Document:

Exhibit 10.1
                STOCK PURCHASE AND REGISTRATION RIGHTS AGREEMENT

     STOCK PURCHASE AND REGISTRATION RIGHTS AGREEMENT, dated as of June 3, 2003,
between  DIRECT  INSITE  CORP.,  a Delaware  corporation  (the  "Company"),  and
METROPOLITAN  VENTURE  PARTNERS II, L.P., a Delaware  limited  partnership  (the
"Purchaser").

     WHEREAS,  pursuant to the terms and  conditions  of the Stock  Purchase and
Registration  Rights  Agreement  dated as of September 25, 2002 (the  "September
2002  Agreement")  by and between the Company and the  Purchaser,  the Purchaser
acquired 93,458 shares of the Company's  Series A Convertible  Preferred  Stock,
par value $0.0001 per share (the "Preferred Stock");

     WHEREAS,  pursuant to the terms and  conditions  of the Stock  Purchase and
Registration  Rights Agreement dated as of December 24, 2002 (the "December 2002
Agreement") by and between the Company and the Purchaser, the Purchaser acquired
23,365 additional shares of the Preferred Stock;

     WHEREAS, the Purchaser desires to subscribe for, and the Company desires to
issue to the  Purchaser,  17,857  shares  ("Purchased  Preferred  Stock") of the
Company's  Preferred  Stock, all upon the terms and conditions set forth in this
Agreement; and

     WHEREAS,  the parties  desire to restate  Section 6 of the  September  2002
Agreement  and the December  2002  Agreement to insure that the same  provisions
apply to the  registration  rights of the holders of all Registrable  Securities
(as defined below);

     NOW,  THEREFORE,  in  consideration  of the  foregoing  and  of the  mutual
premises,  covenants,  representations  and warranties herein  contained,  it is
hereby agreed as follows:

1.      Definitions.

     1.1 Except for any terms that are defined elsewhere in this Agreement,  the
following  terms,  as used  herein,  have the  following  meanings:

     "Accredited Investor" has the meaning set forth in Rule 501 of Regulation D
promulgated under the Securities Act.

     "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.

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     "Agreement"  means this Stock Purchase and Registration  Rights  Agreement,
together  with all Exhibits and  Schedules  hereto,  as the same may be amended,
supplemented or modified in accordance with the terms hereof from time to time.

     "Amendment"  means such  amendments  and changes being made to the terms of
the Preferred  Stock by means of the Certificate of Amendment to the Certificate
of Designation, in substantially the form of Exhibit A hereto.

     "Annual Report" has the meaning set forth in Section 3.9 hereof.

     "Balance Sheet" has the meaning set forth in Section 3.9 hereof.

     "Balance Sheet Date" has the meaning set forth in Section 3.9 hereof.

     "Board of Directors" means the board of directors of the Company.

     "Cause" means, with respect to the Purchaser Designee,  as applicable,  (i)
any act of breach of such  individual's  fiduciary  duty to the  Company  or its
stockholders  by  the  Purchaser   Designee  which  under   applicable  law  (A)
constitutes a violation of any legal obligation of the Purchaser Designee to the
Company  or (B)  creates  or results in any  material  legal  liability  for the
Company;  (ii) the Purchaser  Designee is convicted of, or pleads guilty or nolo
contendere with respect to, theft, fraud or a felony under federal or applicable
state law; or (iii) if such individual  commits and is convicted of any act that
results  in the  Company  or any  member  of the  Board of  Directors  suffering
liability under federal or applicable state law for  discrimination or sexual or
other forms of harassment or other similar liabilities from any employees of the
Company or any of its Affiliates.

     "Certificate  of  Designation"  means the Certificate of Designation of the
Company,  dated as of October 4, 2002, as amended by a Certificate  of Amendment
dated as of December 20, 2002 and by the Amendment,  which,  among other things,
sets forth the number, designation, relative rights, preferences and limitations
of the Preferred Stock as fixed by the Board of Directors.

     "Certificate of  Incorporation"  means the certificate of  incorporation of
the Company, as amended.

     "Closing" means the closing of the sale of the Purchased Preferred Stock by
the Company to the Purchaser.

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

     "Commission"  means the Securities  and Exchange  Commission or any similar
agency then having  jurisdiction  to enforce the  Securities Act or the Exchange
Act.

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     "Common Stock" means the common stock,  par value $0.0001 per share, of the
Company.

     "Company" has the meaning set forth in the preamble of this Agreement.

     "Company  Indemnified  Person" has the meaning set forth in Section  6.6(b)
hereof.

     "December 2002 Agreement" has the meaning set forth in the recitals to this
Agreement.

     "Disclosure Schedule" means the Disclosure Schedule of the Company attached
to this Agreement and hereby made a part hereof.

     "Effectiveness Period" has the meaning set forth in Section 6.1(a) hereof.

     "Environmental  Law" means any federal,  state, or local (including  common
law), statute,  code, ordinance,  rule, regulation or other requirement relating
to the environment,  or natural resources,  and includes, but is not limited to,
the  Comprehensive  Environmental  Response,  Compensation and Liability Act, 42
U.S.C.  Section 9601 et seq.,  the Hazardous  Materials  Transportation  Act, 49
U.S.C.  Section 1801 et seq.,  the Resource  Conservation  and Recovery  Act, 42
U.S.C.  Section  6901 et seq.,  the Clean Water Act, 33 U.S.C.  Section  1251 et
seq., the Clean Air Act, 33 U.S.C.  2601 et seq., the Toxic  Substances  Control
Act, 15 U.S.C.  Section 2601 et seq., the Federal  Insecticide,  Fungicide,  and
Rodenticide Act, 7 U.S.C. Section 136 et seq., the Oil Pollution Act of 1990, 33
U.S.C.  Section  2701 et seq.  and the  Occupational  Safety and Health  Act, 29
U.S.C.  Section 651 et seq., as such laws have been and may from time to time be
further  amended  or  supplemented,  and the  regulations  promulgated  pursuant
thereto.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended.

     "Exchange Act" means the Securities  Exchange Act of 1934, as amended,  and
the rules and regulations of the Commission thereunder.

     "Financial Statements" has the meaning set forth in Section 3.9 hereof.

     "Form 10-Q" has the meaning set forth in Section 3.9 hereof.

     "Hazardous   Substances"   or  "Hazardous   Waste"  means  any   pollutant,
contaminant,  chemical or  industrial  or toxic  substance  or waste,  petroleum
products,   asbestos,  urea  formaldehyde,   radon,  polychlorinated  biphenyls,
flammable explosives,  nuclear radioactive fuel or waste or any other substance,
waste,  material,  substance,  pollutant  or  contaminant  that is  defined as a
hazardous waste or substance under any applicable  Environmental  Law and/or any

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substance for which the generation,  manufacture,  storage, treatment or release
is prohibited or regulated under any applicable Environmental Law.

     "Holder" shall mean any Person that owns Registrable Securities,  including
such  successors  and  assigns as acquire  Registrable  Securities,  directly or
indirectly,  from such Person.  For purposes of this Agreement,  the Company may
deem the registered holder of a Registrable Security as the Holder thereof.

     "Indemnifiable Costs and Expenses" has the meaning ascribed to such term in
Section 6.6(a)(i) hereof.

     "Liens" means any and all security interests, liens, claims,  encumbrances,
pledges, options, Taxes and charges of any kind or nature.

     "Managing Underwriter" has the meaning set forth in Section 6.1(c) hereof.

     "Material  Adverse Effect" means,  with respect to the Company,  a material
adverse  effect on the business,  assets,  condition  (financial or  otherwise),
results of operations or prospects of the Company and its subsidiaries  taken as
a whole.

     "Material Development Election" shall have the meaning set forth in Section
6.4(a) hereof.

     "Other  Approved  Holders"  shall  mean  holders  of  Common  Stock  having
registration rights with respect to the Common Stock, other than pursuant to the
terms of this Agreement.

     "Person" means any individual, company, corporation,  partnership,  limited
liability  company,   trust,  division,   governmental,   quasi-governmental  or
regulatory entity or authority or other entity.

     "Plans" has the meaning set forth in Section 3.24(a) hereof.

     "Preferred  Stock"  has the  meaning  set  forth  in the  recitals  to this
Agreement;  provided,  however, that for the avoidance of doubt, Preferred Stock
shall include the Purchased  Preferred  Stock and the Preferred  Stock issued to
the  Purchaser  pursuant to the September  2002  Agreement and the December 2002
Agreement.

     "Prospectus" shall mean the prospectus (including a preliminary prospectus)
included  in  any  Registration  Statement,  as  amended  or  supplemented  by a
prospectus  supplement  with respect to the terms of the offering of any portion
of the Registrable  Securities covered by such Registration Statement and by all
other  amendments and  supplements to the prospectus,  including  post-effective
amendments and all material incorporated by reference in such prospectus.

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     "Purchase Price" has the meaning set forth in Section 2.1 hereof.

     "Purchased  Preferred  Stock" has the meaning set forth in the  recitals to
this Agreement.

     "Purchaser" has the meaning set forth in the preamble to this Agreement.

     "Purchaser  Designee"  has the  meaning  assigned  to such term in  Section
5.1(a) hereof.

     "Purchaser Expenses" means all legal and out-of-pocket  expense incurred by
the Purchaser or its agents in connection with the transactions  contemplated by
this Agreement,  in an amount not to exceed $10,000 in the aggregate,  including
all fees and  expenses of Kramer Levin  Naftalis & Frankel  LLP,  counsel to the
Purchaser, incurred in connection with the Transaction Documents.

     "Purchaser  Indemnified Person" has the meaning set forth in Section 7.1(a)
hereof.

     "Registrable  Securities"  shall mean the Common Stock issuable on or after
the date hereof upon  conversion  of the  Preferred  Stock and any other capital
stock or other  securities  issued or issuable  as a result of or in  connection
with any stock  dividend,  stock  split or  reverse  stock  split,  combination,
recapitalization,   reclassification,   merger   or   consolidation,   exchange,
distribution  or similar  transaction in respect of the Preferred  Stock or such
Common Stock.

     "Registration  Expenses" shall have the definition set forth in Section 6.5
hereof.

     "Registration Statement" shall mean any registration statement which covers
any of the Registrable  Securities pursuant to the provisions of this Agreement,
including the Prospectus  included  therein,  all amendments and  supplements to
such  Registration  Statement,  including  post-effective  amendments,  and  all
exhibits  and all  material  incorporated  by  reference  in  such  Registration
Statement.

     "Requesting  Securityholder"  has the  meaning  set  forth in  Section  6.2
hereof.

     "Rule 144" shall mean Rule 144  promulgated  under the  Securities  Act, as
amended  from time to time,  or any similar  successor  rule thereto that may be
promulgated by the Commission.

     "Rule 144A" shall mean Rule 144A  promulgated  under the Securities Act, as
amended  from time to time,  or any similar  successor  rule thereto that may be
promulgated by the Commission.

     "SEC  Filings"  means all  forms,  reports  and  documents  filed  with the
Commission  pursuant to the Securities Act and Exchange Act from January 1, 2001
through the date hereof.

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     "Securities  Act" means the  Securities  Act of 1933,  as amended,  and the
rules and regulations of the Commission thereunder.

     "Senior  Indebtedness"  means the  principal  of and  premium,  if any, and
interest on:

     (a)  all  indebtedness  of  the  Company  and  its   subsidiaries   whether
outstanding on the date of this Agreement or hereafter created and which is;

     (i) for money borrowed from a commercial lending  institution,  whether the
same  be  evidenced  by  bonds,  notes  or  debentures  or  evidenced  by a loan
agreement, promissory note or an indenture or similar instrument; or

     (ii) secured by mortgage or other security instrument  (including,  without
limitation,  conditional sales  agreements,  chattel  mortgages,  purchase money
bonds or notes or debentures or mortgages, mortgages made or given or guaranteed
by the Company as  mortgagor or guarantor  and assumed or  guaranteed  mortgages
upon   property)  for  the  payment  of  which  the  Company  is,   directly  or
contingently, liable or on which the Company customarily pays interest; and

     (iii) all obligations of the Company as lessee,  or as the guarantor of any
lessee,  under  leases  of  personal  property  of any  kind  or  nature  and/or
equipment; and

     (b) all renewals,  extensions and refundings of any such indebtedness or of
any such obligations.

     "September  2002  Agreement"  has the meaning set forth in the  recitals to
this Agreement.

     "Stock Option  Plans" means,  collectively,  the 1993  Non-Qualified  Stock
Option Plans, the 1995 Stock Option Plan, the 2000 Stock Option Plan, 2001 Stock
Option/stock  Issuance  Plan,  2001-A Stock  Option Plan,  the 2002 Stock Option
Plan,  the 2002-A Stock Plan,  the 2003 Stock Option Plan,  and the 2003/A Stock
Option Plan.

     "Suspension  Period"  shall have the  meaning  set forth in Section  6.4(a)
hereof.

     "To the best knowledge of the Company" means the actual knowledge of Warren
Wright, Robert L. Carberry, James A. Cannavino or George Aronson.

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     "Threshold  Percentage"  means either (A) 50.1 percent of (i) the aggregate
shares of  Preferred  Stock issued and  outstanding  immediately  following  the
Closing or (ii) the  shares of Common  Stock  issuable  upon  conversion  of the
Preferred  Stock  as the  same  may be  adjusted  pursuant  to the  terms of the
Certificate  of  Designation,  or (B) where the aggregate of the  percentages of
(A)(i) and (A)(ii) equals or exceeds 50.1 percent.

     "Transaction  Documents"  means this  Agreement  (including  the Disclosure
Schedule),  the Amendment  and any other  documents,  instruments  or agreements
executed by any of the parties hereto in connection herewith or therewith.

The foregoing  definitions shall be equally  applicable to both the singular and
plural forms of the defined terms. The use of the word "including"  herein shall
be  interpreted  to mean  "including,  without  limitation,"  unless the context
clearly requires another interpretation.

     2. Authorization and Sale of the Purchased Preferred Stock.

     2.1  Purchase  and Sale of Purchased  Preferred  Stock.  In reliance on the
representations  and  warranties  contained  herein and subject to the terms and
conditions  hereof,  the Company agrees that it will sell to the Purchaser,  and
the Purchaser  agrees that it will purchase from the Company at the Closing,  an
aggregate of 17,857  shares of Preferred  Stock and  concurrently  with delivery
hereof the  Purchaser  has agreed to pay the Company an amount  equal to $14 per
share of  Preferred  Stock,  or an  aggregate  purchase  price of $250,000  (the
"Purchase Price") by wire transfer in immediately  available funds to an account
designated  by notice from the Company;  provided,  however,  that the Purchaser
shall deduct the Purchaser Expenses from the Purchase Price.

     2.2 Deliverables at Closing. In addition to the foregoing,  at the Closing,
the Company shall deliver to the Purchaser:

     (a) a stock  certificate  representing  the shares of  Purchased  Preferred
Stock registered in the name of the Purchaser;

     (b) an opinion of counsel  of the  Company in the form  attached  hereto as
Exhibit B;

     (c) an executed copy of this Agreement;

     (d) a certificate,  dated the date of Closing  signed by a duly  authorized
officer of the Company dated as of the date of the Closing certifying as to:

     (i) a true and correct  copy of the  Certificate  of  Incorporation  of the
Company (including all amendments), as attached thereto,

     (ii) the By-laws, as attached thereto, are in full force and effect;

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     (iii) the satisfactory  waiver of all preemptive rights by the stockholders
of the Company on or before the date of Closing;

     (iv) the resolutions,  in form and substance reasonably satisfactory to the
Purchaser,  of the Board of Directors duly  authorizing the execution,  delivery
and performance of this Agreement,  the filing of the Amendment, the issuance of
the  Purchased  Preferred  Stock and the  execution  and  delivery  of any other
documents,   instruments  or  agreements  executed  in  connection  herewith  or
therewith;

     (v) the incumbency and signature of the  individuals  authorized to execute
and deliver documents on the Company's behalf; and

     (vi) the  performance  and compliance in all material  respects with all of
the Company's agreements,  representations,  warranties, covenants, obligations,
duties and conditions under this Agreement  required to be performed or complied
with by it on or prior to the date of closing.

     (vii) except as set forth in Section 2.2 of the Disclosure Schedule,  since
December 20, 2002, no event has occurred that would require an adjustment to the
Conversion  Price (as defined in the Certificate of Designation,  as amended and
restated by the Amendment).

     2.3 Reservation of Shares. The Company shall reserve and keep available for
issuance such number of its  authorized  but unissued  shares of Common Stock as
will be sufficient to permit the  conversion in full of the Purchased  Preferred
Stock into  Common  Stock in  accordance  with the terms of the  Certificate  of
Designation.  All shares of Common Stock that are so issuable shall, when issued
upon  conversion,  be  duly  authorized,  validly  issued  and  fully  paid  and
non-assessable,  free and clear of any and all Liens and  preemptive  or similar
rights or encumbrances.

     2.4 Use of Cash Proceeds. The Company, shall use the cash proceeds from the
issuance of the Purchased  Preferred  Stock for  development and working capital
purposes as determined by the Board of Directors.

     3.  Representations  and  Warranties of the Company.  The Company makes the
following  representations and warranties to the Purchaser as of the date hereof
and of as the date of Closing, except as otherwise provided herein:

     3.1  Corporate  Status.  The  Company  and  each of its  subsidiaries  is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it was  incorporated  with full corporate power and
authority  to carry on its  business  as now  conducted  and as  proposed  to be
conducted  and to own and lease the  properties  and assets it now owns or holds
under lease.

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     3.2 Authority.  The Company has all necessary corporate power and authority
to execute and deliver the  Transaction  Documents  and to carry out and perform
its  obligations  thereunder.  The  execution,  delivery and  performance by the
Company of the Transaction  Documents and the  consummation of the  transactions
contemplated  hereby  and  thereby,  including  the  issuance  of the  Purchased
Preferred Stock and the Common Stock issuable upon conversion thereof, have been
duly authorized by all necessary corporate action on the part of the Company and
no  further  authorization  on  the  part  of  the  Company,  or  the  Company's
stockholders,   is  necessary  to  authorize   such   execution,   delivery  and
performance.  The  Transaction  Documents,  when  executed and  delivered by the
person  or  persons  authorized  by the  Company  to  execute  and  deliver  the
Transaction  Documents  on  behalf of the  Company,  will be duly  executed  and
delivered by the Company.  The  Transaction  Documents,  when so executed,  will
constitute the legal, valid and binding obligations of the Company,  enforceable
against the Company in accordance  with their  respective  terms,  except as the
same may be  limited by  bankruptcy,  insolvency,  reorganization  or other laws
affecting the  enforcement  of creditors'  rights  generally now or hereafter in
effect  and  subject  to  the  application  of  equitable   principles  and  the
availability  of equitable  remedies.  The issuance of the  Purchased  Preferred
Stock is not and will not be  subject  to  preemptive  rights or rights of first
refusal that have not been  properly  waived or complied  with prior to the date
hereof.

     3.3  No  Conflicts.   The  execution,   delivery  and  performance  of  the
Transaction  Documents and the other  instruments and agreements to be executed,
delivered and performed by the Company  pursuant hereto and the  consummation of
the transactions  contemplated hereby and thereby by the Company,  including the
issuance of the Purchased  Preferred Stock, and upon conversion of the Preferred
Stock,  the  Common  Stock,  do not and will not with or  without  the giving of
notice or the passage of time or both, (a) violate or conflict with or result in
a breach of or a right of  termination  by any  Person of any  provision  of, or
constitute a default  under,  or create a Lien upon any  properties or assets of
the  Company  or any of its  subsidiaries  pursuant  to (i) the  Certificate  of
Incorporation including the Certificate of Designation,  as amended and restated
by the  Amendment  or the By-Laws of the Company or any of its  subsidiaries  or
(ii) any order, judgment, decree, statute,  regulation,  contract,  agreement or
any other  restriction of any kind or description to which the Company or any of
its  subsidiaries  or its  assets  may be  bound or  subject;  (b)  violate  any
applicable law, rule, regulation,  judgment, injunction, order or decree binding
upon the Company or any of its  subsidiaries or to which any of their properties
and assets is subject;  (c) result in the loss or  impairment  of any  approval,
license, franchise,  permit, legal privilege or legal right enjoyed or possessed
by the Company or any of its subsidiaries;  (d) otherwise result in the creation
of any Lien; or (e) require the consent or approval of any Person other than the
consent of the Board of Directors  and those  consents or approvals set forth in
Section 3.15. Neither the Company nor any of its subsidiaries is in violation of
or (with or  without  notice  or lapse of time or both) in  default  under,  any

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material  term or  provision  of its  respective  certificate  of  incorporation
(including  the  Certificate  of  Designation,  as amended  and  restated by the
Amendment)  or  By-laws  or  any  indenture,  loan  or  credit  agreement,  note
agreement,  mortgage,  security  agreement  or other  agreement,  lease or other
instrument,  commitment  or  arrangement  to  which  the  Company  or any of its
subsidiaries  is a party or by which the  Company's  or any of its  subsidiaries
assets are bound.

     3.4 Fully Paid and Non-Assessable. Upon issuance of the Purchased Preferred
Stock and payment therefor pursuant to the terms hereof, each share of Purchased
Preferred  Stock  shall  be duly  authorized,  validly  issued,  fully  paid and
non-assessable and free and clear of any and all Liens (other than those created
by the Purchaser on such Purchased  Preferred Stock),  and is not subject to any
preemptive  right,  right of first  refusal  created by the Company,  redemption
right or  similar  right  that has not  been  waived  on or prior to the date of
Closing,  and upon conversion of the Purchased  Preferred  Stock,  each share of
Common Stock issued upon such  conversion  shall have been duly  authorized  and
reserved for issuance and will be validly issued,  fully paid and non-assessable
and free  and  clear of any and all  Liens  (other  than  those  created  by the
Purchaser on such  Purchased  Preferred  Stock),  and will not be subject to any
preemptive  right,  right of first  refusal  granted by the Company,  redemption
right or similar right that has not been waived on or prior to the date thereof.

     3.5 Compliance with Laws and Instruments.

     (a) Copies of the  Certificate of  Incorporation  and Bylaws of the Company
and each of its subsidiaries which have been delivered to (or made available for
inspection by) the Purchaser prior to the execution of this Agreement,  are true
and complete and have not been amended or repealed.

     (b) The Company and each of its  subsidiaries  is, and their  business  has
been operated, in compliance with their respective certificates of incorporation
and  bylaws  and,  in  all  material  respects,   all  applicable  laws,  rules,
regulations,   decrees,   injunctions,   judgments,   orders,  rulings,  awards,
settlements and writs.

     3.6  Qualification.  The Company and each of its  subsidiaries,  other than
Platinum  Communications,  Inc. ("Platinum") is duly qualified or licensed to do
business and is in good  standing as a foreign  corporation  in the State of New
York. The Company is not and is not required to be qualified to do business as a
foreign  corporation in any other jurisdiction except where the failure to be so
qualified would not individually,  or in the aggregate,  have a Material Adverse
Effect on the Company.

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     3.7 Capital Stock.

     (a) As of the  date  hereof  and  immediately  prior  to the  Closing,  the
authorized capital stock of the Company consists and will consist, respectively,
of (i)  2,000,000  shares of Preferred  Stock,  of which (A) 116,823  shares are
outstanding,  and (B) 134,680  shares shall be  designated as Series A Preferred
Stock as of the date of  Closing  only;  and (ii)  150,000,000  shares of Common
Stock of which:

     (A)  4,029,595  shares are issued and  outstanding  (which  amount does not
          include  50,000  shares that are  currently  anticipated  to be deemed
          issued and  outstanding  on account of the  satisfaction  of  accounts
          payable  of the  Company  that  are due  and  payable  as of the  date
          hereof);

     (B)  4,620,334  shares are  authorized  for issuance under the Stock Option
          Plans,  of which  682,365  shares have been issued and are included in
          the issued and  outstanding  shares stated in 3.7(a)(A)  above and the
          balance  of  3,937,969  shares  are  reserved  for  issuance  upon the
          exercise of options granted and issuable by the Company thereunder;

     (C)  1,346,800  shares are reserved for issuance upon the conversion of the
          Preferred Stock; and

     (D)  No shares are reserved for issuance upon the exercise of warrants.

     (b) All such  outstanding  shares of Common Stock and  Preferred  Stock and
other securities have been duly authorized and validly issued and are fully paid
and nonassessable and were issued in compliance with all applicable  Federal and
state securities laws.

     (c) Except as  contemplated  by this  Agreement  or as set forth in the SEC
Filings, the Company has no outstanding subscription,  option, warrant, right of
first refusal, preemptive right, call, contract, demand, commitment, convertible
security or other  instrument,  agreement  or  arrangement  of any  character or
nature  whatever  under which the Company is or may be obligated to issue Common
Stock,  Preferred  Stock  or any  other  equity  security  of any  kind or which
otherwise relates to the Company's securities.

     (d) Without limiting the generality of the foregoing and except as provided
herein or in the  September  2002  Agreement  and the December  2002  Agreement,
neither the Company nor any of its  subsidiaries  has granted or agreed to grant
any registration rights, including piggyback rights, to any Person.

     3.8 Securities  Laws.  Subject to the accuracy of the  representations  and
warranties of the Purchaser  contained in Section 4 hereof, the offer, issue and
sale of the Purchased  Preferred  Stock, and the shares of Common Stock issuable
upon  conversion  thereof,  (i) are and will be  exempt  from  the  registration

                                       11
<PAGE>

requirements of the Securities Act and (ii) are and will be issued in compliance
with all applicable  Federal and state securities laws.  Neither the Company nor
any agent on its behalf has  solicited or will solicit any offers to sell or has
offered to sell or will offer to sell all or any part of the Preferred  Stock to
any Person or Persons  other  than the  Purchaser  or has taken or will take any
other  action  that  would  require  the  Company to  register  the sale of such
Preferred Stock under the Securities Act.

     3.9 Financial Statements; Liabilities.

     (a)  Included  in the Form 10-Q for the three  months  ended March 31, 2003
("Form  10-Q")  are the  Company's  consolidated  unaudited  balance  sheet (the
"Balance  Sheet")  as of March 31,  2003 (the  "Balance  Sheet  Date"),  and the
consolidated  unaudited  statement of operations for the three-month period then
ended  ("Operating  Statement").  Included in its annual report on Form 10-K for
the  year  ended   December  31,  2002  ("Annual   Report")  are  the  Company's
consolidated audited balance sheets as of December 31, 2002 and the consolidated
audited statements of operations,  cash flow and changes of stockholders' equity
for the period then ended, together with the related report of Marcum & Kliegman
LLP,  independent  certified  public  accountants  (such year-end balance sheet,
statement  of  operations,  cash flow and  changes of  stockholders'  equity and
report, together with the Balance Sheet and Operating Statement,  the "Financial
Statements"). The Financial Statements (including any notes thereto):

     (i) are complete and correct in all material respects and are in accordance
with the books and records of the Company;

     (ii)  present  fairly  the  consolidated  financial  condition,  results of
operations and cash flows of the Company and its  subsidiaries at the respective
dates therein  specified and the results of operations  and changes in financial
position of the Company and its subsidiaries for the respective  periods therein
specified; and

     (iii) were  prepared  in  accordance  with  generally  accepted  accounting
principles  applied on a basis consistent with prior accounting  periods (except
that  the  unaudited   financial   statements  are  subject  to  year-end  audit
adjustments  which will not be material  in amount and do not  contain  complete
footnotes).

     (b) The Company and its subsidiaries  have no liabilities or obligations of
any nature,  either actual or absolute,  contingent or otherwise,  which are not
reflected or provided for in the  Financial  Statements  or related notes except
liabilities  included in the estimated loss from operations set forth in Section
3.9(b) of the Disclosure Schedule.

     (c) The  Company  anticipates  a loss from  operations,  during the quarter
ended June 30, 2003, as set forth in Section 3.9(c) of the Disclosure Schedule.

                                       12
<PAGE>

     3.10 Changes.  Since December 31, 2002, except as disclosed in SEC Filings,
including without limitation, the Form 10-Q and current reports on Form 8-K, the
Annual Report, or Section 3.9(c) of the Disclosure  Schedule,  there has been no
event which has had, or could reasonably be expected to have, a Material Adverse
Effect.  Since March 31,  2003,  except as  disclosed  in Section  3.9(c) of the
Disclosure  Schedule,  the Company and its  subsidiaries  have  conducted  their
business in all material  respects in the ordinary  course  consistent with past
practices,  and without limiting the generality of the foregoing,  there has not
been any:

     (a) change,  occurrence  or  circumstance  in or  affecting  the  business,
assets, liabilities, financial condition, operations or prospects of the Company
or any of its subsidiaries  that has had or may reasonably be expected to have a
Material Adverse Effect;

     (b)   resignation  or  termination  of  any  key  officers,   employees  or
consultants of the Company or any of its subsidiaries;

     (c)  material  change,  except in the ordinary  course of business,  in the
contingent  obligations  of the  Company  or any of its  subsidiaries  by way of
guaranty,  endorsement,  indemnity,  warranty or otherwise  which has had or may
reasonably be expected to have a Material Adverse Effect;

     (d) damage,  destruction or loss, whether or not covered by insurance, that
has had or may  reasonably be expected to have a Material  Adverse Effect on the
Company;

     (e) waiver by the Company or any of its subsidiaries of a material right or
of a  material  debt  owed to any of them  which  has had or may  reasonably  be
expected to have a Material Adverse Effect;

     (f) direct or indirect  loans or advances made by the Company or any of its
subsidiaries to any  stockholder,  employee,  consultant,  officer,  director or
Affiliate  of the  Company  or any of its  subsidiaries,  other  than  loans  or
advances  made in the  ordinary  course of business  or, in the  aggregate,  not
exceeding $250,000;

     (g) material change in any  compensation  arrangement or agreement with any
employee, consultant, officer, director or shareholder has had or may reasonably
be expected to have a Material Adverse Effect;

     (h) declaration or payment of any dividend or other  distribution of assets
of the Company or any of its subsidiaries or any direct or indirect  redemption,
purchase, retirement or other acquisition of any shares of its capital stock has
had or may reasonably be expected to have a Material Adverse Effect;

     (i) debt,  obligation or liability  incurred,  assumed or guaranteed by the
Company or any of its  subsidiaries,  except  those for  amounts  not  exceeding
$250,000 in the  aggregate or for current  liabilities  incurred in the ordinary
course of business;

                                       13
<PAGE>

     (j) sale,  assignment  or  transfer  of any of the  assets or rights of the
Company  or any of its  subsidiaries  (other  than the sale of their  respective
inventory in the ordinary course of business),  including  patents,  trademarks,
copyrights,  trade secrets or other intangible assets or intellectual  property,
or any  mortgage  or  pledge  of or  Lien  imposed  upon  any of the  assets  or
properties  of the Company or any of its  subsidiaries,  except in the  ordinary
course of business  except any such sales,  assignments,  transfers,  mortgages,
pledges or liens  which,  in the  aggregates,  have had,  or may  reasonably  be
expected to have, a Material Adverse Effect;

     (k) change in or event of default under any material agreement to which the
Company or any of its  subsidiaries  is a party or by which any of them is bound
which  modification or event of default has had or may reasonably be expected to
have, a Material Adverse Effect;

     (l) purchase or other  acquisition of any operating  business or a material
amount of assets or the capital stock of any other Person; or

     (m) other event or condition of any character that, either  individually or
cumulatively,  has had or may reasonably be expected to have a Material  Adverse
Effect.

     3.11 Material Agreements of the Company. Neither the Company nor any of its
subsidiaries  is a party to or otherwise bound by any written or oral agreement,
instrument  or  arrangement  that is material  to the  Company  except for those
agreements included as exhibits to, or disclosed in the SEC Filings or any other
documents filed with the Commission (the "Material Contracts").  The Company has
furnished or made  available to the  Purchaser  true and complete  copies of all
such  agreements  and all other  agreements,  instruments  and  other  documents
requested by the Purchaser or its authorized representative. Neither the Company
nor any of its  subsidiaries,  and to the Company's  best  knowledge,  any other
party to a  Material  Contract,  is in default of any  Material  Contract.  Each
Material  Contract  is in full force and  effect.  To the best of the  Company's
knowledge,  IBM has not notified the Company of its intention to modify or amend
in any material respect the Material Contracts between the Company and IBM.

     3.12 Litigation. Except as disclosed in the SEC Filings, there is no action
pending and, to the best knowledge of the Company, there is no action threatened
against  the  Company  or any of its  subsidiaries  or any of  their  respective
directors,  officers or employees or to which any of the properties or assets of
the  Company  or any of its  subsidiaries  is subject  or which  challenges  the
validity of any Transaction  Document,  the issuance of the Purchased  Preferred
Stock or any action taken or to be taken pursuant hereto or thereto, which seeks
to impose or confirm any limitation on the ability of the Purchaser  effectively
to acquire, hold or exercise full rights of ownership of the Purchased Preferred
Stock or the shares of Common Stock  issuable  upon  conversion  thereof,  which
action, in the aggregate with all other such investigations, claims, actions and
proceedings  would have a Material  Adverse  Effect.  Except as disclosed in the
Form 10-Q or the Annual Report or any other SEC Filing,  neither the Company nor
any of its subsidiaries is a party or is subject to the provisions of any order,

                                       14
<PAGE>

writ, judgment,  injunction,  decree,  determination or award of any court or of
any governmental entity or regulatory authority.  Except as disclosed in the SEC
Filings  or any  press  release  of  the  Company,  there  is no  action,  suit,
proceeding or investigation by the Company or any of its subsidiaries  currently
pending  which has had,  or if  finally  determined  in a manner  adverse to the
Company could reasonably be expected to have, a Material Adverse Effect.

     3.13  Disclosure.   The  representations  and  warranties  of  the  Company
contained  herein,  when read together with the SEC Filings,  do not contain any
untrue  statement of material fact or omit to state a material fact necessary to
make the statements  therein, in light of the circumstances under which they are
made, not misleading.

     3.14 Intellectual Property.

     (a)  Section  3.14(a)  of the  Disclosure  Schedule  contains a list of all
material  Intellectual Property Rights (as defined below) including all material
licenses  and  sublicenses  (whether  as  licensee,  sublicensee,   licensor  or
sublicensor)  and  other  agreements  as to  which  the  Company  or  any of its
subsidiaries  is a party and pursuant to which any Person is  authorized  to use
any such  Intellectual  Property  Right,  including  the identity of all parties
thereto.  As used herein, the term  "Intellectual  Property Right" means any and
all material  trademarks,  service marks, and trade names,  patents,  copyrights
(whether  or not  registered  and  whether  or not  published),  (including  any
registrations  or applications  for registration of any of the foregoing) or any
other material  Intellectual  Property  Right, in any country or jurisdiction in
the world,  in each case which is owned or  licensed  by and either used or held
for use or otherwise  related and material to the conduct of the business of the
Company.

     (b) Except as indicated in any of the SEC Filings,  (i) the Company owns or
has the legally  enforceable right to use, sell,  execute,  reproduce,  display,
perform, modify, enhance,  distribute,  prepare derivative works of, and license
and  sublicense  without  further  payment  to any other  Person,  all  material
Intellectual  Property Rights,  free and clear of all Liens; (ii) the execution,
delivery and  performance of the  Transaction  Documents will not conflict with,
result in a breach of,  constitute  an event of default under (or an event that,
with notice or lapse of time or both,  would  constitute  a conflict,  breach or
default  under),  or accelerate  the  performance  required by, or create in any
Person the right to  accelerate,  terminate,  modify,  or cancel (with notice or
lapse of time or both), or require any notice under, any contract  involving any
Intellectual Property Rights, which default,  conflict, breach or event has had,
or may reasonably be expected to have, a Material  Adverse Effect,  and will not
cause the  forfeiture or termination of or give rise to a right of forfeiture or
termination (with notice or lapse of time or both) of any Intellectual  Property
Rights or otherwise impair the rights of the Company to use, sell or license any
Intellectual Property Rights which forfeiture,  termination, right of forfeiture
or termination or impairment has had, or could reasonably be expected to have, a
Material Adverse Effect.

                                       15
<PAGE>

     (c) Except as  indicated  in any of the SEC Filings or set forth in Section
3.14(c) of the  Disclosure  Schedule,  (i) all  current  and  former  employees,
officers and consultants of the Company  (including the Principal  Stockholders)
that, during the term of such Persons' respective employment or consultancy with
the Company has contributed to or participated in the conception and development
of products  currently offered by the Company and the products which the Company
proposes to offer have acted  during such  respective  terms within the scope of
their  employment in so contributing or  participating;  and (ii) no current and
former officers, employees or consultants of the Company has a right to claim an
ownership  interest in any  Intellectual  Property  Rights as a result of having
been  involved in the  development,  creation or licensing  of any  Intellectual
Property  Rights while  employed or serving as  consultants to the Company which
claim has had or could reasonably be expected to have a Material Adverse Effect.

     (d) Except as indicated  in the SEC  Filings,  (i) the Company has not been
sued or  charged  with or  otherwise  been  notified  of, or been a party in any
claim, suit, action or proceeding relating to its business that has not been the
subject of a final  disposition  prior to the date  hereof  and that  involves a
claim of  interference,  infringement,  misappropriation  or  opposition  by the
Company of any trademark,  patent,  trade secret,  copyright,  know-how or other
proprietary information or intellectual property right of any other Person which
claim,  if  subject  of a  final  disposition  adverse  to  the  Company,  could
reasonably be expected to have a Material Adverse Effect, and the Company has no
knowledge of any reasonable  basis for any such claims,  (ii) the Company has no
knowledge of any interference,  infringement,  misappropriation or opposition by
any  other  Person  of any  Intellectual  Property  Rights  which  interference,
infringement,  misappropriation  or opposition  could  reasonably be expected to
have a Material Adverse Effect; (iii) no Intellectual  Property Right is subject
to any outstanding order, judgment, injunction, decree, stipulation or agreement
prohibiting  or  restricting  the use thereof by the Company or  prohibiting  or
restricting the assignment,  licensing or transfer thereof by the Company to any
Person which has had or could  reasonably be expected to have a Material Adverse
Effect;  (iv) no  Intellectual  Property Rights are currently the subject of any
re- examination,  opposition, cancellation or invalidation proceeding before any
governmental  authority  which  re-examination,   opposition,   cancellation  or
invalidation  proceeding could reasonably be expected to have a Material Adverse
Effect,  and  all  Intellectual  Property  Rights  registered  or,  to the  best
knowledge of the Company,  filed with a governmental  authority are currently in
compliance  with  all  material  formal  legal  requirements  and,  to the  best
knowledge of the Company, are valid and enforceable; and (v) the Company has not
entered into any agreement to indemnify  any other Person  against any charge of
infringement or  misappropriation  of any  Intellectual  Property Right or other
proprietary information or intellectual property right of any other Person.

                                       16
<PAGE>

     (e) With respect to software  licensed to the Company  from third  parties,
such as  operating  systems  and  databases  required  by the Company to deliver
services to its  customers,  to the best of the  Company's  knowledge,  all such
licenses  are in good  standing  and the Company is  authorized  to deliver such
services to its customers,  except to the extent that the failure of any license
or licenses to be in good  standing or the absence of such  authorization  would
not have,  or could not  reasonably  be  expected  to have,  a Material  Adverse
Effect.

     (f) To the best of the Company's  knowledge,  none of the operations of the
Company   involves  the  unlicensed  or  unauthorized  use  of  confidential  or
proprietary  information.  The  Company  has taken all  reasonable  measures  to
protect the trade secrets and the  confidential  and proprietary  information of
third Persons used in or related to the Company's operations. To the best of the
Company's knowledge, to the extent that information of a confidential nature has
been used in the  operations of the Company in the five year period prior to the
date hereof,  such information  (except insofar as it has fallen into the public
domain  through  no fault  of the  Company  or is not  material)  has been  kept
strictly  confidential  and has not been disclosed  otherwise than subject to an
obligation  of  confidentiality  being  imposed  on  the  Person  to  whom  such
information was disclosed.

     3.15 No Governmental  Consent or Approval Required.  Assuming the truth and
accuracy of the  representations  made by the Purchaser in Section 4 hereof,  no
authorization,   consent,  approval  or  other  order  of,  declaration  to,  or
registration,  qualification,  designation or filing with, any federal, state or
local  governmental  agency or body is  required  by or from the Company for the
valid and lawful  authorization,  execution  and  delivery by the Company of the
Transaction  Documents and consummation of the transactions  contemplated hereby
or  thereby,  or for the  valid and  lawful  authorization,  issuance,  sale and
delivery  of  the  Purchased  Preferred  Stock  or  for  the  valid  and  lawful
authorization,  reservation,  issuance,  sale  and  delivery  of  the  Purchased
Preferred Stock, other than (i) the filing of the Certificate of Designation, as
amended and restated by the Amendment,  with the Secretary of State of the State
of  Delaware  and (ii) the  qualification  (or  taking of such  action as may be
necessary to secure an exemption from qualification,  if available) of the offer
and sale of the Purchased  Preferred  Stock under  applicable  state and Federal
securities  laws,  which  filings  and  qualifications,  if  required,  will  be
accomplished  in a timely  manner so as to comply  with  such  qualification  or
exemption from qualification requirements.

     3.16 Nasdaq Listing  Compliance.  The Company's  Common Stock is registered
pursuant to Section  12(g) of the Exchange Act and is listed on the Nasdaq Small
Cap Market and the  Company has taken no action  designed  to, or likely to have
the effect of,  terminating  the  registration  of the  Common  Stock  under the
Exchange  Act or  de-listing  the Common Stock from the Nasdaq Small Cap Market.
Section 3.16 of the Disclosure Schedules sets forth a narrative  description (in
chronological order) of the events and communications  involving the Company and
NASDAQ (whether oral or in writing) in relation to the Company's status of being
subject  to or in risk of  being  delisted  from  the  Nasdaq  SmallCap  Market.
Anything  contained  herein  or  elsewhere  in this  Agreement  to the  contrary
notwithstanding,  the  Purchaser  acknowledges  that  the  Company  was  not  in

                                       17
<PAGE>

compliance   with  the   requirements  of  the  Nasdaq  SmallCap  Market  as  to
shareholders' equity as at March 31, 2003.

     3.17 Reporting Status. Except as otherwise set forth in Section 3.17 of the
Disclosure Schedule, the Company has filed in a timely manner all forms, reports
and other documents that the Company was required to file under the Exchange Act
and the Securities Act during the 12 months preceding the date of this Agreement
and  such  documents  complied  as to form in all  material  respects  with  the
Commission's   requirements  as  of  their  respective  filing  dates,  and  the
information contained therein as of the respective dates thereof did not contain
any  untrue  statement  of a  material  fact or omit to  state a  material  fact
required to be stated  therein or  necessary to make the  statements  therein in
light of the circumstances under which they were made not misleading.

     3.18 Compliance with Nasdaq Requirements. The Company has complied with all
requirements  of The Nasdaq Stock  Market,  Inc. with respect to the issuance of
the  Purchased  Preferred  Stock and the shares of Common  Stock  issuable  upon
conversion thereof and agrees to file a listing application with NASDAQ covering
such common stock in compliance with applicable NASD rules.

     3.19  Eligibility  to File Form S-3. The Company is  currently  eligible to
register  the resale of Common Stock in a secondary  offering on a  registration
statement on Form S-3 under the Securities Act.

     3.20 Subsidiaries.  Except as set forth in the SEC Filings, (i) the Company
does not have, and is not committed to purchase or acquire,  any equity interest
or  equivalent  interest  (direct  or  indirect)  in any  Person  other than the
subsidiaries  of the Company  listed  therein,  (ii) all  outstanding  shares of
capital stock of each subsidiary are owned of record and beneficially  solely by
the Company and have been duly  authorized and validly issued and are fully paid
and non- assessable and (iii) the Company owns all of the issued and outstanding
capital stock of each of its subsidiaries free and clear of any and all Liens.

     3.21  Brokerage.  No placement  agent,  banker,  broker or finder has acted
directly or indirectly for the Company in connection  with this Agreement or the
transactions  contemplated  hereby,  and no placement agent,  banker,  broker or
finder is  entitled to any  commission,  brokerage  or  finder's  fee in respect
thereof based in any way on agreements,  arrangements or understandings  made by
or on behalf of the Company.

                                       18
<PAGE>

     3.22  Employees.  Neither  the Company  nor any of its  subsidiaries  has a
collective  bargaining  agreement with any of its  employees.  There is no labor
union  organizing   activity  pending  or,  to  the  Company's  best  knowledge,
threatened  with  respect to the Company or any of its  subsidiaries.  Except as
disclosed  in any of the  SEC  Filings,  to the  Company's  best  knowledge,  no
employee of the Company or any of its subsidiaries, nor any consultant with whom
the Company or any of its  subsidiaries  has contracted,  is in violation of any
term of any employment contract,  proprietary information agreement or any other
agreement  relating to the right of any such individual to be employed by, or to
contract with, the Company or any such  subsidiary  because of the nature of the
business  to be  conducted  by the Company or any such  subsidiary;  and, to the
Company's  best  knowledge,  the  continued  employment  by the Company and each
subsidiary of its current officers and significant employees, will not result in
any such violation.  Except as disclosed in any of the SEC Filings:  the Company
and each of its subsidiaries  have not received any written notice alleging that
any such violation has occurred; and no employee of or consultant to the Company
or any of its subsidiaries has been granted the right to continued employment by
the  Company  or  such  subsidiary  or to any  material  compensation  following
termination of employment with or by the Company or such subsidiary.

     3.23 Taxes. "Taxes" shall mean all taxes,  charges,  fees, Liens, duties or
other assessments, however denominated, including any interest or penalties that
may become payable in respect thereof,  imposed by the United States government,
any state, local or foreign government or any agency or political subdivision of
any such government (a "Tax Authority"),  which shall include,  without limiting
the  generality  of the  foregoing,  all  income  taxes,  payroll  and  employee
withholding taxes, unemployment insurance, social security, sales and use taxes,
excise taxes,  capital taxes,  franchise taxes, gross receipt taxes,  occupation
taxes,  real and  personal  property  taxes,  value added  taxes,  stamp  taxes,
transfer taxes, workers' compensation taxes and other obligations of the same or
of a similar  nature.  All tax returns or reports  required to be filed by or on
behalf of the  Company  or any of its  subsidiaries  have been  timely  filed or
requests  for  extensions  have been timely  filed or any amounts due and unpaid
have been accrued on the Financial  Statements and, to the best knowledge of the
Company,  any such extension has been granted and has not expired,  and all such
filed returns are complete and accurate in all material respects.  All Taxes due
from the  Company or any of its  subsidiaries  through the date hereof have been
paid in full or an  adequate  provision  has been made for any such Taxes on the
Financial   Statements  (in  accordance  with  generally   accepted   accounting
principles).  Except as otherwise  disclosed in any of the SEC Filings and other
than the  audit  of  sales,  use and  income  taxes  being  performed  (or to be
performed)  by  the  New  York  Department  of  Taxation:  there  is  no  audit,
examination,  deficiency,  or refund  litigation  pending  or  threatened,  with
respect to any Taxes of the  Company or any of its  subsidiaries;  all Taxes due
with  respect to completed  and settled  examinations  or  concluded  litigation
relating  to it have been paid in full or adequate  provision  has been made for
any  such  Taxes on the  Financial  Statements  (in  accordance  with  generally
accepted  accounting  principles);  the Company has not executed an extension or
waiver of any statute of  limitations on the assessment or collection of any Tax
that is  currently  in  effect,  except  as set  forth  in  Section  3.23 of the

                                       19
<PAGE>

Disclosure  Schedule;  and no rulings have been issued by or agreements  entered
into  with  any  Tax  Authority  with  respect  to  the  Company  or  any of its
subsidiaries.

     3.24 ERISA and Employee Benefit Plans.

     (a) Except as disclosed  in any of the SEC Filings,  neither of the Company
nor  any  of  its  subsidiaries   maintains,   sponsors,  is  required  to  make
contributions to or otherwise has any liability, direct, indirect, contingent or
otherwise,  with  respect  to any  pension,  profit  sharing,  thrift  or  other
retirement plan,  employee stock ownership plan,  deferred  compensation,  stock
ownership,  stock purchase,  performance  share,  bonus or other incentive plan,
severance plan,  health or group insurance plan,  welfare plan, or other similar
plan, agreement, policy, arrangement or understanding,  whether written or oral,
whether or not such plan is intended to be qualified under Section 401(a) of the
Code,  including any employee benefit plan within the meaning of Section 3(3) of
ERISA,  which plan covers any employee or former  employee of the Company or any
of its subsidiaries (collectively, the "Plans").

     (b) The Company has delivered to the  Purchaser,  or the same are available
as exhibits to or are disclosed  into reports,  registration  statements,  proxy
statements  or other  filings  made by the Company  with the  Commission,  true,
correct and complete copies of each of the following:

     (i) any employment agreements and any procedure and policy manuals relating
to the employment of employees of the Company and each of its  subsidiaries  and
the use of temporary  employees and  independent  contractors by the Company and
each of its subsidiaries;

     (ii)  each  Plan and all  related  trust  agreements,  insurance  and other
material  contracts,  and summary plan  descriptions  and  summaries of material
modifications  relating  to each Plan and any  related  material  communications
distributed to participants under the Plans; and

     (iii) the latest  reports which have been filed (or are in fully  completed
form for filing) with the Internal  Revenue  Service and the Department of Labor
with respect to each Plan.

     (c) With respect to each Plan,  to the best  knowledge  of the Company,  no
party in interest or  disqualified  person (as defined in Section 3(14) of ERISA
and  Section  4975 of the  Code,  respectively)  has at any  time  engaged  in a
transaction  which could subject the Company or any of its subsidiaries to a Tax
in a material  amount for  prohibited  transactions  imposed by ERISA or Section
4975 of the Code.

     (d) To the best  knowledge  of the  Company,  no  fiduciary  (as defined in
Section  3(21) of  ERISA)  with  respect  to any Plan  has  breached  any of the
material  responsibilities or obligations imposed upon fiduciaries under Title I

                                       20
<PAGE>

of ERISA.  Each Plan is and has been  operated  in  compliance  in all  material
respects  with its  terms and all  applicable  reporting,  disclosure  and other
requirements of ERISA and the Code as they relate to such Plan,  including where
applicable,  the group health plan continuation  coverage requirements set forth
in Part 6 of Subtitle B of Title I of ERISA and Section  4980B of the Code,  and
by its terms can be terminated at any time.

     (e) As of the date hereof,  the Company and each of its subsidiaries  shall
have made all required  contributions under each Plan for all applicable periods
or adequate accruals therefor will have been provided for by the Company or such
subsidiary.

     (f)  Except  as set  forth in any of the SEC  Filings,  no  Person  will be
entitled to any severance  benefits under the terms of any Plan solely by reason
of  the  transactions   contemplated  by  this  Agreement  or  the  Stockholders
Agreement. Except as otherwise disclosed in any of the SEC Filings, there are no
actions,  claims, suits or arbitrations pending or, to the best knowledge of the
Company,  threatened with respect to any Plan, which actions,  claims,  suits or
arbitrations  has or could  reasonably  be  expected to have,  alone,  or in the
aggregate, a Material Adverse Effect.

     (g)  Neither  the  Company nor any of its  subsidiaries  has  incurred  any
outstanding  liability in any material  amount to the Pension  Benefit  Guaranty
Corporation. Each Plan which is intended to be "qualified" within the meaning of
Section  401(a)  of the  Code  (and  the  exempt  trust  thereunder),  has  been
determined  by  the  Internal  Revenue  Service  to  satisfy  the  qualification
requirements  of  Sections  401(a)  and  501(a) of the Code and every  Plan (and
related  trust) which is intended to comply with the terms and  requirements  of
applicable statutes does so comply in all material respects.

     (h) Neither the Company nor any of its subsidiaries,  other than Softworks,
Inc.,  has  adopted,  during  the last six (6) years,  any Plan or any  employee
benefit plan  subject to Title IV of ERISA,  giving rise to any  liabilities  to
which the Company or any of its subsidiaries is now or may hereafter be subject,
which  liabilities  have,  or could  reasonably  be expected to have, a Material
Adverse Effect.

     (i) The  consummation  of the  transactions  contemplated by this Agreement
will not result in an  increase  in the amount of  compensation  or  benefits or
accelerate  the  vesting or timing of payment of any  benefits  or  compensation
payable in respect of any employee.

     3.25  Transactions  with Related  Persons.  Except as  otherwise  disclosed
herein, in the Disclosure Schedule or any of the SEC Filings:

     (a) Neither the Company nor any of its  subsidiaries  has entered  into any
agreement  with, and no debts,  obligations or liabilities of the Company or any
of its  subsidiaries is owed to, any of their  respective  officers,  directors,

                                       21
<PAGE>
stockholders,  employees,  consultants  or Affiliates  or any Affiliate  thereof
other than:

     (i) for  payment of salary,  consulting  or  director's  fees for  services
rendered;

     (ii)  reimbursement  for  reasonable  expenses  incurred  on  behalf of the
Company or any such subsidiary; and

     (iii) for other standard employee benefits made generally  available to all
employees (including stock option agreements  outstanding under any stock option
plan  approved  by the board of  directors  either of the  Company or any of its
subsidiaries);

     (b) None of the officers,  directors or  stockholders of the Company or any
of its subsidiaries,  or any members of their immediate families or any of their
Affiliates,  is indebted to, or has any cause of action or legal claim  against,
the Company or any of its subsidiaries or, to the best knowledge of the Company,
has any direct or  indirect  ownership  interest  in any  Person  with which the
Company or any of its  subsidiaries  is  affiliated or with which the Company or
any of its  subsidiaries  has a  business  relationship,  or  any  Person  which
competes  with the Company or any of its  subsidiaries,  except  that  officers,
directors and/or  stockholders of the Company or any of its subsidiaries may own
less than two  percent  (2%) of the  issued  and  outstanding  capital  stock in
publicly  traded  companies  which may  compete  with the  Company or any of its
subsidiaries;

     (c) No  officer,  director  or  stockholder  of the  Company  or any of its
subsidiaries,  or any  member  of  their  immediate  families  or  any of  their
Affiliates, is, directly or indirectly, interested in any material contract with
the Company or any of its subsidiaries; and

     (d)  Neither  the  Company  nor  any of its  subsidiaries  is a  guarantor,
indemnitor or contributor of any  indebtedness  or liability of any other Person
involving any guaranty, indemnification or contribution required to be disclosed
in any such SEC Filings.

     (e) Notwithstanding  anything contained herein to the contrary, the Company
has not, directly or indirectly, extended or maintained credit, arranged for the
extension  of  credit,  or  renewed  any  extension  of  credit in the form of a
personal  loan to or for any officer or director of the Company in  violation of
Section 402 of the Sarbanes-Oxley Act of 2002.

     3.26. Title to Properties and Assets; Liens, etc.

     (a) Except as otherwise disclosed in the SEC Filings,  the Company and each
of its subsidiaries has good and marketable title to its material properties and
assets, and good title to its material  leasehold estates,  in each case subject
to no material Liens, other than (i) those identified on the Balance Sheet, (ii)

                                       22
<PAGE>

those  resulting  from taxes which have not yet become  delinquent,  (iii) minor
Liens  which do not  materially  detract  from  the  value  of the  property  or
materially  impair the  operations  of the Company or such  subsidiary  and (iv)
those that have otherwise arisen in the ordinary course of business.

     (b) All material facilities,  machinery,  equipment, fixtures, vehicles and
other  properties  owned,  leased  or  used  by  the  Company  and  each  of its
subsidiaries  are in good operating  condition and repair and are reasonably fit
and usable for the purposes for which they are being used.

     (c) The SEC Filings sets forth true,  complete and correct  descriptions of
each  leasehold  interest of the Company  and each of its  subsidiaries  in real
property that is material to the business and  operations of the Company and its
subsidiaries,  taken as a whole. The Company and each of its subsidiaries enjoys
peaceful and undisturbed possession of all such real property.

     (d) Neither the Company  nor any of its  subsidiaries  has ever owned,  nor
does the Company nor any of its subsidiaries or currently own any real property.

     (e)  Except  as set  forth  in the  SEC  Filings,  the  Company  has  never
manufactured or produced,  and does not presently manufacture or produce, any of
its products or goods and such  products  and goods have been and are  presently
manufactured and produced by independent third Persons.

     3.27 Permits.  The Company and each of its subsidiaries has all franchises,
permits, licenses, consents and approvals and any similar authorization required
for their operations,  the absence of which could not be reasonably  expected to
have  alone,  or  in  the  aggregate,   a  Material  Adverse  Effect,   and  all
authorizations they have are in full force and effect.

     3.28. Environmental Matters.

     (a) As used herein,  "Subject  Premises" means the real property now owned,
operated, used or leased or previously owned, operated, used or leased (but only
through the date of termination of such ownership,  operation, use or lease) by,
to or for the Company or any of its subsidiaries.

     (b) To the best knowledge of the Company,  none of the Subject Premises has
any condition or conditions  which would require  notification or remediation by
the  Company  or  any  of  its   subsidiaries   under  any   Environmental   Law
(collectively, "Environmental Defects").

     (c) Neither the Company nor any of its subsidiaries,  nor, to the Company's
best  knowledge,  any other Person has at any time during its  possession of the
Subject  Premises  disposed of any wastes,  Hazardous Waste or otherwise,  other
than in accordance with applicable Environmental Laws and Environmental Permits.

                                       23
<PAGE>

     (d)  Neither  the  Company nor any of its  subsidiaries  has  received  any
written  communication from the Federal  Environmental  Protection Agency or any
other local, state or Federal  regulatory  agencies or any other Person relating
to the existence of Environmental Defects at the Subject Premises.

     (e) Except as disclosed in any of the SEC Filings, to the best knowledge of
the Company, there do not exist any judgments,  orders,  directives,  decrees or
awards of any court,  arbitrator or  administrative  or  governmental  agency or
entity or any other Person  concerning the Company or any of its subsidiaries or
any of their agents' or contractors'  compliance with any  Environmental  Law or
Environmental  Permit (in the case of agents and  contractors,  relating  to the
Company, any of its subsidiaries or the Subject Premises).

     (f) Except as  disclosed  in any of the SEC  Filings,  no claims  have been
asserted or, to the best knowledge of the Company,  are  threatened  against the
Company  or any of its  subsidiaries  relating  to any  Environmental  Defect or
condition which with the passage of time could become an Environmental Defect.

     (g) Except as disclosed in any of the SEC Filings, to the best knowledge of
the  Company,  there do not exist any consent  decrees,  administrative  orders,
settlement  agreements  or other  settlement  documents  entered  into  with any
administrative  or governmental  agency or entity or any other Person concerning
compliance with any Environmental Law or Environmental  Permit applicable to the
Company or any subsidiary or any of the Subject Premises.

     (h) Except as disclosed in any of the SEC Filings, the Subject Premises and
all operations  conducted  thereon by the Company or any of its subsidiaries are
and have at all times  been in  compliance  in all  material  respects  with all
Environmental Laws and Environmental Permits.

     (i) The Company and each of its  subsidiaries  have  obtained and currently
maintain in full force and effect all material environmental permits, approvals,
authorizations,    licenses,    variances,    registrations    and   permissions
(collectively,  "Environmental  Permits")  required  for the  conduct  of  their
respective businesses and operations.

     (j) To the best knowledge of the Company, there are no Hazardous Substances
or  Hazardous  Waste on,  under or about the Subject  Premises  other than those
customarily  used in or  incident  to the  business of the Company or any of its
subsidiaries,  which in any event are used or  maintained  by the Company or its
subsidiaries  in  all  material  respects  in  accordance  with  all  applicable
Environmental Laws and Environmental Permits.

     3.29 Customers and Suppliers. Except as disclosed on in the SEC Filings, no
customer or supplier of the Company or any of its  subsidiaries  has taken,  and
the Company has not received any written  notice,  and the Company does not have
any knowledge that any customer or supplier of the Company  contemplates taking,
any steps that could disrupt the business  relationship of the Company with such

                                       24
<PAGE>

customer or supplier or could result in a diminution in the value of the Company
in a manner that, in either event, would be reasonably likely to have a Material
Adverse  Effect.  The Company has no knowledge of any activities by ex-employees
that have disrupted the business  relationship of the Company with its customers
or suppliers in any material respect.

     3.30 Rights  Agreement;  Interested  Stockholder.  All necessary and proper
action has been taken by the  Company and its Board of  Directors  such that the
execution,  delivery and performance of the Transaction Documents, the purchase,
sale and  issuance of the  Purchased  Preferred  Stock and,  the issuance of the
Common Stock upon conversion of the Purchased Preferred Stock, will not (a) give
rise to the exercise of the rights issued under the Rights  Agreement,  dated as
of August 28,  2001,  between  the  Company  and  Manhattan  Transfer  Registrar
Company, or (b) cause the Purchaser to become an "interested  stockholder" under
Section 203 of the Delaware General Corporation Law.

     3.31  Directors  and Officers  Insurance.  The Company has furnished to the
Purchaser a true,  correct and  complete  copy of the  Company's  directors  and
officers  insurance  policy.  There  is no claim  by the  Company  or any of its
directors or officers  pending  under such policy as to which  coverage has been
questioned,  denied or disputed by the underwriters of such policy. All premiums
due and payable  under such  policy  have been paid and the Company  have in all
material  respects  complied fully with the terms and conditions of such policy.
Such policy is in full force and effect.  Such policy is in the coverage  amount
of $7 million.  The  Company  knows,  to its best  knowledge,  of no  threatened
termination of such policy.

     4.   Representations  and  Warranties  of  the  Purchaser.   The  Purchaser
represents  and  warrants  to the  Company as of the date of this  Agreement  as
follows:

     4.1 Status. The Purchaser is a limited partnership duly organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
organization  with full power and authority to execute,  deliver and perform its
obligations under this Agreement and each of the other Transaction  Documents to
which the Purchaser is a party.

     4.2  Authority.  The  Purchaser  has the power and authority to execute and
deliver the  Transaction  Documents  to which it is a party and to carry out its
obligations hereunder and thereunder. The execution, delivery and performance by
the  Purchaser  of the  Transaction  Documents  to which  it is a party  and the
consummation of the transactions  contemplated hereby and thereby have been duly
authorized  by all  necessary  limited  partnership  action  on the  part of the
Purchaser,  and the  Transaction  Documents  to which the  Purchaser  is a party
constitute the legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with their respective  terms,  except as the
same may be  limited by  bankruptcy,  insolvency,  reorganization  or other laws
affecting the  enforcement  of creditors'  rights  generally now or hereafter in
effect  and  subject  to  the  application  of  equitable   principles  and  the
availability of equitable remedies.

                                       25
<PAGE>

     4.3  No  Conflicts.   The  execution,   delivery  and  performance  of  the
Transaction  Documents to which the Company is a party and the  consummation  of
the  transactions  contemplated  hereby and thereby by the  Purchaser do not and
will not with or without  the  giving of notice or the  passage of time or both,
violate or conflict with or result in a breach or  termination  of any provision
of, or constitute a default under any organizational instrument of the Purchaser
or any order, judgment, decree, statute, regulation,  contract, agreement or any
other  restriction  of any kind or description to which the Purchaser is a party
or by which the Purchaser is or may be bound.

     4.4 Purchaser Representations and Acknowledgments.

     (a) The  Purchaser  is  acquiring  the  Purchased  Preferred  Stock for the
Purchaser's  own account for investment only and not as nominee or agent and not
with a view to, or for sale in connection  with, a distribution of the Purchased
Preferred Stock or the shares of Common Stock issuable upon  conversion  thereof
or as dividends thereon and with no present intention of selling,  transferring,
granting a participation in or otherwise  distributing,  the Purchased Preferred
Stock or the shares of Common Stock issuable upon conversion thereof, all within
the  meaning of the  Securities  Act and any  applicable  state,  securities  or
blue-sky laws.

     (b) Except as set forth in a Letter of Intent  dated May 14, 2003 sent from
Purchaser to Company, the Purchaser is not a party or subject to or bound by any
contract,  undertaking,  agreement  or  arrangement  with  any  Person  to sell,
transfer or pledge the  Preferred  Stock or any part thereof to any Person,  and
has no present intention to enter into such a contract,  undertaking,  agreement
or arrangement.

     (c) The Purchaser acknowledges that:

     (i) The Company has advised the Purchaser that neither the Preferred  Stock
nor the  shares of Common  Stock  issuable  upon  conversion  thereof  have been
registered  under the Securities Act or under the laws of any state on the basis
that the issuance  thereof  contemplated  by this  Agreement is exempt from such
registration in accordance with Section 4(2) of the Securities Act;

     (ii) The Company's  reliance on the  availability of an exemption under the
Securities Act for the issuance of the Preferred  Stock and the shares of Common
Stock issuable upon conversion  thereof without  registration is, in part, based
upon the accuracy and truthfulness of the Purchaser's  representations contained
herein;

     (iii) The Purchased Preferred Stock and the shares of Common Stock issuable
upon  conversion  thereof cannot be resold without  registration or an exemption
from  registration  under the Securities Act and any applicable state securities
laws, and that certificates  representing the Purchased  Preferred Stock and the

                                       26
<PAGE>

shares of Common Stock issuable upon conversion  thereof will bear a restrictive
legend  to such  effect  in  substantially  the  following  form and any  legend
required by applicable state laws:

     THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
     AS AMENDED,  OR ANY STATE  SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED
     FOR SALE IN THE ABSENCE OF AN  EFFECTIVE  REGISTRATION  STATEMENT AS TO THE
     SECURITIES  UNDER SAID ACT AND ANY APPLICABLE  STATE  SECURITIES LAW OR THE
     AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT.

     (iv) The Purchaser  has  evaluated  the merits and risks of purchasing  the
Purchased  Preferred  Stock,  and has such knowledge and experience in financial
and business  matters that the Purchaser is capable of evaluating the merits and
risks of such purchase,  is aware of and has considered the financial  risks and
hazards of purchasing  the Purchased  Preferred  Stock,  and is able to bear the
economic risk of purchasing the Preferred Stock,  including the possibility of a
complete loss with respect thereto;

     (v) The Purchaser has had access to such information regarding the business
and finances of the Company,  and has been provided the  opportunity  to discuss
with the Company's  management the business,  affairs and financial condition of
the Company and such other  matters with respect to the Company as would concern
a reasonable person considering the transactions  contemplated by this Agreement
and/or concerned with the operation of the Company;

     (vi) The  representations  and warranties of the Purchaser set forth herein
are true,  correct and  complete as of the date of this  Agreement,  and will be
true,  complete  and correct on the date of closing of the  purchase and sale of
the Purchased Preferred Stock pursuant to the terms hereof,  provided,  however,
if there  should be any  material  change  in the  information  underlying  such
representations  and  warranties at any time prior to such closing the Purchaser
shall immediately furnish such revised or corrected  information to the Company;
and

     (vii) The Purchaser,  by initialing the paragraphs in (a) through (g) below
applicable to the Purchaser,  hereby  represents and warrants that the Purchaser
is an Accredited Investor, because the Purchaser comes within one or more of the
enumerated categories set forth in (a) through (g) below. Check the box provided
in  the  beginning  of  each  applicable  paragraph,  thereby  representing  and
warranting as to the  applicability to the Purchaser of the checked paragraph or
paragraphs:

     [ ]  A bank as defined  in Section  3(a)(2)  of the  Securities  Act,  or a
          savings  and loan  association  or other  institution  as  defined  in
          Section  3(a)(5)(A)  of the  Securities  Act,  whether  acting  in its
          individual  or  fiduciary  capacity;  a broker  or  dealer  registered

                                       27
<PAGE>

          pursuant to Section 15 of the Exchange  Act; an  insurance  company as
          defined in Section 2(13) of the Securities Act; an investment  company
          registered  under the Investment  Company Act of 1940 (the "Investment
          Company Act") or a business  development company as defined in Section
          2(a)(48) of the Investment  Company Act; a Small  Business  Investment
          Company  licensed  by the U.S.  Small  Business  Administration  under
          Section 301(c) or (d) of the Small Business  Investment Act of 1958; a
          plan established and maintained by a state, its political subdivisions
          or  any  agency  or  instrumentality  of  a  state  or  its  political
          subdivisions for the benefit of its employees,  if such plan has total
          assets in excess of  $5,000,000;  an employee  benefit plan within the
          meaning  of the  Employee  Retirement  Income  Security  Act  of  1974
          ("ERISA"),  if the investment decision is made by a plan fiduciary, as
          defined in Section 3(21) of ERISA, which is either a bank, savings and
          loan association, insurance company, or registered investment advisor,
          or if the  employee  benefit  plan  has  total  assets  in  excess  of
          $5,000,000 or, if a self-directed plan, with investment decisions made
          solely by persons that are accredited investors.

     [ ]   A  private  business  development   company  as  defined  in  Section
          202(a)(22) of the Investment Advisers Act of 1940.

     [X]  An   organization   described  in  Section   501(c)(3)  of  the  Code,
          corporation,  Massachusetts or similar business trust, or partnership,
          not  formed  for the  specific  purpose of  acquiring  the  securities
          offered, with total assets in excess of $5,000,000.

     [ ]  A director or executive officer of the Company.

     [ ]  A  natural person  whose individual net worth, or joint net worth with
          that  person's  spouse,  at the  time of his or her  purchase  exceeds
          $1,000,000.

     [ ]  A natural  person who  had an individual  income in excess of $200,000
          in each of the two  most  recent  years  or  joint  income  with  that
          person's spouse in excess of $300,000 in each of those years and has a
          reasonable  expectation  of  reaching  the  same  income  level in the
          current year.

     [ ]  A  trust,  with  total assets in excess of $5,000,000,  not formed for
          the  specific  purpose of  acquiring  the  securities  offered,  whose
          purchase is directed by a  sophisticated  person as  described in Rule
          506(b)(2)(ii) (i.e., a person who has such knowledge and experience in
          financial and business  matters that he is capable of  evaluating  the
          merits and risks of the prospective investment).

     [ ]  An  entity  in   which  all  of  the  equity  owners   are  accredited
          investors.  (If  this  alternative  is  checked,  the  Purchaser  must

                                       28
<PAGE>

          identify  each  equity  owner and  provide  statements  signed by each
          demonstrating how each is qualified as an accredited investor.)

     (d) As long as the Purchaser or its affiliates  owns any shares of Series A
Preferred Stock or Common Stock, neither the Purchaser nor its affiliates shall,
directly  or  indirectly,  engage in any form of "short"  sales of any shares of
Common Stock,  whether  "covered" or "uncovered"  short sales,  or engage in any
transaction,  the  purpose of which is to  effectuate  a short sale of or a sale
with a declared  delivery  (more than three days from the actual sale) of any of
the shares sold.

     (e) The  Purchaser  is on the date  hereof,  and  will  be,  on the date of
Closing,  the sole owner of the  Preferred  Stock,  and as such sole owner,  the
Purchaser  has  consented  to the  adoption  and  filing of the  Certificate  of
Amendment  to the  Certificate  of  Designation  with the  Secretary of State of
Delaware.

     5. Certain Covenants.

     5.1  Board   Designee   (Anything   contained   herein   to  the   contrary
notwithstanding  the  provision  of this  Section 5 shall not be deemed to be in
addition to the rights relative to a Board Designee  granted to the Purchaser in
Section 5 of the September 2002 Agreement but by way of clarification thereof so
as to take  into  account  the  appointment  of Peter B.  Yunich  as a  Director
pursuant to the September 2002 Agreement.)

     (a) The Company hereby covenants and agrees that all times during which the
Purchaser owns not less than the Threshold Percentage, provided that the Company
then has a classified Board of Directors,  the Purchaser shall have the right to
designate  one  director to the  Company's  Board of Directors  (the  "Purchaser
Designee"),  which right shall not be assigned without the prior written consent
of the Company.  The Company and the Purchaser  acknowledge that Peter B. Yunich
is currently  serving as a Class II director on the Board of Directors until the
annual meeting of  stockholders  in 2004 and until his successor is duly elected
and qualified or his earlier resignation or removal.  The Company further agrees
that it shall  nominate  Mr.  Yunich,  or such other  Person  designated  by the
Purchaser and acceptable to the Board of Directors in the good faith exercise of
its reasonable  business  judgment,  to the slate of the Company's  nominees for
election as Class II directors of the Company at the Company's annual meeting of
stockholders in 2004 and that in the event Mr. Yunich shall resign or be removed
from the  Board of  Directors  prior  thereto,  that the  Company  will fill the
vacancy in Class II members of its Board with another  Person  designated by the
Purchaser and acceptable to the Board of Directors in the good faith exercise of
its reasonable  business  judgment.  Notwithstanding  anything contained in this
Section  5.1 to the  contrary,  at any time during  which the  Company  does not
maintain a classified  board of  directors,  so long as the  Purchaser  owns the
Threshold  Percentage,  the Company  shall  comply with the  provisions  of this
Section 5.1 to appoint the Purchaser  Designee to the Board of Directors as then
composed.

                                       29
<PAGE>

     (b) The  Company  agrees to use its best  efforts  to cause  the  Purchaser
Designee to be  nominated  to the Board of Directors of the Company for election
to such Board (and any committees of the Board, to the extent deemed appropriate
by  the   non-Purchaser   Designee  members  of  the  Board)  by  the  Company's
stockholders  at the time and in the manner  provided  for such  nomination  and
election in the Company's Bylaws and Certificate of  Incorporation.  For as long
as the  Purchaser  owns not less than the  Threshold  Percentage,  the Purchaser
Designee may not be removed or replaced  without the  Purchaser's  prior written
consent, except for any removal of such individual for Cause (but subject to the
rights of the  Purchaser  to fill such  vacancy and of the Board of Directors to
accept the Purchaser Designee as provided herein).

     (c) The  Company  shall  also use its best  efforts  to cause  its Board of
Directors to take all necessary and appropriate action to effect the election of
the Purchaser Designee pursuant to the terms of this Section 5.1.

     (d) The Company agrees that the Purchaser Designee shall be entitled to and
shall receive the same  compensation  as other members of the Board of Directors
receive for serving on the Board of Directors.

     (e) Anything contained in this Section 5.1 to the contrary notwithstanding,
neither the Company nor its Board of Directors  shall have any obligation  under
this  Section to do any act or thing which  violates  any  provision of Delaware
law,  the  Exchange  Act,  the  proxy  rules or any other  rules or  regulations
promulgated  under the  Exchange  Act or any other  applicable  Federal or state
securities laws, rules or regulations.

     5.2 Incurrence of Indebtedness; Right of First Refusal.

     (a) If, at any time when the Purchaser owns the Threshold Percentage and at
least 25% of the Preferred Stock outstanding  immediately following the Closing,
the Company desires to incur any indebtedness (other than Senior  Indebtedness),
the Company  shall  deliver a written  notice to the  Purchaser of the Company's
good  faith  desire  to  incur  such  indebtedness,  specifying  the  amount  of
indebtedness  the Company  desires to incur and a detailed  explanation  for the
reason it desires to incur such  indebtedness  (the "Offer  Notice").  The Offer
Notice shall set forth the  principal  amount of the desired  indebtedness,  the
term, the facilities for payment,  schedule of payments,  interest rate, and any
other material terms and conditions of the desired indebtedness.

                                       30
<PAGE>

     (b) As promptly as practicable  but in no event later than 15 calendar days
after receipt of an Offer Notice (the "Offer Period"),  the Purchaser shall have
the right, but not the obligation,  to elect to provide the Company with all the
financing so desired by the Company in accordance with such Offer Notice. If the
Purchaser  elects to provide such financing to the Company,  the Purchaser shall
give written notice to the Company, prior to the expiration of the Offer Period,
of the Purchaser's election to provide such financing to the Company (a "Funding
Notice").

     (c) Any financing to be provided by the Purchaser  pursuant to this Section
5.2  shall  close  within  fifteen  (15)  calendar  days  after  the date of the
applicable  Funding  Notice.  The Company and the Purchaser  shall enter into an
agreement to effect such  transaction  on the terms and  conditions set forth in
the  Offer  Notice  and  with  such  representations,   warranties,   covenants,
conditions  and  indemnities  as  are  customary  under  the  circumstances  and
otherwise commercially reasonable.

     (d) In the event the Purchaser  declines (by written  notice  declining the
offer  pursuant to the Offer  Notice) or shall fail to provide a Funding  Notice
prior to the expiration of the Offer Period (the "Date of Rejection"),  then the
Company  shall have the right to engage in a  transaction  pursuant to the terms
set forth in the  Offer  Notice  at any time  within  45 days  after the Date of
Rejection  (the "Sale  Period") upon terms and  conditions no more  favorable to
such party than those specified in the Offer Notice.

     (e) For the  purposes of this Section 5.2,  "terms and  conditions  no more
favorable"  shall mean that the  price,  facilities  for  payment,  schedule  of
payments,  interest  rates,  indemnification  provisions  and any other material
terms and  conditions  of the  agreement  pursuant  to which such  financing  is
obtained  by the Company  shall not,  in the  aggregate,  be  economically  more
favorable to such Person than the terms and conditions offered to the Purchaser.

     (f) If such  financing  is not  obtained  by the  Company  within  the Sale
Period, any proposed incurrence of indebtedness (other than Senior Indebtedness)
shall again be subject to the notice  requirements  and rights of first  refusal
set forth in this Section 5.2.

     (g) For purposes of this Section 5.2 only,  the term "the Company" shall be
deemed to include the Company and any of its subsidiaries.

                                       31
<PAGE>

5.3     Issuances of Company Securities.

     (a) As long as the Purchaser  owns not less than the  Threshold  Percentage
and at least 25% of the Preferred Stock  outstanding  immediately  following the
Closing,  the Company  only shall have the right to issue shares of Common Stock
or  preferred  stock  ranking  junior to the  Preferred  Stock  with  respect to
liquidation  preferences (the "Junior Securities") as long as such issuance does
not  result in a  limitation  on the use of the  Company's  net  operating  loss
carryforwards under Section 382 of the Code.  Notwithstanding the foregoing, the
issuance  of Junior  Securities  will be  permissible  even if it  results  in a
limitation  on the  use of  the  Company's  net  operating  loss  carryforwards;
provided  that  at  least  two (2) of the  Company's  directors  do not  vote in
opposition to such issuance.

     (b) Notwithstanding  anything contained herein to the contrary, the Company
agrees  that  for as long as the  Purchaser  owns not  less  than the  Threshold
Percentage  and at least  25% of the  Preferred  Stock  outstanding  immediately
following the Closing,  without the prior  written  consent of the Purchaser the
Company will not:

     (i) create or authorize the creation or increase the  authorized  amount of
or alter the rights of any  additional or existing  class or series of shares of
stock,  unless  the same  ranks  junior to the  Preferred  Stock as  liquidation
preferences;

     (ii)  create  or  authorize  any  obligation  or  security  convertible  or
exercisable into or exchangeable  for shares of Preferred  Stock,  regardless of
whether  any  such  creation,  authorization  or  increase  shall be by means of
amendment to the Certificate of  Incorporation,  or by merger,  consolidation or
otherwise; or

     (c) alter or amend the rights,  preferences  or privileges of the Preferred
Stock (whether by merger, consolidation, or otherwise).

     (d)  Notwithstanding  anything contained in this Agreement to the contrary,
there shall be no limitation  whatsoever at any time on the right of the Company
to issue Junior Securities.

     5.4 Delisting.

     In the event that the Company's Common Stock, for any reason, is not listed
on the Nasdaq SmallCap Market, the Over-the-Counter  Bulletin Board or a similar
national exchange,  (absent any time frame applicable to any transition from one
exchange  to  another)  and the  Company is no longer  subject to the  reporting
requirements  of the Exchange Act, the Company hereby  covenants and agrees with
the Purchaser  that, so long as the Purchaser or any of its Affiliates  owns the
Threshold  Percentage,  except as  otherwise  required  in this  Agreement,  the
Company shall:

     (a) Financial and Other Information Rights.

                                       32
<PAGE>

     (i) As soon as  practicable  after the end of each fiscal year,  and in any
event  within  ninety (90) days after each fiscal year  beginning  with the year
ending  December 31, 2003, the Company shall furnish to the Purchaser an audited
consolidated  (and  consolidating)  balance sheet of the Company and each of its
subsidiaries, as of the end of such fiscal year and an audited consolidated (and
consolidating) statements of operations,  accumulated earnings and cash flows of
the Company and each of its  subsidiaries,  for such  fiscal  year,  prepared in
accordance with generally accepted accounting principles,  setting forth in each
case in  comparative  form the  figures for the  previous  fiscal  year,  all in
reasonable  detail and audited by a  nationally  recognized  independent  public
accounting firm selected by the Company and satisfactory to the Purchaser.

     (ii) As soon as practicable  after the end of each fiscal  quarter,  and in
any event within  forty-five (45) days after each fiscal quarter  beginning with
the quarter ending after the Company is subject to such  delisting,  the Company
shall furnish to the  Purchaser an unaudited  consolidated  (and  consolidating)
balance sheet of the Company and each of its subsidiaries, as of the end of such
fiscal  quarter and unaudited  consolidated  (and  consolidating)  statements of
operations,  accumulated  earnings and cash flows of the Company and each of its
subsidiaries,  for such fiscal  quarter and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in  comparative  form the  figures  for the  previous  fiscal
quarter, subject to charges resulting from year-end adjustment,  and accompanied
by a brief narrative  description of the Company's  business  activities  during
said fiscal quarter  setting forth events which could  reasonably be expected to
have a Material Adverse Effect,  all in reasonable  detail, and certified by the
chief financial officer and/or chief executive officer of the Company.

     (iii) As soon as practicable  after the end of each month, and in any event
within thirty (30) days thereafter, the Company shall furnish to the Purchaser a
consolidated  balance sheet of the Company and each of its  subsidiaries,  as of
the end of such month,  and consolidated  statements of operations,  accumulated
earnings and cash flow of the Company each of its  subsidiaries,  for such month
and for the current fiscal year to date,  prepared in accordance  with generally
accepted  accounting  principles,  with such  statements  certified by the chief
financial  officer of the Company as having been  prepared  in  accordance  with
generally accepted accounting principles.

     (iv) No later than the end of each fiscal year,  the Company  shall furnish
to the  Purchaser  a business  plan and budget for the  Company  and each of its
subsidiaries,  for the next fiscal  year.  Such  business  plan and budget shall
contain  information,  data and other materials typically included in a business
plan and  budget  of a  company  similar  in size  and  nature  to the  Company,
including budget data (including without limitation revenues,  expenses and cash
position) for each month of such fiscal year, and which budget and business plan
shall be approved by a majority of the Board of Directors.

                                       33
<PAGE>

     (v) From the date the Company becomes subject to the reporting requirements
of the Exchange Act, and in lieu of the financial  information required pursuant
to this  Agreement,  but within the time  periods  required  for the  furnishing
thereof,  the Company shall furnish to the Purchaser copies of its reports filed
on Form 10-K, Form 10-Q, Form 8-K or any successor form or forms.

     (vi) Each set of financial  statements delivered to the Purchasers pursuant
to this  Section  5.4 will be  accompanied  by a  certificate  of the  Chairman,
President or a Vice President and the Treasurer or an Assistant Treasurer of the
Company setting forth:

     (1)  Covenant  Compliance - any information  required in order to establish
          whether  the Company and any of its  subsidiaries  were in  compliance
          with the requirements of this Section 5.4 during the period covered by
          the income statement then being furnished; and Event of Default - that
          the signers have  reviewed the relevant  terms of this  Agreement  and
          have made, or caused to be made, under their supervision,  a review of
          the  transactions  and  conditions  of  the  Company  and  any  of its
          subsidiaries  from the beginning of the  accounting  period covered by
          the income  statements  being  delivered  therewith to the date of the
          certificate  and that such  review  has not  disclosed  the  existence
          during  such period of any  condition  or event  which  constitutes  a
          breach or default under the other Transaction  Documents or any of the
          other  agreements  contemplated  hereby  or  thereby  or,  if any such
          condition or event existed or exists, specifying the nature and period
          of existence thereof and what action the Company has taken or purposes
          to take with respect thereto.

     (vii)The Company shall permit at least one  representative of the Purchaser
          to:

     (1)  visit and inspect any of the  properties  of the Company or any of its
          subsidiaries  and to  discuss  its and  their  affairs,  finances  and
          accounts with the officers of the Company and its subsidiaries, all at
          such  reasonable  times during regular  business hours and as often as
          may be reasonably requested; and

     (2)  discuss the  affairs,  finances  and  accounts of the Company with its
          officers and consult with and advise the officers of the Company as to
          the management of the Company at all reasonable  times and as often as
          reasonably requested;

                                       34
<PAGE>

provided that such Purchaser shall maintain and shall take appropriate  steps to
ensure that any Purchaser  representative  maintains the  confidentiality of any
proprietary  information of the Company thereby obtained and,  provided further,
that such Purchaser  shall cause all its inspections to be conducted in a manner
that is not materially disruptive to the employees or operations of the Company.

     (viii) Except as otherwise  indicated,  the Company shall provide notice to
such Purchaser of a Reportable  Event (as  hereinafter  defined) within ten (10)
days  (twenty  (20)  days in the case of  clause  (iii) of this  Section  5.4(a)
following  the  occurrence  of  said  event.   The  following  events  shall  be
"Reportable Events":

     (1)  receipt  by the  Company  of a bona  fide  offer to buy a  controlling
          interest in the capital stock of the Company;

     (2)  the  receipt by the Company of a notice that the Company is in default
          under any loan agreement to which the Company is a party;

     (3)  the   existence  of  any  known  default  by  the  Company  under  its
          Certificate of Incorporation  (as the same may be amended from time to
          time), including,  without limitation, any certificate of designations
          or this Agreement;

     (4)  as soon as  available,  information  and data on any material  adverse
          changes in or any event or condition  which has or could be reasonably
          expected to have a Material Adverse Effect;

     (5)  immediately  upon  becoming  aware of any  condition  or  event  which
          constitutes  a breach of any  Transaction  Document  or any  agreement
          contemplated  hereby or thereby,  written notice specifying the nature
          and period of existence  thereof and what action the Company is taking
          or proposes to take with respect thereto;

     (6)  as soon as  reasonably  possible and in any event within five (5) days
          of becoming aware of any condition or event which  reasonably could be
          considered to materially  affect the operating results or valuation of
          the Company, written notice describing such condition or event;

     (7)  as soon as  reasonably  possible and in any event within five (5) days
          of  becoming  aware that any  employee  of the  Company  (other than a
          secretarial  or  clerical  employee  or  employees  earning  less than
          $100,000 per year) has been or will be  terminated or has left or will
          leave his or her employment, written notice thereof;

                                       35
<PAGE>

     (8)  as soon as  reasonably  possible and in any event within five (5) days
          of becoming  aware of any contact with or proposal from any investment
          banker or any other Person expressing an interest in acquiring all, or
          a part of, the Company, written notice thereof describing such contact
          or proposal;

     (9)  as soon as  reasonably  possible and in any event  within  thirty (30)
          days of becoming aware of any significant  development with respect to
          the  Company's  market,  competition,  price  levels or  technologies,
          written notice describing such development;

     (10) immediately   upon  becoming   aware  of  any  pending  or  threatened
          litigation involving the Company, written notice thereof together with
          a description of the Company's proposed response thereto; and

     (11) with  reasonable  promptness,  such  other  information  and data with
          respect to the Company and any Subsidiaries as any such party may from
          time to time reasonably request.

     (b) Additional Covenants.  In addition,  the Company shall, and shall cause
each of its subsidiaries, as applicable, to:

     (i) Taxes. Promptly pay and discharge,  or cause to be paid and discharged,
when due and payable, all lawful Taxes,  assessments and governmental charges or
levies imposed upon the income, profits,  property or business of the Company or
any subsidiary; provided, however, that any such Tax, assessment, charge or levy
need not be paid if the validity  thereof  shall  currently be contested in good
faith and if the  Company  shall have set aside on its books  adequate  reserves
with respect thereto; and provided, further, that the Company shall pay all such
Taxes,  assessments,  charges  or  levies  forthwith  upon the  commencement  of
proceedings to foreclose any Lien that may have attached as security therefor.

     (ii)  Indebtedness.  Promptly  pay,  or  cause  to be paid,  when  due,  in
conformance  with  the  Company's  past  practices,  all  material  indebtedness
incident to the operations of the Company and its subsidiaries.

     (iii)  Maintenance  of  Property.  Keep  its  properties  and  those of its
subsidiaries  in good repair,  working order and condition,  reasonable wear and
tear  excepted,  and from time to time make all  necessary  and proper  repairs,
renewals, replacements, additions and improvements thereto.

     (iv) Leases.  Comply, and cause its subsidiaries to comply, in all material
respects,  at all times  with the  provisions  of all leases to which any of the
Company and its subsidiaries is a party or under which any of them occupies real
property.

                                       36
<PAGE>

     (v) Insurance. Keep its assets and those of its subsidiaries that are of an
insurable  character insured by financially sound and reputable insurers against
loss or damage by fire,  extended revenge and explosion in amounts customary for
companies  in  similar  businesses  similarly  situated;   and  maintain,   with
financially  sound and reputable  insurers,  insurance against other hazards and
risks and  liability  to persons  and  property  to the extent and in the manner
customary  for  companies in similar  businesses  similarly  situated.  All such
policies  of  insurance  shall  be  occurrence  policies  with  "tail  coverage"
so-called   respecting  all  prior  "claims  made"  policies,   all  in  a  form
satisfactory to the Purchaser.  The Company shall give immediate  written notice
to the  Purchaser  and to insurers of loss or damage to the  property  and shall
promptly file proof of loss with insurers.

     (vi) Books and  Records.  Keep true  records  and books of account in which
full,  true and correct  entries will be made of all dealings or transactions in
relation to its  business  and affairs in  accordance  with  generally  accepted
accounting principles.

     (vii)  Compliance  with  Requirements  of  Governmental  Authorities.  Duly
observe and conform to, and cause its subsidiaries to so observe and conform to,
in  all  material  respects,   all  applicable  statutes,   ordinances,   rules,
regulations,  orders  and all valid  requirements  of  governmental  authorities
relating to the conduct of its businesses or to its property or assets.  Without
limiting the generality of the foregoing, the Company will:

     (1)  comply with all minimum funding requirements applicable to any pension
          plans, employee benefit plans or employee contribution plans which are
          subject to ERISA or to the Code, and comply in all other respects with
          the provisions of ERISA and the  provisions of the Code  applicable to
          such plans; and

     (2)  comply  with all  applicable  laws of the  United  States  and of each
          applicable jurisdiction relating to equal employment opportunity,  any
          rules,   regulations,   administrative  orders  and  executive  orders
          relating  thereto  and  the  applicable   terms,   relating  to  equal
          employment  opportunity,  of any  contract,  agreement  or  grant  the
          company  has  with,  from  or  relating  (by  way  of  subcontract  or
          otherwise) to any other  contract,  agreement or grant of, any federal
          or state  governmental unit; and keep all records required to be kept,
          and file all reports,  affirmative  action plans and forms required to
          be filed, pursuant to any such applicable law or the terms of any such
          government contract; and

     (3)  so conduct its business  that  neither the Company nor any  Subsidiary
          nor any property owned or occupied by the Company or any Subsidiary is
          in violation of any  Environmental  Law of any sort or in violation of

                                       37
<PAGE>

          any  federal or state  "OSHA"  law  so-called.  (viii)  Organizational
          Documents.   Duly   observe  and  comply  with  the   Certificate   of
          Incorporation,  as the  same may be  amended  from  time to time,  and
          Bylaws of the Company as then in effect.

     (ix) Transfer or Replacement  of Stock.  Use its best efforts to facilitate
the transfer or surrender of stock in the Company,  and to replace  certificates
of stock if lost or damaged.

     (x) Maintenance of Corporate Existence.

     (1)  Maintain in full force and effect its corporate existence,  rights and
          franchises and use its commercially  reasonable efforts to maintain in
          full  force  and  effect  all   licenses   and  other  rights  to  use
          Intellectual   Property  Rights  owned  or  possessed  by  it  or  any
          Subsidiary and necessary to the conduct of its business.

     (2)  Not  transfer,  assign or  license  any of its  Intellectual  Property
          Rights now owned or hereafter  acquired by it without  approval of the
          Company's Board of Directors without two (2) or more dissenting votes.

     (xi) Proprietary Information.

     (1)  Cause each  person now or  hereafter  employed by it who has access to
          proprietary   information   concerning  the  Company  or  any  of  its
          subsidiaries  to enter into a  customary  business  protection  and or
          confidentiality and non-disclosure agreement.

     (2)  Will use its  commercially  reasonable  best  efforts and  judgment to
          cause  all  technological  developments,  inventions,  discoveries  or
          improvements  made by employees of the Company and any subsidiaries to
          be  fully   documented   in  accordance   with  the  best   prevailing
          professional standards, and where possible and appropriate,  cause all
          employees  to file and  prosecute  United  States and  foreign  patent
          applications relating to and protecting such developments.

     (xii)  Securities Law Filings.  Make any filings  necessary to perfect in a
timely fashion  exemptions  from (i) the  registration  and prospectus  delivery
requirements of the Securities Act, and (ii) the  registration or  qualification
requirements of all applicable securities or blue sky laws of any state or other
jurisdiction,  for  the  issuance  of  the  Purchased  Preferred  Stock  to  the
Purchaser.

                                       38
<PAGE>

     5.5 Additional Covenant.

     (a) The Company's Board of Directors shall not take any action for the sole
purpose of negatively impacting the Preferred Stock and to positively impact the
Common  Stock in the event  that (i) the  Purchaser  owns at least  50.1% of the
Preferred  Stock  outstanding   immediately  following  the  Closing;  (ii)  the
Purchaser shall have notified the Company of the Purchaser's  objections to such
proposed  action;  (iii) Peter B. Yunich or such other Preferred  Designee voted
against  such action at a meeting of the Board of Directors at which such action
was proposed;  and (iv) such action caused (A) a material harm to the holders of
the  Preferred  Stock and (B) a  material  benefit  to the  Common  Stock.  Cash
dividends to holders of Common Stock shall not be deemed action taken within the
meaning of this Section 5.5.

     (b)  Notwithstanding  paragraph 5.5(a) hereof,  nothing  contained  therein
shall  cause the  Company's  Board of  Directors  to engage in, or refrain  from
engaging in any action,  which may cause the Board of  Directors to breach their
fiduciary obligations.

     5.6   Confidentiality.   The   Purchaser   covenants  and  agrees  to  keep
confidential any and all material non-public information which it has heretofore
obtained or shall  hereafter  obtain,  directly or indirectly,  from the Company
pursuant to this  Agreement or otherwise,  and agrees not to use the same except
for the purpose of this Agreement or to disclose the same to any party except as
provided below,  without the Company's prior written consent;  provided that the
terms of this Section 5.6 shall not extend to any such information that:

     (a) is already publicly known;

     (b) has become  publicly known without any fault of the Purchaser or anyone
to whom the Purchaser has made  disclosure in compliance  with the terms of this
Section 5.6; or

     (c) is required to be disclosed to any  governmental  authorities or courts
of law as a result of operation of law,  regulation,  or court order;  provided,
however, that the Purchaser shall have first given prompt written notice of such
requirement to the Company (if  permissible)  and cooperates with the Company to
restrict such disclosure and/or obtain confidential treatment thereof.

     The foregoing notwithstanding,  the Purchaser may disclose such information
to each of its directors,  officers,  employees, partners (including its limited
partners),  members, managers and representatives,  which representatives have a
need to know such information;  provided that the Purchaser informs such persons
of the  restrictions  set  forth  in  this  Section  5.6  with  respect  to such
information and such persons agree to comply with the provisions of this Section
5.6. The  Purchaser  further  agrees to give prompt notice to the Company of any
disclosure made by the Purchaser or any of its directors,  officers,  employees,
partners (including limited partners),  members,  managers or representatives in

                                       39
<PAGE>

breach of this Section 5.6, to the extent the  Purchaser  has  knowledge of such
disclosure;  provided  that the  Purchaser  shall have no  liability  for losses
incurred  by  the  Company  or  any  of  its  directors,   officers,  employees,
stockholders or  representatives  solely as the result of the Company's failure,
following  its actual  receipt of notice from the  Purchaser  of  disclosure  of
information in breach of this Agreement, to make prompt public disclosure of the
information so disclosed. For purposes of this Section 5.6, the knowledge of the
Purchaser  shall mean the actual  knowledge of Peter B. Yunich or any successors
to him as Managing Partner of the Purchaser.

     6. Registration of Restricted  Stock.  Subject to completion of the Closing
hereunder,  the  provisions  of this  Section  6 shall  apply  to the  Purchased
Preferred Stock and the Preferred Stock purchased pursuant to the September 2002
Agreement and the December 2002  Agreement,  and shall be deemed to have amended
and restated  Section 6 of the  September  2002  Agreement and the December 2002
Agreement in their entirety.

     6.1 Demand Registration.

     (a) At any time  after  the  Closing  hereof,  upon  written  notice of the
Holders of a  majority  of the then  outstanding  Registrable  Securities  (on a
common stock equivalent basis) requesting that the Company effect a registration
under the Securities  Act of Registrable  Securities and specifying the intended
method or methods of  distribution  thereof  (which may include a continuous  or
delayed offering),  the Company shall prepare and file a Registration  Statement
on Form S-3 under the  Securities  Act, or other  appropriate  Form in the event
Form S-3 is not available,  covering the Registrable Securities then outstanding
and  shall  use  commercially  reasonable  efforts  to cause  such  Registration
Statement  to  become  effective  as  expeditiously  as  possible  and to remain
effective  until the  earlier to occur of (i) the date on which all  Registrable
Securities  covered  by such  Registration  Statement  have  been  sold  and the
distribution  contemplated  thereby has been completed or (ii) the date by which
all the  Registrable  Securities  covered  thereby may be sold under Rule 144(k)
(the "Effectiveness Period");  provided,  however, that the Purchaser shall not,
pursuant to this Section 6.1, be entitled to sell,  during any calendar quarter,
more than  twenty-five  percent  (25%) of the  aggregate  number of  Registrable
Securities outstanding immediately following at the Closing, or if the Company's
fiscal year is not the calendar year,  during any fiscal quarter of the Company.
A demand  registration  requested  pursuant to this  Section  6.1(a) will not be
deemed to have been effected unless the Registration  Statement relating thereto
has become  effective  under the  Securities  Act and remains  effective for the
period described above.

     (b) A Holder (including the Purchaser) or Holders requesting a registration
pursuant to this Section  6.1(a) may, at any time prior to the effective date of
the Registration Statement relating to such registration, revoke such request by
providing a written notice to the Company revoking such request.

     (c) The Company and any Other Approved Holder may include its securities in
any  demand  registration  effected  pursuant  to this  Section  6.1;  provided,
however,  that if the managing  underwriter(s) or the  representative(s)  of the

                                       40
<PAGE>

several  underwriters  (the "Managing  Underwriter") of a proposed  underwritten
public  offering  of Common  Stock  advises the Holder or Holders  intending  to
participate  in such  offering  in  writing  that the  total  amount  or kind of
securities  which such  Holders,  the  Company and such Other  Approved  Holders
intend to include in such offering is sufficiently large to materially adversely
affect the success of such offering, then the amount or kind of securities to be
offered for the accounts of the Other Approved Holders shall be reduced pro rata
among such Other  Approved  Holders to the extent  necessary to reduce the total
amount or kind of securities to be included in such proposed  public offering to
the  amount  or kind  recommended  by such  Managing  Underwriter  and,  if such
reduction  results in no securities  being offered for the accounts of the Other
Approved  Holders in such proposed public  offering,  then the amount or kind of
securities  to be offered for the account of the Company shall be reduced to the
extent necessary to reduce the total amount or kind of securities to be included
in such  proposed  public  offering  to the amount or kind  recommended  by such
managing underwriter or underwriters.

     6.2 Piggyback  Registration.  If the Company at any time proposes to file a
registration  statement  with  respect  to any class of its  equity  securities,
whether for its own  account  (other than in  connection  with the  Registration
Statement contemplated by Section 6.1 or a registration statement on Form S-4 or
S-8 (or any successor or substantially similar form), or the registration of (A)
an employee stock option,  stock purchase or compensation  plan or of securities
issued or  issuable  pursuant  to any such plan or (B) a  dividend  reinvestment
plan)  or  for  the  account  of  an  Other   Approved   Holder  (a  "Requesting
Securityholder"),  then the Company  shall in each case give  written  notice of
such  proposed  filing to all  Holders  at least  twenty  (20) days prior to the
anticipated filing date of any such registration  statement by the Company,  and
such notice shall offer to all Holders the opportunity to have any or all of the
Registrable  Securities  held  by such  Holders  included  in such  registration
statement.  Each Holder desiring to have its Registrable  Securities  registered
under this  Section  6.2 shall so advise the Company in writing  within  fifteen
(15) days after the date of  receipt of such  notice  (which  request  shall set
forth the amount of Registrable Securities for which registration is requested),
and  the  Company  shall  include  in  such  Registration   Statement  all  such
Registrable Securities so requested to be included therein on the same terms and
conditions  as the  securities  being  registered  by the Company.  Any Holder's
request for such  inclusion may be  withdrawn,  in whole or in part, at any time
prior to the effective date of such Registration Statement.  Notwithstanding the
foregoing,  if the Managing  Underwriter  of any such proposed  public  offering
advises the Company in writing that the total amount or kind of securities which
the Holders, the Company and the Other Approved Holders intend to be included in
such proposed  public  offering is  sufficiently  large to materially  adversely
affect the success of such proposed public offering,  then the amount or kind of
securities  to be offered for the  accounts  of Holders  and the Other  Approved
Holders (other than the Requesting  Securityholder) shall be reduced pro rata to
the extent  necessary  to reduce the total  amount or kind of  securities  to be
included in such proposed public  offering to the amount or kind  recommended by
such Managing  Underwriter  before the securities  offered by the Company or any
Requesting Securityholder are so reduced.

                                       41
<PAGE>

     6.3 Registration Procedures.  In connection with the Company's registration
obligations  pursuant to  Sections  6.1 and 6.2 hereof,  the  Company  will,  as
expeditiously as practicable:

     (a) prepare and file with the  Commission a new  Registration  Statement or
such  amendments  and  post-effective  amendments  to an  existing  Registration
Statement as may be necessary to keep such Registration  Statement effective for
the  time  periods  set  forth  in  Section  6.1 (in  connection  with a  demand
registration); provided, that as soon as practicable, but in no event later than
three (3) business days before filing such Registration  Statement,  any related
Prospectus or any amendment or supplement  thereto,  other than any amendment or
supplement  made solely as a result of  incorporation  by reference of documents
filed  with  the  Commission  subsequent  to the  filing  of  such  Registration
Statement, the Company shall furnish to the Holders covered by such Registration
Statement and the Managing  Underwriter,  if any,  copies of all such  documents
proposed  to be filed,  which  documents  shall be subject to the review of such
Holders and underwriters;

     (b) the Company  shall not file any  Registration  Statement  or  amendment
thereto or any Prospectus or any supplement thereto (other than any amendment or
supplement  made solely as a result of  incorporation  by reference of documents
filed  with  the  Commission  subsequent  to the  filing  of  such  Registration
Statement) to which the Managing Underwriter of the applicable offering, if any,
or the Purchaser (if it is  participating  in such offering) or the Holders of a
majority of the  Registrable  Securities  (on a Common Stock  equivalent  basis)
covered by such Registration Statement shall have reasonably objected in writing
within three (3)  business  days after  receipt of such  documents to the effect
that  such  Registration   Statement  or  amendment  thereto  or  Prospectus  or
supplement   thereto  does  not  comply  in  all  material   respects  with  the
requirements  of the Securities Act (provided that the foregoing shall not limit
the  right  of  any  Holder  whose  Registrable  Securities  are  covered  by  a
Registration  Statement to reasonably object, within two (2) business days after
receipt of such documents, to any particular information that is to be contained
in such Registration Statement, amendment, Prospectus or supplement that relates
specifically to such Holder,  including any information describing the manner in
which such Holder acquired such  Registrable  Securities and the intended method
or methods of distribution of such Registrable  Securities),  and if the Company
is unable  to file any such  document  due to the  objections  of such  Managing
Underwriter,  the  Purchaser  or such  Holders,  the Company  shall use its best
efforts to cooperate with such Managing  Underwriter,  the Purchaser and Holders
to  prepare,  as soon as  practicable,  a  document  that is  responsive  in all
material  respects  to the  reasonable  objections  of  such  underwriters,  the
Purchaser and Holders;

     (c) cause the  Prospectus  to be  supplemented  by any required  Prospectus
supplement,  and as so supplemented to be filed pursuant to Rule 424; and comply
with the provisions of the Securities Act applicable to the Company with respect
to the  disposition of all  securities  covered by such  Registration  Statement
during the applicable  period in accordance  with the intended method or methods

                                       42
<PAGE>

of distribution by the sellers thereof set forth in such Registration Statement,
Prospectus or supplement to the Prospectus;

     (d)  notify the  selling  Holders  and the  Managing  Underwriter,  if any,
promptly (providing confirmation in writing):

     (1)  when  a new  Registration  Statement,  Prospectus  or  any  Prospectus
          supplement  or  post-effective  amendment  has been filed,  and,  with
          respect to any new Registration Statement or post-effective amendment,
          when it has become effective;

     (2)  of any request by the  Commission for amendments or supplements to any
          Registration Statement or Prospectus or for additional information;

     (3)  of the issuance by the Commission of any written comments with respect
          to any filing;

     (4)  of any stop order  suspending the  effectiveness  of any  Registration
          Statement or the  initiation of any  proceedings  for that purpose and
          the Company agrees that it will make every reasonable effort to obtain
          as soon as possible the  withdrawal  of any such order or other action
          suspending  the   effectiveness  of  any  Registration   Statement  or
          suspending the qualification or registration (or exemption  therefrom)
          of the Registrable Securities for sale in any jurisdiction;

     (5)  in  the  case  of  an  underwritten  offering,  if  at  any  time  the
          representations   and  warranties  of  the  Company   contemplated  by
          paragraph  (n) below  cease to be true and correct as of any time they
          are required to be true and correct;

     (6)  of any suspension of the  qualification  or registration (or exemption
          therefrom) of the Registrable  Securities for sale in any jurisdiction
          or the  initiation or  threatening of any proceeding for such purpose;
          and

     (7)  of the  happening of any event which makes any statement of a material
          fact made in any  Registration  Statement,  Prospectus or any document
          incorporated  therein by reference untrue or which requires the making
          of  any  changes  in any  Registration  Statement,  Prospectus  or any
          document incorporated therein by reference so that it will not contain
          any untrue  statement of a material fact or omit to state any material
          fact required to be stated therein or necessary to make the statements
          therein, in the light of the circumstances under which they were made,
          not misleading;

     (e) if  reasonably  requested  by the Managing  Underwriter  or a Holder of
Registrable  Securities being sold in connection with an underwritten  offering,
promptly incorporate in a Prospectus supplement or post-effective amendment such

                                       43
<PAGE>

information as the Managing  Underwriter,  the Purchaser (if it is participating
in such  offering) and the Holders of a majority of the  Registrable  Securities
(on a Common Stock equivalent  basis) being sold in such  underwritten  offering
reasonably  agree  should  be  included  therein  relating  to the  sale  of the
Registrable  Securities,  including  information  with respect to the  aggregate
number of shares of Registrable  Securities being sold to the underwriters,  the
purchase price being paid therefor by such  underwriters and with respect to any
other terms of the  underwritten  offering of the  Registrable  Securities to be
sold in such offering; and promptly make all required filings of such Prospectus
supplement or post-effective amendment;

     (f) promptly after the filing of any document that is to be incorporated by
reference  into a Registration  Statement or Prospectus  relating to Registrable
Securities covered by a Registration Statement filed pursuant to this Section 6,
provide copies of such document to the selling  Holders  covered thereby and the
underwriters, if any;

     (g)  promptly  after the  filing  of such  documents  with the  Commission,
furnish to each selling Holder and each Managing  Underwriter,  if any,  without
charge, at least one manually signed or "edgarized" copy (but not to exceed five
(5)  manually  signed  copies of any  document  to all  selling  Holders and the
Managing  Underwriter in the  aggregate),  and as many  conformed  copies as may
reasonably be requested,  of the then effective  Registration  Statement and any
post-effective amendments thereto, including financial statements and schedules,
all  documents  incorporated  therein by reference  and all exhibits  (including
those previously furnished or incorporated by reference);

     (h) deliver to each selling  Holder and the Managing  Underwriter,  if any,
without charge, as many copies of the then effective Prospectus  (including each
prospectus  subject to completion) and any amendments or supplements  thereto as
such Persons may reasonably request;

     (i) register or qualify (or obtain  exemption  therefrom) or cooperate with
the selling  Holders,  the Managing  Underwriter,  if any, and their  respective
counsel in  connection  with the  registration  or  qualification  (or exemption
therefrom)  of such  Registrable  Securities  for the offer  and sale  under the
securities  or blue sky laws of such  jurisdictions  as any  selling  Holder  or
Managing Underwriter, if any, reasonably requests in writing;

     (j) use its best efforts to keep each such  registration  or  qualification
(or exemption therefrom)  effective during the Effectiveness  Period; and do any
and all other acts or things  reasonably  necessary  or  advisable to enable the
disposition in such  jurisdictions of the Registrable  Securities covered by the
then effective Registration Statement;  provided, however, that the Company will
not be required to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify, but for this paragraph (j);

                                       44
<PAGE>

     (k) cooperate  with the selling  Holders and the Managing  Underwriter,  if
any,  to  facilitate  the  timely   preparation  and  delivery  of  certificates
representing  Registrable  Securities to be sold and not bearing any restrictive
legends; and enable such Registrable  Securities to be in such denominations and
registered  in such names as the Managing  Underwriter  may request at least two
(2)  business  days  prior  to  any  sale  of  Registrable   Securities  to  the
underwriters;

     (l)  upon  the  occurrence  of any  event  contemplated  by  clause  (7) of
paragraph (d) above,  promptly prepare a supplement or post-effective  amendment
to  the  Registration  Statement  or the  related  Prospectus  or  any  document
incorporated  therein by reference or file any other required  document so that,
as thereafter  delivered to the purchasers of the Registrable  Securities  being
sold  thereunder,  the  Prospectus  will not  contain an untrue  statement  of a
material  fact or  omit  to  state  any  material  fact  necessary  to make  the
statements  therein,  in the light of the  circumstances in which they are made,
not  misleading;  if any event  described in clause (2) of  paragraph  (d) above
occurs,  use its best efforts to cooperate  with the  Commission to prepare,  as
soon as practicable,  any amendment or supplement to such Registration Statement
or such related  Prospectus  and any other  additional  information,  or to take
other action that may have been requested by the Commission;

     (m) cause all Registrable  Securities covered by the Registration Statement
to be listed on each  securities  exchange (or  quotation  system  operated by a
national  securities  association) on which identical  securities  issued by the
Company are then listed (or  included) if requested by the  Purchaser  (if it is
participating  in such offering) or the Holders of a majority of the Registrable
Securities (on a Common Stock  equivalent  basis)  covered by such  Registration
Statement  or the  Managing  Underwriter,  if  any,  and  enter  into  customary
agreements  including,  if necessary,  a listing application and indemnification
agreement in customary  form, and provide a transfer agent for such  Registrable
Securities no later than the effective date of such Registration Statement;

     (n)  enter  into  customary  agreements   (including  in  the  case  of  an
underwritten  offering, an underwriting  agreement with the Managing Underwriter
in form customary with respect to issuers of similar market  capitalization  and
reporting and financial histories) and take all such other actions in connection
therewith in order to expedite or facilitate the disposition of such Registrable
Securities included in such Registration  Statement, in each case, in connection
with  an  underwritten  offering,  as the  Managing  Underwriter  determines  is
reasonable and customary, and in connection therewith:

     (1)  make such  representations  and warranties to the selling  Holders and
          each of the  underwriters  in such  form,  substance  and scope as are
          customarily made by issuers to underwriters in secondary  underwritten
          offerings of securities  listed on the NASDAQ  SmallCap  Market or any
          other system of  automated  dissemination  of quotation of  securities
          prices;

                                       45
<PAGE>

     (2)  obtain  opinions of counsel to the Company  addressed  to each selling
          Holder and to each of the  underwriters  and  updates  thereof  (which
          counsel  and  opinions  (in  form,   scope  and  substance)  shall  be
          reasonably  satisfactory to the  underwriters  and the selling Holders
          and shall cover the matters  customarily covered in opinions requested
          in secondary underwritten offerings of securities listed on the NASDAQ
          SmallCap  Market or any other  system of  automated  dissemination  of
          quotation  of  securities  prices  and such  other  matters  as may be
          reasonably requested by such Holders and underwriters);

     (3)  obtain "cold comfort" letters and updates thereof from the independent
          certified public  accountants of the Company addressed to each selling
          Holder and each of the  underwriters,  such letters to be in customary
          form and  covering  matters of the type  customarily  covered in "cold
          comfort" letters in connection with secondary  underwritten  offerings
          of securities listed on the NASDAQ SmallCap Market or any other system
          of automated dissemination of quotation of securities prices;

     (4)  the   underwriting   agreement  shall  contain   indemnification   and
          contribution  provisions  and  procedures no less favorable than those
          set forth in Section 6.6 (and, to the extent applicable,  Section 7.1)
          hereof  with  respect to all  parties to be  indemnified  pursuant  to
          Section 6.6 (and, to the extent applicable, Section 7.1); and

     (5)  the Company shall deliver such  documents and  certificates  as may be
          reasonably   requested  by  the  selling   Holders  and  the  Managing
          Underwriter to evidence  compliance with clause (1) above and with any
          customary conditions contained in the underwriting  agreement or other
          agreement  entered  into by the  Company in  respect  of the  relevant
          offering;

     (o) provide a CUSIP number (if necessary) for the Registrable Securities no
later than the effective date of such registration statement;

     (p) in the case of any non-underwritten offering:

     (1)  obtain opinions of counsel to the Company at the time of effectiveness
          of such  Registration  Statement  covering  such  offering and updates
          thereof of customary frequency, addressed to each Holder participating
          in such  offering and covering  matters that are no more  extensive in
          scope  than  would be  customarily  covered in  opinions  obtained  in
          secondary  underwritten  offerings  by  issuers  with  similar  market
          capitalization and reporting and financial histories;

                                       46
<PAGE>

     (2)  obtain "cold comfort"  letters from the independent  certified  public
          accountants  of the  Company  at the  time  of  effectiveness  of such
          Registration  Statement  and, upon the request of the Purchaser (if it
          is participating in such offering) or the Holders of a majority of the
          Registrable Securities (on a Common Stock equivalent basis) covered by
          such Registration  Statement,  updates thereof of customary frequency,
          in each case addressed to each Holder  participating  in such offering
          and covering matters that are no more extensive in scope than would be
          customarily  covered in "cold comfort" letters and updates obtained in
          secondary  underwritten  offerings  by  issuers  with  similar  market
          capitalization and reporting and financial histories; and

     (3)  deliver a  certificate  of an executive  officer of the Company at the
          time of  effectiveness  of such  Registration  Statement and, upon the
          request of the Purchaser (if it is  participating in such offering) or
          the Holders of a majority of the  Registrable  Securities (on a Common
          Stock  equivalent  basis)  covered  by  such  Registration  Statement,
          updates  thereof of customary  frequency,  such  certificates to cover
          matters no more  extensive  in scope than  those  matters  customarily
          covered  in  officer's   certificates  delivered  in  connection  with
          underwritten  offerings by issuers with similar market  capitalization
          and reporting and financial histories;

     (q) otherwise use its best efforts to comply with all applicable  rules and
regulations of the Commission relating to such registration and the distribution
of the securities  being offered and make generally  available to its securities
holders  earnings  statements  satisfying the provisions of Section 11(a) of the
Securities  Act, no later than 60 days after the end of any 12-month  period (or
120 days,  if such period is a fiscal year)  commencing at the end of any fiscal
quarter in which the  Registrable  Securities are sold to underwriters in a firm
commitment  or  best  efforts  underwritten   offering,   or,  if  not  sold  to
underwriters  in such  an  offering,  beginning  with  the  first  month  of the
Company's  first fiscal  quarter  commencing  after the  effective  date of such
Registration  Statement,  which earnings  statements  shall cover such 12- month
periods;

     (r)  cooperate  and  assist  in any  filings  required  to be made with the
National  Association of Securities Dealers,  Inc. and in the performance of any
customary due diligence investigation;

     (s) make  available,  upon  reasonable  notice and during  normal  business
hours,  for inspection by the Holders of the Registrable  Securities  covered by
such Registration  Statement,  any underwriter  participating in any disposition
pursuant  to  such   registration,   and  any  attorney,   accountant  or  other
representative retained by such sellers or underwriter,  all financial and other
records,  pertinent  corporate documents and properties of the Company and cause

                                       47
<PAGE>

the  Company's  officers,  directors  and  employees  to supply all  information
reasonably  requested by, and to cooperate fully with, any such  representative,
underwriter, attorney or accountant in connection with such registration;

     (t) cause the Registrable  Securities covered by the Registration Statement
to be  registered  with or  approved  by such  other  governmental  agencies  or
authorities  as may be  reasonably  necessary  to enable  the  seller or sellers
thereof or the  underwriters,  if any, to  consummate  the  disposition  of such
Registrable  Securities;  provided,  however,  that  the  Company  shall  not be
required  to  qualify  to do  business  in any  jurisdiction  where it would not
otherwise be required to qualify, but for this paragraph (t); and

     (u) use its best  efforts  to take all action  necessary  or  advisable  to
effect such registration in the manner contemplated by this Agreement.

     6.4 Material Development Election.

     (a) Subject to Section 6.4(b) below,  the Company shall be entitled,  for a
period  of time  not to  exceed  thirty  consecutive  (30)  days (a  "Suspension
Period"),  to  postpone  the  filing  of any  Registration  Statement  otherwise
required  to be filed by it  pursuant  to Section  6.1 and/or  request  that the
Holders  refrain  from  effecting  any public  sales or  distributions  of their
Registrable Securities if the Company's Board of Directors shall have reasonably
determined  in good  faith and in its  reasonable  business  judgment  that such
registration  would interfere in any material  respect with any financing (other
than an  underwritten  secondary  offering of any  securities  of the  Company),
acquisition,  corporate  reorganization  or  other  transaction  or  development
involving the Company or any  subsidiary  of the Company that in the  reasonable
good faith business  judgment of such board is a transaction or development that
is or would be material to the Company (a "Material Development Election").

                                       48
<PAGE>

     (b) The Board of  Directors  shall,  as promptly as  practicable,  give the
Holders written notice of any such Material Development  Election.  In the event
of a  determination  by the  Board of  Directors  to  postpone  the  filing of a
Registration  Statement required to be filed pursuant to Section 6.1 hereof, the
Company  shall  be  required  to file  such  Registration  Statement  as soon as
practicable after the Board of Directors of the Company shall determine,  in its
reasonable business judgment, that the filing of such Registration Statement and
the  offering   thereunder  will  not  interfere  with  the  aforesaid  material
transaction  or  development,  but in any  event no  later  than the end of such
Suspension  Period.  In  addition,  if the Board of Directors of the Company has
requested that the Holders refrain from making public sales or  distributions of
their  Registrable  Securities,  such board  shall,  as promptly as  practicable
following its  determination  that the Holders may recommence  such public sales
and distributions,  notify such Holders in writing of such determination (but in
any event no later  than the end of such  Suspension  Period).  In the event the
Company shall exercise a Material  Development  Election  during a period when a
Registration  Statement  filed pursuant to Section 6.1 hereof is effective,  the
time period  specified  in Section  6.1 hereof  during  which such  Registration
Statement  is required to be kept  effective  shall be extended by the number of
days during  which the  Holders are  prohibited  by the  Company  from  publicly
selling or distributing their securities.

     (c) The Purchaser  agrees that, upon receipt of any notice from the Company
of a Suspension Period, the Purchaser shall forthwith discontinue disposition of
shares of Common Stock  covered by such  Registration  Statement  or  Prospectus
until the  Purchaser  (i) is notified in writing by the Company  that the use of
the  applicable  prospectus  may be  resumed,  (ii)  has  received  copies  of a
supplemental or amended prospectus, if applicable, and (iii) has received copies
of any additional or supplemental filings which are incorporated or deemed to be
incorporated by reference into such prospectus.

     (d) Notwithstanding  the foregoing,  no more than one Suspension Period may
occur during any twelve-month period, unless approved by a  majority-in-interest
of the then  outstanding  Holders (on a common  equivalent  basis).  The Company
shall use its best  efforts to limit the duration  and  aggregate  number of any
Suspension Periods.

     6.5  Registration   Expenses.   All  expenses  incident  to  the  Company's
performance  of or compliance  with Section 6 of this  Agreement,  including all
registration and filing fees, fees and expenses of compliance with securities or
blue  sky laws  (including  reasonable  fees and  disbursements  of  counsel  in
connection with blue sky  qualifications  or registrations  (or the obtaining of
exemptions  therefrom)  of  the  Registrable   Securities),   printing  expenses
(including expenses of printing Prospectuses),  messenger and delivery expenses,
internal  expenses  (including  all  salaries  and  expenses of its officers and
employees performing legal or accounting duties),  fees and disbursements of its
counsel and its independent certified public accountants (including the expenses
of any  special  audit or  "comfort"  letters  required  by or  incident to such
performance or compliance),  securities acts liability insurance (if the Company
elects to obtain such  insurance),  fees and  expenses  of any  special  experts

                                       49
<PAGE>

retained by the Company in connection with any registration hereunder,  fees and
expenses of other  Persons  retained by the Company,  (all such  expenses  being
referred to as "Registration Expenses"),  shall be borne by the Company, whether
or not any registration statement becomes effective;  provided that Registration
Expenses  shall not  include any  underwriting  discounts,  commissions  or fees
attributable to the sale of the Registrable Securities.

     6.6 Registration Rights Indemnification.

     (a) Indemnification by the Company.

     (i) The Company will  indemnify and hold  harmless,  to the fullest  extent
permitted  by law,  but  without  duplication,  each  Holder  and  each of their
respective  Affiliates,  including  any  managed  or  advised  accounts  and any
investment advisor or agent therefor, officers, directors,  employees, partners,
representatives  and agents,  and each Person who  controls  such Holder or such
other Persons  (within the meaning of the Securities  Act) (for purposes of this
Section  6.6(a),  a "Holder  Indemnified  Person"),  from and against,  and will
reimburse  such Holder  Indemnified  Person with respect to, any and all claims,
actions,  demands, losses, damages,  liabilities,  costs and expenses (including
reasonable  costs of  investigation  and  reasonable  legal  fees and  expenses)
("Indemnifiable Costs and Expenses") to which such Holder Indemnified Person may
become  subject  under the  Securities  Act or otherwise and arise out of or are
based upon (i)  violation  of  securities  laws or (ii) any untrue  statement or
alleged  untrue  statement of any material fact contained in, or any omission or
alleged  omission to state therein a material fact required to be stated in, any
such Registration  Statement,  any Prospectus contained therein or any amendment
or supplement thereto or necessary to make the statements  contained therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that the Company will not be liable in any such case to the extent that
any costs or expense covered by the preceding  clauses (i) or (ii) arises out of
or results from any untrue or alleged  untrue  statement  of any  material  fact
contained in such Registration  Statement,  any Prospectus  contained therein or
any amendment or supplement thereto or any omission or alleged omission to state
therein a material fact  required to be stated  therein or necessary to make the
statements  therein,  in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged  untrue  statement  or omission or alleged  omission was so
made  solely  in  reliance  upon  and in  substantial  conformity  with  written
information  furnished by such Holder Indemnified Person specifically for use in
the preparation of any such Registration  Statement,  Prospectus or amendment or
supplement thereto.

                                       50
<PAGE>

     (ii) The  Company  further  agrees  promptly  upon  demand  by each  Holder
Indemnified  Person to reimburse each Holder  Indemnified  Person for any Holder
Indemnifiable  Costs and Expenses as they are incurred by it;  provided  that if
the Company  reimburses a Holder  Indemnified  Person hereunder for any expenses
incurred in connection  with a lawsuit,  claim,  inquiry or other  proceeding or
investigation  for which  indemnification  is sought,  such  Holder  Indemnified
Person agrees to refund such  reimbursement  of Holder  Indemnifiable  Costs and
Expenses to the extent it is finally  judicially  determined  that the indemnity
provided for in this Section  6.6(a) is not applicable to, or the Company is not
otherwise  obligated to pay, such Holder  Indemnified  Person in accordance with
the  terms  hereof  or  otherwise.  The  indemnity,   contribution  and  expense
reimbursement  obligation of the Company  under this Section  6.6(a) shall be in
addition to any liability it may otherwise have.

     (iii) The  obligations of the Company  hereunder  shall survive the Closing
and the  termination of any  Registration  Statement under which any Registrable
Securities  were  registered the  termination of this Agreement and shall not be
extinguished with respect to any Person because any other Person is not entitled
to indemnity or contribution hereunder.

     (b) Indemnification by Holders of Registrable Securities. Each Holder whose
Registrable  Securities are included in a Registration Statement pursuant to the
provisions of this Section 6 will indemnify and hold harmless the Company,  each
of its subsidiaries and Affiliates,  and their respective  officers,  directors,
employees, partners, stockholders,  agents, representatives,  and any Person who
controls  the  Company or any of its  subsidiaries  or  Affiliates  (within  the
meaning of the Securities Act) (each, a "Company Indemnified Person"),  from and
against, and will reimburse such Company Indemnified Person with respect to, any
and all  Indemnifiable  Costs and  Expenses to which the Company or such Company
Indemnified  Person may become subject under the Securities Act or otherwise and
which arise out of or result from any untrue or alleged untrue  statement of any
material fact contained in such Registration Statement, any Prospectus contained
therein or any amendment or supplement  thereto,  or any omission or the alleged
omission to state  therein any material  fact  required to be stated  therein or
necessary to make the statements therein, in light of the circumstances in which
they were made,  not  misleading,  in each case to the  extent,  but only to the
extent,  that such untrue  statement or omission or alleged untrue  statement or
alleged  omission  was so  made  solely  in  reliance  upon  and in  substantial
conformity with written  information  furnished by such Holder  specifically for
use in the preparation  thereof;  provided,  however,  that the liability of any
Holder  pursuant  to this  subsection  (b) shall be  limited to an amount not to
exceed the net  proceeds  received by such Holder  pursuant to the  Registration
Statement which gives rise to such obligation to indemnify.

     (c) Conduct of Indemnification Proceedings; Contribution.

     (i) Each  indemnifying  party and indemnified  party under this Section 6.6
shall comply with the procedures set forth in Section 7.1(c) with respect to any
indemnity sought pursuant to this Section 6.6.

                                       51
<PAGE>

     (ii) Each  indemnifying  party and indemnified party under this Section 6.6
also agrees to comply with the  provisions  in Section  7.1(d) as they relate to
contribution.

     6.7  Reporting  Requirements  Under the Exchange Act. The Company shall use
its best  efforts to make  publicly  available  and  available  to the  Holders,
pursuant to Rule 144, such  information as is necessary to enable the Holders to
make sales of  Registrable  Securities  pursuant to that Rule. The Company shall
use its best  efforts to file  timely  with the  Commission  all  documents  and
reports  required of the  Company  under the  Exchange  Act.  The Company  shall
furnish to any Holder,  upon request,  a written statement executed on behalf of
the Company as to compliance with the current public information requirements of
Rule 144. In addition,  the Company will provide to any Holder of a  Registrable
Security,  or any potential purchaser of a Registrable  Security,  upon any such
Person's  reasonable  request,  the information  required by paragraph (d)(4) of
Rule 144A.

     6.8  Stockholder  Information.  The  Company  may  require  each  seller of
Registrable Securities as to which any registration is being effected to furnish
to the Company such  information  regarding such seller and the  distribution of
such securities as the Company or the Managing Underwriter may from time to time
reasonably request in writing.

     6.9 Participation in Underwritten Registrations.

     (a)  If  any  of  the  Registrable  Securities  covered  by a  Registration
Statement  required to be filed pursuant to Section 6.1 hereunder are to be sold
in an underwritten  offering,  the Company shall select the Managing Underwriter
that  will   administer   the  offering,   provided  the  Purchaser  (if  it  is
participating in such offering) or, if such Purchaser is not so participating in
such  offering,  the Holders of a majority of the  Registrable  Securities (on a
Common Stock equivalent basis) included in such offering shall have the right to
consent  to such  selection,  provided  further  that  such  consent  may not be
unreasonably withheld.

                                       52
<PAGE>

     (b) No Person may participate in any underwritten offering hereunder unless
such Person (i) agrees to sell such Person's Registrable Securities on the basis
provided in any  underwriting  arrangements  approved  by the  Persons  entitled
hereunder  to approve  such  arrangements  and (ii)  completes  and executes all
questionnaires,  powers of attorney,  indemnities,  underwriting  agreements and
other documents  required under the underwriting or other agreement  between the
Company  and the  Managing  Underwriter.  Nothing in this  Section  6.9 shall be
construed  to  create  any  additional  rights  regarding  the  registration  of
Registrable Securities in any Person otherwise than as set forth herein.7.

     7. Miscellaneous.

     7.1 Indemnification.  In addition to any indemnification provided elsewhere
in this Agreement, the parties hereto agree as follows:

     (a) Company Indemnification.

     (i) The Company will  indemnify and hold  harmless,  to the fullest  extent
permitted  by law,  but  without  duplication,  the  Purchaser  and  each of its
Affiliates  including any managed or advised accounts and any investment advisor
or  agent  therefor,  and  their  respective,  officers,  directors,  employees,
partners, representatives,  agents, and each Person who controls the Company and
each of its Affiliates  within the meaning of the  Securities  Act) (each of the
foregoing Persons being a "Purchaser Indemnified Person"),  from and against any
and all  Indemnifiable  Costs and Expenses to which such  Purchaser  Indemnified
Person may become subject under the  Securities Act or otherwise  arising out of
or  based  in  any  manner   upon  any   breach  by  the   Company  of  any  its
representations,  warranties or covenants contained in the Transaction Documents
or in any agreement,  instrument or document  delivered by the Company hereunder
or thereunder.

     (ii) The Company  further  agrees  promptly  upon demand by each  Purchaser
Indemnified  Person to  reimburse  each  Purchaser  Indemnified  Person  for any
Purchaser  Indemnifiable Costs and Expenses as they are incurred by it; provided
that if the Company reimburses a Purchaser  Indemnified Person hereunder for any
Indemnifiable  Costs and Expenses incurred in connection with a lawsuit,  claim,
inquiry  or other  proceeding  or  investigation  for which  indemnification  is
sought, such Purchaser Indemnified Person agrees to refund such reimbursement of
Indemnifiable  Costs  and  Expenses  to  the  extent  it is  finally  judicially
determined  that  the  indemnity  provided  for in this  Section  7.1(a)  is not
applicable to such  Purchaser  Indemnified  Person in accordance  with the terms
hereof or otherwise or the Company is not otherwise  obligated to indemnify such
Purchaser   Indemnified   Person.   The  indemnity,   contribution  and  expense
reimbursement  obligation  of the  Company  under this  Section  7.1 shall be in
addition to any liability it may otherwise have.

     (iii) The  obligations of the Company  hereunder  shall survive the Closing
and any repurchase,  conversion, exchange or transfer of the Preferred Stock and

                                       53
<PAGE>

the termination of this Agreement and shall not be extinguished  with respect to
any Person because any other Person is not entitled to indemnity or contribution
hereunder.

     (b)  Purchaser  Indemnification.  The  Purchaser  will  indemnify  and hold
harmless,  to the fullest  extent  permitted by law,  each  Company  Indemnified
Person,  from and against any and all Indemnifiable  Costs and Expenses to which
such Company  Indemnified  Person may become subject under the Securities Act or
otherwise  which  arises out of or is based in any manner upon any breach by the
Purchaser of any its  representations,  warranties or covenants contained in the
Transaction  Document or in any agreement,  instrument or document  delivered by
the Purchaser hereunder or thereunder.

     (c) Conduct of  Indemnification  Proceedings.  Promptly  after receipt by a
party  indemnified  pursuant to the  provisions  of paragraph (a) or (b) of this
Section 7.1 or paragraph (a) or (b) of Section 6.6 of notice of the commencement
of  any  action  involving  the  subject  matter  of  the  foregoing   indemnity
provisions,  such  indemnified  party  will,  if a claim  thereof  is to be made
against the  indemnifying  party  pursuant to the provisions of paragraph (a) or
(b) of this  Section  7.1 or  paragraph  (a) or (b) of Section  6.6,  notify the
indemnifying  party of the commencement  thereof;  but the omission so to notify
the indemnifying  party will not relieve it from any liability which it may have
to an  indemnified  party  otherwise  than  under  paragraph  (a) or (b) of this
Section 7.1 or  paragraph  (a) or (b) of Section  6.6, and shall not relieve the
indemnifying  party from liability  under this Section 7.1 or Section 6.6 unless
such indemnifying party is materially  prejudiced by such omission. In case such
action is brought against any indemnified party and it notifies the indemnifying
party of the commencement  thereof,  the indemnifying party shall have the right
to participate  in, and, to the extent that it may wish,  jointly with any other
indemnifying  party  similarly  notified,  to assume the defense  thereof,  with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying  party to such  indemnified  party of its election so to assume
the  defense  thereof,  the  indemnifying  party  will  not be  liable  to  such
indemnified  party  pursuant to the  provisions of such  paragraph (a) or (b) of
this Section 7.1 or  paragraph  (a) or (b) of Section 6.6 for any legal or other
expense  subsequently  incurred by such indemnified party in connection with the
defense thereof other than reasonable  costs of  investigation.  No indemnifying
party shall be liable to an  indemnified  party for any settlement of any action
or claim without the consent of the  indemnifying  party. No indemnifying  party
will  consent to entry of any judgment or enter into any  settlement  which does
not  include as an  unconditional  term  thereof  the giving by the  claimant or
plaintiff to such  indemnified  party of a release from all liability in respect
to such claim or litigation and no settlement can have non-monetary remedies.

                                       54
<PAGE>

     (d) Contribution.  If the indemnification provided for in subsection (a) or
(b) of this Section 7.1 or in subsection  (a) or (b) of Section 6.6 is held by a
court of competent  jurisdiction  to be unavailable to a party to be indemnified
with respect to any  Indemnifiable  Costs and Expenses,  then each  indemnifying
party under any such subsection,  in lieu of indemnifying such indemnified party
thereunder,  hereby  agrees to  contribute to the amount paid or payable by such
indemnified  party as a result  of  Indemnifiable  Costs and  Expenses,  in such
proportion as is appropriate  to reflect the relative fault of the  indemnifying
party on the one hand and of the  indemnified  party on the other in  connection
with the statements or omissions,  acts,  facts matters or  circumstances  which
resulted in such Indemnifiable Costs and Expenses, as well as any other relevant
equitable  considerations.  To the extent applicable to Section 6.6 hereof,  the
relative fault of the indemnifying  party and of the indemnified  party shall be
determined by reference  to, among other  things,  whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information  supplied by the indemnifying party or by
the indemnified  party and the parties'  relative intent,  knowledge,  access to
information and opportunity to correct or prevent such statement or omission. No
Person  guilty of  fraudulent  misrepresentation  (within the meaning of Section
11(f) of the Securities  Act) shall be entitled to  contribution  hereunder from
any Person who was not guilty of such fraudulent misrepresentation.

     7.2 Entire Agreement; Survival of Provisions. The Transaction Documents and
the SEC Filings referenced herein and therein constitute the entire agreement of
the parties with respect to the transactions  contemplated  hereby and supersede
all prior agreements and understandings with respect thereto, whether written or
oral. All of the covenants of the parties made herein shall remain operative and
in full  force and effect  pursuant  to their  respective  terms  regardless  of
acceptance  of  the  Purchased   Preferred  Stock  and  payment  therefor.   The
representations  and warranties set forth herein shall survive the execution and
delivery of this Agreement, the issuance of the Preferred Stock and the issuance
of the Common Stock upon  conversion of the  Preferred  Stock in each case until
the second anniversary of the date of Closing (the "Expiration Date"), and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of the  Purchaser or the  Company.  Notwithstanding  the  preceding
sentence, any representation or warranty in respect of which an indemnity may be
sought  hereof  shall  survive  the time at which it would  otherwise  terminate
pursuant to the preceding sentence,  if a claim for  indemnification  shall have
been given to the party  against whom such  indemnity may be sought prior to the
Expiration Date. The representations,  warranties, agreements and covenants made
in the  Transaction  Documents  shall be deemed to have been  relied upon by the
parties hereto.

                                       55
<PAGE>

     7.3 No Waiver;  Modifications in Writing. No failure or delay by a party in
exercising  any  right,  power or remedy  hereunder  shall  operate  as a waiver
thereof,  nor shall any single or partial  exercise of any such right,  power or
remedy  preclude  any other or further  exercise  thereof or the exercise of any
other right, power or remedy. Except as otherwise expressly provided herein with
respect to any right of  indemnification,  the remedies  provided for herein are
cumulative  and are not  exclusive of any remedies  that may be available to any
party at law or in equity or otherwise. No waiver of or consent to any departure
by a party from any provision of this Agreement shall be effective unless signed
in writing  by the  parties  entitled  to the  benefit  thereof.  No  amendment,
modification  or  termination  of any  provision  of  this  Agreement  shall  be
effective unless signed in writing by all parties. Any amendment,  supplement or
modification  of or to any  provision  of  this  Agreement,  any  waiver  of any
provision of this Agreement,  and any consent to any departure from the terms of
any  provision  of this  Agreement,  shall  be  effective  only in the  specific
instance and for the specific purpose for which made or given.

     7.4 Notices.  All notices,  demands and other  communications  provided for
hereunder  shall be in writing,  shall be given by registered or certified mail,
return  receipt  requested,  on  the  date  sent  by  telecopy  with  electronic
confirmation of such transmission,  the business day next following deposit with
a courier  service for  overnight  delivery  with written  confirmation  of such
delivery or upon personal delivery, addressed to the parties, as follows:

        If to the Company, to:

                Direct Insite Corp.
                80 Orville Drive
                Bohemia, New York  11716
                Attention:  Chief Financial Officer
                Telecopy:  (631) 563-8085

        with a copy to:

                David H. Lieberman, Esq.
                Beckman, Lieberman & Barandes, LLP
                Suite 1313, 116 John Street
                New York, NY 10038
                Telecopy:  (212) 608-9687

                                       56
<PAGE>

        If to the Purchaser, to:

                Metropolitan Venture Partners II, L.P.
                257 Park Avenue South, 15th Floor
                New York, NY 10010
                Telecopy:   (212) 844-3699
                Attention: Peter B. Yunich, Managing Partner

        with copies to:

                Kramer, Levin, Naftalis & Frankel LLP
                919 Third Avenue
                New York, New York  10022
                Attention:  Scott S. Rosenblum, Esq.
                Telecopy:  (212) 715-8000

or to such other  address as any party shall  designate in writing in compliance
with the provisions of this Section 7.4.

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

     7.6 Binding Effect;  Assignment.  The rights and obligations of the parties
under this  Agreement may not be assigned or otherwise  transferred to any other
Person,  without the prior written  consent of the other party hereto;  provided
that the Purchaser  may assign or otherwise  transfer the shares of Common Stock
issuable upon  conversion  of the Preferred  Stock and any or all of such rights
(except  the  Preferred  Stock)  and/or  obligations  hereunder  to  any  of its
Affiliates without obtaining any such consent,  but only if such Affiliate:  (A)
agrees to be bound by the terms of this  Agreement;  (B) is, at the time of such
transfer,  an  Accredited  Investor;  (C)  provides  the  Company  such  written
certification  as the  Company  may  reasonably  require as to the  transferee's
status as an Accredited Investor and agreement to be so bound as the Company may
reasonably  request;  and (D)  such  transfer  to any such  transferee  does not
violate federal or state securities laws.  Except as expressly  provided in this
Agreement,  this  Agreement  shall not be construed so as to confer any right or
benefit  upon any Person  other than the  parties  to this  Agreement  and their
respective  successors and permitted  assigns.  This Agreement  shall be binding
upon and shall  inure to the benefit of the  Company,  the  Purchaser  and their
respective permitted successors and assigns.

     7.7  Governing  Law. This  Agreement  shall be deemed to be a contract made
under and shall be governed by and  construed  in  accordance  with the internal
laws of the State of New York without reference to the principles of conflict of

                                       57
<PAGE>

laws, provided, however, that the due authorization, issuance and enforceability
of  the  terms  of,  and  the  designation,   rights,  preferences,  rights  and
privileges, of the Preferred Stock or the due authorization, issuance and of the
Common  Stock,  the conduct of, or any  standard of conduct  applicable  to, the
Board of Directors of the Company, or any requirement of stockholder approval or
the validity or invalidity of any action by the Board of Directors or compliance
by the Company or any subsidiary with its Certificate of Incorporation or bylaws
or any of their  corporate  authority,  shall be governed  by, and  construed in
accordance  with, the laws of the State of Delaware without giving effect to the
principles thereof relating to the conflict of laws.

     7.8 Consent to  Jurisdiction  and Service of Process.  Any suit,  action or
proceeding  arising  out of or  relating  to the  Transaction  Documents  or the
transactions  contemplated  hereby or thereby may be  instituted  in any Federal
court  situated  in the State of New York or any state court of the State of New
York, in each case, in the Borough of Manhattan,  City of New York, or Nassau or
Suffolk County in the State of New York, and each party agrees not to assert, by
way  of  motion,  as a  defense  or  otherwise,  in any  such  suit,  action  or
proceeding,  any claim that it is not subject  personally to the jurisdiction of
such court,  that the suit,  action or proceeding is brought in an  inconvenient
forum,  that the venue of the suit, action or proceeding is improper or that the
Transaction  Documents  or the  subject  matter  hereof  or  thereof  may not be
enforced  in or by such court.  Each party  further  irrevocably  submits to the
jurisdiction of such court in any such suit,  action or proceeding.  Any and all
service of process and any other notice in any such suit,  action or  proceeding
shall be effective  against any party if given  personally  or by  registered or
certified  mail,  return receipt  requested if sent to such party at the address
for such party set forth in Section  7.4  hereof,  or by any other means of mail
that requires a signed receipt,  postage fully prepaid,  mailed to such party as
herein provided. Nothing herein contained shall be deemed to affect the right of
any party to serve process in any manner  permitted by law or to commence  legal
proceedings  or  otherwise   proceed  against  any  other  party  in  any  other
jurisdiction.

     7.9  Further  Assurances.  Each of the  parties  hereto  shall  execute and
deliver such documents, instruments and agreements and take such further actions
as may be  reasonably  required or desirable to carry out the  provisions of the
Transaction Documents and the transactions  contemplated hereby and thereby, and
each of the parties hereto shall  cooperate  with each other in connection  with
the foregoing.

     7.11 Severability of Provisions. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law that renders any such provision  prohibited or unenforceable in
any respect.

                                       58
<PAGE>

     7.12  Headings.  The  Article,  Section  and  subsection  headings  used or
contained in this Agreement are for  convenience of reference only and shall not
affect the construction of this Agreement.

     7.13 Costs, Expenses and Taxes.

     (a) The Company  shall pay any and all stamp,  transfer  and other  similar
Taxes payable or  determined to be payable in connection  with the execution and
delivery of this Agreement or the original  issuance of the Purchased  Preferred
Stock and shall save and hold the  Purchaser  harmless  from and against any and
all  liabilities  with  respect to or  resulting  from any delay in  paying,  or
omission to pay, such Taxes.

     (b) Each party shall bear its own fees,  costs and  expenses in  connection
with the  execution,  delivery and  performance  of the  Transaction  Documents,
except as set forth in this Agreement.

     7.14 Waiver of Jury Trial. The parties hereto hereby  irrevocably waive all
right to a trial by jury in any action,  proceeding or counterclaim  arising out
of  or  relating  to  this  Agreement  or  the  Stockholders  Agreement  or  the
transactions contemplated hereby or thereby.

     7.15  Publicity.  The parties agree that no public release or  announcement
concerning the Transaction Documents or the transactions  contemplated hereby or
thereby shall be made without  advance review and approval by each party hereto,
except as otherwise  required by  applicable  law, and which review and approval
shall not be unreasonably withheld or delayed.

     7.16  Fees.  The  Company  shall  not pay any  fees,  commissions  or other
remuneration to any placement  agent,  banker,  broker,  finder or other Person,
either  directly  or  indirectly,  in  connection  with  this  Agreement  or the
transactions contemplated hereby.

                             SIGNATURE PAGE FOLLOWS

                                       59
<PAGE>

                           COUNTERPART SIGNATURE PAGE

     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.

                                DIRECT INSITE CORP.

                                By:     ________________________
                                Name:
                                Title:

                                       60
<PAGE>

                           COUNTERPART SIGNATURE PAGE

     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.

                                METROPOLITAN VENTURE PARTNERS II,       L.P.

                                By: METROPOLITAN VENTURE PARTNERS
                                (Advisors), L.P., as general partner

                                By: METROPOLITAN VENTURE PARTNERS
                                CORP., as general partner

                                By: _________________________________
                                    Name: Michael Levin
                                    Title: Vice President of Finance

<PAGE>

                              DISCLOSURE SCHEDULE

<PAGE>

                                   EXHIBIT A
                                AMENDMENT TO THE
                           CERTIFICATE OF DESIGNATIONEXHIBIT 4.13

                        $150,000,000

               PHILLIPS-VAN HEUSEN CORPORATION
                          as Issuer

              8 1/8% Senior Notes Due May 1, 2013

                    ____________________

                          INDENTURE

                   Dated as of May 5, 2003

                    ____________________

                        SUNTRUST BANK
                         as Trustee

                    CROSS-REFERENCE TABLE

      TIA                                         Indenture
    Section                                        Section

310  (a)(1)                                       8.10
     (a)(2)                                       8.10
     (a)(3)                                       N.A.
     (a)(4)                                       N.A.
     (b)                                      8.08; 8.10
     (c)                                          N.A.
311  (a)                                          8.11
     (b)                                          8.11
     (c)                                          N.A.
312  (a)                                          2.05
     (b)                                          11.03
     (c)                                          11.03
313  (a)                                          8.06
     (b)(1)                                       N.A.
     (b)(2)                                       8.06
     (c)                                      8.06; 11.02
     (d)                                            8.06
314  (a)                                      5.02; 11.02;
                                                  5.12
     (b)                                          N.A.
     (c)(1)                                       11.04
     (c)(2)                                       11.04
     (c)(3)                                       N.A.
     (d)                                          N.A.
     (e)                                          11.05
     (f)                                          N.A.
315  (a)                                          8.01
     (b)                                      8.05; 11.02
     (c)                                          8.01
     (d)                                          8.01
     (e)                                          7.11
316  (a)(last sentence)                          11.06
     (a)(1)(A)                                    7.05
     (a)(1)(B)                                    7.04
     (a)(2)                                       N.A.
     (b)                                          7.07
     (c)                                          7.10
317  (a)(1)                                       7.08
     (a)(2)                                       7.09
     (b)                                          2.04
318  (a)                                          11.01

                    N.A. means Not Applicable.

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

                      TABLE OF CONTENTS

                                                        Page

                          ARTICLE 1

         DEFINITIONS AND INCORPORATION BY REFERENCE

  SECTION 1.01.DEFINITIONS                               1
  SECTION 1.01.OTHER DEFINITIONS                        28
  SECTION 1.02.INCORPORATION BY REFERENCE OF TRUST
                INDENTURE ACT                           28
  SECTION 1.03.RULES OF CONSTRUCTION                    28

                          ARTICLE 2

                       THE SECURITIES

  SECTION 2.01.FORM AND DATING                          29
  SECTION 2.02.EXECUTION AND AUTHENTICATION             29
  SECTION 2.03.REGISTRAR AND PAYING AGENT               30
  SECTION 2.04.PAYING AGENT TO HOLD MONEY IN TRUST      31
  SECTION 2.05.HOLDER LISTS                             31
  SECTION 2.06.TRANSFER AND EXCHANGE                    31
  SECTION 2.07.REPLACEMENT SECURITIES                   31
  SECTION 2.08.OUTSTANDING SECURITIES                   32
  SECTION 2.09.TEMPORARY SECURITIES                     32
  SECTION 2.10.CANCELLATION                             32
  SECTION 2.11.DEFAULTED INTEREST                       32
  SECTION 2.12.CUSIP NUMBERS                            33
  SECTION 2.13.ISSUANCE OF ADDITIONAL SECURITIES        33

                          ARTICLE 3

                         REDEMPTION

  SECTION 3.01.NOTICES TO TRUSTEE                       34
  SECTION 3.02.SELECTION OF SECURITIES TO BE REDEEMED   34
  SECTION 3.03.NOTICE OF REDEMPTION                     34
  SECTION 3.04.EFFECT OF NOTICE OF REDEMPTION           35
  SECTION 3.05.DEPOSIT OF REDEMPTION PRICE              35
  SECTION 3.06.SECURITIES REDEEMED IN PART              35

                                i

                          ARTICLE 4

                      CHANGE OF CONTROL

  SECTION 4.01.REPURCHASE RIGHT                         35
  SECTION 4.02.NOTICES; METHOD OF EXERCISING
                REPURCHASE RIGHTS, ETC.                 36

                             ARTICLE 5

                          COVENANTS

  SECTION 5.01.PAYMENT OF SECURITIES                    37
  SECTION 5.02.SEC REPORTS                              37
  SECTION 5.03.LIMITATION ON INDEBTEDNESS               37
  SECTION 5.04.LIMITATION ON RESTRICTED PAYMENTS        40
  SECTION 5.05.LIMITATION ON RESTRICTIONS ON
                DISTRIBUTIONS FROM RESTRICTED
                SUBSIDIARIES                            43
  SECTION 5.06.LIMITATION ON SALES OF ASSETS AND
                SUBSIDIARY STOCK                        44
  SECTION 5.07.LIMITATION ON AFFILIATE TRANSACTIONS     46
  SECTION 5.08.LIMITATION ON THE SALE OR ISSUANCE OF
                CAPITAL STOCK OF RESTRICTED
                SUBSIDIARIES                            48
  SECTION 5.09.LIMITATION ON LIENS                      49
  SECTION 5.10.LIMITATION ON SALE/LEASEBACK
                TRANSACTIONS                            51
  SECTION 5.11.FUTURE SUBSIDIARY GUARANTEES             51
  SECTION 5.12.COMPLIANCE CERTIFICATE                   51
  SECTION 5.13.FURTHER INSTRUMENTS AND ACTS             52
  SECTION 5.14.COVENANT REMOVAL                         52

                          ARTICLE 6

                  MERGER AND CONSOLIDATION

  SECTION 6.01.WHEN COMPANY MAY MERGE OR TRANSFER
                ASSETS                                   52

  SECTION 6.02.WHEN A SUBSIDIARY GUARANTOR MAY MERGE
                OR TRANSFER ASSETS                       53

                          ARTICLE 7

                    DEFAULTS AND REMEDIES

  SECTION 7.01.EVENTS OF DEFAULT                        54
  SECTION 7.02.ACCELERATION                             56
  SECTION 7.03.OTHER REMEDIES                           56
  SECTION 7.04.WAIVER OF PAST DEFAULTS                  56
  SECTION 7.05.CONTROL BY MAJORITY                      56
  SECTION 7.06.LIMITATION ON SUITS                      57
  SECTION 7.07.RIGHTS OF HOLDERS TO RECEIVE PAYMENT     57

                              ii

  SECTION 7.08.COLLECTION SUIT BY TRUSTEE               57
  SECTION 7.09.TRUSTEE MAY FILE PROOFS OF CLAIM         57
  SECTION 7.10.PRIORITIES                               58
  SECTION 7.11.UNDERTAKING FOR COSTS                    58
  SECTION 7.12.WAIVER OF STAY OR EXTENSION LAWS         58

                          ARTICLE 8

                           TRUSTEE

  SECTION 8.01.DUTIES OF TRUSTEE                        59

  SECTION 8.02.RIGHTS OF TRUSTEE                        60
  SECTION 8.03.INDIVIDUAL RIGHTS OF TRUSTEE             60
  SECTION 8.04.TRUSTEE'S DISCLAIMER                     60
  SECTION 8.05.NOTICE OF DEFAULTS                       60
  SECTION 8.06.REPORTS BY TRUSTEE TO HOLDERS            61
  SECTION 8.07.COMPENSATION AND INDEMNITY               61
  SECTION 8.08.REPLACEMENT OF TRUSTEE                   62
  SECTION 8.09.SUCCESSOR TRUSTEE BY MERGER              63
  SECTION 8.10.ELIGIBILITY; DISQUALIFICATION            63
  SECTION 8.11.PREFERENTIAL COLLECTION OF CLAIMS
                AGAINST COMPANY                         63

                          ARTICLE 9

             DISCHARGE OF INDENTURE; DEFEASANCE

  SECTION 9.01.DISCHARGE OF LIABILITY ON SECURITIES;
                DEFEASANCE                              63
  SECTION 9.02.CONDITIONS TO DEFEASANCE                 64
  SECTION 9.03.APPLICATION OF TRUST MONEY               65
  SECTION 9.04.REPAYMENT TO COMPANY                     66
  SECTION 9.05.INDEMNITY FOR GOVERNMENT OBLIGATIONS     66
  SECTION 9.06.REINSTATEMENT                            66

                         ARTICLE 10

                         AMENDMENTS

  SECTION 10.01. WITHOUT CONSENT OF HOLDERS                    66
  SECTION 10.02. WITH CONSENT OF HOLDERS                       67
  SECTION 10.03. COMPLIANCE WITH TRUST INDENTURE ACT           68
  SECTION 10.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS 68
  SECTION 10.05. NOTATION ON OR EXCHANGE OF SECURITIES         68
  SECTION 10.06. TRUSTEE TO SIGN AMENDMENTS                    69
  SECTION 10.07. PAYMENT FOR CONSENT                           69

                              iii

                         ARTICLE 11

                        MISCELLANEOUS

  SECTION 11.01. TRUST INDENTURE ACT CONTROLS                  69
  SECTION 11.02. NOTICES                                       69
  SECTION 11.03.COMMUNICATION BY HOLDERS WITH OTHER HOLDERS    70
  SECTION 11.04.CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT    70
  SECTION 11.05.STATEMENTS REQUIRED IN CERTIFICATE OR OPINION  70
  SECTION 11.06. WHEN SECURITIES DISREGARDED                   71
  SECTION 11.07.RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR   71
  SECTION 11.08. LEGAL HOLIDAYS                                71
  SECTION 11.09. GOVERNING LAW                                 71
  SECTION 11.10. NO RECOURSE AGAINST OTHERS                    71
  SECTION 11.11. SUCCESSORS                                    72
  SECTION 11.12. MULTIPLE ORIGINALS                            72
  SECTION 11.13. TABLE OF CONTENTS; HEADINGS                   72

Rule 144A/Regulation S Appendix

Exhibit 1 - Form of Initial Security

Exhibit A - Form of Exchange Security or Private Exchange Security

                                 iv

               INDENTURE, dated as of May 5, 2002,
               among Phillips-Van Heusen Corporation, a
               Delaware corporation (the "Company"),
               the Subsidiary Guarantors, if any, from
               time to time party hereto and SunTrust
               Bank, a state banking association, as
               Trustee (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 and Private Exchange Securities (collectively,
the "Securities" or "Notes"):

                          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 5.03, any additional 8 1/8%
Senior Notes due May 1, 2013 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, 3.06 or 10.05 of this
Indenture or Section 2.3 of the Appendix and other than
Exchange Securities or Private Exchange Securities issued
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 Section 5.04,
Section 5.06 and Section 5.07 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).

          "Asset Disposition" means (a) an Asset Swap or (b)
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 by a Restricted Subsidiary to the Company
or by the Company or a Restricted Subsidiary to a Restricted
Subsidiary (other than a Securitization Subsidiary);

(B)  for purposes of Section 5.06 only, (x) a disposition
that constitutes a Restricted Payment permitted by Section
5.04 or a Permitted Investment and (y) a disposition of all
or substantially all the assets of the Company in accordance
with Article 6;

(C)  a disposition of assets with a fair market value of
less than $2.0 million;

(D)  disposals of obsolete, damaged or worn out equipment or
property or property that is no longer useful in the conduct
of the Company's business and that, in either case, is
disposed of in the ordinary course of business; and

(E)  any disposition of accounts receivable, licensing
royalties and related assets to or of a Securitization
Subsidiary pursuant to a Qualified Securitization
Transaction.

          "Asset Swap" means any exchange of property or
assets of the Company or any Restricted Subsidiary
(including shares of Capital Stock of a Restricted
Subsidiary) for property or assets of another Person
(including shares of Capital Stock of a Person whose primary
business is a Related Business) that are intended to be used
by the Company or any Restricted Subsidiary in a Related
Business, including, to the extent

                                          2

necessary to equalize the value of the assets being exchanged,
cash of any party to such asset swap.

          "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
Notes, 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).

          "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.

          "Board of Directors" means the Board of Directors
of the Company or any committee thereof duly authorized to
act on behalf of such Board.

          "Borrowing Base" means, as of any date of
determination, an amount equal to (x) the sum without
duplication of (1) 80% of the book value of the accounts
receivable of the Company and its Restricted Subsidiaries on
a consolidated basis and (2) 65% of the book value of the
inventory of the Company and its Restricted Subsidiaries on
a consolidated basis, in each case as of the most recently
ended fiscal quarter of the Company preceding the date on
which the Indebtedness is Incurred, less (y) the Foreign
Borrowing Base of any Foreign Restricted Subsidiary to the

extent that Indebtedness of such Foreign Restricted
Subsidiary Incurred under Section 5.03(b)(14)(A) is then
outstanding.

          "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.  For

purposes of Section 5.09, a Capital Lease Obligation will be
deemed to be secured by a Lien on the property being leased.

          "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.

                                3

          "CK Amount" for any period means the Design
Services Purchase Payments (as defined in the CK Purchase
Agreement) paid or payable by the Company or any of its
Subsidiaries to Mr. Calvin Klein or the Klein Heirs (as
defined in the CK Purchase Agreement) for such period
pursuant to the CK Purchase Agreement.

          "CK Purchase Agreement" means the Stock Purchase
Agreement, dated as of December 17, 2002, among the Company,
Calvin Klein, Inc., Calvin Klein (Europe), Inc., Calvin
Klein (Europe II) Corp., Calvin Klein Europe S.R.L., CK
Service Corp., Calvin Klein, Barry Schwartz, Trust for the
Benefit of the Issue of Calvin Klein, Trust for the Benefit
of the Issue of Barry Schwartz, Stephanie Schwartz-Ferdman
and Jonathan Schwartz, as the same may be amended from time
to time.

          "Change of Control" means:

           (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 for purposes of this clause (1) 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 50% of the
                total voting power of the Voting Stock of the Company; (for
                the purposes of this clause (1), such person shall be deemed
                to beneficially own any Voting Stock of a Person (the
                "specified person") held by any other Person (the "parent
                entity"), if such person is the beneficial owner (as defined
                above in this clause (1)), directly or indirectly, of more
                than 50% of the voting power of the Voting Stock of the
                parent entity and the Permitted Holders beneficially own (as
                defined in this proviso), 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 the parent entity);

           (2)  individuals who on the Issue Date constituted the Board
                of Directors (together with any new directors whose election
                by the Board of Directors or whose nomination for election
                by the stockholders of the Company was approved by a vote of
                a majority of the directors of the Company 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 then in office;

                                           4

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

           (4)  any merger, consolidation, reorganization, sale or
                other similar transaction in connection with which any
                holder of the Series B Preferred Stock exercises the right
                to deem such transaction a liquidation event pursuant to the
                terms of the Series B Preferred Stock.

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

          "Commodity Agreement" means any commodity or raw
materials futures contract, commodity or raw materials
option, or any other agreement designed to protect against
or manage exposure to fluctuations in commodity or raw
materials pricing.

          "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 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;

(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 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 has not earned the
interest income actually

                                5

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 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.

                             6

For purposes of this definition, whenever pro forma effect
is to be given to an acquisition of assets (including
Capital Stock), 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 in accordance with GAAP.  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 Current Liabilities" as of the date
of determination means the aggregate amount of liabilities
of the Company and its consolidated Restricted Subsidiaries
which may properly be classified as current liabilities
(including taxes accrued as estimated), on a consolidated
basis, after eliminating:

(1)  all intercompany items between the Company and any
Restricted Subsidiary; and

(2)  all current maturities of long-term Indebtedness, all
as determined in accordance with GAAP consistently applied.

          "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;

(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 declared and paid or payable in cash or
Disqualified Stock in respect of (A) all Disqualified Stock
of the Company and (B) all Preferred Stock of Restricted
Subsidiaries, in each case held by Persons other than the
Company or a Wholly Owned Subsidiary; provided, however,
that such dividends will be multiplied by a fraction, the
numerator of which is one and the

                                 7

denominator of which is one minus the effective combined tax rate
of the issuer of such stock (expressed as a decimal) for such period
(as estimated by the Chief Financial Officer of the Company in
good faith);

(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

(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.

          "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 to the extent of any cash actually
                    contributed by the Company or a Restricted Subsidiary to
                    such Person during such period;

           (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 payment of dividends or the making of
                distributions by such

                                     8

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/Leaseback Transaction) which is not sold or otherwise
                disposed of in the ordinary course of business and any gain
                (or 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
5.04 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 5.04 pursuant to clause
(a)(3)(D) thereof.

          "Consolidated Net Tangible Assets" as of any date
of determination, means the total amount of assets (less
accumulated depreciation and amortization, allowances for
doubtful receivables, other applicable reserves and other
properly deductible items) which would appear on a
consolidated balance sheet of the Company and its
consolidated Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, and after giving
effect to purchase accounting and after deducting therefrom
Consolidated Current Liabilities and, to the extent
otherwise included, the amounts of:

           (1)  minority interests in consolidated Subsidiaries held by
                Persons other than the Company or a Restricted Subsidiary;

                                          9

           (2)  excess of cost over fair value of assets of businesses
                acquired, as determined in good faith by the Board of
                Directors;

           (3)  any revaluation or other write-up in book value of
                assets subsequent to the Issue Date as a result of a change
                in the method of valuation in accordance with GAAP
                consistently applied;

           (4)  unamortized debt discount and expenses and other
                unamortized deferred charges, goodwill, patents, trademarks,
                service marks, trade names, copyrights, licenses,
                organization or developmental expenses and other intangible
                items;

           (5)  cash set apart and held in a sinking or other analogous
                fund established for the purpose of redemption or other
                retirement of Capital Stock to the extent such obligation is
                not reflected in Consolidated Current Liabilities; and

           (6)  Investments in and assets of Unrestricted Subsidiaries.

          "Credit Agreement" means the Revolving Credit
Agreement dated as of October 17, 2002, by and among the
Company, the Subsidiaries of the Company referred to
therein, the lenders referred to therein, JPMorgan Chase
Bank, as Administrative Agent and Collateral Agent, Lead
Arranger and Sole Bookrunner, Fleet Retail Finance Inc., as
Co-Arranger and Co-Syndication Agent, Sun Trust Bank, as Co-
Syndication Agent, and the CIT Group/Commercial Services,
Inc. and Bank of America, N.A., as Co-Documentation Agents,
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, replaced, restructured,
supplemented or otherwise modified (in whole or in part, and
without limitation as to amount of Indebtedness which may be
Incurred thereunder, 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.

          "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:

                                 10

           (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 date that is 91 days after
the Stated Maturity of the Notes; 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 Notes 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 Notes pursuant to Section 5.06 and Article 4; and

           (2)  any such requirement only becomes operative after
                compliance with such terms applicable to the Notes,
                including the purchase of any Notes tendered pursuant
                thereto.

The amount of any Disqualified Stock that does not have a
fixed redemption, repayment or repurchase price will 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
repurchased at the time of such determination, the
redemption, repayment or repurchase price will be the book
value of such Disqualified Stock as reflected in the most
recent financial statements of such Person.  For avoidance
of doubt, the Series B Preferred Stock on the terms thereof
in effect on the Issue Date is deemed not to constitute
Disqualified Stock.

          "EBITDA" for any period means Consolidated Net
Income less the CK Amount, 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;

                                  11

           (3)  depreciation and amortization expense of the Company
                and its consolidated Restricted Subsidiaries (excluding
                amortization expense attributable to a prepaid operating
                expense 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);

           (5)  transition costs of up to $24.0 million in connection
                with the acquisition of Calvin Klein, Inc. incurred no later
                than the fourth quarter of the Company's 2003 fiscal year;
                and

           (6)  the amount of any deduction in Consolidated Net Income
                for such period from a write-off of goodwill attributable to
                the payment of the CK Amount; provided, that such amount
                shall in no event be greater than the CK Amount deducted in
                calculating EBITDA;

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
noncash 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 could have been
distributed by such Restricted Subsidiary during such period
to the Company or another Restricted Subsidiary as a
dividend or other distribution (which other Restricted
Subsidiary could also have made such dividend or other
distribution).

          "Equity Offering" means a primary public or
private offering of common stock of the Company.

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

          "Existing Notes" means the Company's 9 1/2% Senior
Subordinated Notes due 2008 issued under an Indenture dated
as of April 22, 1998 between the Company and Union Bank of
California, N.A., as trustee, and the Company's 7 3/4%
Debentures due 2023 issued under an Indenture dated as of
November 1, 1993 between the Company and the Bank of New
York, as trustee, as amended.

          "Foreign Borrowing Base" means, as of any date of
determination and with respect to any Foreign Restricted
Subsidiary, an amount equal to (x) the sum without
duplication of (1) 80% of the book value of the accounts
receivable of such Foreign Restricted Subsidiary and (2) 65%
of the book value of the inventory of such Foreign
Restricted Subsidiary, in each case as of the most recently
ended fiscal quarter of

                                 12

the Company preceding the date on which the Indebtedness is
Incurred, less (y) any portion of such amount included in the
Borrowing Base, but only to the extent such portion is used to
determine the amount of Indebtedness which could be Incurred and
is then outstanding under Section 5.03(b)(1)(B).

          "Foreign Restricted Subsidiary" means any
Restricted Subsidiary not incorporated or organized under

the laws of the United States, any State thereof or the
District of Columbia.

          "GAAP" means generally accepted accounting
principles in the United States 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.

          "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

           (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.

                                          13

          "Guaranty Agreement" means a supplemental
indenture, in a form satisfactory to the Trustee, pursuant
to which a Subsidiary Guarantor guarantees the Company's
obligations with respect to the Notes 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, Currency Agreement or Commodity Agreement entered
into in the ordinary course of business.

          "Holder" or "Noteholder" means the Person in whose
name a Note 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.

          "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 or accrued liabilities arising in the
                ordinary course of business which are not overdue or which
                are being contested in good faith);

           (4)  all obligations of such Person for the reimbursement of
                any obligor on any letter of credit, banker's acceptance or
                similar credit transaction;

           (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

                                         14

                Subsidiary of such Person, the principal amount of such
                Preferred Stock to be determined in accordance with this
                Indenture;

           (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.

          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.

          "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, interest rate collar agreement or other financial
agreement or arrangement including, without limitation, any
such arrangement whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic
payments calculated by applying either a fixed or floating
rate of interest on a stated notional amount in exchange for
periodic payments made by such Person calculated by applying
a fixed or floating rate of interest on the same notional
amount.

          "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

                                 15

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 5.04:

          (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 (A) the Company's "Investment"
               in such Subsidiary at the time of such redesignation less
               (B) 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

(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.
          "Issue Date" means the date on which the Notes
(other than any Additional Notes) are originally issued.

          "Investment Grade" means (1) with respect to
Standard & Poor's Ratings Group, any of the ratings
categories from and including AAA to and including BBB- and
(2) with respect to Moody's Investor Service, Inc., any of
the ratings categories from and including Aaa to and
including Baa3.

          "Legal Holiday" means a Saturday, a Sunday or a
day on which banking institutions are not required to be
open in the State of New York.

          "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).

          "Limited Originator Recourse" means a
reimbursement obligation of the Company in connection with a
drawing on a letter of credit, revolving loan commitment,
cash collateral account or other such credit enhancement
issued to support Indebtedness of a Securitization

Subsidiary that the Board of Directors determines is
necessary to effectuate a Qualified Securitization
Transaction; provided, that the available amount of any such
form of credit enhancement at any time shall not exceed 10%
of the principal amount of such Indebtedness at such time
and provided, further, that such reimbursement obligation is
permitted to be Incurred by the Company pursuant to Section
5.03 and that any such Lien securing such reimbursement
obligation is permitted pursuant to Section 5.09.

                                 16

          "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 noncash form),
in each case net of:

(1)  all legal, accounting, financial advisory, title and
     recording tax expenses, commissions and other fees and
     expenses incurred, 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, be repaid
     out of the proceeds of 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
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; provided, however, that any reduction in such
reserve after consummation of the Asset Disposition will be
deemed a new Asset Disposition with Net Available Cash equal
to the amount of such reduction.

          "Net Cash Proceeds", with respect to any issuance
or sale of Capital Stock or Indebtedness, means (A) 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
and (B) solely for purposes of Section 5.04(a)(3)(B), the
fair market value (as of the date of the transaction and as
determined in good faith by the Board of Directors) of the
Capital Stock (other than Disqualified Stock) of a Person
(whose primary business is a Related Business) that
thereupon becomes a Restricted Subsidiary (other than a
Securitization Subsidiary), which Capital Stock constitutes
the proceeds received by the Company from an issuance or
sale of its Capital Stock, net of the fees and taxes
described in clause (A) above.

                                17

          "Notes" means the Notes to be issued pursuant to
this Indenture.

          "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.

          "Offering Circular" means the offering circular,
together with any documents incorporated therein by
reference, prepared by the Company and relating to the
Notes, dated as of April 30, 2003.

          "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 reasonably acceptable to the Trustee.
The counsel may be an employee of or counsel to the Company
or the Trustee.

          "Permitted Guarantees" means any guarantee by a
Restricted Subsidiary (i) outstanding on the Issue Date
after giving effect to the use of the net proceeds of the
sale of the Notes as described in the Offering Circular,
(ii) of Indebtedness of the Company Incurred under Section
5.03(b)(1)  and (iii) of Indebtedness of the Company

Incurred under a bank credit facility that is Incurred in
compliance with Section 5.03 and secured in compliance with
Section 5.09.

          "Permitted Holders" means Apax Managers, Inc. and
Apax Partners Europe Managers Limited and their Affiliates.

          "Permitted Investment" means an Investment by the
Company or any Restricted Subsidiary in:

           (1)  the Company, a Restricted Subsidiary (other than a
                Securitization Subsidiary) or a Person that will, upon the
                making of such Investment, become a Restricted Subsidiary
                (other than a Securitization 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

                                           18

                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 but in any event not
                to exceed $2.0 million in the aggregate outstanding at any
                one time;

           (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 or pursuant to any plan of
                reorganization or similar arrangement upon the bankruptcy or
                insolvency of a debtor;

           (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 5.06;

           (9)  Hedging Obligations in compliance with Section 5.03;

           (10) any Person to the extent such Investment is in
                existence on the Issue Date (after giving effect to the use
                of the net proceeds of the sale of the Notes as described in
                the Offering Circular);

           (11) a Securitization Subsidiary in connection with a
                Qualified Securitization Transaction which Investments are
                customary for such transaction; and

           (12) any Person engaged principally in a Related Business
                prior to such Investment if (i) at the time of such
                Investment and after giving pro forma effect thereto, the
                Company is entitled to Incur an additional $1.00 of
                Indebtedness pursuant to Section 5.03(a)  and (ii) the
                aggregate amount of all Investments made pursuant to this
                clause (12) does not exceed $15.0 million at any one time
                outstanding; provided that Investments of up to $5.0 million
                in the aggregate at any one time outstanding shall be
                permitted under this clause (12) without regard to the
                requirements of clause (i) of this clause (12).

          "Person" means any individual, corporation,
partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated

                                           19

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 Note means the principal of the
Note plus the premium, if any, payable on the Note which is
due or overdue or is to become due at the relevant time.

          "Purchase Money Indebtedness" means any
Indebtedness of a Person to any seller or other Person
incurred to finance the acquisition or construction of any
property or assets and which is incurred substantially
concurrently therewith, is secured only by the assets so
financed and the principal amount of which does not exceed
the cost of the assets acquired or constructed.

          "Qualified Securitization Transaction" means any
accounts receivable or licensing royalty financing facility
or arrangement pursuant to which a Securitization Subsidiary
purchases or otherwise acquires accounts receivable or
licensing royalties and related assets from the Company or
any Restricted Subsidiary and enters into a third party
financing thereof on customary market terms that the Board
of Directors has concluded are fair to the Company and its
Restricted Subsidiaries.

          "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 (after giving effect

to the use of the net proceeds of the sale of the Notes as
described in the Offering Circular) 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)  unless otherwise permitted to be Incurred pursuant to
                Section 5.03, such Refinancing Indebtedness has an aggregate
                principal

                                          20

                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.

          "Related Business" means any business in which the
Company or any Restricted Subsidiary was engaged on the
Issue Date and any business related, ancillary or
complementary to any business of the Company or any
Restricted Subsidiary in which the Company or any Restricted
Subsidiary was engaged on the Issue Date.

          "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 in connection with any
                merger or consolidation and 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, 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

                                         21

                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 any arrangement
with any Person providing for the leasing by the Company or
any Restricted Subsidiary of the Company, for a period of
more than three years, of any real or tangible personal
property, which property has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to
such Person in contemplation of such leasing.

          "SEC" means the U.S. Securities and Exchange
Commission.

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

          "Securitization Subsidiary" means a Wholly Owned
Subsidiary of the Company

           (1)  that is designated a "Securitization Subsidiary" by the
                Board of Directors;

           (2)  that does not engage in any activities other than
                Qualified Securitization Transactions and any activity
                necessary or incidental thereto;

           (3)  no portion of the Indebtedness or any other obligation,
                contingent or otherwise, of which

               (A)  is Guaranteed by the Company or any
                    Restricted Subsidiary other than
                    pursuant to Standard Securitization
                    Undertakings or Limited Originator
                    Recourse,

               (B)  is recourse to or obligates the Company
                    or any other Restricted Subsidiary in
                    any way other than pursuant to Standard
                    Securitization Undertakings or Limited
                    Originator Recourse, or

               (C)  subjects any property or asset of the
                    Company or any other Restricted
                    Subsidiary, directly or indirectly,
                    contingently or otherwise, to the
                    satisfaction thereof other than pursuant
                    to Standard Securitization Undertakings
                    or Limited Originator Recourse; and

                                              22

           (4)  with respect to which neither the Company nor any
                Restricted Subsidiary has any obligation to maintain or
                preserve its financial condition or cause it to achieve
                certain levels of operating results.

          "Senior Indebtedness" means with respect to any
Person:

           (1)  Indebtedness of such Person, whether outstanding on the
                Issue Date (after giving effect to the use of the net
                proceeds of the sale of the Notes as described in the
                Offering Circular) or thereafter Incurred; and

           (2)  all other Obligations of such Person (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 Indebtedness described in clause
                (1) above;

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
Indebtedness or other Obligations are subordinate in right
of payment to the Notes or the Subsidiary 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 or other Obligation of such Person
                which is subordinate or junior in any respect to any other
                Indebtedness or other Obligation of such Person;

           (5)  that portion of any Indebtedness which at the time of
                Incurrence is Incurred in violation of this Indenture; or

           (6)  any Capital Stock.

          "Series B Preferred Stock" means the Company's
Series B Convertible Preferred Stock outstanding on the
Issue Date and any additional shares thereof issued in
payment of dividends thereon.

                                     23

          "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.

          "Standard Securitization Undertakings" means
representations, warranties, covenants and indemnities
entered into by the Company or any Restricted Subsidiary
that are reasonably customary in accounts receivable or
licensing royalty securitization transactions, as the case
may be.

          "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 (after giving effect to the use of the net
proceeds of the sale of the Notes as described in the
Offering Circular) or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes or a
Subsidiary 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 each Restricted
Subsidiary of the Company that delivers a Guaranty Agreement
pursuant to Section 5.11.

          "Subsidiary Guaranty" means a Guarantee by a
Subsidiary Guarantor of the Company's obligations with
respect to the Notes.

          "Temporary Cash Investments" means any of the
following:

           (1)  any investment in direct obligations of the United
                States or any agency thereof or obligations guaranteed by
                the United States or any agency thereof;

           (2)  investments in time deposit accounts, certificates of
                deposit and money market deposits maturing within 365 days
                of the date of

                                         24

                acquisition thereof issued by a bank or trust
                company which is organized under the laws of the United
                States, any State thereof or any foreign country recognized
                by the United States, 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
                270 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 or any foreign country recognized by the United
                States 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; and

           (5)  investments in securities with maturities of 270 days
                or less from the date of acquisition issued or fully
                guaranteed by any state, commonwealth or territory of the
                United States, 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.

          "Trustee" means SunTrust Bank, a state banking
association, until a successor replaces it and, thereafter,
means the successor.

          "Trust Indenture Act" means the Trust Indenture
Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the
Issue Date.

          "Trust Officer" means the Chairman of the Board,
the President or any other officer or assistant officer of
the Trustee assigned by the Trustee to administer its
corporate trust matters.

          "U.S. Government Obligations" means direct
obligations (or certificates representing an ownership
interest in such obligations) of the United States
(including any agency or instrumentality thereof) for the
payment of which the full faith and credit of the United
States is pledged and which are not callable at the issuer's
option.

                                  25

          "Unrestricted Subsidiary" means:

           (1)  any Subsidiary of an Unrestricted Subsidiary; and

           (2)  any Subsidiary of the Company which is designated after
                the Issue Date as an Unrestricted Subsidiary by a resolution
                of the Board of Directors of the Company;

provided that a Subsidiary may be so designated as an
Unrestricted Subsidiary only if

               (A)  such designation is in compliance with Section 5.04;

               (B)  such Subsidiary does not own any Capital Stock or
                    Indebtedness of, or hold any Lien on any property of, the
                    Company or any Restricted Subsidiary;

(C)  no Default or Event of Default has occurred and is
continuing or results therefrom; and
(D)  neither the Company nor any Restricted Subsidiary will
at any time
                    (i)  provide a guarantee of, or similar credit support to,
                         any Indebtedness of such Subsidiary (including any
                         undertaking, agreement or instrument evidencing such
                         Indebtedness),

(ii) be directly or indirectly liable for any Indebtedness
of such Subsidiary, or
(iii)     be directly or indirectly liable for any other
Indebtedness which provides that the holder thereof may
(upon notice, lapse of time or both) declare a default
thereon (or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity) upon the
occurrence of a default with respect to any other
Indebtedness that is Indebtedness of such Subsidiary
(including any corresponding right to take enforcement
action against such Subsidiary),
except in the case of clause (i) or (ii) above to the extent

                    (i)  that the Company or such Restricted Subsidiary could
                         otherwise provide such a guarantee or incur such
                         Indebtedness pursuant to Section 5.03(a); and

                                          26

                    (ii) the provision of such guarantee and the incurrence of
                         such Indebtedness otherwise would be permitted under
                         Section 5.04.

          The Board of Directors 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 5.03(a) and (B) no
Default or Event of Default shall have occurred and be
continuing.

          Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with
the foregoing provisions.

          "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' qualifying shares) is owned by the Company or one
or more Wholly Owned Subsidiaries.

                                    27

         SECTION 1.01.

Other Definitions.

Term                                      Defined
                                          in Section

"Affiliate Transaction"                   5.07
"Appendix"                                2.01
"Bankruptcy Law"                          7.01
"covenant defeasance option"              9.01(b)
"Custodian"                               7.01
"Event of Default"                        7.01
"Exchange Securities"                     Appendix
"Initial Securities"                      Appendix
"legal defeasance option"                 9.01(b)
"Paying Agent"                            2.03
"Private Exchange Securities"             Appendix
"Registrar"                               2.03
"Registration Rights Agreement"           Appendix
"Successor Company"                       6.01(1)

         SECTION 1.02.       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 and
     each Subsidiary Guaranty;

          "indenture security holder" means a Holder;

          "indenture to be qualified" means this Indenture;

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

          "obligor" on the indenture securities means the
     Company, each Subsidiary Guarantor 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 1.03.       Rules of Construction.  Unless the context
otherwise requires:

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

                               28

          (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 non-interest
     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.

                          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.  The Company's seal

                           29

shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.

          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 authenticated
under this Indenture.

          On the Issue Date, the Trustee shall authenticate
and deliver $150 million of 8 1/8% Senior Notes Due May 1,
2013, and, at any time and from time to time thereafter, the
Trustee shall authenticate and deliver Securities for
original issue in an aggregate principal amount specified in
such order, 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 an issuance of Additional Securities pursuant to
Section 2.13 after the Issue Date, shall certify that such
issuance is in compliance with Section 5.03.

          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
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 in writing 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 and
indemnity therefor pursuant to Section 8.07.  The Company or
any Wholly Owned Subsidiary incorporated or organized within
the United States may act as Paying Agent, Registrar, co-
registrar or transfer agent.

                             30

          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.

No later than 10:00 a.m. New York City time on 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 and 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 Holders 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 in writing of any default by the Company in making
any such payment.  If the Company or a Wholly Owned
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
complying with this Section 2.04, the Paying Agent shall
have no further liability for the money delivered to the
Trustee.

         SECTION 2.05.       Holder 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 Holders.  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 Holders.

         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.  No service charge shall be made for
any registration of transfer or exchange or redemption of
the Notes, but the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such
transfer taxes or other similar governmental charge payable
upon exchanges pursuant to Article 4 or Section 2.09, 3.06,
5.06 or 10.05).

         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
affidavit of lost certificate and indemnity bond or other
indemnity 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

                             31

suffer if a Security is replaced.  The
Company and the Trustee may charge the Holder for their
expenses in replacing a Security, including reasonable fees
and expenses of counsel, and for any tax imposed in
replacing such Security.

          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 2.08 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, 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.

         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 and
destroy (subject to the record retention requirements of the

Exchange Act) all Securities surrendered for registration of
transfer, exchange, payment or cancellation in accordance
with the Trustee's customary procedures.  The Company may
not issue new Securities to replace Securities it has
redeemed, paid or delivered to the Trustee for cancellation.

         SECTION 2.11.       Defaulted Interest.  If the
Company defaults in a payment of interest on the
Securities, the Company shall pay defaulted interest as
provided in the Securities (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 Holders 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 Holder a
notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.

                                   32

         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 or exchange
as a convenience to Holders; provided, however, that any
such notice may state that no representation is made as to
the correctness of such CUSIP numbers either as printed on
the Securities or as contained in any notice of a redemption
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 will notify the
Trustee in writing of any change in a CUSIP number.  The
Temporary Regulation S Global Security (as defined in
Section 2.1(a) of the Appendix hereto) and the Rule 144A
Global Security (as defined in Section 2.1(a) of the
Appendix hereto) shall be assigned separate CUSIP numbers.

         SECTION 2.13.       Issuance of Additional Securities.
The Company shall be entitled, subject to its compliance
with Section 5.03, 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, the date from which interest will
accrue thereon, the issue price and the amount of interest
payable upon a registration default as provided under a
registration rights agreement related thereto (and if such
Additional Securities shall be issued in the form of
Exchange Securities, other than with respect to transfer
restrictions).  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 of
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
     numbers 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 (as defined in the
     Appendix hereto) 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.

                               33

                          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 notice to the Trustee
provided for in this Section 3.01 at least 30 but not more
than 60 days before the redemption date unless the Trustee
consents in writing to a shorter period.  Such notice shall
be accompanied by an Officers' 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 of the Securities are to be redeemed,
the Trustee shall select the Securities to be redeemed on a
pro rata basis 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 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 of the outstanding
     Securities are to be redeemed, the identification and
     principal amounts of the particular Securities to be
     redeemed;

                                 34

          (6)  that, unless the Company defaults in making
     such redemption payment, interest on Securities (or a
     portion thereof) called for redemption ceases to accrue
     on and after the redemption date; and

          (7)  that no representation is made as to the
     correctness or accuracy of the CUSIP numbers, if any,
     listed in such notice or printed on the Securities.

          At the Company's written 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 3.03.

         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.
No later than 10:00 a.m. New York City time on the
redemption date, the Company shall deposit with the Paying
Agent (or, if the Company or a Subsidiary is the Paying
Agent, shall segregate and hold in trust) money sufficient
to pay the redemption price of and accrued interest on all
Securities to be redeemed on that 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,
the Company shall execute and the Trustee shall authenticate
for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the
Security surrendered.

                          ARTICLE 4

                      Change of Control

         SECTION 4.01.       Repurchase Right.  Upon the
occurrence of a Change of Control,
each Holder shall have the right to require that the Company
repurchase such Holder's Notes 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).

                                35

         SECTION 4.02.       Notices; Method of Exercising Repurchase
Rights, Etc.

(a)  Within 30 days following any Change of Control, the
Company will 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 Notes 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 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 the Section described hereunder, that a
                Holder must follow in order to have its Notes purchased.

          (b)  Holders electing to have a Note purchased
will be required to surrender the Note, 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 will 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 Note purchased.

          (c)  On the purchase date, all Notes purchased by
the Company under this Section 4.02 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.

          (d)  Notwithstanding the foregoing provisions of
this Section 4.02, the Company will not be required to make

a Change of Control Offer following 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 Indenture applicable to a
Change of Control Offer made by the Company and purchases
all Notes validly tendered and not withdrawn under such
Change of Control Offer.

          (e)  The Company will 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 Notes as a result of a
Change of Control.  To the extent that the provisions of any
securities laws or regulations conflict with the provisions
of the covenant described hereunder, the Company will comply
with the

                           36

applicable securities laws and regulations and
shall not be deemed to have breached the Company's
obligations under the covenant described hereunder by virtue
of the Company's compliance with such securities laws or
regulations.

                          ARTICLE 5

                          Covenants

         SECTION 5.01.       Payment of Securities.  The
Company shall promptly pay in lawful currency of the
United States 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 no later than
10:00 a.m. New York City time 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.

          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 5.02.       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 will file with the SEC (to the
extent that the SEC will accept such filing) and provide the
Trustee (and, only if the Company is no longer subject to
such reporting requirements, the Holders) 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
filings of such information, documents and reports under
such Sections.

          In addition, the Company will furnish to the
Holders 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
as the Notes are not freely transferable under the
Securities Act.

         SECTION 5.03.       Limitation on Indebtedness.
(a)  The Company will not, and will not permit any
Restricted Subsidiary to, Incur, directly or indirectly, any
Indebtedness; provided, however, that the Company and any
future Subsidiary Guarantor will 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 would be greater than 2.0 to 1.

     (b)  Notwithstanding the foregoing paragraph (a), the
Company and the Restricted Subsidiaries will be entitled to
Incur any or all of the following Indebtedness:

          (1)  Indebtedness Incurred by the Company and the Restricted
     Subsidiaries (including Restricted Subsidiaries that become
     Subsidiaries after the Issue Date) pursuant to the Credit
     Agreement; provided, however, that, after giving effect to
     any such Incurrence, the aggregate principal amount of all

                                  37

     Indebtedness Incurred under this clause (1) and then
     outstanding does not exceed the greater of (A) $325.0
     million and (B) the Borrowing Base, less in the case of
     clause (A) the sum of all mandatory principal payments with
     respect to such Indebtedness pursuant to Section
     5.06(a)(3)(A) (which principal payments in the case of
     revolving loans are accompanied by a corresponding permanent
     commitment reduction);

(2)  Indebtedness owed to and held by the Company or a
Restricted Subsidiary (other than a Securitization
Subsidiary); provided, however, that 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 (other than a
Securitization Subsidiary)) shall be deemed, in each case,
to constitute the Incurrence of such Indebtedness by the
obligor thereon;

(3)  the Notes and the Exchange Securities (other than any
Additional Notes);

(4)  the Existing Notes and any other Indebtedness
outstanding on the Issue Date after giving effect to the use
of the net proceeds of the sale of the Notes as described in
the Offering Circular (other than Indebtedness described in
clause (1), (2), (3) or (10) of this Section 5.03(b));

(5)  Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Subsidiary
was acquired by the Company (other than Indebtedness
Incurred in connection with, 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 Subsidiary became a
Subsidiary or was acquired by the Company); provided,
however, that at the time of such acquisition and after
giving pro forma effect thereto, the aggregate principal
amount of all Indebtedness Incurred pursuant to this clause
(5) and then outstanding does not exceed $5.0 million

(including
any Refinancing Indebtedness with respect thereto);

(6)  Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to Section 5.03(a) or pursuant to clause
(3), (4) or (5) or this clause (6) of this Section 5.03(b);
provided, however, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness
of a Subsidiary Incurred pursuant to Section 5.03(b)(5),
such Refinancing Indebtedness shall be Incurred only by such
Subsidiary;

(7)  Hedging Obligations consisting of Interest Rate
Agreements, Currency Agreements or Commodity Agreements not
entered into for speculative purposes;

                            38

(8)  obligations in respect of performance, bid and surety
bonds and completion guarantees provided by the Company or
any Restricted Subsidiary in the ordinary course of
business;

(9)  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;

(10) Indebtedness of the Company consisting of (A)
guarantees of payments of accounts payable of third-party
manufacturing facilities up to the amount of the commitment
therefor on the Issue Date but in any event not to exceed
$4.5 million and (B) obligations of Calvin Klein, Inc. for
the payment of letters of credit issued on its behalf up to
the amount of the commitment therefor on the Issue Date but
in any event not to exceed $1.5 million.

(11) Purchase Money Indebtedness and Capital Lease
Obligations Incurred by the Company or a Restricted
Subsidiary to acquire property in the ordinary course of
business and which do not in the aggregate exceed $10.0
million at any time outstanding;

(12) the Subsidiary Guaranty of a Subsidiary Guarantor;

(13) any Permitted Guarantee by a Restricted Subsidiary
described in clause (iii) of the definition of "Permitted
Guarantees" or any Indebtedness Incurred by a Restricted
Subsidiary as a co-borrower of Indebtedness of the Company
described in clause (iii) of the definition of "Permitted
Guarantees";

(14) Indebtedness of a Foreign Restricted Subsidiary which
at any time outstanding does not exceed the greater of (A)
the Foreign Borrowing Base of such Foreign Restricted
Subsidiary and (B) an amount which, when taken together with
all Indebtedness Incurred by all other Foreign Restricted
Subsidiaries and then outstanding, does not exceed $5.0
million in the aggregate;

(15) Indebtedness Incurred by a Securitization Subsidiary in
a Qualified Securitization Transaction; and

(16) Indebtedness of the Company and any future Subsidiary
Guarantors 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 (15) above or Section 5.03(a)) does not
exceed $30.0 million.

     (c)  Notwithstanding the foregoing, neither the Company
nor any Subsidiary Guarantor will Incur any Indebtedness
pursuant to the foregoing paragraph (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

                            39

be subordinated to the Notes or the applicable Subsidiary
Guaranty to at least the same extent as such Subordinated
Obligations.

     (d)  For purposes of determining compliance with this
Section 5.03:

          (1)  any Indebtedness remaining outstanding under the Credit
     Agreement after the application of the net proceeds of the
     sale of the Notes will be treated as Incurred on the Issue
     Date under Section 5.03(b)(1) above;

          (2)  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, will
     classify such item of Indebtedness at the time of Incurrence
     and will only be required to include the amount and type of
     such Indebtedness in one of the above clauses; and

          (3)  the Company will be entitled to divide and classify an
     item of Indebtedness in more than one of the types of
     Indebtedness described above.

          (e)  Notwithstanding any other provision of this
Section 5.03, the accrual of interest, the accretion or
amortization of original issue discount and the payment of
interest on any Indebtedness in the form of additional
Indebtedness with the same terms will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant;
provided, however, that the amount thereof is included in
Consolidated Interest Expense of the Company and its
consolidated Restricted Subsidiaries as accrued.

         SECTION 5.04.       Limitation on Restricted Payments

     .  (a)  The Company will not, and will 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 pursuant to Section 5.03(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 immediately following the fiscal
          quarter during which the Issue Date occurs to the end of the
          most recent fiscal quarter for which 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); plus

                                  40

(B)  100% of the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of its Capital Stock,
including Capital Stock issued pursuant to a stock option or
similar plan established by the Company (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 stockholders subsequent to the Issue Date; plus

(C)  the amount by which Indebtedness of the Company is
reduced on the Company's balance sheet upon the conversion
or exchange subsequent to the Issue Date of any Indebtedness
of the Company convertible or exchangeable 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); provided, however, that the foregoing amount
shall not exceed the Net Cash Proceeds received by the
Company or any Restricted Subsidiary from the sale of such
Indebtedness (excluding Net Cash Proceeds of sales to a
Subsidiary of the Company or to an employee stock ownership
plan or a trust established by the Company or any of its
Subsidiaries for the benefit of their employees); plus

(D)  an amount equal to the sum of (x) the reduction, net of
costs, in the Investments (other than Permitted 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 (excluding dividends and distributions), 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 or Unrestricted
Subsidiary, the amount of Investments (excluding Permitted
Investments) previously made (and treated as a Restricted
Payment) by the Company or any Restricted Subsidiary in such
Person or Unrestricted Subsidiary; plus

(E)  $7.5 million.

     (b)  The preceding provisions will 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

                                 41

     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)
     or a substantially concurrent cash capital contribution
     received by the Company from its stockholders; 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 of 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 5.04(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 5.03; 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 covenant; provided,
     however, that at the time of payment of such dividend, no
     other Default shall have occurred and be continuing (or
     result therefrom); provided further, however, that such
     dividend shall be included in the calculation of the amount
     of Restricted Payments;

(4)  the payment of dividends by the Company on its common
stock in an annual amount of up to $0.15 per outstanding
share of common stock; provided, however, that such payment
will be included in the calculation of the amount of
Restricted Payments;

(5)  repurchases by the Company of Capital Stock deemed to
occur upon the exercise of options or warrants if such
Capital Stock represents all or a portion of the exercise
price thereof; provided, however, that such repurchases will
be excluded from the calculation of the amount of Restricted
Payments; and

(6)  other Restricted Payments not exceeding $15.0 million
in the aggregate at any one time outstanding; provided,
however, that (A) at the time of such Restricted Payments,
no Default or Event of Default shall have occurred and be
continuing (or result therefrom) and (B) such Restricted
Payments will be excluded in the calculation of the amount
of Restricted Payments.

          (c)  For purposes of determining compliance with

this Section 5.04, in the event that a Restricted Payment
meets the criteria of more than one of the types of
Restricted Payments described above, the Company may order
and classify, and from time to time may reclassify, such
Restricted Payment if that classification would have been
permitted at the time such Restricted Payment was made and
at the time of the reclassification.

                                42

          SECTION 5.05.       Limitation on Restrictions on
Distributions from Restricted Subsidiaries.  The Company will not,
and will 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) of this
     Section 5.05,

               (A)  any encumbrance or restriction pursuant to an agreement
          in effect at or entered into on the Issue Date (after giving
          effect to the use of the net proceeds of the sale of the
          Notes as described in the Offering Circular);

               (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 clause (A) or (B) of this
Section 5.05(1) or this clause (C) or contained in any
amendment to an agreement referred to in clause (A) or (B)
of this Section 5.05(1) 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 in
any material respect to the Noteholders than encumbrances
and restrictions with respect to such Restricted Subsidiary
contained in such predecessor agreements;

(D)  any encumbrance or restriction with respect to a
Restricted Subsidiary imposed pursuant to an agreement
entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or
disposition and so long as the consummation of such
transaction would not result in a Default or Event of
Default;

(E)  any encumbrance or restriction under applicable
corporate law or regulation relating to the payment of
dividends or distributions;

                              43

(F)  any encumbrance or restriction contained in the terms
of any Indebtedness permitted to be Incurred under this
Indenture; provided that such encumbrances or restrictions
are ordinary and customary with respect to the type of
Indebtedness being Incurred if the Board of Directors
determines that any such encumbrance or restriction will not
adversely affect the Company's ability to make principal or
interest payments on the Notes; and

(G)  any encumbrance or restriction with respect to
Indebtedness or other contractual requirements of a
Securitization Subsidiary in connection with and, in the
good faith determination of the Board of Directors,
necessary to effectuate, a Qualified Securitization
Transaction; provided, however, that such encumbrance or
restriction applies only to such Securitization Subsidiary;
and

          (2)  with respect to clause (c) of this Section 5.05 only,

               (A)  any 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)  any encumbrance or restriction contained in security
agreements or mortgages securing Indebtedness of a
Restricted Subsidiary to the extent such encumbrance or
restriction restricts the transfer of the property subject
to such security agreements or mortgages.

         SECTION 5.06.       Limitation on Sales of Assets and
Subsidiary Stock.  (a)  The Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless:

           (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 shares and assets subject to
                such Asset Disposition;

           (2)  in the case of an Asset Disposition other than an Asset
                Swap, 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)

                                     44

               (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)  to 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 of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), to
make an offer to the Holders (and to holders of other Senior
Indebtedness of the Company designated by the Company) to
purchase Notes (and such other Senior Indebtedness of the
Company) pursuant to and subject to the conditions contained
in this Indenture;

               provided, however, that in connection with
               any prepayment, repayment or purchase of
               Indebtedness 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 5.06, the Company and the Restricted Subsidiaries
will not be required to apply any Net Available Cash in
accordance with this Section 5.06 except to the extent that
the aggregate Net Available Cash from all Asset Dispositions
which is not applied in accordance with this Section 5.06
exceeds $20.0 million.  Pending application of Net Available
Cash pursuant to this Section 5.06, such Net Available Cash
shall be invested in Temporary Cash Investments or applied
to temporarily reduce revolving credit indebtedness.

          (b)  For the purposes of this Section 5.06, 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; and

           (2)  securities, notes or other obligations received by the
                Company or any Restricted Subsidiary from the transferee to
                the extent

                                   45

                converted within 90 days by the Company or such
                Restricted Subsidiary into cash or Temporary Cash
                Investments.

          (c)  In the event of an Asset Disposition that
requires the purchase of Notes (and other Senior
Indebtedness of the Company) pursuant to clause (a)(3)(C) of
this Section 5.06, the Company will purchase Notes tendered
pursuant to an offer by the Company for the Notes (and such
other Senior Indebtedness) at a purchase price of 100% of
their principal amount (or, in the event such other Senior
Indebtedness of the Company was issued with significant
original issue discount, 100% of the accreted value thereof)
without premium, plus accrued but unpaid interest (or, in
respect of such other Senior Indebtedness of the Company,
such lesser price, if any, as may be provided for by the
terms of such Senior Indebtedness) in accordance with the
procedures (including prorating in the event of
oversubscription) set forth in this Indenture.  If the
aggregate purchase price of the securities tendered exceeds
the Net Available Cash allotted to their purchase, the
Company will select the securities to be purchased on a pro
rata basis but in round denominations, which in the case of
the Notes will be denominations of $1,000 principal amount

or multiples thereof.  The Company shall not be required to
make such an offer to purchase Notes (and other Senior
Indebtedness of the Company) pursuant to this Section 5.06
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).

          (d)  The Company will 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 Notes pursuant to this
Section 5.06.  To the extent that the provisions of any
securities laws or regulations conflict with provisions of
this Section 5.06, the Company will comply with the
applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section
5.06 by virtue of its compliance with such securities laws
or regulations.

         SECTION 5.07.       Limitation on Affiliate Transactions.
(a)    The Company will not, and will 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 the Affiliate
                Transaction in arm's-length dealings with a Person who is
                not an Affiliate;

           (2)  if such Affiliate Transaction involves an amount in
                excess of $5.0 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

                                   46

                (1) of this
                Section 5.07 are satisfied and have 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 $17.5 million, the Board of Directors 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 the preceding paragraph (a) will not
prohibit:

           (1)  any Investment (other than a Permitted Investment) or
                other Restricted Payment, in each case permitted to be made
                pursuant to Section 5.04;

           (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 in the ordinary course of business;

           (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, but in any event not
                to exceed $2.0 million in the aggregate outstanding at any
                one time;

           (4)  the payment of fees and compensation to, and the
                provision of employee benefit arrangements and indemnity for
                the benefit of, directors, officers and employees of the
                Company or any of its Restricted Subsidiaries entered into
                in the ordinary course of business;

           (5)  any transaction between the Company and a Restricted
                Subsidiary or between Restricted Subsidiaries (other than
                Securitization Subsidiaries);

           (6)  any transaction with 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
                otherwise controls such Restricted Subsidiary, joint venture
                or similar entity;

           (7)  the issuance or sale of any Capital Stock (other than
                Disqualified Stock) of the Company;

                                        47

           (8)  any agreement or arrangement in effect on the Issue
                Date (after giving effect to the use of the net proceeds of
                the sale of the Notes as described in the Offering Circular)
                or any amendment or replacement thereof; provided, however,
                that any such amendment or replacement is not less favorable
                in any material respect to the Company or any of its
                Restricted Subsidiaries than that in effect on the Issue
                Date;

           (9)  sales or other dispositions of accounts receivable or
                licensing royalties and related assets to a Securitization
                Subsidiary in a Qualified Securitization Transaction which
                are customarily transferred in such a transaction; and

           (10) purchases by the Company or any Restricted Subsidiary
                from TAL Apparel Limited and related companies in the
                ordinary course of business on terms no less favorable to
                the Company or such Restricted Subsidiary than those that
                could be obtained at the time in arm's length dealings with
                an unrelated Person.

         SECTION 5.08.       Limitation on the Sale or Issuance of
Capital Stock of Restricted Subsidiaries.  The Company:

          (1)  will not, and will not permit any Restricted Subsidiary
     to, sell, lease, transfer or otherwise dispose of any
     Capital Stock of any Restricted Subsidiary to any Person
     (other than the Company or a Restricted Subsidiary other
     than a Securitization Subsidiary), and

          (2)  will not permit any Restricted Subsidiary 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 the
     Company or a Restricted Subsidiary other than a
     Securitization 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;

               (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 5.04
          if made on the date of such issuance, sale or other
          disposition; or

(C)  immediately after giving effect to such issuance, sale
or other disposition of Capital Stock, other than
Disqualified Stock, such Restricted Subsidiary would
continue to be a Restricted Subsidiary,

                                48

and in the case of each of (A), (B) and (C), such issuance,
sale or other disposition complies with, and the proceeds
thereof are applied in accordance with, Section 5.06.

         SECTION 5.09.       Limitation on Liens.  The Company
will not, and will not permit any
Restricted Subsidiary to, issue, assume or guarantee any
Indebtedness for borrowed money secured by any Lien on any
property or asset now owned or hereafter acquired by the
Company or such Restricted Subsidiary without making
effective provision whereby any and all Notes then or
thereafter outstanding will be secured by a Lien equally and
ratably with (or, if the obligation to be secured by such
Lien is subordinated in right of payment to the Notes, prior
to) any and all other obligations thereby secured for so
long as any such obligations shall be so secured.

          The foregoing restriction does not, however, apply
to:

          (1)  Liens existing on the Issue Date after giving effect to
     the use of the net proceeds of the sale of the Notes as
     described in the Offering Circular;

(2)  Liens securing Hedging Obligations so long as such
Hedging Obligations relate to Indebtedness that is, and is
permitted to be under this Indenture, secured by a Lien on
the same property securing such Hedging Obligations;

(3)  Liens to secure Purchase Money Indebtedness that is
otherwise permitted under this Indenture; provided that (i)
any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, the cost
of the acquisition or construction that is the subject of
the Purchase Money Indebtedness and (ii) such Lien is
limited in the manner described in the definition of
Purchase Money Indebtedness;

(4)  Liens securing Capital Lease Obligations; provided,
however, that such Lien does not extend to any property
other than that subject to the underlying lease;

(5)  Liens in favor of landlords contained in leases and
subleases of real property granted by the Company or any
Restricted Subsidiary or inventory or fixtures located on
the leased real property; provided, however, that such Liens
are in the ordinary course of business, are on terms
customary for leases of such type and do not materially
impair the use of the liened property in the operation of
the business of the Company or the Restricted Subsidiary;

(6)  Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs
duties in connection with the importation of goods;

(7)  Liens imposed by law, including, carriers',
warehousemen's and mechanics' Liens, in each case for sums
not yet due or being contested in good faith by appropriate
proceedings; provided that any reserve or other appropriate
provision as is required in conformity with GAAP has been
made therefor;

                            49

(8)  Liens for taxes, assessments and governmental charges
not yet subject to penalties for non-payment or which are
being contested in good faith and by appropriate
proceedings; provided that any reserve or other appropriate
provision as is required in conformity with GAAP has been
made therefor;

(9)  Liens securing Indebtedness Incurred under Section
5.03(b)(1);

(10) Liens securing Indebtedness owed by a Restricted
Subsidiary to the Company or to any other Restricted
Subsidiary (other than a Securitization Subsidiary);

(11) Liens on the property of any Restricted Subsidiary
existing at the time such Person becomes a Subsidiary and
not incurred as result of (or in connection with or in
anticipation of) such Person becoming a Subsidiary;
provided, however, that such Liens do not extend to or cover
any property or assets of the Company or any of the
Restricted Subsidiaries other than the property encumbered
at the time such Person becomes a Subsidiary and do not
secure Indebtedness with a principal amount in excess of the
principal amount outstanding at such time;

(12) Liens securing the Notes and the Exchange Securities;

(13) Liens to secure taxes not yet due or which are being
contested in good faith by the Company or a Restricted
Subsidiary;

(14) Liens securing Refinancing Indebtedness incurred to
refinance Indebtedness that was previously so secured;

provided that such Lien extends to or covers only the same
property that secures the Indebtedness being refinanced;

(15) Liens (excluding in all cases Liens securing Limited
Originator Recourse obligations) on (i) accounts receivable
and related assets transferred to, or on accounts receivable
and related assets of, a Securitization Subsidiary in
connection with a Qualified Securitization Transaction and
(ii) licensing royalties and related assets transferred to,
or on licensing royalties and related assets of, a
Securitization Subsidiary in connection with a Qualified
Securitization Transaction in an aggregate amount of up to
15% of the total revenues from royalties or similar
licensing payments of the Company and its Restricted
Subsidiaries;

(16) Liens securing Indebtedness Incurred under Section
5.03(b)(14); or

(17) Liens (exclusive of any Lien of any type otherwise
permitted under clauses (1) through (16) of this Section
5.09) securing Indebtedness for borrowed money of the
Company or any Restricted Subsidiary in an aggregate
principal amount which, together with the aggregate amount
of Attributable Indebtedness deemed to be outstanding in
respect of all Sale/Leaseback Transactions entered into
pursuant to Section 5.10(a) (exclusive of any such
Sale/Leaseback Transactions otherwise permitted under
clauses (1) through (16) of this Section

                             50

5.09), does not at
the time such Indebtedness is incurred exceed the greater of
$40.0 million and 15% of Consolidated Net Tangible Assets,

as determined based on the consolidated balance sheet of the
Company as of the end of the most recent fiscal quarter for
which financial statements are available.

          Any Lien created for the benefit of the Holders
pursuant to the preceding sentence shall provide by its
terms that such Lien shall be automatically and
unconditionally released and discharged upon the release and
discharge of the initial Lien.

         SECTION 5.10.       Limitation on Sale/Leaseback
Transactions.  The Company will not, and will not permit any
Restricted Subsidiary to, enter into any Sale/Leaseback Transaction
with respect to any property unless (a) the Company or such
Subsidiary would be entitled to (1) incur Indebtedness in an
amount equal to the Attributable Debt with respect to such
Sale/Leaseback Transaction pursuant to Section 5.03 and (2)
create a Lien on such property securing such Attributable
Debt without equally and ratably securing the Notes pursuant
to Section 5.09, (b) the net proceeds received by the
Company or any Restricted Subsidiary in connection with such
Sale/Leaseback Transaction are at least equal to the fair
value (as determined by the Board of Directors) of such
property and (c) the Company applies the proceeds of such
transaction in compliance with Section 5.06.

         SECTION 5.11.       Future Subsidiary Guarantees

          .  The Company will not permit any Restricted
Subsidiary, directly or indirectly, to Guarantee any
Indebtedness of the Company (other than Permitted
Guarantees) or to Incur any Indebtedness under Section
5.03(a) or Section 5.03(b)(16) unless such Restricted
Subsidiary simultaneously executes and delivers a Guaranty
Agreement providing for the unconditional and irrevocable
Guarantee of the Notes by such Restricted Subsidiary,
jointly and severally with all other Subsidiary Guarantors.
If the Indebtedness to be Guaranteed is subordinated to the
Notes, the Guarantee of such Indebtedness will be
subordinated to the Guarantee of the Notes to the same
extent as the Indebtedness to be Guaranteed is subordinated
to the Notes.  Notwithstanding the foregoing, any such
Guarantee by a Restricted Subsidiary of the Notes will
provide by its terms that it will be automatically and
unconditionally released and discharged upon either:

           (1)  the release or discharge of such Guarantee of payment
                of such other Indebtedness, except a discharge by or as a
                result of payment under such Guarantee; or

           (2)  any sale or transfer, other than to the Company or a
                Subsidiary of the Company, of all of the Company's Capital
                Stock in, or all or substantially all the assets of, such
                Restricted Subsidiary, which sale or transfer is made in
                compliance with the applicable provisions of this Indenture.

         SECTION 5.12.       Compliance Certificate.  The Company shall deliver
to the Trustee within 120 days after the end of each fiscal year of the Company
an Officers'

                                  51

Certificate 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 5.13.       Further Instruments and Acts.  Upon
request of the Trustee, the Company will 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.

         SECTION 5.14.       Covenant Removal.  Notwithstanding
any other provision of this Indenture,
during any period of time that both (1) the Notes are rated
Investment Grade by each of Moody's Investor Service, Inc.
and Standard & Poor's Ratings Group and (2) no Default or
Event of Default shall have occurred and be continuing, the
Company and its Restricted Subsidiaries will not be subject
to the covenants set forth in Sections 5.03, 5.04, 5.05,
5.06, 5.07, 5.08 and clause (3) of Section 6.01.

                          ARTICLE 6

                  Merger and Consolidation

         SECTION 6.01.       When Company May Merge or Transfer
Assets.  The Company will 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, 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 satisfactory to the Trustee, all the
               obligations of the Company under the Notes 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 or Event of 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
5.03(a); and

                                  52

(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 clauses (3) and (4) will 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.

          For purposes of this Article 6, the sale, lease,
conveyance, assignment, transfer or other disposition of all
or substantially all of the properties and assets of one or
more Subsidiaries of the Company, which properties and
assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties
and assets of the Company on a consolidated basis, shall be
deemed to be the transfer of all or substantially all of the
properties and assets of the Company.

          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 Notes.

          SECTION 6.02.       When a Subsidiary Guarantor May Merge or
Transfer Assets.  The Company will 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 will comply with its obligations under Section 5.06
     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, 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 or Event of Default shall
have occurred and be continuing; and

                                     53

(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 7

                    Defaults and Remedies

         SECTION 7.01.       Events of Default.  Each of the following is an
"Event of Default":

          (1)  a default in the payment of interest on the Notes when
     due, which continues for 30 days;

          (2)  a default in the payment of principal of any Note when
     due at its Stated Maturity, upon optional redemption, upon
     required purchase, upon declaration of acceleration or otherwise;

(3)  subject to Section 5.14, the failure by the Company to
comply with its obligations under Article 6.

(4)  subject to Section 5.14, the failure by the Company to
comply for 30 days after notice with any of its obligations
under Article 4 (other than a failure to purchase Notes) or
under Sections 5.02, 5.03, 5.04, 5.05, 5.06 (other than a
failure to purchase Notes), 5.07, 5.08, 5.09, 5.10 or 5.11;

(5)  the failure by the Company or any Restricted Subsidiary
to comply for 60 days after notice with its other covenants,
obligations, warranties or agreements contained in this
Indenture;

(6)  Indebtedness of the Company, any Subsidiary 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 $15.0 million (the "cross acceleration provision");

(7)  the Company, a Subsidiary Guarantor or any Significant
Subsidiary pursuant to or within the meaning of any
Bankruptcy Law (the "bankruptcy provisions");

               (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
all or substantially all of its property; or

                              54

(D)  makes a general assignment for the benefit of its
creditors; or takes any comparable action under any foreign laws
relating to insolvency;

          (8)  a court of competent jurisdiction enters an order or
     decree under any Bankruptcy Law that:

               (A)  is for relief against the Company, a Subsidiary
          Guarantor or any Significant Subsidiary in an involuntary
          case;

(B)  appoints a Custodian of the Company, a Subsidiary
Guarantor or any Significant Subsidiary or for all or
substantially all of the property of any of them; or

(C)  orders the winding up or liquidation of the Company, a
Subsidiary 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)  a judgment or order is rendered against the Company, a
     Subsidiary Guarantor or any Significant Subsidiary, which
     requires the payment in money by the Company, a Subsidiary
     Guarantor or any Significant Subsidiary either individually
     or in the aggregate, of an amount (to the extent not covered
     by insurance) in excess of $15.0 million and such judgment
     or order remains unsatisfied, undischarged, unvacated,
     unbonded and unstayed for 60 days (the "judgment default
     provision"); or

(10) a Subsidiary Guaranty ceases to be in full force and
effect (other than in accordance with the terms of such
Subsidiary Guaranty) or a Subsidiary Guarantor denies or
disaffirms its obligations under its Subsidiary Guaranty.

          The foregoing will 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.

          A default under clauses (4) and (5) will not
constitute an Event of Default until the Trustee or the
Holders of at least 25% in principal amount of the
outstanding Notes 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".

                            55

          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) or (5) or (9), its status and what
action the Company is taking or proposes to take with
respect thereto.

         SECTION 7.02.       Acceleration.  If an Event of Default
(other than an Event of Default
specified in Section 7.01(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 7.01(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 Holders.  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 7.03.       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.

          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 Holder 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 7.04.       Waiver of Past Defaults.  The Holders
of a majority in principal amount of the
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 10.02
cannot be amended without the consent of each Holder
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 7.05.       Control by Majority.  The Holders
of a majority in principal amount of the
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

                             56

that conflicts with law or this Indenture or,
subject to Section 8.01, that the Trustee determines is
unduly prejudicial to the rights of other Holders 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 reasonable indemnification
against all losses and expenses caused by taking or not

taking such action.

         SECTION 7.06.       Limitation on Suits.  Except to enforce
the right to receive payment of
principal, premium (if any) or interest when due, no Holder
may pursue any remedy with respect to this Indenture or the
Securities unless:

          (1)  such Holder has previously given the Trustee written
     notice stating that an Event of Default is continuing;

          (2)  Holders of at least 25% in principal amount of the
     outstanding Securities make a written request to the Trustee
     to pursue the remedy;

(3)  such Holder has offered the Trustee reasonable security
or indemnity against any loss, liability or expense;

(4)  the Trustee has not complied with such request within
60 days after the receipt thereof and the offer of security
or indemnity; and

(5)  Holders of a majority in principal amount of the
outstanding Securities have not given the Trustee a
direction inconsistent with such request during such 60-day
period.

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

         SECTION 7.07.       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 7.08.       Collection Suit by Trustee.  If an Event
of Default specified in Section 7.01(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 8.07.

         SECTION 7.09.       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 Holders
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

                                 57

trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such
judicial proceeding is hereby authorized by each Holder to
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 8.07.

         SECTION 7.10.       Priorities.  If the Trustee collects
any money or property pursuant to
this Article 7, it shall pay out the money or property in
the following order:

          FIRST:  to the Trustee for amounts due under
     Section 8.07;

          SECOND:  to Holders 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

          THIRD:  to the Company.

          The Trustee may fix a record date and payment date
for any payment to Holders pursuant to this Section 7.10.
At least 15 days before such record date, the Company shall
mail to each Holder and the Trustee a notice that states the
record date, the payment date and amount to be paid.

         SECTION 7.11.       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 reasonable attorneys' fees, 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 7.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 7.07 or a
suit by Holders of more than 10% in principal amount of the
Securities.

         SECTION 7.12.       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.

                                 58

                          ARTICLE 8

                           Trustee

         SECTION 8.01.       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, the Trustee shall examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.

          (c)  The Trustee may not be relieved from
liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:

          (1)         this paragraph does not limit the effect of
     paragraph (b) of this Section 8.01;

          (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 7.05.

          (d)   Every provision of this Indenture that in
any way relates to the Trustee is subject to this Section
8.01.

          (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

                            59

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 8.01 and to the provisions of the TIA.

         SECTION 8.02.       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 such 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 willful misconduct or negligence.

          (e)  The Trustee may consult with counsel, 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.

         SECTION 8.03.       Individual Rights of Trustee.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Securities and 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 8.10 and 8.11.

         SECTION 8.04.       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 of the Securities, and it
shall not be responsible for any statement of the Company in
this 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 8.05.       Notice of Defaults.  If a Default
occurs and is continuing and if it is known
to the Trustee, the Trustee shall mail to each Holder 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

                                 60

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 best interests of
Holders.

         SECTION 8.06.       Reports by Trustee to Holders.
As promptly as practicable after each May 1 beginning
with the May 1 following the date of this Indenture, and in
any event prior to July 1 in each year, the Trustee shall
mail to each Holder a brief report dated as of May 1 that
complies with TIA Section 313(a).  The Trustee also shall comply
with TIA Section 313(b).

          A copy of each report at the time of its mailing
to Holders 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 8.07.       Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for its services as the Company and
the Trustee shall agree in writing.  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 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.  Except
as otherwise provided in this Section 8.07, the Company
shall indemnify the Trustee against any and all loss,
liability or expense (including reasonable attorneys' fees)
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 except to the extent that the Company
has been materially prejudiced by such failure.  The Company
shall defend the claim and the Trustee may have separate
counsel; provided, that the Trustee shall pay the reasonable
fees and expenses of such separate counsel unless (a) the
Company and the Trustee shall have mutually agreed to the
contrary, (b) the Company has failed within a reasonable
time to retain counsel reasonably satisfactory to the
Trustee, (c) the Trustee shall have reasonably concluded
that there may be legal defenses available to it that are
different from or in addition to those available to the
Company or (d) the named parties in any claim (including any
impleaded parties) include both the Company and the Trustee

and representation of both the Company and the Trustee by
the same counsel would be inappropriate due to actual or
potential differing interests between the Company and the
Trustee.  The Trustee shall not, without the prior written
consent of the Company, effect any settlement of any action
in respect of which the Trustee is indemnified by the
Company hereunder.  The Company need not reimburse any
expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own willful
misconduct, negligence or bad faith.

          To secure the Company's payment obligations in
this Section 8.07, the Trustee shall have a lien prior to
the Securities on all money or property held or collected

                                 61

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 8.07 shall survive the discharge of this Indenture.
When the Trustee incurs expenses after the occurrence of a
Default specified in Section 7.01(7) or (8) with respect to
the Company, the expenses are intended to constitute
expenses of administration under the Bankruptcy Law.

         SECTION 8.08.       Replacement of Trustee.  The Trustee
may resign at any time by so notifying the
Company in writing at least 30 days prior to the date of the
proposed resignation.  The Holders of a majority in
principal amount of the 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 8.10;

          (2)  the Trustee is adjudged bankrupt or insolvent;

(3)  a receiver or other public officer takes charge of
the Trustee or its property; or

(4)       the Trustee otherwise becomes incapable of acting.

          If the Trustee resigns, is removed by the Company
or by the Holders of a majority in principal amount of the
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 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 shall have all the rights, powers and duties of the
Trustee under this Indenture.  The successor Trustee shall
mail a notice of its succession to Holders.  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 8.07.

          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 principal
amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.

          If the Trustee fails to comply with Section 8.10,
any Holder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a
successor Trustee.

                                 62

          Notwithstanding the replacement of the Trustee
pursuant to this Section 8.08, the Company's obligations
under Section 8.07 shall continue for the benefit of the
retiring Trustee.

         SECTION 8.09.       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
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 8.10.       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 $50.0 million 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 8.11.  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 therein.

                          ARTICLE 9

             Discharge of Indenture; Defeasance

         SECTION 9.01.       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

                              63

case the Company pays all other sums payable hereunder by the
Company, then this Indenture shall, subject to Section
9.01(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 at the cost and
expense of the Company.

          (b)  Subject to Sections 9.01(c) and 9.02, 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 4.01, 4.02,
5.02, 5.03, 5.04, 5.05, 5.06, 5.07, 5.08, 5.09, 5.10 and
5.11 and the operation of Sections 7.01(4), 7.01(6),
7.01(7), 7.01(8) and 7.01(9) (but, in the case of Sections
7.01(7) and (8), with respect only to Significant
Subsidiaries and Subsidiary Guarantors) and the limitations
contained in Section 6.01(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 7.01(4), 7.01(6), 7.01(7),
7.01(8) and 7.01(9) (but, in the case of Sections 7.01(7)
and (8), with respect only to Significant Subsidiaries and
Subsidiary Guarantors) or because of the failure of the
Company to comply with Section 6.01(3).  If the Company
exercises its legal defeasance option or its covenant
defeasance option, each Subsidiary Guarantor, if any, shall
be released from all its obligations with respect to its
Subsidiary Guaranty.

          Upon satisfaction of the conditions set forth
herein and upon written 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, 8.07 and 8.08 and in this Article 9 shall
survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 8.07, 9.04
and 9.05 shall survive.

         SECTION 9.02.       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

                                    64

     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 Section 7.01(7)
or (8) with respect to the Company occurs which is
continuing at the end of the period;

(4)  the exercise does not result in or constitute a
     Default or Event of Default under this Indenture;

(5)  the deposit does not constitute a default under
     any other agreement binding on the Company;

(6)       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 regulated
investment company under the Investment Company Act of 1940;

(7)       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 Holders 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;

(8)       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 Holders 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

(9)       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 9 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 9.03.       Application of Trust Money.  The
Trustee shall hold in trust money or U.S. Government
obligations deposited with it pursuant to this Article 9.
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.

                                 65

         SECTION 9.04.       Repayment to Company.  The Trustee
and the Paying Agent shall promptly turn over
to the Company upon written 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 written request any money held by them for the payment
of principal or interest that remains unclaimed for two
years, and, thereafter, Holders entitled to the money must
look to the Company for payment as general creditors.

         SECTION 9.05.       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 or the
principal and interest received on such U.S. Government
Obligations.

         SECTION 9.06.       Reinstatement.  If the Trustee or
Paying Agent is unable to apply any
money or U.S. Government obligations in accordance with this
Article 9 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 9 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 9; 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 10

                 Supplements and Amendments

         SECTION 10.01.      Without Consent of Holders.  The Company,
the Subsidiary Guarantors and the Trustee
may amend or supplement this Indenture and the Securities
without notice to or the consent of any Holder:

          (1)         to cure any ambiguity, omission, defect or
     inconsistency;

          (2)         to provide for the assumption by a successor
     corporation of the obligations of the Company or any

     Subsidiary Guarantor under this Indenture;

(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;

                                66

(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 Restricted Subsidiary;

(6)       to make any change that does not adversely affect
the rights of any Holder; or

(7)         to comply with any requirement of the SEC in
     connection with the qualification of this Indenture under
     the TIA.

     After an amendment or supplement under this Section
10.01 becomes effective, the Company shall mail to Holders a
notice briefly describing such amendment or supplement.  The
failure to give such notice to all Holders, or any defect
therein, shall not impair or affect the validity of an
amendment or supplement under this Section 10.01.

         SECTION 10.02.      With Consent of Holders. The Company, the
Subsidiary Guarantors and the Trustee may
amend, or waive any past Default or noncompliance with any
provision of, this Indenture or the Securities without
notice to any Holder but with the written consent of the
Holders of at least a majority in 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 Holder
affected thereby, an amendment or waiver 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 Holder to receive payment
of principal of and interest on such Holder'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
Holder's Securities;

                                67

(7)  make any change in the amendment provisions that
require each Holder's consent or in the waiver provisions of
this Indenture;

(8)  make any change in the ranking or priority of any
Security that would adversely affect the Holders; or

(9)  make any change in any Subsidiary Guaranty that would
adversely affect the Holders.

          It shall not be necessary for the consent of the
Holders under this Indenture to approve the particular form
of any proposed amendment, but it shall be sufficient if
such consent approves the substance thereof.

          After an amendment under this Indenture becomes
effective, the Company is required to mail to Holders a
notice briefly describing such amendment.  However, the
failure to give such notice to all Holders, or any defect
therein, will not impair or affect the validity of the
amendment.

         SECTION 10.03.      Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall comply with
the TIA as then in effect.

         SECTION 10.04.      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 Holder.  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 Holders
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 Holders 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.

         SECTION 10.05.      Notation on or Exchange of Securities.
If an amendment or waiver 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.

                                68

Failure to make the appropriate notation or to issue a new
Security shall not affect the validity of such amendment or
waiver.

         SECTION 10.06.      Trustee To Sign Amendments

..  The Trustee shall sign any amendment authorized pursuant
to this Article 10 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 8.01) 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 10.07.      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 to
amend.

                         ARTICLE 11

                        Miscellaneous

         SECTION 11.01.      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 11.02.      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:

               Phillips-Van Heusen Corporation
               200 Madison Avenue
               New York, NY 10016
               Attention: Secretary

               with a copy to:

               Katten Muchin Zavis Rosenman
               575 Madison Avenue
               New York, NY 10022-2585
               Attention: David H. Landau, Esq.

          if to the Trustee:

               SunTrust Bank
               25 Park Place, 24th Floor
               Atlanta, GA 30303
               Attention: Jack Ellerin

                                 69

               with a copy to:

               Powell Goldstein Frazer & Murphy LLP
               191 Peachtree Street, N.E., 16th Floor
               Atlanta, GA 30303
               Attention: Gregory H. Worthy, Esq.

          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 such notice or communication mailed to a
Holder shall be mailed to the Holder at such Holder'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
Holder or any defect in the notice or communication shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the
addressee receives such notice or communication.

         SECTION 11.03.      Communication by Holders with Other
Holders.  Holders may communicate pursuant to TIA Section 312(b) with
other Holders 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 11.04.      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 11.05.      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;

                              70

          (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.

         SECTION 11.06.      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 the
Trustee 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 11.07.      Rules by Trustee, Paying Agent and
Registrar.  The Trustee may make reasonable rules for action by or a
meeting of Holders.  The Registrar and the Paying Agent may
make reasonable rules for their functions.

         SECTION 11.08.      Legal Holidays.  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 11.09.      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 11.10.      No Recourse Against Others.  No director, officer,
employee, incorporator or
stockholder, as such, of the Company or any Subsidiary shall
have any liability for any obligations of the Company or
such Subsidiary under the Securities, any Subsidiary
Guaranty or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their
creation.  Each Holder, by accepting a Security, waives and
releases all such liability.  The waiver and release are
part of the consideration for issuance of the Securities.
Such waiver and release may not be effective to waive
liabilities under the U.S. Federal securities laws, and it
is the view of the SEC that such a waiver is against public
policy.

                                  71

         SECTION 11.11.      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 11.12.      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 11.13.      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.

                                    72

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

                          PHILLIPS-VAN HEUSEN CORPORATION

                              By:
                                Name:
                                Title:

                              SUNTRUST BANK,
                                as Trustee

                              By:
                                Name:  Jack Ellerin
                                Title:  Assistant Vice President

                                   73

                             RULE 144A/REGULATION S APPENDIX

         PROVISIONS RELATING TO INITIAL SECURITIES,
                 PRIVATE EXCHANGE SECURITIES
                   AND EXCHANGE SECURITIES

     1.   Definitions

     1.1  Definitions

          Capitalized terms used but not otherwise defined
in this Appendix shall have the meanings assigned in the
Indenture.  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 or 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., as operator
of the Euroclear System or any successor securities clearing
agency.

          "Exchange Securities" means (1) the 8 1/8% Senior
Notes Due May 1, 2013 issued pursuant to the Indenture in
connection with the Registered Exchange offer pursuant to
the Registration Rights Agreement and (2) Additional
Securities, if any, issued pursuant to a registration
statement filed with the SEC under the Securities Act.

                     Appendix - 1

          "Initial Purchasers" means with respect to the
Initial Securities issued on the Issue Date, Credit Suisse
First Boston Corporation, J.P. Morgan Securities Inc. and
Lehman Brothers 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 $150,000,000 aggregate
principal amount of 8 1/8% Senior Notes Due May 1, 2013 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 8 1/8% Senior
Notes Due May 1, 2013 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 April 30, 2003, among the Company and the
Initial Purchasers and (2) with respect to each issuance of
Additional Securities, the purchase agreement or
underwriting agreement among the Issuer, the Company, any
Subsidiary Guarantors 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 April 30, 2003,
among the Company and the Initial Purchasers and (2) with
respect to each issuance of Additional Securities issued in
a transaction exempt from the registration requirements of
the Securities Act, the registration rights agreement, if
any, among the Issuer, the Company and the Persons
purchasing such Additional Securities under the related
Purchase Agreement.

          "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.

                     Appendix - 2

          "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

                     Term                         Defined
                                                in Section:

"Agent Members"                                    2.1(b)
"Global Securities"                                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)

     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 QIBs,
purchasers in reliance on Regulation S and others as
provided in the Securities, in each case 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 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 the Indenture.
Except as set forth in this Section 2.1(a), beneficial
ownership interests in the Temporary Regulation S Global
Security (x) 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 (y) 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.

                     Appendix - 3

          Beneficial interests in the Temporary Regulation S
Global Security may be exchanged for interests in Rule 144A
Global Securities only if (1) such exchange occurs in
connection with a transfer of Securities in compliance with
Rule 144A, and (2) the transferor of the beneficial interest
in the Temporary Regulation S Global Security first delivers
to the Trustee a written certificate (in a form satisfactory
to the Trustee) to the effect that the beneficial interest
in the Temporary Regulation S Global Security is being
transferred to a Person (a) who the transferor reasonably
believes to be a QIB (b) purchasing for its own account or
the account of a QIB in a transaction meeting the
requirements of Rule 144A, and (c) in accordance with all
applicable securities laws of the States of the United
States and other jurisdictions.

          Beneficial interests in the Rule 144A Global
Security may be transferred to a Person who takes delivery
in the form of an interest in the Regulation S Global
Security, whether before or after the expiration of the
Distribution Compliance Period, only if the transferor first
delivers to the trustee a written certificate (in the form
attached to this certificate) to the effect that if such
transfer is being made in accordance with rule 903 or 904 of
Regulation S or Rule 144 (if available) and that, if such
transfer occurs prior to the expiration of the Distribution
Compliance Period, the interest transferred will be held
immediately thereafter through Euroclear Bank S.A./N.A. or
Clearstream Banking Societe Anonyme.

          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 the 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 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

                     Appendix - 4

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 $150.0 million 8 1/8% Senior Notes Due May 1, 2013,
(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
(2) Exchange Securities or Private Exchange Securities for
issue only in a Registered Exchange Offer or a Private
Exchange, respectively, pursuant to the 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:

          (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

                     Appendix - 5

               (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 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

                     Appendix - 6

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 the 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
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
     except as a whole and not in part 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

                     Appendix - 7

(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 in a transaction
meeting the requirements of Rule 144A, (iii) in an offshore
transaction in accordance with Regulation S (other than a
transaction resulting in an exchange for interest in a
Permanent Regulation S Global Security), (iv) pursuant to an
exemption from 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
     paragraphs (ii), (iii) and (iv), each Security
     certificate evidencing the Global Securities (and all
     Securities issued in exchange therefore 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, AS
     AMENDED (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 OF THIS SECURITY 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 SECURITY MAY BE
     OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, 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 A TRANSACTION MEETING THE
     REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED
     STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
     RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO
     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 AND OTHER JURISDICTIONS, 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.

                     Appendix - 8

     Each Definitive Security will also bear the following
     additional legend:

          IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL
          DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH
          CERTIFICATES AND OTHER INFORMATION AS SUCH
          REGISTRAR AND TRANSFER AGENT MAY REASONABLY
          REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
          THE FOREGOING RESTRICTIONS.

          (ii) Upon any sale or transfer of a Transfer
     Restricted 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 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 Holders certificated Initial
     Security or Private Exchange Security or appropriate
     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, in each case without the
     restrictive securities legend set forth in Exhibit 1
     hereto 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

                     Appendix - 9

     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 the Depository for
cancellation or retained and canceled by the Trustee.  At
any time prior to such cancellation, 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 Article 4 or Sections 2.09, 3.06, 5.06 or
     10.05 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 the
     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.

                     Appendix - 10

          (v)  All Securities issued upon any transfer or
     exchange pursuant to the terms of the Indenture shall
     evidence the same debt and shall be entitled to the
     same benefits under the 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 the
     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 the 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 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 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

                     Appendix - 11

Trustee in writing that it elects to cause the
issuance of Definitive Securities under the Indenture.

          (b)  Any Global Security that is transferable to
the beneficial owners thereof pursuant to this Section 2.4
shall be surrendered by the Depository to the Trustee
located at its principal corporate trust office in Atlanta,
Georgia, 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 2.4 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 and definitive security 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 the 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.

                     Appendix - 12

                                                   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.

          [FOR REGULATION S GLOBAL SECURITY ONLY]  UNTIL 40
DAYS AFTER THE COMMENCEMENT OF THE OFFERING, AN OFFER OR
SALE OF NOTES WITHIN THE UNITED STATES BY A DEALER (AS
DEFINED IN THE U.S. SECURITIES ACT) MAY VIOLATE THE
REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT IF SUCH
OFFER OR SALE IS MADE OTHERWISE THAN IN ACCORDANCE WITH THE
RULE 144A THEREUNDER.]

               [Restricted Securities Legend]

          THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (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 OF THIS SECURITY
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER.

                             Ex. 1-1

          THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT
OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, 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
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III)
OUTSIDE THE UNITED STATES IN AN OFFSHORE 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 AND OTHER
JURISDICTIONS, 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.

       [Temporary Regulation S Global Security Legend]

          EXCEPT AS SET FORTH BELOW, BENEFICIAL OWNERSHIP
INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL SECURITY
WILL NOT BE EXCHANGEABLE FOR INTERESTS IN 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(b)(2) 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 A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED
STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER
THE SECURITIES ACT, OR (IV) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED

                             Ex. 1-2

STATES AND OTHER JURISDICTIONS.  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.

          BENEFICIAL INTERESTS IN THIS TEMPORARY REGULATION
S GLOBAL SECURITY MAY BE EXCHANGED FOR INTERESTS IN A RULE
144A GLOBAL SECURITY ONLY IF (1) SUCH EXCHANGE OCCURS IN
CONNECTION WITH A TRANSFER OF THE SECURITIES IN COMPLIANCE
WITH RULE 144A AND (2) THE TRANSFEROR OF THE REGULATION S
GLOBAL SECURITY FIRST DELIVERS TO THE TRUSTEE A WRITTEN
CERTIFICATE (IN THE FORM ATTACHED TO THIS CERTIFICATE) TO
THE EFFECT THAT THE REGULATION S GLOBAL SECURITY BEING
TRANSFERRED TO A PERSON (A) WHO THE TRANSFEROR REASONABLY
BELIEVES TO BE A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A (B) WHO IS PURCHASING FOR ITS OWN
ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, AND (C)
IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

          BENEFICIAL INTEREST IN A RULE 144A GLOBAL SECURITY
MAY BE TRANSFERRED TO A PERSON WHO TAKES DELIVERY IN THE
FORM OF AN INTEREST IN THE REGULATION S GLOBAL SECURITY,
WHETHER BEFORE OR AFTER THE EXPIRATION OF THE 40-DAY
DISTRIBUTION COMPLIANCE PERIOD, ONLY IF THE TRANSFEROR FIRST
DELIVERS TO THE TRUSTEE A WRITTEN CERTIFICATE (IN THE FORM
ATTACHED TO THIS CERTIFICATE) TO THE EFFECT THAT IF SUCH
TRANSFER IS BEING MADE IN ACCORDANCE WITH RULE 903 OR 904 OF
REGULATION S OR RULE 144 (IF AVAILABLE) AND THAT, IF SUCH
TRANSFER OCCURS PRIOR TO THE EXPIRATION OF THE 40-DAY
DISTRIBUTION COMPLIANCE PERIOD, THE INTEREST TRANSFERRED
WILL BE HELD IMMEDIATELY THEREAFTER THROUGH EUROCLEAR BANK
S.A./N.A. OR CLEARSTREAM BANKING SOCIETE ANONYME.

               [Definitive Securities Legend]

          IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL
DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH
CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR AND
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

                             Ex. 1-3

                                             CUSIP No. _____

No. ____________                              $ ____________

              8 1/8% Senior Notes Due May 1, 2013

          Phillips-Van Heusen Corporation, a Delaware
corporation, promises to pay to Cede & Co., or registered
assigns, the principal sum of Dollars on ____________,
2013.

          Interest Payment Dates:  May 1 and November 1.

          Record Dates:  April 15 and October 15.

          Additional provisions of this Security are set
forth on the other side of this Security.

Dated:

                              Phillips-Van Heusen Corporation

                              By:
                                Name:
                                Title:

                              By:
                                Name:
                                Title:

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

SUNTRUST BANK,
 as Trustee, certifies
  that this is one of
  the Securities referred to
  in the Indenture.

by
  Authorized Signatory

                             Ex. 1-4

         [FORM OF REVERSE SIDE OF INITIAL SECURITY]

             [FORM OF REVERSE SIDE OF SECURITY]

              8 1/8% Senior Notes Due May 1, 2013

1.   Interest

     Phillips-Van Heusen Corporation, 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 consecutive 90-day period that occurs after
the date on which such Registration Default occurs up to a
maximum additional interest rate of 1.00%) 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 or otherwise cease to
exist.  The Company will pay interest semiannually in
arrears on May 1 and November 1 of each year, commencing
November 1, 2003.  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 May 5, 2003.
Interest will be computed on the basis of a 360-day year of
twelve 30-day months.  The Company will pay interest on
overdue principal at the above rate and will pay interest on
overdue installments of interest at such rate to the extent
lawful.

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 April
15 or October 15 immediately 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 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).

                             Ex. 1-5

3.   Paying Agent and Registrar

     Initially, SunTrust Bank, a state banking association
(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 May 5, 2003 (the "Indenture"), between the
Company 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 "Act").  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 Holders are referred to the Indenture and the Act
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 5.03 of the Indenture, to issue
Additional Securities pursuant to Section 2.13 of the
Indenture. The Securities issued on the Issue Date and any
Additional Securities will be treated as a single class for
all purposes under the Indenture.  Subject to Section 5.14,
the Indenture contains covenants that limit the ability of
the Company and its subsidiaries to incur or guarantee
additional indebtedness; pay dividends or make distributions
on, or redeem or repurchase capital stock or subordinated
indebtedness; make other restricted payments, including
investments; sell or otherwise dispose of assets, including
capital stock of subsidiaries; enter into transactions with
affiliates; create certain liens; issue stock of
subsidiaries; enter into sale/leaseback transactions; or
consolidate or merge or sell all or substantially all of the
Company's 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 May
1, 2008.

     On and after May 1, 2008, 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 May 1 of the years set forth
below:

     Period                  Price
     2008                   104.063%
     2009                   102.078%
     2010                   101.354%
     2011 and thereafter    100.000%

                             Ex. 1-6

     In addition, prior to May 1, 2006, 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  108.125%, plus accrued and unpaid interest to
the redemption date, with the net cash proceeds of one or
more Equity Offerings; provided, however that:

          (6)  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

          (7)  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 of the Securities of such Holder at a repurchase price
equal to 101% of the principal amount of the Securities to
be repurchased plus accrued and unpaid interest, if any, to
the date of repurchase (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.

8.   Guarantee

     The payment by the Company of the principal of, and
premium and interest on, the Securities is guaranteed by the
Subsidiary Guarantors, if any, on a joint and several basis,
on the terms set forth in the Indenture.

                             Ex. 1-7

9.   Denominations; Transfer; Exchange

     The Securities are in registered form without coupons
in denominations of $1,000 principal amount and whole
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.

10.  Persons Deemed Owners

     The registered Holder of this Security may be treated
as the owner of it for all purposes.

11.  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 written
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.

12.  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.

13.  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
and (ii) any 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 Holder, 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
6 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 a Restricted
Subsidiary, or to comply with any requirement of the SEC in
connection with qualifying the Indenture

                             Ex. 1-8

under the Act, or to make any change that does not adversely affect the rights
of any Holder.

14.  Defaults and Remedies

     Under the Indenture, Events of Default include (i)
default in payment of interest on the Securities when due,
continued for 30 days; (ii) default in payment of principal
on the Securities when due at maturity, upon redemption
pursuant to paragraph 5 of the Securities, upon required
purchase, upon acceleration or otherwise, or failure by the
Company to redeem or purchase Securities when required;
(iii) failure by the Company to comply with other agreements
in the Indenture or the Securities, in certain cases subject
to notice and lapse of time; (iv) certain accelerations or
payment default in respect of other Indebtedness of the
Company, any Subsidiary Guarantor or any Significant
Subsidiary if the amount accelerated (or if the amount of
such Indebtedness with respect to which such a payment is
not made after expiration of any applicable grace period)
exceeds $15.0 million; (v) certain events of bankruptcy or
insolvency with respect to the Company, any Subsidiary
Guarantor and the Significant Subsidiaries; (vi) certain
judgments or decrees for the payment of money in excess of
$15.0 million; and (vii) certain defaults with 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 Securities may declare all the
Securities to be due and payable immediately. 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.

     Holders 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 reasonably 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 Holders notice of any continuing Default (except a
Default in payment of principal or interest) if it
determines that withholding notice is in the best interest
of the Holders.

15.  Trustee Dealings with the Company

     Subject to certain limitations imposed by the Trust
Indenture Act, 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.

16.  No Recourse Against Others

     No director, officer, employee, incorporator or
stockholder, as such, of the Company or any Subsidiary shall
have any liability for any obligations of the Company or
such Subsidiary under the Securities, any Subsidiary
Guaranty or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their
creation.  By

                             Ex. 1-9

accepting a Security, each Holder waives and
releases all such liability.  The waiver and release are
part of the consideration for the issue of the Securities.

17.  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.

18.  Abbreviations

     Customary abbreviations may be used in the name of a
Holder 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).

19.  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 Holders.  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.

20.  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 Holder upon written
request and without charge to the Holder a copy of the
Indenture which has in it the text of this Security in
larger type.  Requests may be made to:

     Phillips-Van Heusen Corporation
     200 Madison Avenue
     New York, NY 10016
     Attention: Secretary

                             Ex. 1-10

                       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) [ ] to the Company; or

     (2) [ ] pursuant to an effective registration
             statement under the U.S. Securities Act of
             1933, as amended (the "Securities Act"); or

     (3) [ ] inside the United States to a "qualified
             institutional buyer" (as defined in Rule 144A
             under the Securities Act) 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; or

     (4) [ ] outside the United States in an offshore
             transaction within the meaning of Regulation
             S under the Securities Act in compliance with
             Rule 904 under the Securities Act; or

                             Ex. 1-11

     (5) [ ] pursuant to the exemption from
             registration provided by Rule 144 under the
             Securities Act.

Unless one of the boxes is checked, the Trustee will refuse
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
(4) or (5) 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 or Registrar 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, 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.

                             Ex. 1-12

    TO BE COMPLETED BY PURCHASER IF (3) 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, as amended 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.

Date:
                              NOTICE:  To be executed by an
                                     executive officer

                             Ex. 1-13

            [TO BE ATTACHED TO GLOBAL SECURITIES]

    SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

     The following increases or decreases in this Global
Security have been made:

 Date of     Amount of   Amount of   Principal   Signature
 Exchange    decrease    increase    amount of       of
                in          in         this      authorized
             principal   principal    Global     officer of
             amount of   amount of   Security    Trustee or
               this        this      following   Securities
              Global      Global       such      Custodian
             Security    Security    decrease
                                        or
                                     increase

                             Ex. 1-14

             OPTION OF HOLDER TO ELECT PURCHASE

     If you want to elect to have this Security purchased by
the Company pursuant to Article 4 or Section 5.06 of the
Indenture, check the box:

                           [ ]

     If you want to elect to have only part of this Security
purchased by the Company pursuant to Article 4 or Section
5.06 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.

                             Ex. 1-15

                                                   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.

                             Exhibit A - 1

                                             CUSIP No. _____

No. ____________                              $ ____________

              8 1/8% Senior Notes Due May 1, 2013

          Phillips-Van Heusen Corporation, a Delaware
corporation, promises to pay to Cede & Co., or registered
assigns, the principal sum of Dollars on ____________,
2013.

          Interest Payment Dates: May 1 and November 1.

          Record Dates:  April 15 and October 15.

          Additional provisions of this Security are set
forth on the other side of this Security.

Dated:

                              Phillips-Van Heusen Corporation

                              By:
                                Name:
                                Title:

                              By:
                                Name:
                                Title:

TRUSTEE'S CERTIFICATE OF
 AUTHENTICATION

SUNTRUST BANK,
 as Trustee, certifies
 that this is one of
 the Securities referred to
 in the Indenture.

by
  Authorized Signatory

                              Exhibit A-2

         [FORM OF REVERSE SIDE OF EXCHANGE SECURITY
                OR PRIVATE EXCHANGE SECURITY]

             [FORM OF REVERSE SIDE OF SECURITY]

              8 1/8% Senior Notes Due May 1, 2013

1.   Interest

     Phillips-Van Heusen Corporation, 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 consecutive 90-day period that occurs after
the date on which such Registration Default occurs up to a
maximum additional interest rate of 1.00%) 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 or otherwise cease to
exist.]1  The Company will pay interest semiannually in
arrears on May 1 and November 1 of each year, commencing
November 1, 2003.  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 May 5.  Interest will
be computed on the basis of a 360-day year of twelve 30-day
months.  The Company will pay interest on overdue principal
at the above rate and will pay interest on overdue
installments of interest at such rate to the extent lawful.

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 April
15 or October 15 immediately 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

________________
      1 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.

                      Exhibit A-3

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 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, SunTrust Bank, a state banking association
(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 May 5, 2003 (the "Indenture"), between the
Company 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 "Act").  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 Holders are referred to the Indenture and the Act
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 5.03 of the Indenture, to issue

Additional Securities pursuant to Section 2.13 of the
Indenture. The Securities issued on the Issue Date and any
Additional Securities will be treated as a single class for
all purposes under the Indenture.  Subject to Section 5.14,
the Indenture contains covenants that limit the ability of
the Company and its subsidiaries to incur or guarantee
additional indebtedness; pay dividends or make distributions
on, or redeem or repurchase capital stock or subordinated
indebtedness; make other restricted payments, including
investments; sell or otherwise dispose of assets, including
capital stock of subsidiaries; enter into transactions with
affiliates; create certain liens; issue stock of
subsidiaries; enter into sale/leaseback transactions; or
consolidate or merge or sell all or substantially all of the
Company's 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 May
1, 2008.

     On and after May 1, 2008, 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

                      Exhibit A-4

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 May 1 of the years set forth
below:

     Period                   Price
     2008                   104.063%
     2009                   102.708%
     2010                   101.354%
     2011 and thereafter    100.000%

     In addition, prior to May 1, 2006, 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  108.125%, plus accrued and unpaid interest to
the redemption date, with the net cash proceeds from one or
more Equity Offerings; 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
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 repurchase price
equal to 101% of the principal amount of the Securities to
be repurchased plus accrued and unpaid interest, if any, to
the date of repurchase (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.

                        Exhibit A-5

8.   Guarantee

     The payment by the Company of the principal of, and
premium and interest on, the Securities is guaranteed by the
Subsidiary Guarantors, if any, on a joint and several basis,
on the terms set forth in the Indenture.

9.   Denominations; Transfer; Exchange

     The Securities are in registered form without coupons
in denominations of $1,000 principal amount and whole
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.

10.  Persons Deemed Owners

     The registered Holder of this Security may be treated
as the owner of it for all purposes.

11.  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 written
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.

12.  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.

13.  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
and (ii) any 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 Holder, the Company, the
Subsidiary Guarantors and the Trustee shall be entitled to
amend the Indenture or the Securities to

                        Exhibit A-6

cure any ambiguity, omission, defect or inconsistency, or to comply
with Article 6 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 a Restricted
Subsidiary, or to comply with any requirement 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 Holder.

14.  Defaults and Remedies

     Under the Indenture, Events of Default include (i)
default in payment of interest on the Securities when due,
continued for 30 days; (ii) default in payment of principal
on the Securities when due at maturity, upon redemption
pursuant to paragraph 5 of the Securities, upon required
purchase, upon acceleration or otherwise, or failure by the
Company to redeem or purchase Securities when required;
(iii) failure by the Company to comply with other agreements
in the Indenture or the Securities, in certain cases subject
to notice and lapse of time; (iv) certain accelerations or
payment default in respect other Indebtedness of the
Company, any Subsidiary Guarantor or any Significant
Subsidiary if the amount accelerated (or if the amount of
such Indebtedness with respect to which such a payment is
not made after expiration of any applicable grace period)
exceeds $15.0 million; (v) certain events of bankruptcy or
insolvency with respect to the Company, any Subsidiary
Guarantor and the Significant Subsidiaries; (vi) certain
judgments or decrees for the payment of money in excess of
$15.0 million; and (vii) certain defaults with 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 Securities may declare all the
Securities to be due and payable immediately. 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.

     Holders 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 reasonably 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 Holders notice of any continuing Default (except a
Default in payment of principal or interest) if it
determines that withholding notice is in the best interest
of the Holders.

15.  Trustee Dealings with the Company

     Subject to certain limitations imposed by the Trust
Indenture Act, 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.

16.  No Recourse Against Others

                        Exhibit A-7

     No director, officer, employee, incorporator or
stockholder, as such, of the Company or any Subsidiary shall
have any liability for any obligations of the Company or
such Subsidiary under the Securities, any Subsidiary
Guaranty 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 Holder waives and

releases all such liability.  The waiver and release are
part of the consideration for the issue of the Securities.

17.  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.

18.  Abbreviations

     Customary abbreviations may be used in the name of a
Holder 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).

19.  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 Holders.  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.

20.  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 Holder upon written
request and without charge to the Holder a copy of the
Indenture which has in it the text of this Security in
larger type.  Requests may be made to:

     Phillips-Van Heusen Corporation
     200 Madison Avenue
     New York, NY 10016
     Attention: Secretary

                        Exhibit A-8

                       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.

                        Exhibit A-9

             OPTION OF HOLDER TO ELECT PURCHASE

     If you want to elect to have this Security purchased by
the Company pursuant to Article 4 or Section 5.06 of the
Indenture, check the box:

                           [ ]

     If you want to elect to have only part of this Security
purchased by the Company pursuant to Article 4 or Section
5.06 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.

                        Exhibit A-10

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