                      a Virginia limited liability company

                                      By: /s/ David B. Patteson
                                          -------------------------------
                                              David B. Patteson, Manager

<Page>

COMMONWEALTH OF VIRGINIA

CITY OF CHARLOTTESVILLE, VIRGINIA

     The foregoing instrument was acknowledged before me this 1st day of April,
2002, in the jurisdiction aforesaid, by David B. Patteson, Manager of Biotage
Real Estate, LLC, on behalf of the company.

                                   /s/ Deanna W. Gregory (commissioned as Deanna
                                   ---------------------------------------------
                                   Pruckner)
                                   ---------

                                                 Notary Public

(SEAL)

My commission expires ________________.

<Page>

                                    EXHIBIT A

ALL that certain lot or parcel of land, situated in Albemarle County, Virginia,
located in the University of Virginia Real Estate Foundation North Fork Business
Park, containing 7.100 acres, more or less, and being more particularly
identified as Parcel F-1A on a plat of Draper Aden Associated, dated February
25, 2001, last revised September 25, 2001, of record in the Clerk's Office,
Circuit Court, Albemarle County, Virginia, in Deed Book 2085, page 709.

BEING the same property conveyed to Biotage, Inc., a Delaware corporation, by
deed from University of Virginia Real Estate Foundation, a Virginia nonstock
corporation dated September 27, 2001, recorded September 28, 2001 in the Clerk's
Office, Circuit Court, Albemarle County, Virginia Deed Book 2065, page 720.

<Page>

                             VIRGINIA NATIONAL BANK

                               GUARANTY AGREEMENT

                                                             April 1, 2002

Dear Sirs:

     As an inducement to VIRGINIA NATIONAL BANK, Charlottesville, Virginia
("Bank") to extend credit to and to otherwise deal with BIOTAGE REAL ESTATE,
LLC, a Virginia limited liability company ("Borrower"), and in consideration
thereof, the undersigned (and each of the undersigned jointly and severally if
more than one) hereby absolutely and unconditionally guarantees to Bank and its
successors and assigns the due and punctual payment of any and all notes,
drafts, debts, obligations and liabilities, primary or secondary (whether by way
of endorsement of otherwise) of Borrower at any time, now or hereafter, incurred
with or held by Bank pursuant to or under the Bond Documents (as such term is
defined by the Loan Agreement, dated as of April 1, 2002, by and among Borrower,
Biotage, Inc., the Industrial Development Authority of Albemarle County,
Virginia (the "Authority"), and the undersigned, and the Bond Purchase
Agreement, dated as of April 1, 2002, by and among Bank, Borrower, Biotage,
Inc., the Authority and the undersigned), together with interest, as and when
the same become due and payable, whether by acceleration or otherwise, in
accordance with the terms of any such notes, drafts, debts, obligations or
liabilities or agreements evidencing any such indebtedness, obligation or
liability including all renewals, extensions and modifications thereof,
including without limitation the promissory note dated as of the Closing Date
(as defined in the Bond Documents). The obligation of the undersigned is a
guarantee of payment and not of collection.

     The undersigned is Bank's debtor for all indebtedness, obligations and
liabilities of which this Guaranty is made, and Bank shall also at all times
have a lien on and security interest in all stocks, bonds and other securities
of the undersigned at any time in Bank's possession and the same shall at Bank's
option be held, administered and disposed of as collateral to any such
indebtedness, obligation or liability of the Borrower, and Bank shall also at
all times have the right of set-off against any deposit account of the
undersigned with Bank in the same manner and to the same extent that the right
of set-off may exist against the Borrower.

     It is understood that any such notes, drafts, debts, obligations and
liabilities may be accepted or created by or with Bank at any time and from time
to time without notice to the undersigned, and the undersigned hereby expressly
waives presentment, demand, protest, and notice of dishonor of any such notes,
drafts, debts, obligations and liabilities or other evidences of any such
indebtedness, obligation or liability.

     Bank may receive and accept from time to time any securities or other
property as a collateral to any such notes, drafts, debts, obligations and
liabilities, and may surrender,

<Page>

compromise, exchange and release absolutely the same or any part thereof at any
time without notice to the undersigned and without in any manner affecting the
obligation and liability of the undersigned hereby created. The undersigned
agrees that Bank shall have no obligation to protest, perfect, secure or insure
any security interests, liens or encumbrances now or hereafter held for the
indebtedness, obligations and liabilities for which this Guaranty is made.
Notwithstanding any other provision of this Guaranty, as a condition of the
Bank's enforcement of this Guaranty the Bank agrees to give the undersigned
notice of the Event of Default (as such term is defined in the Bond Documents)
by Borrower under the Bond Documents for which the Bank seeks enforcement. Such
notice shall be given to the address set forth herein below in the same manner
as provided in the Bond Documents.

     This obligation and liability on the part of the undersigned shall be a
primary, and not a secondary, obligation and liability, payable immediately upon
demand without recourse first having been had by Bank against the Borrower or
any other guarantor, person, firm or corporation, and without first resorting to
any property held by Bank as collateral security; and the undersigned hereby
waives the benefits of all provisions of law, including but not limited to the
provisions of Virginia Code Sections 49-25 and 49-26 or their successors, for
stay or delay of execution or sale of property or other satisfaction of the
indebtedness, obligation or liability thereon returned unsatisfied, or until it
is shown that the Borrower has no property available for the satisfaction of the
indebtedness, obligation or liability guaranteed hereby, or until any other
proceedings can be had; and the undersigned hereby agrees to indemnify the Bank
for all costs of collection, including but not limited to the costs of
repossession, foreclosure, reasonable attorneys' fees, and court costs incurred
by the Bank in the event that the Bank should first be required by the
undersigned to resort to any property held by the Bank or in which the Bank has
a security interest or to obtain execution or other satisfaction of a judgment
against the Borrower on account of Borrower's obligation and liability for its
indebtedness guaranteed hereby, and the undersigned further agrees that the
undersigned is responsible for any obligation or debt, or portion thereof, of
the Borrower to the Bank which has been paid by the Borrower to the Bank and
which the Bank is subsequently required to return to the Borrower or a trustee
for the Borrower in any bankruptcy or insolvency proceeding; and the undersigned
further agrees that none of the undersigned shall have any right of subrogation,
reimbursement or indemnity whatsoever, nor any right of recourse to security for
the debts and obligations of the Borrower to Bank unless and until all of the
debts and obligations of the Borrower to Bank have been paid in full. The
undersigned hereby waives, to the extent avoidable under any provision of the
Bankruptcy Code, any right arising upon payment by the undersigned of any
obligation under this Guaranty to assert a claim against the bankruptcy estate
of the Borrower.

     This agreement shall inure to the benefit of Bank, its successors and
assigns, and the owners and holders of any of the indebtedness, obligations and
liabilities hereby guaranteed, and shall remain in force until a written notice
revoking it has been received by Bank; but such revocation shall not release the
undersigned from liability to Bank, its successors and assigns, or the owners
and holders of any of the indebtedness, obligations and liabilities hereby
guaranteed, for any indebtedness, obligation or liability of the Borrower which
is hereby guaranteed and then in existence or from any renewals, extensions or
modifications thereof in whole or in part, whether such renewals, extensions or
modifications are made before or after such revocation, with or without notice
to the undersigned. The undersigned waives presentment, demand, protest and
notices of every kind and assents to any one or more extensions, modifications,
renewals or

<Page>

postponements of the time or amount of payment or any other indulgences given to
Borrower. The undersigned shall be responsible for and shall reimburse the Bank
for all costs and expenses (including reasonable attorneys' fees) incurred by
the Bank in connection with the enforcement of this Guaranty or the protection
or preservation of any right or claim of the Bank in connection herewith,
including without limitation costs and expenses incurred by the Bank in
connection with its attempts to collect the indebtedness, obligations, and
liabilities guaranteed hereby.

     The undersigned covenants, warrants, and represents to the Bank that: (i)
this guaranty is enforceable against the undersigned in accordance with its
terms; (ii) the execution and delivery of this Guaranty does not violate or
constitute a breach of any agreement to which the undersigned is a party; (iii)
that there is no litigation, claim, action or proceeding pending or, to the best
knowledge of the undersigned, threatened against the undersigned which would
materially adversely affect the financial condition of the undersigned or his
ability to fulfill his obligations hereunder; and (iv) that the undersigned has
knowledge of the Borrower's financial condition and affairs.

     This Guaranty is made in and shall be construed in accordance with the laws
and judicial decisions of the State of Virginia. The undersigned agrees that any
dispute arising out of this Guaranty shall be adjudicated in either the state or
federal courts of Virginia and in no other forum. For that purpose, the
undersigned hereby submits to the jurisdiction of the state and/or federal
courts of Virginia. The undersigned waives any defense that venue is not proper
for any action brought in any federal or state court in the State of Virginia.

             WITNESS the following signature and seal:

                                      BIOTAGE INC.

                                      A DELAWARE CORPORATION

                                      By:  /s/ David B. Patteson
                                           ----------------------

                                      Its: President
                                           ----------------------

<Page>

STATE OF VIRGINIA

COUNTY OF ALBEMARLE, to-wit:

     The foregoing instrument was acknowledged before me this 1st day of April
2002, by David B. Patteson, President of Biotage, Inc.

Given under my hand and seal this 1st day of April 2002.

          /s/ Deanna W. Gregory (commissioned as Deanna Gregory Pruckner)
          ---------------------------------------------------------------
          Notary Public

                         My Commission Expires: _____________________.

<Page>

                             VIRGINIA NATIONAL BANK

                               GUARANTY AGREEMENT

                                                             April 1, 2002

Dear Sirs:

     As an inducement to VIRGINIA NATIONAL BANK, Charlottesville, Virginia
("Bank") to extend credit to and to otherwise deal with BIOTAGE REAL ESTATE,
LLC, a Virginia limited liability company ("Borrower"), and in consideration
thereof, the undersigned (and each of the undersigned jointly and severally if
more than one) hereby absolutely and unconditionally guarantees to Bank and its
successors and assigns the due and punctual payment of any and all notes,
drafts, debts, obligations and liabilities, primary or secondary (whether by way
of endorsement of otherwise) of Borrower at any time, now or hereafter, incurred
with or held by Bank pursuant to or under the Bond Documents (as such term is
defined by the Loan Agreement, dated as of April 1, 2002, by and among Borrower,
Biotage, Inc., the Industrial Development Authority of Albemarle County,
Virginia (the "Authority"), and the undersigned, and the Bond Purchase
Agreement, dated as of April 1, 2002, by and among Bank, Borrower, Biotage,
Inc., the Authority and the undersigned), together with interest, as and when
the same become due and payable, whether by acceleration or otherwise, in
accordance with the terms of any such notes, drafts, debts, obligations or
liabilities or agreements evidencing any such indebtedness, obligation or
liability including all renewals, extensions and modifications thereof,
including without limitation the promissory note dated as of the Closing Date
(as defined in the Bond Documents). The obligation of the undersigned is a
guarantee of payment and not of collection.

     The undersigned is Bank's debtor for all indebtedness, obligations and
liabilities of which this Guaranty is made, and Bank shall also at all times
have a lien on and security interest in all stocks, bonds and other securities
of the undersigned at any time in Bank's possession and the same shall at Bank's
option be held, administered and disposed of as collateral to any such
indebtedness, obligation or liability of the Borrower, and Bank shall also at
all times have the right of set-off against any deposit account of the
undersigned with Bank in the same manner and to the same extent that the right
of set-off may exist against the Borrower.

     It is understood that any such notes, drafts, debts, obligations and
liabilities may be accepted or created by or with Bank at any time and from time
to time without notice to the undersigned, and the undersigned hereby expressly
waives presentment, demand, protest, and notice of dishonor of any such notes,
drafts, debts, obligations and liabilities or other evidences of any such
indebtedness, obligation or liability.

     Bank may receive and accept from time to time any securities or other
property as a collateral to any such notes, drafts, debts, obligations and
liabilities, and may surrender, compromise, exchange and release absolutely the
same or any part thereof at any time without notice to the undersigned and
without in any manner affecting the obligation and liability of the undersigned
hereby created. The undersigned agrees that Bank shall have no obligation to
protest, perfect, secure or insure any security interests, liens or encumbrances
now or hereafter

<Page>

held for the indebtedness, obligations and liabilities for which this Guaranty
is made. Notwithstanding any other provision of this Guaranty, as a condition of
the Bank's enforcement of this Guaranty the Bank agrees to give the undersigned
notice of the Event of Default (as such term is defined in the Bond Documents)
by Borrower under the Bond Documents for which the Bank seeks enforcement. Such
notice shall be given to the address set forth herein below in the same manner
as provided in the Bond Documents.

     This obligation and liability on the part of the undersigned shall be a
primary, and not a secondary, obligation and liability, payable immediately upon
demand without recourse first having been had by Bank against the Borrower or
any other guarantor, person, firm or corporation, and without first resorting to
any property held by Bank as collateral security; and the undersigned hereby
waives the benefits of all provisions of law, including but not limited to the
provisions of Virginia Code Sections 49-25 and 49-26 or their successors, for
stay or delay of execution or sale of property or other satisfaction of the
indebtedness, obligation or liability thereon returned unsatisfied, or until it
is shown that the Borrower has no property available for the satisfaction of the
indebtedness, obligation or liability guaranteed hereby, or until any other
proceedings can be had; and the undersigned hereby agrees to indemnify the Bank
for all costs of collection, including but not limited to the costs of
repossession, foreclosure, reasonable attorneys' fees, and court costs incurred
by the Bank in the event that the Bank should first be required by the
undersigned to resort to any property held by the Bank or in which the Bank has
a security interest or to obtain execution or other satisfaction of a judgment
against the Borrower on account of Borrower's obligation and liability for its
indebtedness guaranteed hereby, and the undersigned further agrees that the
undersigned is responsible for any obligation or debt, or portion thereof, of
the Borrower to the Bank which has been paid by the Borrower to the Bank and
which the Bank is subsequently required to return to the Borrower or a trustee
for the Borrower in any bankruptcy or insolvency proceeding; and the undersigned
further agrees that none of the undersigned shall have any right of subrogation,
reimbursement or indemnity whatsoever, nor any right of recourse to security for
the debts and obligations of the Borrower to Bank unless and until all of the
debts and obligations of the Borrower to Bank have been paid in full. The
undersigned hereby waives, to the extent avoidable under any provision of the
Bankruptcy Code, any right arising upon payment by the undersigned of any
obligation under this Guaranty to assert a claim against the bankruptcy estate
of the Borrower.

     This agreement shall inure to the benefit of Bank, its successors and
assigns, and the owners and holders of any of the indebtedness, obligations and
liabilities hereby guaranteed, and shall remain in force until a written notice
revoking it has been received by Bank; but such revocation shall not release the
undersigned from liability to Bank, its successors and assigns, or the owners
and holders of any of the indebtedness, obligations and liabilities hereby
guaranteed, for any indebtedness, obligation or liability of the Borrower which
is hereby guaranteed and then in existence or from any renewals, extensions or
modifications thereof in whole or in part, whether such renewals, extensions or
modifications are made before or after such revocation, with or without notice
to the undersigned. The undersigned waives presentment, demand, protest and
notices of every kind and assents to any one or more extensions, modifications,
renewals or postponements of the time or amount of payment or any other
indulgences given to Borrower. The undersigned shall be responsible for and
shall reimburse the Bank for all costs and expenses (including reasonable
attorneys' fees) incurred by the Bank in connection with the enforcement of this
Guaranty or the protection or preservation of any right or claim of the Bank in
connection

<Page>

herewith, including without limitation costs and expenses incurred by the Bank
in connection with its attempts to collect the indebtedness, obligations, and
liabilities guaranteed hereby.

     The undersigned covenants, warrants, and represents to the Bank that: (i)
this guaranty is enforceable against the undersigned in accordance with its
terms; (ii) the execution and delivery of this Guaranty does not violate or
constitute a breach of any agreement to which the undersigned is a party; (iii)
that there is no litigation, claim, action or proceeding pending or, to the best
knowledge of the undersigned, threatened against the undersigned which would
materially adversely affect the financial condition of the undersigned or his
ability to fulfill his obligations hereunder; and (iv) that the undersigned has
knowledge of the Borrower's financial condition and affairs.

     This Guaranty is made in and shall be construed in accordance with the laws
and judicial decisions of the State of Virginia. The undersigned agrees that any
dispute arising out of this Guaranty shall be adjudicated in either the state or
federal courts of Virginia and in no other forum. For that purpose, the
undersigned hereby submits to the jurisdiction of the state and/or federal
courts of Virginia. The undersigned waives any defense that venue is not proper
for any action brought in any federal or state court in the State of Virginia.

             WITNESS the following signature and seal:

                                      DYAX CORP.
                                      A DELAWARE CORPORATION
                                      300 Technology Square
                                      Cambridge, Massachusetts 02139

                                      By:  /s/ Henry E. Blair
                                           -------------------------------------

                                      Its: President and Chief Executive Officer
                                           -------------------------------------

<Page>

STATE OF VIRGINIA

COUNTY OF ALBEMARLE, to-wit:

     The foregoing instrument was acknowledged before me this 1st day of April
2002, by Henry E. Blair, President and Chief Executive Officer of Dyax Corp.
                        [Position]
Given under my hand and seal this 1st day of April 2002.

          /s/ Deanna W. Gregory (commissioned as Deanna Gregory Pruckner)
          ---------------------------------------------------------------
                 Notary Public

                        My Commission Expires:_____________________.

<Page>

THIS ASSIGNMENT IS EXEMPT FROM RECORDATION TAXES PURSUANT TO CODE OF
VIRGINIA SECTION 58.1-809

                         ASSIGNMENT OF LEASES AND RENTS

     THIS ASSIGNMENT OF LEASES AND RENTS (this "Assignment") is made as of the
1st day of April 2002, by and between BIOTAGE REAL ESTATE, LLC, a Virginia
limited liability company (the "Company" and the "Grantor" for indexing
purposes) and VIRGINIA NATIONAL BANK, a national banking organization (the
"Bank" and the "Grantee" for indexing purposes).

                                    RECITALS

          A. Pursuant to a Bond Purchase Agreement, made as of April 1, 2002,
(the "Bond Agreement"), by and among the parties, Biotage, Inc., a Delaware
Corporation (the "Lessee"), and the Industrial Development Authority of
Albemarle County, Virginia, a political subdivision of the Commonwealth of
Virginia (the "Authority"), and a Loan Agreement (the "Loan Agreement"), made as
of April 1, 2002, between the Company, the Lessee and the Authority, the
Authority has agreed, (1) to issue and sell to the Bank its Industrial
Development Revenue Bond (Biotage Project), Series 2002 (the "Bonds"), in the
principal amount of Four Million Two Hundred Fifty Thousand Dollars
($4,250,000.00), (2) to loan the proceeds of the sale of the Bonds to the
Company to finance the acquisition of the Land and the construction of the
Project (the "Loan"), and (3) to assign to the Bank, as security for the Bonds,
certain rights under the Loan Agreement together with the Company's Note.

          B. The Company has executed and delivered to the Bank certain
documents (collectively, the "Bond Documents") for the purpose of evidencing and
securing the Company's obligations under the Loan Agreement and the Company's
Note, including, but not limited to, the Bond Agreement, the Loan Agreement, the
Company's Note, and the Credit Line Deed of Trust, Assignment and Security
Agreement (the "Deed of Trust"), each dated as of April 1, 2002, except for the
Company's Note which is dated as of the Closing Date. All capitalized terms not
defined herein shall have the meanings specified in the Loan Agreement, unless
the context otherwise requires.

          C. The Bank requires this Assignment to further secure, (a) payment of
all amounts now or hereafter owing to the Bank by the Company under the Bond
Documents, and (b) the performance and discharge of each and every obligation,
covenant and agreement of the Company contained herein or in the other Bond
Documents, and all costs of collection, including reasonable attorney's fees, as
provided in the Assignment and the other Bond Documents (collectively, the
"Obligations").

                                    AGREEMENT

     NOW, THEREFORE, for and in consideration of the Loan, as additional
security for the obligations of the Company under the Company's Note and the
other Bond Documents, and

<Page>

for other good and valuable consideration, the receipt and sufficiency of which
is acknowledged, the Company hereby agrees as follows:

     1. ASSIGNMENT. The Company hereby absolutely and irrevocably assigns and
transfers to the Bank: (a) the income, rents, receivables, security or similar
deposits, revenues, issues, royalties, profits, earnings, products and proceeds
from any and all of the Land (collectively, the "Rents, Issues and Profits")
together with the right, power and authority to collect the same; (b) all
leases, written or oral, now in existence or hereafter arising, all other
agreements for the use and occupancy of all or any portion of the Land, and any
and all extensions or renewals of any thereof, including without limitation all
leases listed on Exhibit A hereto, (individually "Lease" and collectively, the
"Leases"), together with the right, power and authority of the Company to alter,
modify or change the terms thereof, or surrender, cancel or terminate the same;
and (c) any and all guarantees of any obligations of any lessee under any of the
Leases (a "Lessee"). The Company irrevocably appoints the Bank its true and
lawful attorney-in-fact, at any time and from time to time, at the option of the
Bank to demand, receive and enforce payment of Rents, Issues and Profits, to
give receipts, releases and satisfactions, to sue, in the name of the Company or
the Bank, for all the Rents, Issues and Profits and to apply the same to the
Obligations, save that the Company shall have the right and license to collect
the Rents, Issues and Profits prior to any Event of Default under any of the
Bond Documents. The assignment of the Rents, Issues and Profits in this
Assignment is an absolute assignment from the Company to the Bank and not merely
the passing of a security interest.

     2. WARRANTIES OF THE COMPANY. The Company warrants to the Bank that, (a) it
is the sole owner of the fee simple estate in the Land, (b) the Leases are valid
and enforceable and have not been altered, modified or amended in any manner
whatsoever except as previously disclosed in writing to the Bank, (c) no Lessee
is in default under any of the terms, covenants or conditions of any Lease, (d)
except for an assignment of rents to Steven T. McLean and David P. Turner, which
assignment is subordinate to the assignment hereunder to the Bank, no rent
reserved in any Lease has been assigned or anticipated, (e) no rent for any
period subsequent to the date of this Assignment has been collected more than
one month in advance of the time when the same became due under the terms of any
Lease, (f) it has full right and title to assign the Leases and all Rents,
Issues and Profits thereunder, and (g) except for an assignment of rents to
Steven T. McLean and David P. Turner, which assignment is subordinate to the
assignment hereunder to the Bank, no other assignment of any interest in any
Lease has been made except in favor of the Bank.

     3. COVENANTS AND OBLIGATIONS OF THE COMPANY. The Company agrees, (a) to
observe and perform all obligations imposed under the Leases, (b) to give prompt
notice to the Bank of any notice of default under any Leases received or given
by the Company, together with a complete copy of any such notice, (c) to send
promptly to the Bank a copy of any notice it receives from any tenant or other
party to any of the Leases seeking to terminate such Lease before its scheduled
expiration date, (d) at the sole cost and expense of the Company, to enforce,
short of termination of any Lease, the performance or observance of each and
every covenant and condition thereof by all parties thereto, (e) not to do or
permit to be done anything to impair the security of any Lease, (f) not to pay
or collect any of the Rents, Issues and Profits arising or accruing under the
Leases or from the Land in advance of the time when the same shall become due,
(g) not to execute any other assignment of interest in the Leases or assignment
of Rents,

<Page>

Issues and Profits arising or accruing from the Leases or from the Land, except
for an assignment in favor of Stephen T. McLean and David P. Turner in
accordance with the terms of the Deed of Trust, (h) not to subordinate any Lease
to any other encumbrance or permit, consent, or agree to such subordination
without in each case the Bank's prior written consent, (i) not to alter, modify
or change the terms of any Lease or give any consent or exercise any option
required or permitted by such terms without the prior written consent of the
Bank, which may be withheld in the Bank's sole discretion, (j) without the prior
written consent of the Bank, which the Bank may withhold in its absolute
discretion, not to cancel or terminate any Lease or accept a surrender thereof
or convey or transfer or suffer or permit a conveyance or transfer of the leased
premises thereby or of any interest therein so as to effect, directly or
indirectly, a merger of the estates and rights of, or a termination or
diminution of the obligations of, any party thereunder, (k) not to alter, modify
or change the terms of any guaranty of any Lease or cancel or terminate such
guaranty without the prior written consent of the Bank, which may be withheld in
the Bank's sole discretion, (l) not to consent to any assignment of or
subletting under any Lease, whether or not in accordance with its terms, without
the prior written consent of the Bank, which may be withheld in the Bank's sole
discretion, and (m) at the Bank's request, to assign and transfer to the Bank
any and all subsequent Leases upon all or any part of the Land, and to execute
and deliver at the request of the Bank all such further assurances and
assignments in all or any part of the Land as the Bank shall from time to time
require.

     4. BANK'S RIGHTS AND POWERS. At any time prior to an Event of Default, the
Company shall have the right and obligation to collect and receive at the time
of, but not prior to, the date provided for the payment thereof, all Rents,
Issues and Profits arising under the Leases. Upon the occurrence of an Event of
Default, the Bank may, at its option, without notice and without regard to the
adequacy of the security for the Obligations, either in person or by agent, with
or without bringing any action or proceeding, or by a receiver appointed by a
court, take possession of the premises described in any Lease and have, hold,
manage, lease and operate the same on such terms and for such period of time as
the Bank may deem proper and either with or without taking possession of such
premises in its own name, demand, sue for or otherwise collect and receive all
Rents, Issues and Profits of the Land with full power to make from time to time
all alterations, renovations, repairs or replacements thereto or thereof as may
seem proper to the Bank, and to apply any such collected Rents, Issues and
Profits to the payment of: (a) all reasonable expenses of managing the Land,
including, without limitation, the salaries, fees and wages of a managing agent
and such other employees as the Bank may deem necessary or desirable, and all
reasonable expenses of operating and maintaining the Land, including, without
limitation, all taxes, charges, claims, assessments, water rents, sewer rents
and any other liens, and premiums for all insurance which the Bank may deem
necessary or desirable, and the costs of all alterations, renovations, repairs
or replacements, and all expenses incident to taking and retaining possession of
the Land, and (b) the Obligations, together with all costs and attorneys' fees,
in such order of priority as to any of the items mentioned in this paragraph, as
the Bank in its sole discretion may determine, notwithstanding any statute, law,
custom or use to the contrary. The exercise by the Bank of the option granted in
this Section 4 and the collection of the Rents, Issues and Profits and the
application thereof as herein provided shall not be considered a waiver of any
default by the Company under this Assignment, the other Bond Documents or any
Lease.

<Page>

     5. COMPANY'S INDEMNITY. The Bank shall not be liable for any loss sustained
by the Company resulting from any act or omission of the Bank or from managing
the Land unless such loss is caused by the willful misconduct or gross
negligence of the Bank. The Bank shall not be obligated to perform or discharge,
nor does the Bank hereby undertake to perform or discharge, any obligation, duty
or liability under any Lease or under or by reason of this Assignment, and the
Company shall, and does hereby agree, to the extent permitted by law, to
indemnify the Bank for, and to hold the Bank harmless from, any and all
liability, loss or damage which may or might be incurred under any Lease or
under or by any reason of this Assignment, and from any and all claims and
demands whatsoever which may be asserted against the Bank by reason of any
alleged obligations or undertakings on its part to perform or discharge any of
the terms, covenants or agreements contained in any Lease except as herein
provided. Should the Bank incur any such liability under any Lease or under or
by reason of this Assignment or in defense of any such claims or demands (not
caused by its willful misconduct or gross negligence), the amount thereof,
including costs, expenses, court costs and reasonable attorneys' fees shall be
secured hereby and the Company shall reimburse the Bank therefor immediately
upon demand. Upon the failure of the Company to do so, the Bank may, at its
option, declare the Obligations immediately due and payable. This Assignment
shall not operate to place responsibility for the control, care, management or
repair of the Land or any portion thereof upon the Bank, nor for the carrying
out of any of the terms and conditions of any Lease; nor shall it operate to
make the Bank responsible or liable for any waste committed on the Land by any
parties, or for any dangerous or defective condition of or on the Land or any
portion thereof or for any negligence of the Company or its agents in the
management, upkeep, repair or control of the Land or any portion thereof
resulting in loss or injury or death to any Lessee, tenant, licensee, employee
or stranger.

     6. ASSIGNMENT. The Bank shall have the right to assign the Company's right,
title and interest in any Lease to any subsequent holder of the Obligations
subject to the provisions of this Assignment.

     7. RELEASE. Upon payment and performance in full of the Obligations, this
Assignment shall become and be void and of no effect, but the affidavit,
certificate, letter or statement of any officer, agent or attorney of the Bank
showing any part of the Obligations to remain unpaid or unperformed shall be and
constitute conclusive evidence of the validity, effectiveness, and continuing
force of this Assignment and any person may, and is hereby authorized to, rely
thereon. The Company, as the lessor under any Lease, hereby authorizes and
directs the Lessee named in any such Lease, upon receipt from the Bank of
written notice that the Bank is then the holder of the Company's Note, to pay
over to the Bank all Rents, Issues, and Profits arising or accruing under such
Lease or from the premises described therein and to continue so to do until
otherwise notified by the Bank. The Bank may take or release other security for
the payment of the Obligations, may release any party primarily or secondarily
liable therefor and may apply any other security held by it to the satisfaction
of the Obligations without prejudice to any of its rights under this Assignment.

     8. NO WAIVER. Nothing contained in this Assignment and no act done or
omitted by the Bank pursuant to the powers and rights granted it hereunder shall
be deemed to be a waiver by the Bank of its rights and remedies under the other
Bond Documents. This Assignment is

<Page>

made and accepted without prejudice to any of the rights and remedies possessed
by the Bank under the terms of the other Bond Documents. The right of the Bank
to collect the Obligations and to enforce any other security therefor held by it
may be exercised by the Bank prior to, simultaneously with, or subsequent to any
action taken by it hereunder.

     9. CONDEMNATION. The Company hereby assigns to the Bank any award payable
by reason of condemnation action under the right of eminent domain against the
Land, and directs that such award shall be paid directly to the Bank.

     10. PERFORMANCE OF OBLIGATIONS. Any guaranty of payment and performance of
any obligation under any Lease shall not be released, modified, or limited in
any manner by the Company without the prior written consent of the Bank.

     11. GOVERNING LAW; SEVERABILITY. This Assignment is made, executed and
delivered in the Commonwealth of Virginia and shall be governed by the laws of
the Commonwealth of Virginia. Each provision of this Assignment shall be
interpreted in such a manner as to be effective and valid under the applicable
law, but if any provision hereof shall be prohibited by or invalid under the
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 Assignment.

     12. INDEPENDENT RIGHTS; CONFLICT. The Assignment and the powers and rights
granted are separate and independent from any obligation contained in the Deed
of Trust and may be enforced without regard to whether Lender institutes
foreclosure proceedings under the Deed of Trust. This Assignment is in addition
to the Deed of Trust and shall not affect, diminish or impair the Deed of Trust.
However, the rights and authority granted in this Assignment may be exercised in
conjunction with the Deed of Trust. In case of any conflict between the terms of
this Assignment and the terms of any of the Bond Documents, the terms of this
Assignment shall control.

     13. SUCCESSORS AND ASSIGNS. This Assignment, together with the covenants
and warranties herein contained, shall inure to the benefit of the Bank and any
subsequent holder of the Obligations which may be owing by the Company under the
Bond Documents and shall be binding upon the Company, its successors and assigns
and any subsequent owner of the Land.

     14. AMENDMENTS. No amendment to this Assignment shall be effective unless
in writing signed on behalf of the Company and the Bank.

<Page>

          IN WITNESS WHEREOF, the Company has executed this ASSIGNMENT OF LEASES
AND RENTS by its duly authorized manager.

                                      BIOTAGE REAL ESTATE, LLC

                                      By  /s/ David B. Patteson
                                          --------------------------------

                                      Its Manager
                                          --------------------------------

COMMONWEALTH OF VIRGINIA
CITY OF CHARLOTTESVILLE, VIRGINIA

     The foregoing instrument was acknowledged before me this 1st day of April,
2002, in the jurisdiction aforesaid, by David B. Patteson, Manager of Biotage
Real Estate, LLC, on behalf of the company.

               /s/ Deanna W. Gregory (commissioned as Deanna Gregory Pruckner)
               ---------------------------------------------------------------
               Notary Public

(SEAL)

My commission expires ________________.

<Page>

                   ASSIGNMENT OF CONTRACTS, PERMITS AND PLANS

          THIS ASSIGNMENT OF CONTRACTS, PERMITS AND PLANS (this "Assignment"),
made as of the 1st day of April 2002, is entered into by and between BIOTAGE
REAL ESTATE, LLC, a Virginia limited liability company (the "Company"), and
VIRGINIA NATIONAL BANK, a national banking organization (the "Bank"). Bovis
Lendlease ("Bovis") and nbj Architecture, PLC, (the "Architect") each join
this Assignment for the sole and exclusive purpose of granting consent,
insofar as such consent is required, to all of the assignments and security
interests made and granted by the Company to the Bank pursuant to this
Assignment.

                                    RECITALS

          A. Pursuant to a Bond Purchase Agreement, made as of April 1, 2002
(the "Bond Agreement"), by and among the Bank, the Company, Biotage, Inc., a
Delaware corporation (the "Lessee") and the Industrial Development Authority of
Albemarle County, Virginia, a political subdivision of the Commonwealth of
Virginia (the "Authority") and a Loan Agreement (the "Loan Agreement"), made as
of April 1, 2002, by and among the Company, the Lessee, and the Authority, the
Authority has agreed, (1) to issue and sell to the Bank its Industrial
Development Revenue Bond (Biotage Project), Series 2002 (the "Bonds"), in the
principal amount of Four Million Two Hundred Fifty Thousand Dollars
($4,250,000.00), (2) to loan the proceeds of the sale of the Bonds to the
Company to finance the acquisition of the Property and the construction of the
Project (the "Loan"), and (3) to assign to the Bank, as security for the Bonds,
certain rights under the Loan Agreement, together with the Company's Note.

          B. The Company has executed and delivered to the Bank certain
documents (collectively, the "Bond Documents") for the purpose of evidencing and
securing the Company's obligations under the Loan Agreement and the Company's
Note, including, but not limited to, the Bond Agreement, the Loan Agreement, the
Company's Note, and the Credit Line Deed of Trust, Assignment and Security
Agreement (the "Deed of Trust"), each dated as of April 1, 2002, except for the
Company's Note which is dated as of the Closing Date. All capitalized terms not
defined herein shall have the meanings specified in the Loan Agreement, unless
the context otherwise requires.

          C. The Bank requires this Assignment to further secure, (a) payment of
all amounts now or hereafter owing to the Bank by the Company under the Bond
Documents, and (b) the performance and discharge of each and every obligation,
covenant and agreement of the Company contained herein or in the other Bond
Documents, and all costs of collection, including reasonable attorney's fees, as
provided in the Assignment and the other Bond Documents (collectively, the
"Obligations").

                                    AGREEMENT

          NOW, THEREFORE, for and in consideration of the Loan, as additional
security for the obligations of the Company under the Company's Note and the
other Bond

<Page>

Documents, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the Company hereby agrees as follows:

          1. DEFINITIONS. For the purposes hereof, unless the context otherwise
requires, the following terms shall have the meanings indicated:

             "Contracts" shall mean, collectively, the Construction Contract and
     subcontracts, the architect's contract and subcontracts, and all other
     contracts and agreements pertaining to the construction, operation and use
     of the Project, the Land, the Improvements, or the Security Property (as
     defined in the Deed of Trust), or any part thereof, now or hereafter in
     effect, as hereafter, if at all, amended, supplemented or modified, from
     time to time, including without limitation all documents and instruments
     entered into and between the Company and the General Contractor that relate
     to the Project, the Land, the Improvements or the Security Property.

             "Permits" shall have the meaning specified in the Deed of Trust,
     and for the purposes of this Assignment, shall also include, collectively,
     all permits, consents, licenses, variances and other approvals required to
     be issued by, or obtained from, any Person at any time or times in
     connection with the acquisition, construction, operation or use of the
     Project, the Land, the Improvements, or the Security Property, as
     hereafter, if at all, amended, supplemented or modified from time to time.

             "Person" shall mean any individual, corporation, partnership, joint
     venture, association, stock company, trust, unincorporated organization,
     federal, state, municipal or other governmental department, commission,
     board, bureau or agency.

             "Plans" shall have the meaning ascribed to the term "Plans and
     Specifications" in the Loan Agreement and, for the purposes of this
     Assignment, shall also include, collectively, all site, development and
     construction plans, drawings and specifications with respect to the
     development and construction of the Project, the Land, the Improvements, or
     the Security Property, as hereafter, if at all, amended, supplemented or
     modified from time to time.

          2. ASSIGNMENT. The Company hereby assigns unto the Bank and grants to
the Bank a security interest in, all right, title and interest of the Company,
and all power and authority of the Company to act thereunder and to use the
same, in, to and under the Contracts, Permits and Plans, whether now or
hereafter existing, and all proceeds thereof.

          3. COLLATERAL SECURITY. This Assignment secures the payment of all
indebtedness of the Company evidenced by the Company's Note, the performance of
all the obligations of the Company to the Bank under the other Bond Documents,
and the performance by the Company of each and every obligation, covenant and
agreement of the Company contained herein.

          4. APPROVAL AND MODIFICATION; LICENSE. The Company agrees that all of
the Contracts, Permits and Plans shall be subject to the Bank's prior written
approval, both as to form and substance, and that upon such approval and
execution or issuance by the parties thereto, as the case may be, the Company
shall not, except with the prior written consent of the

<Page>

Bank, cancel, terminate, revoke or modify the terms of any of the Contracts,
Plans or Permits. So long as there does not exist any Event of Default, or any
event which, with the giving of notice, the passage of time, or both, would
constitute an Event of Default, the Bank grants to the Company a license to use
the Contracts, Permits and Plans for the general purposes thereof; provided,
however, that such license shall terminate automatically and immediately upon
the occurrence of an Event of Default and may, thereafter, be reinstated only in
writing given by the Bank in its sole and absolute discretion.

          5. SECURITY AGREEMENT. This Assignment shall serve as a security
agreement as defined in the Virginia Uniform Commercial Code and the Bank shall
also, in addition to the foregoing, have a security interest in all
distributions, profits, income, monies and claims for distributions due or to
come due to the Company under the terms and conditions of any of the Contracts,
Permits or Plans, and all proceeds thereof.

          6. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company hereby
represents and warrants (a) that it has not previously assigned, sold, pledged,
hypothecated or otherwise transferred or encumbered any of its right, title or
interest under any of the Contracts, Plans and Specifications, or Permits, (b)
that the Contracts, Permits and Plans are in full force and effect and are valid
and enforceable agreements or approvals, (c) that no party is in default under
the Contracts, Permits and Plans, and (d) that all parties have performed all
their obligations, covenants and agreements as required under the Contracts,
Permits and Plans, except those not due to be performed until after the date
hereof. The Company hereby covenants and agrees to keep the Contracts, Permits
and Plans in full force and effect and diligently to enforce all of its rights
and to perform all of its duties and obligations thereunder. The Company hereby
further covenants and agrees that, notwithstanding anything contained herein to
the contrary, it will not assign, sell, pledge, mortgage, hypothecate or
otherwise transfer or encumber any of its right, title or interest under the
Contracts, Plans and Specifications, or Permits, or any deposits thereunder,
collateral security therefor, guarantees thereof, or proceeds of the foregoing.

          7. INDEMNIFICATION. The Bank shall not be obligated to perform or
discharge, nor does the Bank hereby undertake to perform or discharge, any
obligation, duty or liability under any Contract, Permit or Plan, and the
Company shall, and does hereby agree, to the extent permitted by law, to
indemnify the Bank for, and to hold the Bank harmless from, any and all
liability, loss or damage which may or might be incurred under any Contract,
Permit or Plan, or this Assignment, and from any and all claims and demands
whatsoever which may be asserted against the Bank by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the
terms, covenants or agreements contained in any Contract, Permit or Plan except
as herein provided. Should the Bank incur any such liability under any Contract,
Permit or Plan or under or by reason of this Assignment or in defense of any
such claims or demands (not caused by its willful misconduct or gross
negligence), the amount thereof, including costs, expenses and reasonable
attorneys' fees shall be secured hereby and the Company shall reimburse the Bank
therefor immediately upon demand. This Assignment shall not operate to place
responsibility for the control, care, management or repair of the Project, the
Land, the Improvements or the Security Property or any portion thereof upon the
Bank, nor for the carrying out of any of the terms and conditions of any
Contract, Plan or Permit.

          8. FURTHER ASSURANCES. The Company agrees to execute and deliver, at
its

<Page>

sole expense, to the Bank, at any time or times during which this Assignment
shall be in effect, such further instruments as the Bank may deem necessary to
confirm, make effective or more effective the assignment of the rights of the
Company assigned to the Bank hereby and the covenants of the Company herein
contained, and to perfect and continue the perfection of the Bank's security
interest in the Contracts, Permits and Plans, and the proceeds thereof, and to
obtain from any Person an undertaking satisfactory in form and substance to the
Bank to perform thereunder, at the Bank's request, for the Company at the
direction of the Bank or, at the Bank's option, directly for the Bank or its
designee and to allow the Bank or its designee to use the same without cost to
the Bank.

          9. TERMINATION. Upon payment of all indebtedness of the Company
evidenced by the Company's Note, together with interest thereon, and the
performance of all of the obligations of the Company to the Bank under the other
Bond Documents or contained herein, this Assignment shall terminate and
thereafter be void and of no further force and effect. Upon request of the
Company, the Bank shall, at the Company's cost and expense, execute and deliver
to the Company an instrument evidencing the termination of this Assignment or
the reassignment to the Company of the rights, title and interest granted
hereunder.

          10. NO WAIVER. Nothing contained in this Assignment and no act done or
omitted by the Bank pursuant to the powers and rights granted it hereunder shall
be deemed to be a waiver by the Bank of its rights and remedies under this
Assignment or any of the other Bond Documents. This Assignment is made and
accepted without prejudice to any of the rights and remedies possessed by the
Bank under the terms of the other Bond Documents. The right of the Bank to
exercise any right or power under any of the Bond Documents may be exercised by
the Bank prior to, simultaneously with, or subsequent to any action taken by it
under this Assignment.

          11. PERFORMANCE OF OBLIGATIONS. Any guaranty of payment and
performance of any obligation under any Contract, Permit or Plan shall not be
released, modified, or limited in any manner by the Company without the prior
written consent of the Bank.

          12. GOVERNING LAW; SEVERABILITY. This Assignment is made, executed and
delivered in the Commonwealth of Virginia and shall be governed by the laws of
the Commonwealth of Virginia. Each provision of this Assignment shall be
interpreted in such a manner as to be effective and valid under the applicable
law, but if any provision hereof shall be prohibited by or invalid under the
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 Assignment.

          13. SUCCESSORS AND ASSIGNS. This Assignment, together with the
covenants and warranties herein contained, shall inure to the benefit of the
Bank and any subsequent holder of the Obligations which may be owing by the
Company under the Bond Documents and shall be binding upon the Company, its
successors and assigns and any subsequent owner of the Land.

          14. NOTICES. All demands, notices, approvals, consents, requests and
other communications hereunder shall be given in accordance with the Loan
Agreement.

<Page>

          15. AMENDMENTS. No amendment to this Assignment shall be effective
unless in writing signed on behalf of the Company and the Bank.

          16. CONSENTS. Insofar as it such consent is necessary, (a) Bovis
consents to the all of the assignments and security interests granted by the
Company to the Bank pursuant to this Assignment, including without limitation,
the assignment of the Construction Contract, and (b) the Architect consents to
the all of the assignments and security interests granted by the Company to the
Bank pursuant to this Assignment, including without limitation, the assignment
of any and all of the Plans.

          IN WITNESS WHEREOF, the Company, Bovis and the Architect have executed
this ASSIGNMENT OF CONTRACTS, PERMITS AND PLANS by its duly authorized manager.

                                      /s/ David B. Patteson
                                      ---------------------------------
                                      BIOTAGE REAL ESTATE, LLC

                                      By  David B. Patteson
                                          -----------------------------
                                      Its Manager
                                          -----------------------------

                                      /s/ G. Wayne Harrell
                                      ---------------------------------
                                      BOVIS LENDLEASE

                                      By  G. Wayne Harrell
                                          -----------------------------
                                      Its Vice President
                                          -----------------------------

                                      /s/ Neil Bhatt
                                      ---------------------------------
                                      NBJ ARCHITECTURE, PLC

                                      By  Neil Bhatt
                                          -----------------------------
                                      Its President
                                          -----------------------------<Page>

                                                                     Exhibit 4.1

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

                      COLLINS & AIKMAN FLOORCOVERINGS, INC.
                                     Issuer

                    9 3/4% Senior Subordinated Notes Due 2010

                                   ----------

                                    INDENTURE

                          Dated as of February 15, 2002

                                   ----------

                              THE BANK OF NEW YORK
                                     Trustee

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

<Page>

                              CROSS-REFERENCE TABLE

<Table>
<Caption>
  TIA                                                           Indenture
Section                                                          Section
-------                                                         ---------

<S>                                                                <C>
310(a)                     ..............................          7.10
   (a)(3)                  ..............................          N.A.
   (a)(4)                  ..............................          N.A.
   (b)                     ..............................          7.03, 7.08, 7.10
   (b)(1)                  ..............................          7.10
   (c)                     ..............................          N.A.
311                        ..............................          7.03
311(a)                     ..............................          7.11
   (b)                     ..............................          7.11
   (c)                     ..............................          N.A.
312(a)                     ..............................          2.05
   (b)                     ..............................          13.03
   (c)                     ..............................          13.03
313(a)                     ..............................          7.06
   (b)(1)                  ..............................          N.A.
   (b)                     ..............................          7.06
   (c)                     ..............................          11.02
   (d)                     ..............................          N.A.
314(a)                     ..............................          4.02
314(a)(4)                  ..............................          4.11
   (b)                     ..............................          N.A.
   (c)(1)                  ..............................          N.A.
   (c)(2)                  ..............................          N.A.
   (c)(3)                  ..............................          N.A.
   (d)                     ..............................          N.A.
   (e)                     ..............................          N.A.
   (f)                     ..............................          N.A.
315(a)                     ..............................          7.01
   (b)                     ..............................          13.02
   (c)                     ..............................          N.A.
   (d)                     ..............................          N.A.
   (e)                     ..............................          N.A.
316(a)(last sentence)      ..............................          13.06
   (a)(1)(A)               ..............................          N.A.
   (a)(1)(B)               ..............................          N.A.
   (a)(2)                  ..............................          N.A.
   (b)                     ..............................          N.A.
317(a)(1)                  ..............................          N.A.
   (a)(2)                  ..............................          N.A.
   (b)                     ..............................          2.04
318(a)                     ..............................          N.A.
</Table>

                                                  N.A. means Not Applicable.

---------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.

<Page>

                                TABLE OF CONTENTS

               ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE

<Table>
<S>                                                                                                     <C>
SECTION 1.01.  DEFINITIONS...............................................................................1
SECTION 1.02.  OTHER DEFINITIONS........................................................................30
SECTION 1.03.  Incorporation by Reference of Trust
                    Indenture Act.......................................................................30
SECTION 1.04.  RULES OF CONSTRUCTION....................................................................31

                             ARTICLE 2 THE SECURITIES

SECTION 2.01.  FORM AND DATING..........................................................................32
SECTION 2.02.  EXECUTION AND AUTHENTICATION.............................................................32
SECTION 2.03.  REGISTRAR AND PAYING AGENT...............................................................33
SECTION 2.04.  PAYING AGENT TO HOLD MONEY IN TRUST......................................................33
SECTION 2.05.  SECURITYHOLDER LISTS.....................................................................34
SECTION 2.06.  TRANSFER AND EXCHANGE....................................................................34
SECTION 2.07.  REPLACEMENT SECURITIES...................................................................34
SECTION 2.08.  OUTSTANDING SECURITIES...................................................................34
SECTION 2.09.  TEMPORARY SECURITIES.....................................................................35
SECTION 2.10.  CANCELLATION.............................................................................35
SECTION 2.11.  DEFAULTED INTEREST.......................................................................35
SECTION 2.12.  CUSIP NUMBERS............................................................................36
SECTION 2.13.  ISSUANCE OF ADDITIONAL SECURITIES........................................................36

                               ARTICLE 3 REDEMPTION

SECTION 3.01.  NOTICES TO TRUSTEE.......................................................................37
SECTION 3.02.  SELECTION OF SECURITIES TO BE REDEEMED...................................................37
SECTION 3.03.  NOTICE OF REDEMPTION.....................................................................37
SECTION 3.04.  EFFECT OF NOTICE OF REDEMPTION...........................................................38
SECTION 3.05.  DEPOSIT OF REDEMPTION PRICE..............................................................38
SECTION 3.06.  SECURITIES REDEEMED IN PART..............................................................39

                               ARTICLE 4 COVENANTS

SECTION 4.01.  PAYMENT OF SECURITIES....................................................................39
</Table>

<Page>

<Table>
<S>                                                                                                     <C>
SECTION 4.02.  SEC REPORTS..............................................................................39
SECTION 4.03.  LIMITATION ON INDEBTEDNESS...............................................................40
SECTION 4.04.  LIMITATION ON RESTRICTED PAYMENTS........................................................43
SECTION 4.05.  Limitation on Restrictions on
                    Distributions from Restricted  Subsidiaries.........................................48
SECTION 4.06.  Limitation on Sales of Assets and
                    Subsidiary Stock....................................................................50
SECTION 4.07.  LIMITATION ON AFFILIATE TRANSACTIONS.....................................................54
SECTION 4.08.  Limitation on the Sale or Issuance
                    of Capital Stock of Restricted Subsidiaries.........................................56
SECTION 4.09.  CHANGE OF CONTROL........................................................................57
SECTION 4.10.  FUTURE GUARANTORS........................................................................58
SECTION 4.12.  FURTHER INSTRUMENTS AND ACTS.............................................................59

                           ARTICLE 5 SUCCESSOR COMPANY

SECTION 5.01.  WHEN COMPANY MAY MERGE OR TRANSFER
                    ASSETS..............................................................................59

                         ARTICLE 6 DEFAULTS AND REMEDIES

SECTION 6.01.  EVENTS OF DEFAULT........................................................................62
SECTION 6.02.  ACCELERATION.............................................................................64
SECTION 6.03.  OTHER REMEDIES...........................................................................65
SECTION 6.04.  WAIVER OF PAST DEFAULTS..................................................................65
SECTION 6.05.  CONTROL BY MAJORITY......................................................................65
SECTION 6.06.  LIMITATION ON SUITS......................................................................66
SECTION 6.07.  RIGHTS OF HOLDERS TO RECEIVE PAYMENT.....................................................66
SECTION 6.08.  COLLECTION SUIT BY TRUSTEE...............................................................66
SECTION 6.09.  TRUSTEE MAY FILE PROOFS OF CLAIM.........................................................67
SECTION 6.10.  PRIORITIES...............................................................................67
SECTION 6.11.  UNDERTAKING FOR COSTS....................................................................67
SECTION 6.12.  WAIVER OF STAY OR EXTENSION LAWS.........................................................68

                                ARTICLE 7 TRUSTEE

SECTION 7.01.  DUTIES OF TRUSTEE........................................................................68
SECTION 7.02.  RIGHTS OF TRUSTEE........................................................................69
SECTION 7.03.  INDIVIDUAL RIGHTS OF TRUSTEE.............................................................71
SECTION 7.04.  TRUSTEE'S DISCLAIMER.....................................................................71
SECTION 7.05.  NOTICE OF DEFAULTS.......................................................................71
SECTION 7.06.  REPORTS BY TRUSTEE TO HOLDERS............................................................72
SECTION 7.07.  COMPENSATION AND INDEMNITY...............................................................72
SECTION 7.08.  REPLACEMENT OF TRUSTEE...................................................................73
SECTION 7.09.  SUCCESSOR TRUSTEE BY MERGER..............................................................74
SECTION 7.10.  ELIGIBILITY; DISQUALIFICATION............................................................74
</Table>

<Page>

<Table>
<S>                                                                                                     <C>
SECTION 7.11.  Preferential Collection of Claims
                    Against Company.....................................................................74

                   ARTICLE 8 DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 8.01.  DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE.........................................75
SECTION 8.02.  CONDITIONS TO DEFEASANCE.................................................................76
SECTION 8.03.  APPLICATION OF TRUST MONEY...............................................................77
SECTION 8.04.  REPAYMENT TO COMPANY.....................................................................77
SECTION 8.05.  INDEMNITY FOR GOVERNMENT OBLIGATIONS.....................................................78
SECTION 8.06.  REINSTATEMENT............................................................................78

                               ARTICLE 9 AMENDMENTS

SECTION 9.01.  WITHOUT CONSENT OF HOLDERS...............................................................78
SECTION 9.02.  WITH CONSENT OF HOLDERS..................................................................79
SECTION 9.03.  COMPLIANCE WITH TRUST INDENTURE ACT......................................................80
SECTION 9.04.  Revocation and Effect of Consents
                    and Waivers.........................................................................80
SECTION 9.05.  NOTATION ON OR EXCHANGE OF SECURITIES....................................................81
SECTION 9.06.  TRUSTEE TO SIGN AMENDMENTS...............................................................81
SECTION 9.07.  PAYMENT FOR CONSENT......................................................................81

                             ARTICLE 10 SUBORDINATION

SECTION 10.01.  AGREEMENT TO SUBORDINATE................................................................82
SECTION 10.02.  LIQUIDATION, DISSOLUTION, BANKRUPTCY....................................................82
SECTION 10.03.  DEFAULT ON SENIOR INDEBTEDNESS OF THE COMPANY...........................................82
SECTION 10.04.  ACCELERATION OF PAYMENT OF SECURITIES...................................................84
SECTION 10.05.  WHEN DISTRIBUTION MUST BE PAID OVER.....................................................84
SECTION 10.06.  SUBROGATION.............................................................................84
SECTION 10.07.  RELATIVE RIGHTS.........................................................................85
SECTION 10.08.  Subordination May Not Be Impaired
                    by Company..........................................................................85
SECTION 10.09.  RIGHTS OF TRUSTEE AND PAYING AGENT......................................................85
SECTION 10.10.  Distribution or Notice to
                    Representative......................................................................86
SECTION 10.11.  Article 10 Not To Prevent Events
                    of Default or Limit Right To
                    Accelerate..........................................................................86
SECTION 10.12.  TRUST MONEYS NOT SUBORDINATED...........................................................86
SECTION 10.13.  TRUSTEE ENTITLED TO RELY................................................................86
SECTION 10.14.  TRUSTEE TO EFFECTUATE SUBORDINATION.....................................................87
SECTION 10.15.  Trustee Not Fiduciary for Holders
                    of Senior Indebtedness of
                    the Company.........................................................................87
</Table>

<Page>

<Table>
<S>                                                                                                     <C>
SECTION 10.16.  Reliance by Holders of Senior
                    Indebtedness of the Company on                                                  ....

                         ARTICLE 11 SUBSIDIARY GUARANTIES

SECTION 11.01.  GUARANTIES..............................................................................88
SECTION 11.02.  LIMITATION ON LIABILITY.................................................................90
SECTION 11.03.  SUCCESSORS AND ASSIGNS..................................................................90
SECTION 11.04.  NO WAIVER...............................................................................91
SECTION 11.05.  MODIFICATION............................................................................91
SECTION 11.06.  RELEASE OF SUBSIDIARY GUARANTOR.........................................................91

                ARTICLE 12 SUBORDINATION OF SUBSIDIARY GUARANTIES

SECTION 12.01.  AGREEMENT TO SUBORDINATE................................................................92
SECTION 12.02.  LIQUIDATION, DISSOLUTION, BANKRUPTCY....................................................92
SECTION 12.03.  Default on Senior Indebtedness of
                    Subsidiary Guarantor................................................................92
SECTION 12.04.  DEMAND FOR PAYMENT......................................................................94
SECTION 12.05.  WHEN DISTRIBUTION MUST BE PAID OVER.....................................................94
SECTION 12.06.  SUBROGATION.............................................................................94
SECTION 12.07.  RELATIVE RIGHTS.........................................................................94
SECTION 12.08.  Subordination May Not Be Impaired
                    by Company..........................................................................95
SECTION 12.09.  RIGHTS OF TRUSTEE AND PAYING AGENT......................................................95
SECTION 12.10.  Distribution or Notice to Representative................................................96
SECTION 12.11.  Article 12 Not To Prevent Events
                    of Default or Limit Right To Demand
                    Payment.............................................................................96
SECTION 12.12.  TRUSTEE ENTITLED TO RELY................................................................96
SECTION 12.13.  TRUSTEE TO EFFECTUATE SUBORDINATION.....................................................97
SECTION 12.14.  Trustee Not Fiduciary for Holders
                    of Senior Indebtedness of Subsidiary
                    Guarantor...........................................................................97
SECTION 12.15.  Reliance by Holders of Senior
                    Indebtedness of Subsidiary
                    Guarantors on Subordination
                    Provisions..........................................................................97

                             ARTICLE 13 MISCELLANEOUS

SECTION 13.01.  TRUST INDENTURE ACT CONTROLS............................................................97
SECTION 13.02.  NOTICES.................................................................................97
SECTION 13.03.  Communication by Holders with
                    Other Holders.......................................................................98
SECTION 13.04.  CERTIFICATE AND OPINION AS TO CONDITIONS ...............................................
</Table>

<Page>

<Table>
<S>                                                                                                    <C>
SECTION 13.05.  STATEMENTS REQUIRED IN CERTIFICATE OR..................................................
SECTION 13.06.  WHEN SECURITIES DISREGARDED............................................................99
SECTION 13.07.  Rules by Trustee, Paying Agent and
                    Registrar..........................................................................100
SECTION 13.08.  LEGAL HOLIDAYS.........................................................................100
SECTION 13.09.  GOVERNING LAW..........................................................................100
SECTION 13.10.  NO RECOURSE AGAINST OTHERS.............................................................100
SECTION 13.11.  SUCCESSORS.............................................................................100
SECTION 13.12.  MULTIPLE ORIGINALS.....................................................................100
SECTION 13.13.  TABLE OF CONTENTS; HEADINGS............................................................101
</Table>

<Page>

Rule 144A/Regulation S Appendix

Exhibit 1 - Form of Initial Security

Exhibit A - Form of Exchange Security or Private Exchange
            Security

Exhibit B - Form of Parent Guaranty Agreement

<Page>

                    INDENTURE dated as of February 15, 2002, among COLLINS &
               AIKMAN FLOORCOVERINGS, INC., a Delaware corporation (the
               "Company"), the Subsidiary Guarantors, and THE BANK OF NEW YORK,
               a New York banking corporation (the "Trustee").

          Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Company's Initial
Securities, Exchange Securities, Private Exchange Securities and Additional
Securities (collectively, the "Securities").

                                    ARTICLE 1

                   DEFINITIONS AND INCORPORATION BY REFERENCE

          SECTION 1.01. DEFINITIONS.

     "ADDITIONAL ASSETS" means:

     (1)  any property, plant or equipment used in a Related Business;

     (2)  the Capital Stock of a Person that becomes a Restricted Subsidiary as
          a result of the acquisition of such Capital Stock by the Company or
          another Restricted Subsidiary; or

     (3)  Capital Stock constituting a minority interest in any Person that at
          such time is a Restricted Subsidiary;

PROVIDED, HOWEVER, that any such Restricted Subsidiary described in clause (2)
or (3) above is primarily engaged in a Related Business.

     "ADDITIONAL SECURITIES" means, subject to the Company's compliance with
Section 4.03, 9 3/4% Senior Subordinated Notes Due 2010 issued from time to time
after the Issue Date under the terms of this Indenture (other than pursuant to
Section 2.06, 2.07, 2.09 or 3.06 of this Indenture and other than Exchange
Securities or Private Exchange Securities issued

<Page>

pursuant to an exchange offer for other Securities outstanding under this
Indenture).

     "AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.04, 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of Capital Stock representing 10% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or of rights
or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.

     "ASSET DISPOSITION" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "DISPOSITION"), of:

     (1)  any shares of Capital Stock of a Restricted Subsidiary (other than
          directors' qualifying shares or shares required by applicable law to
          be held by a Person other than the Company or a Restricted
          Subsidiary);

     (2)  all or substantially all the assets of any division or line of
          business of the Company or any Restricted Subsidiary; or

     (3)  any other assets of the Company or any Restricted Subsidiary outside
          of the ordinary course of business of the Company or such Restricted
          Subsidiary

     (other than, in the case of clauses (1), (2) and (3) above,

          (A)  a disposition or transfer by a Restricted Subsidiary to the
               Company or by the Company or a Restricted Subsidiary to a
               Restricted Subsidiary;

<Page>

                                                                               3

          (B)  for purposes of Section 4.06 only, (x) a disposition that
               constitutes a Restricted Payment permitted by Section 4.04 or a
               Permitted Investment or (y) a disposition of all or substantially
               all the assets of the Company in accordance with Section 4.09;

          (C)  sales or other dispositions of obsolete, uneconomical,
               negligible, worn-out or surplus assets in the ordinary course of
               business (including but not limited to equipment and intellectual
               property); and

          (D)  a disposition of assets with a fair market value of less than
               Section 1.0 million).

     "ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Securities, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended); PROVIDED, HOWEVER, that if such Sale/Leaseback Transaction
results in a Capital Lease Obligation, the amount of Indebtedness represented
thereby will be determined in accordance with the definition of "Capital Lease
Obligation".

     "AVERAGE LIFE" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing:

     (1)  the sum of the products of the numbers of years from the date of
          determination to the dates of each successive scheduled principal
          payment of or redemption or similar payment with respect to such
          Indebtedness multiplied by the amount of such payment by

     (2)  the sum of all such payments.

     "BANK INDEBTEDNESS" means all Obligations pursuant to the Credit Agreement.

<Page>

                                                                               4

     "BOARD OF DIRECTORS" with respect to a Person means the Board of Directors
of such Person or any committee thereof duly authorized to act on behalf of such
Board.

     "BUSINESS DAY" means each day which is not a Legal Holiday.

     "CAPITAL LEASE OBLIGATION" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.

     "CAPITAL STOCK" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.

     "CHANGE OF CONTROL" means the occurrence of any of the following events:

          (1) any "person" (as such term is used in Sections 13(d) and 14(d) of
     the Exchange Act), other than one or more Permitted Holders, is or becomes
     the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
     Exchange Act, except that such person shall be deemed to have "beneficial
     ownership" of all shares that any such person has the right to acquire,
     whether such right is exercisable immediately or only after the passage of
     time), directly or indirectly, of more than 35% of the total voting power
     of the Voting Stock of the Company; PROVIDED, HOWEVER, that the Permitted
     Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the
     Exchange Act), directly or indirectly, in the aggregate a lesser percentage
     of the total voting power of the Voting Stock of the Company than such
     other person and 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 (such other person shall be

<Page>

                                                                               5

     deemed to beneficially own any Voting Stock of a specified person held
     by a parent entity, if such other person is the beneficial owner (as first
     defined in this clause (1)), directly or indirectly, of more than 35% of
     the voting power of the Voting Stock of such parent entity and the
     Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5
     under the Exchange Act), directly or indirectly, in the aggregate a lesser
     percentage of the voting power of the Voting Stock of such parent entity
     and 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
     such parent entity);

          (2) individuals who on the Issue Date constituted the Board of
     Directors of the Company or the Parent Board (together with any new
     directors whose election by such Board of Directors of the Company of the
     Parent Board or whose nomination for election by the shareholders of the
     Company or the Parent, as the case may be, was approved by a vote of a
     majority of the directors of the Company or the Parent, as the case may be,
     then still in office who were either directors on the Issue Date 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 or the Parent Board then in office;

          (3) the adoption of a plan relating to the liquidation or dissolution
     of the Company; or

          (4) the merger or consolidation of Parent or the Company with or into
     another Person or the merger of another Person with or into Parent or the
     Company, or the sale of all or substantially all the assets of Parent or
     the Company (determined on a consolidated basis) to another Person (other
     than, in all such cases, a Person that is controlled by the Permitted
     Holders), other than a transaction following which (A) in the case of a
     merger or consolidation transaction, holders of securities that represented
     100% of the Voting Stock of Parent or the Company immediately prior to such
     transaction (or other securities into which such securities are converted
     as part of such merger or consolidation transaction) own directly or
     indirectly at least a majority of the voting power of the Voting Stock of
     the surviving Person in such merger

<Page>

                                                                               6

     or consolidation transaction immediately after such transaction and (B) in
     the case of a sale of assets transaction, the transferee Person becomes the
     obligor in respect of the Securities and a Subsidiary of the transferor of
     such assets.

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

     "COMPANY" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
indenture securities.

     "CONSOLIDATED COVERAGE RATIO" as of any date of determination means the
ratio of (x) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which internal financial statements are
available on or prior to the date of such determination to (y) Consolidated
Interest Expense for such four fiscal quarters; PROVIDED, HOWEVER, that:

     (1)  if the Company or any Restricted Subsidiary has Incurred any
          Indebtedness since the beginning of such period that remains
          outstanding or if the transaction giving rise to the need to calculate
          the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or
          both, EBITDA and Consolidated Interest Expense for such period shall
          be calculated after giving effect on a PRO FORMA basis to such
          Indebtedness as if such Indebtedness had been Incurred on the first
          day of such period (and, if such Indebtedness is revolving
          Indebtedness, the amount of Indebtedness deemed to be outstanding for
          such period shall be the average outstanding amount of such
          Indebtedness during such period);

     (2)  if the Company or any Restricted Subsidiary has repaid, repurchased,
          defeased or otherwise discharged any Indebtedness since the beginning
          of such period or if any Indebtedness is to be repaid, repurchased,
          defeased or otherwise discharged (in each case other than Indebtedness
          Incurred under any revolving credit facility

<Page>

                                                                               7

          unless such Indebtedness has been permanently repaid and has not been
          replaced) on the date of the transaction giving rise to the need to
          calculate the Consolidated Coverage Ratio, EBITDA and Consolidated
          Interest Expense for such period shall be calculated on a PRO FORMA
          basis as if such discharge had occurred on the first day of such
          period and as if the Company or such Restricted Subsidiary had not
          earned the interest income actually earned during such period in
          respect of cash or Temporary Cash Investments used to repay,
          repurchase, defease or otherwise discharge such Indebtedness;

     (3)  if since the beginning of such period the Company or any Restricted
          Subsidiary shall have made any Asset Disposition, EBITDA for such
          period shall be reduced by an amount equal to EBITDA (if positive)
          directly attributable to the assets which are the subject of such
          Asset Disposition for such period, or increased by an amount equal to
          EBITDA (if negative), directly attributable thereto for such period
          and Consolidated Interest Expense for such period shall be reduced by
          an amount equal to the Consolidated Interest Expense directly
          attributable to any Indebtedness of the Company or any Restricted
          Subsidiary repaid, repurchased, defeased or otherwise discharged with
          respect to the Company and its continuing Restricted Subsidiaries in
          connection with such Asset Disposition for such period (or, if the
          Capital Stock of any Restricted Subsidiary is sold, the Consolidated
          Interest Expense for such period directly attributable to the
          Indebtedness of such Restricted Subsidiary to the extent the Company
          and its continuing Restricted Subsidiaries are no longer liable for
          such Indebtedness after such sale);

     (4)  if since the beginning of such period the Company or any Restricted
          Subsidiary (by merger or otherwise) shall have made an Investment in
          any Restricted Subsidiary (or any person which becomes a Restricted
          Subsidiary) or an acquisition of assets, including any acquisition of
          assets occurring in connection with a transaction requiring a
          calculation to be made hereunder, which constitutes all or
          substantially all of an

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                                                                               8

          operating unit of a business, EBITDA and Consolidated Interest Expense
          for such period shall be calculated after giving PRO FORMA effect
          thereto (including the Incurrence of any Indebtedness) as if such
          Investment or acquisition occurred on the first day of such period;
          and

     (5)  if since the beginning of such period any Person (that subsequently
          became a Restricted Subsidiary or was merged with or into the Company
          or any Restricted Subsidiary since the beginning of such period) shall
          have made any Asset Disposition, any Investment or acquisition of
          assets that would have required an adjustment pursuant to clause (3)
          or (4) above if made by the Company or a Restricted Subsidiary during
          such period, EBITDA and Consolidated Interest Expense for such period
          shall be calculated after giving PRO FORMA effect thereto as if such
          Asset Disposition, Investment or acquisition occurred on the first day
          of such period.

For purposes of this definition, whenever PRO FORMA effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the PRO FORMA calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company
(and shall include any applicable Pro Forma Cost Savings). If any Indebtedness
bears a floating rate of interest and is being given PRO FORMA effect, the
interest on such Indebtedness shall be calculated as if the rate in effect on
the date of determination had been the applicable rate for the entire period
(taking into account any Interest Rate Agreement applicable to such Indebtedness
if such Interest Rate Agreement has a remaining term in excess of 12 months).

     "CONSOLIDATED INTEREST EXPENSE" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, without duplication:

     (1)  interest expense attributable to capital leases and the interest
          expense attributable to leases constituting part of a Sale/Leaseback
          Transaction;

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                                                                               9

     (2)  amortization of debt discount and debt issuance cost;

     (3)  capitalized interest;

     (4)  non-cash interest expense;

     (5)  commissions, discounts and other fees and charges owed with respect to
          letters of credit and bankers' acceptance financing;

     (6)  net payments pursuant to Hedging Obligations;

     (7)  dividends paid in cash or Disqualified Stock in respect of (A) all
          Preferred Stock of Restricted Subsidiaries and (B) all Disqualified
          Stock of the Company, in each case held by Persons other than the
          Company or a Wholly Owned Subsidiary;

     (8)  interest incurred in connection with Investments in discontinued
          operations;

     (9)  interest accruing on any Indebtedness of any other Person to the
          extent such Indebtedness is Guaranteed by (or secured by the assets
          of) the Company or any Restricted Subsidiary and such Indebtedness is
          accelerated or any payment is actually made in respect of such
          Guarantee; and

     (10) the cash contributions to any employee stock ownership plan or similar
          trust to the extent such contributions are used by such plan or trust
          to pay interest or fees to any Person (other than the Company) in
          connection with Indebtedness Incurred by such plan or trust,

and less, to the extent included in such total interest expense, (x) the
breakage costs of Hedging Obligations terminated in connection with the offering
of the Securities on the Issue Date and the application of the net proceeds
therefrom and (y) the amortization during such period of capitalized financing
costs; PROVIDED, HOWEVER, that the aggregate amount of amortization relating to
any such capitalized financing costs deducted in calculating Consolidated
Interest Expense shall not exceed 5.0% of the aggregate amount of the financing
giving rise to such capitalized financing costs.

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                                                                              10

     "CONSOLIDATED LEVERAGE RATIO" as of any date of determination means, the
ratio of (x) consolidated Indebtedness of the Company as of the end of the most
recent fiscal quarter for which internal financial statements are available to
(y) the aggregate amount of the EBITDA for the period of the most recent four
consecutive quarters for which internal financial statements are available, in
each case with such PRO FORMA adjustments to consolidated Indebtedness and
EBITDA as are appropriate and consistent with the PRO FORMA provisions set forth
in the definition of Consolidated Coverage Ratio.

     "CONSOLIDATED NET INCOME" means, for any period, the net income of the
Company and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall
not be included in such Consolidated Net Income:

     (1)  any net income of any Person (other than the Company) if such Person
          is not a Restricted Subsidiary, except that:

          (A)  subject to the exclusion contained in clause (4) below, the
               Company's equity in the net income of any such Person for such
               period shall be included in such Consolidated Net Income up to
               the aggregate amount of cash actually distributed by such Person
               during such period to the Company or a Restricted Subsidiary as a
               dividend or other distribution (subject, in the case of a
               dividend or other distribution paid to a Restricted Subsidiary,
               to the limitations contained in clause (3) below); and

          (B)  the Company's equity in a net loss of any such Person for such
               period shall be included in determining such Consolidated Net
               Income;

     (2)  any net income (or loss) of any Person acquired by the Company or a
          Subsidiary in a pooling of interests transaction for any period prior
          to the date of such acquisition;

     (3)  any net income of any Restricted Subsidiary if such Restricted
          Subsidiary is subject to restrictions, directly or indirectly, on the

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                                                                              11

          payment of dividends or the making of distributions by such Restricted
          Subsidiary, directly or indirectly, to the Company, except that:

          (A)  subject to the exclusion contained in clause (4) below, the
               Company's equity in the net income of any such Restricted
               Subsidiary for such period shall be included in such Consolidated
               Net Income up to the aggregate amount of cash that could have
               been distributed by such Restricted Subsidiary during such period
               to the Company or another Restricted Subsidiary as a dividend or
               other distribution (subject, in the case of a dividend or other
               distribution paid to another Restricted Subsidiary, to the
               limitation contained in this clause); and

          (B)  the Company's equity in a net loss of any such Restricted
               Subsidiary for such period shall be included in determining such
               Consolidated Net Income;

     (4)  any gain or loss realized upon the sale or other disposition of
          any assets of the Company, its consolidated Subsidiaries or any
          other Person (including pursuant to any sale-and-leaseback
          arrangement) which is not sold or otherwise disposed of in the
          ordinary course of business and any gain (but not loss) realized
          upon the sale or other disposition of any Capital Stock of any
          Person;

     (5)  extraordinary gains or losses; and

     (6)  the cumulative effect of a change in accounting principles.

Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any repurchases, repayments or
redemptions of Investments, proceeds realized on the sale of Investments or
return of capital to the Company or a Restricted Subsidiary to the extent such
repurchases, repayments, redemptions, proceeds or returns increase the amount of
Restricted Payments permitted under Section 4.04 pursuant to clause (a)(3)(D)
thereof.

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                                                                              12

     "CREDIT AGREEMENT" means the Credit Agreement dated as of January 25, 2001,
by and among the Company, Parent, the lenders referred to therein and Credit
Suisse First Boston, as Administrative Agent, together with the related
documents thereto (including any guarantees and security documents, whether in
effect on the Issue Date or entered into thereafter), as amended, extended,
renewed, restated, supplemented or otherwise modified (in whole or in part, and
without limitation as to amount, terms, conditions, covenants and other
provisions) from time to time, and any agreement (and related document)
governing Indebtedness incurred to Refinance, in whole or in part, the
borrowings and commitments then outstanding or permitted to be outstanding under
such Credit Agreement or a successor Credit Agreement, whether by the same or
any other lender or group of lenders.

     "CURRENCY AGREEMENT" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.

     "DEFAULT" means any event which is, or after notice or passage of time or
both would be, an Event of Default.

     "DESIGNATED SENIOR INDEBTEDNESS", with respect to a Person means:

     (1)  the Bank Indebtedness; and

     (2)  any other Senior Indebtedness of such Person which, at the date of
          determination, has an aggregate principal amount outstanding of, or
          under which, at the date of determination, the holders thereof are
          committed to lend up to, at least $25.0 million and is specifically
          designated by such Person in the instrument evidencing or governing
          such Senior Indebtedness as "Designated Senior Indebtedness" for
          purposes of this Indenture.

<Page>

                                                                              13

     "DISQUALIFIED STOCK" means, with respect to any Person, 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:

     (1)  matures or is mandatorily redeemable (other than redeemable only for
          Capital Stock of such Person which is not itself Disqualified Stock)
          pursuant to a sinking fund obligation or otherwise;

     (2)  is convertible or exchangeable at the option of the holder for
          Indebtedness or Disqualified Stock; or

     (3)  is mandatorily redeemable or must be purchased upon the occurrence of
          certain events or otherwise, in whole or in part;

in each case on or prior to the first anniversary of the Stated Maturity of the
Securities; PROVIDED, HOWEVER, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Securities shall not constitute
Disqualified Stock if:

     (1)  the "asset sale" or "change of control" provisions applicable to such
          Capital Stock are not more favorable to the holders of such Capital
          Stock than the terms applicable to the Securities in Sections 4.06 and
          4.09 of this Indenture; and

     (2)  any such requirement only becomes operative after compliance with such
          terms applicable to the Securities, including the purchase of any
          Securities tendered pursuant thereto.

The amount of any Disqualified Stock that does not have a fixed redemption,
repayment or repurchase price shall be calculated in accordance with the terms
of such Disqualified Stock as if such Disqualified Stock were redeemed, repaid
or repurchased on any date on which the amount of such Disqualified Stock is to
be determined pursuant to this Indenture; PROVIDED, HOWEVER, that if such
Disqualified Stock could not be required to be redeemed, repaid or

<Page>

                                                                              14

repurchased at the time of such determination, the redemption, repayment or
repurchase price shall be the book value of such Disqualified Stock as reflected
in the most recent financial statements of such Person.

     "EBITDA" for any period means the sum of Consolidated Net Income, plus the
following to the extent deducted in calculating such Consolidated Net Income:

     (1)  all income tax expense of the Company and its consolidated Restricted
          Subsidiaries;

     (2)  Consolidated Interest Expense;

     (3)  depreciation and amortization expense of the Company and its
          consolidated Restricted Subsidiaries (excluding amortization expense
          attributable to a prepaid operating activity item that was paid in
          cash in a prior period);

     (4)  all other non-cash charges of the Company and its consolidated
          Restricted Subsidiaries (excluding any such non-cash charge to the
          extent that it represents an accrual of or reserve for cash
          expenditures in any future period); and

     (5)  non-recurring compensation charges incurred as part of the Company's
          January 2001 recapitalization transaction,

in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion,
including by reason of minority interest) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders.

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                                                                              15

     "EQUITY OFFERING" means a primary offering of common stock of Parent or the
Company.

     "EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934, as amended.

     "GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in:

     (1)  the opinions and pronouncements of the Accounting Principles Board of
          the American Institute of Certified Public Accountants;

     (2)  statements and pronouncements of the Financial Accounting Standards
          Board;

     (3)  such other statements by such other entity as approved by a
          significant segment of the accounting profession; and

     (4)  the rules and regulations of the SEC governing the inclusion of
          financial statements (including PRO FORMA financial statements) in
          periodic reports required to be filed pursuant to Section 13 of the
          Exchange Act, including opinions and pronouncements in staff
          accounting bulletins and similar written statements from the
          accounting staff of the SEC.

All ratios and computations based on GAAP contained in this Indenture shall be
computed in conformity with GAAP.

     "GUARANTEE" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person:

     (1)  to purchase or pay (or advance or supply funds for the purchase or
          payment of) such Indebtedness of such Person (whether arising by
          virtue of partnership arrangements, or by agreements to keep-well, to
          purchase assets, goods, securities or services, to take-or-pay or to
          maintain financial statement conditions or otherwise); or

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                                                                              16

     (2)  entered into for the purpose of assuring in any other manner the
          obligee of such Indebtedness of the payment thereof or to protect such
          obligee against loss in respect thereof (in whole or in part);

PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.

     "GUARANTOR" means Parent and each Subsidiary Guarantor, as applicable.

     "GUARANTY" means the Parent Guaranty and each Subsidiary Guaranty, as
applicable.

     "GUARANTY AGREEMENT" means a supplemental indenture (including, in the case
of Parent, substantially in the form of the Parent Guaranty Agreement attached
as Exhibit B to this Indenture), in a form satisfactory to the Trustee, pursuant
to which Parent or a Subsidiary Guarantor guarantees the Company's obligations
with respect to the Securities on the terms provided for in this Indenture.

     "HEDGING OBLIGATIONS" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.

     "HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security is
registered on the Registrar's books.

     "INCUR" means issue, assume, Guarantee, incur or otherwise become liable
for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Person at the time it becomes a Restricted Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. Solely for
purposes of determining compliance with Section 4.03, (1) amortization of debt
discount or the accretion of principal with respect to a non-interest bearing or
other discount security and (2) the payment of regularly scheduled interest in
the form of additional Indebtedness of the same instrument or the payment of
regularly scheduled dividends on Capital Stock in the form of additional Capital
Stock of

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                                                                              17

the same class and with the same terms will not be deemed to be the Incurrence
of Indebtedness.

     "INDEBTEDNESS" means, with respect to any Person on any date of
determination (without duplication):

     (1)  the principal in respect of (A) indebtedness of such Person for money
          borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
          other similar instruments for the payment of which such Person is
          responsible or liable, including, in each case, any premium on such
          indebtedness to the extent such premium has become due and payable;

     (2)  all Capital Lease Obligations of such Person and all Attributable Debt
          in respect of Sale/Leaseback Transactions entered into by such Person;

     (3)  all obligations of such Person issued or assumed as the deferred
          purchase price of property, all conditional sale obligations of such
          Person and all obligations of such Person under any title retention
          agreement (but excluding trade accounts payable arising in the
          ordinary course of business);

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

     (5)  the amount of all obligations of such Person with respect to the
          redemption, repayment or other repurchase of any Disqualified Stock of
          such Person or, with respect to any Preferred Stock of any Subsidiary
          of such Person, the principal amount of such Preferred Stock to be
          determined in accordance with this Indenture (but excluding, in each
          case, any accrued dividends);

<Page>

                                                                              18

     (6)  all obligations of the type referred to in clauses (1) through (5) of
          other Persons and all dividends of other Persons for the payment of
          which, in either case, such Person is responsible or liable, directly
          or indirectly, as obligor, guarantor or otherwise, including by means
          of any Guarantee;

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

     (8)  to the extent not otherwise included in this definition, Hedging
          Obligations of such Person.

Notwithstanding the foregoing, in connection with the purchase by the Company or
any Restricted Subsidiary of any business, the term "Indebtedness" will exclude
post-closing payment adjustments to which the seller may become entitled to the
extent such payment is determined by a final closing balance sheet or such
payment depends on the performance of such business after the closing; PROVIDED,
HOWEVER, that, at the time of closing, the amount of any such payment is not
determinable and, to the extent such payment thereafter becomes fixed and
determined, the amount is paid within 60 days thereafter.

     The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; PROVIDED,
HOWEVER, that in the case of Indebtedness sold at a discount, the amount of such
Indebtedness at any time will be the accreted value thereof at such time.

     "INDENTURE" means this Indenture as amended or supplemented from time to
time.

<Page>

                                                                              19

     "INDEPENDENT QUALIFIED PARTY" means an investment banking firm, accounting
firm or appraisal firm of national standing; PROVIDED, HOWEVER, that such firm
is not an Affiliate of the Company.

     "INTEREST RATE AGREEMENT" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.

     "INVESTMENT" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. Except as otherwise provided for
herein, the amount of an Investment shall be its fair value at the time the
Investment is made and without giving effect to subsequent changes in value.

     For purposes of the definition of "Unrestricted Subsidiary", the definition
of "Restricted Payment" and Section 4.04:

     (1)  "Investment" shall include the portion (proportionate to the Company's
          equity interest in such Subsidiary) of the fair market value of the
          net assets of any Subsidiary of the Company at the time that such
          Subsidiary is designated an Unrestricted Subsidiary; PROVIDED,
          HOWEVER, that upon a redesignation of such Subsidiary as a Restricted
          Subsidiary, the Company shall be deemed to continue to have a
          permanent "Investment" in an Unrestricted Subsidiary equal to an
          amount (if positive) equal to (x) the Company's "Investment" in such
          Subsidiary at the time of such redesignation less (y) the portion
          (proportionate to the Company's equity interest in such Subsidiary) of
          the fair market value of the net assets of such Subsidiary at the time
          of such redesignation; and

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                                                                              20

     (2)  any property transferred to or from an Unrestricted Subsidiary shall
          be valued at its fair market value at the time of such transfer, in
          each case as determined in good faith by the Board of Directors of the
          Company.

     "ISSUE DATE" means the date on which the Securities are originally issued.

     "LENDERS" has the meaning specified in the Credit Agreement.

     "LIEN" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).

     "NET AVAILABLE CASH" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
non-cash form), in each case net of:

     (1)  all legal, title and recording tax expenses, underwriting discounts,
          commissions and other fees and expenses incurred (including fees and
          expenses of counsel, accountants and investment bankers), and all
          Federal, state, provincial, foreign and local taxes required to be
          accrued as a liability under GAAP, as a consequence of such Asset
          Disposition;

     (2)  all payments made on any Indebtedness which is secured by any assets
          subject to such Asset Disposition, in accordance with the terms of any
          Lien upon or other security agreement of any kind with respect to such
          assets, or which must by its terms, or in order to obtain a necessary
          consent to such Asset Disposition, or by applicable law,

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                                                                              21

          be repaid out of the proceeds from such Asset Disposition;

     (3)  all distributions and other payments required to be made to minority
          interest holders in Restricted Subsidiaries as a result of such Asset
          Disposition; and

     (4)  the deduction of appropriate amounts provided by the seller as a
          reserve, in accordance with GAAP, against any current or contingent
          liabilities associated with the property or other assets disposed in
          such Asset Disposition and retained by the Company or any Restricted
          Subsidiary after such Asset Disposition.

     "NET CASH PROCEEDS", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.

     "OBLIGATIONS" means with respect to any Indebtedness all obligations for
principal, premium, interest, penalties, fees, indemnifications, reimbursements
and other amounts payable pursuant to the documentation governing such
Indebtedness.

     "OFFICER" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.

     "OFFICERS' CERTIFICATE" means a certificate signed by two Officers.

     "OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.

     "PARENT" means Tandus Group, Inc., a Virginia corporation, and its
successors.

     "PARENT BOARD" means the Board of Directors of the Parent or any committee
thereof duly authorized to act on behalf of such Board.

<Page>

                                                                              22

     "PARENT GUARANTY" means the Guarantee of the Securities by Parent pursuant
to a Guaranty Agreement.

     "PERMITTED HOLDERS" means Oaktree Capital Management, LLC, OCM Principal
Opportunities Fund II, L.P. and BancAmerica Capital Investors II, L.P. and their
respective Affiliates as of the Issue Date.

     "PERMITTED INVESTMENT" means an Investment by the Company or any Restricted
Subsidiary in:

     (1)  the Company, a Restricted Subsidiary or a Person that will, upon the
          making of such Investment, become a Restricted Subsidiary; PROVIDED,
          HOWEVER, that the primary business of such Restricted Subsidiary is a
          Related Business;

     (2)  another Person if as a result of such Investment such other Person is
          merged or consolidated with or into, or transfers or conveys all or
          substantially all its assets to, the Company or a Restricted
          Subsidiary; PROVIDED, HOWEVER, that such Person's primary business is
          a Related Business;

     (3)  cash and Temporary Cash Investments;

     (4)  receivables owing to the Company or any Restricted Subsidiary if
          created or acquired in the ordinary course of business and payable or
          dischargeable in accordance with customary trade terms; PROVIDED,
          HOWEVER, that such trade terms may include such concessionary trade
          terms as the Company or any such Restricted Subsidiary deems
          reasonable under the circumstances;

     (5)  payroll, travel and similar advances to cover matters that are
          expected at the time of such advances ultimately to be treated as
          expenses for accounting purposes and that are made in the ordinary
          course of business;

     (6)  loans or advances to employees made in the ordinary course of business
          consistent with past practices of the Company or such Restricted
          Subsidiary;

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                                                                              23

     (7)  stock, obligations or securities received in settlement of debts
          created in the ordinary course of business and owing to the Company or
          any Restricted Subsidiary or in satisfaction of judgments;

     (8)  any Person to the extent such Investment represents the non-cash
          portion of the consideration received for an Asset Disposition as
          permitted pursuant to Section 4.06;

     (9)  any Person where such Investment was acquired by the Company or any of
          its Restricted Subsidiaries (a) in exchange for any other Investment
          or accounts receivable held by the Company or any such Restricted
          Subsidiary in connection with or as a result of a bankruptcy, workout,
          reorganization or recapitalization of the issuer of such other
          Investment or accounts receivable or (b) as a result of a foreclosure
          by the Company or any of its Restricted Subsidiaries with respect to
          any secured Investment or other transfer of title with respect to any
          secured Investment in default; and

     (10) other Investments in any Person having an aggregate fair market value
          (measured on the date each such Investment was made and without giving
          effect to subsequent changes in value), when taken together with all
          other Investments made pursuant to this clause (10) that are at the
          time outstanding, not to exceed $10.0 million.

     "PERMITTED TAX PAYMENTS" means any payments to Parent in respect of
federal, state and local taxes directly attributable to (or arising as a result
of) the operations of the Company and its consolidated Subsidiaries; PROVIDED,
HOWEVER, that in no event shall any such payments exceed the amount of Federal,
state or local taxes that are, at the time the Company makes such payments,
actually due and payable by Parent to the relevant taxing authorities or to
become due and payable within 30 days of such payments by the Company.

     "PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association,

<Page>
                                                                              24

joint-stock company, trust, unincorporated organization, government or any
agency or political subdivision thereof or any other entity.

     "PREFERRED STOCK", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.

     "PRINCIPAL" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to become
due at the relevant time.

     "PROFESSIONAL SERVICES AGREEMENTS" means the professional services
agreement by and among BA SBIC Sub, Inc. and the Company and the professional
services agreement by and among OCM Principal Opportunities Fund II, L.P. and
the Company each dated as of January 25, 2001, in each case as in effect on the
Issue Date.

     "PRO FORMA COST SAVINGS" means, with respect to any period, the reduction
in costs that were

     (1)  directly attributable to an asset acquisition and calculated on a
          basis that is consistent with Regulation S-X under the Securities Act
          in effect and applied as of the Issue Date, or

     (2)  implemented by the business that was the subject of any such asset
          acquisition within six months of the date of the asset acquisition and
          that are supportable and quantifiable by the underlying accounting
          records of such business,

as if in the case of each of clause (1) and (2), all such reductions in costs
had been effected as of the beginning of such period.

     "RATING AGENCY" means Standard & Poor's Ratings Group, Inc. and Moody's
Investors Service, Inc. or if Standard & Poor's Ratings Group, Inc. or Moody's
Investors Service, Inc. or both shall not make a rating on the Securities
publicly available, a nationally recognized

<Page>

                                                                              25

statistical rating agency or agencies, as the case may be, selected by the
Company (as certified by a resolution of the Board of Directors of the Company)
which shall be substituted for Standard & Poor's Ratings Group, Inc. or Moody's
Investors Service, Inc. or both, as the case may be.

     "REFINANCE" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.

     "REFINANCING INDEBTEDNESS" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that:

     (1)  such Refinancing Indebtedness has a Stated Maturity no earlier than
          the Stated Maturity of the Indebtedness being Refinanced;

     (2)  such Refinancing Indebtedness has an Average Life at the time such
          Refinancing Indebtedness is Incurred that is equal to or greater than
          the Average Life of the Indebtedness being Refinanced; and

     (3)  such Refinancing Indebtedness has an aggregate principal amount (or if
          Incurred with original issue discount, an aggregate issue price) that
          is equal to or less than the aggregate principal amount (or if
          Incurred with original issue discount, the aggregate accreted value)
          then outstanding or committed (plus fees and expenses, including any
          premium and defeasance costs) under the Indebtedness being Refinanced;

PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (B)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.

<Page>

                                                                              26

     "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of the Issue Date, among the Company, the Subsidiary Guarantors, Credit
Suisse First Boston Corporation, Banc of America Securities LLC, BNP Paribas
Securities Corp., First Union Securities, Inc. and Fleet Securities, Inc.

     "RELATED BUSINESS" means any business in which the Company was engaged on
the Issue Date and any business reasonably related, ancillary or complementary
to any business of the Company in which the Company was engaged on the Issue
Date or a reasonable expansion thereof.

     "REPRESENTATIVE" means, with respect to a Person, any trustee, agent or
representative (if any) for an issue of Senior Indebtedness of such Person.

     "RESTRICTED PAYMENT" with respect to any Person means:

     (1)  the declaration or payment of any dividends or any other distributions
          of any sort in respect of its Capital Stock (including any payment in
          connection with any merger or consolidation involving such Person) or
          similar payment to the direct or indirect holders of its Capital Stock
          (other than dividends or distributions payable solely in its Capital
          Stock (other than Disqualified Stock) and dividends or distributions
          payable solely to the Company or a Restricted Subsidiary, and other
          than PRO RATA dividends or other distributions made by a Subsidiary
          that is not a Wholly Owned Subsidiary to minority stockholders (or
          owners of an equivalent interest in the case of a Subsidiary that is
          an entity other than a corporation));

     (2)  the purchase, redemption or other acquisition or retirement for value
          of any Capital Stock of the Company held by any Person or of any
          Capital Stock of a Restricted Subsidiary held by any Affiliate of the
          Company (other than a Restricted Subsidiary), including the exercise
          of any option to exchange any Capital Stock (other than into Capital
          Stock of the Company that is not Disqualified Stock);

     (3)  the purchase, repurchase, redemption, defeasance or other acquisition
          or retirement for value,

<Page>

                                                                              27

          prior to scheduled maturity, scheduled repayment or scheduled sinking
          fund payment of any Subordinated Obligations of such Person (other
          than the purchase, repurchase or other acquisition of Subordinated
          Obligations purchased in anticipation of satisfying a sinking fund
          obligation, principal installment or final maturity, in each case due
          within one year of the date of such purchase, repurchase or other
          acquisition); or

     (4)  the making of any Investment (other than a Permitted Investment) in
          any Person.

     "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.

     "SALE/LEASEBACK TRANSACTION" means an arrangement relating to property
owned by the Company or a Restricted Subsidiary on the Issue Date or thereafter
acquired by the Company or a Restricted Subsidiary whereby the Company or a
Restricted Subsidiary transfers such property to a Person and the Company or a
Restricted Subsidiary leases it from such Person.

     "SEC" means the U.S. Securities and Exchange Commission.

     "SECURED INDEBTEDNESS" means any Indebtedness of the Company secured by a
Lien.

     "SECURITIES ACT" means the U.S. Securities Act of 1933, as amended.

     "SENIOR INDEBTEDNESS" means with respect to any Person:

     (1)  Indebtedness of such Person, whether outstanding on the Issue Date or
          thereafter Incurred; and

     (2)  accrued and unpaid interest (including interest accruing on or after
          the filing of any petition in bankruptcy or for reorganization
          relating to such Person whether or not post-filing interest is allowed
          in such proceeding) in respect of (A) indebtedness of such Person for
          money borrowed and (B) indebtedness evidenced by notes, debentures,
          bonds or other similar instruments for

<Page>

                                                                              28

          the payment of which such Person is responsible or liable

unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate or PARI PASSU in right of payment to the
Securities or the Guaranty of such Person, as the case may be; PROVIDED,
HOWEVER, that Senior Indebtedness shall not include:

     (1)  any obligation of such Person to any Subsidiary;

     (2)  any liability for Federal, state, local or other taxes owed or owing
          by such Person;

     (3)  any accounts payable or other liability to trade creditors arising in
          the ordinary course of business (including guarantees thereof or
          instruments evidencing such liabilities);

     (4)  any Indebtedness of such Person (and any accrued and unpaid interest
          in respect thereof) which is subordinate or junior in any respect to
          any other Indebtedness or other obligation of such Person; or

     (5)  that portion of any Indebtedness which at the time of Incurrence is
          Incurred in violation of this Indenture.

     "SENIOR SUBORDINATED INDEBTEDNESS" means, with respect to a Person, the
Securities (in the case of the Company), the Guaranty (in the case of a
Guarantor) and any other Indebtedness of such Person that specifically provides
that such Indebtedness is to rank PARI PASSU with the Securities or such
Guaranty, as the case may be, in right of payment and is not subordinated by its
terms in right of payment to any Indebtedness or other obligation of such Person
which is not Senior Indebtedness of such Person.

     "SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.

<Page>

                                                                              29

     "STATED MATURITY" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).

     "SUBORDINATED OBLIGATION" means, with respect to a Person, any Indebtedness
of such Person (whether outstanding on the Issue Date or thereafter Incurred)
which is subordinate or junior in right of payment to the Securities or a
Guaranty of such Person, as the case may be, pursuant to a written agreement to
that effect.

     "SUBSIDIARY" means, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Voting Stock is at the time owned or controlled,
directly or indirectly, by:

     (1)  such Person;

     (2)  such Person and one or more Subsidiaries of such Person; or

     (3)  one or more Subsidiaries of such Person.

     "SUBSIDIARY GUARANTOR" means Monterey Carpets, Inc. and Monterey Color
Systems, Inc. and each other Subsidiary of the Company that executes this
Indenture as a guarantor on the Issue Date and each other Subsidiary of the
Company that thereafter guarantees the Securities pursuant to the terms of this
Indenture.

     "SUBSIDIARY GUARANTY" means a Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Securities.

     "TEMPORARY CASH INVESTMENTS" means any of the following:

     (1)  any investment in direct obligations of the United States of America
          or any agency thereof or obligations guaranteed by the United States
          of America or any agency thereof;

<Page>

                                                                              30

     (2)  investments in time deposit accounts, certificates of deposit and
          money market deposits maturing within 180 days of the date of
          acquisition thereof issued by a bank or trust company which is
          organized under the laws of the United States of America, any State
          thereof or any foreign country recognized by the United States of
          America, and which bank or trust company has capital, surplus and
          undivided profits aggregating in excess of $50.0 million (or the
          foreign currency equivalent thereof) and has outstanding debt which is
          rated "A" (or such similar equivalent rating) or higher by at least
          one nationally recognized statistical rating organization (as defined
          in Rule 436 under the Securities Act) or any money-market fund
          sponsored by a registered broker dealer or mutual fund distributor;

     (3)  repurchase obligations with a term of not more than 30 days for
          underlying securities of the types described in clause (1) above
          entered into with a bank meeting the qualifications described in
          clause (2) above;

     (4)  investments in commercial paper, maturing not more than 180 days after
          the date of acquisition, issued by a corporation (other than an
          Affiliate of the Company) organized and in existence under the laws of
          the United States of America or any foreign country recognized by the
          United States of America with a rating at the time as of which any
          investment therein is made of "P-1" (or higher) according to Moody's
          Investors Service, Inc. or "A-1" (or higher) according to Standard and
          Poor's Ratings Group;

     (5)  investments in securities with maturities of one year or less from the
          date of acquisition issued or fully guaranteed by any state,
          commonwealth or territory of the United States of America, or by any
          political subdivision or taxing authority thereof, and rated at least
          "A" by Standard & Poor's Ratings Group or "A" by Moody's Investors
          Service, Inc.; and

     (6)  money market funds at least 95% of the assets of which constitute
          Temporary Cash Investments of the

<Page>

                                                                              31

          kind described in clauses (1) through (5) of this definition.

     "TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) in effect on the date of this Indenture, except as
provided in Section 9.03.

     "TRUSTEE" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor.

     "TRUST OFFICER" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.

     "UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code as in
effect from time to time.

     "U.S. DOLLAR EQUIVALENT" means with respect to any monetary amount in a
currency other than U.S. dollars, at any time for determination thereof, the
amount of U.S. dollars obtained by converting such foreign currency involved in
such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as published in THE WALL STREET
JOURNAL in the "Exchange Rates" column under the heading "Currency Trading" on
the date two Business Days prior to such determination.

     Except as described in Section 4.03, whenever it is necessary to determine
whether the Company has complied with any covenant in this Indenture or a
Default has occurred and an amount is expressed in a currency other than U.S.
dollars, such amount will be treated as the U.S. Dollar Equivalent determined as
of the date such amount is initially determined in such currency.

     "U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.

<Page>

                                                                              32

     "UNRESTRICTED SUBSIDIARY" means:

     (1)  any Subsidiary of the Company that at the time of determination shall
          be designated an Unrestricted Subsidiary by the Board of Directors of
          the Company in the manner provided below; and

     (2)  any Subsidiary of an Unrestricted Subsidiary.

     The Board of Directors of the Company may designate any Subsidiary of the
Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; PROVIDED, HOWEVER, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under Section 4.04.

     The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that immediately
after giving effect to such designation (A) the Company could Incur $1.00 of
additional Indebtedness under Section 4.03(a) and (B) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors of
the Company shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the resolution of the Board of Directors of the Company giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions. Notwithstanding the
foregoing, Collins & Aikman Floorcoverings Asia Pte. Ltd. (Singapore) shall be
deemed to be an Unrestricted Subsidiary as of the Issue Date.

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

     "WHOLLY OWNED SUBSIDIARY" means a Restricted Subsidiary all the Capital
Stock of which (other than directors'

<Page>

                                                                              33

qualifying shares) is owned by the Company or one or more Wholly Owned
Subsidiaries.

                        SECTION 1.02. OTHER DEFINITIONS.

<Table>
<Caption>
                                                                 Defined in
                              Term                                  Section
                              ----                               ----------
<S>                                                               <C>
"Affiliate Transaction"......................................     4.07
"Bankruptcy Law".............................................     6.01
"Blockage Notice"............................................     10.03
"Change of Control" .........................................     4.09
"covenant defeasance option".................................     8.01(b)
"Custodian"..................................................     6.01
"Event of Default"...........................................     6.01
"legal defeasance option"....................................     8.01(b)
"Legal Holiday"..............................................     13.08
"Offer"......................................................     4.06(b)
"Offer Period"...............................................     4.06(c)
"pay its Subsidiary Guaranty"................................     12.03
"pay the Securities".........................................     10.03
"Payment Blockage Period"....................................     10.03
"Payment Default"............................................     10.03, 12.03
"Purchase Date"..............................................     4.06(c)(1)
"Registrar"..................................................     2.03
"Successor Company"..........................................     5.01
                                                                  (a)(1)
</Table>

          SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. This
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:

          "Commission" means the SEC;

          "indenture securities" means the Securities;

          "indenture security holder" means a Securityholder;

          "indenture to be qualified" means this Indenture;

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

<Page>

                                                                              34

          "obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.

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

          SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise
requires:

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

          (2)  an accounting term not otherwise defined has the meaning assigned
     to it in accordance with GAAP;

          (3)  "or" is not exclusive;

          (4)  "including" means including without limitation;

          (5)  words in the singular include the plural and words in the plural
     include the singular;

          (6)  unsecured Indebtedness shall not be deemed to be subordinate or
     junior to Secured Indebtedness merely by virtue of its nature as unsecured
     Indebtedness;

          (7)  the principal amount of any noninterest bearing or other discount
     security at any date shall be the principal amount thereof that would be
     shown on a balance sheet of the issuer dated such date prepared in
     accordance with GAAP;

          (8)  the principal amount of any Preferred Stock shall be (i) the
     maximum liquidation value of such Preferred Stock or (ii) the maximum
     mandatory redemption or mandatory repurchase price with respect to such
     Preferred Stock, whichever is greater; and

          (9)  all references to the date the Securities were originally issued
     shall refer to the Issue Date.

<Page>

                                                                              35

                                    ARTICLE 2

                                 THE SECURITIES

          SECTION 2.01. FORM AND DATING. Provisions relating to the Initial
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in the Rule 144A/Regulation S Appendix attached hereto (the "Appendix")
which is hereby incorporated in and expressly made part of this Indenture. The
Initial Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to the Appendix which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities, the Private Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
Each Security shall be dated the date of its authentication. The terms of the
Securities set forth in the Appendix and Exhibit A are part of the terms of this
Indenture.

          SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall sign
the Securities for the Company by manual or facsimile signature.

          If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.

          A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been duly and
validly authenticated and issued under this Indenture.

          The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Securities. Unless limited by the terms of
such appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has

<Page>

                                                                              36

the same rights as any Registrar, Paying Agent or agent for service of notices
and demands.

          SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.

          The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any Wholly Owned Subsidiary incorporated or organized within The
United States of America may act as Paying Agent, Registrar, co-registrar or
transfer agent.

          The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.

          SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent a sum sufficient to pay such principal or interest when so
becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the Company
or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as
Paying Agent and hold it as a separate trust fund. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and to account
for any funds disbursed by the Paying Agent. Upon

<Page>

                                                                              37

complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee. Upon any bankruptcy, reorganization or
similar proceeding with respect to the Company, the Trustee shall serve as
Paying Agent for the Securities.

          SECTION 2.05. SECURITYHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.

          SECTION 2.06. TRANSFER AND EXCHANGE. The Securities shall be issued in
registered form and shall be transferable only upon the surrender of a Security
for registration of transfer. When a Security is presented to the Registrar or a
co-registrar with a request to register a transfer, the Registrar shall register
the transfer as requested if the requirements of this Indenture and
Section 8-401(1) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar or a co-registrar with a request to exchange them for
an equal principal amount of Securities of other denominations, the Registrar
shall make the exchange as requested if the same requirements are met.

          SECTION 2.07. REPLACEMENT SECURITIES. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security.

<Page>

                                                                              38

          Every replacement Security is an additional obligation of the Company.

          SECTION 2.08. OUTSTANDING SECURITIES. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding. A Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.

          If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.

          If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Securities
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture, then on and after that date
such Securities (or portions thereof) cease to be outstanding and interest on
them ceases to accrue.

          SECTION 2.09. TEMPORARY SECURITIES. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for such
definitive Securities upon surrender of such temporary Securities at any office
or agency maintained by the Company for that purpose and such exchange shall be
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute, and the Trustee shall
authenticate and make available for delivery in exchange therefor, one or more
definitive Securities representing an equal principal amount of Securities.
Until so exchanged, the Holder of temporary

<Page>

                                                                              39

Securities shall be entitled to the same benefits under this Indenture as a
Holder of definitive Securities.

          SECTION 2.10. CANCELLATION. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel
(subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation. The Trustee shall dispose of such cancelled Securities in
accordance with its customary procedures unless the Company directs the Trustee
to deliver canceled Securities to the Company. The Company may not issue new
Securities to replace Securities it has redeemed, paid or delivered to the
Trustee for cancellation for any reason other than in connection with a transfer
or exchange.

          SECTION 2.11. DEFAULTED INTEREST. If the Company defaults in a payment
of interest on the Securities, the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.

          SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Securities may
use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; PROVIDED,
HOWEVER, that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company shall
promptly notify the Trustee of any change in the "CUSIP" numbers.

          SECTION 2.13. ISSUANCE OF ADDITIONAL SECURITIES. The Company shall be
entitled, subject to its compliance

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                                                                              40

with Section 4.03, to issue Additional Securities under this Indenture which
shall have identical terms as the Initial Securities issued on the Issue Date,
other than with respect to the date of issuance and issue price. The Initial
Securities issued on the Issue Date, any Additional Securities and all Exchange
Securities or Private Exchange Securities issued in exchange therefor shall be
treated as a single class for all purposes under this Indenture.

          With respect to any Additional Securities, the Company shall set forth
in a resolution of the Board of Directors and an Officers' Certificate, a copy
of each which shall be delivered to the Trustee, the following information:

          (1)  the aggregate principal amount of such Additional Securities to
     be authenticated and delivered pursuant to this Indenture;

          (2)  the issue price, the issue date and the CUSIP number of such
     Additional Securities; PROVIDED, HOWEVER, that no Additional Securities may
     be issued at a price that would cause such Additional Securities to have
     "original issue discount" within the meaning of Section 1273 of the Code;
     and

          (3)  whether such Additional Securities shall be Transfer Restricted
     Securities and issued in the form of Initial Securities as set forth in the
     Appendix to this Indenture or shall be issued in the form of Exchange
     Securities as set forth in Exhibit A.

                                    ARTICLE 3

                                   REDEMPTION

          SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.

          The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'

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                                                                              41

Certificate from the Company to the effect that such redemption will comply with
the conditions herein.

          SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed PRO RATA or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee in its
sole discretion shall deem to be fair and appropriate and in accordance with
methods generally used at the time of selection by fiduciaries in similar
circumstances. The Trustee shall make the selection from outstanding Securities
not previously called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have denominations larger than
$1,000. Securities and portions of them the Trustee selects shall be in
principal amounts of $1,000 or a whole multiple of $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee shall notify the Company
promptly in writing of the Securities or portions of Securities to be redeemed.

          SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than
60 days before a date for redemption of Securities, the Company shall mail a
notice of redemption by first-class mail to each Holder of Securities to be
redeemed at such Holder's registered address.

          The notice shall identify the Securities to be redeemed and shall
state:

          (1)  the redemption date;

          (2)  the redemption price;

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

          (4)  that Securities called for redemption must be surrendered to the
     Paying Agent to collect the redemption price;

          (5)  if fewer than all the outstanding Securities are to be redeemed,
     the identification and principal amounts of the particular Securities to be
     redeemed;

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                                                                              42

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

          (8)  that no representation is made as to the correctness or accuracy
     of the CUSIP number, if any, listed in such notice or printed on the
     Securities.

          At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.

          SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date). Failure to give
notice or any defect in the notice to any Holder shall not affect the validity
of the notice to any other Holder.

          SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or prior to 10:00 a.m.,
New York time, on the redemption date, the Company shall deposit with the
Trustee or Paying Agent (or, if the Company or a Subsidiary is the Paying Agent,
shall segregate and hold in trust) an amount of money sufficient to pay the
redemption price of and accrued interest on all Securities to be redeemed on the
redemption date other than Securities or portions of Securities called for
redemption which have been delivered by the Company to the Trustee for
cancellation.

          SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof), the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of that Security (at the Company's expense) a new Security
equal in principal

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                                                                              43

amount to the unredeemed portion of the principal amount of the Security
surrendered.

                                    ARTICLE 4

                                    COVENANTS

          SECTION 4.01. PAYMENT OF SECURITIES. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.

          The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.

          SECTION 4.02. SEC REPORTS. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC (unless the SEC will not accept such a
filing and commencing with the effectiveness of the Exchange Offer or Shelf
Registration Statement) and will in any event provide the Trustee and
Securityholders with such annual reports and such information, documents and
other reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections.
In addition, the Company shall furnish to the Holder of the Securities and to
prospective investors, upon the requests of such Holders, any information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so
long any Securities are not freely transferable under the Securities Act. The
Company also shall comply with the other provisions of TIA Section 314(a).

          Delivery of such reports, information and documents to the Trustee is
for informational purposes only

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                                                                              44

and the Trustee's receipt of such shall not constitute constructive notice of
any information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificate).

          SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness; PROVIDED, HOWEVER, that the Company and its
Restricted Subsidiaries shall be entitled to Incur Indebtedness if, on the date
of such Incurrence and after giving effect thereto on a PRO FORMA basis, no
Default has occurred and is continuing and the Consolidated Coverage Ratio
exceeds 2 to 1.

          (b)  Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries shall be entitled to Incur any or all of the following
Indebtedness:

          (1)  Indebtedness Incurred by the Company and its Restricted
     Subsidiaries pursuant to the Credit Agreement; PROVIDED, HOWEVER, that,
     immediately after giving effect to any such Incurrence, the aggregate
     principal amount of all Indebtedness Incurred under this clause (1) and
     then outstanding does not exceed the greater of (A) $125.0 million less the
     sum of all principal payments with respect to such Indebtedness pursuant to
     Section 4.06(a)(3)(A) and (B) the sum of (x) 50% of the book value of the
     inventory of the Company and its Restricted Subsidiaries and (y) 80% of the
     book value of the accounts receivables of the Company and its Restricted
     Subsidiaries;

          (2)  Indebtedness owed to and held by the Company or a Restricted
     Subsidiary; PROVIDED, HOWEVER, that (A) any subsequent issuance or transfer
     of any Capital Stock which results in any such Restricted Subsidiary
     ceasing to be a Restricted Subsidiary or any subsequent transfer of such
     Indebtedness (other than to the Company or a Restricted Subsidiary) shall
     be deemed, in each case, to constitute the Incurrence of such Indebtedness
     by the obligor thereon and (B) if the Company is the obligor on such
     Indebtedness, such Indebtedness is expressly subordinated to the prior
     payment in full in cash of all obligations with respect to the Securities;

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                                                                              45

          (3)  the Securities and the Exchange Securities (other than any
     Additional Securities);

          (4)  Indebtedness outstanding on the Issue Date (other than
     Indebtedness described in clause (1), (2) or (3) of this Section 4.03(b));

          (5)  Refinancing Indebtedness in respect of Indebtedness Incurred
     pursuant to Section 4.03(a) or pursuant to clause (3) or (4) of this
     Section 4.03(b) or this clause (5);

          (6)  Hedging Obligations of the Company or any Restricted Subsidiary
     entered into in the ordinary course of business and not for the purpose of
     speculation;

          (7)  obligations in respect of performance, bid surety and other
     similar bonds and completion guarantees provided by the Company or any
     Restricted Subsidiary in the ordinary course of business;

          (8)  Indebtedness arising from the honoring by a bank or other
     financial institution of a check, draft or similar instrument drawn against
     insufficient funds in the ordinary course of business; PROVIDED, HOWEVER,
     that such Indebtedness is extinguished within two Business Days of its
     Incurrence;

          (9)  Indebtedness consisting of the Subsidiary Guaranties and
     Guarantees of other Indebtedness otherwise permitted to be Incurred
     pursuant to this Indenture;

          (10) Indebtedness (including Capital Lease Obligations) Incurred by
     the Company or any of its Restricted Subsidiaries to finance the purchase,
     lease, construction or improvement of property (real or personal) or
     equipment (whether through the direct purchase of assets or the Capital
     Stock of any Person owning such assets) within 180 days after such
     purchase, lease or improvement in an aggregate principal amount which, when
     added together with the amount of Indebtedness Incurred pursuant to this
     clause (10) and then outstanding, does not exceed $10.0 million (including
     any Refinancing Indebtedness with respect thereto);

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                                                                              46

          (11) Indebtedness evidenced by promissory notes subordinated to the
     Securities issued to employees, directors or officers (in each case either
     current or former) of Parent and its Subsidiaries in lieu of cash payment
     for any Equity Interest of Parent being repurchased from such persons;
     PROVIDED, that the aggregate amount of such Indebtedness does not exceed
     $2.0 million at any one time outstanding;

          (12) Indemnities given in the ordinary course of business in favor of
     companies issuing title insurance policies insuring the title to any
     property to induce such issuance; and

          (13) Indebtedness of the Company or of any of its Restricted
     Subsidiaries in an aggregate principal amount which, when taken together
     with all other Indebtedness of the Company and its Restricted Subsidiaries
     outstanding on the date of such Incurrence (other than Indebtedness
     permitted by clauses (1) through (12) of this Section 4.03(b) or
     Section 4.03(a)) does not exceed $15.0 million.
          (c)  Notwithstanding the foregoing, neither the Company nor any
Subsidiary Guarantor shall Incur any Indebtedness pursuant to Section 4.03(b) if
the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations of the Company or any Subsidiary Guarantor unless such
Indebtedness shall be subordinated to the Securities or the applicable
Subsidiary Guaranty to at least the same extent as such Subordinated
Obligations.

          (d)  For purposes of determining compliance with this
Section 4.03, (1) in the event that an item of Indebtedness meets the criteria
of more than one of the types of Indebtedness described above, the Company, in
its sole discretion, shall classify such item of Indebtedness at the time of
Incurrence and only be required to include the amount and type of such
Indebtedness in one of the above clauses (provided that any Indebtedness
originally classified as Incurred pursuant to Section 4.03(b)(13) may later be
reclassified as having been Incurred pursuant to Section 4.03(a) to the extent
that such reclassified Indebtedness could be Incurred pursuant to Section
4.03(a) at the time of such reclassification) and (2) the Company shall be
entitled to divide and classify an item of Indebtedness in more than one of the
types of Indebtedness described above. All Indebtedness outstanding under the

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                                                                              47

Credit Agreement on the Issue Date shall be deemed to have been Incurred
pursuant to clause (b)(1) above.

          (e) Notwithstanding Section 4.03(a) or 4.03(b) above, neither the
Company nor any Subsidiary Guarantor shall Incur (1) any Indebtedness if such
Indebtedness is subordinate in right of payment to any Senior Indebtedness of
the Company or such Subsidiary Guarantor, as applicable, unless such
Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in
right of payment to Senior Subordinated Indebtedness of the Company or such
Subsidiary Guarantor, as applicable, or (2) any Secured Indebtedness (for
borrowed money) that is not Senior Indebtedness of such Person unless
contemporaneously therewith such Person makes effective provision to secure the
Securities or the relevant Subsidiary Guaranty, as applicable, equally and
ratably with such Secured Indebtedness for so long as such Secured Indebtedness
is secured by a Lien.

          (f) For purposes of determining compliance with any U.S. dollar
restriction on the Incurrence of Indebtedness where the Indebtedness Incurred is
denominated in a different currency, the amount of such Indebtedness shall be
the U.S. Dollar Equivalent determined on the date of the Incurrence of such
Indebtedness; PROVIDED, HOWEVER, that if such Indebtedness denominated in a
different currency is subject to a Currency Agreement with respect to U.S.
dollars covering all principal, premium, if any, and interest payable on such
Indebtedness, the amount of such Indebtedness expressed in U.S. dollars shall be
as provided in such Currency Agreement. The principal amount of any Refinancing
Indebtedness Incurred in the same currency as the Indebtedness being Refinanced
shall be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to
the extent that (1) such U.S. Dollar Equivalent was determined based on a
Currency Agreement, in which case the Refinancing Indebtedness shall be
determined in accordance with the preceding sentence, and (2) the principal
amount of the Refinancing Indebtedness exceeds the principal amount of the
Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such
excess shall be determined on the date such Refinancing Indebtedness is
Incurred.

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                                                                              48

          SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS.
     (a) The Company shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time the Company
or such Restricted Subsidiary makes such Restricted Payment:

          (1)  a Default shall have occurred and be continuing (or would result
     therefrom);

          (2)  the Company is not entitled to Incur an additional $1.00 of
     Indebtedness under Section 4.03(a); or

          (3)  the aggregate amount of such Restricted Payment and all other
     Restricted Payments since the Issue Date would exceed the sum of (without
     duplication):

                (A) 50% of the Consolidated Net Income accrued during the period
          (treated as one accounting period) from the beginning of the fiscal
          quarter during which the Issue Date occurs to the end of the most
          recent fiscal quarter for which internal financial statements are
          available on or prior to the date of such Restricted Payment (or, in
          case such Consolidated Net Income shall be a deficit, minus 100% of
          such deficit); PROVIDED, HOWEVER, that if, at the time of a proposed
          Restricted Payment under this Section 4.04(a), the Consolidated
          Leverage Ratio is less than 2.75 to 1, for purposes of calculating the
          availability of amounts hereunder for such Restricted Payment only,
          the reference to 50% in this clause (3)(A) shall be deemed to be 75%;
          PLUS

                (B) 100% of the aggregate Net Cash Proceeds received by the
          Company from the issuance or sale of its Capital Stock (other than
          Disqualified Stock) subsequent to the Issue Date (other than an
          issuance or sale to a Subsidiary of the Company and other than an
          issuance or sale to an employee stock ownership plan or to a trust
          established by the Company or any of its Subsidiaries for the benefit
          of their employees) and 100% of any cash capital contribution received
          by the Company from its shareholders subsequent to the Issue Date;
          PLUS

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                                                                              49

                (C) the amount by which Indebtedness of the Company is reduced
          on the Company's balance sheet upon the conversion or exchange (other
          than by a Subsidiary of the Company) subsequent to the Issue Date of
          any Indebtedness of the Company for Capital Stock (other than
          Disqualified Stock) of the Company (less the amount of any cash, or
          the fair value of any other property, distributed by the Company upon
          such conversion or exchange); PLUS

               (D)  an amount equal to the sum of (x) the net reduction in the
          Investments made by the Company or any Restricted Subsidiary in any
          Person resulting from repurchases, repayments or redemptions of such
          Investments by such Person, proceeds realized on the sale of such
          Investment and proceeds representing the return of capital, in each
          case received by the Company or any Restricted Subsidiary, and (y) to
          the extent such Person is an Unrestricted Subsidiary, the portion
          (proportionate to the Company's equity interest in such Subsidiary) of
          the fair market value of the net assets of such Unrestricted
          Subsidiary at the time such Unrestricted Subsidiary is designated a
          Restricted Subsidiary; PROVIDED, HOWEVER, that the foregoing sum shall
          not exceed, in the case of any such Person, the amount of Investments
          previously made (and treated as a Restricted Payment) by the Company
          or any Restricted Subsidiary in such Person; PLUS

               (E)  $10.0 million.

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                                                                              50

               (b)  The provisions of Section 4.04(a) shall not prohibit:

               (1)  any Restricted Payment made out of the Net Cash Proceeds of
          the substantially concurrent sale of, or made by exchange for, Capital
          Stock of the Company (other than Disqualified Stock and other than
          Capital Stock issued or sold to a Subsidiary of the Company or an
          employee stock ownership plan or to a trust established by the Company
          or any of its Subsidiaries for the benefit of their employees to the
          extent that the purchase by such plan or trust is financed by
          Indebtedness of such plan or trust to the Company or any Restricted
          Subsidiary or Indebtedness Guaranteed by the Company or a Restricted
          Subsidiary) or a substantially concurrent cash capital contribution
          received by the Company from its shareholders; PROVIDED, HOWEVER, that
          (A) such Restricted Payment shall be excluded in the calculation of
          the amount of Restricted Payments and (B) the Net Cash Proceeds from
          such sale or such cash capital contribution (to the extent so used for
          such Restricted Payment) shall be excluded from the calculation of
          amounts under Section 4.04(a)(3)(B);

               (2)  any purchase, repurchase, redemption, defeasance or other
          acquisition or retirement for value of Subordinated Obligations of the
          Company or any Subsidiary Guarantor made by exchange for, or out of
          the proceeds of the substantially concurrent sale of, Indebtedness
          which is permitted to be Incurred pursuant to Section 4.03; PROVIDED,
          HOWEVER, that such purchase, repurchase, redemption, defeasance or
          other acquisition or retirement for value shall be excluded in the
          calculation of the amount of Restricted Payments;

               (3)  dividends paid within 60 days after the date of declaration
          thereof if at such date of declaration such dividend would have
          complied with this Section 4.04; PROVIDED, HOWEVER, that such dividend
          shall be included in the calculation of the amount of Restricted
          Payments;

               (4)  so long as no Default has occurred and is continuing,
          distribution to Parent for the purpose of, or the repurchase or other
          acquisition of, shares of, or options to purchase shares of, common
          stock or preferred stock of Parent, the Company or any of its

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                                                                              51

          Subsidiaries from employees, former employees, consultants, former
          consultants, directors or former directors or from a deferred
          compensation plan that holds shares of, or options to purchase shares
          of, common stock or preferred stock of the Company or its Subsidiaries
          for the benefit of any of the foregoing Persons or Parent, the Company
          or any of its Subsidiaries (or permitted transferees of such
          employees, former employees, consultants, former consultants,
          directors or former directors), pursuant to the terms of the
          agreements (including employment and consulting agreements) or plans
          (or amendments thereto) approved by the Board of Directors of Parent
          or the Company under which such individuals purchase or sell or are
          granted the option to purchase or sell, shares of such common stock or
          preferred stock; PROVIDED, HOWEVER, that the aggregate amount of such
          repurchases and other acquisitions shall not exceed the sum of (x)
          $5.0 million, (y) the Net Cash Proceeds from the sale of Capital Stock
          to employees, former employees, consultants, former consultants,
          directors or former directors of Parent, the Company and its
          Subsidiaries that occur after the Issue Date (to the extent the Net
          Cash Proceeds from the sale of such Capital Stock have not otherwise
          been applied to the payment of Restricted Payments by virtue of
          Section 4.04(a)(3)(B)) and (z) the cash proceeds of any "key man" life
          insurance policies that are used to make such repurchases; PROVIDED
          FURTHER, HOWEVER, that (A) such repurchases and other acquisitions
          shall be excluded in the calculation of the amount of Restricted
          Payments and (B) the Net Cash Proceeds from such sale shall be
          excluded from the calculation of amounts under Section 4.04(a)(3)(B);

               (5)  dividends or other distributions to Parent to be used by
          Parent solely to pay its franchise taxes and other fees required to
          maintain its corporate existence and to pay for general corporate and
          overhead expenses (including salaries and other compensation of the
          employees, directors fees, indemnification obligations, professional
          fees and expenses and amounts payable pursuant to the Professional
          Services Agreements) incurred by Parent in the ordinary course of its
          business; PROVIDED, HOWEVER, that any such dividends or other
          distributions made pursuant to this clause (5) shall not exceed
          $3.0 million in any calendar year; PROVIDED FURTHER, HOWEVER, that
          such dividends or

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                                                                              52

          distributions shall be excluded in the calculation of the amount of
          Restricted Payments;

               (6)  the distribution, as a dividend or otherwise, of shares of
          Capital Stock or assets of an Unrestricted Subsidiary provided that
          the fair market value (as determined in good faith by the Board of
          Directors of the Company) of such shares of Capital Stock or assets
          shall not exceed the amount of the Investments that were made (and not
          subsequently reduced pursuant to Section 4.04(a)(3)(D)) by the Company
          in such Unrestricted Subsidiary and were treated as Restricted
          Payments or were included in the calculation of the amount of
          Restricted Payments previously made; PROVIDED, HOWEVER, that (A) such
          distributions shall be excluded in the calculation of the amount of
          Restricted Payments and (B) any net reduction in Investments in such
          Unrestricted Subsidiary resulting from such distribution shall be
          excluded from the calculation of amounts under Section 4.04(a)(3)(D);

               (7)  Permitted Tax Payments; PROVIDED, HOWEVER, that such
          payments shall be excluded in the calculation of the amount of
          Restricted Payments;

               (8) repurchases of Capital Stock deemed to occur upon the
          exercise of stock options or warrants if such Capital Stock represents
          a portion of the exercise price thereof and repurchases of Capital
          Stock deemed to occur upon the withholding of a portion of the Capital
          Stock granted or awarded to an employee to pay for the taxes payable
          by such employee upon such grant or award; PROVIDED, HOWEVER, that
          such amount shall be excluded in the calculation of the amount of
          Restricted Payments; or

               (9)  Restricted Payments not exceeding $10.0 million in the
          aggregate; PROVIDED, HOWEVER, that (A) at the time of such Restricted
          Payments, no Default shall have occurred and be continuing (or result
          therefrom) and (B) such Restricted Payments shall be included in the
          calculation of the amount of Restricted Payments.

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                                                                              53

          SECTION 4.05. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM
RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) make any loans or advances to the Company
or (c) transfer any of its property or assets to the Company, except:

          (1)  with respect to clauses (a), (b) and (c),

               (A)  any encumbrance or restriction pursuant to an agreement in
          effect at or entered into on the Issue Date (including this Indenture
          and the Credit Agreement);

               (B)  any encumbrance or restriction with respect to a Restricted
          Subsidiary pursuant to an agreement relating to any Indebtedness
          Incurred by such Restricted Subsidiary on or prior to the date on
          which such Restricted Subsidiary was acquired by the Company (other
          than Indebtedness Incurred as consideration in, or to provide all or
          any portion of the funds or credit support utilized to consummate, the
          transaction or series of related transactions pursuant to which such
          Restricted Subsidiary became a Restricted Subsidiary or was acquired
          by the Company) and outstanding on such date;

               (C)  any encumbrance or restriction pursuant to an agreement
          effecting a Refinancing of Indebtedness Incurred pursuant to an
          agreement referred to in Section 4.05(1)(A) or (B) or this clause (C)
          or contained in any amendment to an agreement referred to in
          Section 4.05(1)(A) or (B) or this clause (C); PROVIDED, HOWEVER, that
          the encumbrances and restrictions with respect to such Restricted
          Subsidiary contained in any such refinancing agreement or amendment
          are no less favorable to the Securityholders than encumbrances and
          restrictions with respect to such Restricted Subsidiary contained in
          such predecessor agreements;

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                                                                              54

               (D)  provisions with respect to the disposition or distribution
          of assets or property in joint venture agreements and other similar
          agreements entered into in the ordinary course of business;

               (E)  any restriction with respect to a Restricted Subsidiary
          imposed pursuant to an agreement entered into for the sale or
          disposition of assets permitted by this Indenture pending the closing
          of such sale or disposition;

               (F)  any restriction arising under applicable law, regulation or
          order;

               (G)  any agreement or instruction governing Capital Stock (other
          than Disqualified Stock) of any Person that is in effect on the date
          such Person is acquired by the Company or a Restricted Subsidiary;

               (H) any restriction on cash or other deposits or net worth
          imposed by customers under contracts entered into in the ordinary
          course of business;

               (I)  any restriction in any agreement that is not more
          restrictive than the restrictions under the terms of the Credit
          Agreement as in effect on the Issue Date; and

          (2) with respect to clause (c) only,

               (A)  any such encumbrance or restriction consisting of customary
          nonassignment provisions in leases governing leasehold interests to
          the extent such provisions restrict the transfer of the lease or the
          property leased thereunder; and

               (B)  restrictions contained in security agreements or mortgages
          securing Indebtedness of a Restricted Subsidiary to the extent such
          restrictions restrict the transfer of the property subject to such
          security agreements or mortgages.

          SECTION 4.06. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless:

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                                                                              55

          (1)  the Company or such Restricted Subsidiary receives consideration
     at the time of such Asset Disposition at least equal to the fair market
     value (including as to the value of all non-cash consideration), as
     determined in good faith by the Board of Directors of the Company, of the
     shares and assets subject to such Asset Disposition;

          (2)  at least 75% of the consideration thereof received by the Company
     or such Restricted Subsidiary is in the form of cash or cash equivalents;
     and

          (3)  an amount equal to 100% of the Net Available Cash from such Asset
     Disposition is applied by the Company (or such Restricted Subsidiary, as
     the case may be) pursuant to one or more of the following:

               (A) to the extent the Company elects (or is required by the terms
          of any Indebtedness), to prepay, repay, redeem or purchase Senior
          Indebtedness of the Company or Indebtedness (other than any
          Disqualified Stock) of a Restricted Subsidiary (in each case other
          than Indebtedness owed to the Company or an Affiliate of the Company)
          within one year from the later of the date of such Asset Disposition
          or the receipt of such Net Available Cash;

               (B) the extent the Company elects, to acquire Additional Assets
          within one year from the later of the date of such Asset Disposition
          or the receipt of such Net Available Cash; and

               (C) to the extent the Company elects, or to the extent of the
          balance of such Net Available Cash after application in accordance
          with clauses (A) and (B) above, to make an Offer to the holders of the
          Securities (and to holders of other Senior Subordinated Indebtedness
          of the Company designated by the Company) to purchase Securities (and
          such other Senior Subordinated Indebtedness of the Company) pursuant
          to and subject to the conditions of Section 4.06(b);

     PROVIDED, HOWEVER, that in connection with any prepayment, repayment or
     purchase of Indebtedness

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                                                                              56

     pursuant to clause (A) or (C) above, the Company or such Restricted
     Subsidiary shall permanently retire such Indebtedness and shall cause the
     related loan commitment (if any) to be permanently reduced in an amount
     equal to the principal amount so prepaid, repaid or purchased.

          Notwithstanding the foregoing provisions of this Section 4.06, the
Company and the Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this Section 4.06(a) except to the extent that
the aggregate Net Available Cash from all Asset Dispositions which is not
applied in accordance with this Section 4.06(a) exceeds $10.0 million. Pending
application of Net Available Cash pursuant to this Section 4.06(a), such Net
Available Cash shall be invested in Temporary Cash Investments or applied to
temporarily reduce revolving credit indebtedness.

          For the purposes of this Section 4.06(a), any of the following are
deemed to be cash or cash equivalents:

          (1)  the assumption of Indebtedness of the Company or any Restricted
     Subsidiary and the release of the Company or such Restricted Subsidiary
     from all liability on such Indebtedness in connection with such Asset
     Disposition;

          (2)  securities, notes or other obligations received by the Company or
     any Restricted Subsidiary from the transferee that are converted by the
     Company or such Restricted Subsidiary into cash (within 180 days after such
     Asset Disposition (to the extent of the cash received)); and

          (3)  any Additional Assets (so long as such Additional Assets are
     acquired for fair market value in connection with the transaction giving
     rise to such Asset Disposition, as determined in good faith by the Board of
     Directors of the Company or such Restricted Subsidiary, as applicable),
     which Additional Assets shall be deemed to have been acquired pursuant to
     Section 4.06(a)(3)(A) in connection with such Asset Disposition.

          (b)  In the event of an Asset Disposition that requires the purchase
of Securities (and other Senior Subordinated Indebtedness of the Company)
pursuant to

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                                                                              57

Section 4.06(a)(3)(C), the Company shall purchase Securities tendered pursuant
to an offer by the Company for the Securities (and such other Senior
Subordinated Indebtedness) (the "Offer") at a purchase price of 100% of their
principal amount (or, in the event such other Senior Subordinated Indebtedness
of the Company was issued with original issue discount, 100% of the accreted
value thereof), without premium, plus accrued but unpaid interest (or, in
respect of such other Senior Subordinated Indebtedness of the Company, such
lesser price, if any, as may be provided for by the terms of such Senior
Subordinated Indebtedness) in accordance with the procedures (including
prorating in the event of oversubscription) set forth in Section 4.06(c). If the
aggregate purchase price of the Securities (and any other Senior Subordinated
Indebtedness) tendered exceeds the Net Available Cash allotted to their
purchase, the Company shall select the Securities and other Senior Subordinated
Indebtedness to be purchased on a PRO RATA basis but in round denominations,
which in the case of the Securities shall be denominations of $1,000 principal
amount or multiples thereof. The Company shall not be required to make an Offer
to purchase Securities (and other Senior Subordinated Indebtedness of the
Company) pursuant to this Section 4.06 if the Net Available Cash available
therefor is less than $10.0 million (which lesser amount shall be carried
forward for purposes of determining whether such an offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).

          (c)(1) Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall deliver to the Trustee and
send, by first-class mail to each Holder, a written notice stating that the
Holder may elect to have his Securities purchased by the Company either in whole
or in part (subject to prorating as described in Section 4.06(b) in the event
the Offer is oversubscribed) in integral multiples of $1,000 of principal
amount, at the applicable purchase price. The notice shall specify a purchase
date not less than 30 days nor more than 60 days after the date of such notice
(the "Purchase Date") and shall contain such information concerning the business
of the Company which the Company in good faith believes will enable such Holders
to make an informed decision and all instructions and materials necessary to
tender Securities pursuant to the Offer, together with the information contained
in clause (3).

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                                                                              58

          (2)  Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided below, the Company shall deliver to the
Trustee an Officers' Certificate as to (A) the amount of the Offer (the "Offer
Amount"), including information as to any other Senior Subordinated Indebtedness
included in the Offer, (B) the allocation of the Net Available Cash from the
Asset Dispositions pursuant to which such Offer is being made and (C) the
compliance of such allocation with the provisions of Section 4.06(a) and (b). On
such date, the Company shall also irrevocably deposit with the Trustee or with a
Paying Agent (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust) in Temporary Cash Investments, maturing on the last day prior
to the Purchase Date or on the Purchase Date if funds are immediately available
by open of business, an amount equal to the Offer Amount to be held for payment
in accordance with the provisions of this Section. If the Offer includes other
Senior Subordinated Indebtedness, the deposit described in the preceding
sentence may be made with any other paying agent pursuant to arrangements
satisfactory to the Trustee. Upon the expiration of the period for which the
Offer remains open (the "Offer Period"), the Company shall deliver to the
Trustee for cancellation the Securities or portions thereof which have been
properly tendered to and are to be accepted by the Company. The Trustee shall,
on the Purchase Date, mail or deliver payment (or cause the delivery of payment)
to each tendering Holder in the amount of the purchase price. In the event that
the aggregate purchase price of the Securities delivered by the Company to the
Trustee is less than the Offer Amount applicable to the Securities, the Trustee
shall deliver the excess to the Company immediately after the expiration of the
Offer Period for application in accordance with this Section 4.06.

          (3)  Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the Purchase Date a telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased. Holders whose Securities are purchased
only in part shall be issued new Securities equal

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                                                                              59

in principal amount to the unpurchased portion of the Securities surrendered.

          (4)  At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time the Trustee, directly
or through an agent, mails or delivers payment therefor to the surrendering
Holder.

          (d)  The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.06. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.06, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.06 by virtue of its
compliance with such securities laws or regulations.

          SECTION 4.07. LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, enter into or
permit to exist any transaction (including the purchase, sale, lease or exchange
of any property, employee compensation arrangements or the rendering of any
service) with, or for the benefit of, any Affiliate of the Company (an
"AFFILIATE TRANSACTION") unless:

          (1)  the terms of the Affiliate Transaction are no less favorable to
     the Company or such Restricted Subsidiary than those that could be obtained
     at the time of such Affiliate Transaction in arm's-length dealings with a
     Person who is not such an Affiliate;

          (2)  if such Affiliate Transaction involves an amount in excess of
     $2.0 million, the terms of the Affiliate Transaction are set forth in
     writing and a majority of the non-employee directors of the Company
     disinterested with respect to such Affiliate Transaction have determined in
     good faith that the criteria set forth in clause (1) are satisfied and have

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                                                                              60

     approved the relevant Affiliate Transaction as evidenced by a resolution of
     the Board of Directors; and

          (3)  if such Affiliate Transaction involves an amount in excess of
     $10.0 million, the Board of Directors of the Company shall also have
     received a written opinion from an Independent Qualified Party to the
     effect that such Affiliate Transaction is fair, from a financial
     standpoint, to the Company and its Restricted Subsidiaries or is not less
     favorable to the Company and its Restricted Subsidiaries than could
     reasonably be expected to be obtained at the time in an arm's-length
     transaction with a Person who was not an Affiliate.

          (b)  The provisions of Section 4.07(a) shall not prohibit:

          (1)  any Investment (other than a Permitted Investment) or other
     Restricted Payment, in each case permitted to be made pursuant to
     Section 4.04;

          (2)  any issuance of securities, or other payments, awards or grants
     in cash, securities or otherwise pursuant to, or the funding of, employment
     arrangements, stock options and stock ownership plans approved by the Board
     of Directors of the Company;

          (3)  loans or advances to employees in the ordinary course of business
     in accordance with the past practices of the Company or its Restricted
     Subsidiaries, which are approved by a majority of the Board of Directors of
     the Company or such Restricted Subsidiary, as applicable, in good faith;

          (4)  the payment of reasonable fees to and reimbursement of ordinary
     course expenses of directors of Parent, the Company and its Restricted
     Subsidiaries who are not employees of Parent, the Company or its Restricted
     Subsidiaries;

          (5)  any transaction exclusively between or among the Company and a
     Restricted Subsidiary or joint venture or similar entity which would
     constitute an Affiliate Transaction solely because the Company or a
     Restricted Subsidiary owns an equity interest in or

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                                                                              61

     otherwise controls such Restricted Subsidiary, joint venture or similar
     entity;

          (6)  the issuance or sale of any Capital Stock (other than
     Disqualified Stock) of the Company;

          (7)  the payment of management, consulting and advisory fees and
     related expenses made pursuant to the Professional Services Agreements as
     in effect on the Issue Date and the payment of other customary management,
     consulting and advisory fees and related expenses to the Permitted Holders
     party thereto and their Affiliates made pursuant to any financial advisory,
     financing, underwriting or placement agreement or in respect of other
     investment banking activities, including, in connection with acquisitions
     or divestitures which fees and expenses are made pursuant to arrangements
     approved by the Board of Directors of the Company or such Restricted
     Subsidiary in good faith;

          (8)  any agreement with the Company or any Restricted Subsidiary as in
     effect as of the Issue Date or any amendment or replacement thereto or any
     transaction contemplated thereby (including pursuant to any amendment or
     replacement thereto) so long as any such amendment or replacement agreement
     is not more disadvantageous to the Company or such Restricted Subsidiary in
     any material respect than the original agreement as in effect on the Issue
     Date;

          (9)  any consulting or employment agreement entered into by the
     Company or any of its Restricted Subsidiaries in the ordinary course of
     business consistent with the past practice of the Company or such
     Restricted Subsidiary; and

          (10) any tax sharing agreement or arrangement and payments pursuant
     thereto among the Company and its Subsidiaries and other Person with which
     the Company or its Subsidiaries is required or permitted to file a
     consolidated tax return or with which the Company or any of its Restricted
     Subsidiaries is or could be part of a consolidated group for tax purposes
     in amounts not otherwise prohibited by this Indenture.

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                                                                              62

          SECTION 4.08. LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES. The Company

          (1)  shall not, and shall not permit any Restricted Subsidiary to,
     sell, lease, transfer or otherwise dispose of any Capital Stock of any
     Restricted Subsidiary that was a Restricted Subsidiary as of the Issue Date
     to any Person (other than to the Company or a Wholly Owned Subsidiary), and

          (2)  shall not permit any Restricted Subsidiary that was a Restricted
     Subsidiary as of the Issue Date to issue any of its Capital Stock (other
     than, if necessary, shares of its Capital Stock constituting directors' or
     other legally required qualifying shares) to any Person (other than to the
     Company or a Wholly Owned Subsidiary), unless

               (A)  immediately after giving effect to such issuance, sale or
          other disposition, neither the Company nor any of its Subsidiaries own
          any Capital Stock of such Restricted Subsidiary; or

               (B)  immediately after giving effect to such issuance, sale or
          other disposition, such Restricted Subsidiary would no longer
          constitute a Restricted Subsidiary and any Investment in such Person
          remaining after giving effect thereto is treated as a new Investment
          by the Company and such Investment would be permitted to be made under
          Section 4.04 if made on the date of such issuance, sale or other
          disposition.

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                                                                              63

          SECTION 4.09. CHANGE OF CONTROL. (a) Upon the occurrence of a Change
of Control, each Holder shall have the right to require that the Company
repurchase such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof on the date of purchase plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), In the event that at the time of such Change of Control
the terms of the Senior Indebtedness of the Company restrict or prohibit the
repurchase of Securities pursuant to this Section, then prior to the mailing of
the notice to Holders provided for in Section 4.09(b) below but in any event
within 30 days following any Change of Control, the Company shall (1) repay in
full all such Senior Indebtedness or (ii) obtain the requisite consent under the
agreements governing such Senior Indebtedness to permit the repurchase of the
Securities as provided for in Section 4.09(b).

          (b)  Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder with a copy to the Trustee (the "CHANGE OF CONTROL
OFFER") stating:

          (1)  that a Change of Control has occurred and that such Holder has
     the right to require the Company to purchase such Holder's Securities at a
     purchase price in cash equal to 101% of the principal amount thereof on the
     date of purchase, plus accrued and unpaid interest, if any, to the date of
     such purchase (subject to the right of Holders of record on the relevant
     record date to receive interest on the relevant interest payment date);

          (2)  the circumstances and relevant facts regarding such Change of
     Control;

          (3)  the purchase date (which shall be no earlier than 30 days nor
     later than 60 days from the date such notice is mailed); and

          (4)  the instructions, as determined by the Company, consistent with
     this Section 4.09, that a Holder must follow in order to have its
     Securities purchased.

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                                                                              64

          (c)  Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the purchase date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Security purchased.

          (d)  On the purchase date, all Securities purchased by the Company
under this Section shall be delivered by the Company to the Trustee for
cancellation, and the Company shall pay the purchase price plus accrued and
unpaid interest, if any, to the Holders entitled thereto.

          (e)  Notwithstanding the foregoing provisions of this Section, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.09 applicable to a Change of Control Offer made by the Company and
purchases all Securities validly tendered and not withdrawn under such Change of
Control Offer.

          (f)  The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue of its compliance with
such securities laws or regulations.

          SECTION 4.10. FUTURE GUARANTORS. (a) The Company shall cause each
domestic Restricted Subsidiary that Incurs any Indebtedness to, at the same
time, execute and deliver to the Trustee a Guaranty Agreement pursuant to which
such Restricted Subsidiary shall Guarantee payment of the Securities on the same
terms and conditions as those set forth in this Indenture.

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                                                                              65

          (b)  If at any time, Parent conducts any business or holds any
significant assets other than the capital stock of the Company, the Company
shall cause the Parent to execute a Guaranty Agreement pursuant to which Parent
shall fully and unconditionally Guarantee the Company's obligations with respect
to the Securities on a senior subordinated basis.

          SECTION 4.11. COMPLIANCE CERTIFICATE. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate, one of the signers of which shall be the principal
executive officer, principal financial officer or principal accounting officer
of the Company, stating that in the course of the performance by the signers of
their duties as Officers of the Company they would normally have knowledge of
any Default and whether or not the signers know of any Default that occurred
during such period. If they do, the certificate shall describe the Default, its
status and what action the Company is taking or proposes to take with respect
thereto. The Company also shall comply with TIA Section 314(a)(4).

          SECTION 4.12. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.

                                    ARTICLE 5

                                SUCCESSOR COMPANY

          SECTION 5.01. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. (a) The
Company shall not consolidate with or merge with or into, or convey, transfer or
lease, in one transaction or a series of transactions, directly or indirectly,
all or substantially all its assets to, any Person, unless:

          (1)  the resulting, surviving or transferee Person (the "SUCCESSOR
     COMPANY") shall be a Person organized and existing under the laws of the
     United States of America, any State thereof or the District of Columbia and
     the Successor Company (if not the Company) shall expressly assume, by an
     indenture supplemental hereto, executed and delivered to the Trustee, in
     form

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                                                                              66

     satisfactory to the Trustee, all the obligations of the Company under the
     Securities and this Indenture;

          (2)  immediately after giving PRO FORMA effect to such transaction
     (and treating any Indebtedness which becomes an obligation of the Successor
     Company or any Subsidiary as a result of such transaction as having been
     Incurred by such Successor Company or such Subsidiary at the time of such
     transaction), no Default shall have occurred and be continuing;

          (3)  immediately after giving PRO FORMA effect to such transaction,
     the Successor Company would be able to Incur an additional $1.00 of
     Indebtedness pursuant to Section 4.03(a); and

          (4)  the Company shall have delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel, each stating that such
     consolidation, merger or transfer and such supplemental indenture (if any)
     comply with this Indenture;

PROVIDED, HOWEVER, that clause (3) shall not be applicable to (A) a Restricted
Subsidiary consolidating with, merging into or transferring all or part of its
properties and assets to the Company or (B) the Company merging with an
Affiliate of the Company solely for the purpose and with the sole effect of
reincorporating the Company in another jurisdiction.

          The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture, and the predecessor Company, except in the
case of a lease, shall be released from the obligation to pay the principal of
and interest on the Securities.

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                                                                              67

     (b)  The Company shall not permit any Subsidiary Guarantor to consolidate
with or merge with or into, or convey, transfer or lease, in one transaction or
a series of transactions, all or substantially all of its assets to any Person
unless:

          (1)  except in the case of a Subsidiary Guarantor that has been
     disposed of in its entirety to another Person (other than to the Company or
     an Affiliate of the Company), whether through a merger, consolidation or
     sale of Capital Stock or assets, if in connection therewith the Company
     provides an Officers' Certificate to the Trustee to the effect that the
     Company shall comply with its obligations under Section 4.06 in respect of
     such disposition, the resulting, surviving or transferee Person (if not
     such Subsidiary) shall be a Person organized and existing under the laws of
     the jurisdiction under which such Subsidiary was organized or under the
     laws of the United States of America, or any State thereof or the District
     of Columbia, and such Person shall expressly assume, by a Guaranty
     Agreement, in a form satisfactory to the Trustee, all the obligations of
     such Subsidiary, if any, under its Subsidiary Guaranty;

          (2)  immediately after giving effect to such transaction or
     transactions on a PRO FORMA basis (and treating any Indebtedness which
     becomes an obligation of the resulting, surviving or transferee Person as a
     result of such transaction as having been issued by such Person at the time
     of such transaction), no Default shall have occurred and be continuing; and

          (3)  the Company delivers to the Trustee an Officers' Certificate and
     an Opinion of Counsel, each stating that such consolidation, merger or
     transfer and such Guaranty Agreement, if any, complies with this Indenture.

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                                                                              68

     (c)  If at any time Parent Guarantees the Securities, Parent shall
covenant in its Guaranty Agreement not to merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, all or
substantially all of its assets to any Person unless:

          (1)  the resulting, surviving or transferee Person (if not Parent)
     shall be a Person organized and existing under the laws of the jurisdiction
     under which Parent was organized or under the laws of the United States of
     America, or any State thereof or the District of Columbia, and such Person
     shall expressly assume all the obligations of Parent, if any, under the
     Parent Guaranty;

          (2)  immediately after giving effect to such transaction or
     transactions on a PRO FORMA basis (and treating any Indebtedness which
     becomes an obligation of the resulting, surviving or transferee Person as a
     result of such transaction as having been issued by such Person at the time
     of such transaction), no Default shall have occurred and be continuing; and

          (3)  the Company delivers to the Trustee an Officers' Certificate and
     an Opinion of Counsel, each stating that such consolidation, merger or
     transfer and such Guaranty Agreement, if any, complies with this Indenture.

                                    ARTICLE 6

                              DEFAULTS AND REMEDIES

          SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if:

          (1)  the Company defaults in any payment of interest on any Security
     when the same becomes due and payable, whether or not such payment shall be
     prohibited by Article 10, and such default continues for a period of
     30 days;

          (2)  the Company defaults in the payment of the principal of any
     Security when the same becomes due and payable at its Stated Maturity, upon
     optional redemption, upon required purchase, upon declaration of
     acceleration or otherwise, whether or not such payment shall be prohibited
     by Article 10 or (ii) fails to

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                                                                              69

     redeem or purchase Securities when required pursuant to this Indenture or
     the Securities, whether or not such redemption or purchase shall be
     prohibited by Article 10;

          (3)  the Company or Parent fails to comply with Section 5.01;

          (4)  the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05,
     4.06, 4.07, 4.08, 4.09 or 4.10 (other than a failure to purchase Securities
     when required under Section 4.06 or 4.09) and such failure continues for
     30 days after the notice specified below;

          (5)  the Company or any Guarantor fails to comply with any of its
     agreements in the Securities or this Indenture (other than those referred
     to in clause (1), (2), (3) or (4) above) and such failure continues for
     60 days after the notice specified below;

          (6)  Indebtedness of the Company, any Guarantor or any Significant
     Subsidiary is not paid within any applicable grace period after final
     maturity or is accelerated by the holders thereof because of a default and
     the total amount of such Indebtedness unpaid or accelerated exceeds
     $10.0 million, or its foreign currency equivalent at the time;

          (7)  the Company, a Guarantor or any Significant Subsidiary pursuant
     to or within the meaning of any Bankruptcy Law:

               (A)  commences a voluntary case;

               (B)  consents to the entry of an order for relief against it in
          an involuntary case;

               (C)  consents to the appointment of a Custodian of it or for any
          substantial part of its property; or

               (D)  makes a general assignment for the benefit of its creditors;

     or takes any comparable action under any foreign laws relating to
     insolvency;

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                                                                              70

          (8)  a court of competent jurisdiction enters an order or decree under
     any Bankruptcy Law that:

               (A)  is for relief against the Company, a Guarantor or any
          Significant Subsidiary in an involuntary case;

               (B)  appoints a Custodian of the Company, a Guarantor or any
          Significant Subsidiary or for any substantial part of its property; or

               (C)  orders the winding up or liquidation of the Company, a
          Guarantor or any Significant Subsidiary;

     or any similar relief is granted under any foreign laws and the order or
     decree remains unstayed and in effect for 60 days;

          (9)  any judgment or decree for the payment of money in excess of
     $10.0 million (or its foreign currency equivalent at the time) is entered
     against the Company, a Guarantor or any Significant Subsidiary, and remains
     undischarged, unpaid or unstayed for a period of 60 consecutive days
     following the entry of such judgment or decree; or

          (10) the Parent Guaranty, if applicable, or any Subsidiary Guaranty of
     a Significant Subsidiary ceases to be in full force and effect (other than
     in accordance with the terms of such Guaranty) or any Guarantor denies or
     disaffirms its obligations under its Guaranty.

          The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.

          The term "Bankruptcy Law" means Title 11, UNITED STATES CODE, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.

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          A Default under clauses (4), (5) or (9) is not an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
outstanding Securities notify the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default".

          The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action the Company is taking or
proposes to take with respect thereto.

          SECTION 6.02. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the Securities by notice to the
Company and the Trustee, may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 6.01(7) or (8) with respect to the Company occurs,
the principal of and interest on all the Securities shall IPSO FACTO become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Securityholders. The Holders of a majority in principal
amount of the Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.

          SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.

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          The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.

          SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in
aggregate principal amount of the outstanding Securities by notice to the
Trustee may waive an existing Default and its consequences except (i) a Default
in the payment of the principal of or interest on a Security (ii) a Default
arising from the failure to redeem or purchase any Security when required
pursuant to this Indenture or (iii) a Default in respect of a provision that
under Section 9.02 cannot be amended without the consent of each Securityholder
affected. When a Default is waived, it is deemed cured, but no such waiver shall
extend to any subsequent or other Default or impair any consequent right.

          SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.

          SECTION 6.06. LIMITATION ON SUITS. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:

          (1)  the Holder gives to the Trustee written notice stating that an
     Event of Default is continuing;

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          (2)  the Holders of at least 25% in principal amount of the Securities
     make a written request to the Trustee to pursue the remedy;

          (3)  such Holder or Holders offer to the Trustee reasonable security
     or indemnity satisfactory to the Trustee against any loss, liability or
     expense;

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

          (5)  the Holders of a majority in principal amount of the Securities
     do not give the Trustee a direction inconsistent with the request during
     such 60-day period.

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

          SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.

          SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in
Section 7.07.

          SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to

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make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
          SECTION 6.10. PRIORITIES. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order at the date or dates fixed by the Trustee and, in the case
of distribution of such money on account of principal, premium, if any, or
interest, if any, upon presentation of the Securities and the notation thereon
of the payment if only partially paid and upon surrender thereof if fully paid:

          FIRST: to the Trustee for amounts due under Section 7.07;

          SECOND: to holders of Senior Indebtedness of the Company and, if such
     money or property has been collected from a Subsidiary Guarantor, to
     holders of Senior Indebtedness of such Subsidiary Guarantor, in each case
     to the extent required by Articles 10 and 12;

          THIRD: to Securityholders for amounts due and unpaid on the Securities
     for principal and interest, ratably, without preference or priority of any
     kind, according to the amounts due and payable on the Securities for
     principal and interest, respectively; and

          FOURTH: to the Company.

          The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.

          SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including rea-

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sonable attorneys' fees and expenses, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a suit
by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in
principal amount of the Securities.

          SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. The Company (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.

                                    ARTICLE 7

                                     TRUSTEE

          SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.

          (b)  Except during the continuance of an Event of Default:

          (1)  the Trustee undertakes to perform such duties and only such
     duties as are specifically set forth in this Indenture and no implied
     covenants or obligations shall be read into this Indenture against the
     Trustee; and

          (2)  in the absence of bad faith on its part, the Trustee may
     conclusively rely, as to the truth of the statements and the correctness of
     the opinions expressed therein, upon certificates or opinions furnished to
     the Trustee and conforming to the requirements of this Indenture. However,
     in the case of any

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     such certificates or opinions which by any provision hereof are
     specifically required to be furnished to the Trustee, the Trustee shall
     examine the certificates and opinions to determine whether or not they
     conform to the requirements of this Indenture.

          (c)  The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:

          (1)  this paragraph does not limit the effect of paragraph (b) of this
     Section;

          (2)  the Trustee shall not be liable for any error of judgment made in
     good faith by a Trust Officer unless it is proved that the Trustee was
     negligent in ascertaining the pertinent facts; and

          (3)  the Trustee shall not be liable with respect to any action it
     takes or omits to take in good faith in accordance with a direction
     received by it pursuant to Section 6.05.

          (d)  Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.

          (e)  The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.

          (f)  Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.

          (g)  No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.

          (h)  Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.

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          SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document.

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

          (c)  The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.

          (d)  The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute wilful
misconduct or negligence.

          (e)  The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.

          (f)  The Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction of
the Holders of a majority in principal amount of the outstanding Securities.

          (g)  The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney
at the sole cost of the Company and shall incur no liability or

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additional liability of any kind by reason of such inquiry or investigation.

          (h)  The Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Trust Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such a default is
received by the Trustee at the corporate trust office of the Trustee, and such
notice references the Securities and this Indenture.

          (i)  The rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and each agent, custodian and other Person employed
to act hereunder.

          (j)  The Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles of officers
authorized at such time to take specified actions pursuant to this Indenture,
which Officers' Certificate may be signed by any person authorized to sign an
Officers' Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded.

          SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and, subject to TIA Sections 310(b) and 311, may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the
same with like rights. However, the Trustee must comply with Sections 7.10 and
7.11.

          SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in the Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.

          SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing with respect to the Securities and

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if it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the Default within 90 days after it occurs. Except in the case of a
Default in payment of principal of or interest on any Security (including
payments pursuant to the mandatory redemption provisions of such Security, if
any), the Trustee may withhold the notice if and so long as a committee of its
Trust Officers in good faith determines that withholding the notice is in the
interests of Securityholders.

          SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of May 15 that
complies with TIA Section 313(a) if such report is required. The Trustee also
shall comply with TIA Section 313(b).

          A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.

          SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the
Trustee from time to time such compensation as shall be agreed in writing
between the Company and the Trustee for its services. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection, in
connection with the exercise or performance of any of its powers or duties
hereunder, in addition to the compensation for its services. Such expenses shall
include the reasonable compensation and expenses, disbursements and advances of
the Trustee's agents, counsel, accountants and experts. The Company shall
indemnify the Trustee against any and all loss, liability or expense (including
attorneys' fees and expenses) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the
Trustee may have separate counsel (if the Trustee determines in its

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reasonable judgment that the need for separate counsel exists (due to a conflict
of interest or otherwise)) and the Company shall pay the fees and expenses of
such counsel. The Company need not reimburse any expense or indemnify against
any loss, liability or expense incurred by the Trustee through the Trustee's own
wilful misconduct, negligence or bad faith. The Company need not pay any
settlement made without its consent, which consent shall not be unreasonably
withheld.

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

          The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(7) or (8) with respect to
the Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.

          SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in aggregate
principal amount of the outstanding Securities may remove the Trustee by so
notifying the Trustee and may appoint a successor Trustee. The Company shall
remove the Trustee if:

          (1)  the Trustee fails to comply with Section 7.10;

          (2)  the Trustee fails to comply with TIA Section 310(b) after written
     request therefor by the Company;

          (3)  the Trustee is adjudged bankrupt or insolvent;

          (4)  a receiver or other public officer takes charge of the Trustee or
     its property; or

          (5)  the Trustee otherwise becomes incapable of acting.

          If the Trustee resigns, is removed by the Company or by the Holders of
a majority in aggregate principal amount of the outstanding Securities and such
Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy
exists in the office of Trustee for any reason (the

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Trustee in such event being referred to herein as the retiring Trustee), the
Company shall promptly appoint a successor Trustee.

          A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee, without further act, deed or conveyance, shall have all the
rights, powers and duties of the retiring Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Securityholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 7.07. No
successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under the TIA.

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

          If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.

          Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.

          SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.

          In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate

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of authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.

          SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all
times satisfy the requirements of TIA Section 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.

          SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.

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                                    ARTICLE 8

                       DISCHARGE OF INDENTURE; DEFEASANCE

          SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE.
(a) When (1) the Company delivers to the Trustee all outstanding Securities
(other than Securities replaced pursuant to Section 2.07) for cancellation or
(2) all outstanding Securities have become due and payable, whether at maturity
or on a redemption date as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof and the Company irrevocably deposits with the
Trustee funds sufficient to pay at maturity or upon redemption all outstanding
Securities, including interest thereon to maturity or such redemption date
(other than Securities replaced pursuant to Section 2.07), and if in either case
the Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 8.01(c), cease to be of further effect. The
Trustee shall acknowledge satisfaction and discharge of this Indenture on demand
of the Company accompanied by an Officers' Certificate and an Opinion of Counsel
and at the cost and expense of the Company.

          (b)  Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (1) all its obligations under the Securities and this Indenture
("legal defeasance option") or (2) its obligations under Sections 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.09 and 4.10 and the operation of
Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of
Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) and the
limitations contained in Section 5.01(a)(3) ("covenant defeasance option"). The
Company may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.

          If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default with respect
thereto. If the Company exercises its covenant defeasance option, payment of the
Securities may not be accelerated because of an Event of Default specified in
Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of
Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) or
because of the failure of the Company to comply with Section 5.01(a)(3). If the
Company exercises its legal defeasance option or its covenant defeasance option,
each

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Guarantor, if any, shall be released from all its obligations with respect to
its Guaranty.

          Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.

          (c)  Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.

          SECTION 8.02. CONDITIONS TO DEFEASANCE. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:

          (1)  the Company irrevocably deposits in trust with the Trustee money
     or U.S. Government Obligations for the payment of principal of and interest
     on the Securities to maturity or redemption, as the case may be;

          (2)  the Company delivers to the Trustee a certificate from a
     nationally recognized firm of independent accountants expressing their
     opinion that the payments of principal and interest when due and without
     reinvestment on the deposited U.S. Government Obligations plus any
     deposited money without investment will provide cash at such times and in
     such amounts as will be sufficient to pay principal and interest when due
     on all the Securities to maturity or redemption, as the case may be;

          (3)  123 days pass after the deposit is made and during the 123-day
     period no Default specified in Sections 6.01(7) or (8) with respect to the
     Company occurs which is continuing at the end of the period;

          (4)  the deposit does not constitute a default under any other
     agreement binding on the Company and is not prohibited by Article 10;

          (5)  the Company delivers to the Trustee an Opinion of Counsel to the
     effect that the trust resulting from the deposit does not constitute, or is
     qualified as, a

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     regulated investment company under the Investment Company Act of 1940;

          (6)  in the case of the legal defeasance option, the Company shall
     have delivered to the Trustee an Opinion of Counsel stating that (A) the
     Company has received from, or there has been published by, the Internal
     Revenue Service a ruling, or (B) since the date of this Indenture there has
     been a change in the applicable Federal income tax law, in either case to
     the effect that, and based thereon such Opinion of Counsel shall confirm
     that, the Securityholders will not recognize income, gain or loss for
     Federal income tax purposes as a result of such defeasance and will be
     subject to Federal income tax on the same amounts, in the same manner and
     at the same times as would have been the case if such defeasance had not
     occurred;

          (7)  in the case of the covenant defeasance option, the Company shall
     have delivered to the Trustee an Opinion of Counsel to the effect that the
     Securityholders will not recognize income, gain or loss for Federal income
     tax purposes as a result of such covenant defeasance and will be subject to
     Federal income tax on the same amounts, in the same manner and at the same
     times as would have been the case if such covenant defeasance had not
     occurred; and

          (8)  the Company delivers to the Trustee an Officers' Certificate and
     an Opinion of Counsel, each stating that all conditions precedent to the
     defeasance and discharge of the Securities as contemplated by this
     Article 8 have been complied with.

          Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.

          SECTION 8.03. APPLICATION OF TRUST MONEY. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities. Money and securities
so held in trust are not subject to Article 10.

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          SECTION 8.04. REPAYMENT TO COMPANY. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.

          Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors.
          SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS. The Company shall
pay and shall indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against deposited U.S. Government Obligations deposited pursuant
to this Article 8 or the principal and interest received on such U.S. Government
Obligations.

          SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; PROVIDED, HOWEVER, that, if the
Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.

                                    ARTICLE 9

                                   AMENDMENTS

          SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, the Guarantors
and the Trustee may amend this Indenture or the Securities without notice to or
consent of any Securityholder:

          (1)  to cure any ambiguity, omission, defect or inconsistency;

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          (2)  to comply with Article 5;

          (3)  to provide for uncertificated Securities in addition to or in
     place of certificated Securities; PROVIDED, HOWEVER, that the
     uncertificated Securities are issued in registered form for purposes of
     Section 163(f) of the Code or in a manner such that the uncertificated
     Securities are described in Section 163(f)(2)(B) of the Code;

          (4)  to add guarantees with respect to the Securities, including any
     Subsidiary Guaranties, or to secure the Securities;

          (5)  to add to the covenants of the Company or a Subsidiary Guarantor
     for the benefit of the Holders or to surrender any right or power herein
     conferred upon the Company or a Subsidiary Guarantor; or

          (6)  to comply with any requirements of the SEC in connection with
     qualifying, or maintaining the qualification of, this Indenture under the
     TIA; or

          (7)  to make any change that does not adversely affect the rights of
     any Securityholder.

          An amendment under this Section may not make any change that adversely
affects the rights under Article 10 or 12 of any holder of Senior Indebtedness
of the Company or of a Guarantor then outstanding unless the holders of such
Senior Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.

          After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.

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                                                                              88

          SECTION 9.02. WITH CONSENT OF HOLDERS. The Company, the Subsidiary
Guarantors and the Trustee may amend this Indenture or the Securities without
notice to any Securityholder but with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Securities). However, without the consent of each
Securityholder affected thereby, an amendment may not:

          (1)  reduce the amount of Securities whose Holders must consent to an
     amendment;

          (2)  reduce the rate of or extend the time for payment of interest on
     any Security;

          (3)  reduce the principal amount of or extend the Stated Maturity of
     any Security;

          (4)  reduce the amount payable upon the redemption of any Security or
     change the time at which any Security may be redeemed in accordance with
     Article 3;

          (5)  make any Security payable in money other than that stated in the
     Security;

          (6)  impair the right of any Securityholder to receive payment of
     principal of and interest on such Securityholder's Securities on or after
     the due dates therefor or to institute suit for the enforcement of any
     payment on or with respect to such Securityholder's Securities;

          (7)  make any changes in the ranking or priority of any Security that
     would adversely affect the Securityholders;

          (8)  make any change in Section 6.04 or 6.07 or the second sentence of
     this Section; or

          (9)  make any change in any Guaranty that would adversely affect the
     Securityholders.

          It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.

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                                                                              89

          An amendment under this Section may not make any change that adversely
affects the rights under Article 10 or 12 of any holder of Senior Indebtedness
of the Company or of a Subsidiary Guarantor then outstanding unless the holders
of such Senior Indebtedness (or any group or representative thereof authorized
to give a consent) consent to such change.

          After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.

          SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to
this Indenture or the Securities shall comply with the TIA as then in effect.

          SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A consent
to an amendment or a waiver by a Holder of a Security shall bind the Holder and
every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent or waiver is not made on the Security. However, any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Security
or portion of the Security if the Trustee receives the notice of revocation
before the date the amendment or waiver becomes effective. After an amendment or
waiver becomes effective, it shall bind every Securityholder. An amendment or
waiver becomes effective upon the execution of such amendment or waiver by the
Trustee.

          The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than
120 days after such record date.

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                                                                              90

          SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.

          SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.

          SECTION 9.07. PAYMENT FOR CONSENT. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.

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                                                                              91

                                   ARTICLE 10

                                  SUBORDINATION

          SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees, and each
Securityholder by accepting a Security agrees, that the Indebtedness evidenced
by the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article 10, to the prior payment in full in cash of all
Senior Indebtedness of the Company and that the subordination is for the benefit
of and enforceable by the holders of such Senior Indebtedness. The Securities
shall in all respects rank PARI PASSU with all other Senior Subordinated
Indebtedness of the Company and only Indebtedness of the Company which is Senior
Indebtedness of the Company shall rank senior to the Securities in accordance
with the provisions set forth herein. All provisions of this Article 10 shall be
subject to Section 10.12.

          SECTION 10.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment
or distribution upon a total or partial liquidation or dissolution of the
Company or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property:

          (1)  holders of Senior Indebtedness of the Company shall be entitled
     to receive payment in full in cash of such Senior Indebtedness before
     Securityholders shall be entitled to receive any payment on the Securities;
     and

          (2)  until such Senior Indebtedness of the Company is paid in full in
     cash, any payment or distribution to which Securityholders would be
     entitled but for this Article 10 shall be made to holders of such Senior
     Indebtedness as their interests may appear, except that Securityholders may
     receive shares of stock and any debt securities that are subordinated to
     such Senior Indebtedness to at least the same extent as the Securities.

          SECTION 10.03. DEFAULT ON SENIOR INDEBTEDNESS OF THE COMPANY. The
     Company shall not pay the principal of premium, if any, or interest, if
     any, on the Securities or make any deposit pursuant to Section 8.01 and may
     not purchase, redeem or otherwise retire any

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                                                                              92

     Securities (collectively, "pay the Securities") if either of the following
     (a "Payment Default") occurs (1) any Designated Senior Indebtedness of the
     Company is not paid in full in cash when due; or (2) any other default on
     Designated Senior Indebtedness of the Company occurs and the maturity of
     such Designated Senior Indebtedness is accelerated in accordance with its
     terms unless, in either case, the Payment Default has been cured or waived
     and any such acceleration has been rescinded or such Designated Senior
     Indebtedness has been paid in full in cash; PROVIDED, HOWEVER, that the
     Company shall be entitled to pay the Securities without regard to the
     foregoing if the Company and the Trustee receive written notice approving
     such payment from the Representatives of all Designated Senior Indebtedness
     with respect to which the Payment Default has occurred and is continuing.
     During the continuance of any default (other than a Payment Default) with
     respect to any Designated Senior Indebtedness of the Company pursuant to
     which the maturity thereof may be accelerated without further notice
     (except such notice as may be required to effect such acceleration) or the
     expiration of any applicable grace periods, the Company shall not pay the
     Securities for a period (a "Payment Blockage Period") commencing upon the
     receipt by the Trustee (with a copy to the Company) of written notice
     (a "Blockage Notice") of such default from the Representative of such
     Designated Senior Indebtedness specifying an election to effect a Payment
     Blockage Period and ending 179 days thereafter. The Payment Blockage Period
     shall end earlier if such Payment Blockage Period is terminated (1) by
     written notice to the Trustee and the Company from the Person or Persons
     who gave such Blockage Notice; (2) because the default giving rise to such
     Blockage Notice is cured, waived or otherwise no longer continuing; or
     (3) because such Designated Senior Indebtedness has been discharged or
     repaid in full in cash. Notwithstanding the provisions described in the
     immediately preceding two sentences (but subject to the provisions
     contained in the first sentence of this Section), unless a Payment Default
     exists, the Company shall be entitled to resume payments on the Securities
     after termination of such Payment Blockage Period. The Securities shall not
     be subject to more than one Payment Blockage Period in any consecutive
     360-day period, irrespective of the number of defaults with respect to
     Designated Senior Indebtedness of the Company during such period;

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                                                                              93

     PROVIDED, HOWEVER, that if any Blockage Notice within such 360-day period
     is delivered to the Trustee by or on behalf of any holders of Designated
     Senior Indebtedness of the Company (other than holders of the Bank
     Indebtedness), a Representative of holders of the Bank Indebtedness shall
     be entitled to give another Blockage Notice within such period; PROVIDED
     FURTHER, HOWEVER, that in no event shall the total number of days during
     which any Payment Blockage Period or Periods is in effect exceed 179 days
     in the aggregate during any 360-consecutive-day period, and there must be
     181 days during any consecutive 360-day period during which no Payment
     Blockage Period is in effect. For purposes of this Section, no default or
     event of default which existed or was continuing on the date of the
     commencement of any Payment Blockage Period with respect to the Designated
     Senior Indebtedness of the Company initiating such Payment Blockage Period
     shall be, or be made, the basis of the commencement of a subsequent Payment
     Blockage Period by the Representative of such Designated Senior
     Indebtedness, whether or not within a period of 360 consecutive days,
     unless such default or event of default shall have been cured or waived for
     a period of not less than 90 consecutive days.

          SECTION 10.04. ACCELERATION OF PAYMENT OF SECURITIES. If payment of
the Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
of the Company (or their Representatives) of the acceleration.

          SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a distribution
is made to Securityholders that because of this Article 10 should not have been
made to them, the Securityholders who receive the distribution shall hold it in
trust for holders of Senior Indebtedness of the Company and pay it over to them
as their interests may appear. If any Designated Senior Indebtedness of the
Company is outstanding, neither the Company nor any Subsidiary Guarantor shall
pay the Securities until five Business Days after the Representatives of all the
issues of Designated Senior Indebtedness of the Company receive notice of such
acceleration and, thereafter, shall be entitled to pay the Securities only if
this Article 10 otherwise permits payment at that time.

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                                                                              94

          SECTION 10.06. SUBROGATION. After all Senior Indebtedness of the
Company is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated (equally and ratably with all other
Indebtedness PARI PASSU with the Securities) to the rights of holders of such
Senior Indebtedness to receive distributions applicable to such Senior
Indebtedness. A distribution made under this Article 10 to holders of such
Senior Indebtedness which otherwise would have been made to Securityholders is
not, as between the Company and Securityholders, a payment by the Company on
such Senior Indebtedness.

          SECTION 10.07. RELATIVE RIGHTS. This Article 10 defines the relative
rights of Securityholders and holders of Senior Indebtedness of the Company.
Nothing in this Indenture shall:

          (1)  impair, as between the Company and Securityholders, the
     obligation of the Company, which is absolute and unconditional, to pay
     principal of and interest on the Securities in accordance with their terms;
     or

          (2)  prevent the Trustee or any Securityholder from exercising its
     available remedies upon a Default, subject to the rights of holders of
     Senior Indebtedness of the Company to receive distributions otherwise
     payable to Securityholders.

          SECTION 10.08. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right
of any holder of Senior Indebtedness of the Company to enforce the subordination
of the Indebtedness evidenced by the Securities shall be impaired by any act or
failure to act by the Company or by its failure to comply with this Indenture.

          SECTION 10.09. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding
Section 10.03, the Trustee or Paying Agent shall continue to make payments on
the Securities and shall not be charged with knowledge of the existence of facts
that under this Article 10 would prohibit the making of any such payments
unless, not less than two Business Days prior to the date of such payment, a
Trust Officer of the Trustee receives notice satisfactory to it that such
payments are prohibited by this Article 10. The Company, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness of the Company shall be entitled to give the notice; PROVIDED,

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                                                                              95

HOWEVER, that, if an issue of Senior Indebtedness of the Company has a
Representative, only the Representative shall be entitled to give the notice.

          The Trustee in its individual or any other capacity shall be entitled
to hold Senior Indebtedness of the Company with the same rights it would have if
it were not Trustee. The Registrar and co-registrar and the Paying Agent shall
be entitled to do the same with like rights. The Trustee shall be entitled to
all the rights set forth in this Article 10 with respect to any Senior
Indebtedness of the Company which may at any time be held by it, to the same
extent as any other holder of such Senior Indebtedness; and nothing in Article 7
shall deprive the Trustee of any of its rights as such holder. Nothing in this
Article 10 shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 7.07.

          SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever any
Person is to make a distribution or give a notice to holders of Senior
Indebtedness of the Company, such Person shall be entitled to make such
distribution or give such notice to their Representative (if any).

          SECTION 10.11. ARTICLE 10 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE. The failure to make a payment pursuant to the Securities by
reason of any provision in this Article 10 shall not be construed as preventing
the occurrence of a Default. Nothing in this Article 10 shall have any effect on
the right of the Securityholders or the Trustee to accelerate the maturity of
the Securities.

          SECTION 10.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of U.S.
Government Obligations held in trust under Article 8 by the Trustee for the
payment of principal of and interest on the Securities shall not be subordinated
to the prior payment of any Senior Indebtedness of the Company or subject to the
restrictions set forth in this Article 10, and none of the Securityholders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness of the Company or any other creditor of the Company.

          SECTION 10.13. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article 10, the

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                                                                              96

Trustee and the Securityholders shall be entitled to rely (1) upon any order or
decree of a court of competent jurisdiction in which any proceedings of the
nature referred to in Section 10.02 are pending, (2) upon a certificate of the
liquidating trustee or agent or other Person making such payment or distribution
to the Trustee or to the Securityholders or (3) upon the Representatives of
Senior Indebtedness of the Company for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of such
Senior Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 10. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of the Company to participate
in any payment or distribution pursuant to this Article 10, the Trustee shall be
entitled to request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and other facts pertinent to the rights of such Person
under this Article 10, and, if such evidence is not furnished, the Trustee shall
be entitled to defer any payment to such Person pending judicial determination
as to the right of such Person to receive such payment. The provisions of
Sections 7.01 and 7.02 shall be applicable to all actions or omissions of
actions by the Trustee pursuant to this Article 10.

          SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Company as provided in this Article 10 and appoints
the Trustee as attorney-in-fact for any and all such purposes.

          SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS OF THE COMPANY. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of the Company and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Securityholders or the Company or any other Person, money or assets to which
any holders of Senior

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                                                                              97

Indebtedness of the Company shall be entitled by virtue of this Article 10 or
otherwise.

          SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS OF THE
COMPANY ON SUBORDINATION PROVISIONS. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Company, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness and such holder of
such Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.

                                   ARTICLE 11

                              SUBSIDIARY GUARANTIES

          SECTION 11.01. GUARANTIES. Each Subsidiary Guarantor hereby
unconditionally and irrevocably guarantees, jointly and severally, to each
Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns (a) the full and punctual payment of
principal of and interest on the Securities when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Company under this Indenture and the Securities and (b) the full and
punctual performance within applicable grace periods of all other obligations of
the Company under this Indenture and the Securities (all the foregoing being
hereinafter collectively called the "Obligations"). Each Subsidiary Guarantor
further agrees that the Obligations may be extended or renewed, in whole or in
part, without notice or further assent from such Subsidiary Guarantor and that
such Subsidiary Guarantor shall remain bound under this Article 11
notwithstanding any extension or renewal of any Obligation.

          Each Subsidiary Guarantor waives presentation to, demand of, payment
from and protest to the Company of any of the Obligations and also waives notice
of protest for nonpayment. Each Subsidiary Guarantor waives notice of any
default under the Securities or the Obligations. The obligations of each
Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any
Holder or the Trustee

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                                                                              98

to assert any claim or demand or to enforce any right or remedy against the
Company or any other Person under this Indenture, the Securities or any other
agreement or otherwise; (b) any extension or renewal of any thereof; (c) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Indenture, the Securities or any other agreement; (d) the release of any
security held by any Holder or the Trustee for the Obligations or any of them;
(e) the failure of any Holder or the Trustee to exercise any right or remedy
against any other guarantor of the Obligations; or (f) except as set forth in
Section 11.06, any change in the ownership of such Subsidiary Guarantor.

          Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty
herein constitutes a guarantee of payment, performance and compliance when due
(and not a guarantee of collection) and waives any right to require that any
resort be had by any Holder or the Trustee to any security held for payment of
the Obligations.

          Each Subsidiary Guaranty is, to the extent and in the manner set forth
in Article 12, subordinated and subject in right of payment to the prior payment
in full of the principal of and premium, if any, and interest on all Senior
Indebtedness of the Subsidiary Guarantor giving such Subsidiary Guaranty and
each Subsidiary Guaranty is made subject to such provisions of this Indenture.

          Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06,
the obligations of each Subsidiary Guarantor hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and shall not
be subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Subsidiary Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any remedy under this Indenture, the
Securities or any other agreement, by any waiver or modification of any thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the obligations, or by any other act or thing or omission or delay to do any
other act or thing which may or might in any manner or to any extent vary the
risk of

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                                                                              99

such Subsidiary Guarantor or would otherwise operate as a discharge of such
Subsidiary Guarantor as a matter of law or equity.

          Each Subsidiary Guarantor further agrees that its Guarantee herein
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of principal of or interest on any Obligation
is rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Company or otherwise.

          In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay
the principal of or interest on any Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Obligation, each Subsidiary Guarantor hereby
promises to and shall, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (1) the unpaid amount of such Obligations, (2) accrued and unpaid
interest on such Obligations (but only to the extent not prohibited by law) and
(3) all other monetary Obligations of the Company to the Holders and the
Trustee.

          Each Subsidiary Guarantor agrees that it shall not be entitled to any
right of subrogation in respect of any Obligations guaranteed hereby until
payment in full of all Obligations and all obligations to which the Obligations
are subordinated as provided in Article 12. Each Subsidiary Guarantor further
agrees that, as between it, on the one hand, and the Holders and the Trustee, on
the other hand, (x) the maturity of the Obligations Guaranteed hereby may be
accelerated as provided in Article 6 for the purposes of such Subsidiary
Guarantor's Subsidiary Guaranty herein, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such Obligations as provided in Article 6, such Obligations (whether or not due
and payable) shall forthwith become due and payable by such Subsidiary Guarantor
for the purposes of this Section. The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as the exercise of such right

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does not impair the rights of the Holders under the Guaranty.

          Each Subsidiary Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section.

          SECTION 11.02. LIMITATION ON LIABILITY. Any term or provision of this
Indenture to the contrary notwithstanding, the maximum aggregate amount of the
Obligations guaranteed hereunder by any Subsidiary Guarantor shall not exceed
the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.

          SECTION 11.03. SUCCESSORS AND ASSIGNS. This Article 11 shall be
binding upon each Subsidiary Guarantor and its successors and assigns and shall
enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.

          SECTION 11.04. NO WAIVER. Neither a failure nor a delay on the part of
either the Trustee or the Holders in exercising any right, power or privilege
under this Article 11 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 11 at law,
in equity, by statute or otherwise.

          SECTION 11.05. MODIFICATION. No modification, amendment or waiver of
any provision of this Article 11, nor the consent to any departure by any
Subsidiary Guarantor therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to

<Page>

                                                                             101

or demand on any Subsidiary Guarantor in any case shall entitle such Subsidiary
Guarantor to any other or further notice or demand in the same, similar or other
circumstances.

          SECTION 11.06. RELEASE OF SUBSIDIARY GUARANTOR. Upon the sale
(including any sale pursuant to any exercise of remedies by a holder of Senior
Indebtedness of the Company or of such Subsidiary Guarantor) or other
disposition (including by way of consolidation or merger) of a Subsidiary
Guarantor or the sale or disposition of all or substantially all the assets of
such Subsidiary Guarantor (in each case other than a sale or disposition to the
Company or an Affiliate of the Company), or if the Company properly designates
any Restricted Subsidiary that is a Subsidiary Guarantor as an Unrestricted
Subsidiary in accordance with the applicable provisions of this Indenture, or at
such time a Subsidiary Guarantor no longer has outstanding any other
Indebtedness or Guarantees any Indebtedness of the Company or another Subsidiary
Guarantor, such Subsidiary Guarantor shall be deemed released from all
obligations under this Article 11 without any further action required on the
part of the Trustee or any Holder. At the request of the Company, the Trustee
shall execute and deliver an appropriate instrument evidencing such release.

                                   ARTICLE 12

                     SUBORDINATION OF SUBSIDIARY GUARANTIES

          SECTION 12.01. AGREEMENT TO SUBORDINATE. Each Subsidiary Guarantor
agrees, and each Securityholder by accepting a Security agrees, that the
Indebtedness evidenced by such Subsidiary Guarantor's Subsidiary Guaranty is
subordinated in right of payment, to the extent and in the manner provided in
this Article 12, to the prior payment in full in cash of all Senior Indebtedness
of such Subsidiary Guarantor and that the subordination is for the benefit of
and enforceable by the holders of such Senior Indebtedness. The Obligations of a
Subsidiary Guarantor shall in all respects rank PARI PASSU with all other Senior
Subordinated Indebtedness of such Subsidiary Guarantor and only Senior
Indebtedness of such Subsidiary Guarantor (including such Subsidiary Guarantor's
Guaranty of Senior Indebtedness of the Company) shall rank senior to the
Obligations of such Subsidiary Guarantor in accordance with the provisions set
forth herein.

<Page>

                                                                             102

          SECTION 12.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment
or distribution upon a total or partial liquidation or dissolution of such
Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Subsidiary Guarantor or its
property:

          (1)  holders of Senior Indebtedness of such Subsidiary Guarantor shall
     be entitled to receive payment in full in cash of such Senior Indebtedness
     before Securityholders shall be entitled to receive any payment pursuant to
     the Subsidiary Guaranty of such Subsidiary Guarantor; and

          (2)  until the Senior Indebtedness of any Subsidiary Guarantor is paid
     in full in cash, any payment or distribution to which Securityholders would
     be entitled but for this Article 12 shall be made to holders of such Senior
     Indebtedness as their interests may appear, except that Securityholders may
     receive shares of stock and any debt securities of such Subsidiary
     Guarantor that are subordinated to such Senior Indebtedness to at least the
     same extent as the Subsidiary Guaranty.

          SECTION 12.03. DEFAULT ON SENIOR INDEBTEDNESS OF SUBSIDIARY GUARANTOR.
No Subsidiary Guarantor shall make its Subsidiary Guaranty or purchase, redeem
or otherwise retire or defease any Securities or other Obligations
(collectively, "pay its Subsidiary Guaranty") if either of the following (a
"Payment Default") occurs (1) any Designated Senior Indebtedness of such
Subsidiary Guarantor is not paid in full in cash when due; or (2) any other
default on Designated Senior Indebtedness of such Subsidiary Guarantor occurs
and the maturity of such Designated Senior Indebtedness is accelerated in
accordance with its terms unless, in either case, the Payment Default has been
cured or waived and any such acceleration has been rescinded or such Designated
Senior Indebtedness has been paid in full in cash; PROVIDED, HOWEVER, that any
Subsidiary Guarantor shall be entitled to pay its Subsidiary Guaranty without
regard to the foregoing if such Subsidiary Guarantor and the Trustee receive
written notice approving such payment from the Representatives of all Designated
Senior Indebtedness with respect to which the Payment Default has occurred and
is continuing. During the continuance of any default (other

<Page>

                                                                             103

than a Payment Default) with respect to any Designated Senior Indebtedness of
such Subsidiary Guarantor pursuant to which the maturity thereof may be
accelerated without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
such Subsidiary Guarantor shall not pay its Subsidiary Guaranty for a period (a
"Payment Blockage Period") commencing upon the receipt by the Trustee of (with a
copy to such Subsidiary Guarantor) written notice (a "Blockage Notice") of such
default from the Representative of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter. The Payment Blockage Period shall end earlier if such Payment
Blockage Period is terminated (1) by written notice to the Trustee and such
Subsidiary Guarantor from the Person or Persons who gave such Blockage Notice;
(2) because the default giving rise to such Blockage Notice is cured, waived or
otherwise no longer continuing; or (3) because such Designated Senior
Indebtedness has been discharged or repaid in full in cash. Notwithstanding the
provisions described in the immediately preceding two sentences (but subject to
the provisions contained in the first sentence of this Section), unless a
Payment Default exists, any Subsidiary Guarantor shall be entitled to resume
payments pursuant to its Subsidiary Guaranty after termination of such Payment
Blockage Period. No Subsidiary Guarantor shall be subject to more than one
Blockage Period in any consecutive 360-day period, irrespective of the number of
defaults with respect to Designated Senior Indebtedness of such Subsidiary
Guarantor during such period; PROVIDED, HOWEVER, that if any Blockage Notice
within such 360-day period is delivered to the Trustee by or on behalf of any
holders of Designated Senior Indebtedness of such Subsidiary Guarantor (other
than holders of the Bank Indebtedness), a Representative of holders of the Bank
Indebtedness shall be entitled to give another Blockage Notice within such
period; PROVIDED FURTHER, HOWEVER, that in no event shall the total number of
days during which any Payment Blockage Period or Periods is in effect exceed 179
days in the aggregate during any 360-consecutive day period, and there must be
181 days during any consecutive 360-day period during which no Payment Blockage
Period is in effect. For purposes of this Section, no default or event of
default which existed or was continuing on the date of the commencement of any
Payment Blockage Period with respect to the Designated Senior Indebtedness of
such Subsidiary Guarantor initiating such Payment Blockage Period shall be, or
be made, the basis of the commencement of a subsequent

<Page>

                                                                             104

Payment Blockage Period by the Representative of such Designated Senior
Indebtedness, whether or not within a period of 360 consecutive days, unless
such default or event of default shall have been cured or waived for a period of
not less than 90 consecutive days.

          SECTION 12.04. DEMAND FOR PAYMENT. If a demand for payment is made on
a Subsidiary Guarantor pursuant to Article 11, the Trustee shall promptly notify
the holders of the Designated Senior Indebtedness of such Subsidiary Guarantor
(or their Representatives) of such demand.

          SECTION 12.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a distribution
is made to Securityholders that because of this Article 12 should not have been
made to them, the Securityholders who receive the distribution shall hold it in
trust for holders of Senior Indebtedness of the applicable Subsidiary Guarantor
and pay it over to them or their Representatives as their interests may appear.

          SECTION 12.06. SUBROGATION. After all Senior Indebtedness of a
Subsidiary Guarantor is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated (equally and ratably with all other
Indebtedness PARI PASSU with such Subsidiary Guaranties) to the rights of
holders of such Senior Indebtedness to receive distributions applicable to
Senior Indebtedness of such Subsidiary Guarantor. A distribution made under this
Article 12 to holders of such Senior Indebtedness which otherwise would have
been made to Securityholders is not, as between the relevant Subsidiary
Guarantor and Securityholders, a payment by such Subsidiary Guarantor on such
Senior Indebtedness.

          SECTION 12.07. RELATIVE RIGHTS. This Article 12 defines the relative
rights of Securityholders and holders of Senior Indebtedness of a Subsidiary
Guarantor. Nothing in this Indenture shall:

          (1)  impair, as between a Subsidiary Guarantor and Securityholders,
     the obligation of such Subsidiary Guarantor, which is absolute and
     unconditional, to pay its Subsidiary Guaranty to the extent set forth in
     Article 11; or

          (2)  prevent the Trustee or any Securityholder from exercising its
     available remedies upon a default by such Subsidiary Guarantor under its
     Subsidiary

<Page>

                                                                             105

     Guaranty, subject to the rights of holders of Senior Indebtedness of such
     Subsidiary Guarantor to receive distributions otherwise payable to
     Securityholders.

          SECTION 12.08. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right
of any holder of Senior Indebtedness of any Subsidiary Guarantor to enforce the
subordination of the Subsidiary Guaranty of such Subsidiary Guarantor shall be
impaired by any act or failure to act by such Subsidiary Guarantor or by its
failure to comply with this Indenture.

          SECTION 12.09. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding
Section 12.03, the Trustee or Paying Agent shall continue to make payments on
any Subsidiary Guaranty and shall not be charged with knowledge of the existence
of facts that would prohibit the making of any such payments unless, not less
than two Business Days prior to the date of such payment, a Trust Officer of the
Trustee receives written notice satisfactory to it that such payments are
prohibited by this Article 12. The Company, the relevant Subsidiary Guarantor,
the Registrar or co-registrar, the Paying Agent, a Representative or a holder of
Senior Indebtedness of such Subsidiary Guarantor shall be entitled to give the
notice; PROVIDED, HOWEVER, that, if an issue of Senior Indebtedness of any
Subsidiary Guarantor has a Representative, only the Representative shall be
entitled to give the notice.

          The Trustee in its individual or any other capacity shall be entitled
to hold Senior Indebtedness of any Subsidiary Guarantor with the same rights it
would have if it were not the Trustee. The Registrar and co-registrar and the
Paying Agent may do the same with like rights. The Trustee shall be entitled to
all the rights set forth in this Article 12 with respect to any Senior
Indebtedness of any Subsidiary Guarantor which may at any time be held by it, to
the same extent as any other holder of such Senior Indebtedness; and nothing in
Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing
in this Article 12 shall apply to claims of, or payments to, the Trustee under
or pursuant to Section 7.07.

          SECTION 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever any
Person is to make a distribution or give a notice to holders of Senior
Indebtedness of any Subsidiary Guarantor, such Person shall be entitled to make
such distribution or give such notice to their Representative (if any).

<Page>

                                                                             106

          SECTION 12.11. ARTICLE 12 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO DEMAND PAYMENT. The failure to make a payment pursuant to a Subsidiary
Guaranty by reason of any provision in this Article 12 shall not be construed as
preventing the occurrence of a Default. Nothing in this Article 12 shall have
any effect on the right of the Securityholders or the Trustee to make a demand
for payment on any Subsidiary Guarantor pursuant to its Subsidiary Guaranty.

          SECTION 12.12. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Securityholders
shall be entitled to rely (1) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (2) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the
Securityholders or (3) upon the Representatives for the holders of Senior
Indebtedness of any Subsidiary Guarantor for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
such Senior Indebtedness and other indebtedness of such Subsidiary Guarantor,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 12. In the
event that the Trustee determines, in good faith, that evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness of any
Subsidiary Guarantor to participate in any payment or distribution pursuant to
this Article 12, the Trustee shall be entitled to request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness of such Subsidiary Guarantor held by such Person, the extent
to which such Person is entitled to participate in such payment or distribution
and other facts pertinent to the rights of such Person under this Article 12,
and, if such evidence is not furnished, the Trustee shall be entitled to defer
any payment to such Person pending judicial determination as to the right of
such Person to receive such payment. The provisions of Sections 7.01 and 7.02
shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article 12.

          SECTION 12.13. TRUSTEE TO EFFECTUATE SUBORDINATION. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such

<Page>

                                                                             107

action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Securityholders and the holders of Senior Indebtedness
of any Subsidiary Guarantor as provided in this Article 12 and appoints the
Trustee as attorney-in-fact for any and all such purposes.

          SECTION 12.14. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS OF SUBSIDIARY GUARANTOR. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of any Subsidiary Guarantor
and shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Securityholders or the Company or any other Person, money or
assets to which any holders of such Senior Indebtedness shall be entitled by
virtue of this Article 12 or otherwise.

          SECTION 12.15. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS OF
SUBSIDIARY GUARANTORS ON SUBORDINATION PROVISIONS. Each Securityholder by
accepting a Security acknowledges and agrees that the foregoing subordination
provisions are, and are intended to be, an inducement and a consideration to
each holder of any Senior Indebtedness of any Subsidiary Guarantor, whether such
Senior Indebtedness was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively
to have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Indebtedness.

                                   ARTICLE 13

                                  MISCELLANEOUS

          SECTION 13.01. TRUST INDENTURE ACT CONTROLS. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.

          SECTION 13.02. NOTICES. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:

          if to the Company or any Subsidiary Guarantor:

               Collins & Aikman Floorcoverings, Inc.

<Page>

                                                                             108

               311 Smith Industrial Boulevard
               Dalton, GA 30722

               Attention:  President

          with copies to:

               Kirkland & Ellis
               200 East Randolph Lane
               Chicago, IL 60601

               Attention:  Dennis M. Myers

                         and

               Oaktree Capital Management, LLC
               333 South Grand Avenue, 28th Floor
               Los Angeles, CA 90071

               Attention:  Caleb Kramer

          if to the Trustee:

               The Bank of New York
               101 Barclay Street
               Floor 21 West
               New York, NY 10286
               Attention:  Corporate Trust Administration

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

          Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.

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

<Page>

                                                                             109

          SECTION 13.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, any Subsidiary Guarantor, the Trustee, the Registrar
and anyone else shall have the protection of TIA Section 312(c).

          SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:

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

          (2)  an Opinion of Counsel in form and substance reasonably
     satisfactory to the Trustee stating that, in the opinion of such counsel,
     all such conditions precedent have been complied with.

          SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:

          (1)  a statement that the individual making such certificate or
     opinion has read such covenant or condition;

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

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

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

<Page>

                                                                             110

          SECTION 13.06. WHEN SECURITIES DISREGARDED. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which a Trust Officer of the Trustee actually knows are so owned
shall be so disregarded. Also, subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.

          SECTION 13.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.

          SECTION 13.08. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal Holiday,
the record date shall not be affected.

          SECTION 13.09. GOVERNING LAW. This Indenture and the Securities shall
be governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.

          SECTION 13.10. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the Company or any Subsidiary Guarantor
shall not have any liability for any obligations of the Company under the
Securities or this Indenture or of such Subsidiary Guarantor under its
Subsidiary Guaranty or this Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. By accepting a Security,
each Securityholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Securities.

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                                                                             111

          SECTION 13.11. SUCCESSORS. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.

          SECTION 13.12. MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.

          SECTION 13.13. TABLE OF CONTENTS; HEADINGS. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.

<Page>

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

                                             COLLINS & AIKMAN
                                             FLOORCOVERINGS, INC.,

                                               by /s/ Darrel V. McCay
                                                 -------------------------------
                                                 Name:  Darrel V. McCay
                                                 Title: Vice President and Chief
                                                             Financial Officer

                                             MONTEREY CARPETS, INC.,

                                               by /s/ Darrel V. McCay
                                                 -------------------------------
                                                 Name:  Darrel V. McCay
                                                 Title: Vice President and
                                                        Assistant Secretary

                                             MONTEREY COLOR SYSTEMS, INC.,

                                               by /s/ Darrel V. McCay
                                                 -------------------------------
                                                 Name:  Darrel V. McCay
                                                 Title: Vice President and
                                                        Assistant Secretary

                                             THE BANK OF NEW YORK,

                                               by /s/ Mary LaGumina
                                                 -------------------------------
                                                 Name:  Mary LaGumina
                                                 Title: Vice President

<Page>

                                                RULE 144A/REGULATIONS S APPENDIX

                   PROVISIONS RELATING TO INITIAL SECURITIES,
                           PRIVATE EXCHANGE SECURITIES
                             AND EXCHANGE SECURITIES

     1.   DEFINITIONS

     1.1  DEFINITIONS

     For the purposes of this Appendix the following terms shall have the
meanings indicated below:

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

          "Clearstream" means Clearstream Banking, societe anonyme, or any
successor securities clearing agency.

          "Definitive Security" means a certificated Initial Security, Exchange
Security or Private Exchange Security bearing, if required, the restricted
securities legend set forth in Section 2.3(e).

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

          "Distribution Compliance Period", with respect to any Securities,
means the period of 40 consecutive days beginning on and including the later of
(i) the day on which such Securities are first offered to Persons other than
distributors (as defined in Regulation S under the Securities Act) in reliance
on Regulation S and (ii) the Issue Date with respect to such Securities.

          "Euroclear" means Euroclear Bank S.A./N.V., as operator of the
Euroclear System or any successor securities clearing agency.

          "Exchange Securities" means (1) the 9 3/4% Senior Subordinated Notes
Due 2010 issued pursuant to the Indenture in connection with a Registered
Exchange Offer pursuant to a Registration Rights Agreement and (2) Additional
Securities, if any, issued pursuant to a registration statement filed with the

<Page>

SEC under the Securities Act.

          "Initial Purchasers" means (1) with respect to the Initial Securities
issued on the Issue Date, Credit Suisse First Boston Corporation, Banc of
America Securities LLC, BNP Paribas Securities Corp., First Union Securities,
Inc. and Fleet Securities, Inc., and (2) with respect to each issuance of
Additional Securities, the Persons purchasing such Additional Securities under
the related Purchase Agreement.

          "Initial Securities" means (1) $175 million aggregate principal amount
of 9 3/4% Senior Subordinated Notes Due 2010 issued on the Issue Date and (2)
Additional Securities, if any, issued in a transaction exempt from the
registration requirements of the Securities Act.

          "Private Exchange" means the offer by the Company, pursuant to a
Registration Rights Agreement, to the Initial Purchasers to issue and deliver to
each Initial Purchaser, in exchange for the Initial Securities held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.

          "Private Exchange Securities" means any 9 3/4% Senior Subordinated
Notes Due 2010 issued in connection with a Private Exchange.

          "Purchase Agreement" means (1) with respect to the Initial Securities
issued on the Issue Date, the Purchase Agreement dated February 14, 2002, among
the Company, the Subsidiary Guarantors and the Initial Purchasers, and (2) with
respect to each issuance of Additional Securities, the purchase agreement or
underwriting agreement among the Company and the Persons purchasing such
Additional Securities.

          "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

          "Registered Exchange Offer" means the offer by the Company, pursuant
to a Registration Rights Agreement, to certain Holders of Initial Securities, to
issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.

          "Registration Rights Agreement" means (1) with respect to the Initial
Securities issued on the Issue Date, the Registration Rights Agreement dated as
of the Issue Date, among the Company, the Subsidiary Guarantors and the Initial
Purchasers, and (2) with respect to each issuance of Additional

<Page>

Securities issued in a transaction exempt from the registration requirements of
the Securities Act, the registration rights agreement, if any, among the Company
and the Persons purchasing such Additional Securities under the related Purchase
Agreement.

          "Securities" means the Initial Securities, the Exchange Securities and
the Private Exchange Securities, treated as a single class.

          "Securities Act" means the Securities Act of 1933.

          "Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depository), or any successor Person thereto and
shall initially be the Trustee.

          "Shelf Registration Statement" means the registration statement issued
by the Company in connection with the offer and sale of Initial Securities or
Private Exchange Securities pursuant to a Registration Rights Agreement.

          "Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.3(e) hereto.

     1.2  OTHER DEFINITIONS

<Table>
<Caption>
                                                                   Defined
     Term                                                        in Section:
     ----                                                        -----------
     <S>                                                           <C>
     "Agent Members"                                               2.1(b)
     "Global Security"                                             2.1(a)
     "Permanent Regulation S Global Security"                      2.1(a)
     "Regulation S"                                                2.1(a)
     "Rule 144A"                                                   2.1(a)
     "Rule 144A Global Security"                                   2.1(a)
     "Temporary Regulation S Global Security"                      2.1(a)
</Table>

     2.   THE SECURITIES.

     2.1 (a) FORM AND DATING. The Initial Securities will be offered and sold by
the Company pursuant to a Purchase Agreement. The Initial Securities will be
resold initially only to (i) QIBs in reliance on Rule 144A under the Securities
Act ("Rule 144A") and (ii) Persons other than U.S. Persons (as defined in
Regulation S) in reliance on Regulation S under the Securities Act ("Regulation
S"). Initial Securities may thereafter be transferred to, among others, QIBs and
purchasers in reliance on Regulation S, subject to the restrictions on transfer
set forth herein. Initial Securities initially resold pursuant to Rule 144A
shall be issued initially in the form of one or more

<Page>

permanent global Securities in definitive, fully registered form (collectively,
the "Rule 144A Global Security") and Initial Securities initially resold
pursuant to Regulation S shall be issued initially in the form of one or more
temporary global securities in definitive, fully registered form (collectively,
the "Temporary Regulation S Global Security"), in each case without interest
coupons and with the global securities legend and restricted securities legend
set forth in Exhibit 1 hereto, which shall be deposited on behalf of the
purchasers of the Initial Securities represented thereby with the Securities
Custodian, and registered in the name of the Depository or a nominee of the
Depository, duly executed by the Company and authenticated by the Trustee as
provided in this Indenture. Beneficial ownership interests in the Temporary
Regulation S Global Security will not be exchangeable for interests in the Rule
144A Global Security, a permanent global security (the "Permanent Regulation S
Global Security"), or any other Security without a legend containing
restrictions on transfer of such Security prior to the expiration of the
Distribution Compliance Period and then only upon certification in form
reasonably satisfactory to the Trustee that beneficial ownership interests in
such Temporary Regulation S Global Security are owned either by non-U.S. persons
or U.S. persons who purchased such interests in a transaction that did not
require registration under the Securities Act. The Rule 144A Global Security,
the Temporary Regulation S Global Security and the Permanent Regulation S Global
Security are collectively referred to herein as "Global Securities". The
aggregate principal amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depository or its nominee as hereinafter provided.

          (b) BOOK-ENTRY PROVISIONS. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depository.

          The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (b)
shall be delivered by the Trustee to such Depository or pursuant to such
Depository's instructions or held by the Trustee as custodian for the
Depository.

          Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Security, and the Company, the Trustee and any
agent of

<Page>

the Company or the Trustee shall be entitled to treat the Depository as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices of such Depository governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.

          (c) CERTIFICATED SECURITIES. Except as provided in this Section 2.1 or
Section 2.3 or 2.4, owners of beneficial interests in Global Securities shall
not be entitled to receive physical delivery of Definitive Securities.

     2.2 AUTHENTICATION. The Trustee shall authenticate and deliver: (1) on the
Issue Date, an aggregate principal amount of $175 million 9 3/4% Senior
Subordinated Notes Due 2010, (2) any Additional Securities for an original issue
in an aggregate principal amount specified in the written order of the Company
pursuant to Section 2.02 of the Indenture and (3) Exchange Securities or Private
Exchange Securities for issue only in a Registered Exchange Offer or a Private
Exchange, respectively, pursuant to a Registration Rights Agreement, for a like
principal amount of Initial Securities, in each case upon a written order of the
Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. Such order shall specify the
amount of the Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated and, in the case of any issuance of
Additional Securities pursuant to Section 2.13 of the Indenture, shall certify
that such issuance is in compliance with Section 4.03 of the Indenture.

     2.3  TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF DEFINITIVE
SECURITIES. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:

          (x) to register the transfer of such Definitive Securities; or

          (y) to exchange such Definitive Securities for an equal principal
     amount of Definitive Securities of other authorized denominations,

the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
PROVIDED, HOWEVER, that the Definitive Securities surrendered for transfer or
exchange:

<Page>

          (i) shall be duly endorsed or accompanied by a written instrument of
     transfer in form reasonably satisfactory to the Company and the Registrar
     or co-registrar, duly executed by the Holder thereof or its attorney duly
     authorized in writing; and

          (ii) if such Definitive Securities are required to bear a restricted
     securities legend, they are being transferred or exchanged pursuant to an
     effective registration statement under the Securities Act, pursuant to
     Section 2.3(b) or pursuant to clause (A), (B) or (C) below, and are
     accompanied by the following additional information and documents, as
     applicable:

               (A) if such Definitive Securities are being delivered to the
          Registrar by a Holder for registration in the name of such Holder,
          without transfer, a certification from such Holder to that effect; or

               (B)  if such Definitive Securities are being transferred to the
          Company, a certification to that effect; or

               (C) if such Definitive Securities are being transferred (x)
          pursuant to an exemption from registration in accordance with Rule
          144A, Regulation S or Rule 144 under the Securities Act; or (y) in
          reliance upon another exemption from the requirements of the
          Securities Act: (i) a certification to that effect (in the form set
          forth on the reverse of the Security) and (ii) if the Company so
          requests, an opinion of counsel or other evidence reasonably
          satisfactory to it as to the compliance with the restrictions set
          forth in the legend set forth in Section 2.3(e)(i).

          (b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A BENEFICIAL
INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be exchanged for a
beneficial interest in a Rule 144A Global Security or a Permanent Regulation S
Global Security except upon satisfaction of the requirements set forth below.
Upon receipt by the Trustee of a Definitive Security, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:

          (i) certification, in the form set forth on the reverse of the
     Security, that such Definitive Security is either (A) being transferred to
     a QIB in accordance with Rule 144A or (B) is being transferred after
     expiration of the

<Page>

     Distribution Compliance Period by a Person who initially purchased such
     Security in reliance on Regulation S to a buyer who elects to hold its
     interest in such Security in the form of a beneficial interest in the
     Permanent Regulation S Global Security; and

     (ii) written instructions directing the Trustee to make, or to direct the
     Securities Custodian to make, an adjustment on its books and records with
     respect to such Rule 144A Global Security (in the case of a transfer
     pursuant to clause (b)(i)(A)) or Permanent Regulation S Security (in the
     case of a transfer pursuant to clause (b)(i)(B)) to reflect an increase in
     the aggregate principal amount of the Securities represented by the Rule
     144A Global Security or Permanent Regulation S Global Security, as
     applicable, such instructions to contain information regarding the
     Depository account to be credited with such increase,

then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Rule 144A Global
Security or Permanent Regulation S Global Security, as applicable, to be
increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Rule 144A Global
Security or Permanent Regulation S Global Security, as applicable, equal to the
principal amount of the Definitive Security so canceled. If no Rule 144A Global
Securities or Permanent Regulation S Global Securities, as applicable, are then
outstanding, the Company shall issue and the Trustee shall authenticate, upon
written order of the Company in the form of an Officers' Certificate, a new Rule
144A Global Security or Permanent Regulation S Global Security, as applicable,
in the appropriate principal amount.

          (c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. (i) The transfer and
     exchange of Global Securities or beneficial interests therein shall be
     effected through the Depository, in accordance with this Indenture
     (including applicable restrictions on transfer set forth herein, if any)
     and the procedures of the Depository therefor. A transferor of a beneficial
     interest in a Global Security shall deliver to the Registrar a written
     order given in accordance with the Depository's procedures containing
     information regarding the participant account of the Depository to be
     credited with a beneficial interest in the Global Security. The Registrar
     shall, in accordance with such instructions, instruct the Depository to
     credit to the

<Page>

     account of the Person specified in such instructions a beneficial interest
     in the Global Security and to debit the account of the Person making the
     transfer the beneficial interest in the Global Security being transferred.

     (ii) If the proposed transfer is a transfer of a beneficial interest in one
     Global Security to a beneficial interest in another Global Security, the
     Registrar shall reflect on its books and records the date and an increase
     in the principal amount of the Global Security to which such interest is
     being transferred in an amount equal to the principal amount of the
     interest to be so transferred, and the Registrar shall reflect on its books
     and records the date and a corresponding decrease in the principal amount
     of the Global Security from which such interest is being transferred.

     (iii) Notwithstanding any other provisions of this Appendix (other than the
     provisions set forth in Section 2.4), a Global Security may not be
     transferred as a whole except by the Depository to a nominee of the
     Depository or by a nominee of the Depository to the Depository or another
     nominee of the Depository or by the Depository or any such nominee to a
     successor Depository or a nominee of such successor Depository.

     (iv) In the event that a Global Security is exchanged for Definitive
     Securities pursuant to Section 2.4 of this Appendix, prior to the
     consummation of a Registered Exchange Offer or the effectiveness of a Shelf
     Registration Statement with respect to such Securities, such Securities may
     be exchanged only in accordance with such procedures as are substantially
     consistent with the provisions of this Section 2.3 (including the
     certification requirements set forth on the reverse of the Initial
     Securities intended to ensure that such transfers comply with Rule 144A or
     Regulation S, as the case may be) and such other procedures as may from
     time to time be adopted by the Company.

          (d) RESTRICTIONS ON TRANSFER OF TEMPORARY REGULATION S GLOBAL
SECURITIES. During the Distribution Compliance Period, beneficial ownership
interests in Temporary Regulation S Global Securities may only be sold, pledged
or transferred through Euroclear or Clearstream in accordance with the
Applicable Procedures and only (i) to the Company, (ii) so long as such Security
is eligible for resale pursuant to Rule 144A, to a Person whom the selling
holder reasonably believes is a QIB that purchases for its own account or for
the account of a QIB to whom notice is given that the resale, pledge or transfer
is being made in reliance on Rule 144A, (iii) in an offshore transaction in
accordance with Regulation S, (iv) pursuant to an exemption from

<Page>

registration under the Securities Act provided by Rule 144 (if applicable) under
the Securities Act or (v) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States.

          (e)  LEGEND.

          (i) Except as permitted by the following para graphs (ii), (iii) and
     (iv), each Security certificate evidencing the Restricted Global Securities
     (and all Securities issued in exchange therefor or in substitution thereof)
     shall bear a legend in substantially the following form:

               THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
     TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE
     "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE
     TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
     THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
     SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
     THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

               THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY
     THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
     TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER
     REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
     144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
     RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
     ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO
     EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
     THEREUNDER (IF AVAILABLE), (IV) PURSUANT TO AN EFFECTIVE REGISTRATION
     STATEMENT UNDER THE SECURITIES ACT OR (V) TO THE COMPANY, IN EACH OF CASES
     (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
     STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
     HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE
     RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

          (ii) Upon any sale or transfer of a Transfer Security (including any
     Transfer Restricted Security represented by a Global Security) pursuant to
     Rule 144 under the Securities Act, the Registrar shall permit the
     transferee thereof to exchange such Transfer Restricted Security for a
     certificated Security that does not bear the legend set forth above and
     rescind any restriction on the transfer of

<Page>

     such Transfer Restricted Security, if the transferor thereof certifies in
     writing to the Registrar that such sale or transfer was made in reliance on
     Rule 144 (such certification to be in the form set forth on the reverse of
     the Security).

     (iii) After a transfer of any Initial Securities or Private Exchange
     Securities pursuant to and during the period of the effectiveness of a
     Shelf Registration Statement with respect to such Initial Securities or
     Private Exchange Securities, as the case may be, all requirements
     pertaining to legends on such Initial Security or such Private Exchange
     Security will cease to apply, the requirements requiring any such Initial
     Security or such Private Exchange Security issued to certain Holders be
     issued in global form will cease to apply, and a certificated Initial
     Security or Private Exchange Security or an Initial Security or Private
     Exchange Security in global form, in each case without restrictive transfer
     legends, will be available to the transferee of the Holder of such Initial
     Securities or Private Exchange Securities upon exchange of such
     transferring Holder's certificated Initial Security or Private Exchange
     Security or directions to transfer such Holder's interest in the Global
     Security, as applicable.

     (iv) Upon the consummation of a Registered Exchange Offer with respect to
     the Initial Securities, all requirements pertaining to such Initial
     Securities that Initial Securities issued to certain Holders be issued in
     global form will still apply with respect to Holders of such Initial
     Securities that do not exchange their Initial Securities, and Exchange
     Securities in certificated or global form will be available to Holders that
     exchange such Initial Securities in such Registered Exchange Offer.

     (v) Upon the consummation of a Private Exchange with respect to the Initial
     Securities, all requirements pertaining to such Initial Securities that
     Initial Securities issued to certain Holders be issued in global form will
     still apply with respect to Holders of such Initial Securities that do not
     exchange their Initial Securities, and Private Exchange Securities in
     global form with the global securities legend and the Restricted Securities
     Legend set forth in Exhibit 1 hereto will be available to Holders that
     exchange such Initial Securities in such Private Exchange.

          (f)  CANCELLATION OR ADJUSTMENT OF GLOBAL SECURITY. At such time as
all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, purchased or canceled, such Global Security
shall be returned to

<Page>

the Depository for cancellation or retained and canceled by the Trustee. At any
time prior to such cancelation, if any beneficial interest in a Global Security
is exchanged for certificated Securities, redeemed, purchased or canceled, the
principal amount of Securities represented by such Global Security shall be
reduced and an adjustment shall be made on the books and records of the Trustee
(if it is then the Securities Custodian for such Global Security) with respect
to such Global Security, by the Trustee or the Securities Custodian, to reflect
such reduction.

          (g)  OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
SECURITIES.

          (i) To permit registrations of transfers and exchanges, the Company
     shall execute and the Trustee shall authenticate Definitive Securities and
     Global Securities at the Registrar's or co-registrar's request.

          (ii) No service charge shall be made for any registration of transfer
     or exchange, but the Company may require payment of a sum sufficient to
     cover any transfer tax, assessments, or similar governmental charge payable
     in connection therewith (other than any such transfer taxes, assessments or
     similar governmental charge payable upon exchange or transfer pursuant to
     Sections 3.06, 4.06, 4.09 and 9.05 of the Indenture).

          (iii) The Registrar or co-registrar shall not be required to register
     the transfer of or exchange of (a) any Definitive Security selected for
     redemption in whole or in part pursuant to Article 3 of this Indenture,
     except the unredeemed portion of any Definitive Security being redeemed in
     part, or (b) any Security for a period beginning 15 Business Days before
     the mailing of a notice of an offer to repurchase or redeem Securities or
     15 Business Days before an interest payment date.

          (iv) Prior to the due presentation for registration of transfer of any
     Security, the Company, the Trustee, the Paying Agent, the Registrar or any
     co-registrar may deem and treat the person in whose name a Security is
     registered as the absolute owner of such Security for the purpose of
     receiving payment of principal of and interest on such Security and for all
     other purposes whatsoever, whether or not such Security is overdue, and
     none of the Company, the Trustee, the Paying Agent, the Registrar or any
     co-registrar shall be affected by notice to the contrary.

          (v)   All Securities issued upon any transfer or

<Page>

     exchange pursuant to the terms of this Indenture shall evidence the same
     debt and shall be entitled to the same benefits under this Indenture as the
     Securities surrendered upon such transfer or exchange.

          (h)  NO OBLIGATION OF THE TRUSTEE.

          (i) The Trustee shall have no responsibility or obligation to any
     beneficial owner of a Global Security, a member of, or a participant in the
     Depository or other Person with respect to the accuracy of the records of
     the Depository or its nominee or of any participant or member thereof, with
     respect to any ownership interest in the Securities or with respect to the
     delivery to any participant, member, beneficial owner or other Person
     (other than the Depository) of any notice (including any notice of
     redemption) or the payment of any amount, under or with respect to such
     Securities. All notices and communications to be given to the Holders and
     all payments to be made to Holders under the Securities shall be given or
     made only to or upon the order of the registered Holders (which shall be
     the Depository or its nominee in the case of a Global Security). The rights
     of beneficial owners in any Global Security shall be exercised only through
     the Depository subject to the applicable rules and procedures of the
     Depository. The Trustee may rely and shall be fully protected in relying
     upon information furnished by the Depository with respect to its members,
     participants and any beneficial owners.

          (ii) The Trustee shall have no obligation or duty to monitor,
     determine or inquire as to compliance with any restrictions on transfer
     imposed under this Indenture or under applicable law with respect to any
     transfer of any interest in any Security (including any transfers between
     or among Depository participants, members or beneficial owners in any
     Global Security) other than to require delivery of such certificates and
     other documentation or evidence as are expressly required by, and to do so
     if and when expressly required by, the terms of this Indenture, and to
     examine the same to determine substantial compliance as to form with the
     express requirements hereof.

          2.4  CERTIFICATED SECURITIES.

               (a) A Global Security deposited with the Depository or with the
Trustee as Securities Custodian for the Depository pursuant to Section 2.1 shall
be transferred to the beneficial owners thereof in the form of Definitive
Securities in an aggregate principal amount equal to the principal amount of
such

<Page>

Global Security, in exchange for such Global Security, only if such transfer
complies with Section 2.3 hereof and (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for such Global
Security or if at any time such Depository ceases to be a "clearing agency"
registered under the Exchange Act and, in either case, a successor Depository is
not appointed by the Company within 90 days of such notice, or (ii) an Event of
Default has occurred and is continuing or (iii) the Company, in its sole
discretion, notifies the Trustee in writing that it elects to cause the issuance
of Definitive Securities under this Indenture.

               (b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section shall be surrendered by the Depository
to the Trustee located at its principal corporate trust office in the Borough of
Manhattan, The City of New York, to be so transferred, in whole or from time to
time in part, without charge, and the Trustee shall authenticate and deliver,
upon such transfer of each portion of such Global Security, an equal aggregate
principal amount of Definitive Securities of authorized denominations. Any
portion of a Global Security transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations of $1,000 principal
amount and any integral multiple thereof and registered in such names as the
Depository shall direct. Any Definitive Security delivered in exchange for an
interest in the Transfer Restricted Security shall, except as otherwise provided
by Section 2.3(e) hereof, bear the restricted securities legend set forth in
Exhibit 1 hereto.

               (c) Subject to the provisions of Section 2.4(b) hereof, the
registered Holder of a Global Security shall be entitled to grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.

               (d) In the event of the occurrence of one of the events specified
in Section 2.4(a) hereof, the Company shall promptly make available to the
Trustee a reasonable supply of Definitive Securities in definitive, fully
registered form without interest coupons.

<Page>

                                                                       EXHIBIT 1
                                                                              to
                                                 RULE 144A/REGULATION S APPENDIX

                       [FORM OF FACE OF INITIAL SECURITY]

                           [Global Securities Legend]

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

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

                         [RESTRICTED SECURITIES LEGEND]

          THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933(THE
"SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

          THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I)
IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (V) TO THE
COMPANY, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO,

<Page>

NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO
IN (A) ABOVE.

                 [Temporary Regulation S Global Security Legend]

          BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL
SECURITY WILL NOT BE EXCHANGEABLE FOR INTERESTS IN THE RULE 144A GLOBAL SECURITY
OR THE PERMANENT REGULATION S GLOBAL SECURITY OR ANY OTHER SECURITY REPRESENTING
AN INTEREST IN THE SECURITIES REPRESENTED HEREBY WHICH DO NOT CONTAIN A LEGEND
CONTAINING RESTRICTIONS ON TRANSFER, UNTIL THE EXPIRATION OF THE "40-DAY
DISTRIBUTION COMPLIANCE PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
REGULATION S UNDER THE SECURITIES ACT) AND THEN ONLY UPON CERTIFICATION IN FORM
REASONABLY SATISFACTORY TO THE TRUSTEE THAT SUCH BENEFICIAL INTERESTS ARE OWNED
EITHER BY NON-U.S. PERSONS OR U.S. PERSONS WHO PURCHASED SUCH INTERESTS IN A
TRANSACTION THAT DID NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT. DURING
SUCH 40-DAY DISTRIBUTION COMPLIANCE PERIOD, BENEFICIAL OWNERSHIP INTERESTS IN
THIS TEMPORARY REGULATION S GLOBAL SECURITY MAY ONLY BE SOLD, PLEDGED OR
TRANSFERRED THROUGH EUROCLEAR BANK S.A./N.A., AS OPERATOR OF THE EUROCLEAR
SYSTEM OR CLEARSTREAM BANKING, SOCIETE ANONYME AND ONLY (I) TO THE COMPANY, (II)
IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE
THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES
(I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES. HOLDERS OF INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL
SECURITY WILL NOTIFY ANY PURCHASER OF THIS SECURITY OF THE RESALE RESTRICTIONS
REFERRED TO ABOVE, IF THEN APPLICABLE.

<Page>

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

                    9 3/4% Senior Subordinated Note Due 2010

          Collins & Aikman Floorcoverings, Inc., a Delaware corporation,
promises to pay to Cede & Co., or registered assigns, the principal sum of
______________________________________________________________ Dollars on
February 15, 2010.

          Interest Payment Dates: February 15 and August 15, commencing August
15, 2002.

          Record Dates: February 1 and August 1.

          Additional provisions of this Security are set forth on the other side
of this Security.

                                                 COLLINS & AIKMAN
                                                 FLOORCOVERINGS, INC.,

                                                  by
                                                     --------------------------
                                                     Name:
                                                     Title:

                                                  by
                                                     ---------------------------
                                                     Name:
                                                     Title:

Dated:

TRUSTEE'S CERTIFICATE OF
     AUTHENTICATION

THE BANK OF NEW YORK,

  as Trustee, certifies
  that this is one of
  the Securities referred
  to in the Indenture.

    by

<Page>

       -----------------------------------
             Authorized Signatory

<Page>

                   [FORM OF REVERSE SIDE OF INITIAL SECURITY]

                    9 3/4% Senior Subordinated Note Due 2010

1.   INTEREST

          Collins & Aikman Floorcoverings, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above; PROVIDED,
HOWEVER, that if a Registration Default (as defined in the Registration Rights
Agreement) occurs, additional interest will accrue on this Security at a rate of
0.25% per annum (increasing by an additional 0.25% per annum after each
subsequent 90-day period that occurs after the date on which such Registration
Default occurs up to a maximum additional interest rate of 1.50% per annum) from
and including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured. The
Company will pay interest semiannually in arrears on February 15 and August 15
of each year, commencing August 15, 2002. Interest on the Securities will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from February 20, 2002. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.

2.   METHOD OF PAYMENT

          The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the February 1 or August 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of the Securities represented by a
Global Security (including principal, premium, if any, and interest) will be
made by wire transfer of immediately available funds to the accounts specified
by The Depository Trust Company. The Company will make all payments in respect
of a certificated Security (including principal, premium, if any, and interest)
by mailing a check to the registered address of each Holder thereof; PROVIDED,
HOWEVER, that payments on a certificated Security will

<Page>

be made by wire transfer to a U.S. dollar account maintained by the payee with a
bank in the United States if such Holder elects payment by wire transfer by
giving written notice to the Trustee or the Paying Agent to such effect
designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).

3.   PAYING AGENT AND REGISTRAR

          Initially, The Bank of New York, a New York banking corporation (the
"Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Company
or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or coregistrar.

4.   INDENTURE

          The Company issued the Securities under an Indenture dated as of
February 15, 2002 ("Indenture"), among the Company, the Subsidiary Guarantors
and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. SECTIONS 77aaa-77bbbb) as in effect on the date
of the Indenture (the "TIA"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the TIA for a statement of those terms.

          The Securities are general unsecured obligations of the Company. The
Company shall be entitled, subject to its compliance with Section 4.03 of the
Indenture, to issue Additional Securities pursuant to Section 2.13 of the
Indenture. The Initial Securities issued on the Issue Date, any Additional
Securities and all Exchange Securities or Private Exchange Securities issued in
exchange therefor will be treated as a single class for all purposes under the
Indenture. The Indenture contains covenants that limit the ability of the
Company and its subsidiaries to incur additional indebtedness; pay dividends or
distributions on, or redeem or repurchase capital stock; make investments; issue
or sell capital stock of subsidiaries; engage in transactions with affiliates;
transfer or sell assets; guarantee indebtedness; restrict dividends or other
payments of subsidiaries; and consolidate, merge or transfer all or
substantially all of its assets and the assets of its subsidiaries. These
covenants are subject to important

<Page>

exceptions and qualifications.

5.   OPTIONAL REDEMPTION

          Except as set forth below, the Company shall not be entitled to redeem
the Securities at its option prior to February 15, 2006.

          On and after February 15, 2006, the Company shall be entitled at its
option to redeem all or a portion of the Securities upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed in percentages of
principal amount on the redemption date), plus accrued interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing on February 15 of the years set
forth below:

<Table>
<Caption>
                                          Redemption
     Period                                 Price
     ------                               ---------
     <S>                                   <C>
     2006 ..........................       104.875%
     2007 ..........................       102.438%
     2008 and thereafter ...........       100.000%
</Table>

          Prior to February 15, 2005, the Company shall be entitled at its
option on one or more occasions to redeem Securities (which includes Additional
Securities, if any) in an aggregate principal amount not to exceed 35% of the
aggregate principal amount of the Securities (which includes Additional
Securities, if any) originally issued at a redemption price (expressed as a
percentage of principal amount) of 109.75%, plus accrued and unpaid interest to
the redemption date, with the net cash proceeds from one or more Equity
Offerings (PROVIDED that if the Equity Offering is an offering by Parent, a
portion of the net cash proceeds thereof equal to the amount required to redeem
any such Securities is contributed to the equity capital of the Company);
PROVIDED, HOWEVER, that (1) at least 65% of such aggregate principal amount of
Securities (which includes Additional Securities, if any) remains outstanding
immediately after the occurrence of each such redemption (other than Securities
held, directly or indirectly, by the Company or its Affiliates) and (2) each
such redemption occurs within 90 days after the date of the related Equity
Offering.

6.   NOTICE OF REDEMPTION

          Notice of redemption will be mailed at least 30 days

<Page>

but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at its registered address. Securities in denominations
larger than $1,000 principal amount may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.

7.   PUT PROVISIONS

          Upon a Change of Control, any Holder of Securities will have the right
to cause the Company to repurchase all or any part of the Securities of such
Holder at a purchase price equal to 101% of the principal amount of the
Securities to be purchased plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest due on the related interest payment date) as provided
in, and subject to the terms of, the Indenture.

          Under certain circumstances as set forth in the Indenture, the Company
will be required to offer to purchase Securities with the Net Available Cash
from Asset Dispositions.

8.   SUBORDINATION

          The Securities are subordinated to Senior Indebtedness of the Company,
as defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness of the Company must be paid before the Securities may be paid. The
Company agrees, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give it effect and appoints the Trustee as attorney-in-fact for such purpose.

9.   GUARANTY

          The payment by the Company of the principal of, and premium and
interest on, the Securities is unconditionally guaranteed on a joint and several
senior subordinated basis by each of the Subsidiary Guarantors.

10.  DENOMINATIONS; TRANSFER; EXCHANGE

          The Securities are in registered form without coupons

<Page>

in denominations of $1,000 principal amount and integral multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer or
exchange of any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.

11.  PERSONS DEEMED OWNERS

          The registered Holder of this Security may be treated as the owner of
it for all purposes.

12.  UNCLAIMED MONEY

          If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.

13.  DISCHARGE AND DEFEASANCE

          Subject to certain conditions, the Company at any time shall be
entitled to terminate some or all of its obligations under the Securities and
the Indenture if the Company deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.

14.  AMENDMENT, WAIVER

          Subject to certain exceptions set forth in the Indenture, (i) the
Indenture and the Securities may be amended with the written consent of the
Holders of at least a majority in aggregate principal amount outstanding of the
Securities (including consents obtained in connection with a tender offer or
exchange for the Securities) and (ii) any past default or noncompliance with any
provision may be waived with the written consent of the Holders of a majority in
aggregate principal

<Page>

amount outstanding of the Securities. Subject to certain exceptions set forth in
the Indenture, without the consent of any Securityholder, the Company, the
Subsidiary Guarantors and the Trustee shall be entitled to amend the Indenture
or the Securities to cure any ambiguity, omission, defect or inconsistency, or
to comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities, including Subsidiary Guaranties, or
to secure the Securities, or to add additional covenants or surrender rights and
powers conferred on the Company or the Subsidiary Guarantors, or to comply with
any request of the SEC in connection with qualifying the Indenture under the
Act, or to make any change that does not adversely affect the rights of any
Securityholder.

15.  DEFAULTS AND REMEDIES

          Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption pursuant to paragraph 5 of the
Securities, upon required purchase, upon declaration of acceleration or
otherwise; (iii) failure by the Company or any Subsidiary Guarantor to comply
with other agreements in the Indenture or the Securities, in certain cases
subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company, any Guarantor or any Significant Subsidiary if the
amount accelerated (or so unpaid) exceeds $10 million; (v) certain events of
bankruptcy or insolvency with respect to the Company, a Guarantor or any
Significant Subsidiary; (vi) certain judgments or decrees for the payment of
money in excess of $10 million; and (vii) certain defaults with respect to
Guaranties. If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the outstanding Securities may
declare all the Securities to be due and payable. Certain events of bankruptcy
or insolvency are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.

          Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives indemnity or security satisfactory to it.
Subject to certain limitations, Holders of a majority in aggregate principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from

<Page>

Securityholders notice of any continuing Default (except a Default in payment of
principal or interest) if it determines that withholding notice is not opposed
to the interest of the Holders.

16.  TRUSTEE DEALINGS WITH THE COMPANY

          Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.

17.  NO RECOURSE AGAINST OTHERS

          A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. By accepting a Security,
each Securityholder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.

18.  AUTHENTICATION

          This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.

19.  ABBREVIATIONS

          Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).

20.  CUSIP NUMBERS

          Pursuant to a recommendation promulgated by the

<Page>

Committee on Uniform Security Identification Procedures the Company has caused
CUSIP numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.

21.  HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT

          Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including the
obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein.

22.  GOVERNING LAW

          THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

          The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to:

          Collins & Aikman Floorcoverings, Inc.
          311 Smith Industrial Boulevard
          Dalton, GA 30722

          Attention: President

<Page>

--------------------------------------------------------------------------------
                                                                 ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

         (Print or type assignee's name, address and zip code)

         (Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                           agent to
transfer this Security on the books of the Company.  The agent
may substitute another to act for him.

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

Date:                      Your Signature:
      --------------------                  -------------------------

---------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.

In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

     (1)  -    in the United States to a "qualified institutional buyer" (as
               defined in Rule 144A under the Securities Act of 1933) that
               purchases for its own account or for the account of a qualified
               institutional buyer to whom notice is given that such transfer is
               being made in reliance on Rule 144A, in each case pursuant to and
               in compliance with Rule 144A under the Securities Act of 1933; or

     (2)  -    outside the United States in an offshore

<Page>

               transaction within the meaning of Regulation S under the
               Securities Act in compliance with Rule 904 under the Securities
               Act of 1933; or

     (3)  -    pursuant to the exemption from registration provided by Rule 144
               under the Securities Act of 1933; or

     (4)  -    pursuant to an effective registration statement under the
               Securities Act of 1933; or

     (5)  -    to the Company.

     If such transfer is being made pursuant to an offshore transaction in
     accordance with Rule 904 under the Securities Act, the undersigned further
     certifies that:

     (i)   the offer of the Securities was not made to a person in the United
     States;

     (ii) either (a) at the time the buy offer was originated, the transferee
     was outside the United States or we and any person acting on our behalf
     reasonably believed that the transferee was outside the United States, or
     (b) the transaction was executed in, on or through the facilities of a
     designated off-shore securities market and neither we nor any person acting
     on our behalf knows that the transaction has been pre-arranged with a buyer
     in the United States;

     (iii) no directed selling efforts have been made in the United States in
     contravention of the requirements of Rule 903 or Rule 904 of Regulation S,
     as applicable;

     (iv)  the transaction is not part of a plan or scheme to evade the
     registration requirements of the Securities Act;

     (v)   we have advised the transferee of the transfer restrictions
     applicable to the Securities; and

     (vi) if the circumstances set forth in Rule 904(B) under the Securities Act
     are applicable, we have complied with the additional conditions therein,
     including (if applicable) sending a confirmation or other notice stating
     that the Securities may be offered and sold during the distribution
     compliance period specified in Rule 903 of Regulation S; pursuant to
     registration of the Securities under the Securities Act; or pursuant to an
     available exemption from the registration requirements under the Securities
     Act. Unless one of the boxes is checked, the Trustee will refuse

<Page>

     to register any of the Securities evidenced by this certificate in the name
     of any person other than the registered holder thereof; PROVIDED, HOWEVER,
     that if box (2) or (3) is checked, the Trustee shall be entitled to
     require, prior to registering any such transfer of the Securities, such
     legal opinions, certifications and other information as the Company has
     reasonably requested to confirm that such transfer is being made pursuant
     to an exemption from, or in a transaction not subject to, the registration
     requirements of the Securities Act of 1933, such as the exemption provided
     by Rule 144 under such Act.

                                                     --------------------------
                                                               Signature

Signature Guarantee:

----------------------------                         --------------------------
Signature must be guaranteed                                   Signature

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

             TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED.

               The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.

Dated:
      ----------------                            ------------------------------

<Page>

                                                   NOTICE:  To be executed by
                                                            an executive officer

                      [TO BE ATTACHED TO GLOBAL SECURITIES]

<Page>

              SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

          The following increases or decreases in this Global Security have been
made:

<Table>
<Caption>
Date of      Amount of decrease   Amount of increase   Principal amount      Signature of
Exchange     in Principal         in Principal         of this Global        authorized
             amount of this       amount of this       Security following    signatory of
             Global Security      Global Security      such decrease or      Trustee or
                                                       increase              Securities
                                                                             Custodian
<S>          <C>                  <C>                  <C>                   <C>

</Table>

<Page>

                       OPTION OF HOLDER TO ELECT PURCHASE

          If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.09 of the Indenture, check the box:

                                       / /

          If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount
in principal amount: $

Date:                              Your Signature:
     ---------------                               ----------------------------
                                                   (Sign exactly as your name
                                                   appears on the other side of
                                                   this Security.)

Signature Guarantee:
                     ----------------------------------------------------------
                           (Signature must be guaranteed)

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

<Page>

                                                                       EXHIBIT A

                       [FORM OF FACE OF EXCHANGE SECURITY
                       OR PRIVATE EXCHANGE SECURITY*/**/]

----------
*/ If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".

**/ If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment, add
the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the
Assignment Form included in this Exhibit A with the Assignment Form included in
such Exhibit 1.

<Page>

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

                    9 3/4% Senior Subordinated Note Due 2010

          Collins & Aikman Floorcoverings, Inc., a Delaware corporation,
promises to pay to _________________, or registered assigns, the principal sum
of__________________________ Dollars on February 15, 2010.

          Interest Payment Dates: February 15 and August 15 commencing August
15, 2002.

          Record Dates: February 1 and August 1.

          Additional provisions of this Security are set forth on the other side
of this Security.

Dated:

                                            COLLINS & AIKMAN
                                            FLOORCOVERINGS, INC.

                                              by

                                                  Name:
                                                  Title:

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

TRUSTEE'S CERTIFICATE OF
     AUTHENTICATION

THE BANK OF NEW YORK,

  as Trustee, certifies
     that this is one of
     the Securities referred
     to in the Indenture.

 by
    -----------------------------
        Authorized Signatory

<Page>

                   [FORM OF REVERSE SIDE OF EXCHANGE SECURITY
                          OR PRIVATE EXCHANGE SECURITY]

                    9 3/4% Senior Subordinated Note Due 2010

1.   INTEREST

          Collins & Aikman Floorcoverings, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above; PROVIDED,
HOWEVER, THAT IF A REGISTRATION DEFAULT (AS DEFINED IN THE REGISTRATION RIGHTS
AGREEMENT) OCCURS, ADDITIONAL INTEREST WILL ACCRUE ON THIS SECURITY AT A RATE OF
0.25% PER ANNUM (INCREASING BY AN ADDITIONAL 0.25% PER ANNUM AFTER EACH
SUBSEQUENT 90-DAY PERIOD THAT OCCURS AFTER THE DATE ON WHICH SUCH REGISTRATION
DEFAULT OCCURS UP TO A MAXIMUM ADDITIONAL INTEREST RATE OF 1.50% PER ANNUM) FROM
AND INCLUDING THE DATE ON WHICH ANY SUCH REGISTRATION DEFAULT SHALL OCCUR TO BUT
EXCLUDING THE DATE ON WHICH ALL REGISTRATION DEFAULTS HAVE BEEN CURED. ***/The
Company will pay interest semiannually in arrears on February 15 and August 15
of each year, commencing August 15, 2002. Interest on the Securities will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from [insert last interest payment date on which interest was paid on
the Initial Securities or, if no interest has been paid on the Initial
Securities, insert the date of original issue of the Initial Securities].
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.

2.   METHOD OF PAYMENT

          The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the February 1 or August 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of the Securities represented by a
Global Security (including principal, premium, if any, and

----------
***/ Insert if at the date of issuance of the Exchange Security or Private
Exchange Security (as the case may be) any Registration Default has occurred
with respect to the related Initial Securities during the interest period in
which such date of issuance occurs.
interest) will be made by wire transfer of immediately available funds to the
accounts specified by The Depository Trust Company. The Company will make all
payments in respect of a certificated Security (including principal, premium and
interest) by mailing a

<Page>

check to the registered address of each Holder thereof; PROVIDED, HOWEVER, that
payments on a certificated Security will be made by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).

3.   PAYING AGENT AND REGISTRAR

          Initially, The Bank of New York, a New York banking corporation (the
"Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Company
or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.

4.   INDENTURE

          The Company issued the Securities under an Indenture dated as of
February 15, 2002 (the "Indenture"), among the Company, the Subsidiary
Guarantors and the Trustee. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. SECTIONS 77aaa-77bbbb) as in effect on the date
of the Indenture (the "TIA"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the TIA for a statement of those terms.

          The Securities are general unsecured obligations of the Company. The
Company shall be entitled, subject to its compliance with Section 4.03 of the
Indenture, to issue Additional Securities pursuant to Section 2.13 of the
Indenture. The Initial Securities issued on the Issue Date, any Additional
Securities and all Exchange Securities or Private Exchange Securities issued in
exchange therefor will be treated as a single class for all purposes under the
Indenture. The Indenture contains covenants that limit the ability of the
Company and its subsidiaries to incur additional indebtedness; pay dividends or
distributions on, or redeem or repurchase capital stock; make investments; issue
or sell capital stock of subsidiaries; engage in transactions with affiliates;
transfer or sell assets; guarantee indebtedness; restrict dividends or other
payments of subsidiaries; and consolidate, merge or transfer all or
substantially all of its assets and the assets of its subsidiaries. These
covenants are subject to important exceptions and qualifications.

5.   OPTIONAL REDEMPTION

          Except as set forth below, the Company shall not be entitled to redeem
the Securities at its option prior to

<Page>

February 15, 2006.

          On and after February 15, 2006, the Company shall be entitled at its
option to redeem all or a portion of the Securities upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed in percentages of
principal amount on the redemption date) plus accrued interest to the redemption
date (subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the 12-month period commencing on February 15 of the years set forth below:

<Table>
<Caption>
                                      Redemption
     Period                             Price
     ------                           ----------
     <S>                                <C>
     2006 ..........................    104.875%
     2007 ..........................    102.438%
     2008 and thereafter............    100.000%
</Table>

          Prior to February 15, 2005, the Company shall be entitled at its
option on one or more occasions to redeem Securities (which includes Additional
Securities, if any) in an aggregate principal amount not to exceed 35% of the
aggregate principal amount of the Securities (which includes Additional
Securities, if any) originally issued at a redemption price (expressed as a
percentage of principal amount) of 109.75%, plus accrued and unpaid interest to
the redemption date, with the net cash proceeds from one or more Equity
Offerings (PROVIDED that if the Equity Offering is an offering by Parent, a
portion of the Net Cash Proceeds thereof equal to the amount required to redeem
any such Securities is contributed to the equity capital of the Company);
PROVIDED, HOWEVER, that (1) at least 65% of such aggregate principal amount at
maturity of Securities (which includes Additional Securities, if any) remains
outstanding immediately after the occurrence of each such redemption (other than
Securities held, directly or indirectly, by the Company or its Affiliates); and
(2) each such redemption occurs within 90 days after the date of the related
Equity Offering.

6.   NOTICE OF REDEMPTION

          Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at its registered address. Securities in denominations larger than $1,000
principal amount may be redeemed in part but only in whole multiples of $1,000.
If money sufficient to pay the redemption price of and accrued interest on all
Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.

7.   PUT PROVISIONS

          Upon a Change of Control, any Holder of Securities will have the right
to cause the Company to repurchase all or any part

<Page>

of the Securities of such Holder at a purchase price equal to 101% of the
principal amount of the Securities to be purchased plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of holders of
record on the relevant record date to receive interest due on the related
interest payment date) as provided in, and subject to the terms of, the
Indenture.

          Under certain circumstances as set forth in the Indenture, the Company
will be required to offer to purchase Securities with the Net Available Cash
from Asset Dispositions.

8.   SUBORDINATION

          The Securities are subordinated to Senior Indebtedness of the Company,
as defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness of the Company must be paid before the Securities may be paid. The
Company agrees, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give it effect and appoints the Trustee as attorney-in-fact for such purpose.

9.   GUARANTY

          The payment by the Company of the principal of, and premium and
interest on, the Securities is unconditionally guaranteed on a joint and several
senior subordinated basis by each of the Subsidiary Guarantors.

10.  DENOMINATIONS; TRANSFER; EXCHANGE

          The Securities are in registered form without coupons in denominations
of $1,000 principal amount and integral multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange of
any Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.

11.  PERSONS DEEMED OWNERS

          The registered Holder of this Security may be treated as the owner of
it for all purposes.

12.  UNCLAIMED MONEY

          If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an

<Page>

abandoned property law designates another Person. After any such payment,
Holders entitled to the money must look only to the Company and not to the
Trustee for payment.

13.  DISCHARGE AND DEFEASANCE

          Subject to certain conditions, the Company at any time shall be
entitled to terminate some or all of its obligations under the Securities and
the Indenture if the Company deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.

14.  AMENDMENT, WAIVER

          Subject to certain exceptions set forth in the Indenture, (i) the
Indenture and the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
(including consents obtained in connection with a tender offer or exchange for
the Securities) and (ii) any past default or noncompliance with any provision
may be waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities. Subject to certain exceptions set forth in
the Indenture, without the consent of any Securityholder, the Company, the
Subsidiary Guarantors and the Trustee shall be entitled to amend the Indenture
or the Securities to cure any ambiguity, omission, defect or inconsistency, or
to comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities, including Subsidiary Guaranties, or
to secure the Securities, or to add additional covenants or surrender rights and
powers conferred on the Company or the Subsidiary Guarantors, or to comply with
any request of the SEC in connection with qualifying the Indenture under the
Act, or to make any change that does not adversely affect the rights of any
Securityholder.

15.  DEFAULTS AND REMEDIES

          Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption pursuant to paragraph 5 of the
Securities, upon required purchase, upon declaration of acceleration or
otherwise; (iii) failure by the Company or any Subsidiary Guarantor to comply
with other agreements in the Indenture or the Securities, in certain cases
subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company, any Guarantor or any Significant Subsidiary if the
amount accelerated (or so unpaid) exceeds $10 million; (v) certain events of
bankruptcy or insolvency with respect to the Company, a Guarantor or any
Significant Subsidiary; (vi) certain judgments or decrees for the payment of
money in excess of $10 million; and (vii) certain defaults with

<Page>

respect to Subsidiary Guaranties. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the outstanding Securities may declare all the Securities to be due and payable.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Events of Default.

          Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives indemnity or security satisfactory to it.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is not opposed to the interest of the Holders.

16.  TRUSTEE DEALINGS WITH THE COMPANY

          Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.

17.  NO RECOURSE AGAINST OTHERS

          A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. By accepting a Security,
each Securityholder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.

18.  AUTHENTICATION

          This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.

19.  ABBREVIATIONS

          Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).

<Page>

20.  CUSIP NUMBERS

          Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.

21.  HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT

          Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including the
obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein.****/

----------
****/ Delete if this Security is not being issued in exchange for an Initial
Security.

<Page>

22.  GOVERNING LAW.

          THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

          The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to:

          Collins & Aikman Floorcoverings, Inc.
          311 Smith Industrial Boulevard
          Dalton, GA 30722

          Attention: President

<Page>

--------------------------------------------------------------------------------
                                                                 ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

     (Print or type assignee's name, address and zip code)

     (Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                                  agent to transfer this
Security on the books of the Company.  The agent may substitute another to act
for him.

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

Date:                      Your Signature:
     ---------------------                 ------------------------------------

-------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.

<Page>

                       OPTION OF HOLDER TO ELECT PURCHASE

          If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.09 of the Indenture, check the box:

                                      / /

          If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount
in principal amount: $

Date:                    Your Signature:
     -------------------                 --------------------------------------
                                         (Sign exactly as your name appears on
                                         the other side of this Security.)

Signature Guarantee:
                    -------------------------------------------------------
                                (Signature must be guaranteed)

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

<Page>

                                                                       EXHIBIT B

                        FORM OF PARENT GUARANTY AGREEMENT

                     PARENT GUARANTY AGREEMENT, dated as of _________, 20__,
                     made by Tandus Group, Inc.("Parent") and Collins & Aikman
                     Floorcoverings, Inc. (the "Company"), in favor of the
                     Holders and the Trustee (as defined below).

          Reference is made to the Indenture (as the same may be amended,
restated, supplemented or modified from time to time, the "Indenture") entered
into among the Company, each of the Company's subsidiaries that are signatories
thereto and The Bank of New York, as trustee (the "Trustee"), dated as of
February 15, 2002 relating to the Securities.

          WHEREAS, Parent shall become a party to the Indenture through
execution of a Supplemental Indenture (the "Supplemental Indenture") to be dated
as of the date of this Parent Guaranty Agreement;

          WHEREAS, Parent directly owns all of the interests in the Company; and

          WHEREAS, the Company has agreed to cause Parent to Guarantee the
Securities pursuant to the terms of the Indenture, the Supplemental Indenture
and this Guaranty Agreement,

          NOW, THEREFORE, in consideration of the promises thereby, Parent
hereby agrees with and for the benefit of the Holders as follows:

                                    ARTICLE 1

                                   DEFINITIONS

          SECTION 1.01. DEFINED TERMS. As used in this Parent Guaranty
Agreement, terms that shall be defined in the Indenture (to the extent not
otherwise defined herein) or in the preamble or recitals hereto are used herein
as shall therein be defined.

                                    ARTICLE 2

                                 PARENT GUARANTY

          SECTION 2.01. GUARANTY. Parent hereby unconditionally and irrevocably
guarantees to each Holder of a Security authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of and interest on the Securities when due,
whether at maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Company under the Indenture and the Securities and
(b) the full and punctual performance within applicable grace periods of all
other obligations of the Company under the Indenture and the Securities (all the
foregoing being

<Page>

hereinafter collectively called the "Indenture Obligations"). Parent further
agrees that the Indenture Obligations may be extended or renewed, in whole or in
part, without notice or further assent from Parent and that Parent shall remain
bound under this Article 2 notwithstanding any extension or renewal of any
Indenture Obligation.

          Parent waives presentation to, demand of, payment from and protest to
the Company of any of the Indenture Obligations and also waives notice of
protest for nonpayment. Parent waives notice of any default under the Securities
or the Indenture Obligations. The obligations of Parent hereunder shall not be
affected by (a) the failure of any Holder or the Trustee to assert any claim or
demand or to enforce any right or remedy against the Company or any other Person
under the Indenture, the Securities or any other agreement or otherwise; (b) any
extension or renewal of any thereof; (c) any rescission, waiver, amendment or
modification of any of the terms or provisions of the Indenture, the Securities
or any other agreement; (d) the release of any security held by any Holder or
the Trustee for the Indenture Obligations or any of them; (e) the failure of any
Holder or the Trustee to exercise any right or remedy against any other
guarantor of the Indenture Obligations; or (f) any change in the ownership of
Parent.

          Parent further agrees that its Guaranty herein constitutes a guarantee
of payment, performance and compliance when due (and not a guarantee of
collection) and waives any right to require that any resort be had by any Holder
or the Trustee to any security held for payment of the Indenture Obligations.

          The Parent Guaranty is, to the extent and in the manner set forth in
Article 3, subordinated and subject in right of payment to the prior payment in
full of the principal of and premium, if any, and interest on all Senior
Indebtedness of Parent and the Parent Guaranty is made subject to such
provisions of the Indenture.

          Except as expressly set forth in Sections 8.01(b) of the Indenture and
as expressly set forth in Section 2.02, the obligations of Parent hereunder
shall not be subject to any reduction, limitation, impairment or termination for
any reason, including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense of setoff, counterclaim,
recoupment or termination whatsoever or by reason of the invalidity, illegality
or unenforceability of the Indenture Obligations or otherwise. Without limiting
the generality of the foregoing, the obligations of Parent herein shall not be
discharged or impaired or otherwise affected by the failure of any Holder or the
Trustee to assert any claim or demand or to enforce any remedy under the
Indenture, the Securities or any other agreement, by any waiver or modification
of any thereof, by any default, failure or delay, willful or otherwise, in the
performance of the obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of Parent or would otherwise operate as a discharge of
Parent as

<Page>

a matter of law or equity.

          Each Subsidiary Guarantor further agrees that its Guarantee herein
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of principal of or interest on any Obligation
is rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Company or otherwise.

          In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against Parent by
virtue hereof, upon the failure of the Company to pay the principal of or
interest on any Indenture Obligation when and as the same shall become due,
whether at maturity, by acceleration, by redemption or otherwise, or to perform
or comply with any other Indenture Obligation, Parent hereby promises to and
shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to
be paid, in cash, to the Holders or the Trustee an amount equal to the sum of
(1) the unpaid amount of such Indenture Obligations, (2) accrued and unpaid
interest on such Indenture Obligations (but only to the extent not prohibited by
law) and (3) all other monetary Indenture Obligations of the Company to the
Holders and the Trustee.

          Parent agrees that it shall not be entitled to any right of
subrogation in respect of any Indenture Obligations guaranteed hereby until
payment in full of all Indenture Obligations and all obligations to which the
Indenture Obligations are subordinated as provided in Article 3. Parent further
agrees that, as between it, on the one hand, and the Holders and the Trustee, on
the other hand, (x) the maturity of the Indenture Obligations Guaranteed hereby
may be accelerated as provided in Article 6 of the Indenture for the purposes of
Parent's Parent Guaranty herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Indenture Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such Indenture Obligations as provided in Article 6 of the Indenture, such
Indenture Obligations (whether or not due and payable) shall forthwith become
due and payable by Parent for the purposes of this Section.

          Parent also agrees to pay any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing
any rights under this Section.

          SECTION 2.02. SUCCESSORS AND ASSIGNS. This Article 2 shall be binding
upon Parent and its successors and assigns and shall enure to the benefit of the
successors and assigns of the Trustee and the Holders and, in the event of any
transfer or assignment of rights by any Holder or the Trustee, the rights and
privileges conferred upon that party in the Indenture and in the Securities
shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of the Indenture.

<Page>

          SECTION 2.03. NO WAIVER. Neither a failure nor a delay on the part of
either the Trustee or the Holders in exercising any right, power or privilege
under this Article 2 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 2 at law,
in equity, by statute or otherwise.

          SECTION 2.04. MODIFICATION. No modification, amendment or waiver of
any provision of this Article 2, nor the consent to any departure by Parent
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Trustee, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on Parent in any case shall entitle Parent to any other or further
notice or demand in the same, similar or other circumstances.

                                    ARTICLE 3

                        SUBORDINATION OF PARENT GUARANTY

          SECTION 3.01. AGREEMENT TO SUBORDINATE. Parent agrees, and each
Securityholder by accepting a Security agrees, that the Indebtedness evidenced
by Parent's Parent Guaranty is subordinated in right of payment, to the extent
and in the manner provided in this Article 3, to the prior payment in full in
cash of all Senior Indebtedness of Parent and that the subordination is for the
benefit of and enforceable by the holders of such Senior Indebtedness. The
Indenture Obligations of Parent shall in all respects rank PARI PASSU with all
other Senior Subordinated Indebtedness of Parent and only Senior Indebtedness of
Parent (including Parent's Guaranty of Senior Indebtedness of the Company) shall
rank senior to the Indenture Obligations of Parent in accordance with the
provisions set forth herein.

          SECTION 3.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment
or distribution upon a total or partial liquidation or dissolution of Parent or
in a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to Parent or its property:

          (1) holders of Senior Indebtedness of Parent shall be entitled to
     receive payment in full in cash of such Senior Indebtedness before
     Securityholders shall be entitled to receive any payment pursuant to the
     Parent Guaranty; and

          (2) until the Senior Indebtedness of Parent is paid in full in cash,
     any payment or distribution to which Securityholders would be entitled but
     for this Article 3 shall be made to holders of such Senior Indebtedness as
     their interests may appear, except that Securityholders may

<Page>

     receive shares of stock and any debt securities of Parent that are
     subordinated to such Senior Indebtedness to at least the same extent as the
     Parent Guaranty.

          SECTION 3.03. DEFAULT ON SENIOR INDEBTEDNESS OF PARENT. Parent shall
not make its Parent Guaranty nor purchase, redeem or otherwise retire or defease
any Securities or other Indenture Obligations (collectively, "pay its Guaranty")
if either of the following (a "Payment Default") occurs (1) any Designated
Senior Indebtedness of Parent is not paid in full in cash when due; or (2) any
other default on Designated Senior Indebtedness of Parent occurs and the
maturity of such Designated Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, the Payment Default has been cured or
waived and any such acceleration has been rescinded or such Designated Senior
Indebtedness has been paid in full in cash; PROVIDED, HOWEVER, that Parent shall
be entitled to pay its Parent Guaranty without regard to the foregoing if Parent
and the Trustee receive written notice approving such payment from the
Representatives of all Designated Senior Indebtedness with respect to which the
Payment Default has occurred and is continuing. During the continuance of any
default (other than a Payment Default) with respect to any Designated Senior
Indebtedness of Parent pursuant to which the maturity thereof may be accelerated
without further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, Parent shall
not pay its Parent Guaranty for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee of (with a copy to Parent) written
notice (a "Blockage Notice") of such default from the Representative of such
Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter. The Payment Blockage Period
shall end earlier if such Payment Blockage Period is terminated (1) by written
notice to the Trustee and Parent from the Person or Persons who gave such
Blockage Notice; (2) because the default giving rise to such Blockage Notice is
cured, waived or otherwise no longer continuing; or (3) because such Designated
Senior Indebtedness has been discharged or repaid in full in cash.
Notwithstanding the provisions described in the immediately preceding two
sentences (but subject to the provisions contained in the first sentence of this
Section), unless a Payment Default exists, Parent shall be entitled to resume
payments pursuant to its Parent Guaranty after termination of such Payment
Blockage Period. Parent shall not be subject to more than one Blockage Period in
any consecutive 360-day period, irrespective of the number of defaults with
respect to Designated Senior Indebtedness of Parent during such period;
PROVIDED, HOWEVER, that if any Blockage Notice within such 360-day period is
delivered to the Trustee by or on behalf of any holders of Designated Senior
Indebtedness of Parent (other than holders of the Bank Indebtedness), a
Representative of holders of the Bank Indebtedness shall be entitled to give
another Blockage Notice within such period; PROVIDED FURTHER, HOWEVER, that in
no event shall the total number of days during which any Payment Blockage Period
or Periods is in effect exceed 179 days in the aggregate during any
360-consecutive day period, and there must be 181 days

<Page>

during any consecutive 360-day period during which no Payment Blockage Period is
in effect. For purposes of this Section, no default or event of default which
existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness of Parent
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event of default shall have been cured
or waived for a period of not less than 90 consecutive days.

          SECTION 3.04. DEMAND FOR PAYMENT. If a demand for payment is made on
Parent pursuant to Article 2, the Trustee shall promptly notify the holders of
the Designated Senior Indebtedness of Parent (or their Representatives) of such
demand.

          SECTION 3.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a distribution
is made to Securityholders that because of this Article 3 should not have been
made to them, the Securityholders who receive the distribution shall hold it in
trust for holders of Senior Indebtedness of Parent and pay it over to them or
their Representatives as their interests may appear.

          SECTION 3.06. SUBROGATION. After all Senior Indebtedness of Parent is
paid in full and until the Securities are paid in full, Securityholders shall be
subrogated (equally and ratably with all other Indebtedness PARI PASSU with the
Parent Guaranty) to the rights of holders of such Senior Indebtedness to receive
distributions applicable to Senior Indebtedness of Parent. A distribution made
under this Article 3 to holders of such Senior Indebtedness which otherwise
would have been made to Securityholders is not, as between Parent and
Securityholders, a payment by Parent on such Senior Indebtedness.

          SECTION 3.07. RELATIVE RIGHTS. This Article 3 defines the relative
rights of Securityholders and holders of Senior Indebtedness of Parent. Nothing
in the Indenture shall:

          (1) impair, as between Parent and Securityholders, the obligation of
     Parent, which is absolute and unconditional, to pay its Parent Guaranty to
     the extent set forth in Article 2; or

          (2) prevent the Trustee or any Securityholder from exercising its
     available remedies upon a default by Parent under its Parent Guaranty,
     subject to the rights of holders of Senior Indebtedness of Parent to
     receive distributions otherwise payable to Securityholders.

          SECTION 3.08. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right
of any holder of Senior Indebtedness of Parent to enforce the subordination of
the Parent Guaranty shall be impaired by any act or failure to act by Parent or
by its failure to comply with the Indenture.

          SECTION 3.09. RIGHTS OF TRUSTEE AND PAYING AGENT.

<Page>

Notwithstanding Section 3.03, the Trustee or Paying Agent shall continue to make
payments on the Parent Guaranty and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives written notice satisfactory to it that such
payments are prohibited by this Article 3. The Company, Parent, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness of Parent shall be entitled to give the notice; PROVIDED, HOWEVER,
that, if an issue of Senior Indebtedness of Parent has a Representative, only
the Representative shall be entitled to give the notice.

          The Trustee in its individual or any other capacity shall be entitled
to hold Senior Indebtedness of Parent with the same rights it would have if it
were not the Trustee. The Registrar and co-registrar and the Paying Agent may do
the same with like rights. The Trustee shall be entitled to all the rights set
forth in this Article 3 with respect to any Senior Indebtedness of Parent which
may at any time be held by it, to the same extent as any other holder of such
Senior Indebtedness; and nothing in Article 7 of the Indenture shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article 3 shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
7.07 of the Indenture.

          SECTION 3.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever any
Person is to make a distribution or give a notice to holders of Senior
Indebtedness of Parent, such Person shall be entitled to make such distribution
or give such notice to their Representative (if any).

          SECTION 3.11. ARTICLE 3 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO DEMAND PAYMENT. The failure to make a payment pursuant to the Parent
Guaranty by reason of any provision in this Article 3 shall not be construed as
preventing the occurrence of a Default. Nothing in this Article 3 shall have any
effect on the right of the Securityholders or the Trustee to make a demand for
payment on Parent pursuant to its Parent Guaranty.

          SECTION 3.12. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article 3, the Trustee and the Securityholders
shall be entitled to rely (1) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 3.02
are pending, (2) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the
Securityholders or (3) upon the Representatives for the holders of Senior
Indebtedness of Parent for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of such Senior
Indebtedness and other indebtedness of Parent, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 3. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder

<Page>

of Senior Indebtedness of Parent to participate in any payment or distribution
pursuant to this Article 3, the Trustee shall be entitled to request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness of Parent held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article 3, and, if such
evidence is not furnished, the Trustee shall be entitled to defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment. The provisions of Sections 7.01 and 7.02 of the Indenture
shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article 3.

          SECTION 3.13. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Securityholder
by accepting a Security authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Securityholders and the holders of Senior Indebtedness
of Parent as provided in this Article 3 and appoints the Trustee as
attorney-in-fact for any and all such purposes.

          SECTION 3.14. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS
OF PARENT. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of Parent and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to Securityholders or the
Company or any other Person, money or assets to which any holders of such Senior
Indebtedness shall be entitled by virtue of this Article 3 or otherwise.

          SECTION 3.15. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS OF PARENT ON
SUBORDINATION PROVISIONS. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of Parent, whether such Senior Indebtedness was created or acquired
before or after the issuance of the Securities, to acquire and continue to hold,
or to continue to hold, such Senior Indebtedness and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.

                                    ARTICLE 4

                           LIMITATIONS ON INDEBTEDNESS

          SECTION 4.01. LIMITATIONS ON INDEBTEDNESS. Parent hereby agrees that
it shall not Incur (1) any Indebtedness if such Indebtedness is subordinate in
right or payment to any Senior Indebtedness of Parent, unless such Indebtedness
is Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness of Parent or (2) any Secured
Indebtedness (for borrowed money) that is not

<Page>

Senior Indebtedness of such Person unless contemporaneously therewith such
Person makes effective provision to secure the Parent Guaranty equally and
ratably with such Secured Indebtedness for so long as such Secured Indebtedness
is secured by a Lien.

                                    ARTICLE 5

                                SUCCESSOR COMPANY

          SECTION 5.01. WHEN PARENT MAY MERGE OR TRANSFER ASSETS. Parent hereby
agrees to be bound by the provisions of Section 5.01(c) of the Indenture.

                                    ARTICLE 6

                                  MISCELLANEOUS

          SECTION 6.01. NOTICES. All notices and other communications pertaining
to this Parent Guaranty Agreement shall be deemed to have been duly given (a) at
the time delivered by hand, if personally delivered, (b) five Business Days
after being deposited in the mail, postage prepaid, if mailed, (c) when answered
back, if telexed, (d) when receipt is acknowledged, if telecopied, and (e) the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. Such notices shall be delivered by hand,
or mailed, certified or registered mail with postage prepaid (x) if to Parent,
at the Issuer's address set forth in the Indenture, and (y) if to the Holders or
the Trustee, as provided in the Indenture. The Issuer, Parent and the Trustee
may, by notice to the others, designate additional or different addresses for
subsequent notices or communications.

          SECTION 6.02. PARTIES. Nothing expressed or mentioned in this Parent
Guaranty Agreement is intended or shall be construed to give any Person, firm or
corporation, other than the Holders and the Trustee, any legal or equitable
right, remedy or claim under or in respect of this Parent Guaranty Agreement or
any provision herein contained.

          SECTION 6.03. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THESE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

          SECTION 6.04. SEVERABILITY CLAUSE. In case any provision of this
Parent Guaranty Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be ineffective only to the extent of such invalidity, illegality or
unenforceability.

          SECTION 6.05. WAIVERS, AMENDMENTS AND REMEDIES. The failure to insist
in any one or more instances upon strict performance of any of the provisions of
this Parent Guaranty

<Page>

Agreement or to take advantage of any of its rights hereunder shall not be
construed as a waiver of any such provisions or the relinquishment of any such
rights, but the same shall continue and remain in full force and effect. Except
as otherwise expressly limited in this Parent Guaranty Agreement, all remedies
under this Parent Guaranty Agreement shall be cumulative and in addition to
every other remedy provided for herein or by law.

          SECTION 6.06. HEADINGS. The headings of the Articles and the sections
in this Parent Guaranty Agreement are for convenience of reference only and
shall not be deemed to alter or affect the meaning or interpretation of any
provisions thereof.

          SECTION 6.07. EFFECTIVENESS. Notwithstanding anything herein to the
contrary, this Agreement shall not take effect until [the Closing Date], the
representations and warranties set forth in this Agreement shall be deemed to be
made solely as of [the Closing Date], and the covenants, agreements and other
obligations created by this Agreement shall only apply prospectively from [the
Closing Date] and shall have no retroactive effect.

<Page>

          IN WITNESS WHEREOF, Parent has duly executed this Parent Guaranty
Agreement as of the date first above written.

                                                TANDUS GROUP, INC.,

                                                  by:
                                                      ------------------------
                                                      Name:
                                                      Title:

     Acknowledged:

     COLLINS & AIKMAN FLOORCOVERINGS, INC

      by
          -----------------------
          Name:
          Title:

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