Document:

<PAGE> 34

                                                                EXHIBIT 4.2

                                     BYLAWS
                                       OF
                     COMMUNITY BANK SHARES OF INDIANA, INC.

                                    ARTICLE I

                                     OFFICES

          1.1 REGISTERED OFFICE AND REGISTERED AGENT. The registered office of
Community Bank Shares of Indiana, Inc. (the "Corporation") shall be located in
the State of Indiana at such place as may be fixed from time to time by the
Board of Directors upon filing of such notices as may be required by law, and
the registered agent shall have a business office identical with such registered
office.

          1.2 OTHER OFFICES. The Corporation may have other offices within or
outside the State of Indiana at such place or places as the Board of Directors
may from time to time determine, as permitted by applicable law and regulation.

                                   ARTICLE II

                             STOCKHOLDERS' MEETINGS

          2.1 MEETING PLACE. All meetings of the stockholders shall be held at
the principal place of business of the Corporation, or at such other place
within or without the State of Indiana as shall be determined from time to time
by the Board of Directors, and the place at which any such meeting shall be held
shall be stated in the notice of the meeting.

          2.2 ANNUAL MEETING TIME. The annual meeting of the stockholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the third Tuesday of
April at the hour of 2:00 p.m., if not a legal holiday, and if a legal holiday,
then on the day following, at the same hour, or at such other date and time as
may be determined by the Board of Directors and stated in the notice of such
meeting.

          2.3 ORGANIZATION. Each meeting of the stockholders shall be presided
over by the Chairman of the Board, or if the Chairman of the Board is not
present, by the Vice-Chairman of the Board or the President, or if the Chairman
of the Board, the Vice-Chairman of the Board or the President are not present,
by an Executive or Senior Vice President or such other officer as designated by
the Board of Directors. The Secretary, or in his absence a temporary Secretary,
shall act as secretary of each meeting of the stockholders. In the absence of
the Secretary or any temporary Secretary, the chairman of the meeting may
appoint any person present to act as secretary of the meeting. The chairman of
any meeting of the stockholders, unless prescribed by law or regulation, shall
determine the order of the business and the procedure at the meeting, including
such regulation of the manner of voting and the conduct of discussions as shall
be deemed appropriate by him in his sole discretion.

          2.4 SPECIAL MEETINGS. Special meetings of the stockholders for any
purpose may be called at any time in the manner provided in the Corporation's
Articles of Incorporation, which are incorporated herein with the same effect as
if they were set forth herein.

          2.5 NOTICE.

(a)  Notice of the date,  time and place of the annual  meeting of  stockholders
shall be given by  delivering  personally  or by  mailing a written  or  printed
notice of the same,  at least ten days and not more than sixty days prior to the
meeting,  to each  stockholder of record entitled to vote at such meeting.  When
any stockholders'  meeting,  either annual or special, is adjourned and if a new
record date is fixed for an  adjourned  meeting of  stockholders,  notice of the
adjourned meeting shall be given as in the case

                                        1

<PAGE> 35

of an original meeting. It shall not be necessary to give any notice of the time
and place of any meeting adjourned, unless a new record date is fixed therefore,
other than an  announcement  of the new date,  time and place at the  meeting at
which such adjournment is taken.

(b) At least ten days and not more  than  sixty  days  prior to the  meeting,  a
written or printed notice of each special meeting of  stockholders,  stating the
place,  day and hour of such meeting,  and the purpose or purposes for which the
meeting  is  called,  shall be  either  delivered  personally  or mailed to each
stockholder for record entitled to vote at such meeting.

          2.6 VOTING LIST. At least five days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, shall be made, arranged by voting group, in
alphabetical order, with the address of and number of shares held by each, which
list shall be kept on file at the principal office of the Corporation for a
period of five business days prior to such meeting. The list shall be kept open
at the time and place of such meeting for the inspection of any stockholder.

          2.7 QUORUM. Except as otherwise required by law:

(a) A quorum at any annual or special meeting of stockholders shall consist of
stockholders representing, either in person or by proxy, a majority of the
outstanding capital stock of the Corporation entitled to vote on that matter at
such meeting.

(b) With respect to any other matter other than the election of directors,
action on a matter shall be approved if the votes cast in favor of the action
exceed the votes cast opposing the action at any properly called meeting or
adjourned meeting of stockholders at which a quorum, as defined above, is
present.

          2.8 VOTING OF SHARES.

(a) Except as otherwise provided in these Bylaws or to the extent that voting
rights of the shares of any class or classes are limited or denied by the
Articles of Incorporation, each stockholder, on each matter submitted to a vote
at a meeting of stockholders, shall have one vote for each share of stock
registered in his name on the books of the Corporation.

(b) Directors are to be elected by a plurality of votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present.
Stockholders shall not be permitted to cumulate their votes for the election of
directors. If, at any meeting of the stockholders, due to a vacancy or vacancies
or otherwise, directors of more than one class of the Board of Directors are to
be elected, each class of directors to be elected at the meeting shall be
elected in a separate election by a plurality vote.

          2.9 CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. For the purpose
of determining stockholders entitled to notice of or to vote at any meeting of
stockholders, or any adjournment thereof, or entitled to receive payment of any
distribution by the Corporation or share dividend, or in order to make a
determination of stockholders for any other proper purpose, the Board of
Directors may provide that the stock transfer books shall be closed for a stated
period not to exceed seventy days preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix in advance a record date
for any such determination of stockholders, such date to be not more than
seventy days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. A determination of stockholders
entitled to notice of or to vote at a meeting of stockholders is effective for
any adjournment of the meeting unless the Board of Directors fixes a new record
date, which it must do if the meeting is adjourned to a date more than one
hundred and twenty (12) days after the date fixed for the original meeting.

          2.10 PROXIES. A stockholder may vote either in person, by transmission
of an electronic  transmission (which includes telephone) or by any other method
allowed by law, or by proxy. A proxy may be appointed in writing, signed, in the
manner   permitted  by  law,  by  the   stockholder,   or  his  duly  authorized
attorney-in-fact.  No proxy shall be valid after eleven  months from the date of
its execution, unless otherwise provided in the proxy.

                                       2

<PAGE> 36

          2.11 WAIVER OF NOTICE. Whenever any notice is required to be given to
any stockholder, a waiver of notice signed by the person or persons entitled to
such notice and delivered to the Corporation, whether before or after the time
stated therein for the meeting, shall be equivalent to the giving of such
notice. A stockholder's attendance at a meeting (I) waives objection to lack of
notice or defective notice of the meeting, unless the stockholder at the
beginning of the meeting objects to the holding of the meeting or transacting
business at the meeting; and (ii) waives objection to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the stockholder objects to considering
the matter when it is presented.

          2.12 VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS. When
ownership stands in the name of two or more persons, in the absence of written
directions to the Corporation to the contrary, at any meeting of the
stockholders of the Corporation any one or more of such stockholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.

          2.13 VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name
of another corporation may be voted by an officer or agent of such corporation.
Shares held by an administrator, executor, guardian, conservator, trustee,
receiver, pledgee, beneficial owner or attorney-in-fact may be voted by him,
either in person or by proxy, without a transfer of such shares into his name,
but the Corporation may request of such person prior to the acceptance of the
vote evidence acceptable to the Corporation of such person's status or authority
to sign with respect to the vote, consent, waiver or proxy appointment. The
Corporation is entitled to reject a vote, consent, waiver or proxy appointment
if the Secretary or other officer or agent authorized to tabulate votes, acting
in good faith, has reasonable basis for doubt about the validity of the
signature on it or about the signatory's authority to sign for the stockholder.

          2.14 STOCKHOLDER PROPOSALS. Stockholder proposals shall be made in
accordance with the provisions of the Corporation's Articles of Incorporation,
which provisions are incorporated herein with the same effect as if they were
set forth herein.

          2.15 INSPECTORS. For each meeting of stockholders, the Board of
Directors may appoint one or more inspector of election. If for any meeting the
inspector(s) appointed by the Board of Directors shall be unable to act or the
Board of Directors shall fail to appoint any inspector, one or more inspectors
may be appointed at the meeting by the chairman thereof. Such inspectors shall
tabulate the voting in each election of directors and, as directed by the Board
of Directors or chairman of the meeting, the voting on the matters voted on at
such meeting, and after the voting shall make a certificate of the vote taken.
Inspectors need not be stockholders.

                                   ARTICLE III

                                  CAPITAL STOCK

          3.1  CERTIFICATES.  Certificates of stock shall be issued in numerical
order,  and each  stockholder  shall be entitled to a certificate  signed by the
President or a Vice President, and the Secretary and may be sealed with the seal
of the Corporation or a facsimile  thereof.  The signatures of such officers may
be  facsimiles  if the  certificate  is manually  signed on behalf of a transfer
agent,  or registered by a registrar,  other than the  Corporation  itself or an
employee of the  Corporation.  If an officer  who has signed or whose  facsimile
signature has been placed upon such  certificate  ceases to be an officer before
the  certificate is issued,  it may be issued by the  Corporation  with the same
effect as if the person were an officer on the date of issue.  Each  certificate
of stock shall state:

(a) the name of the Corporation and that the Corporation is organized under the
laws of the State of Indiana;

                                        3

<PAGE> 37

(b) the name of the person to whom issued;

(c) the number and class of shares and the designation of the series, if any,
which such certificate represents; and

(d) conspicuously on its front or back that the Corporation will furnish to any
stockholder without charge the designations, relative rights, preferences and
limitations applicable to each class and the variations and limitations in
rights, preferences and limitations determined for each series and the authority
of the Board of Directors to determine variations for future series.

          3.2 TRANSFERS.

(a) Transfers of stock shall be made only upon the stock transfer books of the
Corporation, kept at the registered office of the Corporation or at its
principal place of business, or at the office of its transfer agent or
registrar, and before a new certificate is issued the old certificate shall be
surrendered for cancellation. The Board of Directors may, by resolution, open a
share register in any state of the United States, and may employ an agent or
agents to keep such register, and to record transfers of shares therein.

(b) Shares of stock shall be transferred by delivery of the certificates
therefor, accompanied either by an assignment in writing on the back of the
certificate or an assignment separate from the certificate, or by a written
power of attorney to sell, assign and transfer the same, signed by the holder of
said certificate. No shares of stock shall be transferred on the books of the
Corporation until the outstanding certificates therefor have been surrendered to
the Corporation.

          3.3 REGISTERED OWNER. Registered stockholders shall be treated by the
Corporation as the holders in fact of the stock standing in their respective
names and the Corporation shall not be bound to recognize any equitable or other
claim to or interest in any share on the part of any other person, whether or
not it shall have express or other notice thereof, except as expressly provided
below or be the laws of the State of Indiana. The Board of Directors may adopt
by resolution a procedure whereby a stockholder of the Corporation may certify
in writing to the Corporation that all or a portion of the shares registered in
the name of such stockholder are held for the account of a specified person or
persons.

          3.4 MUTILATED, LOST OR DESTROYED CERTIFICATES. In case of any
mutilation, loss or destruction of any certificate of stock, another may be
issued in its place upon receipt of proof of such mutilation, loss or
destruction. The Board of Directors may impose conditions on such issuance and
may require the giving of a satisfactory bond or indemnity to the Corporation in
such sum as they might determine or establish such other procedures as they deem
necessary.

          3.5 SHARES OF ANOTHER CORPORATION. Shares owned by the Corporation in
another corporation, domestic or foreign, may be voted by such officer, agent or
proxy as the Board of Directors may determine or, in the absence of such
determination, by the President of the Corporation.

                                   ARTICLE IV

                               BOARD OF DIRECTORS

          4.1 NUMBER AND POWERS. The management of all the affairs, property and
interests of the Corporation shall be vested in a Board of Directors.  The Board
of  Directors  shall  consist  of up to twelve  persons.  Directors  need not be
residents of the State of Indiana or stockholders of the Corporation.  The Board
of Directors, other than those who may be elected by the holders of any class or
series of stock having  preference over the Common Stock as to dividends or upon
liquidation,  shall be divided  into three  classes as nearly equal in number as
possible,  with one class to be elected annually. At the first annual meeting of
stockholders  following  the  effective  date of the Articles of  Incorporation,
directors of the first class shall be elected to hold office for a term expiring
at the next

                                        4

<PAGE> 38

succeeding annual meeting, directors of the second class shall be elected to
hold office for a term expiring at the second succeeding annual meeting, and
directors of the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting; and, as to directors of each class, when
their respective successors are elected and qualified. At each subsequent annual
meeting of stockholders, directors elected to succeed those whose terms are
expiring shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders and when their respective successors are elected
and qualified. In addition to the powers and authorities expressly conferred
upon it by these Bylaws and Articles of Incorporation, the Board of Directors
may exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.

          4.2 CHANGE OF NUMBER. The number of directors may at any time be
increased or decreased by a vote of a majority of the Whole Board of Directors
and a majority of the Continuing Directors, as such terms are defined in the
Articles of Incorporation, provided that no decrease shall have the effect of
shortening the term of any incumbent director except as provided in Sections 4.3
and 4.4 hereunder.

          4.3 VACANCIES. All vacancies in the Board of Directors shall be filled
in the manner provided in the Corporation's Articles of Incorporation, which
provisions are incorporated herein with the same effect as if they were set
forth herein.

          4.4 REMOVAL OF DIRECTORS. Directors may be removed in the manner
provided in the Corporation's Articles of Incorporation, which provisions are
incorporated herein with the same effect as if they were set forth herein.

          4.5 REGULAR MEETINGS. Regular meetings of the Board of Directors or
any committee may be held without notice at the principal place of business of
the Corporation or at such other place or places, either within or without the
State of Indiana, as the Board of Directors or such committee, as the case may
be, any from time to time designate. The annual meeting of the Board of
Directors shall be held without notice immediately after the adjournment of the
annual meeting of stockholders.

          4.6 SPECIAL MEETINGS.

(a) Special meetings of the Board of Directors may be called at any time by the
Chairman of the Board, the President or by a majority of the authorized number
of directors, to be held at the principal place of business of the Corporation
or at such other place or places as the Board of Directors or the person or
persons calling such meeting may from time to time designate. Notice of all
special meetings of the Board of Directors shall be given to each director by at
least two days' service of the same by facsimile or personally, and by at least
three days' service when delivered by mail at the address at which the director
is most likely to be reached. Such notice shall be deemed to be delivered when
deposited in the mail so addressed with postage prepared, or when delivered to
the telegraph company if sent by telegram. Such notice need not specify the
business to be transacted at, nor the purpose of, the meeting.

(b) Special meetings of any committee may be called at any time by such person
or persons and with such notice as shall be specified for such committee by the
Board of Directors, or in the absence of such specification, in the manner and
with the notice required for special meetings of the Board of Directors.

          4.7 QUORUM. A majority of the Whole Board of Directors, as such term
is defined in the Corporation's Articles of Incorporation, shall be necessary at
all meetings to constitute a quorum for the transaction of business.

          4.8 WAIVER OF NOTICE. Attendance of a director at a meeting of
directors shall constitute a waiver of notice of such meeting, unless the
director at the beginning of the meeting (or promptly upon his arrival) objects
to the holding of the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting. A waiver of
notice signed by

                                        5

<PAGE> 39

the director or directors and filed with the minutes of the meeting or in the
corporate records of the corporation, whether before or after the time stated
for the meeting, shall be equivalent to the giving of notice.

          4.9 REGISTERING DISSENT. A director who is present at a meeting of the
Board of Directors at which action on a corporate matter is taken shall be
deemed to have assented to such action unless the director objects at the
beginning of the meeting (or promptly upon the directors arrival) to holding it
on or transacting business at the meeting, the director's dissent or abstention
from the action taken is entered in the minutes of the meeting, or the director
delivers written notice of his dissent or abstention to the presiding officer of
the meeting before its adjournment or to the Secretary of the Corporation
immediately after adjournment of the meeting. Such right to dissent shall not
apply to to a director who voted in favor of such action.

          4.10 EXECUTIVE, AUDIT AND OTHER COMMITTEES. Standing or special
committees may be appointed from its own number by the Board of Directors from
time to time and the Board of Directors may from time to time invest such
committees with such powers as it may see fit, subject to such conditions as may
be prescribed by the Board. An Executive Committee may be appointed by
resolution passed by a majority of the Whole Board of Directors, as such term is
defined in the Corporation's Articles of Incorporation. It shall have and
exercise all of the authority of the Board of Directors, except in reference to
amending the Articles of Incorporation or Bylaws (except as expressly permitted
by the Act), authorizing distributions (except that it may authorize or approve
a reacquisition of shares of capital stock of the Corporation or other
distribution if done according to a formula or method or within a range
prescribed by the Board of Directors), approving or proposing to stockholders
action required by law to be approved by stockholders, approving a plan of
merger not requiring stockholder approval, authorizing or approving the issuance
or sale or a contract for the sale of shares (except that it may authorize or
approve the issuance or sale or a contract for sale of shares of capital stock
of the Corporation, or determine the designation and relative rights,
preferences and limitations of a class or series of shares of capital stock of
the Corporation as prescribed by a resolution of the Board of Directors),
adopting, amending or repealing bylaws, or filling vacancies on the Board of
Directors or on any committee thereof. An Audit Committee may be appointed by a
resolution approved by a majority of the Whole Board of Directors, as such term
is defined in the Corporation's Articles of Incorporation and at least a
majority of the members of the Audit Committee shall be directors who are not
also officers of the Corporation. The Audit Committee shall recommend
independent auditors to the Board of Directors annually and shall review the
Corporation's budget, the scope and results of the audit performed by the
Corporation's independent auditors and the Corporation's system of internal
control with management and such independent auditors, and such other duties as
may be assigned to such Committee. All committees so appointed shall keep
regular minutes of the transactions of their meetings and shall cause them to be
recorded in books kept for that purpose in the office of the Corporation. The
designation of any such committee, and the delegation of authority thereto,
shall not relieve the Board of Directors, or any member thereof, of any
responsibility imposed by law.

          4.11 REMUNERATION. Directors, as such, may receive a stated salary for
their service, and by resolution of the Board of Directors, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of such Board. Members of standing or special committees may be
allowed like compensation for attending committee meetings.

          4.12 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or
which may be taken at a meeting of the directors, or of a committee thereof, may
be taken without a meeting if a consent in writing, setting forth the action so
taken or to be taken, shall be signed by all of the directors, or all of the
members of the committee, as the case may be, and included in the minutes or
filed with the corporate records reflecting the action taken. Such consent shall
have the same effect as a unanimous vote.

          4.13 ACTION OF DIRECTORS BY COMMUNICATIONS EQUIPMENT. Any action
required or which may be taken at a meeting of directors, or of a committee
thereof, may be taken by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. A director participating in the
meeting by this means is deemed to be present in person at the meeting.

                                        6

<PAGE> 40

          4.14 NOMINATIONS. Nominations of candidates for election as directors
at any annual meeting of stockholders shall be made in the manner set forth in
the provisions of the Corporation's Articles of Incorporation, which provisions
are incorporated herein with the same effect as if they were set forth herein.

                                    ARTICLE V

                                    OFFICERS

          5.1  DESIGNATIONS.   The  officers  of  the  Corporation  shall  be  a
President,  a Secretary and such Vice  Presidents,  Assistant and Secretaries as
the Board may designate, each of whom shall be elected by a majority vote of the
Board of Directors for one year at their first meeting after the annual  meeting
of  stockholders,  and who shall hold office until their  successors are elected
and qualify. The Board of Directors may also designate the Chairman of the Board
as an  officer.  The  Board  of  Directors  also  may  elect  or  authorize  the
appointment  of such other  officers  as the  business  of the  Corporation  may
require. Any two or more office may be held by the same person.

          5.2 POWERS AND DUTIES. The officers of the Corporation shall have such
authority and perform such duties as the Board of Directors may from time to
time authorize or determine. In the absence of action of the Board of Directors,
the officers shall have such powers and duties as may be provided in these
Bylaws and as generally pertain to their respective offices. The Secretary of
the Corporation shall be responsible for preparing minutes of the directors' and
stockholders' meetings and for authenticating records of the Corporation.

          5.3 DELEGATION. In the case of absence or inability to act of any
officer of the Corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time elevate the powers or duties
of such officer to any other officer or any directors or other person whom it
may select.

          5.4 VACANCIES. Vacancies in any office arising from any cause may be
filled by a vote of a majority of the Whole Board of Directors, as such term is
defined in the Articles of Incorporation, at any regular or special meeting of
the Board.

          5.5 OTHER OFFICERS. Directors may appoint such other officers and
agents as it shall deem necessary or expedient, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.

          5.6 TERM; REMOVAL. The officers of the Corporation shall hold office
until their successors are chosen and qualify. Any officer or agent elected or
appointed by the Board of Directors may be removed at any time, with or without
cause, by the affirmative vote of a majority of the Whole Board of Directors, as
such term is defined in the Corporation's Articles of Incorporation, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.

                                   ARTICLE VI

                              DIVIDENDS AND FINANCE

          6.1 DIVIDENDS. Subject to the conditions and limitations imposed by
the Act, dividends may be declared by the Board of Directors and paid by the
Corporation.

                                       7

<PAGE> 41

          6.2 RESERVES. There may be set aside out of the net earnings of the
Corporation such sum or sums as the directors from time to time in the absolute
discretion deem expedient as a reserve fund to meet contingencies or for any
other proper purpose.

          6.3 DEPOSITORIES. The monies of the Corporation shall be deposited in
the name of the Corporation in such financial institution or financial
institutions or trust company or trust companies as the Board of Directors shall
designate, and shall be drawn out only by check or other order for payment of
money signed by such persons and in such manner as may be determined by
resolution of the Board of Directors.

                                   ARTICLE VII

                                     NOTICES

          Except as may otherwise be required by law, any notice to any
stockholder or director may be delivered personally or by mail. If mailed, the
notice shall be deemed to have been delivered when deposited in the United
States mail, addressed to the addressee at his last known address in the records
of the Corporation, with postage thereon prepaid.

                                  ARTICLE VIII

                                      SEAL

          The corporate seal of the Corporation shall be in such form and bear
such inscription as may be adopted by resolution of the Board of Directors, or
by usage of the officers on behalf of the Corporation.

                                   ARTICLE IX

                                BOOKS AND RECORDS

          The Corporation shall keep correct and complete books and records of
account and shall keep minutes and proceedings of its stockholders and Board of
Directors; and it shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of its
stockholders, giving the names and addresses of all stockholders and the number
and class of the shares held by each. Any books, records and minutes may be in
written form and any other form capable of being converted into written form
within a reasonable time.

                                    ARTICLE X

                            FISCAL YEAR; ANNUAL AUDIT

          The fiscal year of the Corporation shall end on the 31st day of
December each year. The Corporation shall be subject to an annual audit as of
the end of its fiscal year by independent public accountants appointed by and
responsible to the Board of Directors. The appointment of such accountants shall
be subject to annual ratification by the stockholders.

                                   ARTICLE XI

                PERSONAL LIABILITY OF DIRECTORS; INDEMNIFICATION

               (a) A director of the Corporation  shall not be personally liable
for  monetary  damages for action  taken,  or any failure to take  action,  as a
director,   to  the  extent  set  forth  in  the   Corporation's   Articles   of
Incorporation,  which provisions are incorporated herein with the same affect as
if they were set forth herein.

               (b) The Corporation shall indemnify any person who is a director,
agent, officer,  employee or agent of the Corporation to the extent set forth in
the Corporation's  Articles of Incorporation,  which provisions are incorporated
herein with the same affect as if they were set forth herein.

                                       8

<PAGE> 42

                                   ARTICLE XII

                                   AMENDMENTS

          AMENDMENTS. These Bylaws may be altered, amended or repealed only in
the manner set forth in the Corporation's Articles of Incorporation, which
provisions are incorporated herein with the same effect as if they were set
forth herein. Action by the Board of Directors to adopt or amend a bylaw that
changes the quorum or voting requirement for stockholders must be approved by an
affirmative majority of votes entitled to be case on the matter. Action by the
Board of Directors to adopt or amend a bylaw that changes the quorum or voting
requirement for the Board of Directors shall meet the same quorum requirement
and be adopted by the same vote required to take action under the quorum and
voting requirement then in effect or proposed to be adopted, whichever is
greater.

As adopted on the 7th day of December 1994, amended on the 20th day of May
1997, amended on the 19th day of May, 1998, and amended again on the 23rd day
of November 1999.

                                    9EX-4: FORM OF 7.375% NOTE

 

Exhibit 4.1

Form of 7.375% Note Due 2018

THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE (AS
HEREINAFTER DEFINED) AND IS REGISTERED IN THE NAME OF CEDE & CO., AS NOMINEE OF
THE DEPOSITORY TRUST COMPANY (THE “DEPOSITARY”). THIS NOTE MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY SUCH DEPOSITARY TO A NOMINEE OF SUCH
DEPOSITARY OR BY A NOMINEE OF SUCH DEPOSITARY TO SUCH DEPOSITARY OR ANOTHER
NOMINEE OF SUCH DEPOSITARY OR BY SUCH DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY, UNLESS AND
UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
CERTIFICATED FORM.

Unless this Note is presented by an authorized representative of the Depositary
to the Company or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co., or such
other name as requested by an authorized representative of The Depository Trust
Company, and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.

	 	 	 
	CUSIP No. 892335AL4	 	 
	ISIN No. US892335AL43	 	
R-
	 	 	 
	$400,000,000	 	 

TOYS “R” US, INC.

7.375% NOTE DUE 2018

     TOYS “R” US, INC., a Delaware corporation (the “Company”, which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to CEDE & CO., or registered assigns,
the principal sum of FOUR HUNDRED MILLION Dollars ($400,000,000) as increased
or decreased as provided for in Schedule A hereto on October 15, 2018 (such
date is hereinafter referred to as the “Maturity”), and to pay interest on said
principal sum from September 22, 2003 or from the most recent date to which
interest has been paid or duly provided for, semi-annually in arrears on April
15 and October 15 of each year (each such date, an “Interest Payment Date”),
commencing on April 15, 2004, at the rate of 7.375% per annum through and
including the day immediately preceding the next Interest Payment Date until
the principal hereof shall have been paid or duly made available for payment.

     The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year consisting of twelve 30-day months and,
except as provided in the Indenture (as defined below), the amount of interest
payable for any period shorter than a full quarterly period for which interest
is computed will be computed on the basis of the actual

 

2

 number of days elapsed in such 90-day period. In the event that any
Interest Payment Date is not a Business Day, then payment of interest payable
on such date will be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of any such delay), in
each case with the same force and effect as if made on such Interest Payment
Date. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the person in whose name this Note (or one or more predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest installment which shall be April 1 or October 1, as the case
may be, prior to the relevant Interest Payment Date.

     Except as otherwise provided in the Indenture, this Note will be issued in
global form only registered in the name of The Depository Trust Company (the
“Depositary”) or its nominee. This Note will not be issued in definitive form,
except as otherwise provided in the Indenture, and, while in global form,
ownership of this Note shall be maintained in book-entry form by the Depositary
for the accounts of participating organizations of the Depositary.

     The principal of (and premium, if any) and the interest on this Note shall
be payable at the office or agency of the Company maintained for that purpose
in the Borough of Manhattan, The City of New York in any coin or currency of
the United States of America that at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of
interest may be made, at the option of the Company, by check mailed to the
registered Holder at such address as shall appear in the records of the Trustee
or by wire transfer to an account appropriately designated by the Holder
entitled thereto.

     This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the Trustee
in accordance with the Indenture referred to in Section 1 on the reverse
hereof.

     REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE
REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.

 

3

     IN WITNESS WHEREOF, the Company has caused this Note to be executed.

	 	 	 	 	 	 	 	 	 
	Dated:  September 22, 2003	 	 	 	 	 	 
	 	 	 	 	TOYS “R” US, INC.,
	 	 	 	 	 	 	as Issuer	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	

Name:  	 
	 	 	 	 	 	 	Title:  

	 	 
	 	 	 	 	 	 	 	 	 
	Attest:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	By:	 	 	 	 	 	 	 	 
	 	 	

	 	 	 	 	 	 
	 	 	
Name:  	 	 	 	 	 	 
	 	 	
Title:    	 	 	 	 

 

4

CERTIFICATE OF AUTHENTICATION

     This is one of the Securities of the series designated therein described in the
within-mentioned Indenture.

	 	 	 	 	 	 	 
	 	 	THE BANK OF NEW YORK,

as Trustee	 	 
	 	 	 	 	 	 	 
	 	 	
By
	 	

Authorized Signatory
	 	 
	 	 	 	 	 	 	 
	Dated:  September 22, 2003	 	 	 	 	 	 

 

5

REVERSE OF NOTE

          1. Indenture.

          This Note is one of a duly authorized series of Securities of the Company
designated as the 7.375% Notes Due 2018 of the Company (herein sometimes
referred to as the “Notes”), issued pursuant to an Indenture dated as of May
28, 2002 (the “Indenture”), between the Company and The Bank of New York, as
Trustee (the “Trustee”, which term includes any successor trustee under the
Indenture), as amended and supplemented, to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the Holders of the Notes. The Notes are one of an
indefinite number of series of debt securities of the Company (herein
collectively called the “Securities”) issued or to be issued in one or more
series under the Indenture. The Notes are initially issued (subject to increase
as provided in the Indenture) in an aggregate principal amount of $400,000,000.

          The terms, conditions and provisions of the Notes are those stated in the
Indenture, those made part of the Indenture by reference to the Trust Indenture
Act of 1939, as amended, and those set forth in this Note. To the extent that
the terms, conditions and other provisions of this Note modify, supplement or
are inconsistent with those of the Indenture, then the terms, conditions and
other provisions of this Note shall govern.

          All terms used in this Note that are defined in the Indenture shall have
the meanings assigned to them in the Indenture.

          The Company may, without the consent of the holders, issue and sell
additional Securities ranking equally with the Notes and otherwise identical in
all respects (except for their date of issue, issue price and the date from
which interest payments thereon shall accrue) so that such additional
Securities shall be consolidated and form a single series with the Notes.

          2. Ranking.

          The Notes shall constitute the senior, unsubordinated and unsecured debt
obligations of the Company and shall rank equally in right of payment with all
other existing and future senior, unsubordinated and unsecured obligations of
the Company.

          3. Form; Transfer.

          Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee, any Paying Agent and the Registrar may deem and treat the
registered Holder hereof as the absolute owner hereof (whether or not this Note
shall be overdue and notwithstanding any notice of ownership or writing hereon
made by anyone other than the Registrar) for the purpose of receiving payment
of or on account of the principal hereof (and premium, if any) and interest due
hereon and for all other purposes, and neither the Company nor the Trustee nor
any Paying Agent nor any Registrar shall be affected by any notice to the
contrary.

 

6

          4. Sinking Fund.

          The Notes are not entitled to the benefit of any sinking fund.

          5. Optional Redemption.

          The Company may redeem the Notes, in whole at any time and in part from
time to time, at its option, at a redemption price equal to the greater of:

	 	(1)	 	100% of the principal amount of
the Notes to be redeemed, plus accrued and unpaid interest thereon to the date of redemption;
and
	 
	 	(2)	 	the sum of the remaining scheduled payments of principal of
and interest on the principal amount of the Notes to be redeemed
(not including any portion of the payments of interest accrued as of
the date of redemption), discounted to its present value as of the
date of redemption on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate,
as determined by the Quotation Agent, plus 50 basis points, plus
accrued and unpaid interest on the principal amount of the Notes to
be redeemed to the date of redemption.

          "Adjusted Treasury Rate” means, with respect to any date of redemption,
the rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such date of redemption.

          "Comparable Treasury Issue” means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the
remaining term of the Notes to be redeemed that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing
new issues of corporate debt securities of comparable maturity to the remaining
term of the Notes.

          "Comparable Treasury Price” means, with respect to any date of redemption,
(1) the average of the Reference Treasury Dealer Quotations for such date of
redemption, after excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (2) if the trustee obtains fewer than three Reference
Treasury Dealer Quotations, the average of all Reference Treasury Dealer
Quotations.

          "Quotation Agent” means the Reference Treasury Dealer appointed by us.

          "Reference Treasury Dealer” means (1) each of Citigroup Global Markets
Inc. and J.P. Morgan Securities Inc., and its respective successors, and two
other nationally recognized investment banking firm that is a primary U.S.
Government securities dealer in New York City (a “Primary Treasury Dealer”)
specified from time to time by the Company; provided, however, if any of the
foregoing shall cease to be a Primary Treasury Dealer, the Company shall
substitute therefor another Primary Treasury Dealer; and (2) any other Primary
Treasury Dealer selected by the Company.

 

7

          "Reference Treasury Dealer Quotations” means, with respect to each
Reference Treasury Dealer and any date of redemption, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the trustee by such Reference Treasury Dealer at 5:00
p.m., New York City time, on the third business day preceding such date of
redemption.

          Notice of any redemption will be mailed at least 30 days but not more than
60 days before the date of redemption to each Holder of the Notes to be
redeemed. Unless the Company defaults in payment of the redemption price, on
and after the date of redemption, interest will cease to accrue on the Notes or
portions thereof called for redemption.

          6. Default and Remedies.

          In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of all of the Notes may be declared,
and upon such declaration shall become, due and payable (or, in certain
circumstances shall become due and payable without any such declaration), in
the manner, with the effect and subject to the conditions provided in the
Indenture. The Indenture contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the outstanding
Securities of each series at the time outstanding, on behalf of the Holders of
all Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note
shall be conclusive and binding upon such Holder and upon all future Holders of
this Note and of any Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Note.

          7. Covenants.

          The Notes are subject to the covenants set forth in the Indenture. The
Indenture imposes certain limitations on the ability of the Company to, among
other things, merge or consolidate with any other Person or sell, assign,
convey or transfer or otherwise dispose of assets substantially as an entirety
to another Person, and requires that the Company comply with certain further
covenants. All such covenants and limitations are subject to a number of
important qualifications and exceptions.

          8. Amendment; Supplements.

          Without the consent of any Holders of the Notes, the Company and the
Trustee may enter into one or more supplemental indentures supplementing the
Indenture, pursuant to Section 901 of the Indenture to, among other things, add
to the covenants of the Company for the benefits of the Holders of the Notes,
to add any additional Events of Default with respect to the Notes, cure any
ambiguity or defect, to correct or supplement any provision of the Indenture
which may be inconsistent with any other provision therein or herein, or to
make any other provisions or changes with respect to matters or questions
arising under the Indenture or this Note or make such other changes as are
specified and permitted under Section 901 of the Indenture. With respect to
provisions of the Notes and the Indenture other than those specified in the
preceding sentence pursuant to Section 901 of the Indenture, the Company and
the Trustee

 

8

may enter into one or more supplemental indentures supplementing the
Indenture, pursuant to Section 902 of the Indenture, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of modifying in any manner the rights of the
Holders of the Notes, but only with the consent of the Holders of more than 50%
in aggregate principal amount of the Outstanding Securities, provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security, among other things, (1) change the Maturity of the
principal of or interest on the Notes, or reduce the principal amount thereof
or the rate of interest thereon, if any, reduce the amount payable in
accordance with the terms of the Notes upon a declaration of acceleration of
Maturity thereof, (2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of the Indenture or certain
defaults hereunder and their consequences, or (3) modify other provisions as
set forth in the Indenture.

          Upon the execution of any supplemental indenture under the Indenture, the
Indenture shall be modified in accordance therewith and such supplemental
indenture shall form a part of the Indenture for all purposes and every Holder
of Notes theretofore or thereafter authenticated and delivered thereunder shall
be bound thereby.

          9. Defeasance.

          Sections 401, 402, 403 and 404 of the Indenture, which relate to
defeasance of Securities, shall apply to the Notes.

          10. Obligation Absolute and Unconditional.

          No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Note at the time and place and at the rate and in the money
herein prescribed.

          11. No Recourse.

          No recourse shall be had for the payment of the principal of (and premium,
if any), or the interest, if any, on this Note, or for any claim based thereon,
or upon any obligation, covenant or agreement of the Indenture, against any
incorporator, stockholder, officer, employee or director, as such, past,
present or future, of the Company or of any predecessor or successor Person,
either directly or indirectly through the Company or any predecessor or
successor Person, whether by virtue of any constitution, statute or rule of law
or by the enforcement of any assessment of penalty or otherwise; it being
expressly agreed and understood that the Indenture and this Note are solely
corporate obligations, and that no personal liability whatever shall attach to,
or is incurred by, any incorporator, stockholder, officer, employee or
director, past, present or future, of the Company or of any predecessor or
successor Person, either directly or indirectly through the Company or any
predecessor or successor Person, because of the incurring of the indebtedness
hereby authorized or under or by reason of any of the obligations, covenants or
agreements contained in the Indenture and this Note, or to be implied herefrom
or therefrom; and

 

9

that all such personal liability is hereby expressly released and waived
as a condition of, and as part of the consideration for, the execution of the
Indenture and the issuance of this Note.

          12. Separability.

          In case any one or more of the provisions contained in the Indenture or in
the Notes shall for any reason be held to be invalid, illegal or unenforceable
in any respect, then, to the extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provisions of the
Indenture or of the Notes, but the Indenture and the Notes shall be construed
as if such invalid or illegal or unenforceable provision had never been
contained herein or therein.

          13. Governing Law.

          THE NOTES AND THE INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

          14. Copies of Indenture.

          The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:

	 	 	 
	 	 	
Toys “R” Us, Inc.

One Geoffrey Way

Wayne, New Jersey 07470

Attention: Secretary

          15. Notices.

          If the Company is required to give notice to the Holders of the Notes
pursuant to the terms of the Indenture, then it shall do so as set forth in
Section 106 of the Indenture.

 

10

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers this Note to:

 

(Insert assignee’s social security or tax identification number)

 

(Insert address and zip code of assignee)

and irrevocably appoints

 

agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him or her.

	 	 	 	 	 	 	 	 	 
	Date:	 	 	 	 	 	 	 	 
	 	 	

	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	Signature:	 	 	 	 
	 	 	 	 	
	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	Signature Guarantee:	 	 	 	 
	 	 	 	 	 	 	

	 	 

(Sign exactly as your name appears on the other side of this Note)

 

11

ABBREVIATIONS

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

	 	 	 	 
	TEN COM -	 	
as tenants in common
	 	 	 
	UNIF GIFT MIN ACT -	 	
Custodian
	 	 	 
	 	 	

	 	 	
(cust) 	
(minor)
	 	 	 
	 	 	
Under Uniform Gifts to Minors Act
	 	 	 
	 	 	

	 	 	
(State)
	 	 	 
	TEN ENT -	 	
as tenants by the entireties
	 	 	 
	JT TEN -	 	
as joint tenants with right of survivorship and not as
tenants in common

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

 

Schedule A

(TO BE ATTACHED TO GLOBAL SECURITIES)

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

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

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Stated Amount of	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	the Global Security	 	 	 	 
	 	 	Amount of Decrease	 	Amount of Increase	 	Following Such	 	Signature of
	 	 	in Stated Amount of	 	in Stated Amount of	 	Decrease or	 	Authorizing
	Date	 	the Global Security	 	the Global Security	 	Increase	 	Signatory

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}]]