Document:

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                                                                  Exhibit 10.6

                                 CARTER'S, INC.

                           2003 EQUITY INCENTIVE PLAN

1.       DEFINITIONS.

         EXHIBIT A, which is incorporated by reference, defines the terms used
in the Plan and sets forth certain operational rules related to those terms.

2.       PURPOSE.

         The purpose of this amended, restated and renamed Plan is to advance
the interests of the Company by enhancing the ability of the Company and its
subsidiaries to attract and retain able employees, consultants or advisers; to
reward such individuals for their contributions; and to encourage such
individuals to take into account the long-term interests of the Company and its
subsidiaries by providing for the grant to Participants of Stock-based incentive
Awards.

3.       ADMINISTRATION.

         The Administrator has discretionary authority, subject only to the
express provisions of the Plan, to interpret the Plan; determine eligibility for
and grant Awards; determine, modify or waive the terms and conditions of any
Award; prescribe forms, rules and procedures; and otherwise do all things
necessary to carry out the purposes of the Plan. In the case of any Award
intended to be eligible for the performance-based compensation exception under
Section 162(m), the Administrator will exercise its discretion consistent with
qualifying the Award for that exception. Determinations of the Administrator
made under the Plan will be conclusive and will bind all parties.

4.       EFFECTIVE DATE AND TERM OF PLAN.

         The Plan was originally adopted on August 15, 2001 and was approved by
shareholders on August 15, 2001. The provisions of the amended, restated and
renamed Plan set forth herein, including without limitation the increase in the
number of shares available to be delivered under Awards, shall become effective
on the date on which such amendment and restatement is approved by the
shareholders of the Company. Except as hereinafter provided, any Award made
prior to shareholder approval of the amendment and restatement set forth herein
shall be subject to the terms of the Plan as in effect prior to such amendment
and restatement. Notwithstanding the foregoing, an Award may be made under the
terms of the amended, restated and renamed Plan but prior to shareholder
approval of such amendment and restatement if the Award is conditioned upon such
approval.

         No ISOs may be granted under the Plan after August 15, 2011.

5.       SHARES SUBJECT TO THE PLAN.

         (a) NUMBER OF SHARES. The aggregate maximum number of shares of Stock
that may be delivered in satisfaction of Awards under the Plan shall be
4,344,193. If any Award granted

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under the Plan terminates without having been exercised in full, or upon
exercise is satisfied other than by delivery of Stock, the number of shares of
Stock as to which such Award was not exercised shall be available for future
grants.

         (b) SHARES TO BE DELIVERED. Stock delivered under the Plan shall be
authorized but unissued Stock, or if the Administrator so decides in its sole
discretion, previously issued Stock acquired by the Company and held in its
treasury. No fractional shares of Stock shall be delivered under the Plan.

         (c) SECTION 162(M) LIMITS. The maximum number of shares of Stock for
which Stock Options may be granted to any person in any calendar year and the
maximum number of shares of Stock subject to SARs granted to any person in any
calendar year will each be 4,000,000. The maximum benefit that may be paid to
any person under other Awards in any calendar year will be, to the extent paid
in shares, 4,000,000 shares (or their value in dollars), and, with respect to
any cash Award made in connection with a related Award pursuant to subparagraph
(viii) under the definition of "Award" in Appendix A, an amount not to exceed
the amount necessary to defray in whole or in part the cost (including tax cost)
of the related Award to the Participant. However, Stock Options and SARs that
are granted with an exercise price that is less than the fair market value of
the underlying shares on the date of grant will be subject to the limits imposed
by both of the two preceding sentences. The foregoing provisions will be
construed in a manner consistent with Section 162(m) of the Code.

6.       ELIGIBILITY AND PARTICIPATION.

         Persons eligible to receive Awards under the Plan shall be such key
Employees, directors (whether or not Employees), and such non-Employees who, in
the opinion of the Administrator, are in a position to make a significant
contribution to the success of the Company and its subsidiaries. A subsidiary
for purposes of the Plan shall be a corporation in which the Company owns,
directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock. Eligibility for ISOs is limited to
employees of the Company or of a "parent corporation" or a "subsidiary
corporation" of the Company as those terms are defined in Section 424 of the
Code.

7.       TERMS AND CONDITIONS OF AWARDS.

         (a) ALL AWARDS

                  (i) AWARD PROVISIONS. The Administrator will determine the
         terms of all Awards, subject to the limitations provided herein.

                  (ii) TRANSFERABILITY. No Award may be transferred other than
         by will or by the laws of descent and distribution, and during a
         Participant's lifetime an Award may be exercised only by him or her;
         PROVIDED, HOWEVER, that the foregoing provisions shall not prohibit any
         pledge of an Award (other than an ISO) to the Company and shall not
         prohibit the transfer of an Award of unrestricted stock or, for
         periods after Restricted Stock ceases to be subject to restrictions
         requiring that it be redelivered or offered for sale to the Company
         if specified conditions are not satisfied, Restricted Stock.

                  (iii) VESTING, ETC. An Award will vest or become exercisable
         at such time or times and upon such conditions as the Administrator
         shall specify. Without limiting the

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         foregoing, the Administrator may at any time accelerate the vesting or
         exercisability of all or any part of an Award.

                  (iv) TAXES. The Administrator will make such provision for the
         withholding of taxes as it deems necessary. The Administrator may, but
         need not, hold back shares of Stock from an Award or permit a
         Participant to tender previously owned shares of Stock (which in the
         case of Stock acquired from the Company shall have been owned by the
         Participant for such minimum time, if any, as the Administrator may
         determine) in satisfaction of tax withholding requirements (but not in
         excess of the minimum withholding required by law).

                  (v) DIVIDEND EQUIVALENTS, ETC. The Administrator may provide
         for the payment of amounts in lieu of cash dividends or other cash
         distributions with respect to Stock subject to an Award.

                  (vi) SECTION 162(M). Except as hereinafter provided, this
         Section 7(a)(vi) applies to any Performance Award intended to qualify
         as performance-based for the purposes of Section 162(m). In the case of
         any Performance Award to which this Section 7(a)(vi) applies, the Plan
         and such Award will be construed to the maximum extent permitted by law
         in a manner consistent with qualifying the Award for such exception.
         With respect to such Performance Awards, the Administrator will
         preestablish, in writing, one or more specific Performance Criteria no
         later than 90 days after the commencement of the period of service to
         which the performance relates (or at such earlier time as is required
         to qualify the Award as performance-based under Section 162(m)). The
         Performance Criteria so established shall serve as a condition to the
         grant, vesting or payment of the Performance Award, as determined by
         the Administrator. Prior to grant, vesting or payment of the
         Performance Award, as the case may be, the Administrator will certify
         whether the Performance Criteria have been attained and such
         determination will be final and conclusive. If the Performance Criteria
         with respect to the Award are not attained, no other Award will be
         provided in substitution of the Performance Award. The provisions of
         this Section 7(a)(vi) shall not apply to (i) an Award that consists of
         a Stock Option or SAR that was granted with an exercise price not less
         than the fair market value of the underlying Stock on the date of
         grant, or (ii) any Award to which the provisions of Treas. Regs.
         Section 1.162-27(f) apply if made during the period to which such
         provisions apply, as determined by the Administrator.

         (b) AWARDS REQUIRING EXERCISE

                  (i) TIME AND MANNER OF EXERCISE OF AWARDS. Any exercise of an
         Award shall be in writing, signed by the proper person and furnished to
         the Company, accompanied by (A) such documents as may be required by
         the Administrator and (B) payment in full as specified below. A Stock
         Option shall be exercisable during such period or periods as the
         Administrator may specify. The latest date on which a Stock Option may
         be exercised shall be the Expiration Date.

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                  (ii) EXERCISE PRICE. The Administrator will determine the
         exercise price, if any, of each Award requiring exercise. The exercise
         price of each Stock Option shall be determined by the Administrator,
         but in the case of an ISO or a Stock Option described in the last
         sentence of this Section 7(b)(ii) shall not be less than 100% (110%, in
         the case of an ISO granted to a ten-percent shareholder) of the fair
         market value of the Stock at the time the Stock Option is granted; nor
         shall the exercise price be less, in the case of an original issue of
         authorized stock, than par value. For this purpose, "fair market value"
         in the case of ISOs shall have the same meaning as it does in the
         provisions of the Code and the regulations thereunder applicable to
         incentive options; and "ten-percent shareholder" shall mean any
         Participant who at the time of grant owns directly, or by reason of the
         attribution rules set forth in section 424(d) of the Code is deemed to
         own, stock possessing more than 10% of the total combined voting power
         of all classes of stock of the Company or of any of its parent or
         subsidiary corporations. In the case of any Stock Option intended to
         qualify for the performance-based compensation exception under Section
         162(m), other than a Stock Option to which the provisions of Treas.
         Regs. Section 1.162-27(f) apply and which is granted during the period
         to which such provisions apply, as determined by the Administrator,
         the exercise price shall be not less than 100% of the fair market
         value of the Stock at the time the Stock Option is granted.

                  (iii) PAYMENT OF EXERCISE PRICE. Stock purchased upon exercise
         of a Stock Option under the Plan shall be paid for as follows: (i) in
         cash, by check acceptable to the Administrator (determined in
         accordance with such guidelines as the Administrator may prescribe), or
         by money order payable to the order of the Company, or (ii) if so
         permitted by the Administrator and if legally permissible, (A) through
         the delivery of shares of Stock (which, in the case of Stock acquired
         from the Company, shall have been held for at least six months unless
         the Administrator approves a shorter period) having a fair market value
         on the last business day preceding the date of exercise equal to the
         exercise price, (B) through a broker-assisted exercise program
         acceptable to the Administrator, (C) by delivery to the Company of a
         promissory note of the Participant with a reasonable commercial rate of
         interest, such note to be payable on such terms as are specified by the
         Administrator, or (D) by any combination of the permissible forms of
         payment; PROVIDED, that if the Stock delivered upon exercise of the
         option is an original issue of authorized Stock, at least so much of
         the exercise price as represents the par value of such Stock shall be
         paid other than with a personal check or promissory note of the person
         exercising the Stock Option.

                  (iv) DELIVERY OF STOCK. A Participant shall not have the
         rights of a shareholder with regard to Awards under the Plan except as
         to Stock actually received by him or her under the Plan.

                  The Company shall not be obligated to deliver any shares of
         Stock under the Plan (i) until, in the opinion of the Company's
         counsel, all applicable federal and state laws and regulations have
         been complied with, (ii) if the outstanding Stock is at the time listed
         on any stock exchange, until the shares to be delivered have been
         listed or authorized to be listed on such exchange upon official notice
         of issuance, and (iii) until all other legal matters in connection with
         the issuance and delivery of such shares have been approved by the
         Company's counsel. Without limiting the generality of the foregoing, if
         the sale of

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         Stock has not been registered under the Securities Act of 1933, as
         amended, the Company may require, as a condition to exercise of the
         Award, such representations or agreements as counsel for the Company
         may consider appropriate to avoid violation of such Act and may require
         that the certificates evidencing such Stock bear an appropriate legend
         restricting transfer.

                  If an Award is exercised by the executor or administrator of a
         deceased Participant, or by the person or persons to whom the Award has
         been transferred by the Participant's will or the applicable laws of
         descent and distribution, the Administrator shall be under no
         obligation to deliver Stock pursuant to exercise until the
         Administrator is satisfied as to the authority of the person or persons
         excising the Award.

                  (v) ISOS. In the case of an ISO, the Administrator may require
         as a condition of exercise that the Participant exercising the ISO
         agree to inform the Company promptly of any disposition (within the
         meaning of section 424(c) of the Code and the regulations thereunder)
         of Stock received upon exercise of the ISO.

         (c) AWARDS NOT REQUIRING EXERCISE

                  Awards of Restricted Stock and Unrestricted Stock may be made
         in exchange for past services or other lawful consideration.

8.       EFFECT OF CERTAIN TRANSACTIONS.

         (a) MERGERS, ETC.

                  Except as otherwise provided in an Award, in the event of a
         Covered Transaction in which there is an acquiring or surviving entity
         the following rules shall apply:

                  (i) AWARDS OTHER THAN STOCK OPTIONS.

                           (A) The Administrator may provide for the assumption
                  of some or all outstanding Awards, or for the grant of new
                  awards in substitution therefor, by the acquiror or survivor
                  or an affiliate of the acquiror or survivor, in each case on
                  such terms and subject to such conditions as the Administrator
                  determines.

                           (B) In the absence of such an assumption or if there
                  is no substitution, except as otherwise provided in the Award,
                  each SAR and other Award requiring exercise (other than Stock
                  Options) will become fully exercisable, and the delivery of
                  shares of Stock issuable under each outstanding Award of
                  Deferred Stock will be accelerated and such shares will be
                  issued, prior to the Covered Transaction, in each case on a
                  basis that gives the holder of the Award a reasonable
                  opportunity, as determined by the Administrator, following
                  exercise of the Award or the issuance of the shares, as the
                  case may be, to participate as a stockholder in the Covered
                  Transaction, and the Award will terminate upon consummation of
                  the Covered Transaction.

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                           (C) In the case of Restricted Stock, the
                  Administrator may require that any amounts delivered,
                  exchanged or otherwise paid in respect of such Stock in
                  connection with the Covered Transaction be placed in escrow or
                  otherwise made subject to such restrictions as the
                  Administrator deems appropriate to carry out the intent of the
                  Plan.

                  (ii) STOCK OPTIONS.

                           (A) Subject to paragraph 8(a)(ii)(B) below, all
                  outstanding Stock Options will cease to be exercisable and
                  will be forfeited (after any payment or other consideration
                  deemed equitable by the Administrator for the termination of
                  any vested portion of any Award is made), as of the effective
                  time of the Covered Transaction; provided, that the
                  Administrator may in its sole discretion on or prior to the
                  effective date of the Covered Transaction, (1) make any
                  outstanding Stock Options exercisable in part or in full, (2)
                  remove any performance or other conditions or restrictions on
                  any Stock Options, and/or (3) in the event of a Covered
                  Transaction under the terms of which holders of the Stock of
                  the Company will receive upon consummation thereof a payment
                  (whether cash, non-cash or a combination of the foregoing) for
                  each share of such Stock surrendered in the Covered
                  Transaction, make or provide for a payment (whether cash,
                  non-cash or a combination of the foregoing) to the Participant
                  equal to the difference between (A) the fair market value per
                  share of the Stock times the number of shares of Stock subject
                  to outstanding Stock Options (to the extent then exercisable
                  at prices not in excess of the fair market value) and (B) the
                  aggregate exercise price of all such outstanding Stock Options
                  in exchange for the termination of such Stock Options.

                           (B) With respect to an outstanding Stock Option held
                  by a Participant who, following the Covered Transaction, will
                  be employed by or otherwise providing services to an entity
                  which is a surviving or acquiring entity in the Covered
                  Transaction or an affiliate of such an entity, the
                  Administrator may at or prior to the effective time of the
                  Covered Transaction, in its sole discretion and in lieu of the
                  action described in paragraph 8(a)(ii)(A) above, arrange to
                  have such surviving or acquiring entity or affiliate assume
                  any Stock Option held by such Participant outstanding
                  hereunder or grant a replacement award which, in the judgment
                  of the Administrator, is substantially equivalent to any Stock
                  Option being replaced.

                  (iii) OTHER SITUATIONS. The Administrator may grant Awards
         under the Plan in substitution for Awards held by directors, employees,
         consultants or advisers of another corporation who concurrently become
         directors, employees, consultants or advisers of the Company or a
         subsidiary of the Company as the result of a merger or consolidation of
         that corporation with the Company or a subsidiary of the Company, or as
         the result of the acquisition by the Company or a subsidiary of the
         Company of property or stock of that corporation. The Company may
         direct that substitute Awards be granted on such terms and conditions
         as the Administrator considers appropriate in the circumstances.

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         (b) CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK

                  (i) BASIC ADJUSTMENT PROVISIONS. In the event of a stock
         dividend, stock split or combination of shares (including a reverse
         stock split), recapitalization or other change in the Company's capital
         structure, the Administrator will make appropriate adjustments to the
         maximum number of shares that may be delivered under the Plan under
         Section 5(a) and to the maximum share limits described in Section 5(c),
         and will also make appropriate adjustments to the number and kind of
         shares of stock or securities subject to Awards then outstanding or
         subsequently granted, any exercise prices relating to Awards and any
         other provision of Awards affected by such change, whose determination
         will be binding on all persons.

                  (ii) CERTAIN OTHER ADJUSTMENTS. To the extent consistent with
         qualification of ISOs under Section 422 of the Code and with the
         performance-based compensation rules of Section 162(m), where
         applicable, the Administrator may also make adjustments of the type
         described in paragraph (i) above to take into account distributions to
         stockholders other than those provided for in Section 8(a) and 8(b)(i),
         material changes in accounting practices or principles, extraordinary
         dividends, consolidations or mergers (except those described in Section
         8(a)), acquisition of stock or property, or any other event, if the
         Administrator determines that adjustments are appropriate to avoid
         distortion in the operation of the Plan and to preserve the value of
         Awards made hereunder.

9.       TERMINATION OF EMPLOYMENT.

         In the case of any Award, the Administrator may, through agreement with
the Participant (including without limitation, any Stockholders Agreement of the
Company to which the Participant is a party), resolution, or otherwise, provide
for post-termination exercise provisions different from those expressly set
forth in this Section 9, including without limitation the vesting immediately
prior to termination of all or any portion of an Award not otherwise vested
prior to termination, and terms allowing a later exercise by a former employee,
consultant or advisor (or, in the case of a former employee, consultant or
advisor who is deceased, the person or persons to whom the Award is transferred
by will or the laws of descent and distribution) as to all or any portion of the
Award not exercisable immediately prior to termination of Employment, but in no
case may an Award be exercised after the Expiration Date. If the Administrator
does not otherwise provide for such provisions and if a Participant's Employment
terminates prior to the Expiration Date (including by reason of death) the
following provisions shall apply:

         (a) All Stock Options and SARs held by the Participant immediately
prior to the cessation of the Participant's Employment that are not vested
immediately prior to the cessation of Employment shall automatically terminate
upon such cessation of Employment.

         (b) To the extent vested immediately prior to cessation of Employment,
the Stock Option or SAR shall continue to be vested and shall be exercisable
thereafter during the period prior to the Expiration Date for 60 days following
such cessation (90 days in the event that a Participant's service terminates by
reason of death); PROVIDED, HOWEVER, that if the Participant's

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Employment is terminated "for Cause" as defined herein, all unvested or
unexercised Awards shall terminate immediately.

         (c) Except as otherwise provided in an Award, after completion of the
exercise period described in paragraph (b) above, the Awards described in
paragraph (b) above shall terminate to the extent not previously exercised,
expired, or terminated.

No Award requiring exercise shall be exercised or surrendered in exchange for a
cash payment after the Expiration Date.

10.      EMPLOYMENT RIGHTS.

         Neither the adoption of the Plan nor the grant of Awards shall confer
upon any Participant any right to continue as an employee of, or consultant or
adviser to, the Company or any subsidiary or affect in any way the right of the
Company or a subsidiary to terminate the Participant's relationship at any time.
Except as specifically provided by the Administrator in any particular case, the
loss of existing or potential profit in Awards granted under this Plan shall not
constitute an element of damages in the event of termination of the relationship
of a Participant even if the termination is in violation of an obligation of the
Company to the Participant by contract or otherwise.

11.      EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, AND TERMINATION.

         Neither adoption of the Plan nor the grant of Awards to a Participant
shall affect the Company's right to make awards to such Participant that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or compensation arrangements under which Stock may be
issued.

         The Administrator may at any time discontinue granting Awards under the
Plan. With the consent of the Participant, the Administrator may at any time
cancel an existing Award in whole or in part and grant another Award for such
number of shares as the Administrator specifies. The Administrator may at any
time or times amend the Plan or any outstanding Award for the purpose of
satisfying the requirements of section 422 of the Code or of any changes in
applicable laws or regulations or for any other purpose that may at the time be
permitted by law, or may at any time terminate the Plan as to any further grants
of Awards; PROVIDED, that except to the extent expressly required by the Plan,
no such amendment shall adversely affect the rights of any Participant (without
his or her consent) under any Award previously granted, nor shall such
amendment, without the approval of the stockholders of the Company, effectuate a
change for which stockholder approval is required in order for the Plan to
continue to qualify for the Award of incentive stock options under Section 422
of the Code.

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                                    EXHIBIT A

                               DEFINITION OF TERMS

         The following terms, when used in the Plan, will have the meanings and
be subject to the provisions set forth below:

         "ADMINISTRATOR": The committee of the Board, consisting of two of more
Directors, all of whom shall be "non-employee directors" within the meaning of
Rule 16b-3 under the 1934 Act and "outside directors" within the meaning of
Section 162(m). The Administrator may delegate ministerial tasks to such persons
as it deems appropriate.

         "AFFILIATE": Any corporation or other entity owning, directly or
indirectly, 50% or more of the outstanding Stock of the Company, or in which the
Company or any such corporation or other entity owns, directly or indirectly,
50% of the outstanding capital stock (determined by aggregate voting rights) or
other voting interests.

         "AWARD": Any or a combination of the following:

                  (i) Stock Options;

                  (ii) SARs;

                  (iii) Restricted Stock;

                  (iv) Unrestricted Stock;

                  (v) Deferred Stock;

                  (vi) Securities (other than Stock Options) that are
         convertible into or exchangeable for Stock on such terms and conditions
         as the Administrator determines;

                  (vii) Performance Awards; and

                  (viii) Grants of cash made in connection with other Awards in
         order to help defray in whole or in part the cost (including tax cost)
         of the Award to the Participant.

         "BOARD": The Board of Directors of the Company.

         "CAUSE": The Board's determination, in its reasonable judgment, that
any one or more of the following has occurred:

                  (i) the Participant shall have been convicted of, or shall
         have pleaded guilty or NOLO CONTENDERE to, any felony or any crime
         involving dishonesty or moral turpitude;

                  (ii) the Participant shall have committed any fraud, theft,
         embezzlement, misappropriation of funds, breach of fiduciary duty or
         act of dishonesty;

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                  (iii) the Participant shall have breached in any material
         respect any of the provisions of any agreement between the Participant
         and the Company, including, without limitation, the Company's
         Stockholders Agreement;

                  (iv) the Participant shall have engaged in conduct likely to
         make the Company or any of its Affiliates subject to criminal
         liabilities other than those arising from the Company's normal business
         activities; or

                  (v) the Participant shall have wilfully engaged in any other
         conduct that involves a breach of fiduciary obligation on the part of
         the Participant or otherwise could reasonably be expected to have a
         material adverse effect upon the business, interests or reputation of
         the Company or any of its Affiliates.

         "CODE": The U.S. Internal Revenue Code of 1986 as from time to time
amended and in effect, or any successor statute as from time to time in effect.

         "COMPANY": Carter's, Inc., a Delaware corporation.

         "COVERED TRANSACTION": Any of (i) a consolidation, merger, or similar
transaction or series of related transactions in which the Company is not the
surviving corporation or which results in the acquisition of all or
substantially all of the Company's then outstanding voting stock by a single
person or entity or by a group of persons and/or entities acting in concert, or
(ii) a sale or transfer of all or substantially all the Company's assets.

         "DEFERRED STOCK": An unfunded and unsecured promise to deliver Stock or
other securities in the future on specified terms.

         "EMPLOYEE": Any person who is employed by the Company or an Affiliate.

         "EMPLOYMENT": A Participant's employment or other service relationship
with the Company and its Affiliates. Employment will be deemed to continue,
unless the Administrator expressly provides otherwise, so long as the
Participant is employed by, or otherwise is providing services in a capacity
described in Section 6 to the Company or its Affiliates. If a Participant's
employment or other service relationship is with an Affiliate and that entity
ceases to be an Affiliate, the Participant's Employment will be deemed to have
terminated when the entity ceases to be an Affiliate unless the Participant
transfers Employment to the Company or its remaining Affiliates.

         "EXPIRATION DATE": In the case of an Award requiring exercise, the date
which is ten years (five years in the case of an ISO granted to anyone other
than a "ten percent shareholder" as defined in Section 7(b)(ii)) from the date
the Award was granted or such earlier date as may be specified by the
Administrator at the time the Award is granted.

         "ISO": A Stock Option intended to be an "incentive stock option" within
the meaning of Section 422 of the Code. Each option granted pursuant to the Plan
will be treated as providing by its terms that it is to be a non-incentive
option unless, as of the date of grant, it is expressly designated as an ISO.

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         "PARTICIPANT": A person who is granted an Award under the Plan.

         "PERFORMANCE AWARD": An Award subject to Performance Criteria. The
Administrator in its discretion may grant Performance Awards that are intended
to qualify for the performance-based compensation exception under Section 162(m)
and Performance Awards that are not intended so to qualify.

         "PERFORMANCE CRITERIA": Specified criteria the satisfaction of which is
a condition for the grant, exercisability, vesting or full enjoyment of an
Award. For purposes of Awards that are intended to qualify for the
performance-based compensation exception under Section 162(m), without regard to
the provisions of Treas. Regs. Section 1.162-27(f), a Performance Criterion will
mean an objectively determinable measure of performance relating to any or any
combination of the following (determined either on a consolidated basis or, as
the context permits, on a divisional, subsidiary, line of business, project or
geographical basis or in combinations thereof): sales; revenues; assets;
expenses; earnings before or after deduction for all or any portion of interest,
taxes, depreciation, or amortization, whether or not on a continuing operations
or an aggregate or per share basis; return on equity, investment, capital or
assets; one or more operating ratios; borrowing levels, leverage ratios or
credit rating; market share; capital expenditures; cash flow; stock price;
stockholder return; sales of particular products or services; customer
acquisition or retention; acquisitions and divestitures (in whole or in part);
joint ventures and strategic alliances; spin-offs, split-ups and the like;
reorganizations; or recapitalizations, restructurings, financings (issuance of
debt or equity) or refinancings. A Performance Criterion measure and any targets
with respect thereto determined by the Administrator need not be based upon an
increase, a positive or improved result or avoidance of loss.

         "PLAN": The Carter's, Inc. 2003 Equity Incentive Plan, as from time to
time amended and in effect.

         "RESTRICTED STOCK": An Award of Stock for so long as the Stock remains
subject to restrictions requiring that it be redelivered or offered for sale to
the Company if specified conditions are not satisfied.

         "SECTION 162(m)": Section 162(m) of the Code.

         "SARS": Rights entitling the holder upon exercise to receive cash or
Stock, as the Administrator determines, equal to a function (determined by the
Administrator using such factors as it deems appropriate) of the amount by which
the Stock has appreciated in value since the date of the Award.

         "STOCK": Common Stock of the Company, par value $ .01 per share.

         "STOCK OPTIONS": Options entitling the recipient to acquire shares of
Stock upon payment of the exercise price.

         "UNRESTRICTED STOCK": An Award of Stock not subject to any restrictions
under the Plan.<Page>
                                 CARTER'S, INC.

                             STOCKHOLDERS AGREEMENT

                          Dated as of August 15, 2001,
                         As amended on February 8, 2002,
                        April 3, 2002 and October 3, 2003
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                                 CARTER'S, INC.
                             STOCKHOLDERS AGREEMENT

                                TABLE OF CONTENTS

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                                                                                                               Page
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ARTICLE I..........................................................................................................3

 DEFINITIONS.......................................................................................................3

     1.1.  Certain Matters of Construction.........................................................................3
     1.2.  Definitions.............................................................................................4

ARTICLE II........................................................................................................12

COVENANTS AND CONDITIONS..........................................................................................12

     2.1.  Restrictions on Transfers; Involuntary Transfers.......................................................12
     2.2.  Call by the Company of Management Stockholders' Equity Interests.......................................14
     2.3.  Take Along.............................................................................................16
     2.4.  Come Along.............................................................................................18
     2.5.  Corporate Governance...................................................................................20
     2.6.  Rights of Participation................................................................................21
     2.7.  Confidentiality........................................................................................23

ARTICLE III.......................................................................................................23

REGISTRATION RIGHTS...............................................................................................23

     3.1.  General................................................................................................23
     3.2.  Demand Registration Initiated by the Berkshire Stockholders............................................23
     3.3.  Piggyback Registration; Reduction in Registration......................................................24
     3.4.  Obligations of the Company.............................................................................25
     3.5.  Furnish Information....................................................................................27
     3.6.  Expenses of Registration...............................................................................27
     3.7.  Underwriting Requirements..............................................................................27
     3.8.  Indemnification........................................................................................28
     3.9.  Registration on Form S-3...............................................................................30
     3.10. Reports Under Securities Exchange Act of 1934..........................................................30
     3.11. No Inconsistent Agreements.............................................................................31
     3.12. Stock Split............................................................................................31
     3.13. Timing and Other Limitations...........................................................................31
     3.14. Lock-up................................................................................................31

ARTICLE IV........................................................................................................32

MISCELLANEOUS.....................................................................................................32

     4.1.  Appointment of the Management Proxy....................................................................32

                                       i
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     4.2.  Remedies...............................................................................................32
     4.3.  Entire Agreement; Amendment; Waiver....................................................................32
     4.4.  Severability...........................................................................................33
     4.5.  Notices................................................................................................33
     4.6.  Binding Effect; Assignment.............................................................................34
     4.7.  Governing Law..........................................................................................34
     4.8.  Termination............................................................................................34
     4.9.  Recapitalizations, Exchanges, Etc......................................................................35
     4.10. Action Necessary to Effectuate the Agreement...........................................................35
     4.11. Purchase for Investment; Legend on Certificate.........................................................35
     4.12. Effectiveness of Transfers.............................................................................36
     4.13. Other Stockholders.....................................................................................36
     4.14. No Waiver..............................................................................................36
     4.15. Costs and Expenses.....................................................................................36
     4.16. Counterpart............................................................................................36
     4.17. Headings...............................................................................................36
     4.18. Third Party Beneficiaries..............................................................................36
     4.19. Consent to Jurisdiction................................................................................37
     4.20. WAIVER OF JURY TRIAL...................................................................................37
</table>
                                       ii
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                             STOCKHOLDERS AGREEMENT

           This Stockholders Agreement (this "Agreement") is entered into as of
the 15th day of August, 2001 by and among (i) Carter's, Inc., a Delaware
corporation and successor to Carter Holdings, Inc., a Massachusetts corporation
(together with its successors and permitted assigns, the "Company") and (ii) the
Stockholders (as defined below) party hereto and has been amended on each of
February 8, 2002, April 3, 2002 and October 3, 2003.

           WHEREAS, upon consummation of the transactions contemplated by that
certain Stock Purchase Agreement dated as of July 12, 2001, as heretofore
amended (the "Stock Purchase Agreement") by and among the Company, the selling
stockholders of the Company and CH Acquisition LLC, a Delaware limited liability
company, the Berkshire Stockholders (as defined below), the Management
Stockholders (as defined below) and the Other Stockholders (as defined below) as
of the date of such consummation will own the number of shares of Common Stock
(as defined below) and options to purchase shares of Common Stock, each as set
forth in the books and records of the Company;

         WHEREAS, each of the parties to this Agreement desires that this
Agreement supersedes the Stock Acquisition Agreements (as defined below), the
Stock Option Agreements (as defined below) and the Existing Stock Purchase
Agreements (as defined below), and by execution of this Agreement, such Stock
Acquisition Agreements, Stock Option Agreements (to the extent not restated as
of the date hereof) and Existing Stock Purchase Agreements shall terminate
effective as of the date of this Agreement; and

         WHEREAS, each of the Stockholders desires to enter into this Agreement
for the purpose of regulating certain relationships of the Stockholders with
regard to the Company and certain restrictions on the Common Stock and other
equity securities owned by the Stockholders.

         NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:

                                   ARTICLE I.

                                  DEFINITIONS

           1.1. CERTAIN MATTERS OF CONSTRUCTION. In addition to the definitions
referred to or set forth below in this Section 1:

                      (a) The words "hereof," "herein," "hereunder" and words of
           similar import shall refer to this Agreement as a whole and not to
           any particular Section or provision of this Agreement, and reference
           to a particular Section of this Agreement shall include all
           subsections thereof;

                      (b) References to Sections and Articles refer to Sections
           and Articles of this Agreement;
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                      (c) Definitions shall be equally applicable to both nouns
           and verbs and the singular and plural forms of the terms defined; and

                      (d) The masculine, feminine and neuter genders shall each
           include the other.

           1.2. DEFINITIONS. For the purposes of this Agreement, the following
terms shall have the following meanings:

           "1933 Act" shall mean the Securities Act of 1933, as amended, or any
successor act.

           "1934 Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor act.

           "Adverse Claim" shall have the meaning set forth in Section 8.102 of
the applicable Uniform Commercial Code.

           "Affiliate" shall mean, with respect to any specified Person, any
other Person which, directly or indirectly, through one or more intermediaries
controls, or is controlled by, or is under 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, means 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, by agreement or otherwise.

           "Agreement" shall have the meaning set forth in the first paragraph
of this Agreement.

           "Associate" (i) when used to indicate a relationship with any Person
shall mean, (a) any corporation or organization of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of equity securities, (b) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as a trustee or in a similar fiduciary capacity, and (c) any
relative of such Person who has the same home as such Person, is a parent,
sibling, spouse, in-law, child or grandchild of such Person, or the spouse of
any of them, or (ii) when used to indicate a relationship with the Company,
shall also mean a director or officer of the Company or any Subsidiary. Neither
the Company nor any of its Subsidiaries shall be deemed an Associate of any
Stockholder.

           "Berkshire Representatives" shall have the meaning as set forth in
Section 2.5(a).

           "Berkshire Stockholders" shall mean (i) those Persons listed as the
Berkshire Stockholders on the signature pages hereof, and (ii) their Permitted
Transferees (other than the Company), as evidenced by an executed counterpart to
this Agreement or a joinder to this Agreement, in either case, indicating that
such Permitted Transferee will be a Berkshire Stockholder.

           "Board" or "Board of Directors" shall mean the Board of Directors of
the Company as the same shall be constituted from time to time.
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           "Board Determination Procedures" shall mean the procedures by which
the Board calculates the Board Participation Determination. Such procedures
shall include, but not be limited to, a good faith estimate by the Board of any
acceleration of vesting of any Time Options and/or Performance Options upon
consummation of the proposed Transfer, the Applicable Percentage (as defined in
the Performance Options), the IRR (as defined in the Performance Options),
Adjusted EBITA (as defined in the Performance Options) and the number of Shares
the prospective transferee will ultimately purchase in the proposed Transfer.

           "Board Participation Determination" shall mean for each Management
Stockholder a good faith estimate of the number of Time Options which will vest
upon the consummation of the proposed Transfer and the number of Performance
Options which will vest upon consummation of the proposed Transfer, determined
in accordance with the Board Determination Procedures.

           "Call Event" shall have the meaning as set forth in Section 2.2(a).

           "Call Group" shall have the meaning as set forth in Section 2.2(a).

           "Call Notice" shall have the meaning as set forth in Section 2.2(a).

           "Call Option" shall have the meaning as set forth in Section 2.2(a).

           "Call Price" shall have the meaning as set forth in Section 2.2(b).

           "Call Securities" shall mean all of (i) the Shares, (ii) vested Time
Options, (iii) Rollover Options and (iv) vested Performance Options, in each
case which are owned by the members of the Call Group on the date of a Call
Event.

           "Cause" shall have the meaning as set forth below, except with
respect to any Management Stockholder who is employed by the Company or one of
its Subsidiaries pursuant to an effective written employment agreement, if any,
between the Company and/or one of its Subsidiaries and such Management
Stockholder in which there is a definition of "Cause," in which event the
definition of "Cause" as set forth in such employment agreement shall be deemed
to be the definition of "Cause" herein solely for such Management Stockholder
and only for so long as such employment agreement remains effective.

           In all other events, the term "Cause" shall mean that the Board of
Directors has determined in its reasonable judgement, that any one or more of
the following has occurred:

                      (i) the Management Stockholder shall have been convicted
           of, or shall have pleaded guilty or NOLO CONTENDERE to, any felony or
           any crime involving dishonesty or moral turpitude;

                      (ii) the Management Stockholder shall have committed any
           fraud, theft, embezzlement, misappropriation of funds, breach of
           fiduciary duty or act of dishonesty;
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                      (iii) the Management Stockholder shall have breached, in
           any material respect, any of the provisions of this Agreement or any
           other agreement between the Management Stockholder and the Company;

                      (iv) the Management Stockholder shall have engaged in
           conduct likely to make the Company or any of its Affiliates subject
           to criminal liabilities other than those arising from the Company's
           normal business activities;

                      (v) the Management Stockholder shall have openly
           disregarded his or her responsibilities to the Company and/or its
           Affiliates and shall have refused to devote substantial time and
           energy to the business and affairs of the Company and/or its
           Affiliates (other than due to Disability or temporary disability
           which, in the reasonable judgment of the Board of Directors, causes
           the Management Stockholder to be incapable of devoting such time and
           energy); or

                      (vi) the Management Stockholder shall have willfully
           engaged in any other conduct that involves a breach of fiduciary
           obligation on the part of the Management Stockholder or otherwise
           could reasonably be expected to have a material adverse effect upon
           the business, interests or reputation of the Company or any of its
           Affiliates.

           "Change in Control" shall mean (i) any transaction or series of
related transactions in which any Person who is not an Affiliate of the Company,
or any two or more such Persons acting as a group, and all Affiliates of such
Person or Persons, who prior to such time owned no Shares or Shares representing
less than fifty percent (50%) of the voting power at elections for the Board,
shall (A) acquire, whether by purchase, exchange, tender offer, merger,
consolidation, recapitalization or otherwise, or (B) otherwise be the owner of
(as a result of a redemption of Shares or otherwise), Shares (or shares in a
successor corporation by merger, consolidation or otherwise) such that following
such transaction or transactions, such Person or group and their respective
Affiliates beneficially own fifty percent (50%) or more of the voting power at
elections for the board of directors of the Company or any successor
corporation, or (ii) the sale or transfer of all or substantially all of the
Company's or The William Carter Company's assets and following such sale or
transfer, there is a liquidation of the Company.

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

           "Come Along Percentage" shall have the meaning set forth in Section
2.4(a).

           "Common Stock" shall mean the Company's common stock, par value $.01
per share, that the Company may be authorized to issue from time to time, any
other securities of the Company into which such Common Stock may hereafter be
changed or for which such Common Stock may be exchanged after giving effect to
the terms of such change or exchange (by way of reorganization,
recapitalization, merger, consolidation or otherwise) and shall also include any
common stock of the Company hereafter authorized and any capital stock of the
Company of any other class hereafter authorized which is not preferred as to
dividends or distribution of assets in liquidation over any other class of
capital stock of the Company and which has ordinary voting power for the
election of directors of the Company.
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           "Common Stock Equivalents" shall mean all shares of Common Stock (i)
owned by, or (ii) issuable upon exercise of Performance Options (solely to the
extent such Performance Options, on or prior to the time the determination of
Common Stock Equivalents is made, are vested), Time Options (solely to the
extent such Time Options, on or prior to the time the determination of Common
Stock Equivalents is made, are vested) and Rollover Options held by, each
Stockholder.

           "Company" shall have the meaning set forth in the first paragraph of
this Agreement.

           "Company Note" shall have the meaning as set forth in Section 2.2(c).

           "Company Option Period" shall have the meaning as set forth in
Section 2.1(c)(ii).

           "Company Sale" shall mean any transaction or a series of related
transactions through which the holders of Common Stock Equivalents and their
Affiliates immediately prior to the transaction or series of related
transactions shall own less than fifty percent (50%) of all Common Stock
Equivalents (including without limitation, all shares issued in respect of any
such Common Stock Equivalents by way of stock dividend, stock split or
combination of shares) immediately following the transaction or series of
related transactions.

           "Default" shall have the meaning as set forth in Section 2.2(c).

           "Designated Employee" or "Designated Employees" shall have the
meaning as set forth in Section 2.2(d).

           "Disability" shall mean permanent disability within the meaning of
Section 22(e)(3) of the Code, unless otherwise defined in a separate written
employment agreement between the Company and/or one of its Subsidiaries and the
person whose disability is in question in which event the definition of
"Disability" as set forth in such employment agreement shall be deemed to be the
definition of "Disability" herein solely for such person and only for so long as
such employment agreement remains effective.

           "Existing Stock Purchase Agreements" shall mean the Stock Purchase
Agreements between the Company and each of Eileen Brody (dated April 1, 1997),
Joseph D. Elles (dated January 1, 1998), Ralph L. Shannon (dated June 19, 1997)
and Clyde Stutts (dated March 1, 2000).

           "Fair Market Value" shall mean the fair value per share of the
applicable Shares as of the applicable date on the basis of a sale of such
Shares in an arms length private sale between a willing buyer and a willing
seller, neither acting under compulsion. In determining such Fair Market Value,
no discount shall be taken for constituting a minority interest or for the
illiquidity of such Shares and no upward adjustment or discount shall be taken
relating to the fact that the Shares in question are subject to the restrictions
and entitled to the rights provided hereunder. Such Fair Market Value shall be
determined in good faith by the Board of Directors.

           "Federal Bankruptcy Code" means Title 11 of the United States Code.
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           "Gross-Up Amount" shall mean the amount, if any, by which the Fair
Market Value per Share or Option is less than the amount the Management
Stockholder would have received in the Change in Control transaction or the
Public Offering, as the case may be, had his or her securities not been called
pursuant to Section 2.2., such amount to be determined in good faith by the
Board.

           "Holder" or "Holders" have the meaning as set forth in Section 3.1.

           "Incentive Plan" shall mean Carter Holdings, Inc. 2001 Equity
Incentive Plan.

           "Investment Price" shall mean an amount per Share equal to the price
per Share paid for such Share at the time of initial purchase thereof (subject
to appropriate adjustments for stock splits, recapitalizations and the like).

           "Involuntary Transfer" shall have the meaning as set forth in Section
2.1(c)(vi).

           "Management Proxy" shall have the meaning as set forth in Section
4.1.

           "Management Representatives" shall have the meaning as set forth in
Section 2.5(a).

           "Management Stockholders" shall mean (i) those Persons listed as the
Management Stockholders on the signature pages hereof and (ii) their Permitted
Transferees (other than the Company), as evidenced by an executed counterpart to
the Agreement or a joinder to this Agreement, in either case, indicating that
such Permitted Transferee will be a Management Stockholder.

           "Mid-term Applicable Federal Rate" shall mean the mid-term applicable
federal rate as defined in Section 1274 of the Code.

           "New Securities" shall have the meaning as set forth in Section
2.6(b).

           "Options" shall mean Performance Options, Time Options and Rollover
Options.

           "Other Stockholders" shall mean (i) those Persons listed as the Other
Stockholders on the signature pages hereof, (ii) their Permitted Transferees
(other than the Company) as evidenced by an executed counterpart to the
Agreement or a joinder to this Agreement, in either case, indicating that such
Permitted Transferee will be an Other Stockholder and (iii) those Persons
described in Section 4.13(iii).

           "Participating Offeree" shall have the meaning as set forth in
Section 2.4(a).

           "Participation Notice" shall have the meaning as set forth in Section
2.4(a).

           "Participation Securities" shall have the meaning as set forth in
Section 2.4(a).

           "Performance Options" shall mean, collectively, the options granted
to certain Management Stockholders under the Incentive Plan to purchase shares
of Common Stock, the
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number of vested options of which is subject to the attainment of certain
targets set forth in the Incentive Plan and the option certificates issued
pursuant thereto.

           "Permitted Transfer" shall mean:

                      (i) a Transfer of Shares by any Stockholder who is a
           natural person to (a) such Stockholder's spouse, children (including
           legally adopted children and stepchildren), spouses of children,
           grandchildren, spouses of grandchildren, parents or siblings; (b) a
           trust for the benefit of the Stockholder and/or any of the Persons
           described in clause (a); or (c) a corporation, limited partnership or
           limited liability company whose sole shareholders, partners or
           members, as the case may be, are the Stockholder and/or any of the
           Persons described in clause (a) or clause (b); PROVIDED, that in any
           of clauses (a), (b) or (c), the Stockholder transferring such Shares
           retains exclusive power to exercise all rights under this Agreement.

                      (ii) a Transfer of Shares by any Stockholder to the
           Company (including, without limitation, any pledge of Shares or
           Options to the Company);

                      (iii) a Transfer of Shares by a Stockholder upon death or
           incapacity to such Stockholder's estate, executors, administrators
           and personal representatives, and then to such Stockholder's legal
           representatives, heirs or legatees (whether or not such recipients
           are a spouse, children, spouses of children, grandchildren, spouses
           of grandchildren, parents or siblings of such Stockholder); PROVIDED,
           that, in the case of a Management Stockholder whose Shares were
           subject to the provisions of Section 2.2 immediately prior to such
           Management Stockholder's death, the Company has not exercised its
           Call Option with respect to such Shares under Section 2.2;

                      (iv) a Transfer of Shares (a) by the initial Berkshire
           Stockholders to any Affiliate of Berkshire Partners LLC or any of the
           employees, partners, members or Affiliates of such Berkshire
           Stockholder or any such Affiliate, or (b) between any Berkshire
           Stockholders; or

                      (v) a Transfer of Shares by any Other Stockholder who is
           not a natural person to any Affiliate of such Other Stockholder;

PROVIDED, HOWEVER, that Performance Options, Time Options and Rollover Options
may only be transferred in accordance with the terms of the Incentive Plan; and
PROVIDED, FURTHER, that a Permitted Transfer from a Management Stockholder to
any Permitted Transferee must be approved by the Management Proxy; and PROVIDED,
FURTHER, that no Permitted Transfer shall be effective unless and until the
transferee of the Shares, Performance
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Options, Time Options or Rollover Options so transferred complies with Section
4.13 including without limitation, executing and delivering to the Company a
counterpart of this Agreement and agreeing to be bound hereunder in the same
manner and to the same extent as the Stockholder from whom the Shares,
Performance Options, Time Options or Rollover Options were transferred. Except
in the case of a Permitted Transfer pursuant to clause (ii) above, from and
after the date on which a Permitted Transfer becomes effective, the Permitted
Transferee of the Shares, Performance Options, Time Options or Rollover Options
so transferred shall have the same rights, and shall be bound by the same
obligations, under this Agreement as the transferor of such Shares, Performance
Options, Time Options or Rollover Options and shall be deemed for all purposes
hereunder (i) a "Berkshire Stockholder" in the case of a Permitted Transfer from
a Berkshire Stockholder, (ii) a "Management Stockholder" in the case of a
Permitted Transfer from a Management Stockholder or (iii) an "Other Stockholder"
in the case of a Permitted Transfer from an Other Stockholder. No Permitted
Transfer shall conflict with or result in any violation of a judgment, order,
decree, statute, law, ordinance, rule or regulation.

           "Permitted Transferee" shall mean any Person who shall have acquired
and who shall hold Shares, Performance Options, Time Options or Rollover Options
pursuant to a Permitted Transfer.

           "Person" shall mean any individual, partnership, corporation,
association, limited liability company, trust, joint venture, unincorporated
organization or entity, or any government, governmental department or agency or
political subdivision thereof.

           "Proportionate Share" shall have the meaning as set forth in Section
2.1(c)(iii).

           "Proprietary Information" shall have the meaning as set forth in
Section 2.7.

           "Public Offering" shall mean the completion of a sale of Common Stock
pursuant to a registration statement which has become effective under the 1933
Act (excluding registration statements on Form S-4, S-8 or similar limited
purpose forms), in which the Common Stock shall be listed and traded on a
national exchange or on the NASDAQ National Market System.

           "register," "registered" and "registration" shall have the meaning as
set forth in Section 3.1.

           "Registrable Securities" shall mean (i) all shares of Common Stock
held by any Stockholder, (ii) all shares of Common Stock issuable upon the
exercise of Performance Options, Time Options and Rollover Options, in each
case, to the extent exercisable, held by any Stockholder, and (iii) any other
common equity securities of the Company issued in exchange for, upon a
reclassification of, or in a distribution with respect to, such Common Stock. As
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (a) a registration statement (other than a
registration statement on Form S-8) with respect to the sale of such securities
shall have become effective under the 1933 Act and such securities shall have
been disposed of in accordance with such registration statement, (b) a
registration statement on Form S-8 with respect to such securities shall have
become effective under the 1933 Act, or (c) such securities shall have been sold
under Rule 144 (or any successor provision) under the 1933 Act and such
securities may be resold by the Holder thereof without registration under the
1933 Act.

           "Rollover Options" shall mean, collectively, the vested options
retained by certain Management Stockholders under the Incentive Plan, to
purchase shares of Common Stock on the terms set forth therein and in the Stock
Option Agreements issued pursuant thereto.

           "Sale Request" shall have the meaning as set forth in Section 2.3(a).
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           "Schedule" shall refer to the Schedule of Stockholders attached
hereto as Exhibit A, as amended from time to time.

           "SEC" shall mean the United States Securities and Exchange
Commission.

           "Seller" shall have the meaning as set forth in Section 2.3(a).

           "Shares" shall mean (i) shares of Common Stock held by Stockholders
from time to time, or (ii) securities of the Company issued in exchange for,
upon reclassification of, or as a distribution in respect of, the foregoing.

           "Stock Acquisition Agreements" shall mean the Stock Acquisition
Agreements dated as of October 30, 1996, by and between the Company and each of
Joan I. Bonomi, David A. Brown, Leonard R. Bythewood, Suzanne B. Calkins,
Michael D. Casey, M. Lawson Farmer, David J. Foy, Geoffrey J. Gibson, Herbert W.
Green, Ben F. Logan, Robin R. Owen, Joseph Pacifico, Frederick J. Rowan, II,
Charles E. Whetzel, Jr. and Joseph C. Wilson, Jr.

           "Stock Option Agreements" shall mean the Stock Option Agreement
pursuant to the Carter Holdings, Inc. Senior Management Stock Incentive Plan
between the Company and each of Frederick J. Rowan, II (dated October 30, 1996,
as amended April 28, 1998), David A. Brown (dated October 30, 1996, as amended
April 28, 1998), Joseph Pacifico (dated October 30, 1996, as amended April 28,
1998), Charles E. Whetzel, Jr. (dated October 30, 1996, as amended April 28,
1998), Michael D. Casey (dated October 30, 1996, as amended April 28, 1998,
dated April 1, 1998 and dated March 17, 1999), Douglas Boyle (dated March 22,
1999), Joanie Gross (dated March 1, 1998, as amended May 4, 1998), Suzanne B.
Calkins (dated October 30, 1996, as amended April 28, 1998), Joseph M. Elles
(dated October 30, 1996, as amended April 28, 1998), Geoffrey J. Gibson (dated
October 30, 1996, as amended April 28, 1998), Ben F. Logan (dated October 30,
1996, as amended April 28, 1998), Joseph C. Wilson, Jr. (dated October 30, 1996,
as amended April 28, 1998), M. Lawson Farmer (dated June 1, 1999), Robert
Papirner (dated June 1, 1999), Clyde D. Stutts (dated June 1, 1999), Ralph L.
Shannon (dated June 19, 1997, as amended April 28, 1998 and dated March 17,
1999) and Eileen B. Brody (dated April 1, 1997, as amended April 28, 1998).

           "Stock Purchase Agreement" shall have the meaning set forth in the
recitals.

           "Stockholders" shall mean, collectively, the Berkshire Stockholders,
the Management Stockholders and the Other Stockholders.

           "Subsidiary" with respect to any entity (the "parent") shall mean any
corporation, company, firm, association or trust of which such parent, at the
time in respect of which such term is used, (i) owns directly or indirectly more
than fifty percent (50%) of the equity or beneficial interest, on a consolidated
basis, or (ii) owns directly or controls with power to vote, directly or
indirectly through one or more Subsidiaries, shares of the equity or beneficial
interest having the power to elect more than fifty percent (50%) of the
directors, trustees, managers or other officials having powers analogous to that
of directors of a corporation. Unless otherwise specifically indicated, when
used herein the term Subsidiary shall refer to a direct or indirect Subsidiary
of the Company.

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         "Take Along Group" shall have the meaning as set forth in Section
2.3(a).

           "Third Party" shall mean any Person other than the Company.

           "Time Options" shall mean, collectively, the time vested options,
granted to certain Management Stockholders under the Incentive Plan, to purchase
shares of Common Stock on the terms set forth therein and in the certificates
and agreements issued pursuant thereto.

           "Transfer" shall mean to transfer, sell, assign, pledge, hypothecate,
give, create a security interest in or lien on, place in trust (voting or
otherwise), assign or in any other way encumber or dispose of, directly or
indirectly and whether or not by operation of law or for value, any Shares,
Performance Options, Time Options or Rollover Options.

           "Transfer Date" shall have the meaning as set forth in Section
2.1(c)(i).

           "Transferor" shall have the meaning as set forth in Section 2.4(a).

           "Transferring Stockholder" shall have the meaning as set forth in
Section 2.1(c)(i).

           "Voluntary Termination" shall mean any voluntary termination of
employment with the Company or a Subsidiary of the Company by a Management
Stockholder, except as otherwise specified in an effective written agreement, if
any, between the Company and/or one of its Subsidiaries and such Management
Stockholder. The term Voluntary Termination shall not include termination of
employment due to death, Disability or retirement in accordance with Company
policy.

                                  ARTICLE II.

                            COVENANTS AND CONDITIONS

           Subject to the provisions of Section 4.8 hereof relating to the
termination of certain provisions of this Agreement, the following covenants and
conditions shall apply.

           2.1. RESTRICTIONS ON TRANSFERS; INVOLUNTARY TRANSFERS.

                      (a) No Management Stockholder or Other Stockholder may
           Transfer all or any of the Shares owned by such Management
           Stockholder or Other Stockholder to any Person other than (i) a
           Permitted Transferee, (ii) pursuant to Section 2.2, (iii) pursuant to
           Section 2.3 in accordance with a Sales Request, or (iv) pursuant to
           Section 2.4 as a Participating Offeree. Any attempted Transfer of
           Shares not permitted by this Section 2.1 shall be null and void, and
           the Company shall not in any way give effect to such nonpermissible
           Transfer. Any attempted Transfer of Performance Options, Time Options
           or Rollover Options not permitted by the Incentive Plan shall be null
           and void, and the Company shall not in any way give effect to such
           nonpermissible Transfer.

                      (b) Transferred Shares Subject to Transfer Restrictions.
           Any Shares Transferred pursuant to this Section 2.1 shall remain
           subject to the Transfer restrictions of this Agreement and each
           intended transferee pursuant to this Section shall execute and

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           deliver to the Company a counterpart of this Agreement, which shall
           evidence such transferee's agreement that the Shares intended to be
           transferred shall continue to be subject to this Agreement and that
           as to such Shares the transferee shall be bound by the restrictions
           of this Agreement as a Stockholder hereunder.

                      (c) INVOLUNTARY TRANSFERS.

                                 (i) Any Stockholder who is the subject of an
                      Involuntary Transfer (as defined below) (the "Transferring
                      Stockholder"), shall notify the Company and the other
                      Stockholders in writing within ten (10) days of such
                      Involuntary Transfer (but the failure to give such notice
                      shall not affect the rights of the parties hereunder). For
                      purposes of this Section 2.1(c), the later of receipt of
                      such notice by the Company and the other Stockholders and
                      the date of such Involuntary Transfer shall be the
                      "Transfer Date".

                                 (ii) For a period of twenty (20) days after the
                      Transfer Date (the "Company Option Period"), the Company
                      may, by notice in writing to the Transferring Stockholder,
                      elect in writing to purchase any or all of the Shares
                      subject to the Involuntary Transfer at the Fair Market
                      Value of such Shares.

                                 (iii) If the Company does not elect to purchase
                      any of the Shares subject to the Involuntary Transfer, or
                      exercises such right only with respect to a portion of
                      such Shares, then for a period of twenty (20) days
                      commencing on the earlier of (a) the date, if any, that
                      the Transferring Stockholder notifies the other
                      Stockholders in writing that the Company has determined
                      either not to exercise such right of purchase or to
                      exercise such right only with respect to a portion of the
                      Shares subject to the Involuntary Transfer, and (b) the
                      expiration of the Company Option Period, the other
                      Stockholders shall have the right to purchase all or any
                      portion of such Shares subject to the Involuntary Transfer
                      not so elected to be purchased by the Company, at the Fair
                      Market Value of such Shares. The specific number of such
                      Shares subject to the Involuntary Transfer remaining after
                      the Company has exercised its right pursuant to clause
                      (ii) to which each other Stockholder shall be entitled to
                      purchase shall be determined on a PRO RATA basis in
                      proportion to the respective number of shares of Common
                      Stock owned beneficially by each such Stockholder as of
                      the Transfer Date in relation to the total number of
                      shares of Common Stock owned beneficially by all such
                      Stockholder (for each such Stockholder, its "Proportionate
                      Share"). Each such Stockholder shall also be entitled to
                      indicate a desire to purchase all or a portion of any
                      Shares subject to the Involuntary Transfer remaining after
                      such PRO RATA allocation. Each such Stockholder shall be
                      allocated the maximum amount of Shares subject to the
                      Involuntary Transfer set forth in such Stockholder's offer
                      to purchase, unless such allocation would result in the
                      allocation of more securities in the aggregate than are
                      available for purchase by the other Stockholders, in which
                      case such Shares subject to the Involuntary Transfer shall
                      be allocated among the Stockholders PRO RATA in accordance
                      with each such Stockholder's Proportionate Share;
                      PROVIDED, HOWEVER, that if the foregoing results in any
                      Stockholder being allocated more than the maximum amount
                      of Shares subject to

<Page>

                      the Involuntary Transfer specified in such Stockholder's
                      offer to purchase, such Stockholder will be allocated such
                      maximum amount and the excess will be allocated as
                      provided in this sentence (including this proviso).

                                 (iv) Any Shares subject to the Involuntary
                      Transfer not accepted pursuant to clauses (ii) and (iii)
                      above shall be Transferred in accordance with the terms
                      and conditions of the Involuntary Transfer.

                                 (v) The closing of the purchase and sale of any
                      Shares subject to the Involuntary Transfer hereunder shall
                      be held at the offices of the Company on such dates and
                      times as the parties may agree but in all events within
                      twenty (20) days following termination of the offer period
                      granted to the other Stockholders.

                                 (vi) For purposes of this Agreement, the term
                      "Involuntary Transfer" shall mean any involuntary sale,
                      transfer, encumbrance or other disposition (other than as
                      a result of the death of the Stockholder) by or in which
                      any Stockholder shall be deprived or divested of any
                      right, title or interest in or to any Shares, including
                      without limitation (I) any levy of execution, transfer in
                      connection with bankruptcy, reorganization, insolvency or
                      similar proceedings, (II) any transfer to a public officer
                      or agency pursuant to any abandoned property or escheat
                      law, or (III) any transfer to the spouse of an individual
                      or change in the record holder made pursuant to divorce
                      proceedings. A Transfer pursuant to Section 2.2 shall not
                      be deemed to be an Involuntary Transfer.

           2.2. CALL BY THE COMPANY OF MANAGEMENT STOCKHOLDERS' EQUITY
INTERESTS.

           (a) Upon the termination of the employment of any Management
Stockholder by the Company or any of its Subsidiaries (a "Call Event") for any
reason, the Company or its designee shall have the right to purchase (the "Call
Option"), by delivery of a written notice (the "Call Notice") to such terminated
Management Stockholder no later than ninety (90) days after the date of such
Call Event, and such Management Stockholder and such Management Stockholder's
Permitted Transferees (collectively, the "Call Group") shall be required to sell
all (but not less than all) of the Call Securities at a price per share (or per
option) equal to the Call Price (as defined below) of such Call Securities
determined as of the date of repurchase pursuant to the Call Notice.

           (b) For purposes of this Section 2.2, the term "Call Price" shall
mean:

                      (i) with respect to any Shares (including Shares purchased
           upon exercise of Rollover Options, Time Options and Performance
           Options) held by the Call Group,

                                 (A) in the event of a termination of a
                      Management Stockholder's employment (w) by the Company
                      without Cause, (x) by virtue of death or Disability, (y)
                      upon retirement in accordance with Company policy, or (z)
                      by Voluntary Termination on or after the third anniversary
                      of the date hereof, the Fair Market Value of such Shares;
                      and

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                                 (B) in the event of a termination of a
                      Management Stockholder's employment by (x) Voluntary
                      Termination prior to the third anniversary of the date
                      hereof or (y) by the Company for Cause, the lower of (I)
                      the Investment Price of such Shares, or (II) the Fair
                      Market Value of such Shares.

                      (ii) with respect to any vested Time Options, vested
           Performance Options or Rollover Options, the difference between (x)
           the Call Price for the Shares underlying such Time Options or
           Rollover Options, as the case may be (calculated as if the Shares
           underlying such Time Options, Performance Options or Rollover
           Options, as the case may be were outstanding and had been called
           pursuant to this Section 2.2 and therefore calculated in accordance
           with the procedures set forth in clause 2.2(b)(i) above) minus (y)
           the exercise price of such vested Time Options, vested Performance
           Options or Rollover Options, as the case may be; PROVIDED, that such
           difference shall not be less than zero;

                      (iii) with respect to any unvested Time Options or
           unvested Performance Options, such options shall automatically expire
           as set forth in the Option Certificates pursuant to which they were
           granted.

           (c) The closing of any purchase of Call Securities by the Company
pursuant to Section 2.2(a) shall take place at the principal office of the
Company no later than 185 days after the Call Event. At such closing, the
Company shall deliver to the Call Group consideration in an amount equal to the
aggregate Call Price payable in respect of such Call Securities against delivery
of (i) original stock certificates and stock powers duly endorsed in favor of
the Company representing the Call Securities, and (ii) an executed agreement, in
form reasonably satisfactory to the Company, evidencing the cancellation of any
vested Time Options, Rollover Options and vested Performance Options purchased
at such closing. The Company shall pay the Call Price by paying the Call Group
in cash; PROVIDED, HOWEVER, that in the event that any such cash payment could,
in the reasonable judgement of the Board, cause the Company or any Subsidiary to
be in violation of applicable law or in default under or otherwise in violation
of the terms of any material loan or credit agreement to which the Company or
any of its Subsidiaries is a party (a "Default"), the Company shall pay such
cash portion of the Call Price by issuing a subordinated promissory note in a
principal amount equal to the cash portion of the purchase price (the "Company
Note"). The principal of such note will be due and payable in five equal annual
installments, the first such installment becoming due and payable on the first
anniversary of the issuance of such note, and interest will accrue thereon at a
rate equal to the Mid-term Applicable Federal Rate plus three percent (3%) from
the date of issuance of the Company Note and will be payable quarterly in
arrears. Such Company Note may be prepaid by the Company in whole at any time or
in part from time to time without premium or penalty and shall otherwise be in
the form acceptable to the Board; PROVIDED, HOWEVER, that if at any time after a
Company Note has been issued, the Board determines that prepaying such Company
Note in whole would not reasonably be likely to cause a Default, the Company
Note shall then be prepaid in full at such time. Notwithstanding anything to the
contrary in this Agreement, the Company shall not be obligated to make any cash
payment pursuant to this Section 2.2(c)

<Page>

or any cash payment of principal or interest due under a Company Note if such
payment would cause a Default. In the event the Company cannot make any cash
payment under this Section 2.2(c) or the cash payments of principal and interest
due under a Company Note because it is in Default or would be in Default by
virtue of such payments, the Company will undertake to make such payments at
such time as the Company is no longer in, or would no longer be by virtue of
such payments in, Default.

           (d) Notwithstanding anything set forth in this Section 2.2 to the
contrary, prior to the exercise by the Company of its Call Option to purchase
Call Securities pursuant to this Section 2.2, the Board of Directors may
designate one or more new or existing employees of the Company or any Subsidiary
(individually a "Designated Employee" and collectively, the "Designated
Employees") or another Stockholder who shall have the right, but not the
obligation, to exercise the Call Option and to acquire, in lieu of the Company,
some or all (as determined by the Company) of the Call Securities that the
Company is entitled to purchase from the Call Group hereunder, on the same terms
and conditions as set forth in Section 2.2(c) which apply to the purchase of
Call Securities by the Company, except all payments pursuant to this Section
2.2(d) shall be made in immediately available funds or by certified or cashier's
check, and shall not be payable in the form of a note of any kind. Concurrently
with any such purchase of Call Securities by any such Designated Employee, such
Designated Employee shall execute a counterpart of this Agreement, whereupon
such Designated Employee shall be deemed a "Management Stockholder" and shall
have the same rights and be bound by the same obligations as the Management
Stockholders hereunder.

           (e) In the event of a termination of a Management Stockholder for any
reason other than the Voluntary Termination of such Management Stockholder or
for Cause and, within six (6) months after such termination, the Company
consummates a Public Offering or a Change in Control transaction, or a Change in
Control transaction is agreed upon in a definitive agreement, the Company shall
pay to the Management Stockholder, subject to the provisions of clauses (c) and
(d) above, cash in an amount equal to the Gross-Up Amount for each Share or
Option purchased pursuant to this Section 2.2. Notwithstanding the foregoing, in
the case of a Change in Control transaction that is agreed upon in a definitive
agreement within six (6) months after the date of termination of the Management
Stockholder, the Management Stockholder shall not be entitled to receive any
cash pursuant to this clause (e) unless such Change in Control transaction is
consummated within six (6) months after execution of such definitive agreement.

2.3. TAKE ALONG.

           (a) If at any time, any of the Stockholders constituting more than
fifty (50%) of the Common Stock Equivalents, individually or acting as a group
(such Stockholders, as applicable, being referred to herein as the "Take Along
Group") elect to consummate, or cause the Company to consummate, a Company Sale
to a Third Party which is not an Affiliate of any Stockholder included in the
Take Along Group, then upon twenty (20) days' written notice by the Take Along
Group to each other Stockholder, which notice shall set forth the terms and
conditions of such proposed Company Sale, including the name of the prospective
transferee, the number of shares of Common Stock and Common

<Page>

Stock Equivalents proposed to be sold by the Take Along Group in the Company
Sale, the consideration to be received by the Take Along Group and the proposed
time and place of closing (such notice being referred to as the "Sale Request"),
each other Stockholder (each, a "Seller"), in the event the Company Sale is
consummated, shall be obligated to consummate, consent to and raise no objection
to the proposed Company Sale and take all other actions reasonably necessary or
desirable to consummate the proposed Company Sale on the terms proposed by the
Take Along Group as set forth in the Sale Request. Without limiting the
generality of the foregoing, (i) if the Company Sale is structured as a merger,
consolidation or similar business transaction, each Seller will vote or cause to
be voted all Shares that he holds or with respect to which he has the power to
direct the voting and which he is entitled to vote on such proposed Company Sale
in favor of such proposed Company Sale and will waive all appraisal and
dissenters rights and hereby grants a proxy in favor of the Take Along Group to
vote the Seller's Shares in accordance with this Section 2.3(a) and (ii) if the
Company Sale is structured as a sale or redemption of Common Stock, each Seller
will agree to sell his PRO RATA portion of Common Stock Equivalents (including
his pro rata portion of Time Options, Rollover Options and Performance Options
which would become Common Stock Equivalents by reason of the Company Sale) being
sold in the Company Sale on the same terms and conditions as the Take Along
Group. A Stockholder's PRO RATA portion, for purposes of this Section 2.3(a), is
the product of (i) a fraction, the numerator of which is the number of
outstanding Common Stock Equivalents which such Stockholder then owns and the
denominator of which is the total number of such Common Stock Equivalents then
actually outstanding and (ii) the total number of Common Stock Equivalents being
sold in the Company Sale. Each proxy granted above in this Section 2.3(a) is
irrevocable, coupled with an interest and shall survive until the expiration of
the provisions of this Section 2.3(a). If required, each Seller shall (i)
deliver certificates for all of its Shares being Transferred pursuant to this
Section 2.3(a) at the closing of the proposed Transfer, free and clear of all
claims, liens and encumbrances. The terms and conditions of any sale pursuant to
this Section 2.3(a) shall be the same as set forth in the Sale Request;
PROVIDED, HOWEVER, that in the case of Performance Options, Time Options and
Rollover Options, the holders of such securities shall have the opportunity to
either (i) exercise such Performance Options, Time Options and Rollover Options
(if such Performance Options, Time Options or Rollover Options are exercisable
or would be exercisable upon consummation of the Company Sale) and participate
in such sale as holders of Common Stock issuable upon such exercise, or (ii)
upon the consummation of the sale, receive in exchange for such Performance
Options, Time Options and Rollover Options the amount determined by multiplying
(1) the same amount of consideration per share received by the Stockholders for
which the Performance Option or Time Option is exercisable less the exercise
price or conversion price per share of such Performance Option or Time Option by
(2) the number of shares of Common Stock represented by such Performance
Options, Time Options and Rollover Options.

           (b) Each Stockholder, whether in his capacity as a Seller,
Stockholder, officer or director of the Company, or otherwise, shall take or
cause to be taken all commercially reasonable actions in order expeditiously to
consummate any Company Sale and any related transactions, including, without
limitation, executing, acknowledging and delivering consents, assignments,
waivers and other documents or instruments as may be

<Page>

reasonably requested and otherwise cooperating with the Take Along Group and any
prospective buyer; PROVIDED, HOWEVER, that Stockholders shall be obligated to
become liable in respect of any representations, warranties, covenants,
indemnities or otherwise to the Third Party solely to the extent provided in the
immediately following sentence. Without limiting the generality of the
foregoing, each Stockholder agrees to execute and deliver such agreements as may
be reasonably specified by the Take Along Group to which such Take Along Group
will also be party, including, without limitation, agreements to (i) (1) make
individual representations, warranties, covenants and other agreements as to the
unencumbered title to its Shares and the power, authority and legal right to
Transfer such Shares and the absence of any Adverse Claim with respect to such
Shares and (2) be liable without limitation as to such representations,
warranties, covenants (including without limitation, covenants not to compete,
as appropriate) and other agreements and (ii) be liable (whether by purchase
price adjustment, indemnity payments or otherwise) in respect of
representations, warranties, covenants and agreements in respect of the Company
and its subsidiaries; PROVIDED, HOWEVER, that the aggregate amount of liability
described in this clause (ii) in connection with any Company Sale shall not
exceed the lesser of (I) such Stockholder's pro rata portion of any such
liability, to be determined in accordance with such Stockholder's portion of the
total value for his, her or its Shares included in such Company Sale or (II) the
proceeds to such Stockholder in connection with such Company Sale.

           2.4. COME ALONG. No Stockholder may Transfer Shares to a Third Party
who is not a Permitted Transferee without complying with the terms and
conditions set forth in this Section 2.4.

                      (a) Any Stockholder or group of Stockholders when desiring
           to Transfer Shares (the "Transferor") shall give not less than
           fifteen (15) days prior written notice of such intended Transfer to
           each other Stockholder and the Company. Such notice (the
           "Participation Notice") shall set forth the terms and conditions of
           such proposed Transfer, including the name of the prospective
           transferee, the number of Shares proposed to be transferred (the
           "Participation Securities") by the Transferor, the percentage of the
           total number of shares of Common Stock held by the Transferor that
           the Participation Securities constitutes of such class (the "Come
           Along Percentage"), the purchase price per share of Common Stock
           proposed to be paid therefor, the payment terms and type of transfer
           to be effectuated and the proposed time and place of closing. Within
           fifteen (15) days following the delivery of the Participation Notice
           by the Transferor to each other Stockholder and to the Company, each
           other Stockholder desiring to participate in such proposed Transfer
           (each, a "Participating Offeree") shall, by notice in writing to the
           Transferor and to the Company, have the opportunity and right to sell
           to the purchasers in such proposed Transfer (upon the same terms and
           conditions as the Transferor) up to that number of shares of Common
           Stock, as the case may be, subject to the last sentence of Section
           2.4(c) below, as shall equal the product of (i) the Come Along
           Percentage for the Common Stock, as the case may be, and (ii) the
           number of shares of Common Stock which will be owned by such
           Participating Offeree as of the proposed date of closing set forth in
           the Participation Notice without giving effect to the transfer
           contemplated hereby; PROVIDED, HOWEVER, that for purposes of
           determining whether Options owned by a Management Stockholder will be
           vested, such determination will be made after giving

<Page>

           effect to the transfer contemplated hereby and the Board, in its
           reasonable judgment, within five (5) business days after the
           Participation Notice is delivered to the Company, will make a Board
           Participation Determination for each Management Stockholder and
           notify such Management Stockholder of such Board Participation
           Determination. No Management Stockholder may participate in the
           proposed Transfer with respect to any Options which may vest upon
           consummation of the Transfer in excess of the Board Participation
           Determination and notwithstanding the Board Participation
           Determination, no Management Stockholder may sell or transfer in the
           proposed Transfer any unvested Time Options or any unvested
           Performance Options if such options do not become vested upon
           consummation of the proposed Transfer. The Transferor shall attempt
           to obtain inclusion in the proposed Transfer of the entire number of
           Shares which the Transferor and the Participating Offerees desire to
           have included in the proposed Transfer. In the event the Transferor
           shall be unable to obtain the inclusion of such entire number of
           shares of Common Stock in the proposed Transfer, the number of shares
           of Common Stock to be sold in the Proposed Transfer by each
           Participating Offeree and the Transferor shall be determined in
           accordance with Section 2.4(c) below. The terms and conditions of any
           sale pursuant to this Section 2.4(a) shall be the same as set forth
           in the Participation Notice, except as is provided in Section 2.4(c)
           below and except that the actual date of the closing of any proposed
           Transfer may change.

                      (b) At the closing of any proposed Transfer in respect of
           which a Participation Notice has been delivered, the Transferor,
           together with all Participating Offerees, shall deliver to the
           proposed transferee certificates evidencing the Shares to be sold
           thereto duly endorsed with stock powers and shall receive in exchange
           therefor the consideration to be paid or delivered by the proposed
           transferee in respect of such Shares as described in the
           Participation Notice.

                      (c) The acceptance of each Participating Offeree shall be
           irrevocable except as hereinafter provided, and each such
           Participating Offeree shall be bound and obligated to sell, on the
           same terms and conditions specified in the Participation Notice as
           the Transferor (subject to all of the provisions of this Agreement),
           such number of Shares as specified in such Participating Offeree's
           written commitment; provided, however, that in the case of
           Performance Options, Time Options and Rollover Options (for which the
           exercise price is less than the price per share of Common Stock being
           paid in the Transfer), the holders of such securities shall have the
           opportunity to either (i) exercise such Performance Options, Time
           Options and Rollover Options (if then exercisable) and participate in
           such sale as holders of Common Stock issuable upon such exercise or
           conversion, or (ii) upon the consummation of the sale, receive in
           exchange for such Options the amount determined by multiplying (1)
           the same amount of consideration per share of Common Stock received
           by the other Stockholders less the exercise price per share of such
           Performance Option and Time Option by (2) the number of shares of
           Common Stock of such class represented by such Performance Option or
           Time Option. In the event the Transferor shall be unable to obtain
           the inclusion in the sale of all Shares which the Transferor and each
           Participating Offeree desires to have included in the sale, the
           number of Shares to be sold in the sale by the Transferor and each
           Participating Offeree shall be reduced on a PRO RATA basis according

<Page>

           to the proportion which the number of Shares which each such party
           desires to have included in the sale bears to the total number of
           Shares desired by all such parties to have included in the sale.

                      (d) The provisions of this Section 2.4 shall not in any
           way limit or affect the restrictions placed on the Stockholders by
           Section 2.1 and shall not apply to (i) any Transfer to the Company or
           other Stockholders pursuant to Section 2.1, (ii) any Transfer
           pursuant to Section 2.2, (iii) any Transfer pursuant to Section 2.3
           or (iv) any Permitted Transfer.

2.5. CORPORATE GOVERNANCE.

           (a) BOARD OF DIRECTORS. At each annual meeting of the Stockholders
and at each special meeting of the Stockholders called for the purpose of
electing directors of the Company, and at any time at which stockholders of the
Company shall have the right to, or shall, vote for directors of the Company,
then, and in each event, the Stockholders hereby agree to attend each meeting in
person or by proxy and hereby agree to vote stock of the Company and shares of
the Company now owned or hereafter acquired by him, her or it (whether at a
meeting or by written consent in lieu thereof) (i) to fix the number of members
of the Board at up to seven (7) (unless the Board is expanded pursuant to
Section 2.4(b) hereto, in which case to fix the number of members of the Board
in accordance with Section 2.4(b) hereto), and (ii) to elect and thereafter to
continue in office as a director of the Company the following: (a) two (2)
directors nominated by the Berkshire Stockholders (who shall initially be
Bradley M. Bloom and Ross M. Jones) (collectively the "Berkshire
Representatives"); (b) three (3) directors nominated by the Management
Stockholders (who shall initially be Frederick J. Rowan, II, David A. Brown and
Joseph Pacifico) (collectively, the "Management Representatives"), and (c) up to
two (2) directors who are not officers or employees of the Company, who shall be
nominated by mutual consent of the Berkshire Stockholders (as a group) and the
Management Stockholders (as a group) (the "Outside Representatives"). As to the
directors elected to the Board pursuant to this Section 2.4(a) or Section
2.4(b), the following provisions shall apply: (i) no Berkshire Representative
may be removed without the consent of a majority in interest of the Berkshire
Stockholders, except for cause as determined in good faith by unanimous decision
of all directors other than the Berkshire Representatives, (ii) no Management
Representative may be removed without the consent of a majority in interest of
the Management Stockholders, except for cause as determined in good faith by
unanimous decision of all directors other than the Management Representatives,
PROVIDED, that in the event of a determination by the Board pursuant to clause
(i) or (ii) of this sentence to remove a director, each Stockholder shall take
all action as may be necessary or appropriate, including without limitation, the
voting of all Shares owned by such Stockholder, to effect the removal of such
director. Any vacancy on the Board shall be filled by the designee of the
Stockholders who would be entitled to designate such director pursuant to this
Section 2.5(a) or Section 2.5(b), as the case may be, and if there shall be no
such designation right, such vacancy may be filled by the remaining directors.
Each Stockholder shall, upon receipt of notice identifying such designee, take
all action as may be necessary or appropriate, including without limitation, the
voting of all Shares owned by such Stockholder, to elect the director so
designated.

<Page>

           (b) PROPORTIONAL REPRESENTATION. Upon a majority vote of the holders
of Common Stock, the composition of the directors constituting the Board of
Directors shall be changed so that after designating directors in accordance
with this Section 2.5(b), each of the Berkshire Stockholders and the Management
Stockholders shall have represented on the Board that number of directors
(rounded up to the nearest whole number) represented by the percentage equal to
(x) the number of shares of Common Stock held by such stockholder group over (y)
the total number of shares of Common Stock held by all Stockholders. In the
event that the size of the Board of Directors needs to be increased in order to
establish the foregoing representation, each Stockholder shall take all action
as may be necessary or appropriate, including without limitation, the voting of
all Shares owned by such Stockholder, to effect the increase in the size of the
Board. Each Stockholder agrees that such Stockholder shall take all action as
may be necessary or appropriate, including without limitation, the voting of all
Shares owned by them, to elect the directors so designated by the Stockholders
as set forth in this Section 2.5(b).

           (c) SUBSIDIARIES; COMMITTEES. Unless the Board unanimously determines
otherwise, the board of directors of each Subsidiary of the Company and the
audit committee, the compensation committee and all other authorized committees
of the Board and of each Subsidiary's board of directors shall be composed so
that the representation thereon shall be in the same proportion, as nearly as
may be possible (subject to any foreign law requirements, where applicable), as
the representation of such directors on the Board; PROVIDED, HOWEVER, that no
Management Representative shall sit on the audit committee or the compensation
committee.

2.6. RIGHTS OF PARTICIPATION.

           (a) RIGHTS OF PARTICIPATION. The Company hereby grants to each
Stockholder so long as it shall own any Shares, the right to purchase up to a
PRO RATA portion of New Securities (as defined in paragraph (b) below) which the
Company, from time to time, proposes to sell or issue following the date hereof.
A Stockholder's PRO RATA portion, for purposes of this Section 2.6, is the
product of (i) a fraction, the numerator of which is the number of outstanding
Shares which such Stockholder then owns (on a fully diluted basis after giving
effect to the exercise of all Rollover Options, vested Time Options and vested
Performance Options and the like and the conversion of all securities
convertible into or exchangeable for Common Stock) and the denominator of which
is the total number of such Shares then actually outstanding (on a fully diluted
basis after giving effect to the exercise of all Rollover Options, vested Time
Options and vested Performance Options and the like and the conversion of all
securities convertible into or exchangeable for Common Stock), multiplied by
(ii) the number of New Securities the Company proposes to sell or issue.

           (b) DEFINITION OF NEW SECURITIES. "New Securities" shall mean any
Common Stock or other equity securities of the Company whether now authorized or
not, any rights, options or warrants to purchase Common Stock or other equity
securities and any indebtedness or preferred stock of the Company which is
convertible into Common Stock or other equity securities (or which is
convertible into a security which is, in turn, convertible into Common Stock or
other equity securities); PROVIDED, that the term "New

<Page>

Securities" does not include (i) indebtedness of the Company which is not by its
terms convertible into Common Stock; (ii) Common Stock issued as a stock
dividend to all holders of Common Stock PRO RATA or upon any subdivision or
combination of shares of Common Stock; (iii) Common Stock issued to any employee
or director and approved by the Board of Directors and any employee or director
stock options approved by the Board of Directors; (iv) Common Stock issued in
exchange for the cancellation or retirement of any debt securities of the
Company or in connection with any restructuring or other financial workout of
the Company; (v) Common Stock or warrants to purchase Common Stock issued to
non-Affiliates of the Company as part of a bona fide debt offering of units
comprised of such Common Stock or warrants and a debt security of the Company;
(vi) Common Stock issued in connection with the acquisition of another
corporation or other entity by the Company by merger, purchase of substantially
all assets or other reorganization; (vii) the issuance of Common Stock upon the
exercise or conversion of any rights, options or warrants to purchase Common
Stock; (viii) Common Stock issuable in a Public Offering; or (ix) Common Stock
issued in respect of services provided (other than as an employee) to the
Company or its subsidiaries and approved by the Board of Directors; and
PROVIDED, FURTHER, that if any "New Securities" include Common Stock and other
equity securities coupled as a package, "New Securities" shall mean the package
of securities and not each class of securities individually.

           (c) NOTICE FROM THE COMPANY. In the event the Company proposes to
issue New Securities, the Company shall give each Stockholder who has a right of
participation under this Section 2.6 written notice of such proposal, describing
the type of New Securities and the price and the terms upon which the Company
proposes to issue the same. For a period of ten (10) business days following the
delivery of such notice by the Company, the Company shall be deemed to have
irrevocably offered to sell to each Stockholder its PRO RATA share of such New
Securities for the price and upon the terms specified in the notice. Each
Stockholder may exercise its rights of participation hereunder by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased. Each Stockholder shall also be entitled to indicate a desire to
purchase all or a portion of any New Securities remaining after such PRO RATA
allocation. If, as a result of such oversubscription right, such
oversubscriptions exceed the total number of New Securities available in respect
of such oversubscription right, the oversubscribing Stockholders shall be cut
back with respect to their oversubscriptions on a pro rata basis or as they may
otherwise agree among themselves.

           (d) SALE BY THE COMPANY. In the event that the Stockholders who have
a right of participation under this Section 2.6 fail to commit to purchase all
of such New Securities within said ten (10) business day period, the Company
shall have ninety (90) days thereafter to sell the New Securities with respect
to which the right of participation was not exercised, at a price and upon terms
no more favorable to the purchasers thereof than specified in the Company's
notice given pursuant to Section 2.6(c).

           (e) CLOSING. The closing for any such issuance shall take place as
proposed by the Company with respect to the New Securities to be issued, at
which closing the Company shall deliver certificates for the New Securities in
the respective names of the purchasing Stockholders against receipt of payment
therefor.

<Page>

           2.7. CONFIDENTIALITY. Each Stockholder shall maintain the
confidentiality of any confidential and proprietary information of the Company
("Proprietary Information") using the same standard of care, but in no event
less than reasonable care, as it applies to its own confidential information,
except for any Proprietary Information which is publicly available or a matter
of public knowledge generally. Nothing herein shall prevent any Stockholder from
using Proprietary Information to enforce its rights under this Agreement or from
disclosing a summary of Proprietary Information to the partners of such
Stockholder as to the performance of the Company.

                                  ARTICLE III.

                               REGISTRATION RIGHTS

           3.1. GENERAL. For purposes of Article III: (a) the terms "register,"
"registered" and "registration" refer to a registration effected by preparing
and filing a registration statement in compliance with the 1933 Act and the
declaration or ordering of effectiveness of such registration statement; (b) the
term "Holder" means any Stockholder holding Registrable Securities; and (c) the
shares of Common Stock issuable upon the exercise of vested Time Options,
Rollover Options and vested Performance Options shall be deemed to be
outstanding and held by the holders of such vested Time Options, Rollover
Options and vested Performance Options.

           3.2. DEMAND REGISTRATION INITIATED BY THE BERKSHIRE STOCKHOLDERS.

                      (a) Subject to paragraph (b) hereof, on or after the date
           on which the Company has effected a Public Offering, if the Company
           shall receive a written request (specifying that it is being made
           pursuant to this Section 3.2) by or on behalf of Berkshire
           Stockholders holding an aggregate of fifty percent (50%) or more of
           the Registrable Securities held by the Berkshire Stockholders, that
           the Company file a registration statement under the 1933 Act, or a
           similar document pursuant to any other statute then in effect
           corresponding to the 1933 Act, covering the registration of at least
           the lesser of (i) $20 million of Registrable Securities (determined
           based upon the Fair Market Value of such Registrable Securities on
           the date of request), or (ii) one hundred percent (100%) of the
           Registrable Securities then held by the Berkshire Stockholders, then
           the Company shall promptly notify all other Holders of such request
           and shall use its best efforts to cause all Registrable Securities
           that the Holders have requested (within thirty (30) days after such
           Company notice) be registered, to be registered under the 1933 Act.

                      (b) If the total amount of Registrable Securities that the
           Holders request to be included in such offering exceeds the amount of
           securities that the underwriters reasonably believe compatible with
           the success of the offering, then the Company will include in such
           registration only the number of securities which, in the opinion of
           such underwriters, can be sold in accordance with the procedures set
           forth in Section 3.3(b);

                      (c) The Company shall be obligated to effect for the
           Berkshire Stockholders two (2) registrations of Registrable
           Securities pursuant to this Section 3.2; PROVIDED, that

<PAGE>

           in the event that, at the request of the underwriters, the amount of
           Registrable Securities that the Berkshire Stockholders requested to
           be included in any offering is reduced by more than thirty percent
           (30%), such offering shall be deemed not to be a registration
           demanded by the Berkshire Stockholders for purposes of this Section
           3.2.

           3.3. PIGGYBACK REGISTRATION; REDUCTION IN REGISTRATION.

                      (a) If, at any time, the Company determines to register
           any of its equity securities for its own account under the 1933 Act
           in connection with a Public Offering of such securities, other than
           the first Public Offering of its Common Stock, solely for cash on a
           form that would also permit the registration of any of the
           Registrable Securities, the Company shall, at each such time,
           promptly give each Holder written notice of such determination. Upon
           the written request of any Holder received by the Company within
           thirty (30) days after the giving of any such notice by the Company,
           the Company shall use its best efforts to cause to be registered
           under the 1933 Act all of the Registrable Securities of such Holder
           that each Holder has requested be registered. If the total amount of
           Registrable Securities that are to be included by the Company for its
           own account and at the request of Holders exceeds the amount of
           securities that the underwriters reasonably believe compatible with
           the success of the offering, then the Company will include in such
           registration only the number of securities which in the opinion of
           such underwriters can be sold, in the following order:

                                 (i) first, the equity securities to be
                      registered on behalf of the Company; and

                                 (ii) then the Registrable Securities requested
                      to be included by the Holders, PRO RATA, based on the
                      number of Registrable Securities owned by each of them
                      which each of them request be included in such
                      registration; PROVIDED, HOWEVER, that if an underwriter
                      who is not an Affiliate or Associate of any Holder, in
                      good faith requests for the success of the offering, that
                      the number of Registrable Securities to be sold by any
                      Holder be apportioned or excluded, such number of
                      Registrable Securities of such Holder shall be reduced or
                      not included to the extent so requested by said
                      underwriter.

                      (b) If the Company at any time proposes to register any of
           its equity securities for the account of any Holder pursuant to
           Section 3.2 or Section 3.9 of this Agreement, under the 1933 Act in
           connection with the public offering of such securities solely for
           cash on a form that would also permit the registration of any of the
           Registrable Securities, the Company shall, at each such time,
           promptly give each Holder written notice of such determination. Upon
           the written request of any Holder received by the Company within
           thirty (30) days after the giving of any such notice by the Company,
           the Company shall use its best efforts to cause to be registered
           under the 1933 Act all of the Registrable Securities of such Holder
           that such Holder has requested be registered. If the total amount of
           Registrable Securities requested to be included by the requesting
           Holders under Section 3.2 or 3.9, and at the request of the Company
           and the other Holders, exceeds the amount of securities that the
           underwriters reasonably believe compatible with the success of the
           offering, then the Company will include in such registration only the
<PAGE>

           number of securities which in the opinion of such underwriters can be
           sold, in the following order:

                                 (i) first, the equity securities to be
                      registered on behalf of Stockholders initiating the
                      demand, PRO RATA, based on the number of Registrable
                      Securities owned by each of them which each of them
                      request be included in such registration;

                                 (ii) second, the equity securities to be
                      registered on behalf of the Company; and

                                 (iii) third, the Registrable Securities
                      requested to be included by the other Holders, PRO RATA,
                      based on the number of Registrable Securities owned by
                      each of them which each of them request be included in
                      such registration;

           PROVIDED, HOWEVER, that if an underwriter who is not an Affiliate or
           Associate of any Holder or the Company, in good faith, requests for
           the success of the underwritten offering that the number of
           Registrable Securities to be sold by any Holder or the Company be
           apportioned or excluded, such number of Registrable Securities of
           such Holder or the Company shall be reduced or not included to the
           extent so requested by said underwriter.

           3.4. OBLIGATIONS OF THE COMPANY. Whenever required under Sections
3.2, 3.3 or 3.9 to use its best efforts to effect the registration of any
Registrable Securities, the Company shall:

                      (a) prepare and file with the SEC a registration statement
           with respect to such Registrable Securities, and use its best efforts
           to cause such registration statement to become and remain effective;

                      (b) as expeditiously as reasonably possible, prepare and
           file with the SEC such amendments and supplements to such
           registration statement and the prospectus used in connection with
           such registration statement as may be necessary to comply with the
           provisions of the 1933 Act with respect to the disposition of all
           securities covered by such registration statement;

                      (c) as expeditiously as reasonably possible, furnish to
           the Holders such numbers of copies of a prospectus, including a
           preliminary prospectus, in conformity with requirements of the 1933
           Act, and such other documents they may reasonably request in order to
           facilitate the disposition of Registrable Securities owned by them;

                      (d) as expeditiously as reasonably possible, use its best
           efforts to register and qualify the securities covered by such
           registration statement under the securities or Blue Sky laws of such
           jurisdictions as shall be reasonably appropriate for the distribution
           of the securities covered by the registration statement, PROVIDED
           that the Company shall not be required in connection therewith or as
           a condition thereto to qualify to do business or to file a general
           consent to service of process in any such jurisdiction, and further
           PROVIDED that (anything in this Agreement to the contrary
           notwithstanding with respect to the bearing of expenses) if any
           jurisdiction in which the securities shall be qualified shall
<PAGE>

           require that expenses incurred in connection with the qualification
           of the securities in that jurisdiction be borne by selling
           stockholders, then such expenses shall be payable by selling
           stockholders PRO RATA, to the extent required by such jurisdiction;

                      (e) use its best efforts to cause all Registrable
           Securities covered by such registration statement to be registered
           with, or approved by, such other governmental agencies or authorities
           as may be necessary to enable the seller or sellers thereof to
           consummate the disposition of such Registrable Securities;

                      (f) notify each seller of Registrable Securities covered
           by such registration statement, at any time when a prospectus
           relating thereto is required to be delivered under the 1933 Act, upon
           discovery that, or upon the happening of any event as a result of
           which, the prospectus included in such registration statement, as
           then in effect, includes an untrue statement of a material fact or
           omits to state any material fact required to be stated therein or
           necessary to make the statements therein not misleading in the light
           of the circumstances under which they were made, and at the request
           of any such seller or Holder, promptly prepare and file with the SEC
           and furnish to such seller or Holder a reasonable number of copies of
           a supplement to or an amendment of such prospectus as may be
           necessary so that, as thereafter delivered to the purchasers of such
           securities, such prospectus shall not include an untrue statement of
           a material fact or omit to state a material fact required to be
           stated therein or necessary to make the statements therein not
           misleading in the light of the circumstances under which they were
           made; PROVIDED, that, each Holder agrees that it shall not sell any
           Registrable Securities covered by such a registration statement upon
           notice from the Company until receipt of notice that such statement
           or omission has been corrected.

                      (g) otherwise use its best efforts to comply with all
           applicable rules and regulations of the SEC, and make available to
           its security holders, as soon as reasonably practicable, an earnings
           statement covering the period of at least twelve (12) months, but not
           more than eighteen (18) months, beginning with the first full
           calendar month after the effective date of such registration
           statement, which earnings statement shall satisfy the provisions of
           Section 11(a) of the 1933 Act, and will furnish to each seller at
           least two (2) business days prior to the filing thereof a copy of any
           amendment or supplement to such registration statement or prospectus
           and shall not file any amendment or supplement thereof to which any
           such seller shall have reasonably objected, except to the extent
           required by law, on the grounds that such amendment or supplement
           does not comply in all material respects with the requirements of the
           1933 Act or of the rules or regulations thereunder;

                      (h) provide and cause to be maintained a transfer agent
           and registrar for all Registrable Securities covered by such
           registration statement from and after a date not later than the
           effective date of such registration statement; and

                      (i) use its best efforts to list all Registrable
           Securities covered by such registration statement on a securities
           exchange or the NASDAQ National Market on which any class of
           Registrable Securities is then listed.
<PAGE>

           3.5. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any act pursuant to this Article III that the
Holders selling Registrable Securities shall furnish to the Company such
information regarding them, the Registrable Securities held by them and the
intended method of disposition of such securities as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.

           3.6. EXPENSES OF REGISTRATION. All expenses incurred in connection
with a registration pursuant to Sections 3.2, 3.3 or 3.9 (excluding
underwriters' discounts and commissions, which shall be borne by the sellers),
including without limitation all registration and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company (which
counsel shall be reasonably satisfactory to the holders of a majority of the
Registrable Securities then being registered), and the reasonable fees and
disbursements of one counsel for the selling Holders (which counsel shall be
selected by the Holders which own a majority of the Registrable Securities being
sold under the applicable registration) shall be borne by the Company; PROVIDED,
HOWEVER, that all such expenses in connection with any amendment or supplement
to a registration statement or prospectus filed more than nine (9) months after
the effective date of such registration statement because any Holder of
Registrable Securities has not effected the disposition of the securities
requested to be registered shall be paid by such Holder; PROVIDED, FURTHER,
HOWEVER, that Holders initiating a demand may withdraw any request made pursuant
to Section 3.2, in which event such first withdrawn request shall be deemed for
all purposes herein not to have been made.

           3.7. UNDERWRITING REQUIREMENTS. Each Holder selling Registrable
Securities in any registration pursuant to Sections 3.2 or 3.3 shall, as a
condition for inclusion of such Registrable Securities in such underwritten
registration, execute and deliver an underwriting agreement acceptable to the
Company and consented to by the Berkshire Stockholders, in the case of a
registration pursuant to Section 3.2, or acceptable to Holders who own a
majority of the Registrable Securities to be included in such registration, in
the case of a registration pursuant to Section 3.3, and the underwriters with
respect to such registration. Such underwriters shall be selected (i) by the
Company and consented to by the Berkshire Stockholders, in the case of a
registration pursuant to Section 3.3, or (ii) by a majority in interest of the
Registrable Securities to be included in such registration in all other cases
and shall be reasonably acceptable to the Company, in the case of a registration
pursuant to Section 3.3.

           Notwithstanding the foregoing, each Holder shall take all action
reasonably necessary with respect to executing such underwriting agreement,
including being liable in respect of (i) any representations and warranties
being made by each selling Holder, and (ii) any indemnification agreements and
"lock-up" agreements made by each selling Holder for the benefit of the
underwriters in such underwriting agreement; PROVIDED, HOWEVER, that except with
respect to individual representations and warranties regarding such matters as
legal capacity or due organization of such participating Holder, authority to
participate in the Public Offering, compliance by such Holder with laws and
agreements applicable to it, ownership (free and clear of liens, charges,
encumbrances and adverse claims) of Registrable Securities to be sold by such
Holder and accuracy of information with respect to such Holder furnished for
inclusion in any disclosure document relating to each Public Offering, the
aggregate amount of the liabilities of such participating Holder pursuant to
such underwriting agreement shall not exceed either (a)

<PAGE>

such participating Holder's PRO RATA portion of any such liability, in
accordance with such participating Holder's portion of the total number of
Registrable Securities included in the public offering, or (b) the net proceeds
received by such participating Holder from the public offering.

           3.8. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Article III:

                      (a) To the fullest extent permitted by law, the Company
           will indemnify and hold harmless each Holder (which term, for
           purposes of this Section 3.8, shall include each Stockholder,
           including the Berkshire Stockholders, the Management Stockholders and
           the Other Stockholders holding Registrable Securities, and shall also
           include the directors, officers and employees of the Stockholders and
           their Affiliates) requesting or joining in a registration, any
           underwriter (as defined in the 1933 Act) for a registration, and each
           Person, if any, who controls such Holder or such underwriter within
           the meaning of the 1933 Act, against any and all losses, claims,
           damages or liabilities, joint or several, to which any such Holder,
           underwriter or Person may become subject under the 1933 Act or
           otherwise, insofar as such losses, claims, damages or liabilities (or
           actions or proceedings, whether commenced or threatened, in respect
           thereof) arise out of or are based on any untrue or alleged untrue
           statement of any material fact contained in a registration statement
           relating to a registration pursuant to this Article III, including
           any preliminary prospectus or final prospectus contained therein or
           any amendments or supplements thereto, or arise out of or are based
           upon the omission or alleged omission to state therein a material
           fact required to be stated therein, or necessary to make the
           statements therein not misleading, or arise out of any violation by
           the Company of the 1933 Act or any rule or regulation promulgated
           under the 1933 Act applicable to the Company and relating to action
           or inaction required of the Company in connection with any such
           registration, and will reimburse each such Holder, underwriter or
           control Person for any and all legal or other expenses reasonably
           incurred by them in connection with investigating or defending any
           such loss, claim, damage, liability, action or proceeding; PROVIDED,
           HOWEVER, that the indemnity agreement contained in this Section
           3.8(a) shall not apply to amounts paid in settlement of any such
           loss, claim, damage, liability, action or proceeding if such
           settlement is effected without the consent of the Company (which
           consent shall not be unreasonably withheld), nor shall the Company be
           liable to anyone for any such loss, claim, damage, liability, action
           or proceeding to the extent that it arises out of or is based upon an
           untrue statement or omission made in connection with such
           registration statement, preliminary prospectus, final prospectus or
           amendments or supplements thereto in reliance upon and in conformity
           with written information furnished expressly for use in connection
           with such registration by such Holder, underwriter or control Person.
           Such indemnity shall remain in full force and effect regardless of
           any investigation made by or on behalf of such Holder, underwriter or
           control Person and shall survive the transfer of such securities by
           such Holder.

                      (b) To the fullest extent permitted by law, each Holder
           requesting or joining in a registration will indemnify and hold
           harmless the Company, each of its directors, each of its officers who
           has signed the registration statement, each Person, if any, who
           controls the Company within the meaning of the 1933 Act, and each
           agent and any underwriter for the Company and any Person who controls
           any such agent or underwriter

<PAGE>
           and each other Holder and any Person who controls such Holder (within
           the meaning of the 1933 Act) against any and all losses, claims,
           damages or liabilities, joint or several, to which the Company or any
           such director, officer, control Person, agent, underwriter or other
           Holder may become subject, under the 1933 Act or otherwise, insofar
           as such losses, claims, damages or liabilities (or actions or
           proceedings, whether commenced or threatened in respect thereto)
           arise out of or are based upon an untrue statement of any material
           fact contained in such registration statement, including any
           preliminary prospectus or final prospectus contained therein or any
           amendments or supplements thereto, or arise out of or are based upon
           the omission to state therein a material fact required to be stated
           therein or necessary to make the statements therein not misleading,
           in each case to the extent, but only to the extent, that such untrue
           statement or omission was made in such registration statement,
           preliminary or final prospectus, or amendments or supplements
           thereto, in reliance upon and in conformity with written information
           furnished by such Holder (other than information furnished by such
           Holder on behalf of the Company in his or her capacity as an officer
           or director of the Company) expressly for use in connection with such
           registration; and such Holder will reimburse the Company and each
           such director, officer, control Person, agent, underwriter or other
           Holder for any and all legal or other expenses reasonably incurred by
           them in connection with investigating or defending any such loss,
           claim, damage, liability, action or proceeding; PROVIDED, HOWEVER,
           the indemnity obligation of each such Holder hereunder shall be
           limited to and shall not exceed the proceeds actually received by
           such Holder upon a sale of Registrable Securities pursuant to a
           registration statement hereunder; and PROVIDED, FURTHER that the
           indemnity agreement contained in this Section 3.8(b) shall not apply
           to amounts paid in settlement of any such loss, claim, damage,
           liability, action or proceeding if such settlement is effected
           without the consent of such Holder (which consent shall not be
           unreasonably withheld). Such indemnity shall remain in full force and
           effect regardless of any investigation made by or on behalf of the
           Company or any such director, officer, Holder, underwriter or control
           Person and shall survive the transfer of such securities by such
           Holder.

                      (c) Any Person seeking indemnification under this Section
           3.8 will (i) give prompt notice to the indemnifying party of any
           claim with respect to which it seeks indemnification (but the failure
           to give such notice will not affect the right to indemnification
           hereunder, unless and to the extent the indemnifying party is
           materially prejudiced by such failure) and (ii) unless in such
           indemnified party's reasonable judgment a conflict of interest may
           exist between such indemnified and indemnifying parties with respect
           to such claim, permit such indemnifying party, and other indemnifying
           parties similarly situated, jointly to assume the defense of such
           claim with counsel reasonably satisfactory to the parties. In the
           event that the indemnifying parties cannot mutually agree as to the
           selection of counsel, each indemnifying party may retain separate
           counsel to act on its behalf and at its expense. The indemnified
           party shall in all events be entitled to participate in such defense
           at its expense through its own counsel. If such defense is not
           assumed by the indemnifying party, the indemnifying party will not be
           subject to any liability for any settlement made without its consent
           (but such consent will not be unreasonably withheld). No indemnifying
           party will consent to entry of any judgment or enter into any
           settlement which does not include as an unconditional term thereof
           the giving by the claimant or plaintiff to such indemnified party of
           a release from

<PAGE>
           all liability in respect of such claim or litigation. An indemnifying
           party who is not entitled to, or elects not to, assume the defense of
           a claim will not be obligated to pay the fees and expenses of more
           than one counsel for all parties indemnified by such indemnifying
           party with respect to such claim, unless in the reasonable judgment
           of any indemnified party a conflict of interest may exist between
           such indemnified party and any other of such indemnified parties with
           respect to such claim, in which event the indemnifying party shall be
           obligated to pay the reasonable fees and expenses of such additional
           counsel.

                      (d) If for any reason the foregoing indemnification is
           unavailable to any party or insufficient to hold it harmless as and
           to the extent contemplated by the preceding paragraphs of this
           Section 3.8, then each indemnifying party shall contribute to the
           amount paid or payable by the indemnified party as a result of such
           loss, claim, damage or liability in such proportion as is appropriate
           to reflect the relative benefits received by the applicable
           indemnifying party, on the one hand, and the applicable indemnified
           party, as the case may be, on the other hand, and also the relative
           fault of the applicable indemnifying party and the applicable
           indemnified party, as the case may be, as well as any other relevant
           equitable considerations.

           3.9. REGISTRATION ON FORM S-3. After the date on which the Company
has effected a Public Offering, if (i) a Holder or Holders request in writing
(specifying that such request is being made pursuant to this Section 3.9) that
the Company file a registration statement on Form S-3 (or any successor form to
Form S-3 regardless of its designation) for a public offering of securities
having an aggregate value of not less than $1,000,000 and (ii) the Company is
entitled to use such form to register such securities, then the Company shall
file a Form S-3 with respect to such securities within ninety (90) days from the
date of such request, and shall use its best efforts to cause such registration
statement to become effective; PROVIDED, that the Company shall not be required
to effect such registration more frequently than once every six (6) months.

           3.10. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders and their Permitted Transferees the benefits of
Rule 144 promulgated under the 1933 Act and any other rule or regulation of the
SEC that may at any time permit a Holder to sell securities of the Company to
the public without registration, the Company agrees to use its best efforts to:

                      (a) make and keep public information available, as those
           terms are understood and defined in Rule 144, at all times subsequent
           to ninety (90) days after the effective date of the first
           registration statement covering a Public Offering filed by the
           Company;

                      (b) file with the SEC in a timely manner all reports and
           other documents required of the Company under the 1933 Act and the
           1934 Act; and

                      (c) furnish to any Holder forthwith upon request a written
           statement by the Company that it has complied with the reporting
           requirements of Rule 144 (at any time after ninety (90) days after
           the effective date of said first registration statement filed by the
           Company), and of the 1933 Act and the 1934 Act (at any time after it
           has become subject to such reporting requirements), a copy of the
           most recent annual or quarterly

<PAGE>

           report of the Company, and such other reports and documents so filed
           by the Company as may be reasonably requested in availing any Holder
           of any rule or regulation of the SEC permitting the selling of any
           such securities without registration.

           3.11. NO INCONSISTENT AGREEMENTS. The Company represents and warrants
that it has not entered into, and covenants that it will not hereafter enter
into, any agreement with respect to the registration of its securities that is
inconsistent with the rights granted to the Holders of Registrable Securities in
this Agreement without the prior written consent of a majority in interest of
the Holders.

           3.12. STOCK SPLIT. If, on or after the receipt by the Company of a
request for registration of a public offering pursuant to Section 3.2, the
proposed managing underwriter or underwriters of such offering reasonably
believes that the number of shares to be registered is less than the minimum
number necessary for the success of such offering, the Company will promptly
prepare and submit to its Board of Directors, use its best efforts to cause to
be adopted by its Board of Directors and stockholders, and, if so adopted, file
and cause to become effective, an amendment to its certificate of incorporation
so as to cause each share of its outstanding Common Stock to be converted into
such number of shares of such Common Stock so that the number of shares of
Registrable Securities to be registered is equal to the minimum number which
such managing underwriter or underwriters reasonably believes is necessary for
the success of such offering. Each Stockholder, together with his or its
Permitted Transferees, hereby agrees to vote the shares of the Company's Common
Stock held by him or it in favor of adopting such amendment.

           3.13. TIMING AND OTHER LIMITATIONS.

                      (a) No request shall be made with respect to any
           registration pursuant to Section 3.2 within one hundred twenty (120)
           days immediately following the effective date of any registration
           statement filed pursuant to this Article III.

                      (b) If the Company shall furnish to the Holders of
           Registrable Securities requesting a registration pursuant to Section
           3.2 a certificate signed by a majority of the Board of Directors
           stating that in the good faith judgment of the Board of Directors, it
           would be seriously detrimental to the Company or its stockholders for
           such registration statement to be filed on or before the date filing
           would be required and it is therefore advisable to defer the filing
           of such registration statement, then the Company shall have the right
           to defer the filing of the registration statement for a period of not
           more than one hundred twenty (120) days and the request pursuant to
           Section 3.2 then made shall not be counted for purposes of
           determining the number of registrations pursuant to Section 3.2;
           PROVIDED, HOWEVER, that the Company may not utilize such right more
           than once in any twelve-month period.

           3.14. LOCK-UP. In connection with any Public Offering of Shares, no
holder of Shares shall Transfer any Shares for a period beginning seven (7) days
immediately preceding the date upon which the Company in good faith believes
that the relevant registration statement shall become effective, and ending on
the one hundred eightieth (180th) day (or, at the discretion of the underwriter,
such lesser period) following the effectiveness of such registration statement
with respect to such Public Offering without the prior written consent of the

<PAGE>

underwriters managing the offering, and at the request of the underwriter, each
holder of Shares shall enter into an agreement to such effect with the
underwriter; PROVIDED, HOWEVER, that the provisions of this Section 3.14 shall
not prohibit any Permitted Transfers, provided that the Permitted Transferee
agrees to be bound by the terms of this Agreement, including this Section 3.14.

                                  ARTICLE IV.

                                  MISCELLANEOUS

           4.1. APPOINTMENT OF THE MANAGEMENT PROXY. Each of the Management
Stockholders hereby appoints Frederick J. Rowan, II (the "Management Proxy") as
the agent, proxy, and attorney-in-fact for the Management Stockholders
(including, without limitation, full power and authority to act on the
Management Stockholders' behalf) to take any action, should the Management Proxy
elect to do so in his sole discretion: (i) to vote on all matters to be voted on
under this Agreement, (ii) to receive all notices on behalf of each Management
Stockholder, (iii) to execute and deliver on behalf of the Management
Stockholders any amendment to this Agreement so long as such amendments shall
apply to all Management Stockholders and (vii) to take all other actions to be
taken by or on behalf of the Management Stockholders as a group and exercise any
and all rights which the Management Stockholders are permitted or required to do
or exercise under this Agreement other than exercise any rights with respect to
investment decisions set forth in Sections 2.1(c), 2.4, 2.6 or 3.3 hereof. Each
of the Management Stockholders hereby agrees not to assert any claim against,
and agrees to indemnify and hold harmless, the Management Proxy from and against
any and all losses incurred by the Management Proxy or any of his Affiliates,
partners, employees, agents, investment bankers or representatives, or any
Affiliate of any of the foregoing, relating to the Management Proxy's capacity
as the Management Proxy other than such claims or losses resulting from the
Management Proxy's gross negligence or willful misconduct. By execution hereof,
Frederick J. Rowan, II hereby agrees to act as Management Proxy until such time
as a new Management Proxy is elected by the majority in interest of the
Management Stockholders.

           4.2. REMEDIES. The parties to this Agreement acknowledge and agree
that the covenants of the Company and the Stockholders set forth in this
Agreement may be enforced in equity by a decree requiring specific performance.
In the event of a breach of any material provision of this Agreement, the
aggrieved party will be entitled to institute and prosecute a proceeding to
enforce specific performance of such provision, as well as to obtain damages for
breach of this Agreement. Without limiting the foregoing, if any dispute arises
concerning the Transfer of any of the Shares subject to this Agreement or
concerning any other provisions hereof or the obligations of the parties
hereunder, the parties to this Agreement agree that an injunction may be issued
in connection therewith (including, without limitation, restraining the Transfer
of such Shares or rescinding any such Transfer). Such remedies shall be
cumulative and non-exclusive and shall be in addition to any other rights and
remedies the parties may have under this Agreement or otherwise.

           4.3. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement, together
with the Schedule hereto, set forth the entire understanding of the parties, and
as of the closing contemplated by the Stock Purchase Agreement supersedes all
prior agreements including, without limitation the Stock Acquisition Agreements,
the Stock Option Agreements and the

<PAGE>

Existing Stock Purchase Agreements, and all other arrangements and
communications, whether oral or written, with respect to the subject matter
hereof. The Schedule may be amended to reflect changes in the composition of the
Stockholders as a result of Permitted Transfers or Transfers permitted under
Article II. Amendments to the Schedule reflecting Permitted Transfers or
Transfers permitted under Article II shall become effective when a copy of the
Agreement as executed by any new transferee is filed with the Company, except as
otherwise provided in Section 4.13. Any other amendments to, or the termination
of, this Agreement shall require the prior written consent of a majority of the
Stockholders. Without the consent of the Management Stockholders holding a
majority of the Shares held by the Management Stockholders, no amendment may be
made to Section 2.2. Notwithstanding any provisions to the contrary contained
herein, any party may waive any rights with respect to which such party is
entitled to benefits under this Agreement. No waiver of or consent to any
departure from any provision of this Agreement shall be effective unless signed
in writing by the party entitled to the benefit thereof.

           4.4. SEVERABILITY. It is the desire and intent of the parties that
the provisions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, the invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if the invalid
or unenforceable provision were omitted. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid or unenforceable
in such jurisdiction, it shall, as to such jurisdiction, be so more narrowly
drawn, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction.

           4.5. NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered in
the manner specified herein or, in the absence of such specification, shall be
deemed to have been duly given seven (7) days after mailing by certified mail,
when delivered by hand, upon confirmation of receipt by telecopy, or one (1)
business day after sending by overnight delivery service, to the respective
addresses of the parties set forth below:

                      (a) For notices and communications to the Company to:

                          Carter's, Inc.
                          1170 Peachtree Street, Suite 900
                          Atlanta, Georgia 30309
                          Attention: Mr. Frederick J. Rowan, II
                          Facsimile: 770-960-1556

                          with a copy to:

                          Berkshire Partners LLC
                          One Boston Place
                          Boston, MA 02108
                          Attention:  Mr. Bradley Bloom
                          Facsimile: (617) 227-6105
<PAGE>
                          Ropes & Gray
                          One International Place
                          Boston, MA 02110
                          Attention:  David C. Chapin, Esq.
                          Facsimile: (617) 951-7050

                      (b) for notices and communications to the Berkshire
           Stockholders, to their respective addresses set forth in the
           Schedule, with a copy to:

                          Ropes & Gray
                          One International Place
                          Boston, Massachusetts 02110
                          Attention: David C. Chapin, Esq.
                          Facsimile: (617) 951-7050

                      (c) for notices and communications to any Management
           Stockholders, to their respective addresses set forth in the
           Schedule, with a copy to:

                          The William Carter Company
                          1170 Peachtree Street, Suite 900
                          Atlanta, Georgia 30309
                          Attention: Mr. David A. Brown
                          Facsimile: 770-960-1556

                      (d) for notices and communications to any Other
           Stockholders, to their respective addresses set forth in the
           Schedule.

By notice complying with the foregoing provisions of this Section 4.5, each
party shall have the right to change the mailing address for future notices and
communications to such party.

           4.6. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and to their respective
transferees, successors and assigns; PROVIDED, HOWEVER, that no right or
obligation under this Agreement may be assigned except as expressly provided
herein, it being understood that the Company's rights hereunder may be assigned
by the Company to any corporation which is the surviving entity in a merger,
consolidation or like event involving the Company. No such assignment shall
relieve an assignor of its obligations hereunder.

           4.7. GOVERNING LAW. This Agreement shall be governed by the law of
The Commonwealth of Massachusetts (regardless of the laws that might otherwise
govern under applicable Massachusetts principles of conflicts of law) as to all
matters, including but not limited to matters of validity, construction, effect,
performance and remedies.

           4.8. TERMINATION. Without affecting any other provision of this
Agreement requiring termination of any rights in favor of any Stockholder or any
transferee of Shares, the provisions

<PAGE>

of Article II shall terminate as to such Stockholder or transferee, when,
pursuant to and in accordance with this Agreement, such Stockholder or
transferee, as the case may be, no longer owns any Shares, Performance Options,
Rollover Options or Time Options; PROVIDED, that termination pursuant to this
Section 4.8. shall only occur in respect of a Stockholder after all Permitted
Transferees in respect thereof also no longer own any Shares. Notwithstanding
the foregoing, Article II shall terminate upon the earlier of a Change in
Control or the consummation of the first Public Offering; PROVIDED, that the
Company shall be obligated to consummate the purchase of any vested Time
Options, Rollover Options and vested Performance Options which have been called
pursuant to Section 2.2 prior to such termination, but have not otherwise been
paid for as of such date.

           4.9. RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to
Shares, to any and all shares of capital stock of the Company or any successor
or assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of the Shares, by reason of a stock dividend, stock split, stock
issuance, reverse stock split, combination, recapitalization, reclassification,
merger, consolidation or otherwise.

           4.10. ACTION NECESSARY TO EFFECTUATE THE AGREEMENT. The parties
hereto agree to take or cause to be taken all such corporate and other action as
may be necessary to effect the intent and purposes of this Agreement.

           4.11. PURCHASE FOR INVESTMENT; LEGEND ON CERTIFICATE. Each of the
parties acknowledges that all of the Shares held by such party are being (or
have been) acquired for investment and not with a view to the distribution
thereof and that no transfer, hypothecation or assignment of Shares may be made
except in compliance with applicable federal and state securities laws. All the
certificates of Shares which are now or hereafter owned by the Stockholders and
which are subject to the terms of this Agreement shall have endorsed in writing,
stamped or printed, thereon the following legend:

                 "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                 REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
                 MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
                 THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
                 SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
                 SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
                 REGISTRATION IS NOT REQUIRED."

                 "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
                 THE TERMS AND CONDITIONS, INCLUDING CERTAIN RESTRICTIONS ON
                 TRANSFER, OF A STOCKHOLDERS AGREEMENT DATED AS OF AUGUST 15,
                 2001, AS AMENDED FROM TIME TO TIME, AND NONE OF SUCH
                 SECURITIES, OR ANY INTEREST THEREIN, SHALL BE TRANSFERRED,
                 PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT AS
                 PROVIDED IN THAT AGREEMENT. A COPY OF THE STOCKHOLDERS
                 AGREEMENT IS ON FILE WITH THE CLERK OF THE COMPANY AND WILL BE
                 MAILED TO ANY PROPERLY INTERESTED PERSON WITHOUT CHARGE WITHIN
                 FIVE (5) BUSINESS DAYS AFTER RECEIPT OF A WRITTEN REQUEST."
<PAGE>

           All shares shall also bear all legends required by federal and state
securities laws.

           4.12. EFFECTIVENESS OF TRANSFERS. All Shares transferred by a
Stockholder (other than pursuant to an effective registration statement under
the 1933 Act or pursuant to a Rule 144 transaction) shall, except as otherwise
expressly stated herein, be held by the transferee thereof subject to this
Agreement. Such transferee shall, except as otherwise expressly stated herein,
have all the rights and be subject to all of the obligations of a Stockholder
under this Agreement (as though such party had so agreed pursuant to Section
4.13) automatically and without requiring any further act by such transferee or
by any parties to this Agreement. Without affecting the preceding sentence, if
such transferee is not a Stockholder on the date of such transfer, then such
transferee, as a condition to such transfer, shall confirm such transferee's
obligations hereunder in accordance with Section 4.13. No Shares shall be
transferred on the Company's books and records, and no transfer of Shares shall
be otherwise effective, unless any such transfer is made in accordance with the
terms and conditions of this Agreement, and the Company is hereby authorized by
all of the Stockholders to enter appropriate stop transfer notations on its
transfer records to give effect to this Agreement.

           4.13. OTHER STOCKHOLDERS. Subject to the restrictions on transfers of
Shares contained herein, any Person who is not already a Stockholder acquiring
Shares, shall, on or before the transfer or issuance to it of Shares, sign a
counterpart or joinder to this Agreement in form reasonably satisfactory to the
Company and shall thereby become a party to this Agreement to be bound hereunder
as (i) a Berkshire Stockholder if a transferee (other than the Company) of a
Berkshire Stockholder, (ii) a Management Stockholder if a transferee (other than
the Company) of a Management Stockholder or (iii) an Other Stockholder if such
transferee (other than the Company) does not fall within clause (i) or (ii)
above. Each such additional Stockholder shall be listed on the Schedule, as
amended from time to time.

           4.14. NO WAIVER. No course of dealing and no delay on the part of any
party hereto in exercising any right, power or remedy conferred by this
Agreement shall operate as waiver thereof or otherwise prejudice such party's
rights, powers and remedies. No single or partial exercise of any rights, powers
or remedies conferred by this Agreement shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.

           4.15. COSTS AND EXPENSES. Each party shall pay its own costs and
expenses incurred in connection with this Agreement, and any and all other
documents furnished pursuant hereto or in connection herewith.

           4.16. COUNTERPART. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original but all of which
together shall constitute one and the same instrument, and all signatures need
not appear on any one counterpart.

           4.17. HEADINGS. All headings and captions in this Agreement are for
purposes of reference only and shall not be construed to
limit or affect the substance of this Agreement.

           4.18. THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended or shall be construed to entitle any Person other than the
Company and the Stockholders to any claim, cause of action, right or remedy of
any kind.

<PAGE>

           4.19. CONSENT TO JURISDICTION. The Company and each of the
Stockholders, by its, his or her execution hereof, (i) hereby irrevocably submit
to the exclusive jurisdiction of the state courts in The Commonwealth of
Massachusetts for the purposes of any claim or action arising out of or based
upon this Agreement or relating to the subject matter hereof, (ii) hereby waive,
to the extent not prohibited by applicable law, and agree not to assert by way
of motion, as a defense or otherwise, in any such claim or action, any claim
that it or he is not subject personally to the jurisdiction of the above-named
courts, that its, his or her property is exempt or immune from attachment or
execution, that any such proceeding brought in the above-named court is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court and (iii) hereby agree not to commence any claim or action arising
out of or based upon this Agreement or relating to the subject matter hereof
other than before the above-named courts nor to make any motion or take any
other action seeking or intending to cause the transfer or removal of any such
claim or action to any court other than the above-named courts whether on the
grounds of inconvenient forum or otherwise. The Company and each of the
Stockholders hereby consent to service of process in any such proceeding, and
agree that service of process by registered or certified mail, return receipt
requested, at its address specified pursuant to Section 4.5 is reasonably
calculated to give actual notice.

           4.20. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE)
ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION,
CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY,
PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE
SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY
THE OTHER PARTIES HERETO THAT THIS SECTION 4.20 CONSTITUTES A MATERIAL
INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO THIS
AGREEMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION 4.20 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH
PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

           IN WITNESS WHEREOF, each of the stockholders of Carter's, Inc. has
duly executed this Stockholders Agreement (or caused this Stockholders Agreement
to be executed on its behalf by its officer or representative thereunto duly
authorized) as of the date first above written.

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