Document:

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                              [FORM OF INDENTURE]                   Exhibit 4(e)

                         COEUR D'ALENE MINES CORPORATION

                                    as Issuer

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

        13 3/8% Convertible Senior Subordinated Notes Due December 31, 2003

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

                                    INDENTURE

                           Dated as of [June __], 2001

                              THE BANK OF NEW YORK

                                   as Trustee

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                                TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE.............................................1

        Section 1.1   Definitions................................................................1
        Section 1.2   Other Definitions..........................................................7
        Section 1.3   Incorporation by Reference of Trust Indenture Act..........................7
        Section 1.4   Rules of Construction......................................................8

ARTICLE II THE SECURITIES........................................................................8

        Section 2.1   Form and Dating............................................................8
        Section 2.2   Execution and Authentication...............................................9
        Section 2.3   Registrar, Paying Agent and Conversion Agent..............................10
        Section 2.4   Paying Agent to Hold Money in Trust.......................................10
        Section 2.5   Noteholder Lists..........................................................11
        Section 2.6   Transfer and Exchange.....................................................11
        Section 2.7   Replacement Securities....................................................12
        Section 2.8   Outstanding Securities....................................................12
        Section 2.9   Treasury Securities.......................................................13
        Section 2.10  Temporary Securities......................................................13
        Section 2.11  Cancellation..............................................................13
        Section 2.12  Transfer of Interests in Global Securities................................13
        Section 2.13  Defaulted Interest........................................................13

ARTICLE III REDEMPTION AND REPURCHASE...........................................................14

        Section 3.1   Notices to Trustee........................................................14
        Section 3.2   Selection of Securities to be Redeemed....................................14
        Section 3.3   Notice of Redemption......................................................14
        Section 3.4   Effect of Notice of Redemption............................................15
        Section 3.5   Deposit of Redemption Price...............................................15
        Section 3.6   Securities Redeemed in Part...............................................15
        Section 3.7   Optional Redemption.......................................................15
        Section 3.8   Designated Event Offer....................................................16

ARTICLE IV COVENANTS............................................................................18

        Section 4.1   Payment of Securities.....................................................18
        Section 4.2   SEC Reports...............................................................18
        Section 4.3   Compliance Certificate....................................................18
        Section 4.4   Stay, Extension and Usury Laws............................................19
        Section 4.5   Corporate Existence.......................................................19
        Section 4.6   Taxes.....................................................................19
        Section 4.7   Designated Event..........................................................19
</TABLE>
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                               TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<S>                                                                                            <C>
        Section 4.8   Stockholder Rights Plan...................................................20

ARTICLE V CONVERSION............................................................................20

        Section 5.1   Conversion Privilege......................................................20
        Section 5.2   Conversion Procedure......................................................20
        Section 5.3   Fractional Shares.........................................................21
        Section 5.4   Taxes on Conversion.......................................................21
        Section 5.5   Company to Provide Stock..................................................22
        Section 5.6   Adjustment of Conversion Price............................................22
        Section 5.7   No Adjustment.............................................................25
        Section 5.8   Other Adjustments.........................................................25
        Section 5.9   Adjustments for Tax Purposes..............................................25
        Section 5.10  Adjustments by the Company................................................26
        Section 5.11  Notice of Adjustment......................................................26
        Section 5.12  Notice of Certain Transactions............................................26
        Section 5.13  Effect of Reclassifications, Consolidations, Mergers or Sales on
                Conversion Privilege............................................................26
        Section 5.14  Trustee's Disclaimer......................................................27
        Section 5.15  Automatic Conversion by the Company.......................................27
        Section 5.16  Voluntary Conversion by Holders...........................................29

ARTICLE VI SUBORDINATION........................................................................30

        Section 6.1   Agreement to Subordinate..................................................30
        Section 6.2   No Payment on Securities if Senior Debt in Default........................30
        Section 6.3   Distribution on Acceleration of Securities; Dissolution and
               Reorganization; Subrogation of Securities........................................32
        Section 6.4   Reliance by Senior Debt on Subordination Provisions.......................35
        Section 6.5   No Waiver of Subordination Provisions.....................................35
        Section 6.6   Trustee's Relation to Senior Debt.........................................35
        Section 6.7   Other Provisions Subject Hereto...........................................36
        Section 6.8   Certain Conversions, Interest Payments and Repurchases in Common
               Stock Deemed Payment.............................................................36

ARTICLE VII SUCCESSORS..........................................................................37

        Section 7.1   Merger, Consolidation or Sale of Assets...................................37
        Section 7.2   Successor Corporation Substituted.........................................37

ARTICLE VIII DEFAULTS AND REMEDIES..............................................................38

        Section 8.1   Events of Default.........................................................38
        Section 8.2   Acceleration..............................................................39
</TABLE>

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                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
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        Section 8.3   Other Remedies............................................................39
        Section 8.4   Waiver of Past Defaults...................................................39
        Section 8.5   Control by Majority.......................................................40
        Section 8.6   Limitation on Suits.......................................................40
        Section 8.7   Rights of Noteholders to Receive Payment..................................40
        Section 8.8   Collection Suit by Trustee................................................40
        Section 8.9   Trustee May File Proofs of Claim..........................................40
        Section 8.10  Priorities................................................................41
        Section 8.11  Undertaking for Costs.....................................................41

ARTICLE IX TRUSTEE..............................................................................41

        Section 9.1   Duties of Trustee.........................................................41
        Section 9.2   Rights of Trustee.........................................................42
        Section 9.3   Individual Rights of Trustee..............................................43
        Section 9.4   Trustee's Disclaimer......................................................44
        Section 9.5   Notice of Defaults........................................................44
        Section 9.6   Reports by Trustee to Noteholders.........................................44
        Section 9.7   Compensation and Indemnity................................................44
        Section 9.8   Replacement of Trustee....................................................45
        Section 9.9   Successor Trustee by Merger, Etc..........................................46
        Section 9.10  Eligibility; Disqualification.............................................46
        Section 9.11  Preferential Collection of Claims Against Company.........................46
        Section 9.12  Sections Applicable to Registrar, Paying Agent and Conversion Agent.......46

ARTICLE X DISCHARGE OF INDENTURE................................................................46

        Section 10.1  Termination of Company's Obligations......................................46
        Section 10.2  Repayment to Company......................................................47

ARTICLE XI AMENDMENTS, SUPPLEMENTS AND WAIVERS..................................................47

        Section 11.1  Without Consent of Noteholders............................................47
        Section 11.2  With Consent of Noteholders...............................................47
        Section 11.3  Compliance with Trust Indenture Act.......................................49
        Section 11.4  Revocation and Effect of Consents.........................................49
        Section 11.5  Notation on or Exchange of Securities.....................................49
        Section 11.6  Trustee Protected.........................................................49

ARTICLE XII MISCELLANEOUS.......................................................................50

        Section 12.1  Trust Indenture Act Controls..............................................50
        Section 12.2  Notices...................................................................50
        Section 12.3  Communication by Noteholders with Other Noteholders.......................50
</TABLE>

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                                TABLE OF CONTENTS
                                   (CONTINUED)

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        Section 12.4  Certificate and Opinion as to Conditions Precedent........................50
        Section 12.5  Statements Required in Certificate or Opinion.............................51
        Section 12.6  Rules by Trustee and Agents...............................................51
        Section 12.7  Legal Holidays............................................................51
        Section 12.8  No Recourse Against Others................................................51
        Section 12.9  Counterparts..............................................................51
        Section 12.10 Variable Provisions.......................................................51
        Section 12.11 Governing Law.............................................................52
        Section 12.12 No Adverse Interpretation of Other Agreements.............................52
        Section 12.13 Successors................................................................52
        Section 12.14 Severability..............................................................53
        Section 12.15 Table of Contents Headings, Etc...........................................53
        Section 12.16 Waiver of Jury Trial......................................................53
        Section 12.17 Jurisdiction..............................................................53
</TABLE>

Exhibit A -      Form of Convertible Senior Subordinated Note

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        INDENTURE dated as of [June __], 2001 between Coeur D'Alene Mines
Corporation, an Idaho corporation (the "Company"), and The Bank of New York, a
New York banking corporation, as trustee (the "Trustee").

        Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the holders of the Company's 13 3/8%
Convertible Senior Subordinated Notes due December 31, 2003 (the "Securities"):

                                   ARTICLE I

                   DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.1    Definitions.

        "Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities or by agreement or otherwise;
provided, however, that beneficial ownership of 10% or more of the voting
securities of a person shall be deemed to be control.

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

        "Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board.

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

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

        "Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of equity interests in any
entity, including, without limitation, corporate stock and partnership
interests.

        "Change of Control" means any event where: (i) any "person" or "group"
(as such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) of shares representing more than 50% of the combined voting power
of the then outstanding securities entitled to vote generally in elections of
directors of the Company ("Voting Stock"), (ii) the Company consolidates with or
merges into any other corporation, or any other corporation merges into the
Company, and, in the case of any such transaction, the outstanding Common Stock
of the Company is reclassified into or exchanged

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for any other property or security, unless the stockholders of the Company
immediately before such transaction own, directly or indirectly immediately
following such transaction, at least a majority of the combined voting power of
the outstanding voting securities of the corporation resulting from such
transaction in substantially the same proportion as their ownership of the
Voting Stock immediately before such transaction, (iii) the Company conveys,
transfers or leases all or substantially all of its assets (other than to a
wholly-owned subsidiary of the Company) or (iv) any time the Continuing
Directors do not constitute a majority of the Board of Directors of the Company
(or, if applicable, a successor corporation to the Company); provided, that a
Change of Control shall not be deemed to have occurred if at least 90% of the
consideration (excluding cash payments for fractional shares) in the transaction
or transactions constituting the Change of Control consists of shares of common
stock that are, or upon issuance will be, traded on a United States national
securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States.

        "Common Stock" means the common stock of the Company as the same exists
at the date of the execution of this Indenture or as such stock may be
constituted from time to time.

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

        "Continuing Directors" means as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such board at the time of such
nomination or election.

        "Corporate Trust Office" means the principal office of the Trustee at
which at any time its corporate trust business shall be administered, which
office at the date hereof is located at 101 Barclay Street, Floor 21 West, New
York, New York 10286, Attention: Corporate Trust Administration - Global Finance
Unit, or such other address as the Trustee may designate from time to time by
notice to the Holders and the Company, or the principal corporate trust office
of any successor Trustee (or such other address as a successor Trustee may
designate from time to time by notice to the Holders and the Company).

        "Custodian" means The Bank of New York, as custodian with respect to the
Global Securities, or any successor entity thereto.

        "Daily Market Price" means the price of a share of Common Stock on the
relevant date, determined (a) on the basis of the last reported sale price
regular way of the Common Stock as reported on the NYSE, or if the Common Stock
is not then listed on the NYSE, as reported on such national securities exchange
upon which the Common Stock is listed, or (b) if there is no such reported sale
on the day in question, on the basis of the average of the closing bid and asked
quotations regular way as so reported, or (c) if the Common Stock is not listed
on the NYSE or on any national securities exchange, on the basis of the average
of the high bid and low asked quotations regular way on the day in question in
the over-the-counter market as reported by the

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National Association of Securities Dealers Automated Quotation System, or if not
so quoted, as reported by National Quotation Bureau, Incorporated, or a similar
organization.

        "Dealer Manager Agreement" means that certain Dealer Manager Agreement
relating to the Securities dated as of [June __], 2001 between the Company and
RSCO.

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

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

        "Designated Event" means the occurrence of a Change of Control or a
Termination of Trading.

        "Designated Senior Debt" means all Senior Debt which, at the date of
determination, has an aggregate principal amount outstanding of, or commitments
to lend up to, at least $10 million and is specifically designated by the
Company in the instrument evidencing or governing such Senior Debt as
"Designated Senior Debt" for purposes of this Indenture (provided, that such
instrument may place limitations and conditions on the right of such Senior Debt
to exercise the rights of Designated Senior Debt).

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

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

        "Existing Debentures" means the Company's 6% Convertible Subordinated
Debentures due June 10, 2002, 6 3/8% Convertible Subordinated Debentures due
January 31, 2004 and 7 1/4% Convertible Subordinated Debentures due October 31,
2005.

        "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect on the Issuance Date.

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        "Global Securities" means a permanent global note that contains the
Global Securities Legend referred to in the form of Security and Schedule A
attached thereto, as attached hereto as Exhibit A, and that is deposited with
and registered in the name of the Depositary.

        "Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.

        "Indebtedness" means, with respect to any person, all obligations,
whether or not contingent, of such person (i)(a) for borrowed money (including,
but not limited to, any indebtedness secured by a security interest, mortgage or
other lien on the assets of such person which is (1) given to secure all or part
of the purchase price of property subject thereto, whether given to the vendor
of such property or to another, or (2) existing on property at the time of
acquisition thereof), (b) evidenced by a note, debenture, bond or other written
instrument, (c) under a lease required to be capitalized on the balance sheet of
the lessee under GAAP or under any lease or related document (including a
purchase agreement) which provides that such person is contractually obligated
to purchase or to cause a third party to purchase such leased property, (d) in
respect of letters of credit, bank guarantees or bankers' acceptances, (e) with
respect to Indebtedness secured by a mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title or resulting in an encumbrance to which the
property or assets of such person are subject, whether or not the obligation
secured thereby shall have been assumed or Guaranteed by or shall otherwise be
such person's legal liability, (f) in respect of the balance of deferred and
unpaid purchase price of any property or assets, and (g) under interest rate or
currency swap agreements, cap, floor and collar agreements, spot and forward
contracts and similar agreements and arrangements; (ii) with respect to any
obligation of others of the type described in the preceding clause (i) or under
clause (iii) below, assumed by or guaranteed in any manner by such person or in
effect guaranteed by such person through an agreement to purchase (including,
without limitation, "take or pay" and similar arrangements), contingent or
otherwise (and the obligations of such person under any such assumptions,
Guarantees or other such arrangements); and (iii) any and all deferrals,
renewals, extensions, refinancings and refundings of, or amendments,
modifications or supplements to, any of the foregoing.

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

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

        "Material Subsidiary" means any Subsidiary of the Company which is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act (as such Regulation is in effect on the date
hereof).

        "Maturity" when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided.

        "Noteholder" or "holder" means a person in whose name a Security is
registered.

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        "NYSE" means the New York Stock Exchange.

        "Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

        "Officers' Certificate" means a certificate signed by two Officers, one
of whom must be the Chairman of the Board, the President, the Treasurer or a
Vice-President of the Company. See Sections 12.4 and 12.5 hereof.

        "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. See Sections 12.4 and 12.5 hereof.

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

        "Placement Agreement" means that certain Placement Agreement relating to
the Securities dated as of [June __], 2001 between the Company and RSCO.

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

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

        "Responsible Officer" shall mean, when used with respect to the Trustee,
any officer within the corporate trust department of the Trustee, including any
vice president, assistant vice president, assistant secretary, assistant
treasurer, trust officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such person's knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of this Indenture.

        "RSCO" means Robertson Stephens, Inc.

        "SEC" means the Securities and Exchange Commission.

        "Securities" means the Company's 13 3/8% Convertible Senior Subordinated
Notes due December 31, 2003 issued, authenticated and delivered under this
Indenture.

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

        "Senior Debt" means the principal of, interest on, fees costs and
expenses in connection with and other amounts due on Indebtedness of the
Company, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or Guaranteed by the Company, unless, in the instrument
creating or evidencing or pursuant to which such Indebtedness is outstanding, it
is

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expressly provided that such Indebtedness is not senior in right of payment to
the Securities. Senior Debt includes, with respect to the obligations described
above, interest accruing, pursuant to the terms of such Senior Debt, on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company, whether or not post-filing interest is allowed in such proceeding, at
the rate specified in the instrument governing the relevant obligation.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not
include: (a) Indebtedness of or amounts owed by the Company for compensation to
employees, or for goods, services or materials purchased in the ordinary course
of business; (b) Indebtedness of the Company to a Subsidiary of the Company; or
(c) the Securities or the Existing Debentures. For the purposes of this
definition of Senior Debt under this Indenture, it is the intent of the parties
hereto that the Securities issued under this Indenture be "Senior Debt" (as
defined under that certain Indenture, dated June 10, 1987 between the Company
and Citibank, N.A., that certain Indenture, dated January 26, 1994 between the
Company and Bankers Trust Company, and that certain Indenture, dated October 15,
1997 between the Company and Bankers Trust Company (together, the "Existing
Debentures Indentures")) for purposes of the Existing Debentures Indentures and
the Existing Debentures, and in furtherance thereof, the parties hereto agree
that nothing contained in this Indenture or in the definition of Senior Debt
under this Indenture is meant to or shall be construed to expressly provide that
the Securities issued under this Indenture are not superior to the Existing
Debentures.

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

        "Termination of Trading" means an event where the Common Stock (or other
common stock into which the Securities are then convertible) is neither listed
for trading on a United States national securities exchange nor approved for
trading on an established automated over-the-counter trading market in the
United States.

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

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

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

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        Section 1.2     Other Definitions.

<TABLE>
<CAPTION>
                                                                                     DEFINED IN
                                      TERM                                             SECTION
--------------------------------------------------------------------------------       -------
<S>                                                                                  <C>
"Additional Interest"                                                                    2.1
"Additional Voluntary Conversion Interest"                                              5.16
"Agent Members"                                                                          2.1
"Automatic Conversion"                                                                  5.15
"Automatic Conversion Date"                                                             5.15
"Automatic Conversion Notice"                                                           5.15
"Applicable Procedures"                                                                  2.6
"Bankruptcy Law"                                                                         8.1
"Bankruptcy Custodian"                                                                   8.1
"Commencement Date"                                                                      3.8
"Conversion Agent"                                                                       2.3
"Conversion Date"                                                                        5.2
"Conversion Price"                                                                       5.1
"Conversion Shares"                                                                      5.6
"current market price"                                                                   5.6
"Designated Event Offer"                                                                 4.7
"Designated Event Payment"                                                               3.8
"Designated Event Payment Date"                                                          3.8
"Distribution Date"                                                                      5.6
"Distribution Record Date"                                                               5.6
"Event of Default"                                                                       8.1
"Legal Holiday"                                                                         12.7
"Notice of Default"                                                                      8.1
"Officer"                                                                               12.10
"Paying Agent"                                                                           2.3
"Payment Blockage Notice"                                                                6.2
"Payment Blockage Period"                                                                6.2
"Payment Default"                                                                        8.1
"Purchase Date"                                                                          5.6
"Registrar"                                                                              2.3
"Rights"                                                                                 5.6
"Tender Period"                                                                          3.8
</TABLE>

        Section 1.3     Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.

        The following TIA terms used in this Indenture have the following
meanings:

        "indenture securities" means the Securities;

        "indenture security holder" means a Noteholder;

        "indenture to be qualified" means this Indenture;

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

        "obligor" on the Securities means the Company or any other obligor on
the Securities.

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

        Section 1.4    Rules of Construction.  Unless the context otherwise
requires:

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

        (b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP consistently applied;

        (c) references to "GAAP" shall mean GAAP in effect as of the time when
and for the period as to which such accounting principles are to be applied;

        (d) "or" is not exclusive;

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

        (f) provisions apply to successive events and transactions.

                                   ARTICLE II

                                 THE SECURITIES

        Section 2.1     Form and Dating. The 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). The Company shall furnish any such legend not contained in
Exhibit A to the Trustee in writing. Each Security shall be dated the date of
its authentication. The terms and provisions of the Securities set forth in
Exhibit A are part of the terms of this Indenture and to the extent applicable,
the Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.

        (a) Global Securities. Securities shall be issued initially in the form
of one or more Global Securities in definitive, fully registered form without
interest coupons, which shall be deposited on behalf of the holders of the
Securities represented thereby with the Trustee, at its office at 101 Barclay
Street, 21W, New York, NY 10286, Attention: Corporate Trust Office, as
Custodian for the Depositary, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the Global
Security may from time to time be increased or decreased by

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adjustments made on the records of the Trustee and the Depositary or its nominee
as hereinafter provided.

        Each Global Security shall represent such of the outstanding Securities
as shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Securities from time to time endorsed thereon
and that the aggregate amount of outstanding Securities represented thereby may
from time to time be reduced or increased, as appropriate, to reflect exchanges
and redemptions. Any endorsement of a Global Security to reflect the amount of
any increase or decrease in the amount of outstanding Securities represented
thereby shall be made by the Trustee or the Custodian, at the direction of the
Trustee, in accordance with instructions given by the holder thereof as required
by Section 2.6 hereof.

        (b) Book-Entry Provisions. 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 Depositary or nominee of the Depositary and (b) shall be delivered by the
Trustee to such Depositary or pursuant to such Depositary's instructions or held
by the Trustee as Custodian for the Depositary pursuant to a FAST Balance
Certificate Agreement between the Depositary and the Trustee.

        Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as the Custodian of the
Depositary or under such Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global 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 Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.

        (c) Certificated Securities. Except as provided in Section 2.6(b),
owners of beneficial interests in Global Securities will not be entitled to
receive physical delivery of certificated Securities.

        Section 2.2     Execution and Authentication. Two Officers shall sign
the Securities for the Company by manual or facsimile signature.

        If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.

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

                                      -9-
<PAGE>   15
\
        Upon a written order of the Company signed by two Officers, the Trustee
shall authenticate the Securities for original issue up to an aggregate
principal amount of $[___],000,000. The aggregate principal amount of Securities
outstanding at any time shall not exceed such amount except as provided in
Section 2.7.

        The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. 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 an Agent to deal with the Company or
an Affiliate.

        Section 2.3     Registrar, Paying Agent and Conversion Agent. The
Company shall maintain in the Borough of Manhattan, City of New York, State of
New York (i) an office or agency where Securities may be presented for
registration of transfer or for exchange ("Registrar"), (ii) an office or agency
where Securities may be presented for payment ("Paying Agent") and (iii) an
office or agency where Securities may be presented for conversion ("Conversion
Agent"). The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company may appoint the Registrar, the Paying Agent
and the Conversion Agent. The Company may appoint one or more co-registrars, one
or more additional paying agents and one or more additional conversion agents in
such other locations as it shall determine; provided that no such designation
shall in any manner relieve the Company of its obligation to maintain an office
or agency in the Borough of Manhattan, The City of New York, State of New York,
for such purposes. The term "Paying Agent" includes any additional paying agent
and the term "Conversion Agent" includes any additional conversion agent. The
Company may change any Paying Agent, Registrar, co-registrar or Conversion Agent
without prior notice to any Noteholder. The Company shall notify the Trustee of
the name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar, Paying Agent or
Conversion Agent, the Trustee shall act as such. The Company or any of its
Affiliates may act as Paying Agent, Registrar, co-registrar or Conversion Agent.
The Company initially appoints the Trustee as Paying Agent, Registrar,
Conversion Agent and Custodian and the Trustee hereby accepts such appointments
and each of the Corporate Trust Office of the Trustee at 101 Barclay Street,
21W New York, NY 10286, Attention: Corporate Trust Office.

        Section 2.4     Paying Agent to Hold Money in Trust. The Company shall
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Noteholders or the Trustee
all money held by the Paying Agent for the payment of principal of, premium, if
any, or interest on the Securities, and will notify the Trustee of any default
by the Company in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Company at any time may require a Paying Agent to pay all money held by it
to the Trustee and to account for any money disbursed by it. Upon payment over
to the Trustee, the Paying Agent (if other than the Company or

                                      -10-
<PAGE>   16

any Affiliate of the Company) shall have no further liability for the money. If
the Company or an Affiliate of the Company acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Noteholders
all money held by it as Paying Agent.

        Section 2.5     Noteholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Noteholders. If the Trustee is not the Registrar,
the Company shall furnish to the Trustee on or before each interest payment date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of Noteholders.

        Section 2.6     Transfer and Exchange. Where Securities are presented
to the Registrar or a co-registrar with a request to register a transfer or to
exchange them for an equal principal amount of Securities of other
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met. To permit registrations of
transfers and exchanges, the Company shall issue and the Trustee shall
authenticate Securities at the Registrar's request. No service charge shall be
made for any registration of transfer or exchange (except as otherwise expressly
permitted herein), but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer tax or similar governmental charge
payable upon exchanges pursuant to Sections 2.6(f), 2.10, 3.6 or 11.5 hereof).

        The Company and the Registrar shall not be required (i) to issue,
register the transfer of, or exchange Securities during a period beginning at
the opening of business 15 days before the day of any selection of Securities
for redemption under Section 3.2 hereof and ending at the close of business on
the day of selection, (ii) to exchange or register the transfer of any Security
so selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part or (iii) to issue, register the transfer of
or exchange Securities submitted for repurchase (and not withdrawn) under
Section 4.7 hereof.

        (a) Restrictions on Transfer and Exchange of Global Securities. The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depositary, in accordance with this Indenture and the
procedures of the Depositary therefor. Notwithstanding the aforementioned, a
Global Security may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.

        (b) Authentication of Certificated Security in Absence of Depositary. If
at any time:

                (i)     the Depositary for the Securities notifies the Company
that the Depositary is unwilling or unable to continue as Depositary for the
Global Securities and a successor Depositary for the Global Securities is not
appointed by the Company within 90 days after delivery of such notice; or

                                      -11-
<PAGE>   17

                (ii)    an Event of Default has occurred and is continuing then
the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.2 hereof, authenticate and
deliver, certificated Securities in an aggregate principal amount equal to the
principal amount of the Global Securities in exchange for such Global
Securities.

        In the event of the occurrence of either of the events specified in this
Section, the Company will promptly make available to the Trustee a reasonable
supply of certificated Securities in definitive, fully registered form without
interest coupons.

        Section 2.7     Replacement Securities. If the holder of a Security
claims that the Security has been lost, destroyed or wrongfully taken or if such
Security is mutilated and is surrendered to the Trustee, the Company shall issue
and the Trustee shall authenticate a replacement Security if the Trustee's and
the Company's requirements are met. If required by the Trustee or the Company,
an indemnity bond must be sufficient in the judgment of both to protect and hold
harmless the Company, the Trustee, any Agent or any authenticating agent from
any loss, liability or expense which any of them may suffer if a Security is
replaced. The Company may charge for its expenses in replacing a Security.

        In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be redeemed or
purchased by the Company pursuant to Article III hereof or converted into shares
of Common Stock pursuant to Article V hereof, the Company in its discretion may,
instead of issuing a new Security, pay, redeem, purchase or convert such
Security, as the case may be.

        Every replacement Security is an additional obligation of the Company
and shall be entitled to all the benefits provided under this Indenture equally
and proportionately with all other Securities duly issued hereunder.

        Section 2.8     Outstanding Securities. The Securities outstanding at
any time are all the Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation, and those described in
this Section as not outstanding, provided, however, that in determining whether
the holders of the requisite principal amount of outstanding Securities are
present at a meeting of holders of Securities for quorum purposes or have
consented to or voted in favor of any request, demand, authorization,
direction, notice, consent, waiver, amendment or modification hereunder,
Securities held for the account of the Company, any of its subsidiaries or any
of its affiliates shall be disregarded and deemed not to be outstanding, except
that in determining whether the Trustee shall be protected in making such a
determination or relying upon any such quorum, consent or vote, only Securities
which a Responsible Officer of the Trustee actually knows to be so owned shall
be so disregarded.

        If a Security is replaced (including pursuant to Section 2.1(a)), paid
or purchased pursuant to Section 2.7 hereof, it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced, paid or
purchased Security is held by a bona fide purchaser.

                                      -12-
<PAGE>   18

        If Securities are considered paid under Section 4.1 hereof, they cease
to be outstanding and interest on them ceases to accrue.

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

        Section 2.9     Treasury Securities. In determining whether the
Noteholders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or an Affiliate of
the Company shall be considered as though they are not outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities which a Trust
Officer of the Trustee actually knows are so owned shall be so disregarded.

        Section 2.10    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 in
exchange for temporary Securities.

        Section 2.11    Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar, Paying Agent and
Conversion Agent shall forward to the Trustee any Securities surrendered to
them for registration of transfer, redemption, conversion, exchange or payment.
The Trustee shall promptly cancel all Securities surrendered for registration
of transfer, redemption, conversion, exchange, payment, replacement or
cancellation, shall destroy such canceled Securities (subject to the record
retention requirement of the Exchange Act) and deliver to the Company a
certificate of a Trust Officer certifying as to such destruction. The Company
may not issue new Securities to replace Securities that it has paid or that
have been delivered to the Trustee for cancellation or that any holder has
converted.

        Section 2.12    Transfer of Interests in Global Securities. The
registered holder of a Global Security may grant proxies and otherwise authorize
any person, including Agent Members and persons that may hold interests through
Agent Members, to take any action which a holder is entitled to take under this
Indenture or the Securities.

        Section 2.13    Defaulted Interest. If the Company fails to make a
payment of interest on the Securities, it shall pay such defaulted interest plus
any interest payable on the defaulted interest, in any lawful manner. It may pay
such defaulted interest, plus any such interest payable on it, to the persons
who are Noteholders on a subsequent special record date. The Company shall fix
any such record date and payment date. At least 15 days before any such record
date, the Company shall cause to be mailed to Noteholders a notice that states
the record date, payment date, and amount of such interest to be paid.

                                      -13-
<PAGE>   19

                                  ARTICLE III

                            REDEMPTION AND REPURCHASE

        Section 3.1     Notices to Trustee. If the Company elects to redeem
Securities pursuant to the optional redemption provision of Section 3.7 hereof,
it shall notify the Trustee of the redemption date and the principal amount of
Securities to be redeemed. The Company shall give each notice to the Trustee
provided for in this Section 3.1 at least 30 days before the redemption date
(unless a shorter notice period shall be satisfactory to the Trustee).

        Section 3.2     Selection of Securities to be Redeemed. If less than all
the Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities are listed, or, if the
Securities are not so listed, on a pro rata basis. The Trustee shall make the
selection not more than 60 days and not less than 15 days before the redemption
date from Securities outstanding 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 it
selects shall be in amounts of $1,000 or integral multiples 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 called
for redemption.

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

Section 3.3 Notice of Redemption. At least 15 days but not more than 30 days
before a redemption date, the Company shall mail a notice of redemption to each
holder whose Securities are to be redeemed at such holder's registered address.

        The notice shall identify the Securities to be redeemed (including the
CUSIP numbers) and shall state:

        (a) the redemption date;

        (b) the redemption price;

        (c) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the redemption
date, upon cancellation of such Security, a

                                      -14-
<PAGE>   20

new Security or Securities in principal amount equal to the unredeemed portion
will be issued in the name of the holder thereof;

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

        (e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued interest, if any;

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

        (g) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed.

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

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

        Section 3.4     Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date at the price set forth in the Security.

        Section 3.5     Deposit of Redemption Price. On or before 10:00 am New
York City time on the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price
of and accrued interest, if any, up to but not including the redemption date on
all Securities to be redeemed on that date (subject to the right of holders of
record on the relevant record date to receive interest, if any, due on an
interest payment date) unless theretofore converted into Common Stock pursuant
to the provisions hereof. The Trustee or the Paying Agent shall return to the
Company any money not required for that purpose.

        Section 3.6     Securities Redeemed in Part. Upon cancellation of a
Security that is redeemed in part, the Company shall issue and the Trustee shall
authenticate for the holder at the expense of the Company a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.

        Section 3.7     Optional Redemption. The Company may redeem all or any
portion of the Securities, upon the terms and at the redemption prices set forth
in each of the Securities. Any redemption pursuant to this Section 3.7 shall be
made pursuant to the provisions of Section 3.1 through 3.6 hereof.

                                      -15-
<PAGE>   21
        Section 3.8     Designated Event Offer.

        (a) In the event that, pursuant to Section 4.7 hereof, the Company shall
commence a Designated Event Offer, the Company shall follow the procedures in
this Section 3.8.

        (b) The Designated Event Offer shall remain open for a period specified
by the Company which shall be no less than 30 calendar days and no more than 40
calendar days following its commencement on the date of the mailing of notice in
accordance with Section 3.8(e) hereof (the "Commencement Date"), except to the
extent that a longer period is required by applicable law (the "Tender Period").
Upon the expiration of the Tender Period (the "Designated Event Payment Date"),
the Company shall purchase the principal amount of Securities required to be
purchased pursuant to Section 4.7 hereof at a purchase price equal to 100% of
principal thereof, together with accrued and unpaid interest thereon, if any
(the "Designated Event Payment").

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

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

        (e) On or before the Commencement Date, the Company or the Trustee (upon
the request and at the expense of the Company) shall send, by first class mail,
a notice to each of the Noteholders, which shall govern the terms of the
Designated Event Offer and shall state:

                (i)     that the Designated Event Offer is being made pursuant
to this Section 3.8 and Section 4.7 hereof and that all Securities tendered will
be accepted for payment;

                (ii)    the purchase price (as determined in accordance with
Section 4.7 hereof), the length of time the Designated Event Offer will remain
open and the Designated Event Payment Date;

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

                (iv)    that, unless the Company defaults in the payment of the
Designated Event Payment, any Security or portion thereof accepted for payment
pursuant to the Designated Event Offer shall cease to accrue interest and, if
applicable, after the Designated Event Payment Date;

                (v)     that Noteholders electing to have a Security or portion
thereof purchased pursuant to any Designated Event Offer will be required to
surrender the Security, with the form entitled "Option of Noteholder To Elect
Purchase" on the reverse of the Security completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the third
Business Day preceding the Designated Event Payment Date;

                                      -16-
<PAGE>   22

                (vi)    that Noteholders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the second Business Day preceding the Designated Event Payment Date, or such
longer period as may be required by law, a letter or a telegram, telex or
facsimile transmission (receipt of which is confirmed and promptly followed by a
letter) setting forth the name of the Noteholder, the principal amount of the
Security or portion thereof the Noteholder delivered for purchase and a
statement that such Noteholder is withdrawing his election to have the Security
or portion thereof purchased; and

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

        In addition, the notice shall contain all instructions and materials
that the Company shall reasonably deem necessary to enable such Noteholders to
tender Securities pursuant to the Designated Event Offer.

        (f) On or prior to 10:00 am New York City time the Designated Event
Payment Date, the Company shall irrevocably deposit with the Trustee or a
Paying Agent in immediately available funds an amount equal to the Designated
Event Payment to be held for payment in accordance with the terms of this
Section 3.8. On the Designated Event Payment Date, the Company shall, to the
extent lawful, (i) accept for payment the Securities or portions thereof
tendered pursuant to the Designated Event Offer, (ii) deliver or cause to be
delivered to the Trustee Securities so accepted and (iii) deliver to the
Trustee an Officers' Certificate stating such Securities or portions thereof
have been accepted for payment by the Company in accordance with the terms of
this Section 3.8. The Paying Agent shall promptly (but in any case not later
than ten (10) calendar days after the Designated Event Payment Date) mail or
deliver to each tendering Noteholder an amount equal to the purchase price of
the Securities tendered by such Noteholder, and the Trustee shall promptly
authenticate and mail or deliver to such Noteholders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered, if
any; provided, that each new Security shall be in a principal amount of $1,000
or an integral multiple thereof. Any Securities not so accepted shall be
promptly mailed or delivered by or on behalf of the Company to the holder
thereof. The Company will publicly announce the results of the Designated Event
Offer on, or as soon as practicable after, the Designated Event Payment Date.

        (g) The Designated Event Offer shall be made by the Company in
compliance with all applicable provisions of the Exchange Act, and all
applicable tender offer rules promulgated thereunder, and shall include all
instructions and materials that the Company shall reasonably deem necessary to
enable such Noteholders to tender their Securities.

                                      -17-
<PAGE>   23

                                   ARTICLE IV

                                    COVENANTS

        Section 4.1     Payment of Securities. The Company shall pay the
principal of, premium, if any and interest on the Securities on the dates and in
the manner provided in the Securities. Principal and interest shall be
considered paid on the date due if the Paying Agent (other than the Company or
an Affiliate of the Company) holds on that date money designated for and
sufficient to pay all principal, premium, if any and interest then due and such
Paying Agent is not prohibited from paying such money to the Noteholders on that
date pursuant to the terms of this Indenture. To the extent lawful, the Company
shall pay interest (including post petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the rate borne by the Securities, compounded
semiannually.

        Section 4.2     SEC Reports. Whether or not required by the rules and
regulations of the SEC, so long as any Securities are outstanding, the Company
will file with the SEC and, if requested, furnish to the Trustee and to the
holders of Securities all quarterly and annual financial information required to
be contained in a filing with the SEC on Forms 10-Q and 10-K, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to annual information only, a report thereon by
the Company's certified independent accountants. Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).

        Section 4.3     Compliance Certificate. The Company shall deliver to the
Trustee, within 120 days after the end of each fiscal year of the Company, an
Officers' Certificate stating that a review of the activities of the Company and
its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under, and
complied with the covenants and conditions contained in, this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge, the Company has kept, observed, performed and
fulfilled each and every covenant, and complied with the covenants and
conditions contained in this Indenture and is not in default in the performance
or observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge) and that to the best of
his or her knowledge no event has occurred and remains in existence by reason of
which payments on account of the principal or of interest, if any, on the
Securities are prohibited.

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

        The Company will, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon becoming aware of:

                                      -18-
<PAGE>   24

        (a) any Default, Event of Default or default in the performance of any
covenant, agreement or condition contained in this Indenture; or

        (b) any event of default under any other mortgage, indenture or
instrument described in Section 8.1(e), an Officers' Certificate specifying such
Default, Event of Default or default.

        Section 4.4     Stay, Extension and Usury Laws. The Company covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.

        Section 4.5     Corporate Existence. Subject to Article VII hereof, the
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the corporate, partnership or
other existence of each Subsidiary of the Company in accordance with the
respective organizational documents of each Subsidiary and the rights (charter
and statutory), licenses and franchises of the Company and its Subsidiaries;
provided, however, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any Subsidiary, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries taken as a whole and that the loss thereof is not adverse in
any material respect to the Noteholders. Notwithstanding the foregoing, the
corporate existence of any Subsidiary may also be terminated in connection with
any Board approved corporate restructuring or reorganization.

        Section 4.6     Taxes. The Company shall, and shall cause each of its
Subsidiaries to, pay prior to delinquency all taxes, assessments and
governmental levies, except as contested in good faith and by appropriate
proceedings.

        Section 4.7     Designated Event.

        (a) Upon the occurrence of a Designated Event, each holder of Securities
shall have the right, in accordance with this Section 4.7 and Section 3.8
hereof, to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such holder's Securities pursuant to the terms
of Section 3.8 (the "Designated Event Offer") at a purchase price in cash equal
to 100% of the principal amount thereof, together with accrued and unpaid
interest thereon, if any, to the Designated Event Payment Date, plus an amount
payable in cash equal to two years' interest on the Securities, less any
interest actually paid to such holder prior to the Designated Event Payment Date
(the "Designated Event Payment").

        (b) On or before the Commencement Date, the Company shall mail to each
holder the notice provided by Section 3.8(e).

                                      -19-
<PAGE>   25

        (c) Payment by the Company of the Designated Event Payment upon the
occurrence of a Designated Event is subject to the subordination provisions of
Article VI.

        Section 4.8     Stockholder Rights Plan. In the event that the Company
implements a stockholder rights plan, such rights plan shall provide that upon
conversion of the Securities the holders will receive, in addition to the Common
Stock issuable upon such conversion, the rights issued under such rights plan
(whether or not such rights have separated from the Common Stock at the time of
such conversion), provided that a holder of Securities shall be subject to all
of the terms and conditions of any such rights plan.

                                   ARTICLE V

                                   CONVERSION

        Section 5.1     Conversion Privilege. A holder of a Security may convert
the principal amount thereof (or any portion thereof that is an integral
multiple of $1,000) into fully paid and nonassessable shares of Common Stock of
the Company at any time prior to the close of business (New York City time) on
the date of the Security's maturity at the Conversion Price then in effect,
except that, with respect to any Security called for redemption, such conversion
right shall terminate at the close of business on the Business Day immediately
preceding the redemption date (unless the Company shall default in making the
redemption payment when it becomes due, in which case the conversion right shall
terminate on the date such default is cured). A Security in respect of which a
holder has delivered an "Option of Noteholder to Elect Purchase" form appearing
in Exhibit A attached hereto exercising the option of such holder to require the
Company to purchase such Security may be converted only if the notice of
exercise is withdrawn as provided in Section 3.8. The number of shares of Common
Stock issuable upon conversion of a Security is determined by dividing the
principal amount of the Security converted by the conversion price in effect on
the Conversion Date (the "Conversion Price").

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

        Provisions of this Indenture that apply to conversion of all of a
Security also apply to conversion of a portion of it. A holder of Securities is
not entitled to any rights of a holder of Common Stock (other than as provided
in Section 4.8 hereof) until such holder of Securities has converted such
Securities into Common Stock, and only to the extent that such Securities are
deemed to have been converted into Common Stock under this Article V.

        Section 5.2     Conversion Procedure. To convert a Security, a holder
must satisfy the requirements in paragraph 10 of the Securities. The date on
which the holder satisfies all of those requirements is the conversion date (the
"Conversion Date"). As soon as practicable after the Conversion Date, the
Company shall deliver to the holder through the Conversion Agent a certificate
for the number of whole shares of Common Stock issuable upon the conversion and
a check for any fractional share determined pursuant to Section 5.3. Such
certificate shall bear any legends set forth on the converted Security, unless
and to the extent the restrictions contained in such legends no

                                      -20-
<PAGE>   26

longer apply to such Common Stock. The person in whose name the certificate is
registered shall become the stockholder of record on the Conversion Date and, as
of such date, such person's rights as a Noteholder shall cease; provided,
however, that no surrender of a Security on any date when the stock transfer
books of the Company shall be closed shall be effective to constitute the person
entitled to receive the shares of Common Stock upon such conversion as the
stockholder of record of such shares of Common Stock on such date, but such
surrender shall be effective to constitute the person entitled to receive such
shares of Common Stock as the stockholder of record thereof for all purposes at
the close of business on the next succeeding day on which such stock transfer
books are open; provided further, however, that such conversion shall be at the
Conversion Price in effect on the date that such Security shall have been
surrendered for conversion, as if the stock transfer books of the Company had
not been closed.

        No payment or adjustment will be made for accrued and unpaid interest on
a converted Security or for dividends or distributions on shares of Common Stock
issued upon conversion of a Security, but if any holder surrenders a Security
for conversion after the close of business on the record date for the payment of
an installment of interest and prior to the opening of business on the next
interest payment date, then, notwithstanding such conversion, the interest
payable on such interest payment date shall be paid to the holder of such
Security on such record date. In such event, such Security, when surrendered for
conversion, must be accompanied by payment in funds acceptable to the Company of
an amount equal to the interest (but in no circumstance shall this requirement
to pay interest upon conversion result in any holder being required to pay
Additional Interest or Additional Voluntary Conversion Interest) and payable on
such interest payment date on the portion so converted unless the Security has
been called for redemption by the Company and a notice of redemption has been
mailed to the holders.

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

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

        Section 5.3     Fractional Shares. The Company will not issue fractional
shares of Common Stock upon conversion of a Security. In lieu thereof, the
Company will pay an amount in cash based upon the Daily Market Price of the
Common Stock on the trading day prior to the date of conversion.

        Section 5.4     Taxes on Conversion. The issuance of certificates for
shares of Common Stock upon the conversion of any Security shall be made without
charge to the converting Noteholder for such certificates or for any tax in
respect of the issuance of such certificates, and such certificates shall be
issued in the respective names of, or in such names as may be directed by, the
holder or holders of the converted Security; provided, however, that in the
event that certificates for shares of Common Stock are to be issued in a name
other than the name of the holder of the Security converted, such Security, when
surrendered for conversion, shall be accompanied by an instrument

                                      -21-
<PAGE>   27

of transfer, in form satisfactory to the Company, duly executed by the
registered holder thereof or his duly authorized attorney; and provided further,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificates in a name other than that of the holder of the converted
Security, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid or is
not applicable.

        Section 5.5     Company to Provide Stock. The Company shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Common Stock, solely for the purpose of issuance upon conversion of
Securities as herein provided, a sufficient number of shares of Common Stock to
permit the conversion of all outstanding Securities for shares of Common Stock.

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

        Section 5.6     Adjustment of Conversion Price. The Conversion Price
shall be subject to adjustment from time to time as follows:

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

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

                                      -22-
<PAGE>   28

Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered (or into which the convertible securities so
offered are convertible). Such adjustments shall become effective immediately
after such record date.

        (c) In case the Company shall distribute to all holders of Common Stock
shares of any class of Capital Stock of the Company other than Common Stock,
evidences of indebtedness or other assets (other than cash dividends out of
current or retained earnings), or shall distribute to substantially all holders
of Common Stock rights or warrants to subscribe for securities (other than those
securities referred to in subsection (b) above), then in each such case the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the date of such distribution by a fraction of which the numerator shall be the
current market price (determined as provided in subsection (f) below) of the
Common Stock on the record date mentioned below less the then fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive evidence of such fair market value and described in a Board
Resolution) of the portion of the assets so distributed or of such subscription
rights or warrants applicable to one share of Common Stock, and of which the
denominator shall be such current market price of the Common Stock. Such
adjustment shall become effective immediately after the record date for the
determination of the holders of Common Stock entitled to receive such
distribution. Notwithstanding the foregoing, in the event that the Company shall
distribute rights or warrants to subscribe for additional shares of the
Company's Capital Stock (other than the Common Stock referred to in subsection
(b) above) ("Rights") pro rata to holders of Common Stock, the Company may, in
lieu of making any adjustment pursuant to this Section 5.6, make proper
provision so that each holder of a Security who converts such Security (or any
portion thereof) after the record date for such distribution and prior to the
expiration or redemption of the Rights shall be entitled to receive upon such
conversion, in addition to the shares of Common Stock issuable upon such
conversion (the "Conversion Shares"), a number of Rights to be determined as
follows: (i) if such conversion occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date")," the same number of Rights to which a holder
of a number of shares of Common Stock equal to the number of Conversion Shares
is entitled at the time of such conversion in accordance with the terms and
provisions of and applicable to the Rights; and (ii) if such conversion occurs
after the Distribution Date, the same number of Rights to which a holder of the
number of shares of Common Stock into which the principal amount of the Security
so converted was convertible immediately prior to the Distribution Date would
have been entitled on the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights.

        (d) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (including any distributions
of cash out of current or retained earnings of the Company but excluding any
cash that is distributed as part of a distribution requiring a Conversion Price
adjustment pursuant to paragraph (c) of this Section) in an aggregate amount
that, together with the sum of (x) the aggregate amount of any other
distributions to all holders of its Common Stock made in cash plus (y) all
Excess Payments, in each case made within the 12 months preceding the date fixed
for determining the stockholders entitled to such distribution (the
"Distribution Record Date") and in respect of which no Conversion Price
adjustment pursuant to

                                      -23-
<PAGE>   29

paragraphs (c) or (e) of this Section or this paragraph (d) has been made,
exceeds 15% of the product of the current market price per share (determined as
provided in paragraph (f) of this Section) of the Common Stock on the
Distribution Record Date times the number of shares of Common Stock outstanding
on the Distribution Record Date (excluding shares held in the treasury of the
Company), the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying such Conversion Price in effect immediately
prior to the effectiveness of the Conversion Price reduction contemplated by
this paragraph (d) by a fraction of which the numerator shall be the current
market price per share (determined as provided in paragraph (f) of this Section)
of the Common Stock on the Distribution Record Date less the amount of such cash
and other consideration (including any Excess Payments) so distributed
applicable to one share (based on the pro rata portion of the aggregate amount
of such cash and other consideration (including any Excess Payments), divided by
the shares of Common Stock outstanding on the Distribution Record Date) of
Common Stock and the denominator shall be such current market price per share
(determined as provided in paragraph (f) of this Section) of the Common Stock on
the Distribution Record Date, such reduction to become effective immediately
prior to the opening of business on the day following the Distribution Record
Date.

        (e) In case a tender offer or other negotiated transaction made by the
Company or any Subsidiary of the Company for all or any portion of the Common
Stock shall be consummated, if an Excess Payment is made in respect of such
tender offer or other negotiated transaction and the amount of such Excess
Payment, together with the sum of (x) the aggregate amount of all Excess
Payments plus (y) the aggregate amount of all distributions to all holders of
the Common Stock made in cash (specifically including distributions of cash out
of retained earnings), in each case made within the 12 months preceding the date
of payment of such current negotiated transaction consideration or expiration of
such current tender offer, as the case may be (the "Purchase Date"), and as to
which no adjustment pursuant to paragraph (c) or paragraph (d) of this Section
or this paragraph (e) has been made, exceeds 15% of the product of the current
market price per share (determined as provided in paragraph (f) of this Section)
of the Common Stock on the Purchase Date times the number of shares of Common
Stock outstanding (including any tendered shares but excluding any shares held
in the treasury of the Company) on the Purchase Date, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying such
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this paragraph (e) by a fraction of
which the numerator shall be the current market price per share (determined as
provided in paragraph (f) of this Section) of the Common Stock on the Purchase
Date less the amount of such Excess Payments and such cash distributions, if
any, applicable to one share (based on the pro rata portion of the aggregate
amount of such Excess Payments and such cash distributions, divided by the
shares of Common Stock outstanding on the Purchase Date) of Common Stock and the
denominator shall be such current market price per share (determined as provided
in paragraph (f) of this Section) of the Common Stock on the Purchase Date, such
reduction to become effective immediately prior to the opening of business on
the day following the Purchase Date.

        (f) The current market price per share of Common Stock on any date shall
be deemed to be the average of the Daily Market Prices for the shorter of (i) 30
consecutive Business Days ending on

                                      -24-
<PAGE>   30

the last full trading day on the exchange or market referred to in determining
such Daily Market Prices prior to the time of determination or (ii) the period
commencing on the date next succeeding the first public announcement of the
issuance of such rights or such warrants or such other distribution or such
negotiated transaction through such last full trading day on the exchange or
market referred to in determining such Daily Market Prices prior to the time of
determination.

        (g) In any case in which this Section 5.6 shall require that an
adjustment be made immediately following a record date for an event, the Company
may elect to defer, until such event, issuing to the holder of any Security
converted after such record date the shares of Common Stock and other Capital
Stock of the Company issuable upon such conversion over and above the shares of
Common Stock and other Capital Stock of the Company issuable upon such
conversion only on the basis of the Conversion Price prior to adjustment; and,
in lieu of the shares the issuance of which is so deferred, the Company shall
issue or cause its stock transfer agent to issue due bills or other appropriate
evidence of the right to receive such shares.

        Section 5.7     No Adjustment. No adjustment in the Conversion Price
shall be required until cumulative adjustments amount to 1% or more of the
Conversion Price as last adjusted; provided, however, that any adjustments which
by reason of this Section 5.7 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article V shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. No adjustment need be made for rights
to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest. No adjustment need be made for a change in the par value
or no par value of the Common Stock.

        Section 5.8     Other Adjustments.

        (a) In the event that, as a result of an adjustment made pursuant to
Section 5.6 above, the holder of any Security thereafter surrendered for
conversion shall become entitled to receive any shares of Capital Stock of the
Company other than shares of its Common Stock, thereafter the Conversion Price
of such other shares so receivable upon conversion of any Securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock
contained in this Article V.

        (b) In the event that shares of Common Stock are not delivered after the
expiration of any of the rights or warrants referred to in Section 5.6(b) and
Section 5.6(c) hereof, the Conversion Price shall be readjusted to the
Conversion Price which would otherwise be in effect had the adjustment made upon
the issuance of such rights or warrants been made on the basis of delivery of
only the number of shares of Common Stock actually delivered.

        Section 5.9     Adjustments for Tax Purposes.
The Company may, at its option, make such reductions in the Conversion Price, in
addition to those required by Section 5.6 above, as it determines to be
advisable in order that any stock dividend, subdivision of shares, distribution
of rights to purchase stock or securities or distribution of securities
convertible into or exchangeable for stock made by the Company to its
stockholders will not be taxable to the recipients thereof.

                                      -25-
<PAGE>   31

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

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

        Section 5.12    Notice of Certain Transactions. In the event that:

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

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

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

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

        Section 5.13    Effect of Reclassifications, Consolidations, Mergers or
Sales on Conversion Privilege. If any of the following shall occur, namely: (i)
any reclassification or change of outstanding shares of Common Stock issuable
upon conversion of Securities (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), (ii) any consolidation or merger to which the
Company is a party other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification of, or change
(other than a change in name, or par value, or from par value to no par value,
or from no par value to par value or as a result of a subdivision or
combination) in, outstanding shares of Common Stock or (iii) any sale or
conveyance of all or substantially all of the property or business of the
Company as an entirety, then the Company, or such successor or purchasing
corporation, as the case may be, shall, as a condition precedent to such
reclassification, change, consolidation, merger, sale or conveyance, execute and
deliver to the Trustee a supplemental indenture in form satisfactory to the
Trustee providing that the holder of each Security then

                                      -26-
<PAGE>   32

outstanding shall have the right to convert such Security into the kind and
amount of shares of stock and other securities and property (including cash)
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock deliverable upon
conversion of such Security immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Such supplemental indenture shall
provide for adjustments of the Conversion Price which shall be as nearly
equivalent as may be practicable to the adjustments of the Conversion Price
provided for in this Article V. The foregoing, however, shall not in any way
affect the right a holder of a Security may otherwise have, pursuant to clause
(ii) of the last sentence of subsection (c) of Section 5.6, to receive Rights
upon conversion of a Security. If, in the case of any such consolidation,
merger, sale or conveyance, the stock or other securities and property
(including cash) receivable thereupon by a holder of Common Stock includes
shares of stock or other securities and property of a corporation other than the
successor or purchasing corporation, as the case may be, in such consolidation,
merger, sale or conveyance, then such supplemental indenture shall also be
executed by such other corporation and shall contain such additional provisions
to protect the interests of the holders of the Securities as the Board of
Directors of the Company shall reasonably consider necessary by reason of the
foregoing. The provision of this Section 5.13 shall similarly apply to
successive consolidations, mergers, sales or conveyances.

        In the event the Company shall execute a supplemental indenture pursuant
to this Section 5.13, the Company shall promptly file with the Trustee an
Officers' Certificate briefly stating the reasons therefor, the kind or amount
of shares of stock or securities or property (including cash) receivable by
holders of the Securities upon the conversion of their Securities after any such
reclassification, change, consolidation, merger, sale or conveyance and any
adjustment to be made with respect thereto.

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

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

        Section 5.15    Automatic Conversion by the Company.

        (a) The Company may elect to automatically convert the Securities (an
"Automatic Conversion") at any time prior to Maturity if the average Daily
Market Price of the Company's Common Stock has exceeded 200% of the Conversion
Price for at least 20 Trading Days during a

                                      -27-
<PAGE>   33

30-day Trading Day period ending within five Trading Days prior to the notice of
Automatic Conversion.

        (b) In the event that the date that the Securities will be automatically
converted (the "Automatic Conversion Date") occurs on or prior to [---], 2003,
the Company will pay Additional Interest (as defined below) in cash or, at the
Company's election, in Common Stock. In the event that the Company elects to pay
Additional Interest, if any, on the Securities in Common Stock upon an Automatic
Conversion, the shares of Common Stock will be valued at 90% of the average of
the Daily Market Price for the five Trading Days immediately preceding the
second Trading Day preceding the Automatic Conversion Date. "Additional
Interest" shall be equal to $[___] per each $1,000 principal amount of
Securities, less any interest actually paid or provided for with respect to such
Securities prior to the Automatic Conversion Date.

                (i)     The shares of Common Stock deliverable in payment of the
Additional Interest shall have a fair market value as of the Automatic
Conversion Date of not less than the Additional Interest as determined by this
Section 5.15. For purposes of this Section 5.15, the fair market value of shares
of Common Stock shall be determined by the Company and shall be equal to 90% of
the average of the Daily Market Price for the five consecutive Trading Days
immediately preceding the second Trading Day prior to the Automatic Conversion
Date;

                (ii)    Additional Interest shall be paid only in cash in the
event any shares of Common Stock to be issued for the payment of Additional
Interest in the Securities hereunder (i) require registration under any federal
securities law before such shares may be freely transferable without being
subject to any transfer restrictions under the Securities Act upon an Automatic
Conversion and if such registration is not completed or does not become
effective prior to the Automatic Conversion Date, and/or (ii) require
registration with or approval of any governmental authority under any state law
or any other federal law before such shares may be validly issued or delivered
upon an Automatic Conversion and if such registration is not completed or does
not become effective or such approval is not obtained prior to the Automatic
Conversion Date;

                (iii)   The Common Stock is, or shall have been, approved for
listing on the NYSE prior to the Automatic Conversion Date; and

                (iv)    All shares of Common Stock which may be issued with
respect to the payment of interest on the Securities will be issued out of the
Company's authorized but unissued Common Stock and will, upon issue, be duly and
validly issued and fully paid and non-assessable and free of any preemptive
rights.

        If all of the conditions set forth in this Section 5.15(b) are not
satisfied in accordance with the terms thereof, the interest required to be paid
or duly provided for by the Company pursuant to this Section shall be paid by
the Company only in cash.

        (c) Unless the Company shall have theretofore called for redemption all
of the outstanding Securities, the Company or, at the request and expense of
the Company, the Trustee, shall give to all holders of Securities notice (the
"Automatic Conversion Notice") of the Automatic Conversion not

                                      -28-
<PAGE>   34

more than 30 days but not less than 15 days prior to the Automatic Conversion
Date. The Company shall also deliver a copy of such notice of an Automatic
Conversion to the Trustee.

        Each Automatic Conversion Notice shall state:

                (i)     the Automatic Conversion Date,

                (ii)    whether the Additional Interest, if any, shall be paid
                        by the Company in cash or by delivery of shares of
                        Common Stock,

                (iii)   the place or places where such Securities are to be
                        surrendered for conversion and accrued Additional
                        Interest, if any, and

                (iv)    the Conversion Price then in effect.

        If any of the foregoing provisions or other provisions of this Section
are inconsistent with applicable law, such law shall govern.

        (d) In the event of an Automatic Conversion, the Company shall issue and
deliver a certificate or certificates for the number of full shares of Common
Stock issuable upon conversion of the Securities and the Additional Interest, if
any, due on such Securities along with any cash in respect of any fractional
shares of Common Stock otherwise issuable upon conversion or in the event that
the Company elects to pay Additional Interest, if any, in Common Stock instead
of cash, for payment to the holder as promptly after the Automatic Conversion
Date as practicable in accordance with the provisions of this Article V.

        (e) All Securities subject to the Automatic Conversion shall be
delivered to the Trustee to be canceled at the direction of the Trustee, which
shall dispose of the same as provided in Section 2.11 hereof.

        Section 5.16    Voluntary Conversion by Holders.

        (a) If a holder elects to voluntarily convert Securities at any time
prior on or prior to [---], 2003, such holder will receive a payment of
additional interest equal to Additional Interest (as defined in Section 5.15(b))
("Additional Voluntary Conversion Interest") in cash or, at the Company's
election, in Common Stock, as long as the Company has not previously mailed an
Automatic Conversion Notice. In the event that the Company elects to pay
Additional Voluntary Conversion Interest, if any, on the Securities in Common
Stock upon a voluntary conversion, the shares of Common Stock will be valued at
90% of the average of the Daily Market Price for the five Trading Days
immediately preceding the second Trading Day preceding the Conversion Date,
subject to a minimum valuation of $1.215 per share of Common Stock, less any
interest actually paid or provided for with respect to such Securities prior to
the date of such voluntary conversion.

                (i)     Additional Voluntary Conversion Interest shall be paid
only in cash in the event any shares of Common Stock to be issued for the
payment of Additional Voluntary Conversion Interest in the Securities hereunder
(i) require registration under any federal securities law before such shares may
be freely transferable without being subject to any transfer restrictions

                                      -29-
<PAGE>   35

under the Securities Act upon a voluntary conversion and if such registration is
not completed or does not become effective prior to the date of such voluntary
conversion, and/or (ii) require registration with or approval of any
governmental authority under any state law or any other federal law before such
shares may be validly issued or delivered upon a voluntary conversion and if
such registration is not completed or does not become effective or such approval
is not obtained prior to the date of such voluntary conversion;

                (ii)    The Common Stock is, or shall have been, approved for
listing on the New York Stock Exchange prior to the date of the voluntary
conversion; and

                (iii)   All shares of Common Stock which may be issued with
respect to the payment of interest on the Securities will be issued out of the
Company's authorized but unissued Common Stock and, will upon issue, be duly and
validly issued and fully paid and non-assessable and free of any preemptive
rights.

        If all of the conditions set forth in this Section 5.16(b) are not
satisfied in accordance with the terms thereof, the interest required to be paid
or duly provided for by the Company pursuant to this Section shall be paid by
the Company only in cash.

        (b) In the event of a voluntary conversion by a holder, the Company
shall issue and deliver a certificate or certificates for the number of full
shares of Common Stock issuable upon conversion of the Securities submitted for
conversion and the Additional Voluntary Conversion Interest, if any, due on such
Securities along with any cash in respect of any fractional shares of Common
Stock otherwise issuable upon conversion or in the event that the Company elects
to pay Additional Voluntary Conversion Interest, if any, in Common Stock instead
of cash, for payment to the holder as promptly after the date of the voluntary
conversion as practicable in accordance with the provisions of this Article V.

        (c) All Securities submitted for voluntary conversion shall be delivered
to the Trustee to be canceled at the direction of the Trustee, which shall
dispose of the same as provided in Section 2.11 hereof.

                                   ARTICLE VI

                                  SUBORDINATION

        Section 6.1     Agreement to Subordinate. The Company, for itself and
its successors, and each Noteholder, by his acceptance of Securities, agree that
the payment of the principal of or interest on or any other amounts due on the
Securities is subordinated in right of payment, to the extent and in the manner
stated in this Article VI, to the prior payment in full of all existing and
future Senior Debt.

        Section 6.2     No Payment on Securities if Senior Debt in Default.
Anything in this Indenture to the contrary notwithstanding, no payment on
account of principal of or redemption or repurchase of, interest on or other
amounts due on the Securities, including any payments on a

                                      -30-
<PAGE>   36

Designated Event Offer, and no redemption, purchase, or other acquisition of the
Securities (including, without limitation, upon a Designated Event), shall be
made by or on behalf of the Company (i) unless full payment of amounts then due
for principal and interest and of all other amounts then due on all Senior Debt
has been made or duly provided for pursuant to the terms of the instrument
governing such Senior Debt, (ii) if, at the time of such payment, redemption,
purchase or other acquisition, or immediately after giving effect thereto, there
shall exist under any Senior Debt, or any agreement pursuant to which any Senior
Debt is issued, any default, which default shall not have been cured or waived
and which default shall have resulted in the full amount of such Senior Debt
being declared due and payable or (iii) if, at the time of such payment,
redemption, purchase or other acquisition, the Trustee shall have received
written notice from a Representative of the holders of Designated Senior Debt (a
"Payment Blockage Notice") that there exists under such Designated Senior Debt,
or any agreement pursuant to which such Designated Senior Debt is issued, any
default, which default shall not have been cured or waived, permitting the
holders thereof to declare any amounts of such Designated Senior Debt due and
payable, but only for the period (the "Payment Blockage Period") commencing on
the date of receipt of the Payment Blockage Notice and ending (unless earlier
terminated by notice given to the Trustee by a Representative of the holders of
such Designated Senior Debt) on the earlier of (a) the date on which such event
of default shall have been cured or waived or (b) 180 days from the receipt of
the Payment Blockage Notice. Notwithstanding the provisions described in the
immediately preceding sentence (other than in clauses (i) and (ii)), unless the
holders of such Designated Senior Debt or the Representative of such holders
shall have accelerated the maturity of such Designated Senior Debt, the Company
may resume payments on the Securities after the end of such Payment Blockage
Period. Not more than one Payment Blockage Notice may be given in any
consecutive 360-day period irrespective of the number of defaults with respect
to Senior Debt during such period.

        In the event that, notwithstanding the provisions of this Section 6.2,
payments are made by or on behalf of the Company in contravention of the
provisions of this Section 6.2, such payments shall be held by the Trustee, any
Paying Agent or the holders, as applicable, in trust for the benefit of, and
shall be paid over to and delivered to, the Representative of the holders of
Senior Debt or the trustee under the indenture or other agreement (if any),
pursuant to which any instruments evidencing any Senior Debt may have been
issued for application to the payment of all Senior Debt ratably according to
the aggregate amounts remaining unpaid to the extent necessary to pay all Senior
Debt in full in accordance with the terms of such Senior Debt, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.

        The Company shall give prompt written notice to the Trustee and any
Paying Agent of any default or event of default under any Senior Debt or under
any agreement pursuant to which any Senior Debt may have been issued. The
Trustee and the Paying Agent may assume that all payments have been made with
respect to all Senior Debt unless the Trustee or the Paying Agent, as the case
may be, has received written notice that payment has not been made and three (3)
Business Days have expired.

                                      -31-
<PAGE>   37

        Section 6.3 Distribution on Acceleration of Securities; Dissolution and
Reorganization; Subrogation of Securities.

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

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

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

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

                (3) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (other than securities of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in this Article with respect to the
Securities, to the payment in full without diminution or modification by such
plan of Senior Debt), shall be received by the Trustee or the holders before all
Senior Debt is paid in full, such payment or distribution shall be held in trust
for the benefit of, and be paid over to upon request by a holder of the Senior
Debt,

                                      -32-
<PAGE>   38

the holders of the Senior Debt remaining unpaid (or their representatives) or
trustee(s) acting on their behalf, ratably as aforesaid, for application to the
payment of such Senior Debt until all such Senior Debt shall have been paid in
full, after giving effect to any concurrent payment or distribution to the
holders of such Senior Debt.

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

        Nothing contained in this Article or elsewhere in this Indenture or in
the Securities is intended to or shall (i) impair, as between the Company and
its creditors other than the holders of Senior Debt, the obligation of the
Company, which is absolute and unconditional, to pay to the holders the
principal of, premium, if any, and interest, if any, on the Securities as and
when the same shall become due and payable in accordance with the terms of the
Securities, (ii) affect the relative rights of the holders and creditors of the
Company other than holders of Senior Debt or, as between the Company and the
Trustee, the obligations of the Company to the Trustee, or (iii) prevent the
Trustee or the holders from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article of the holders of Senior Debt in respect of cash, property
and securities of the Company received upon the exercise of any such remedy.

        Upon distribution of assets of the Company referred to in this Article,
the Trustee, subject to the provisions of Section 9.1 hereof, and the holders
shall be entitled to rely upon a certificate of the liquidating trustee or agent
or other person making any distribution to the Trustee or to the holders for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
The Trustee, however, shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt. Nothing contained in this Article or elsewhere in this
Indenture, or in any of the Securities, shall prevent the good faith application
by the Trustee of any moneys which shall have been deposited with it hereunder,
prior to its receipt of written notice of facts which would prohibit such
application, for the purpose of the payment of or on account of the principal
of, premium, if any, or interest on the Securities unless, prior to the date on
which such application is made by the Trustee, the Trustee shall be charged with
actual notice under Section 6.3(d) hereof of the facts which would prohibit the
making of such application.

                                      -33-
<PAGE>   39

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

        (d) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment of
money to or by the Trustee in respect of the Securities pursuant to the
provisions of this Article. The Trustee, subject to the provisions of Section
9.1 hereof, shall be entitled to assume that no such fact exists unless the
Company or any holder of Senior Debt or any trustee therefor has given written
notice thereof to the Trustee. Notwithstanding the provisions of this Article or
any other provisions of this indenture, the Trustee shall not be charged with
knowledge of the existence of any fact which would prohibit the making of any
payment of moneys to or by the Trustee in respect of the Securities pursuant to
the provisions in this Article, unless and until three Business Days after the
Trustee shall have received written notice thereof from the Company or any
holder or holders of Senior Debt or from any trustee therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 9.1 hereof, shall be entitled in all respects conclusively to assume
that no such facts exist; provided that if on a date not less than three
Business Days immediately preceding the date upon which, by the terms hereof,
any such moneys may become payable for any purpose (including, without
limitation, the principal of or interest on any Security), the Trustee shall not
have received with respect to such moneys the notice provided for in this
Section 6.3(d), then anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such moneys and to
apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date.

        The Trustee shall be entitled to conclusively rely on the delivery to it
of a written notice by a person representing himself to be a holder of Senior
Debt (or a trustee on behalf of such holder) to establish that such notice has
been given by a holder of Senior Debt (or a trustee on behalf of any such holder
or holders). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article, and, if such evidence is not furnished, the Trustee
may defer any payment to such person pending judicial determination as to the
right of such person to receive such payment; nor shall the Trustee be charged
with knowledge of the curing or waiving of any default of the character
specified in Section 6.2 hereof or that any event or any condition preventing
any payment in respect of the Securities shall have ceased to exist, unless and
until the Trustee shall have received written notice to such effect.

        (e) The provisions of this Section 6.3 applicable to the Trustee shall
(unless the context requires otherwise) also apply to any Paying Agent for the
Company.

                                      -34-
<PAGE>   40

        Section 6.4     Reliance by Senior Debt on Subordination Provisions.
Each holder of any Security by his acceptance thereof acknowledges and agrees
that the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration for each holder of any Senior Debt, whether such
Senior Debt was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Debt, and such holder of Senior Debt shall be deemed conclusively to have relied
on such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Debt. Notice of any default in the payment of
any Senior Debt, except as expressly stated in this Article, and notice of
acceptance of the provisions hereof are hereby expressly waived. Except as
otherwise expressly provided herein, no waiver, forbearance or release by any
holder of Senior Debt under such Senior Debt or under this Article shall
constitute a release of any of the obligations or liabilities of the Trustee or
holders of the Securities provided in this Article.

        Section 6.5     No Waiver of Subordination Provisions. Except as
otherwise expressly provided herein, no right of any present or future holder of
any Senior Debt to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.

        Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of, or notice to, the Trustee or the holders of the Securities, without
incurring responsibility to the holders of the Securities and without impairing
or releasing the subordination provided in this Article VI or the obligations
hereunder of the holders of the Securities to the holders of Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
of, or renew or alter, Senior Debt, or otherwise amend or supplement in any
manner Senior Debt or any instrument evidencing the same or any agreement under
which Senior Debt, is outstanding; (ii) sell, exchange, release or otherwise
dispose of any property pledged, mortgaged or otherwise securing Senior Debt;
(iii) release any person liable in any manner for the collection of Senior Debt;
and (iv) exercise or refrain from exercising any rights against the Company or
any other person.

        Section 6.6     Trustee's Relation to Senior Debt. The Trustee in its
individual capacity shall be entitled to all the rights set forth in this
Article in respect of any Senior Debt at any time held by it, to the same extent
as any holder of Senior Debt, and nothing in Section 9.11 hereof or elsewhere in
this Indenture shall deprive the Trustee of any of its rights as such holder.

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

        Each holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination

                                      -35-
<PAGE>   41

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

        Section 6.7     Other Provisions Subject Hereto. Except as expressly
stated in this Article, notwithstanding anything contained in this Indenture to
the contrary, all the provisions of this Indenture and the Securities are
subject to the provisions of this Article. However, nothing in this Article
shall apply to or adversely affect the claims of, or payment to, the Trustee
pursuant to Section 9.7. Notwithstanding the foregoing, the failure to make a
payment on account of principal of or interest on the Securities by reason of
any provision of this Article VI shall not be construed as preventing the
occurrence of an Event of Default under Section 8.1.

        Section 6.8     Certain Conversions, Interest Payments and Repurchases
in Common Stock Deemed Payment. For the purposes of this Article VI only, (1)
the issuance and delivery of junior securities upon (i) conversion of Securities
in accordance with Article V, (ii) upon the payment of interest in accordance
with Section 1 of the form of Security (iii) upon the payment of Additional
Interest in accordance with Section 5.15 or (iv) upon the payment of Additional
Voluntary Conversion Interest in accordance with Section 5.16, in each case in
the manner specified in such respective Sections, shall not be deemed to
constitute a payment or distribution on account of the principal of (or premium,
if any) or interest on Securities or on account of the purchase or other
acquisition of Securities, and will therefore not be subject to the
subordination provisions of this Article VI, and (2) the payment, issuance or
delivery of cash (excluding cash paid for fractional shares upon conversion of a
Security or payment of interest, Additional Interest or Additional Voluntary
Conversion Interest), property or securities (other than junior securities) upon
conversion, payment of interest, payment of Additional Interest or payment of
Additional Voluntary Conversion Interest shall be deemed to constitute payment
on account of the principal of such Security. For the purposes of this Section,
the term "junior securities" means (a) shares of any stock of any class of the
Company and (b) securities of the Company which are subordinated in right of
payment to all Senior Debt which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a greater
extent than, the Securities are so subordinated as provided in this Article VI.
Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its creditors
other than holders of

                                      -36-
<PAGE>   42

Senior Debt and the holders of the Securities, the right, which is absolute and
unconditional, of the holder of any Security to convert such Security in
accordance with Article V.

                                  ARTICLE VII

                                   SUCCESSORS

        Section 7.1     Merger, Consolidation or Sale of Assets. The Company may
not consolidate or merge with or into any person (whether or not the Company is
the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets
unless:

        (a) the Company is the surviving corporation or the entity or the person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;

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

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

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

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

        Section 7.2     Successor Corporation Substituted. Upon any
consolidation or merger, or any sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 7.1 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for and may exercise every right and power of,
the Company under this indenture with the same effect as if such successor
person has been named as the Company herein; provided, however, that the
predecessor Company in the case of a sale, assignment, transfer, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of and interest on the Securities.

                                      -37-
<PAGE>   43

                                  ARTICLE VIII

                              DEFAULTS AND REMEDIES

        Section 8.1     Events of Default.  An "Event of Default" occurs if:

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

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

        (c) the Company defaults in the payment of the Designated Event Payment
when the same becomes due and payable, whether or not such payment may be
prohibited by Article VI;

        (d) the Company fails to provide notice of any Designated Event in
accordance with Section 4.7;

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

        (f) there is a default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Subsidiary of the Company
(or the payment of which is guaranteed by the Company or any Subsidiary of the
Company), whether such Indebtedness or guarantee now exists or is created after
the Issuance Date, which default (i) is caused by a failure to pay when due
principal of or interest on such Indebtedness within the grace period provided
for in such Indebtedness (which failure continues beyond the longer of any
applicable grace period and 30 days) (a "Payment Default") or (ii) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there is a Payment Default or
the maturity of which has been so accelerated, aggregates $10 million or more;

        (g) a final, non-appealable judgment or final, non-appealable judgments
(other than any judgment as to which a reputable insurance company has accepted
full liability) for the payment of money are entered by a court or courts of
competent jurisdiction against the Company or any Subsidiary of the Company and
remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
judgments exceeds $10 million;

                                      -38-
<PAGE>   44
        (h) the Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to
the entry of an order for relief against it in an involuntary case in which it
is the debtor, (iii) consents to the appointment of a Bankruptcy Custodian of
it or for all or substantially all of its property, (iv) makes a general
assignment for the benefit of its creditors, or (v) makes the admission in
writing that it generally is unable to pay its debts as the same become due; or

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

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

        Section 8.2     Acceleration. If an Event of Default (other than an
Event of Default specified in clauses (h) and (i) of Section 8.1 hereof) occurs
and is continuing, the Trustee by notice to the Company, or the Noteholders of
at least 25% in principal amount of the then outstanding Securities by notice to
the Company and the Trustee, may declare all the Securities to be due and
payable. Upon such declaration, the principal of, premium, if any, and accrued
and unpaid interest on the Securities shall be due and payable immediately. If
an Event of Default specified in clause (h) or (i) of Section 8.1 hereof occurs,
such an amount shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any
Noteholder. The Noteholders of a majority in aggregate principal amount of the
then outstanding 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 the
acceleration.

        Section 8.3     Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal or interest then due and payable 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 Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.

        Section 8.4     Waiver of Past Defaults. The Noteholders of a majority
in aggregate principal amount of the then outstanding Securities by notice to
the Trustee may waive an existing Default or Event of Default and its
consequences except a continuing Default or Event of Default in the payment of
the Designated Event Payment or the principal of, or interest on, any Security.
When a

                                      -39-
<PAGE>   45

Default or Event of Default is waived, it is cured and ceases; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.

        Section 8.5     Control by Majority. The Noteholders of a majority in
principal amount of the then outstanding Securities may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture, is
unduly prejudicial to the rights of other Noteholders, or would involve the
Trustee in personal liability.

        Section 8.6     Limitation on Suits. A Noteholder may pursue a remedy
with respect to this Indenture or the Securities only if:

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

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

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

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

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

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

        Section 8.7     Rights of Noteholders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Noteholder of a Security to receive payment of principal and interest on the
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Noteholder
made pursuant to this Section.

        Section 8.8     Collection Suit by Trustee. If an Event of Default
specified in Section 8.1(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount of principal and interest remaining unpaid on the
Securities and interest on overdue principal and interest and such further
amount as shall be sufficient to cover the costs and, to the extent lawful,
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.

        Section 8.9     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

                                      -40-
<PAGE>   46

Trustee and the Noteholders allowed in any judicial proceedings relative to the
Company, its creditors or its property. Nothing contained herein shall be deemed
to authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Noteholder thereof, or
to authorize the Trustee to vote in respect of the claim of any Noteholder in
any such proceeding.

        Section 8.10    Priorities. If the Trustee collects any money or
property pursuant to this Article, it shall pay out the money or proceeds, in
the case of property, in the following order:

        First: to the Trustee for amounts due under Section 9.7 hereof;

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

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

        Fourth: to the Company.

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

        Section 8.11    Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an undertaking to
pay the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a holder pursuant to Section 8.7 hereof, or a suit by
Noteholders of more than 10% in principal amount of the then outstanding
Securities.

                                   ARTICLE IX

                                     TRUSTEE

        Section 9.1     Duties of Trustee.

        (a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent 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: (i) the
Trustee need perform only those duties that are specifically set forth in this
Indenture and no others and (ii) in the absence of

                                      -41-
<PAGE>   47

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 (i) this paragraph does not limit the effect of paragraph (b) of this
Section 9.1; (ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts and (iii) the Trustee shall not be
liable with respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 8.5 hereof.

        (d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 9.1. No
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.

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

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

        Section 9.2     Rights of Trustee.

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

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

        (c) The Trustee may act through agents and nominees 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 that it takes or
omits to take in good faith, without negligence or willful misconduct, and that
it reasonably believes to be authorized or within its rights or powers.

                                      -42-
<PAGE>   48

        (e) The Trustee shall not be charged with knowledge of any Event of
Default under subsection (c), (d), (e), (f), (g), (h) or (i) of Section 8.1
unless either (1) a Responsible Officer assigned to its Corporate Trust Services
division shall have actual knowledge thereof, or (2) the Trustee shall have
received notice thereof in accordance with Section 12.2 hereof from the Company
or any holder.

        (f) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;

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

        (h) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity satisfactory to the Trustee against
the costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;

        (i) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney
at the sole cost of the Company and shall incur no liability or additional
liability of any kind by reason of such inquiry or investigation;

        (j) The rights, privileges, protections, immunities and benefits given
to the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and each agent, custodian and other person employed to act hereunder;
and

        (k) The Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles of officers
authorized at such time to take specified actions pursuant to this Indenture,
which Officers' Certificate may be signed by any person authorized to sign an
Officers' Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded.

        Section 9.3     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 an Affiliate with the same rights it
would have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Sections 9.10 and 9.11 hereof.

                                      -43-
<PAGE>   49

        Section 9.4     Trustee's Disclaimer. The Trustee makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from any Securities authenticated and delivered by the Trustee in conformity
with the provisions of this Indenture, and it shall not be responsible for any
statement of the Company in the Indenture or any statement in the Securities
other than its authentication.

        Section 9.5     Notice of Defaults. If a Default or Event of Default
occurs and is continuing and if it is actually known to the Trustee, the Trustee
shall mail to Noteholders a notice of the Default or Event of Default within 90
days after it occurs. Except in the case of a Default or Event of Default in
payment on any Security, the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Noteholders.

        Section 9.6     Reports by Trustee to Noteholders. Within 60 days after
the reporting date stated in Section 12.10, the Trustee shall mail to
Noteholders a brief report dated as of such reporting date that complies with
TIA Section 313(a) if and to the extent required by such Section 313(a). The
Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).

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

        Section 9.7 Compensation and Indemnity. The Company shall pay to the
Trustee from time to time such compensation for its services hereunder as the
Company and the Trustee shall agree on 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
and duly documented disbursements, expenses and advances incurred or made by
it. Such disbursements and expenses may include the reasonable and duly
documented disbursements, compensation and expenses of the Trustee's agents and
counsel.

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

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

                                      -44-
<PAGE>   50

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

        When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 8.1(h) or (i) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

        The provisions of this Section 9.7 shall survive the termination of this
Indenture, and the resignation or removal of the Trustee.

        Section 9.8     Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section.

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

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

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

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

        (d) the Trustee becomes incapable of acting.

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

        If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Noteholders of at least 10% in principal amount of the then outstanding
Securities may petition any court of competent jurisdiction at the expense of
the Company for the appointment of a successor Trustee.

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

                                      -45-
<PAGE>   51

        A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, the
Company shall promptly pay all amounts due and payable to the retiring Trustee
pursuant to Section 9.7 hereof and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. The successor
Trustee shall mail a notice of its succession to Noteholders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in Section 9.7 hereof.
Notwithstanding replacement of the Trustee pursuant to this Section 9.8, the
Company's obligations under Section 9.7 hereof shall continue for the benefit of
the retiring Trustee with respect to expenses and liabilities incurred by it
prior to such replacement.

        Section 9.9     Successor Trustee by Merger, Etc. If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.

        Section 9.10    Eligibility; Disqualification.

        This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (5). The Trustee, or if the Trustee is
a member of a bank holding company system, its bank holding company, shall
always have a combined capital and surplus as stated in Section 12.10 hereof.
The Trustee is subject to TIA Section 310(b).

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

        Section 9.12    Sections Applicable to Registrar, Paying Agent and
Conversion Agent. The term "Trustee" as used in Sections 6.3, 9.1, 9.2, 9.3, 9.4
and 9.7 hereof shall (unless the context requires otherwise) be construed as
extending to and including the Trustee acting in its capacity, if any, as
Registrar, Paying Agent and Conversion Agent.

                                   ARTICLE X

                             DISCHARGE OF INDENTURE

        Section 10.1    Termination of Company's Obligations. This Indenture
shall cease to be of further effect (except that the Company's obligations under
Sections 9.7 and 10.2 hereof shall survive) when all outstanding Securities
theretofore authenticated and issued have been delivered to the Trustee for
cancellation and the Company has paid all sums payable hereunder.

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

                                      -46-
<PAGE>   52

        Section 10.2    Repayment to Company. The Trustee and the Paying Agent
shall promptly pay to the Company upon request any excess money or securities
held by them at any time.

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

                                   ARTICLE XI

                       AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 11.1 Without Consent of Noteholders. The Company and the Trustee may
amend or supplement this Indenture or the Securities without the consent of any
Noteholder:

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

        (b) to comply with Sections 5.13 and 7.1 hereof;

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

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

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

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

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

        Section 11.2 With Consent of Noteholders. Subject to Section 8.7
hereof, the Company and the Trustee may amend or supplement this Indenture or
the Securities with the written consent (including consents obtained in
connection with any tender offer or exchange offer for Securities) of the
Noteholders of at least a majority in principal amount of the then outstanding
Securities. Subject to Sections 8.4 and 8.7 hereof, the Noteholders of a
majority in principal amount of the Securities then outstanding may also by
their written consent (including consents obtained in connection with

                                      -47-
<PAGE>   53

any tender offer or exchange offer for Securities) waive any existing Default as
provided in Section 8.4 or waive compliance in a particular instance by the
Company with any provision of this Indenture or the Securities. However, without
the consent of each Noteholder affected, an amendment, supplement or waiver
under this Section may not (with respect to any Securities held by a
nonconsenting Noteholder):

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

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

        (c) reduce the principal of or change the fixed maturity of any Security

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

        (e) make any change in Section 8.4, 8.7 or 11.2 hereof (this sentence);

        (f) waive a default in the payment of the Designated Event Payment or
the principal of, or interest on, any Security (other than as provided in
Section 8.4);

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

        (h) make any change that adversely affects the right of Noteholders to
convert Securities into Common Stock of the Company; or

        (i) make any change in Articles V or VI hereof that adversely affects
the interests of the Noteholders.

        To secure a consent of the Noteholders under this Section 11.2, it shall
not be necessary for the Noteholders to approve the particular form of any
proposed amendment supplement or waiver, but it shall be sufficient if such
consent approves the substance thereof.

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

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

                                      -48-
<PAGE>   54

        Section 11.3    Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall be set forth in a supplemental indenture
that complies with the TIA as then in effect.

        Section 11.4    Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Noteholder of a
Security is a continuing consent by the Noteholder and every subsequent
Noteholder of a Security or portion of a Security that evidences the same debt
as the consenting Noteholder's Security, even if notation of the consent is not
made on any Security. However, any such Noteholder or subsequent Noteholder may
revoke the consent as to such Noteholder's Security or portion of a Security if
the Trustee receives the notice of revocation before the date on which the
Trustee receives an Officers' Certificate certifying that the Noteholders of the
requisite principal amount of Securities have consented to the amendment,
supplement or waiver.

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

        After an amendment, supplement or waiver becomes effective it shall bind
every Noteholder, unless it is of the type described in any of clauses (a)
through (i) of Section 11.2 hereof. In such case, the amendment or waiver shall
bind each Noteholder who has consented to it and every subsequent Noteholder of
a Security or portion of a Security that evidences the same debt as the
consenting Noteholder's Security.

        Section 11.5    Notation on or Exchange of Securities. The Trustee may
place an appropriate notation about an amendment or waiver on any Security
thereafter authenticated. The Company in exchange for all Securities may issue
and the Trustee shall authenticate new Securities that reflect the amendment or
waiver.

        Section 11.6    Trustee Protected. The Trustee shall sign all
supplemental indentures, except that the Trustee may, but need not, sign any
supplemental indenture that adversely affects its rights.

                                      -49-
<PAGE>   55

                                  ARTICLE XII

                                  MISCELLANEOUS

        Section 12.1    Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies, or conflicts with another provision which is
automatically deemed to be incorporated in this Indenture by the TIA, the
incorporated provision shall control.

        Section 12.2    Notices. Any notice or communication by the Company or
the Trustee to the other is duly given if in writing and delivered in person or
mailed by first class mail or nationally recognized courier to the other's
address stated in Section 12.10 hereof. The Company or the Trustee by notice to
the other may designate additional or different addresses for subsequent notices
or communications.

        Notice shall be deemed given to the Trustee when received by the
Trustee.

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

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

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

        All notices or communications shall be in writing.

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

        Section 12.3    Communication by Noteholders with Other Noteholders.
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Securities.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).

        Section 12.4    Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:

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

                                      -50-
<PAGE>   56

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

        Section 12.5    Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than pursuant to Section 4.3) shall
include:

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

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

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

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

        Section 12.6    Rules by Trustee and Agents. The Trustee may make
reasonable rules for action by, or a meeting of, Noteholders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.

        Section 12.7    Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions in the State of New York are not
required to be open. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If any other
operative date for purposes of this Indenture shall occur on a Legal Holiday
then for all purposes the next succeeding day that is not a Legal Holiday shall
be such operative date.

        Section 12.8    No Recourse Against Others. A director, officer,
employee or stockholder, as such of the Company shall not have any liability for
any obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Securities.

        Section 12.9    Counterparts. This Indenture may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

        Section 12.10   Variable Provisions. "Officer" means the Chairman of the
Board, the President, any Vice-President, the Treasurer, the Secretary, any
Assistant Treasurer or any Assistant Secretary of the Company.

                                      -51-
<PAGE>   57

        The first certificate pursuant to Section 4.3 hereof shall be for the
2001 fiscal year ending on December 31, 2001.

        The reporting date for Section 9.6 hereof is June 1 of each year. The
first reporting date is June 1, 2002.

        The Trustee, or if the Trustee is a member of a bank holding company
system, its bank holding company, shall always have a combined capital and
surplus of at least $50,000,000 as set forth in its most recent published annual
report of condition.

<TABLE>
<S>                                               <C>
        The Company's address is:                  Coeur D'Alene Mines Corporation
                                                   505 Front Avenue
                                                   Coeur D'Alene, Idaho 83814
                                                   Attention: Chief Financial Officer
                                                   Telephone number: (208) 667-3511
                                                   Telefax number: (208) 667-2213

        with a copy to:                            Arthur Bill
                                                   Foley & Lardner
                                                   Washington Harbor
                                                   3000 K Street N.W., Suite 500
                                                   Washington, DC  20007
                                                   Telephone Number: (202) 672-5300
                                                   Telefax Number: (202) 672-5399

        The Trustee's address is:                  101 Barclay Street, 21 West
                                                   New York, NY 10286
                                                   Attention: Corporate Trust Office - Global Finance Unit
                                                   Telephone Number: 212-815-5381
                                                   Telefax Number: 212-815-5595
</TABLE>

        Section 12.11   Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW
YORK SHALL GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO THE
CONFLICT OF LAWS PROVISIONS THEREOF.

        Section 12.12   No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or an Affiliate. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.

        Section 12.13   Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.

                                      -52-
<PAGE>   58

        Section 12.14   Severability. In case any provision in this Indenture or
in the Securities shall be, invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

        Section 12.15   Table of Contents Headings, Etc. The Table of Contents,
Cross Reference Table, and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.

        Section 12.16   WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE
TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

        Section 12.17   Jurisdiction. Each party hereto irrevocably agrees that
any legal suit, action or proceeding arising out of or relating to this
Indenture or the Securities may be instituted in any federal or state court in
the State and County of New York and waives any objection which it may now or
hereafter have to the laying of the venue of any such legal suit, action or
proceeding and waives immunity from jurisdiction or to service of process in
respect of any such suit, action or proceeding, and irrevocably submits to the
exclusive jurisdiction of any such court in any such suit, action or
proceeding. The Company agrees that a final judgment in any such suit, action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law in accordance with
applicable law.

                                      -53-
<PAGE>   59

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

                                           COEUR D'ALENE MINES CORPORATION,
                                           as Issuer,

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

                                           THE BANK OF NEW YORK,
                                           as Trustee

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

<PAGE>   60

                                    EXHIBIT A

                             [FORM OF FACE OF NOTE]

                           [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 SUCH NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO SUCH 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 OWNED HEREOF 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.

<PAGE>   61

No. ______________

                                                            Cusip No. __________

                         COEUR D'ALENE MINES CORPORATION
                    13 3/8% CONVERTIBLE SENIOR SUBORDINATED NOTE
                                    DUE 2003

                         COEUR D'ALENE MINES CORPORATION

        Coeur D'Alene Mines Corporation, an Idaho corporation (the "Company")
promises to pay to ____________________________________________ or registered
assigns, the principal sum indicated on Schedule A hereof on December 31, 2003,
and to pay interest thereon in the manner set forth on the reverse hereof
accruing from [_____], 2001 at the rate of 13 3/8% per annum.

<TABLE>
<S>                                 <C>
        Interest Payment Dates:     June 30 and December 31, commencing December 31, 2001

        Record Dates:               June 15 and December 15
</TABLE>

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

<PAGE>   62

        IN WITNESS WHEREOF, Coeur D'Alene Mines Corporation has caused this
Convertible Note to be signed manually or by facsimile by its duly authorized
officers.

Dated: _______________

                                       COEUR D'ALENE MINES CORPORATION

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

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

[Seal]

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

This is one of the 13 3/8% Convertible Senior Subordinated Notes due December
31, 2003 described in the within-mentioned Indenture.

THE BANK OF NEW YORK,
as Trustee

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

<PAGE>   63

                         COEUR D'ALENE MINES CORPORATION

       13 3/8% CONVERTIBLE SENIOR SUBORDINATED NOTE DUE DECEMBER 31, 2003

        1.     Interest. Coeur D'Alene Mines Corporation, an Idaho corporation
(the "Company"), is the issuer of this 13 3/8% Convertible Senior Subordinated
Note due December 31, 2003 (the "Convertible Note"). The Company promises to
pay interest on the Convertible Notes in cash or in Common Stock, at the option
of the Company, semiannually on each June 30 and December 31, commencing on
December 31, 2001, to holders of record on the immediately preceding June 15
and December 15.

               In the event that the Company elects to pay interest in the
Company's Common Stock, such Common Stock will be valued at 90% of the average
of the Daily Market Price for the five trading days immediately preceding the
second Trading Day prior to the interest payment date.

               Interest on the Convertible Notes will accrue from the most
recent date to which interest has been paid, or if no interest has been paid,
from December 31, 2001. Interest will be computed on the basis of a 360-day year
of twelve 30-day months. To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace period)
at the rate borne by the Convertible Notes, compounded annually.

        2.     Method of Payment. The Company will pay interest on the
Convertible Notes (except defaulted interest) to the persons who are registered
holders of the Convertible Notes entitled to such payments at the close of
business on the record date for the next interest payment date even though
Convertible Notes are canceled after the record date and on or before the
interest payment date. The Noteholder hereof must surrender Convertible Notes 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. However, the Company may pay
principal and interest by check payable in such money. It may mail an interest
check to a holder's registered Address.

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

        4.     Indenture. The Company issued the Convertible Notes under an
indenture, dated as of [July __], 2001 (the "Indenture"), between the Company
and The Bank of New York, as Trustee. The terms of the Convertible Notes include
those stated in the Indenture (which is incorporated hereby as though fully set
forth herein) and those made part of the Indenture by the Trust Indenture Act of
1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
Indenture. The Convertible Notes are subject to, and ratified by, all such
terms, certain of which are summarized hereon, and Noteholders are referred to
the Indenture and such Act for a statement of such terms. The Convertible Notes
are unsecured obligations of the Company limited to (except as otherwise

<PAGE>   64

provided in the Indenture) up to an aggregate principal amount of $[---], and
are subordinated in right of payment to all existing and future Senior Debt of
the Company as provided in the Indenture. The Indenture does not limit the
ability of the Company or any of its Subsidiaries to incur indebtedness or to
grant security interests or liens in respect of their assets. Any holder of this
Convertible Note shall be deemed to have agreed to and be bound by all the terms
and conditions contained in the Indenture applicable to a holder of a
Convertible Note. All capitalized terms herein that are not otherwise defined
shall have the meaning ascribed thereto in the Indenture.

        5.     Optional Redemption. The Convertible Notes are not subject to
redemption at the Company's option prior to [---], 2003. On such date and
thereafter, the Convertible Notes will be subject to redemption at the option of
the Company, in whole or in part (in any integral multiple of $1,000), upon not
less than 20 nor more than 30 days' prior notice by mail at the following
redemption price (expressed as a percentage of the principal amount set forth
below):

<TABLE>
<CAPTION>
                                                                         REDEMPTION
                                   YEAR PRICE
     -----------------------------------------------------------   ------------------------
<S>                                                               <C>
     Beginning on [___], 2003 and ending on December 30, 2003              102.675%

     December 31, 2003                                                      100%
</TABLE>

in each case together with accrued and unpaid interest up to but not including
the redemption date (subject to the right of holders of record an the relevant
record date to receive interest due on an interest payment date). On or after
the redemption date, interest will cease to accrue on the Convertible Notes, or
portion thereof, called for redemption.

        6.     Notice of Redemption. Notice of redemption will be mailed at
least 15 days but not more than 60 days before the redemption date to each
holder of the Convertible Notes to be redeemed at his address of record. The
Convertible Notes in denominations larger than $1,000 may be redeemed in part
but only in integral multiples of $1,000. In the event of a redemption of less
than all of the Convertible Notes, the Convertible Notes will be chosen for
redemption by the Trustee in accordance with the Indenture. Unless the Company
defaults in making such redemption payment, or the Paying Agent is prohibited
from making such payment pursuant to the Indenture, interest cease to accrue on
the Convertible Notes or portions of them called for redemption on and after the
redemption date.

        If this Convertible Note is redeemed subsequent to a record date with
respect to any interest payment date specified above and on or prior to such
interest payment date, then any accrued interest payable on such interest
payment date will be paid to the person in whose name this Convertible Note is
registered at the close of business on such record date.

<PAGE>   65

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

        8.     Repurchase at Option of Holder. If there is a Designated Event,
the Company shall be required to offer to purchase on the Designated Event
Payment Date all outstanding Convertible Notes at a purchase price equal to 100%
of the principal amount thereof on the date of purchase, plus accrued and unpaid
interest to the Designated Event Payment Date, plus an amount payable in cash
equal to two years' interest on the securities, less any interest actually paid
to the Designated Event Payment Date. Holders of Convertible Notes that are
subject to such a Designated Event Offer will be mailed a notice of Designated
Event Offer from the Company prior to any related Designated Event Payment Date
and, in accordance with the procedures and terms set forth in the Indenture, may
elect to have such Convertible Notes or portions thereof in authorized
denominations purchased by completing the form entitled "Option of Noteholder To
Elect Purchase." Noteholders have the right to withdraw their election by
delivering a written notice of withdrawal to the Paying Agent in accordance with
the terms of the Indenture.

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

        10.    Conversion. The holder of any Convertible Note has the right at
any time prior to the close of business (New York time) on the date of the
Convertible Note's maturity, to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $1,000) into shares of Common
Stock at the initial Conversion Price of [$_____] per share, subject to
adjustment under certain circumstances as more fully described in the Indenture,
except that if a Convertible Note is called for redemption, the conversion right
will terminate at the close of business on the Business Day immediately
preceding the date fixed for redemption.

        To convert a Convertible Note, a holder must (1) complete and sign a
notice of election to convert substantially in the form set forth below, (2)
surrender the Convertible Note to a Conversion Agent, (3) furnish appropriate
endorsements or transfer documents if required by the Registrar or Conversion
Agent and (4) pay any transfer or similar tax, if required. Upon conversion, no
adjustment or payment will be made for interest or dividends, but if any
Noteholder surrenders a Convertible Note for conversion after the close of
business on the record date for the payment of an installment of interest and
prior to the opening of business on the next interest payment date, then,
notwithstanding such conversion, the interest payable on such interest payment
date will be paid to the registered holder of such Convertible Note on such
record date. In such event, such Convertible Note, when surrendered for
conversion, must be accompanied by payment in funds acceptable to the Company of
an amount equal to the interest payable on such interest payment date on the
portion so converted. The number of shares of Common Stock issuable upon
conversion of a Convertible Note

<PAGE>   66

is determined by dividing the principal amount of the Convertible Note converted
by the Conversion Price in effect on the Conversion Date. No fractional shares
will be issued upon conversion but a cash adjustment will be made for any
fractional interest.

        A Convertible Note in respect of which a holder has delivered an "Option
of Noteholder to Elect Purchase" form appearing below exercising the option of
such holder to require the Company to purchase such Convertible Note may be
converted only if the notice of exercise is withdrawn as provided above and in
accordance with the terms of the Indenture. The above description of conversion
of the Convertible Notes is qualified by reference to, and is subject in its
entirety by, the more complete description thereof contained in the Indenture.

        11.    Automatic Conversion by Company. If at any time the Daily Market
Price of the Company's Common Stock exceeds 200% of the Conversion Price for at
least 20 Trading Days during a 30-day trading day period, the Company may elect
to automatically convert the Convertible Notes pursuant to the terms of the
Indenture. In the event that the date that the Securities will be automatically
converted occurs on or prior to [---], 2003, the Company will pay Additional
Interest in cash or, at the Company's election, in Common Stock to the Holders.
The Company may elect to pay Additional Interest, if any, on the Convertible
Notes in Common Stock, which shares of Common Stock will be valued at 90% of the
average of the Daily Market Price for the five Trading Days immediately
preceding the second Trading Day preceding the date of the Automatic Conversion.
In the event of an Automatic Conversion on or prior to [---], 2003, each Holder
of the Convertible Notes will receive Additional Interest in an amount of $[___]
in Common Stock or cash at the election of the Company per each $1,000 principal
amount of the Convertible Notes, less any interest actually paid or provided for
prior to the date of the Automatic Conversion.

        12.    Voluntary Conversion by Holder. If any Holder elects to
voluntarily convert their Convertible Notes at any time on or prior to [---],
2003, such Holders will receive a payment of Additional Voluntary Conversion
Interest upon conversion so long as the Company has not previously mailed an
automatic conversion notice to Holders. The Company will pay Additional
Voluntary Conversion Interest upon conversion equal to two years of interest,
less any interest actually paid or provided for prior to the date of the
voluntary conversion, payable at the Company's option in cash or Common Stock,
or a combination of cash and Common Stock, valued at the Conversion Price.

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

<PAGE>   67

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

        15.    Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for the shorter of two years after such payment was
due or a period ending 10 Business Days prior to the date, such funds would
escheat to the State, the Trustee and the Paying Agent shall pay the money back
to the Company at its request. After that, Noteholders of Convertible Notes
entitled to the money must look to the Company for payment unless an abandoned
property law designates another person and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.

        16.    Defaults and Remedies. The Convertible Notes shall have the
Events of Default as set forth in Section 8.1 of the Indenture. Subject to
certain limitations in the Indenture, if an Event of Default occurs and is
continuing, the Trustee by notice to the Company or the Noteholders of at least
25% in aggregate principal amount of the then outstanding Convertible Notes by
notice to the Company and the Trustee may declare all the Convertible Notes to
be due and payable immediately, except that in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all unpaid principal,
interest accrued on the Convertible Notes shall become due and payable
immediately without further action or notice. Upon acceleration as described in
either of the preceding sentences, the subordination provisions of the Indenture
preclude any payment being made to Noteholders for at least 5 days except as
otherwise provided in the Indenture and may preclude payment entirely.

        The Noteholders of a majority in principal amount of the Convertible
Notes then outstanding by written 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 the acceleration. Noteholders may not enforce the Indenture or the
Convertible Notes except as provided in the Indenture. Subject to certain
limitations, Noteholders of a majority in principal amount of the then
outstanding Convertible Notes issued under the Indenture may direct the Trustee
in its exercise of any trust or power. The Company must furnish compliance
certificates to the Trustee annually. The above description of Events of Default
and remedies is qualified by reference to, and subject in its entirety by, the
more complete description thereof contained in the Indenture.

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

<PAGE>   68

TIA, and to comply with the requirements of the SEC in order to maintain the
qualification of the Indenture under the TIA.

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

        19.    No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Convertible Notes or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder, by accepting a Convertible Note, waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Convertible Notes.

        20.    Governing Law.  THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE CONVERTIBLE NOTES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.

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

        22.    Abbreviations. Customary abbreviations may be used in the name of
a Noteholder or an assignee, such as: TEN COM (for tenants in common), TEN ENT
(for tenants by the entireties), JT TEN (for joint tenants with right of
survivorship and not as tenants in common), CUST (for Custodian), and U/G/M/A
(for Uniform Gifts to Minors Act).

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

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

               Coeur D'Alene Mines Corporation
               505 Front Avenue
               Coeur D'Alene, Idaho 83814
               Attention of:  Investor Relations

<PAGE>   69

                      [TO BE ATTACHED TO GLOBAL SECURITIES]

                                   SCHEDULE A

        The initial principal amount at maturity of this Global Security shall
be $__________. The following increases or decreases in the principal amount of
this Global Security have been made:

<TABLE>
<CAPTION>
              AMOUNT OF INCREASE                                                     SIGNATURE OF
              IN PRINCIPAL AMOUNT                           PRINCIPAL ANOUNT OF       AUTHORIZED
                OF THIS GLOBAL                                  THIS GLOBAL           OFFICER OF
              SECURITY INCLUDING    AMOUNT OF DECREASE IN    SECURITY FOLLOWING       TRUSTEE OR
   DATE      UPON EXERCISE OF THE    PRINCIPAL AMOUNT OF      SUCH DECREASE OR        SECURITIES
   MADE      OVER-ALLOTMENT OPTION   THIS GLOBAL SECURITY         INCREASE            CUSTODIAN
------------ ---------------------- ----------------------- --------------------- -------------------
<S>          <C>                    <C>                     <C>                   <C>
------------ ---------------------- ----------------------- --------------------- -------------------

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

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

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

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

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

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

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

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

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

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

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

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

------------ ---------------------- ----------------------- --------------------- -------------------
</TABLE>

<PAGE>   70

                     OPTION OF NOTEHOLDER TO ELECT PURCHASE

        If you want to elect to have this Convertible Note or a portion thereof
repurchased by the Company pursuant to Section 3.8 or 4.7 of the Indenture,
check the box: [ ]

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

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

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

        Signature Guarantee:(1)
                               ------------------------------------------------

--------

        (1)    Signature must be guaranteed by a commercial bank, trust
               company or member firm of the New York Stock Exchange.

<PAGE>   71

                               ELECTION TO CONVERT

To:  Coeur D'Alene Mines Corporation

        The undersigned owner of $________ in principal of Coeur D'Alene Mines
Corporation's 13 3/8% Convertible Senior Subordinated Notes due December 31,
2003 (the "Convertible Note") hereby irrevocably exercises the option to convert
the Convertible Note, or the portion below designated, into Common Stock of
Coeur D'Alene Mines Corporation in accordance with the terms of the Indenture
referred to in the Convertible Note, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.

Date:

                                                Amount of Convertible Note to
                                                be converted ($1,000 or
                                                integral multiples thereof);
                                                $
                                                 -------------------

                                                Signature (for conversion only)

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

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

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

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

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

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

                                                -----------------------------
                                                Signature Guarantee(2)

--------

        (2)    Signature must be guaranteed by a commercial bank, trust company
               or member firm of the New York Stock Exchange.<PAGE>   1
                                                                    EXHIBIT 10.6

                            ASSET PURCHASE AGREEMENT

                            Dated as of May 25, 2001

                                  by and among

                                  PFSWEB, INC.,

                       PRIORITY FULFILLMENT SERVICES, INC.

                                 DAISYTEK, INC.

                                       and

                       DAISYTEK INTERNATIONAL CORPORATION

<PAGE>   2

<TABLE>
<S>                <C>
SCHEDULE
2.1A               Assets
2.1B               Excluded Assets
2.2                Assumed Liabilities
2.4                Employees to Whom Seller May Offer Employment
2.4(c)             Wages of Transferring Employees and Assumed Employee Expenses
3.2                Cash Payment Adjustments
3.3                Allocation of Purchase Price
3.5                Proration of Taxes
3.6                Proration of Utilities
3.8                Required Consents
4.2                Authority - Non-contravention
4.3                Leased Real Property
4.4                Personal Property
4.6                Material Permits
4.9                Contract Defaults
4.13               Benefit Plans
4.14               Employees
4.15               Consents
4.16               Insurance
4.17               Contested Taxes
4.21               Guaranteed Agreements
5.3                Purchaser Consents Required
7.2                IBM Agreements
12                 Ongoing Expenses
14.1               Expenses

EXHIBITS
A                  Bill of Sale and Assignment
B                  Assumption Agreement
C                  Termination Agreement
D                  Transition Agreement
E                  Private Letter Ruling
</TABLE>

<PAGE>   3

                            ASSET PURCHASE AGREEMENT

         THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 25th day of May, 2001, by and among Priority Fulfillment
Services, Inc., a Delaware corporation with its principal offices at 500 North
Central Expressway, Plano, Texas 75074 ("Seller"), PFSweb, Inc., a Delaware
corporation with its principal offices at 500 North Central Expressway, Plano,
Texas 75074 ("PFSweb"), Daisytek, Inc., a Delaware corporation with its
principal offices at 1025 Central Expressway South, Suite 200, Allen, Texas
75013 ("Purchaser"), and Daisytek International Corporation, a Delaware
corporation with its principal offices at 1025 Central Expressway South, Suite
200, Allen, Texas 75013 ("Parent").

         WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
buy from Seller, all of the assets of Seller used in its business operations
(other than the Excluded Assets) to provide comprehensive outsourcing solutions
to Purchaser and B.A. Pargh Company (the "Business"); and

         WHEREAS, Purchaser is a wholly-owned subsidiary of Parent and Parent
will benefit from Purchaser's purchase of all of Seller's assets used in the
Business (other than the Excluded Assets); and

         WHEREAS, Seller is a wholly-owned subsidiary of PFSweb and PFSweb will
benefit from Seller's sale of all of its assets used in the Business (other than
the Excluded Assets); and

         NOW, THEREFORE, for and in consideration of the mutual representations,
warranties, covenants and agreements hereinafter set forth and other good and
valuable consideration, and upon the terms and subject to the conditions
hereinafter set forth, the parties do hereby agree as follows:

                                   ARTICLE I
                                   DEFINITIONS

         1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:

                           "Action" means any claim, action, suit or arbitration
         in each case, by or before any Governing Authority.

                           "Additional Documents" means the Bill of Sale and
         Assignment, the Assumption Agreement, the Termination Agreement and the
         Transition Agreement.

                           "Affiliate" means, with respect to any specified
         Person, any other Person that directly, or indirectly through one or
         more intermediaries, Controls, is Controlled by, or is Under Common
         Control With, such specified Person.

                           "Assets" has the meaning specified in Section 2.1.

<PAGE>   4

                           "Assumed Contracts" has the meaning specified in
         Section 4.8.

                           "Assumed Employee Expenses" has the meaning specified
         in Section 2.4(d).

                           "Assumed Liabilities" has the meaning specified in
         Section 2.2.

                           "Assumption Agreement" shall mean that certain
         Assignment and Assumption Agreement in the form of that attached hereto
         as Exhibit B to be executed by Purchaser, Seller and such third parties
         as Purchaser may request.

                           "Bill of Sale and Assignment" shall mean that certain
         Bill of Sale and Assignment in the form of that attached hereto as
         Exhibit A to be executed by Seller and such Affiliates of Seller as
         Purchaser may request.

                           "BSD" has the meaning specified in Section 7.2.

                           "BSD Business" has the meaning specified in Section
         7.2.

                           "BSD Group" has the meaning specified in Section 7.2.

                           "Business" has the meaning set forth in the recitals
         of this Agreement.

                           "Business Day" means any day that is not a Saturday,
         a Sunday or other day on which banks are required or authorized by law
         to be closed in The City of New York.

                           "Cash Payment" has the meaning specified in Section
         3.2(a).

                           "CERCLA" means the Comprehensive Environmental
         Response, Compensation and Liability Act of 1980, as amended, and the
         rules and regulations promulgated thereunder.

                           "CERCLIS" means the Comprehensive Environmental
         Response, Compensation and Liability Information System.

                           "Claims" means any debts, contracts, leases,
         liabilities, arrangements, commitments, obligations, restrictions,
         disabilities or duties whatsoever, whether known or unknown, contingent
         or absolute, tort or contract.

                           "Closing" and "Closing Date" have the meanings
         specified in Section 8.1.

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

                           "Control" (including the terms "Controlled By" and
         "Under Common Control With"), with respect to the relationship between
         or among two or more Persons, means the possession, directly or
         indirectly or as trustee, personal representative or executor, of the
         power to direct or cause the direction of the affairs or management of
         a

<PAGE>   5

         Person, whether through the ownership of voting securities, as trustee,
         personal representative or executor, by contract or otherwise,
         including, without limitation, the ownership, directly or indirectly,
         of securities having the power to elect a majority of the board of
         directors or similar body governing the affairs of such Person.

                           "Controlled Group" has the meaning specified in the
         Ruling.

                           "Deferred Payment" and "Deferred Payments" have the
         meanings specified in Section 3.2(b).

                           "Distributing Group" has the meaning specified in the
         Ruling.

                           "Employee Claims" has the meaning specified in
         Section 13.3.

                           "Encumbrance" means any security interest, pledge,
         mortgage, lien (including, without limitation, environmental and tax
         liens), charge, encumbrance, adverse claim, preferential arrangement,
         or restriction of any kind other than (a) mechanic's, materialman's,
         and similar liens for work completed but for which payment is not yet
         due; (b) liens for taxes not yet due and payable or for taxes that the
         taxpayer is contesting (and which contest has been disclosed on
         Schedule 4.17 with respect to Seller) in good faith through appropriate
         proceedings; or (c) with respect to leased Assets, the interest of the
         lessor, or any party claiming through the lessor, therein.

                           "Environmental Laws" means any federal, state or
         local law or any foreign law, including any statute, rule, regulation,
         ordinance, code or rule of common law, now or hereafter in effect and
         in each case as amended, including any judicial or administrative
         order, consent decree or judgment, relating to the environment, health,
         safety or Hazardous Materials, including, without limitation, CERCLA;
         CERCLIS; the Resource Conservation and Recovery Act, 42 U.S.C. Sections
         6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
         Sections 1801 et seq.; the Clean Water Act, 33 U.S.C. ss.ss. 1251 et
         seq.; the Toxic Substances Control Act, 15 U.S.C Sections 2601 et seq.;
         the Clean Air Act, 42 U.S.C Sections 7401 et seq.; the Safe Drinking
         Water Act, 42 U.S.C Sections 300f et seq.; the Atomic Energy Act, 42
         U.S.C Sections 2011 et seq.; the Federal Insecticide, Fungicide and
         Rodenticide Act, 7 U.S.C Sections 136 et seq.; Emergency Planning and
         Community Right-to-Know Act, 42 U.S.C Sections 11001 et seq.; the
         Occupational Safety and Health Act, 29 U.S.C Sections 651 et seq.; and
         the Superfund Amendments and Reauthorization Act, 42 U.S.C Sections
         9601 et seq.

                           "Environmental Permits" means all permits, written
         approvals, U.S. Environmental Protection Agency or state generator
         numbers, licenses and other authorizations from applicable Governing
         Authorities required under any applicable Environmental Law.

                           "ERISA" means the Employee Retirement Income Security
         Act of 1974, as amended, and the rules and regulations promulgated
         thereunder.

<PAGE>   6

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

                           "Excluded Assets" has the meaning specified in
         Section 2.1.

                           "Excluded Claims" has the meaning specified in
         Section 2.2.

                           "GAAP" means United States generally accepted
         accounting principles and practices in effect from time to time applied
         consistently throughout the periods involved.

                           "Governmental Actions" means all authorizations,
         consents, approvals, waivers, exceptions, variances, franchises,
         permissions, permits and licenses of, and filings and declarations
         with, by or in respect of, Governing Authorities.

                           "Governing Authority" means any United States
         federal, state, local, possession or foreign governmental, regulatory
         or administrative authority, agency or commission, or any political
         subdivision thereof, or any court, tribunal or arbitral body (whether
         governmental or not).

                           "Governmental Order" means any order, writ, judgment,
         injunction, decree, stipulation, determination or award entered by or
         with any Governing Authority.

                           "Guaranteed Agreements" has the meaning specified in
         Section 4.21.

                           "Guaranty Revocation Date" has the meaning specified
         in Section 4.21.

                           "Hazardous Materials" means (a) petroleum and
         petroleum fuels, lubricants and cleaning agents, radioactive materials,
         friable asbestos material as defined under 40 C.F.R. 61.141, urea
         formaldehyde foam insulation, transformers or other equipment that
         contain polychlorinated biphenyls in concentrations of 50 ppm, and
         radon gas; (b) any other pollutants, contaminants, wastes, chemicals,
         materials or substances defined as or included in the definition of
         "hazardous substances", "hazardous wastes", "hazardous materials",
         "toxic substances", "contaminants", "pollutants" or "extremely
         hazardous wastes" or words of similar import, under any applicable
         Environmental Law or otherwise subject to regulation, control or
         remediation under Environmental Laws; and (c) any other pollutant,
         contaminant, waste, chemical, material or substance exposure to which
         is regulated pursuant to any applicable Environmental Law.

                           "IBM Agreements" has the meaning specified in Section
         7.2.

                           "IBM Products" has the meaning specified in Section
         7.2.

                           "Income Taxes" means any and all income taxes
         (together with any and all interest, penalties, and additional amounts
         imposed with respect thereto) imposed by any government or taxing
         authority.

                           "Indemnified Party" has the meaning specified in
         Section 13.5.

<PAGE>   7
                           "Indemnification Notice" has the meaning specified in
         Section 13.5.

                           "Indemnifying Party" has the meaning specified in
         section 13.5.

                           "IRS" means the Internal Revenue Service.

                           "Knowledge" (including the terms "to the knowledge
         of" or "to the best knowledge of") means, with respect to Seller, the
         actual personal knowledge of Mark Layton, Scott Talley, Steve Graham,
         Cliff Defee, Tom Madden, Chris Yates at the time when the applicable
         statement is made.

                           "Laws" means all laws, statutes, rules, regulations,
         ordinances and other pronouncements having the effect of law of the
         United States, any foreign country or any domestic or foreign state,
         county, city or other political subdivision or of any Governing
         Authority.

                           "Leased Real Property" means the "Demised Premises"
         defined in that certain Industrial Lease Agreement dated March 31, 1999
         between New York Life Insurance Company, as landlord, and Daisytek,
         Inc., as tenant, as assigned to Seller pursuant to that certain
         Assignment of Industrial Lease Agreement dated May 9, 2000

                           "Losses" has the meaning specified in Section 13.4.

                           "Material Adverse Effect" means any circumstance,
         change in, or effect on, the Business or the Assets that individually,
         or in the aggregate with any other circumstances, changes in, or
         effects on, the Business or the Assets, taken as a whole would
         materially adversely affect the ability of Purchaser to operate or
         conduct the Business in the manner in which it is currently operated or
         conducted by Seller or utilize the Assets in the manner in which they
         are currently utilized by Seller.

                           "Material Permits" has the meaning specified in
         Section 4.6.

                           "MMH Certificate" has the meaning set forth in
         Section 6.5.

                           "Objection Period" has the meaning specified in
         Section 13.9(a).

                           "Parent" has the meaning specified in the opening
         paragraph.

                           "Person" means any individual, partnership, firm,
         corporation, association, trust, unincorporated organization or other
         entity, as well as any syndicate or group that would be deemed to be a
         person under Section 13(d)(3) of the Exchange Act.

                           "PFS Group" has the meaning specified in Section 7.2.

                           "PFSweb" has the meaning specified in the opening
         paragraph.

                           "Plans" has the meaning specified in Section 4.13.

<PAGE>   8

                           "Private Actions" means all authorizations, consents,
         approvals, waivers, exceptions, variances, franchises, permissions,
         permits and licenses of (a) Persons other than Governing Authorities
         and (b) Governing Authorities acting in private capacities.

                           "Purchase" has the meaning specified in the Ruling.

                           "Purchase Price" has the meaning specified in Section
         3.1.

                           "Purchaser" has the meaning specified in the opening
         paragraph.

                           "Purchaser's Losses" has the meaning specified in
         Section 13.2.

                           "Recalculation Notice" has the meaning specified in
         Section 3.5.

                           "Remedial Action" means all action required under any
         applicable Environmental Law or Environmental Permit and all action
         required by a Governing Authority to (i) clean up, remove, treat or
         handle in any other way Hazardous Materials in the environment; (ii)
         prevent the release of Hazardous Materials so that they do not migrate,
         endanger or threaten to endanger public health or the environment; or
         (iii) perform remedial investigations, feasibility studies, corrective
         actions, closures, and postremedial or postclosure studies,
         investigations, operations, maintenance and monitoring on, about or in
         any real property, including, without limitation, Seller's Leased Real
         Property.

                           "Required Consents" means all orders, approvals,
         estoppel certificates or consents of the Seller's Board of Directors
         and any third parties, including, without limitation, any orders,
         approvals, certificates or consents deemed necessary by counsel to
         Purchaser which shall be required to consummate the transactions
         contemplated hereby, including, without limitation, consents to the
         assignment of the Assumed Liabilities listed on Schedule 2.2.

                           "Ruling" means that certain IRS Private Letter Ruling
         120721-01, a copy of which is attached hereto as Exhibit E.

                           "SASA" has the meaning specified in Section 2.5.

                           "Seller" has the meaning specified in the opening
         paragraph.

                           "Seller Commercial Software Rights" means packaged
         commercially available software programs generally available to the
         public through retail dealers in computer software which have been
         licensed to Seller and which are used in Seller's business but are in
         no way a component of or incorporated in any of Seller's products and
         related trademarks, technology and know-how.

                           "Seller's Bank Account" means the account to be
         designated by the Seller in a written notice to Purchaser not less than
         five Business Days before the Closing.

                           "Seller's Losses" has the meaning specified in
         Section 13.4.

<PAGE>   9

                           "Separation" has the meaning specified in the Ruling.

                           "Service Level Penalties" has the meaning specified
         in the Transition Agreement.

                           "Services" has the meaning specified in Section 7.2.

                           "Spin-off" means the transaction in which the Parent
         distributed its ownership interest in PFSweb to its stockholders.

                           "Supplemental Ruling Request" has the meaning
         specified in Section 4.11.

                           "Tax" or "Taxes" means any and all taxes, fees,
         levies, duties, tariffs, imposts, and other charges of any kind
         (together with any and all interest, penalties, additions to tax and
         additional amounts imposed with respect thereto) imposed by any
         government or taxing authority, including, without limitation: taxes or
         other charges on or with respect to income, franchises, windfall or
         other profits, gross receipts, property, sales, use, capital stock,
         payroll, employment, social security, workers' compensation,
         unemployment compensation, or net worth; taxes or other charges in the
         nature of excise, withholding, ad valorem, stamp, transfer, value
         added, or gains taxes; sales and use taxes charged by the U.S. federal
         government, any state, country or any other locality; license,
         registration and documentation fees; and customs' duties, tariffs, and
         similar charges.

                           "Tax Allocation Agreement" shall mean that certain
         Tax Indemnification and Allocation Agreement dated as of December 7,
         1999 between the Parent and PFSweb.

                           "Termination Agreement" shall mean that certain
         Termination Agreement in the form of that attached hereto as Exhibit C
         to be executed by Purchaser, Parent, Seller and such Affiliates of
         Parent and Seller as the other may request.

                           "TMSA" has the meaning specified in Section 2.5.

                           "Transferring Employee" has the meaning specified in
         Section 2.4(a).

                           "Transition Agreement" shall mean that certain
         Transition Services Agreement in the form of that attached hereto as
         Exhibit D to be executed by Parent and PFSweb.

                           "Vendor Debt" has the meaning specified in Section
         9.8.

                           "WARN Act" means the Worker Adjustment and Retraining
         Notification Act of 1988, as amended.

<PAGE>   10

                                   ARTICLE II
                                PURCHASE AND SALE

         2.1 Purchase and Sale of Assets. Effective at the Closing, Seller will
sell, convey, transfer, assign and deliver to Purchaser, and Purchaser will
acquire and accept from Seller, the assets and properties listed on Schedule
2.1A (collectively, the "Assets"), free and clear of any and all Encumbrances
provided, however, that "Assets" shall not include, and Seller will not sell,
convey, transfer, assign or deliver to Purchaser, and Purchaser will not acquire
from Seller, (i) the corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of the Seller as a corporation,
(ii) any of the rights of the Seller under this Agreement, (iii) claims (and
benefits to the extent they arise therefrom) that relate to Seller's liabilities
other than the Assumed Liabilities, (iv) all of Seller's cash, bank accounts,
certificates of deposit, securities and accounts receivable, (v) insurance
policies of Seller and proceeds and the deposits related thereto to the extent
such policies are not expressly assumed by Purchaser and Parent, and (vi) the
items listed on Schedule 2.1B (collectively, the "Excluded Assets").

         2.2 Assumption of Certain Obligations. Effective at the Closing and
subject to the terms set forth herein, Purchaser shall assume and be liable
solely for the liabilities and obligations of Seller listed on Schedule 2.2,
including the Assumed Employee Expenses (collectively, the "Assumed
Liabilities"). Purchaser will not assume and will not be liable for and Seller
will be liable and will pay for any Claims: (i) of the Seller or of its
Affiliates or (ii) which arise from or relate to the ownership, use, sale,
manufacture, design, possession, operation or control of the Assets or operation
of the Business prior to the Closing Date (collectively, "Excluded Claims");
other than the Assumed Liabilities and only in the amounts set forth on Schedule
2.2. Furthermore, Purchaser will not assume and Seller shall remain liable for
all tax liabilities, including, but not limited to, personal property taxes and
income taxes, incurred, imposed upon or accrued by the Seller through the
Closing Date, as more fully described in Section 3.5.

         2.3 Transfer and Conveyance. Seller shall execute and deliver to
Purchaser at the Closing, a Bill of Sale and Assignment in substantially the
form attached hereto as Exhibit A, the Assumption Agreement in substantially the
form attached hereto as Exhibit B, and all such other assignments, endorsements
and instruments of transfer as shall be necessary or appropriate to carry out
the intent of this Agreement and as shall be sufficient to vest in Purchaser
title to all of the Assets free and clear of any Encumbrances and to evidence
Purchaser's assumption of the Assumed Liabilities.

         2.4 Employees and Agents of Seller.

             (a) On the Closing Date, Purchaser shall offer the employees of
Seller listed on Schedule 2.4 (the "Transferring Employees") employment with the
Purchaser, on the terms mutually agreed to by the Purchaser and the employee.
Seller hereby agrees to such solicitation and agrees to encourage such employees
to go to work for the Purchaser and not to discourage any individuals who are
offered employment with Purchaser from accepting such employment with Purchaser.

<PAGE>   11

             (b) Purchaser and Parent will not assume sponsorship of any of the
Seller's Plans.

             (c) Effective on the Closing, Seller shall terminate the employment
of all Transferring Employees, and indemnify and hold harmless the Purchaser and
Parent against all claims made by any Transferring Employee as set forth in
Section 13.3. Purchaser shall provide all Transferring Employees with wages and
benefits (other than stock options) which are comparable to the wages and
benefits as set forth on Schedule 2.4(c). Purchaser intends to provide certain
key Transferring Employees options to acquire Parent common stock pursuant to
the Parent's stock option plans but Purchaser shall have no obligation to
provide stock options to any Transferring Employee.

             (d) Effective as of the Closing Date, the Purchaser shall assume
the liability of the Seller in respect of the Transferring Employees for accrued
but unpaid salaries, wages, vacation and sick pay, but only to the extent such
liability is reflected on Schedule 2.4(c) hereto and not to include vacation
time accrued for any period before the last twelve (12) months (the "Assumed
Employee Expenses"). Except as set forth in the preceding sentence, Seller shall
remain responsible for payment of any and all other Employee Claims as provided
in Section 13.3 hereof.

             (e) Seller and Purchaser agree that Purchaser has purchased
substantially all the property used in a separate unit of Seller's trade or
business. Accordingly, pursuant to Rev. Proc. 96-60, 1996-2 C.B. 399, provided
that Seller provides Purchaser with all necessary payroll records for the
calendar year which includes the Closing Date, Purchaser shall furnish a Form
W-2 to each Transferring Employee disclosing all wages and other compensation
paid for such calendar year, and taxes withheld therefrom, and Seller shall be
relieved of the responsibility to do so.

             (f) Except as contemplated in this Section 2.4, for a period of one
year after Closing, Purchaser and Parent will not solicit for employment,
directly or indirectly, any employee of Seller or PFSweb. For a period of one
year after Closing, PFSweb and Seller will not solicit for employment, directly
or indirectly, any Transferring Employee or any employee of Purchaser or Parent.

         2.5 Termination of Certain Agreements. Each Party will execute the
Termination Agreement, the form of which is attached hereto as Exhibit C that
provides for the termination of the Transaction Management Services Agreement
dated December 7, 1999 between PFSweb, Inc./Priority Fulfillment Services, Inc.
and Daisytek, Inc., (the "TMSA") and the Strategic Alliance Services Agreement
dated July 15, 1999 between B.A. Pargh Company, a wholly-owned subsidiary of the
Purchaser, and PFSweb, Inc./Priority Fulfillment Services, Inc. (the "SASA").
Each Party will remain subject to the confidentiality provisions of the TMSA and
the SASA and such sections are hereby incorporated herein.

         2.6 Transition Agreement. Each Party will execute and deliver to the
other at the Closing, the Transition Agreement substantially in the form
attached hereto as Exhibit D.

<PAGE>   12

         2.7 Deposits. Effective at the Closing, Seller will sell, convey,
transfer, assign and deliver to Purchaser, and Purchaser will acquire and accept
from Seller, all rights to any deposits or advances made in connection with
leases for Assets.

                                  ARTICLE III
                                 PURCHASE PRICE

         3.1 Purchase Price. The purchase price (the "Purchase Price") for the
Assets shall be (a) Ten Million Dollars ($10,000,000) plus (b) the Deferred
Payments plus (c) the mutual execution and delivery of the Termination Agreement
including releases minus (d) the Assumed Employee Expenses (except for the sick
pay portion thereof), subject to the adjustments set forth in Sections 3.5 and
3.6 hereof.

         3.2 Method of Payment of Purchase Price Payable at the Closing. The
Purchase Price shall be delivered by Purchaser on the Closing Date and Purchaser
shall assume the Assumed Liabilities on the Closing Date as follows:

             (a) by wire transfer of immediately available funds to the Seller's
Bank Account in an amount equal to Ten Million Dollars ($10,000,000) (the "Cash
Payment"), subject to the adjustments as set forth on Schedule 3.2.

             (b) by payment of One Hundred Sixty-Six Thousand Six Hundred
Sixty-Six Dollars and Sixty-Six Cents ($166,666.66) on each of July 31, 2001,
August 31, 2001, September 28, 2001, October 31, 2001 and a final payment of
$333,333.44 on November 26, 2001 (each, a "DEFERRED PAYMENT" and collectively,
the "DEFERRED PAYMENTS") for aggregate Deferred Payments equal to One Million
Dollars ($1,000,000); provided that each Deferred Payment shall be subject to
the rights of offset set forth in this Agreement and the Transition Agreement.

             (c) by Purchaser's assumption of the obligations for Assumed
Employee Expenses.

             (d) by Purchaser's execution of the Termination Agreement in order
to effectuate the releases set forth therein.

             (e) by Purchaser's execution and delivery to Seller at the Closing
of an Assumption Agreement in substantially the form attached hereto as Exhibit
B.

         3.3 Allocation of Purchase Price. Subject to adjustment as set forth
herein, for tax purposes the Purchase Price shall be allocated among the Assets
and other matters as set forth on Schedule 3.3. Purchaser and Seller shall
report the allocation on Internal Revenue Service Form 8594 in a manner
consistent with the allocation provided in Schedule 3.3, subject to the
adjustments set forth herein.

         3.4 Right of Offset for Claims. Parent and Purchaser shall have the
option, in addition to and not in lieu of any other available rights or remedies
hereunder, in the event Seller is determined to owe any indemnification amount
in accordance with the procedures of Article

<PAGE>   13

XIII of this Agreement, and Seller fails to pay such amount, Parent and
Purchaser shall have the right to offset such amount against the Deferred
Payments and the amounts payable under the Transition Agreement, in each case,
respectively, in accordance with the terms and provisions set forth herein and
therein.

         3.5 Proration of Taxes. All real and personal property taxes and
special assessments payable but not yet due with respect to any of the Assets
shall be prorated between Seller and Purchaser as set forth on Schedule 3.5 on
the basis of actual days elapsed between the commencement of the current fiscal
tax year and the Closing Date, based on a 365-day year; provided that all such
taxes and assessments which Seller has agreed to pay on an installment basis
shall be paid in full at or prior to the Closing Date. In connection with such
proration of taxes, in the event that actual tax figures for the year of Closing
are not available at the Closing Date, an estimated, provisional proration of
taxes shall be made using tax figures from the preceding year together with such
increases or decreases thereof as Purchaser and Seller may agree. It is the
intent of the parties that the Seller shall be responsible for all tax
liabilities related to the Assets up to and including the Closing Date, and
Purchaser shall be responsible for all tax liabilities related to the Assets
following the Closing. In the event that one of the parties later receives a
bill showing such charges to be more or less than originally estimated, such
party shall send notice to the other party within thirty (30) days of such
receipt (the "Recalculation Notice") with a statement indicating the amount
overpaid or underpaid by such other party. The party that underpaid shall pay
the other party within thirty (30) days of receipt of the Recalculation Notice
unless such amount is disputed utilizing the procedures set forth in Section
13.9. All transfer taxes, if any, arising from the sale of the Assets shall be
borne by Seller.

         3.6 Proration of Utility Charges and Other Payments. In any case in
which the Closing Date shall fall on a date other than the date on which
payments are due, and for which a final billing has not been obtained by Seller,
with respect to any utility or similar regular periodic charge respecting the
Assets or the Leased Real Property including, but not limited to, common area
maintenance charges, any such utility or similar charge payable with respect to
the current period in which the Closing Date occurs shall be prorated between
Seller and Purchaser on the basis of the actual number of days elapsed from the
first day of such period to the Closing Date as set forth on Schedule 3.6. In
the event that one of the parties later receives a bill showing such charges to
be more or less than originally estimated, such party shall send a Recalculation
Notice to the other party within thirty (30) days of such receipt with a
statement indicating the amount overpaid or underpaid by such other party. The
party that underpaid shall pay the other party within thirty (30) days of
receipt of the Recalculation Notice unless such amount is disputed utilizing the
procedures set forth in Section 13.9. Appropriate adjustment shall also be made
at Closing to apportion the Assumed Liabilities so that Seller shall be
responsible for, and enjoy the benefits of, the Assumed Liabilities for the
period prior to and including the Closing Date, and Purchaser shall be
responsible for, and enjoy the benefits of, the Assumed Liabilities for the
period following the Closing Date.

         3.7 Additional Rights for Assets. Effective on the Closing Date, Seller
hereby constitutes and appoints Purchaser the true and lawful attorney of
Seller, with full power of substitution, in the name of Seller or Purchaser, but
on behalf of and for the benefit of Purchaser: (i) to demand and receive from
time to time any and all the Assets and to make endorsements and

<PAGE>   14

give receipts and releases for and in respect of the same and any part thereof;
(ii) to institute, prosecute, compromise and settle any and all Actions that
Purchaser may deem proper in order to assert or enforce any claim, right or
title of any kind in or to the Assets; (iii) to defend or compromise any or all
Actions in respect of any of the Assets; and (iv) to do all such acts and things
in relation to the matters set forth in the preceding clauses (i) through (iii)
as Purchaser shall deem desirable. Seller hereby acknowledges that the
appointment hereby made and the powers hereby granted are coupled with an
interest and are not and shall not be revocable by it in any manner or for any
reason. Seller shall deliver to Purchaser at Closing an acknowledged power of
attorney to the foregoing effect executed by Seller. Purchaser shall indemnify
and hold harmless Seller from any and all Losses caused by or arising out of any
breach of Law by Purchaser in its exercise of such power of attorney.

         3.8 Transfer and Conveyance. Notwithstanding anything contained herein
to the contrary, this Agreement shall not constitute an agreement to assign any
Asset or Assumed Contracts if an assignment or attempted assignment of the same
without the consent of another Person would constitute a breach thereof or in
any way impair the rights of Purchaser thereunder or give to any third party any
rights with respect thereto. If any such consent is not obtained prior to the
Closing Date or if an attempted assignment would be ineffective or would impair
Purchaser's rights under any such Asset or Assumed Contract so that it would not
receive all such rights and responsibilities, then, except for those required
consents set forth on Schedule 3.8, (i) Seller shall use commercially reasonable
efforts to provide or cause to be provided to Purchaser, to the extent permitted
by law, the benefits of any such Asset or Assumed Contract and (ii) in
consideration thereof Purchaser shall pay, perform and discharge on behalf of
Seller such of the Seller's liabilities thereunder to the extent that the
Purchaser would have been responsible if such consent or approval had been
obtained. In addition, Seller shall take such other actions as may reasonably be
requested by Purchaser in order to place Purchaser, insofar as reasonably
possible, in the same position as if such Asset or Assumed Contracts had been
transferred as contemplated hereby and so all the benefits and burdens relating
thereto, including possession, use, risk of loss, potential for gain and
dominion, control and command, shall inure to Purchaser. If and when such
consents and approvals are obtained, the transfer of the applicable Asset or
Assumed Contract shall be effected in accordance with the terms of this
Agreement.

                                   ARTICLE IV
               REPRESENTATIONS AND WARRANTIES OF SELLER AND PFSWEB

         The Seller and PFSweb, jointly and severally, represent and warrant to
the Purchaser as follows:

         4.1 Due Organization and Qualification. Each of Seller and PFSweb is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
own, lease or operate its properties and to carry on its business as it is
presently being operated and in the place where such properties are owned,
leased or operated and such business is conducted.

         4.2 Corporate Power and Authority. The execution, delivery and
performance of this Agreement and Additional Documents by Seller and PFSweb and
the consummation by them of

<PAGE>   15

the transactions contemplated hereby and thereby, have been duly authorized by
all requisite corporate action, including, but not limited to, Board of Director
approvals, and no vote of shareholders or further action or approval is required
to permit Seller and PFSweb to consummate the transactions contemplated hereby
and thereby. This Agreement and Additional Documents when executed and delivered
in accordance with the terms thereof, will constitute, the legal, valid and
binding obligations of Seller and PFSweb, enforceable in accordance with their
terms, Seller and PFSweb have full power, authority and legal right to enter
into this Agreement and the Additional Documents and to consummate the
transactions contemplated hereby and thereby. The making and performance of this
Agreement and the Additional Documents and the consummation of the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof
will not (a) conflict with the Certificate of Incorporation or the Bylaws of
Seller or PFSweb, (b) result in any breach or termination of, or constitute a
default under, or constitute an event that with notice or lapse of time, or
both, would become a default under, or result in the creation of any Encumbrance
upon any of the Assets under, or create any rights of termination, cancellation
or acceleration in any person under, any Assumed Contract, or violate any order,
writ, injunction or decree, to which Seller or PFSweb is a party, by which any
of the Assets, business or operations of Seller or PFSweb may be bound or
affected or under which any of the Assets, business or operations of Seller or
PFSweb receive benefits, except as set forth in Schedule 4.2, (c) result in the
loss or adverse modification of any license, franchise or permit granted to or
otherwise held by Seller or PFSweb required for the Business except as set forth
in Schedule 4.2 or (d) result in the violation of any provisions of law
applicable to Seller or PFSweb, the violation of which would reasonably be
expected to have a Material Adverse Effect. Based upon the Seller's estimate of
its going concern value, the Seller is not insolvent as of the date hereof, will
not be insolvent on the Closing Date and the transfer of the assets contemplated
hereby will not render it insolvent. The transactions contemplated hereby are
not being done with actual intent to hinder, delay, or defraud any entity to
which the Seller is, or reasonably expects to become, indebted on or after the
Closing Date. Based upon the PFSweb's estimate of its going concern value,
PFSweb is not insolvent as of the date hereof, will not be insolvent on the
Closing Date and the transfer of the assets contemplated hereby will not render
it insolvent. The transactions contemplated hereby are not being done with
actual intent to hinder, delay, or defraud any entity to which PFSweb is, or
reasonably expects to become, indebted on or after the Closing Date.

         4.3 Real Property.

             (a) Schedule 4.3 lists: (i) the address of Leased Real Property,
(ii) the identity of the lessor, lessee and current occupant (if different from
lessee) of the Leased Real Property and (iii) the term pertaining to the Leased
Real Property.

             (b) Except as described in Schedule 4.3, Seller has not received
any written notice of any violation of any law, regulation or ordinance relating
to any of the Leased Real Property. Seller has made available to Purchaser true
and correct copies of, if any, all certificates of occupancy, environmental
reports and appraisals which it currently possesses in respect of the Leased
Real Property. Seller, as the lessee of each parcel of Leased Real Property, is
in peaceful and undisturbed possession of such parcel of Leased Real Property,
and there are no contractual legal restrictions to which Seller or PFSweb is a
party which preclude or restrict the ability to use

<PAGE>   16

the subject premises for the purposes for which they are currently being used
which would reasonably be expected to have a Material Adverse Effect. Except as
set forth in Schedule 4.3, Seller has not leased or subleased any parcel of
Leased Real Property to any other Person, nor has Seller assigned its interest
under any lease or sublease set forth in Schedule 4.3 to any third party.

             (c) Seller has delivered to Purchaser correct and complete copies
of all leases and subleases set forth in Schedule 4.3 and any amendments. With
respect to each of these leases and subleases:

                           (i) such lease or sublease, as amended is legal,
         valid, binding, enforceable and in full force and effect with respect
         to Seller, and, to the knowledge of Seller, with respect to all other
         parties thereto and is the entire agreement between the parties thereto
         with respect to such property;

                           (ii) except as otherwise set forth in Schedule 4.3,
         such lease or sublease will not cease to be legal, valid, binding,
         enforceable and in full force and effect on terms identical to those
         currently in effect as a result of the consummation of the transactions
         contemplated by this Agreement, nor will the consummation of the
         transactions contemplated hereby constitute a breach or default under
         such lease or sublease or otherwise give the landlord a right to
         terminate, recapture or modify such lease or sublease;

                           (iii) except as otherwise disclosed in Schedule 4.3,
         with respect to each such lease or sublease: (A) Seller has not
         received any notice of cancellation or termination under such lease or
         sublease and, no lessor has any right of termination or cancellation
         under such lease or sublease except in connection with the default of
         Seller thereunder, (B) Seller has not received any notice of a breach
         or default by Seller under such lease or sublease, and (C) Seller has
         not granted to any other Person any material rights, adverse or
         otherwise, under such lease or sublease; or

                           (iv) except as set forth in Schedule 4.3, neither
         Seller nor, to Seller's Knowledge, any other party to such lease or
         sublease is in breach or default in any respect, and no event has
         occurred that, with notice or lapse of time, would constitute such a
         breach or default by Seller or any other party to such lease or
         sublease or permit termination or acceleration of such lease or
         sublease.

             (d) Seller has received no written notice of the commencement of
any condemnation proceedings or eminent domain proceedings of any kind against
the Leased Real Property. To Seller's Knowledge, there are no condemnation
proceedings or eminent domain proceedings of any kind threatened against the
Leased Real Property.

         4.4 Personal Property; Title to Property.

             (a) Set forth on Schedule 4.4 is a list of all Assets.

             (b) Except for the leased Assets as listed on Schedule 4.4, Seller
is the legal and equitable owner and has good and indefeasible title to all of
the Assets, and upon conveyance

<PAGE>   17

of the Assets to Purchaser by Seller at the Closing, Purchaser will acquire and
hold indefeasible title to all of the Assets, whether real, personal, tangible,
intangible or mixed, free and clear of any and all Encumbrances. Seller enjoys
peaceable possession of all Assets. Except for the Excluded Assets, the Assets
constitute all the assets necessary to conduct the Business as currently
conducted on the date hereof. The Assets listed on Schedule 2.1A constitute all
of the Assets located, as of the Closing Date, at the Leased Real Property. All
of the assets listed in the MMH Certificate continue to be located at the Leased
Real Property as of the Closing Date.

             (c) With respect to any leased Assets: (i) the lease agreement is
legal, valid, binding, enforceable, and in full force and effect; (ii) the lease
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in Section 2.2 above); (iii) no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the lease agreement; and (iv) no party has repudiated any provision of the lease
agreement.

         4.5 [Intentionally Omitted]

         4.6 Permits. Seller owns and holds all licenses, franchises, permits,
titles and other governmental authorizations (including, without limitation,
motor vehicle titles and current registrations), Environmental Permits,
licenses, and franchises, the absence of any of which would have a Material
Adverse Effect (the "Material Permits"). An accurate list of all such Material
Permits is set forth on Schedule 4.6 hereto. The Material Permits are valid and,
to the extent permitted by Law or the terms thereof, will be transferred to
Purchaser at the Closing, and to Seller's Knowledge no governmental authority
intends to cancel, terminate or not renew any such Material Permit. Seller has
conducted and is conducting the Business in compliance with the requirements,
standards, criteria and conditions set forth in the Material Permits and is not
in violation of any of the foregoing except where such noncompliance or
violation would not have a Material Adverse Effect. Except as specifically
provided on Schedule 4.6, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to Seller, or to Purchaser after the Closing,
by any such Material Permits.

         4.7 Compliance with Laws. The Seller has not received notice of any
investigation, threatened or contemplated, by any federal, state or local agency
or Governing Authority, which remains unresolved involving the Business or the
Assets, including, but not limited to, the safety aspects of the Assets or the
safe working conditions and environment of its employees at the Leased Property
or employment practices or policies.

         4.8 Assumed Contracts. Seller owns all rights granted to Seller under
any contract, agreement, lease or license that Purchaser has elected to assume
as an Assumed Liability (the "Assumed Contracts") and has not made any
assignment, pledge or other transfer of such rights.

         4.9 Contract Defaults. Seller is not in default nor has any act
occurred which upon the passage of time will constitute a default by Seller and
Seller has not been declared to be in default in any respect under Assumed
Contract, and such Assumed Contracts are legal, valid and

<PAGE>   18

binding obligations of the Seller and, to Seller's Knowledge, the other parties
thereto in accordance with their terms and, except to the extent reflected in
Schedule 4.9, have not been amended and no defenses, offsets or counterclaims
thereto have been asserted by any party thereto other than Seller nor has Seller
waived any rights thereunder. Except as set forth on Schedule 4.9, each of the
Assumed Contracts is assumable by the Purchaser and will not cease to be legal,
valid, binding, enforceable and in full force and effect on terms identical to
those currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, nor will the consummation of the transactions
contemplated hereby constitute a breach or default under such contract or
otherwise give the other party thereto a right to terminate, recapture or modify
such contract.

         4.10 Litigation. There are no Actions pending against Seller or, to the
knowledge of Seller, threatened against Seller, Seller's business, including,
without limitation, the Business or the Assets, or any property or rights of
Seller, at law or in equity or before or by any Governing Authority. Seller is
not in default with respect to any order, writ, injunction or decree of any
Governing Authority with respect to the Assets, the Business or the operations
or employees of the Business.

         4.11 Private Letter Ruling. PFSweb examined the letter from the Parent
to the IRS dated April 6, 2001 requesting a supplemental ruling to PLR 100247-00
(the "Supplemental Ruling Request") and the facts presented and the
representations made therein, to the extent descriptive of PFSweb or the
Controlled Group or the business of PFSweb or the Controlled Group (including,
without limitation, the business purposes for the Separation and the Purchase,
that none of the cash received as part of the Separation will be distributed,
directly or indirectly, to the shareholders of PFSweb, the representations in
the Supplemental Ruling Request to the extent that they relate to PFSweb or the
Controlled Group or the business of PFSweb or the Controlled Group and the
plans, proposals, intentions and policies of PFSweb and the Controlled Group),
shall be treated as having been made by PFSweb and are true, correct, and
complete. Neither the Purchaser nor the Parent will have liability for any
misrepresentations made by PFSweb in this Section 4.11. A breach of the
representations made in this Section 4.11 shall be deemed a Prohibited Action
(as defined in the Tax Allocation Agreement).

         4.12 Absence of Undisclosed Liabilities. There are no liabilities,
contingent or otherwise, except as disclosed on Schedule 2.2, for which
Purchaser or Parent would be obligated or which would attach to or follow the
Assets.

         4.13 Employee Benefit Plans. Each employee benefit plan within the
meaning of Section 3(3) of ERISA, maintained or contributed to by Seller and
used for any of the Transferring Employees (collectively, the "Plans") is listed
on Schedule 4.13. Neither the Purchaser nor the Parent will have liability under
any of the Plans.

<PAGE>   19

         4.14 Employees; Employee Relations.

              (a) Schedule 4.14 sets forth (i) the name and current annual
salary (or rate of pay) and other compensation (including, without limitation,
normal bonus, profit-sharing and other compensation) now payable by Seller to
each Transferring Employee, (ii) any increase to become effective after the date
of this Agreement in the total compensation or rate of total compensation
payable by Seller to each such person, and (iii) all accrued but unpaid vacation
pay owing to any Transferring Employee.

              (b) Seller is not a party to, or bound by, the terms of any
collective bargaining agreement that covers any Transferring Employee. Except as
set forth on Schedule 4.14, there are no labor disputes existing or, to the best
knowledge of Seller, threatened that involve, by way of example, strikes, work
stoppages, slowdowns, picketing, or any other interference with work or
production, or any other concerted action by employees that involve any of the
Transferring Employees. No charges or proceedings before the National Labor
Relations Board, or similar agency, exist or, to the best knowledge of Seller,
are threatened that relate to the Business. To the Seller's Knowledge, there are
no attempts being made to organize any employees presently employed in the
Business nor have any employees left or been fired who were attempting to
organize the employees. To Seller's Knowledge, all of the Transferring Employees
will continue to be available on substantially the same terms and conditions to
the Purchaser following Closing.

              (c) Except as disclosed on Schedule 4.14, Seller is not a party to
any employment agreement or other agreement with any Transferring Employee. No
Actions have been commenced nor to the Seller's Knowledge are threatened against
Seller by any employee of Seller concerning such employee's work with the
Business under any federal, state or local laws in respect of the employment
relationship of such employee or the independent contractor relationship of any
contractor or consultant, including, but not limited to, Actions under: (i)
anti-discrimination statutes such as Title VII of the Civil Rights Act of 1964,
as amended (or similar state or local laws prohibiting discrimination because of
race, sex, religion, national origin, age and the like); (ii) the Fair Labor
Standards Act or other federal, state or local laws regulating hours of work,
wages, overtime and other working conditions; (iii) requirements imposed by
federal, state or local Governing contracts such as those imposed by Executive
Order 11246; (iv) state laws with respect to tortious employment conduct, such
as slander, harassment, false light, invasion of privacy, negligent hiring or
retention, intentional infliction of emotional distress, assault and battery, or
loss of consortium; (v) the Occupational Safety and Health Act, as amended, as
well as any similar state laws, or other regulations respecting safety in the
workplace; or (vi) any state or federal statutes, rules or regulations
classifying persons as employees rather than independent contractors. Seller is
not subject to any settlement or consent decree with any present or former
employee, employee representative or any Governing Authority relating to claims
of discrimination or other claims in respect to employment practices and
policies; and no Governing Authority has issued a judgment, order, decree or
finding with respect to the labor and employment practices (including practices
relating to discrimination) of Seller involving the Business.

<PAGE>   20

              (d) Since December 7, 1999, Seller has not incurred any liability
or obligation under the WARN Act or similar state laws.

              (e) The Seller does not owe any wages, salaries or bonuses to
Transferring Employees for services rendered prior to the Closing Date that are
not Assumed Employee Expenses and no claims have been made for any such amount
by any Transferring Employee.

         4.15 Consents. Except as set forth in Schedule 4.15 no consent,
approval, authorization or order of any court, Governing Authority or any other
person or under any Assumed Contract is required to permit Seller to convey the
Assets free of Encumbrances, assign the Assumed Contracts or to otherwise
consummate the transactions contemplated by this Agreement.

         4.16 Insurance. Set forth on Schedule 4.16 is a summary description of
all policies of fire, casualty, liability and other forms of insurance and all
fidelity bonds held by Seller covering the Assets or the Business together with
a list of all prepaid amounts, deposits and claims made other than health claims
made by employees under group health plans.

         4.17 Taxes. PFSweb and Seller have paid all Taxes which have become due
or have been assessed against it or the Assets and all Taxes which any taxing
authority has proposed or asserted to be owing, except for Taxes which are not
yet due and payable or which it is contesting as set forth on Schedule 4.17. All
Tax liabilities to which the properties of Seller may have been subjected have
been discharged, except for Taxes assessed but not yet payable. There are no Tax
claims for unpaid Taxes which are due and owing presently being asserted against
Seller, PFSweb or the Assets and to Seller's Knowledge there is no basis for any
such claim. Neither Seller nor PFSweb has granted any extension to any taxing
authority of the limitation period during which any Tax liability against the
Assets may be asserted thereby. The Assets will be conveyed to Purchaser at
Closing free and clear of any claims or Encumbrances for Taxes incurred prior to
the Closing Date, except for Taxes which are not yet due and payable.

         4.18 Environmental Laws and Regulations. Except as set forth in the
Mock OSHA Safety Survey prepared by Operations Excellence Inc. for a survey
conducted from March 28, 2001 to March 29, 2001, (i) to Seller's Knowledge, the
operations of the Leased Real Property and any use, storage, treatment, disposal
or transportation of Hazardous Materials which has occurred in or on the Leased
Real Property from December 7, 1999 to the Closing Date have been in compliance
with Environmental Law, except for such noncompliance as would not reasonably be
expected to have a Material Adverse Effect; (ii) to Seller's Knowledge, from
December 7, 1999 to the Closing Date, no release, leak, discharge, spill,
disposal or emission of Hazardous Materials has occurred in, on or under the
Leased Real Property in a quantity or manner which violates or requires further
investigation or Remedial Action under Environmental Law; (iii) to Seller's
Knowledge, there is no pending or threatened litigation or administrative
investigation or proceeding concerning the Leased Real Property involving
Hazardous Materials or Environmental Laws; and (iv) to Seller's Knowledge, there
are no above-ground or underground storage tank systems located at the Leased
Real Property, except for two above ground diesel fuel tanks.

         4.19 Absence of Certain Changes or Events. Neither Seller nor PFSweb
has suffered any event or circumstance which could reasonably be expected to
preclude Purchaser from using

<PAGE>   21

the Assets in the manner previously used by Seller in the Business or received
any notice of any claim asserted against it by any Governing Authority which
could reasonably be expected to preclude Purchaser from using the Assets in the
manner previously used by Seller in the Business.

         4.20 [Intentionally Omitted]

         4.21 Agreements with Guaranties. Schedule 4.21 sets forth a list of all
agreements to which the Seller or PFSweb is a party and for which the Parent or
the Purchaser has guaranteed the performance and all amounts owing thereunder
(the "Guaranteed Agreements"). With respect to each Guaranteed Agreement,
neither Seller nor PFSweb is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default by
Seller or PFSweb, or permit termination, modification, or acceleration, under
such agreement. Seller and PFSweb have been notified by the Parent and the
Purchaser of their intent, subject to Section 7.3, to notify, after June 15,
2001, all parties holding guaranties in connection with the Guaranteed
Agreements that, effective upon Closing or such other date as otherwise required
by the terms of any guaranties in connection with the Guaranteed Agreements (the
"Guaranty Revocation Date"), Parent and Purchaser will no longer act as
guarantor under the Guaranteed Agreements for amounts incurred from the Guaranty
Revocation Date.

         4.22 True, Correct and Complete Information. No representation or
warranty by Seller and PFSweb contained in this Agreement, in the schedules
attached hereto or in any certificate furnished by Seller and PFSweb to
Purchaser in connection herewith or pursuant hereto contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make any statement herein or therein, in light of the circumstances in
which it was made, not misleading.

         4.23 Broker's and Finder's Fees. Neither Seller nor PFSweb has made any
agreement with any Person, or taken any action which would cause any Person, to
become entitled to an agent's, broker's or finder's fee or commission in
connection with the transactions contemplated by this Agreement.

                                   ARTICLE V
             REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT

         Purchaser and Parent, jointly and severally, represent and warrant to
the Seller as follows:

         5.1 Organization and Authority. Each of Purchaser and Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
own or lease its properties and to carry on its business as it is presently
being operated and in the place where such properties are owned or leased and
such business is conducted. The execution, delivery and performance of this
Agreement by each of Purchaser and Parent, and all other agreements by and among
the parties, and the consummation by it of the transactions contemplated hereby
and thereby, have been duly authorized by all requisite corporate action and no
further action or approval is required in order to permit Purchaser and/or
Parent to consummate the transactions contemplated hereby and thereby. This
Agreement constitutes, and all other agreements by and among the parties, when

<PAGE>   22

executed and delivered in accordance with the terms thereof, will constitute the
legal, valid and binding obligations of each of Purchaser and/or Parent,
enforceable in accordance with their terms. Each of Purchaser and Parent has
full power, authority and legal right to enter into this Agreement and all other
agreements by and among the parties and to consummate the transactions
contemplated hereby and thereby. The making and performance of this Agreement,
and all other agreements by and among the parties, and the consummation of the
transactions contemplated hereby and thereby in accordance with the terms hereof
and thereof will not conflict with the Certificate of Incorporation or the
Bylaws of Purchaser or Parent.

         5.2 Corporate Power and Authority. The execution, delivery and
performance of this Agreement and Additional Documents by Purchaser and Parent
and the consummation by them of the transactions contemplated hereby and
thereby, have been duly authorized by all requisite corporate action, including,
but not limited to, Board of Director approvals, and no further action or
approval is required to permit Purchaser and Parent to consummate the
transactions contemplated hereby and thereby. This Agreement and Additional
Documents when executed and delivered in accordance with the terms thereof, will
constitute, the legal, valid and binding obligations of Purchaser and Parent,
enforceable in accordance with their terms. Purchaser and Parent have full
power, authority and legal right to enter into this Agreement and the Additional
Documents and to consummate the transactions contemplated hereby and thereby.
The making and performance of this Agreement and the Additional Documents and
the consummation of the transactions contemplated hereby and thereby in
accordance with the terms hereof and thereof will not (a) conflict with the
Certificate of Incorporation or the Bylaws of Purchaser and Parent, (b) result
in any breach or termination of, or constitute a default under, or constitute an
event that with notice or lapse of time, or both, would become a default under,
or result in the creation of any Encumbrance upon any of the assets of, or
create any rights of termination, cancellation or acceleration in any person
under any contract of, or violate any order, writ, injunction or decree, to
which Purchaser and Parent is a party, by which any of the assets, business or
operations of Purchaser and Parent may be bound or affected or under which any
of the assets, business or operations of Purchaser and Parent receive benefits,
or (c) result in the violation of any provisions of law applicable and material
to Purchaser and Parent.

         5.3 Consents. Except as set forth on Schedule 5.3, no consent,
approval, authorization or order of any court, Governing Authority or any other
person is required in order to permit Purchaser or Parent to consummate the
transactions contemplated by this Agreement.

         5.4 True, Correct and Complete Information. No representation or
warranty by Purchaser and Parent contained in this Agreement, in the schedules
attached hereto or in any certificate furnished by Purchaser and Parent to
Seller in connection herewith or pursuant hereto contains any untrue statement
of a material fact or omits to state any material fact necessary in order to
make any statement herein or therein, in light of the circumstances in which it
was made, not misleading.

         5.5 Broker's and Finder's Fees. Purchaser and Parent have not made any
agreement with any Person, or taken any action which would cause any Person, to
become entitled to an agent's, broker's or finder's fee or commission in
connection with the transactions contemplated by this Agreement.

<PAGE>   23

         5.6 Private Letter Ruling. Parent hereby represents and warrants, on
its own behalf and on behalf of each member of the Distributing Group, that (i)
it has examined the Supplemental Ruling Request, and (ii) the facts presented
and the representations made therein, to the extent descriptive of Parent or the
Distributing Group or the business of Parent or the Distributing Group
(including, without limitation, the business purposes for the Separation and the
Purchase, the representations in the Supplemental Ruling Request to the extent
that they relate to Parent or the Distributing Group or the business of Parent
or the Distributing Group and the plans, proposals, intentions and policies of
Parent and the Distributing Group), shall be treated as having been made by
Parent and are true, correct, and complete. Neither the Seller nor PFSweb will
have liability for any misrepresentations made by the Parent in connection
therewith. A breach of the representations made in this Section 5.6 shall be
deemed a Prohibited Action (as defined in the Tax Allocation Agreement).

                                   ARTICLE VI
                               COVENANTS OF SELLER

         The Seller covenants and agrees with Purchaser as follows:

         6.1 Notices. Seller will timely give all notices required to be given
relating to the transactions contemplated hereby, including without limitation,
(i) required to be given to employees and (ii) any notices required to be given
to all creditors or claimants against Seller.

         6.2 Access to Books, Records and Properties.

             (a) Seller agrees to provide Purchaser, its accountants, counsel
and other representatives, during normal business hours and upon reasonable
notice, for a period of four years (plus such longer period of time should the
statute of limitations for any matter for which Purchaser has or is asserted to
have liability which relates to information or records which the Seller has)
after the Closing Date, access to the books, records, income tax returns,
contracts and other underlying data and documentation of Seller relating to the
Assets, Business or Transferring Employees during the period prior to the
Closing Date and to make available to Purchaser, personnel of Seller in
Purchaser's review thereof for the purpose of enabling them to determine and
calculate any tax liabilities in connection with the Assets, Business or the
Transferring Employees. Seller agrees that, for such four-year period, it will
preserve and keep intact all such books and records.

             (b) Purchaser agrees to provide Seller, its accountants, counsel
and other representatives, during normal business hours and upon reasonable
notice, for a period of four years (plus such longer period of time should the
statute of limitations for any matter for which Seller has or is asserted to
have liability which relates to information or records which the Seller has)
after the Closing Date, access to the books, records, income tax returns,
contracts and other underlying data and documentation of Purchaser relating to
the Assets, Business or Transferring Employees during the period prior to the
Closing Date and to make available to Seller, personnel of Purchaser in Seller's
review thereof for the purpose of enabling them to determine and calculate any
tax liabilities in connection with the Assets, Business or Transferring
Employees. Purchaser agrees that, for such four-year period, it will preserve
and keep intact all such books and records.

<PAGE>   24

         6.3 Approvals of Third Parties. As soon as practicable after the date
hereof, the Seller will use its best efforts to secure all necessary consents,
approvals and clearances of third parties that Parent or Purchaser has
requested, but that were not obtained prior to the Closing and were waived by
the Parent and Purchaser as conditions to the closing.

         6.4 Obligations under Guaranteed Agreements. Seller and PFSweb each
hereby agree to perform and discharge all of their obligations under such
Guaranteed Agreements. The obligations of Seller and PFSweb under this Section
6.4 will expire when Seller and PFSweb have paid all obligations under the
Guaranteed Agreements and all guarantees of Purchaser and Parent under the
Guaranteed Agreements have terminated.

         6.5 Certificate of Memphis Material Handling, Inc. Seller shall deliver
to Purchaser on or before June 15, 2001 a certificate from an authorized officer
of Memphis Material Handling, Inc. (the "MMH Certificate") certifying that the
list of assets they prepared contains a list of every Asset located in Building
H, known as 4650 Quality Drive in Memphis, Tennessee, as identified in a survey
conducted from April 11, 2001 through April 13, 2001.

                                  ARTICLE VII
                        COVENANTS OF PURCHASER AND PARENT

         7.1 Approvals. Purchaser and Parent will each take all necessary
corporate and other action and file all documents required to obtain, and will
use its reasonable efforts to obtain, all approvals of regulatory authorities,
consents and approvals required of it to carry out the transactions contemplated
by this Agreement and will cooperate with the Seller to obtain all such
approvals and consents required by Purchaser and Parent.

         7.2 BSD. Seller and its Affiliates, Priority Fulfillment Services
Canada, Inc. and Priority Fulfillment Services Europe B.V. (collectively, the
"PFS Group"), provide certain services ("Services") to Purchaser's subsidiary,
Business Supplies Distributors, Inc. ("BSD") and its Affiliates, BSD (Canada),
Inc. and Business Supplies Distributors Europe B.V., (collectively, including
Priority Fulfillment Services Australia pty Ltd and Priority Fulfillment
Services de Mexico S.A. de C.V., the "BSD Group"), in connection with the
purchase and sale by the BSD Group (the "BSD Business") of various IBM products
(the "IBM Products") pursuant to various IBM Master Distributor Agreements set
forth on Schedule 7.2 hereof (the "IBM Agreements"). Parent covenants and agrees
that between the date hereof and December 31, 2001 (i) it will provide
reasonable cooperation to Seller in connection with the proposed transition and
transfer of the BSD Business and the IBM Agreements to the PFS Group or its
designee and (ii) it will not become a master distributor of IBM products, as
provided in the IBM Agreements or, so long as the PFS Group is a master
distributor of IBM products, become a second master distributor of IBM products.
Nothing contained herein shall restrict Parent or its Affiliates (other than the
BSD Group) from continuing to conduct its business as it is currently being
conducted, which includes the distribution and sale of IBM products.

         7.3 Agreements with Guaranties. Parent and Purchaser will not rescind,
revoke or terminate any guaranty if, under the terms of the applicable
Guaranteed Agreement, such action

<PAGE>   25

would, with or without notice or lapse of time, constitute a breach or default
by Seller or PFSweb, or permit termination or acceleration under such Guaranteed
Agreement and prior to June 15, 2001, Seller has provided written notice of such
potential breach, default, termination or acceleration.

                                  ARTICLE VIII
                            DATE AND PLACE OF CLOSING

         8.1 Date and Place of Closing. Subject to satisfaction or waiver of the
conditions to the obligations of the parties, the purchase and sale of the
Assets pursuant to this Agreement will occur at a closing (the "Closing") to be
held in the offices of Munsch Hardt Kopf & Harr, P.C., 1445 Ross Avenue, 40th
Floor, Dallas, Texas 75202, or such other place as mutually agreed to by the
parties, at midnight Dallas, Texas time, on May 25, 2001, or such other date as
the parties may mutually agree upon (the "Closing Date") to be effective on such
Closing Date. The parties may mutually agree to close this transaction via the
prior delivery of the closing documents, the facsimile of executed signature
pages and the wiring of the Cash Payment.

                                   ARTICLE IX
                CONDITIONS TO OBLIGATIONS OF PURCHASER AND PARENT

         The obligations of Purchaser and Parent to cause the purchase of the
Assets and the other transactions contemplated hereby to occur at Closing shall
be subject to the satisfaction on or prior to the Closing Date of all of the
following conditions, except such conditions as Purchaser and Parent may waive
in writing:

         9.1 Representations and Warranties of Seller. All of the
representations and warranties of Seller contained in this Agreement and in any
Schedule or other disclosure in writing from Seller shall have been true and
correct when made, and shall be true and correct on and as of the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of the Closing Date, except for such representations as are
made as of a different date which shall be true and correct as of such different
date.

         9.2 Covenants of Seller. All of the covenants and agreements herein on
the part of Seller to be complied with or performed on or before the Closing
Date shall have been fully complied with and performed.

         9.3 Seller's Certificate. There shall be delivered to Purchaser a
certificate dated as of the Closing date and signed by the President or a Vice
President of Seller to the effect set forth in Sections 9.1 and 9.2, which
certificate shall have the effect of a representation and warranty made by
Seller on and as of the Closing Date.

         9.4 Litigation. At the Closing Date, there shall not be pending or
threatened any litigation in any court or any proceeding before any Governing
Authority (i) in which it is sought to restrain, invalidate, set aside or obtain
damages in respect of the consummation of the purchase and sale of the Assets or
the other transactions contemplated hereby; (ii) that could, if adversely
determined, result in any Material Adverse Effect; or (iii) as a result of
which, in the

<PAGE>   26

reasonable judgement of Purchaser, Purchaser would be deprived of the material
benefits of its ownership of the Assets.

         9.5 Satisfactory to Purchaser's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto and all other related matters shall have been satisfactory to Munsch
Hardt Kopf & Harr, P.C., counsel for Purchaser.

         9.6 No Material Adverse Effect. There shall not have occurred any
Material Adverse Effect. Purchaser shall receive a certificate from Seller,
dated as of the Closing Date and in form and substance satisfactory to
Purchaser, as to the fulfillment of the conditions set forth in this Section
9.6.

         9.7 Consents. Seller shall have obtained all orders, approvals,
estoppel certificates or consents of third parties, including, without
limitation, any orders, approvals, certificates or consents deemed necessary by
counsel to Purchaser which shall be required to consummate the transactions
contemplated hereby, including, without limitation, consents to the assignment
of the Assumed Liabilities listed on Schedule 2.2.

         9.8 [Intentionally Omitted]

         9.9 Assurance from Tax Advisors. Purchaser and Parent shall have
received assurance from their tax advisors, in form and substance reasonably
acceptable to each of Purchaser and Parent, that the Transaction will not affect
the tax-free status of the Spin-off.

                                    ARTICLE X
                       CONDITIONS TO OBLIGATIONS OF SELLER

         The obligations of Seller to cause the sale of the Assets and the other
transactions contemplated hereby to occur at Closing shall be subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
except such conditions as Seller may waive in writing.

         10.1 Representations and Warranties of Purchaser and Parent. All of the
representations and warranties of Purchaser and Parent contained in this
Agreement and in any Schedule or other disclosure in writing from Purchaser or
Parent shall have been true and correct when made, and shall be true and correct
on and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date,
except for such representations as are made as of a different date which shall
be true and correct as of such different date.

         10.2 Covenants of Purchaser and Parent. All of the covenants and
agreements herein on the part of the Purchaser and Parent to be complied with or
performed on or before the Closing Date shall have been fully complied with and
performed.

         10.3 Purchaser's/Parent's Certificate. There shall be delivered to
Seller a certificate dated as of the Closing Date and signed by the President or
a Vice President of Purchaser and

<PAGE>   27

Parent to the effect set forth in Sections 10.1 and 10.2, which certificate
shall have the effect of a representation and warranty made by Purchaser and
Parent on and as of the Closing Date.

         10.4 Satisfactory to Seller's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto and all other related legal matters shall have been satisfactory to
Wolff & Samson, P.A., counsel for Seller.

         10.5 Assurance from Tax Advisors. Seller shall have received assurance
from its tax advisors, in form and substance reasonably acceptable to Seller,
that the transaction contemplated hereby will not affect the tax-free status of
the Spin-off.

                                   ARTICLE XI
                                     CLOSING

         11.1 Performance by Seller. At the Closing, concurrently with
performance by Purchaser and Parent of their respective obligations to be
performed at the Closing:

              (a) Conveyances. Seller shall execute and deliver to Purchaser, in
form and substance acceptable to Purchaser (i) a Bill of Sale and Assignment in
substantially the form attached hereto as Exhibit A conveying to Purchaser all
items of personalty included among the Assets, assignments of each of the
contracts, leases, arrangements and commitments listed on Schedule 2.1A; (ii)
all other assignments, endorsements and instruments of transfer as shall be
necessary or appropriate to carry out the intent of this Agreement and as shall
be sufficient to vest in Purchaser title to all of the Assets and all right,
title and interest of Seller thereto and (iii) all other Additional Documents to
which Seller is a party. If requested by Purchaser, such documents shall be in a
form suitable for recording and shall be consented to by any third parties to
such agreements.

              (b) Records. Except as may be necessary for the proper fulfillment
of its obligations under the Transition Agreement, Seller shall deliver to
Purchaser all documents, agreements, reports, books, records and accounts
pertaining specifically to the Assets that are in Seller's possession,
including, but not limited to, the list of Material Permits attached as Schedule
4.6.

              (c) Certificates. Seller shall execute and deliver to Purchaser
such certificates as may be reasonably requested by the Purchaser, including,
but not limited to, an Incumbency Certificates and an officer's certificates
certifying that the representations and warranties contained herein are true.

              (d) Certificates of Authorities. Seller shall deliver to Purchaser
(i) certificates of the Secretary of State of Delaware, each dated as of a date
not more than twenty (20) days prior to the Closing Date, attesting to the
organization, existence and good standing of Seller and PFSweb and (ii) a copy,
certified by an authorized officer of each of Seller and PFSweb, of resolutions
duly adopted by the Board of Directors of each of Seller and PFSweb duly
authorizing the transactions contemplated in this Agreement.

<PAGE>   28

              (e) Opinion of Seller's Counsel. Seller shall deliver to Purchaser
the legal opinion of its counsel, Wolff & Samson, P.A., dated the Closing Date,
as to the matters set forth in Sections 4.1 and 4.2, such opinion to be
reasonably satisfactory to Purchaser.

              (f) Consents. Seller shall deliver to Purchaser the Required
Consents.

              (g) Tax Proration Schedule. Seller shall deliver to Purchaser the
tax proration schedule attached hereto as Schedule 3.5.

              (h) Expenses Owed for TMSA and SASA. The parties shall mutually
agree upon an invoice and payment schedule for all services performed under the
TMSA and the SASA through the date of termination.

              (i) Other Actions. Seller shall take all such other steps as may
be necessary or appropriate to put Purchaser in actual and complete ownership
and possession of the Assets.

         11.2 Performance by Purchaser. At the Closing, concurrently with the
performance by Seller of its obligations to be performed at the Closing,
Purchaser shall:

              (a) Purchase Price. Deliver to Seller the funds specified in
Section 3.1.

              (b) Assumption Agreement. Deliver to Seller the Assumption
Agreement.

              (c) Certificates of Authorities. Deliver the following to Seller
(i) a certificate of the Secretary of State of Delaware, dated as of a date not
more than twenty (20) days prior to the Closing Date, attesting to the
organization, existence and good standing of Purchaser and Parent and (ii) a
copy, certified by an authorized officer of Purchaser and Parent, of resolutions
duly adopted by the Board of Directors of each of Purchaser and Parent duly
authorizing the transactions contemplated in this Agreement.

              (d) Expenses Owed for TMSA and SASA. At closing, Purchaser shall
pay all invoices rendered by Seller to Purchaser under either the TMSA or the
SASA, provided the invoices are delivered to Purchaser prior to the Closing Date
for services already rendered and said invoices have been approved by
Purchaser's personnel. The parties shall mutually agree upon an invoice and
payment schedule for all services performed under the TMSA and the SASA through
the date of termination.

              (e) Opinion of Purchaser's Counsel. Purchaser shall deliver to
Seller the legal opinion of its counsel, Munsch Hardt Kopf & Harr, P.C., dated
the Closing Date, as to the matters set forth in Sections 5.1 and 5.2, such
opinion to be reasonably satisfactory to Seller.

              (f) Additional Documents. Execute and deliver to Seller the
Additional Documents to which Purchaser and/or Parent is a party, as the case
may be.

         11.3 Other Instruments. In addition to the foregoing, Purchaser, Parent
and Seller agree as follows:

              (a) Further Action by Seller. At any time and from time to time,
at or after the Closing, upon request of Purchaser, Seller shall do, execute,
acknowledge and deliver or shall

<PAGE>   29

cause to be done, executed, acknowledged and delivered all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may reasonably be required to evidence, vest in and confirm to Purchaser full
and complete title to, possession of, and the right to use and enjoy, the
Assets.

              (b) Further Action by Purchaser and Parent. At any time and from
time to time, at or after the Closing, upon request of Seller, each of Purchaser
and Parent shall do, execute, acknowledge and deliver or shall cause to be done,
executed, acknowledged and delivered all such further acts and assurances as may
reasonably be required to better assure and confirm to Seller the assumption by
Purchaser of the obligations to render performance that are to be assumed by
Purchaser pursuant to this Agreement.

                                  ARTICLE XII
                                ONGOING EXPENSES

         The parties agree to continue making the payments as agreed by the
parties, including, but not limited to, those set forth on Schedule 12.

                                  ARTICLE XIII
                          SURVIVAL AND INDEMNIFICATION

         13.1 Survival of Covenants, Agreements, Representations and Warranties.

              (a) Covenants and Agreements. All covenants and agreements made
hereunder or pursuant hereto or in connection with the transactions contemplated
hereby shall survive the Closing and shall continue in full force and effect
thereafter according to their terms.

              (b) Representations and Warranties. All representations and
warranties contained herein shall survive the Closing and shall continue in full
force and effect thereafter for a period of one year following the Closing,
except that (a) the representations and warranties contained in Section 4.17
(Taxes) hereof shall survive until the earlier of (i) the expiration of the
applicable periods (including any extensions) of the respective statutes of
limitation applicable to the payment of the taxes to which such representations
and warranties relate without an assertion of a deficiency in respect thereof by
the applicable taxing authority or (ii) the completion of the final audit and
determinations by the applicable taxing authority and final disposition of any
deficiency resulting therefrom; and (b) the representations and warranties
contained in Sections 4.1 and 5.1 (Due Organization and Qualification); Sections
4.2 and 5.2 (Corporate Power and Authority); Section 4.4 (Personal Property;
Title to Property) and Section 4.18 (Environmental Laws and Regulations) hereof
shall survive until one day after the expiration of the applicable periods
(including any extensions) of the respective statutes of limitation.

              (c) Claims Made Prior to Expiration. Notwithstanding the foregoing
survival periods set forth in this Section 13.1, the termination of a survival
period shall not affect the rights of an Indemnified Party in respect of any
claim made by such party with specificity, in good faith and in writing to the
Indemnifying Party in accordance with Section 13.5 and Section 14.9 hereof prior
to the expiration of the applicable survival period.

<PAGE>   30

         13.2 Purchaser's Losses. Seller and PFSweb, jointly and severally,
agree to indemnify and hold harmless Purchaser, Parent, their Affiliates and
their directors, officers, employees, representatives, agents and attorneys
from, against, for and in respect of any and all damages (including, without
limitation, amounts paid in settlement with Seller's consent, which may not be
unreasonably withheld), penalties, fines, interest and monetary sanctions,
losses, obligations, liabilities, claims, deficiencies, costs and expenses,
including, without limitation, reasonable attorneys' fees and other costs and
expenses incident to any suit, action, investigation, claim or proceeding
(hereinafter referred to collectively as "Purchaser's Losses") suffered,
sustained, incurred or required to be paid by any of them by reason of (i) any
representation or warranty made by Seller or PFSweb in or pursuant to this
Agreement being untrue or incorrect in any respect; (ii) any failure by Seller
or PFSweb to observe or perform its covenants and agreements set forth in this
Agreement; and (iii) any failure by Seller or PFSweb to satisfy and discharge
any liability or obligation not expressly assumed by Purchaser or Parent
pursuant to this Agreement. Furthermore, Seller agrees that in the event that
the representation made by the Seller in the last sentence of Section 4.4(b) is
found to be inaccurate, in addition to all other remedies available to Purchaser
and its Affiliates (including, without limitation, seeking such damages it can
show it has sustained by reason of such breach), the Seller will execute and
deliver all other assignments, endorsements and instruments of transfer as shall
be necessary or appropriate to vest in Purchaser title to all of the assets
necessary to make such representation accurate.

         13.3 Employee Compensation and Benefits. Seller agrees to indemnify and
hold Purchaser, and its directors, officers, employees, representatives, agents
and attorneys harmless from and against any and all claims made by employees or
persons claiming to be employees of Seller for wages, salaries, bonuses,
pension, workmen's compensation, medical insurance, disability, vacation,
severance, pay in lieu of notice, sick benefits or other compensation or benefit
arrangements to the extent the same are based on employment service rendered to
Seller prior to the Closing Date or injury or sickness occurring prior to the
Closing Date and are not Assumed Liabilities or Assumed Employee Expenses
(collectively, "Employee Claims"). Employee Claims do not include insurance
premium adjustments, increases or other charges incurred by Purchaser or Parent
in connection with providing health care or other insurance benefits following
the Closing Date for Transferring Employees as the result of any pre-existing
condition of any such Transferring Employee.

         13.4 Seller's Losses. Purchaser and Parent, jointly and severally,
agree to indemnify and hold harmless the Seller, PFSweb, their Affiliates and
their directors, officers, employees, representatives, agents and attorneys
from, against, for and in respect of any and all damages (including, without
limitation, amounts paid in settlement with Purchaser's consent, which may not
be unreasonably withheld), penalties, fines, interest and monetary sanctions,
losses, obligations, liabilities, claims, deficiencies, costs and expenses,
including, without limitation, reasonable attorneys' fees and other costs and
expenses incident to any suit, action, investigation, claim or proceeding
(hereinafter referred to collectively as "Seller's Losses"; Seller's Losses or
Purchaser's Losses are sometimes referred to herein as "Losses") suffered,
sustained, incurred or required to be paid by any of them by reason of (i) any
representation or warranty made by Purchaser or Parent in or pursuant to this
Agreement being untrue or incorrect in any respect; (ii) any failure by
Purchaser or Parent to observe or perform its covenants and agreements set

<PAGE>   31

forth in this Agreement; or (iii) any failure by Purchaser or Parent to satisfy
and discharge any Assumed Liability.

         13.5 Notice of Loss. Except to the extent set forth in the next
sentence, a party to this Agreement shall not have any liability under the
indemnity provisions of this Agreement with respect to a particular matter
unless a notice (the "Indemnification Notice") setting forth in reasonable
detail the breach which is asserted has been given to the Indemnifying Party (as
hereafter defined). Notwithstanding the preceding sentence, failure of the
Indemnified Party to give notice hereunder shall not release the Indemnifying
Party from its obligations under this Article XIII, except to the extent the
Indemnifying Party is actually prejudiced by such failure to give notice. With
respect to Purchaser's Losses and Employee Claims, Seller shall be the
"Indemnifying Party" and Purchaser and the other Persons described in Section
13.2 shall be the "Indemnified Party." With respect to Seller's Losses,
Purchaser, shall be the "Indemnifying Party" and Seller and the other Persons
described in Section 13.4 shall be the "Indemnified Party."

         13.6 Right to Defend. Upon receipt of notice of any suit, action,
investigation, claim or proceeding for which indemnification might be claimed by
an Indemnified Party, the Indemnifying Party shall be entitled to defend,
contest or otherwise protect against such suit, action, investigation, claim or
proceeding at its own cost and expense, and the Indemnified Party must cooperate
in any such defense or other action, including the assertion of any counterclaim
or crossclaim. The Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in a defense thereof by counsel of
its own choosing, but the Indemnifying Party shall be entitled to control the
defense unless the Indemnified Party has relieved the Indemnifying Party from
liability with respect to the particular matter or the Indemnifying Party fails
to assume defense of the matter. If the Indemnifying Party shall fail to defend,
contest or otherwise protect in a timely manner against any such suit, action,
investigation, claim or proceeding, the Indemnified Party shall have the right,
but not the obligation, to defend, contest or otherwise protect against the same
and make any compromise or settlement thereof and recover the entire cost
thereof from the Indemnifying Party including reasonable attorneys' fees,
disbursements and all amounts paid as a result of such suit, action,
investigation, claim or proceeding or the compromise or settlement thereof;
provided, however, that the Indemnified Party must send a written notice to the
Indemnifying Party of any such proposed settlement or compromise, which
settlement or compromise the Indemnifying Party may reject, in its reasonable
judgment, within 30 days of its receipt of such written notice. A failure by the
Indemnifying Party to reject such settlement or compromise within such thirty
(30) day period shall be deemed an acceptance of such settlement or compromise.
The Indemnified Party shall have the right to effect a settlement or compromise
over the objection of the Indemnifying Party; provided, that if (i) the
Indemnifying Party is contesting such claim in good faith or (ii) the
Indemnifying Party has assumed the defense from the Indemnified Party and the
Indemnifying Party has a net worth in excess of the amount being sought, the
Indemnified Party waives any right to indemnity therefor. If the Indemnifying
Party undertakes the defense of such matters, the Indemnified Party shall not,
so long as the Indemnifying Party does not abandon the defense thereof, be
entitled to recover from the Indemnifying Party any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than the reasonable costs of investigation undertaken by the
Indemnified Party with the prior written consent of the

<PAGE>   32

Indemnifying Party and other than such amounts incurred where a conflict of
interest is reasonably determined to exist by the Indemnified Party such that
more than one legal counsel is reasonably needed.

         13.7 Cooperation. Each of Parent, Purchaser and the Seller and each of
their affiliates, successors and assigns shall cooperate with each other in the
defense of any suit, action, investigation, proceeding or claim by a third party
and, during normal business hours, shall afford each other access to their books
and records and employees relating to such suit, action, investigation,
proceeding or claim and shall furnish each other all such further information
that they have the right and power to furnish as may reasonably be necessary to
defend such suit, action, investigation, proceeding or claim, including, without
limitation, reports, studies, correspondence and other documentation relating to
Environmental Protection Agency, Occupational Safety and Health Administration,
and Equal Employment Opportunity Commission matters.

         13.8 Satisfaction of Amounts Owed. Until the Deferred Payments have
been made pursuant to Section 3.2, if Seller is determined to owe an
indemnification amount pursuant to the procedures set forth in this Article
XIII, then the amount due the Indemnified Party hereunder may, in addition to
and not in lieu of any other rights or remedies, be recovered by (i) offsetting
such amount against the Deferred Payments or (ii) offsetting such amount against
amounts due under the Transition Agreement.

         13.9 Right to Dispute.

              (a) If the Indemnifying Party notifies the Indemnified Party that
it does not dispute the claim described in such Indemnification Notice or fails
to notify the Indemnified Party within ten (10) business days of receiving the
Indemnification Notice pursuant to Section 13.5 (the "Objection Period") that
the Indemnifying Party disputes the claim described in such Indemnification
Notice, the loss in the amount specified in such Indemnification Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 13.2,
13.3 or 13.4, as the case may be, and the Indemnifying Party shall pay the
amount of such loss to the Indemnified Party on demand. If the Indemnifying
Party has disputed its liability with respect to such claim within the Objection
Period, the Indemnifying Party and the Indemnified Party will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved through
negotiations within fifteen (15) days of the Indemnifying Party disputing the
claim, such dispute shall be resolved by arbitration in accordance with Section
13.9(b).

              (b) Any dispute submitted to arbitration pursuant to this Section
13.9 shall be finally and conclusively determined by arbitration conducted
pursuant to the commercial arbitration rules of the American Arbitration
Association in Dallas, Texas. Any decision made by the arbitrators shall be
final, binding and conclusive on the Indemnified Party and the Indemnifying
Party and entitled to be enforced to the fullest extent permitted by law and
entered in any court of competent jurisdiction. The expenses of each party to
any arbitration, including but not limited to such party's attorneys' fees, if
any, and the expenses and fees of the arbitrators shall be recoverable or borne
as determined by the arbitrators.

<PAGE>   33

              (c) In the event Seller disputes any claim for indemnification as
provided in paragraph (a) above, Purchaser and Parent may not exercise their
right of offset set forth herein (including Sections 3.4 and 13.8) as to such
claim until such claim has been finally determined in accordance with the
arbitration provisions of the preceding paragraph (b); provided, however,
Purchaser and Parent shall not be obligated to pay the Deferred Payments to
Seller or pay amounts due under the Transition Agreement to the extent of such
disputed amounts, but shall instead pay such disputed amounts into the Joint
Deposit Account (as such term is defined in the Transition Agreement) pursuant
to the terms of the Transition Agreement, with such amounts to be paid out upon
resolution of the dispute as provided herein or in the Transition Agreement, as
applicable.

         13.10 Limitations on Losses.

               (a) In case any event shall occur that would otherwise entitle
any party to assert a claim for indemnification hereunder, no Losses shall be
deemed to have been sustained by such party to the extent of (i) any actual tax
benefit or savings realized by such party with respect thereto (net of any tax
cost attributable to the receipt of any indemnification payment hereunder) or
(ii) any proceeds (net of deductibles, taxes and collection costs) received by
such party from any insurance policies maintained by or on behalf of such party
with respect to losses (net of any increase in insurance premiums attributable
to such recovery). The parties agree to submit a claim under any applicable
insurance policies prior to or promptly following making a request for
indemnification hereunder.

               (b) The sum of all Losses incurred by any party seeking
indemnification must exceed, on a cumulative basis, Twenty-Five Thousand Dollars
($25,000) before such party shall be entitled to indemnification hereunder;
provided, however, once such cumulative Losses exceed Twenty-Five Thousand
Dollars ($25,000), such party shall be entitled to indemnification for all
Losses.

               (c) Except for the representations and warranties expressly set
forth herein and the Schedules hereto, no party hereto makes any representation
or warranty of any kind or nature regarding the Assets, the Business or any
other matter, fact or circumstance, and any and all other warranties, whether
express or implied, including warranties of merchantability or fitness for a
particular purpose, are hereby expressly disclaimed. Parent and the Purchaser
acknowledge that they (and their authorized agents and representatives ) have
conducted their own investigation and due diligence review of the Assets and the
Business and have reviewed the operations, facilities, books and records of the
Seller and have met with and interviewed such employees and other personnel as
they deemed appropriate.

               (d) The indemnification obligations of Seller, Parent and
Purchaser hereunder shall, except in the case of fraud, intentional breach,
intentional misconduct, or intentional misrepresentation, constitute the sole
and exclusive remedies of the parties, respectively, for the recovery of money
damages with respect to the matters for which indemnification is provided
hereunder; provided, that the foregoing shall not be construed as limiting in
any way whatsoever any remedy other than for the recovery of money damages to
which any party may be entitled.

<PAGE>   34

                                  ARTICLE XIV
                                  MISCELLANEOUS

         14.1 Expenses. Except as otherwise expressly provided herein or on
Schedule 14.1, the Seller, the Parent and the Purchaser shall each pay its own
expenses in connection with the preparation of this Agreement, and the
consummation of the transactions contemplated hereby, including, without
limitation, fees of their own counsel, auditors and other experts, whether or
not such transactions be consummated.

         14.2 Entire Agreement. This Agreement (including the exhibits and
schedules hereto) and the Additional Documents constitute the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter thereof,
including, but not limited to the Letter of Intent between the Parent and the
Seller dated March 21, 2001, and no party shall be liable or bound to the other
in any manner by any representations or warranties not set forth herein.
Notwithstanding the foregoing, this Agreement and the Additional Documents shall
not supersede, replace, amend or modify any of the terms or provisions of the
following agreements dated December 7, 1999 to which Parent and PFSweb are a
party: Master Separation Agreement, Tax Indemnification and Allocation
Agreement, and Initial Public Offering and Distribution Agreement (each as
supplemented by the Agreement dated April 6, 2001).

         14.3 Publicity. Except as otherwise required by law, no party hereto
shall issue any press release or make any public statement, in either case
relating to this Agreement or the matters contained herein, without obtaining
the prior written approval of the other parties hereto to the content and manner
of presentation and publication thereof, which consent shall not be unreasonably
withheld or delayed. Each party hereby agrees that if the other party determines
in its good faith opinion that it must make a disclosure regarding this
transaction, including, but not limited to, the filing of copies of agreements
or other documents with the Securities and Exchange Commission, in order to
comply with applicable securities laws, that such party may make such disclosure
and such party's only obligation shall be to provide a copy of such proposed
disclosure to the other party prior to making such disclosure publicly and to
seek confidential treatment of the portions of such agreements or documents
which the other party reasonably deems appropriate.

         14.4 Successors and Assigns. No party may assign either this Agreement
or any of its rights, interests, or obligations hereunder without the prior
written approval of the other parties; provided, however, that the Purchaser may
(i) assign any or all of its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Purchaser nonetheless
shall remain responsible for the performance of all of its obligations
hereunder). Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
such agreements.

         14.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.

<PAGE>   35

         14.6 Headings. The headings of the paragraphs and subparagraphs of this
Agreement are inserted for convenience of reference only and shall not be deemed
to constitute part of this Agreement or to affect the construction hereof.

         14.7 Use of Certain Terms. As used in this Agreement, the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision.

         14.8 Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended by a written
instrument executed by Parent, Purchaser and Seller. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
all of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.

         14.9 Notices. All notices of communication required or permitted
hereunder shall be in writing and may be given by (a) depositing the same in
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, (b) delivering the same
in person to an officer or agent of such party, (c) sending by a nationally
recognized overnight delivery service or (d) telecopying the same with
electronic confirmation of receipt.

         (i)        If to Seller and/or PFSweb:

                             PFSweb, Inc.
                             500 North Central Expressway
                             Plano, TX  75074
                             Attention: Mark Layton
                             Telecopy No.:  972-881-0145

                             With copies to:

                             Wolff & Samson, P.A.
                             5 Becker Farm Road
                             Roseland, New Jersey 07068
                             Attention: Morris Bienenfeld, Esq.
                             Telecopy No.: (973) 740-1407

<PAGE>   36

         (ii)       If to Purchaser and/or to Parent:

                             c/o Daisytek International
                             1025 Central Expressway South, Suite 200
                             Allen, Texas 75013
                             Attention:  Mr. John D. Kearney, Sr.
                             Telecopy Number: (972) 424-4604

                             With copies to:

                             Munsch Hardt Kopf & Harr, P.C.
                             1445 Ross Avenue, 40th Floor
                             Dallas, Texas  75202
                             Attention:  A. Michael Hainsfurther, Esq.
                             Telecopy Number:  (214) 855-7584

or at such other address or counsel as any party hereto shall specify pursuant
to this Section 14.9 from time to time.

         14.10 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PRINCIPLES THEREOF.

         14.11 Time. Time is of the essence with respect to this Agreement.

         14.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.

         14.13 Remedies Cumulative. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.

                  [Remainder of Page Left Intentionally Blank]

<PAGE>   37

         IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed in counterparts all as of the date first above written.

                                   SELLER:

                                   PRIORITY FULFILLMENT SERVICES, INC.

                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

                                   PFSWEB:

                                   PFSWEB, INC.

                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

                                   PURCHASER:

                                   DAISYTEK, INC.

                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

                                   PARENT:

                                   DAISYTEK INTERNATIONAL CORPORATION

                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

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