GRAND COURT LIFESTYLES INC, 10-Q, 1999-09-14

GRAND COURT LIFESTYLES INC
10-Q, 1999-09-14
NURSING & PERSONAL CARE FACILITIES

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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________

Commission file number: 0-21249

GRAND COURT LIFESTYLES, INC.
(Exact name of registrant as specified in its charter)

Delaware 22-3423087
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2650 North Military Trail, Suite 350, Boca Raton, Florida 33431
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code (561) 997-0323

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----.

At September 7, 1999, the Company had 17,545,600 shares of Common Stock,
$.01 par value, outstanding.

<PAGE>

GRAND COURT LIFESTYLES, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED JULY 31, 1999

PAGE

PART I - FINANCIAL INFORMATION

Item 1: Financial Statements and Supplementary Data.......................... 2

Consolidated Balance Sheets as of January 31, 1999 and July 31, 1999. 2

Consolidated Statements of Operations for the three and six months
ended July 31, 1998 and 1999......................................... 3

Consolidated Statements of Cash Flows for the six months
ended July 31, 1998 and 1999......................................... 4

Notes to Consolidated Financial Statements........................... 5

Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 12

Item 3: Quantitative and Qualitative Disclosures about Market Risk........... 33

PART II - OTHER INFORMATION

Item 2: Changes in Securities and Use of Proceeds............................ 34

Item 5: Other................................................................ 34

Item 6: Exhibits and Reports on Form 8-K..................................... 35

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------

<TABLE>

<CAPTION>
<S> <C> <C>
July 31,
January 31, (unaudited)
---------------- ----------------
1999 1999
---------------- ----------------
ASSETS

Cash and cash equivalents.............................................. $ 22,784,000 $ 8,372,000

Notes and receivables - net............................................ 227,104,000 238,598,000

Investments in affiliated entities..................................... 4,945,000 11,533,000

Construction-in-progress............................................... 11,617,000 15,712,000

Property, buildings and equipment - net................................ 35,294,000 13,308,000

Other assets - net..................................................... 17,570,000 20,130,000
------------ ------------

Total assets..................................................... $319,314,000 $307,653,000
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Loans and accrued interest payable..................................... $169,781,000 $177,742,000

Construction and mortgage loans payable................................ 35,286,000 12,917,000

Notes and commissions payable.......................................... 4,158,000 2,910,000

Other liabilities...................................................... 5,767,000 6,269,000

Deferred income........................................................ 68,596,000 68,173,000
------------ ------------

Total liabilities................................................. 283,588,000 268,011,000
------------ ------------

Commitments and contingencies...............................................

Minority interest........................................................... -- 1,070,000

Stockholders' equity........................................................

Preferred Stock, $.001 par value - authorized, 15,000,000 shares;
none issued and outstanding............................................ -- --

Common Stock, $.01 par value - shares authorized
40,000,000 ; shares issued 17,800,000 ................................. 178,000 178,000

Paid-in capital........................................................ 73,451,000 74,335,000

Treasury stock - 200,000 shares at cost -- (1,143,000)

Accumulated deficit.................................................... (37,903,000) (34,798,000)
------------ ------------

Total stockholders' equity........................................ 35,726,000 38,572,000
------------ ------------

Total liabilities and stockholders' equity................... $319,314,000 $307,653,000
============ ============

See Notes to Consolidated Financial Statements.

</TABLE>
2

<PAGE>

GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------

<S> <C> <C>
Three months ended Six months ended
July 31, July 31,
(unaudited) (unaudited)
------------------------------ ------------------------------
1998 1999 1998 1999
------------- --------------- -------------- --------------
Revenues:
Sales.......................................... $ 7,481,000 $ 18,638,000 $ 17,961,000 $ 36,853,000
Syndication fee income......................... 1,912,000 1,624,000 4,087,000 3,478,000
Deferred income earned......................... 207,000 156,000 415,000 311,000
Interest income................................ 3,598,000 1,826,000 7,487,000 4,652,000
Property management fees from related
parties...................................... 724,000 841,000 1,712,000 1,924,000
Equity in earnings (losses) in affiliated
entities..................................... 164,000 (34,000) 322,000 137,000
Senior living revenues......................... 1,171,000 1,330,000 1,589,000 3,892,000

Other income................................... 665,000 -- 1,350,000 --
------------ ------------ ------------ ------------
15,922,000 24,381,000 34,923,000 51,247,000
------------ ------------ ------------ ------------
Cost and Expenses:
Cost of sales.................................. 10,210,000 9,044,000 18,576,000 19,188,000
Selling........................................ 1,522,000 1,298,000 3,632,000 2,854,000
Interest....................................... 5,280,000 5,029,000 10,750,000 10,740,000
General and administrative..................... 2,650,000 3,176,000 5,174,000 6,167,000
Loss on impairment of notes and
receivables.................................... -- 713,000 -- 713,000
Senior living operating expenses............... 1,219,000 2,152,000 2,165,000 5,095,000
Officers' compensation......................... 300,000 300,000 600,000 600,000

Depreciation and amortization.................. 1,301,000 1,172,000 2,388,000 2,785,000
------------ ------------ ------------ ------------
22,482,000 22,884,000 43,285,000 48,142,000
------------ ------------ ------------ ------------
Net (loss) income................................. $ (6,560,000) $ 1,497,000 $ (8,362,000) $ 3,105,000
============ ============ ============ ============

(Loss) income per common share (basic and
diluted)..................................... $ (.37) $ .08 $ (.49) $ .18
============ ============ ============= ============

Weighted average common shares.................... 17,800,000 17,674,000 17,104,000 17,733,000
============ ============ ============= ============

</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------

Six months ended July 31, (unaudited)
---------------------------------------
<S> <C> <C>
1998 1999
------------------ -----------------
Cash flows used from operating activities:

Net (loss) income.................................................... $ (8,362,000) $ 3,105,000
------------- ------------
Adjustments to reconcile net (loss) income to net cash used by
operating activities:
Loss on impairment of notes and receivables.......................... -- 713,000
Depreciation and amortization........................................ 2,388,000 2,785,000
Deferred income earned............................................... (415,000) (311,000)
Changes in operating assets and liabilities:
Accrued interest on notes and receivables ........................... 4,695,000 8,163,000
Notes and receivables................................................ (12,272,000) (19,486,000)
Commissions payable.................................................. 49,000 456,000
Other liabilities.................................................... 3,627,000 502,000
Minority interest.................................................... -- 1,070,000
Deferred income...................................................... 3,521,000 (112,000)
------------- ------------
1,593,000 (6,220,000)
------------- ------------
Net cash used by operating activities................................ (6,769,000) (3,115,000)
Cash flows used from investing activities:
Increase in investments.............................................. (535,000) (565,000)
Cost of investment sold.............................................. -- 5,365,000
Building, furniture and equipment.................................... (7,725,000) (9,274,000)
Construction in progress............................................. (4,706,000) (10,579,000)
------------- ------------
Net cash used by investing activities................................ (12,966,000) (15,053,000)
------------- ------------
Cash flows provided by financing activities:
Payments on loans payable............................................ (11,712,000) (24,780,000)
Proceeds from loans payable ......................................... 17,973,000 32,741,000
Proceeds from construction and mortgage loans payable................ 6,373,000 12,917,000
Payments on construction and mortgage loans payable.................. -- (9,250,000)
Decrease (increase) in other assets.................................. 522,000 (5,025,000)
Payments of notes payable............................................ (161,000) (1,704,000)
Purchase of treasury stock........................................... -- (1,143,000)
Net proceeds from initial public offering ........................... 22,292,000 --
------------- ------------
Net cash provided by financing activities............................ 35,287,000 3,756,000
------------- ------------
(Decrease) increase in cash and cash equivalents..................... 15,552,000 (14,412,000)

Cash and cash equivalents, beginning of period....................... 11,964,000 22,784,000
------------- ------------
Cash and cash equivalents, end of period........................... $ 27,516,000 $ 8,372,000
Supplemental information:

Interest paid........................................................ $ 10,508,000 $ 10,720,000
============= ============

Non-cash capital contribution........................................ $ -- $ 883,000
============= ============

</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1999
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The accompanying consolidated financial statements of Grand Court
Lifestyles, Inc. and its wholly-owned subsidiaries (the "Company") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The consolidated financial statements as of and for the periods
ended July 31, 1998 and 1999 are unaudited. The results of operations for the
interim periods are not necessarily indicative of the results of operations for
the fiscal year. Certain amounts in the prior period have been reclassified to
conform with current year presentation. These consolidated financial statements
should be read in connection with the financial statements and notes included
thereto in the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1999. Capitalized terms used but not defined herein shall have the
same meanings as set forth in the Company's annual report on Form 10-K for the
fiscal year ended January 31, 1999. The Company has no items of comprehensive
income.

Unless the context otherwise requires, (i) all references herein to a
"Fiscal" year refer to the fiscal year beginning on February 1 of that year (for
example, "Fiscal 1998" refers to the fiscal year beginning on February 1, 1998)
and (ii) all references to the Company, include the Company, its subsidiaries
and its predecessors taken as a whole.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVESTMENTS--Historically, the Company retained a 1% general partnership
interest in the Owning Partnership and a 1% general partnership interest in the
Investing Partnership of the Syndicated senior living communities and
accounted for such interests under the equity method of accounting. Under this
method, the Company records its share of income and loss of the entity as well
as any distributions or contributions as an increase or decrease to its
investment account. In recent Syndications, the Company has been retaining a
50% partnership interest in the Syndicated senior living communities. Due to
this increased percentage in ownership being retained by the Company, the
Company consolidates these Owning Partnerships into its consolidated
financial statements.

5
<PAGE>

2. NEWLY DEVELOPED COMMUNITIES

The Company has completed construction of eight senior living communities
(each a "Development Community"). Each Development Community is in its
initial lease-up phase. Four of these Development Communities were
developed as part of its development financing arrangement with Capstone
Capital Corporation ("Capstone") and are leased to and operated by the
Company. These four communities contain a total of 550 apartment units
offering both independent and assisted living services. The four remaining
completed Development Communities contain a total of 536 apartment units
offering both independent and assisted living services.

In April 1999, the Company entered into joint venture arrangements
regarding four completed Development Communities, two of such joint venture
arrangements being effective as of April 1, 1999 and the other two being
effective as of May 1, 1999. Pursuant to each joint venture arrangement,
the Company sold a 50% interest in the Development Communities to George
Batchelor. The Company realized a profit from each of the sales and earns
management fees for managing each of the communities. Mr. Batchelor has the
right to terminate the Company's management upon thirty days written
notice. Mr. Batchelor receives a cumulative priority return on its
investment from all cash flow generated by the community and any excess
cash flow is shared 50% by the Company and 50% by Mr. Batchelor. The
Development Communities that are subject to joint venture arrangements are
not consolidated into the Company's consolidated financial statements.
Instead, the Company recognizes its investment in these Development
Communities under the equity basis of accounting.

In addition, the Company has commenced construction on three additional
Development Communities.

3. CAPITALIZATION

In March 1998, in an initial public offering of its common stock, the
Company sold 2,800,000 shares of its common stock at a price of $9.50 per
share. The net proceeds, after deducting for all offering expenses, that
the Company received as a result of this offering was $22,300,000. The
Company intends to use approximately $19,300,000 of the net proceeds to
finance the development of new senior living communities and the remaining
$3,000,000 for working capital. As of July 31, 1999, $11,500,000 has been
used to finance the development of new senior living communities and
$3,000,000 has been used for working capital. The Company purchased a
series of treasury bills with the remaining net proceeds pending
application of such funds to the intended uses.

In March 1999, the Board of Directors authorized the Company to purchase up
to 300,000 shares of the Company's common stock at prevailing rates. As of
July 31, 1999, the Company purchased 200,000 of such shares.

6
<PAGE>

4. COMMITMENTS AND CONTINGENCIES

The Company rents office space under a lease expiring February 2000. Annual
rent under such lease is approximately $206,000. The Company entered into a
ten year lease for additional office space, commencing September 1, 1991.
The annual rent is approximately $330,000.

The Company's revenues have been, and are expected to continue to be,
primarily derived from the sales of partnership interests ("Syndications")
of partnerships it organizes to acquire existing senior living communities
(each, an "Owning Partnership"). In a typical Syndication, the Company
identifies a senior living community suitable for acquisition and forms an
Owning Partnership (in which it is the managing general partner and
initially owns all of the partnership interests) to acquire the property.
Another partnership (the "Investing Partnership") is also formed (in which
the Company is also the general partner with a 1% interest) to purchase
from the Company a 99% partnership interest in the Owning Partnership (the
"Purchased Interest"), leaving the Company with a 1% interest in the Owning
Partnership and a 1% interest in the Investing Partnership. The Company
accounts for these general partnership interests using the equity method of
accounting. The purchase price for the Purchased Interest is paid in part
in cash and in part by a note from the Investing Partnership with a term of
approximately five years ( a "Purchase Note"). Limited partners purchase
partnership interests in the Investing Partnership by agreeing to make
capital contributions to the Investing Partnership over approximately five
years. These capital contributions enable the Investing Partnership to pay
the purchase price for the Purchased Interest, including the Purchase Note.
The limited partners are entitled to receive, for a period not to exceed
five years, distributions equal to between 11% and 12% per annum of their
then paid-in scheduled capital contributions. Although the Company incurs
certain costs in connection with acquiring a community and arranging for
the Syndication of partnership interests, the Company makes a profit on the
sale of the Purchased Interest. In addition, as part of the purchase price
for the Purchased Interest paid by the Investing Partnership, the Company
receives a 40% interest in sale and refinancing proceeds after certain
priority payments to the limited partners. In recent Syndications, the
Company has been selling 50% partnership interests in the Owning
Partnerships. Based upon this change, the Company receives a 50% rather
than a 40% interest in sale and refinancing proceeds after certain priority
payments to the limited partners. The Company anticipates that future
Syndications will involve the sale of 50% interests in the Owning
Partnerships. Due to this increased percentage in ownership being retained
by the Company, the Company consolidates these Owning Partnerships into its
consolidated financial statements. The Company also enters into a
management contract with the Owning Partnership pursuant to which the
Company agrees to manage the senior living community. As part of the
management fee arrangements, the management contract requires the Company,
for a period not to exceed five years, to pay to the Owning Partnership (to
the extent that cash flows generated by the property are insufficient)
amounts sufficient to fund (i) any operating cash deficiencies of such
Owning Partnership and (ii) any part of such 11% to 12% return not paid
from cash flow from the related property (collectively, the "Management
Contract Obligations"). The Company, therefore, has no direct obligation to
pay specified returns to limited partners. Rather, the Company is obligated

<PAGE>

pursuant to the management contract to pay to the Owning Partnership
amounts sufficient to make the specified returns to the limited partners,
to the extent the cash flows generated by the property are insufficient to
do so. The Owning Partnership then distributes these amounts to the
Investing Partnership which, in turn, distributes these amounts to the
limited partners. As a result of the Management Contract Obligations, the
Company bears the risks of operations and financial viability of the
related property for such five-year period. The management contract,
however, rewards the Company for successful management of the property by
allowing the Company to retain any cash flow generated by the property in
excess of the amount needed to satisfy the Management Contract Obligations
as an incentive management fee. After the initial five-year period, the
limited partners are entitled to the same specified rate of return, but
only to the extent there is sufficient cash flow from the property, and any
amounts of cash flow available after payment of the specified return to
limited partners are shared as follows: 40% to the Company as an incentive
management fee and 60% for distribution to the limited partners. In recent
Syndications, any amounts of cash flow available after payment of the
specified return to limited partners are shared 50% to the Company and 50%
to the limited partners. The management contract is not terminable during
this initial five-year period and is terminable thereafter by either party
upon thirty to sixty days notice. The Company has arranged for the
acquisition of the Syndicated senior living communities that it manages by
utilizing mortgage financing and by arranging for Syndications of Investing
Partnerships formed to acquire interests in the Owning Partnerships that
own the senior living communities. The Syndicated senior living communities
managed by the Company are owned by the respective Owning Partnerships and
not by the Company. The Company is the managing general partner of all but
one of the Owning Partnerships and manages all of the senior living
communities in its portfolio. The Company is the general partner of most of
the senior living Investing Partnerships. The mortgage financing of the
Syndicated Communities and Syndicated Multi-Family Properties are generally
without recourse to the general credit or assets of the Company except with
respect to certain specified obligations, including, for example, costs
incurred for the correction of hazardous environmental conditions. However,
except for such non-recourse obligations, as a general partner, the
Company, or a wholly-owned entity formed solely to be the general partner,
is fully liable for all partnership obligations, including those presently
unknown or unobserved, and unknown or future environmental liabilities. The
cost of any such obligations or claims, if partially or wholly borne by the
Company, could adversely affect the Company's business, operating results
and financial condition. Although most of the mortgage loans are
non-recourse, (i) the Company is liable as a general partner for
approximately $12,667,000 in principal amount of mortgage debt relating to
six Syndicated Communities and (ii) wholly-owned entities (whose only asset
is a specific general partnership interest) are liable as general partners
for approximately $44,745,000 in principal amount of mortgage debt relating
to eleven Syndicated Communities managed by the Company as of July 31,
1999. In the case of the general partner liabilities of the wholly-owned
entities (whose only asset is a specific general partnership interest), the
only assets of the Company at risk of loss are the general partnership
interests in the wholly-owned entities. The Company fully guarantees the
mortgage debt relating to four Syndicated Communities in the amount of
$13,400,000.

<PAGE>

In addition, six of the Syndications have involved the construction of
additional apartment units and/or common space at the existing senior
living communities. The Owning Partnerships hire independent third party
contractors to do the construction pursuant to guaranteed maximum price
contracts. The new construction generates additional risks, such as
increased costs due to change orders, which the Company believes are not
material.

As part of the Company's development program, on September 18, 1996 the
Company entered into a master development agreement with Capstone pursuant
to which Capstone funded 100% of the development cost of four Development
Communities. The Capstone arrangement provides that the Company will
operate these four Development Communities pursuant to long-term operating
leases with Capstone, which leases were entered into upon the completion of
construction and the satisfaction of certain other conditions. The initial
term of each lease is 15 years with five-year extension options. The
cumulative annual rent which the Company is obligated to pay to Capstone
for the four Development Communities placed in service is $3,792,000.

The Company has guaranteed the mortgages on the Development Communities
subject to joint venture arrangements and such guarantees remain in effect.

The Company is involved in legal proceedings which have arisen in the
ordinary course of business. The Company intends to vigorously defend
itself in these matters and does not believe that the outcome of these
matters will have a material effect on its financial statements.

5. NEW ACCOUNTING PRONOUNCEMENTS

In June of 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement established accounting and reporting standards
for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. The
Company's use of derivative instruments has consisted of a treasury bill
lock related to two specific debt financings. While the Company has not
completed its analysis of Statement No. 133 and has not made a decision
regarding the timing of adoption, it does not believe that adoption will
have a material effect on its financial position and results of operations
based on its current use of derivative instruments.

6. SEGMENT REPORTING

The Company views its business in the following three segments:

1. Syndication - Revenues are comprised of sales, syndication fee income,
property management fees, interest income, deferred income earned and
equity in earnings from partnerships relating to the Syndicated
Communities.

<PAGE>

2. Multi-Family - Revenues are comprised of interest income and
recognition of deferred income from Syndicated Multi-Family
properties, which income is being recognized on the installment
method.

3. New Development - Revenues are derived from senior living rental
revenues from the Development Communities and from sales, management
fees and equity in earnings (losses) from Development Communities
subject to joint venture arrangements.

<PAGE>

Three months ended Six months ended
July 31, July 31,
-----------------------------------------------------------
1998 1999 1998 1999
-----------------------------------------------------------

REVENUES

Syndication (a) $10,281,000 $11,373,000 $24,082,000 $22,696,000

Multi-family (b) 207,000 156,000 415,000 311,000

New
Development (a) 1,836,000 11,026,000 2,939,000 23,588,000
----------- ----------- ----------- -----------
Combined
Segments $ 12,324,000 $ 22,555,000 $ 27,436,000 $ 46,595,000
============ ============ ============ ============

INTEREST INCOME

Syndication $ 827,000 $ 807,000 $ 2,515,000 $ 2,173,000

Multi-family 2,723,000 942,000 4,465,000 2,349,000

New
Development 48,000 77,000 507,000 130,000
------------ ------------ ------------ ------------

Combined
Segments $ 3,598,000 $ 1,826,000 $ 7,487,000 $ 4,652,000
============ ============ ============ ============

OPERATING PROFIT (LOSS) (c)

Syndication $ (3,646,000) $ 2,588,000 $ (2,028,000) $ 3,969,000

Multi-family (2,359,000) (4,960,000) (5,385,000) (8,552,000)

New
Development (555,000) 3,869,000 (949,000) 7,688,000

Combined
Segments $ (6,560,000) $ 1,497,000 $ (8,362,000) $ 3,105,000
============ ============ ============ ============

GROSS ASSETS

Syndication $ 26,938,000 $ 33,758,000 $ 26,938,000 $ 33,758,000

Multi-family 238,297,000 233,240,000 238,297,000 233,240,000

New
Development 63,749,000 40,655,000 63,749,000 40,655,000

Combined
Segments $328,984,000 $307,653,000 $328,984,000 $307,653,000
============ ============ ============ ============

Three months ended Six months ended
July 31, July 31,
---------------------------------------------------------
1998 1999 1998 1999
---------------------------------------------------------

INTEREST EXPENSE

Syndication $ 948,000 $ 943,000 $ 2,231,000 $ 1,839,000

Multi-family 3,712,000 4,053,000 7,284,000 7,870,000

New
Development 620,000 33,000 1,235,000 1,031,000
----------- ----------- ----------- -----------
Combined
Segments $ 5,029,000 $ 5,029,000 $10,740,000 $10,740,000
=========== =========== =========== ===========

DEPRECIATION AND AMORTIZATION

Syndication $ 87,000 $ 109,000 $ 207,000 $ 282,000

Multi-family 952,000 974,000 1,756,000 2,010,000

New
Development 262,000 89,000 425,000 493,000
----------- ----------- ----------- -----------
Combined
Segments $ 1,301,000 $ 1,172,000 $ 2,388,000 $ 2,785,000
=========== =========== =========== ===========

CAPITAL EXPENDITURES

Syndication $ ___ $ ___ $ ___ $ ___

Multi-family ___ ___ ___ ___

New
Development 8,374,000 15,305,000 12,341,000 19,853,000
----------- ----------- ----------- -----------
Combined
Segments $ 8,374,000 $15,305,000 $12,431,000 $19,853,000
=========== =========== =========== ===========

(a) Includes non-cash income comprised of equity in earnings from
unconsolidated affiliates.

(b) Includes non-cash income comprised of deferred income earned.

(c) Includes the allocation of certain expenses based upon either gross
revenues or gross assets to the individual segments.

<PAGE>

7. SUMMARY INFORMATION

The Company has entered into four joint venture arrangements regarding four
completed Development Communities. Two of such joint venture arrangements were
effective on April 1, 1999 and the other two arrangements were effective as of
May 1, 1999. Pursuant to the joint venture arrangements, the Company sold 50%
interests in the Development Communities. The Company has recorded its retained
interest in the joint venture arrangements under the equity method of
accounting. The following sets forth the combined financial information of the
joint ventures as of and for the six months ended July 31, 1999.

ASSETS

Cash $ 982,000
Property, building and equipment-net 39,038,000
Other assets 151,000
------------
$ 40,171,000
============

LIABILITIES AND STOCKHOLDERS' EQUITY

Construction and mortgage loans payable $ 27,336,000
Notes payable 127,000
Other liabilities 677,000
Stockholders' equity 12,031,000
------------
$ 40,171,000
============

REVENUES

Senior living revenues $ 2,613,000
------------

EXPENSES

Senior living operating expenses $ 2,197,000
Interest 1,112,000
Depreciation 380,000
------------
3,689,000
------------
Net loss $ (1,076,000)
============

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

<PAGE>

and its predecessors taken as a whole. Capitalized terms used but not defined
herein shall have the same meanings as set forth in the Company's annual report
on Form 10-K for the Fiscal Year ending January 31, 1999.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

The Company is including the following cautionary statements to make
applicable and take advantage of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statements made
by, or on behalf, of the Company in this Quarterly Report on Form 10-Q.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements which are other than statements of historical facts. Such
forward-looking statements may be identified, without limitation, by the use of
the words "anticipates", "estimates", "expects", "intends", "believes" and
similar expressions. From time to time, the Company or one of its subsidiaries
individually may publish or otherwise make available forward-looking statements
of this nature. All such forward-looking statements, whether written or oral,
and whether made by or on behalf of the Company or its subsidiaries, are
expressly qualified by these cautionary statements and any other cautionary
statements which may accompany the forward-looking statements. In addition, the
Company disclaims any obligation to update any forward-looking statements to
reflect events or circumstances after the date hereof.

Forward-looking statements made by the Company are subject to risks and
uncertainties that could cause actual results or events to differ materially
from those expressed in, or implied by, the forward-looking statements. These
forward-looking statements include, among others, statements concerning the
Company's revenue and cost and expense trends, the number and economic impact of
anticipated acquisitions and new developments, planned capital expenditures and
financing needs and availability. Investors or other users of the forward-
looking statements are cautioned that such statements are not a guarantee of
future performance by the Company and that such forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those expressed in, or implied by, such statements. In addition
to other factors and matters discussed elsewhere herein, the following are some,
but not all, of the important factors that, in the view of the Company, could
cause actual results to differ materially from those discussed in the forward
looking statements:

1. The ability of the Company to service its substantial debt
obligations.

2. The ability of the Company to pay Management Contract Obligations from
the cash flow generated by the Syndicated Communities and the impact
of the terms of future Syndications.

3. The need for the Company to utilize cash from operations and obtain
additional financing to pursue its Development Plan.

4. The Company's ability to identify and Syndicate suitable acquisition
opportunities, a significant source of revenues for the Company.

<PAGE>

5. The Company's ability to identify suitable development opportunities,
pursue such opportunities, complete development, lease-up and
effectively operate the Development Communities.

6. The ability of the Company to obtain sufficient joint venture capital
for its Development Program on favorable terms, anticipated to be a
significant source of revenues for the Company.

7. The impact of mortgage defaults and/or foreclosures relating to
Multi-Family Properties (as defined below) on the Company's ability to
collect on its MultiFamily Notes (as defined below).

8. Governmental regulatory actions and initiatives, including, without
limitation, those relating to healthcare laws, benefiting disabled
persons, government mortgage insurance and subsidy programs,
environmental requirements and safety requirements.

9. The ability to attract seniors with sufficient resources to pay for
the Company's services.

10. Changes in anticipated construction costs, operating expenses and
start-up losses relating to the Company's new Development Plan.

11. Unanticipated delays in the Company's Development Plan, including,
without limitation, permitting, licensing and construction delays.

12. Changes in general economic conditions, including, but not limited to,
factors particularly affecting real estate and the capital markets,
including, but not limited to, changes in interest rates.

13. Changes in operating costs of senior living communities, including,
without limitation, staffing and labor costs.

14. The Company's ability to attract and retain qualified personnel.

15. Competitive factors affecting the long-term care services industry.

16. The potential recourse and guarantee obligations of the Company,
including, without limitation, the correction of hazardous
environmental conditions relating to the mortgage financing of the
senior living communities.

17. The potential liabilities arising from the Company's status as the
general partner of Syndicated Communities.

18. The potential impact of recent net losses.

19. The potential impact of computer related Year 2000 problems on the
Company's operations, including the ability of the Company and
material third parties to identify and/or address all material Year

14
<PAGE>

2000 issues and implement contingency plans. OVERVIEW

The Company is a fully-integrated provider of senior living accommodations
and services which acquires, develops and manages senior living communities
which provide independent and assisted-living services. The Company's revenues
have been, and are expected to continue to be, primarily derived from the sales
of partnership interests ("Syndications") of partnerships it organizes to
acquire real properties. Since 1986, the Company has focused on the acquisition
and Syndication of existing senior living communities ("Syndicated
Communities"). The Company has established a new development program (the
"Development Plan") pursuant to which it is building new senior living
communities which offer independent and assisted living services ("Development
Communities"). The Company currently owns the Development Communities pursuant
to joint venture arrangements or operates such communities pursuant to long-term
leases. To the extent that the Company's Development Plan is successfully
implemented, the Company anticipates that the percentage of its revenues derived
from Syndications would decrease and the percentage of its revenues derived from
the Development Communities would increase and, the Company believes, over time,
become the primary source of the Company's revenues.

Historically, the Company has arranged for the acquisition and development
of senior living communities and multi-family properties by utilizing mortgage
financing and Syndications. The multi-family properties, which were Syndicated
by the Company prior to 1986, are not owned or managed by the Company. Such
properties are owned by their respective Owning Partnerships and are managed by
third party managing agents. The senior living communities Syndicated by the
Company since 1986 are managed by the Company but are owned by the respective
Owning Partnerships and not by the Company.

Future revenues, if any, of the Company relating to previously Syndicated
Communities would primarily arise in the form of (i) deferred income earned on
the sale of the Purchased Interests in the related Owning Partnerships, (ii)
management fees, (iii) amounts payable by the Investing Partnerships to the
Company in the event of the subsequent sale or refinancing of such communities,
(iv) interest income on purchase notes receivable, and (v) earnings derived from
the Company's equity interests in Owning Partnerships and Investing
Partnerships. Future revenues, if any, of the Company relating to future
Syndicated Communities would primarily arise from any initial profit recognized
upon completion of the Syndication and from the same items listed in the
previous sentence.

The Company intends to continue to arrange for future acquisitions of
existing senior living communities by utilizing mortgage financing and by
arranging Syndications, and anticipates that between six and twelve communities
will be acquired and Syndicated in this manner during the next two years. Future
Syndications will require the allocation of funds generated by the Company to
cover the Company's initial costs relating to the Syndication transactions
(primarily any funds required to acquire the property above the amounts received
from the mortgage financing obtained, the costs of any improvements to the
property deemed necessary and the costs associated with arranging for the sale
of the partnership interests). The Company typically pays these costs from the
proceeds it receives from its sale of the Purchased Interests to the Investing
Partnership. In addition, future Syndications may require the allocation of the

<PAGE>

Company's funds to satisfy any associated Management Contract Obligations
(including payment of required returns for distribution to limited partners)
that are not funded from the respective property's operations.

The Company has instituted a Development Plan pursuant to which it has
completed construction of and opened eight Development Communities as of July
31, 1999, and has commenced construction on three additional communities. During
the next two years of the plan, the Company intends to commence construction on
between six and twelve additional new Development Communities. The Company plans
to own pursuant to joint venture arrangements or lease pursuant to long-term
operating leases or similar arrangements the Development Communities that are
being developed under the plan. The Company will manage and operate each of the
Development Communities. The Company estimates that the cost of developing each
of the new Development Communities (including reserves necessary to carry the
community through its lease-up period) utilizing mortgage financing will be
approximately $10.5 million. The Company expects to complete the construction of
the remaining three Development Communities under construction by the end of
Fiscal 1999. These three Development Communities, along with the eight
communities already completed pursuant to the Development Plan, contain an
aggregate of 1,488 senior living apartment units. The six to twelve additional
new communities which the Company intends to commence construction on over the
next two years will contain between 1,008 and 1,512 additional senior living
apartment units. The Company will use a substantial portion of the proceeds of
the Company's initial public offering which occurred in March, 1998, funds
generated by its business operations, mortgage construction financing, the
proceeds of joint venture arrangements for, anticipated refinancings of
construction financing on, and/or sale-leasebacks of, completed Development
Communities, and may complete additional new issuances of debt or equity
securities to finance the development, construction and initial operating costs
of additional Development Communities. Four of the completed Development
Communities are being operated by the Company pursuant to long-term leases. The
Company may use additional long-term leases or similar arrangements which
require the investment of little or no capital on the part of the Company, to
the extent necessary to proceed with this Development Plan. In April 1999, the
Company entered into joint venture arrangements regarding four completed
Development Communities, two of such joint venture arrangements being effective
as of April 1, 1999 and the other two being effective May 1, 1999. Pursuant to
each joint venture arrangement, the Company sold a 50% interest in a Development
Community to a third party. The Company realized a profit from each of the sales
and earns management fees for managing each of the communities. The third party
has the right to terminate the Company's management upon thirty days' written
notice. The third party receives a cumulative priority return on its investment
from all cash flow generated by the community and any excess cash flow is shared
50% by the Company and 50% by the third party. The Company no longer
consolidates these Development Communities into its consolidated financial
statements but recognizes its investment in these Development Communities under
the equity basis of accounting.

EARNINGS

The Company recorded net income of $1.5 million and $3.1 million for the
three and six months ended July 31, 1999, compared to a net loss of $6.6 million
and $8.4 million for the three and six months ended July 31, 1998.

<PAGE>

RESULTS OF OPERATIONS

o Revenues - Overview

Total revenues for the three months ended July 31, 1999 were $24.4 million
as compared to $15.9 million for the three months ended July 31, 1998
representing an increase of $8.5 million or 53.5%. Total revenues for the six
months ended July 31, 1999 were $51.2 million as compared to $34.9 million for
the six months ended July 31, 1998 representing an increase of $16.3 million or
46.7%.

o Syndication Communities

Revenues from this segment are derived from sales of general partnership
interests in Owning Partnerships to Investing Partnerships, recognition of
deferred income with respect to previous sales of general partnership interests,
interest on Purchase Notes received by the Company from such Investing
Partnerships as part of the purchase price paid for such general partnership
interests, property management fees received by the Company and the Company's
share of income and loss of the entities based upon its retained general
partnership interests. Such general partnership interests were historically 1%
of the Owning Partnership and 1% of the Investing Partnership. In recent
Syndications, the Company has been selling 50% partnership interests in the
Owning Partnerships. Due to this increased percentage in ownership being
retained by the Company, the Company consolidates these Owning Partnerships into
its consolidated financial statements. As a result of this consolidation, senior
living revenues derived from these Owning Partnerships will also be a source of
revenues for this segment.

<S> <C> <C> <C> <C>
THREE MONTHS ENDED JULY 31, SIX MONTHS ENDED JULY 31,
------------------------------------ ---------------------------------------
1998 1999 1998 1999
----------------- -------------- ------------------ ---------------

Sales............................ $ 7,481,000 $ 8,638,000 $17,961,000 $16,853,000
Syndication fee income........... 1,912,000 1,624,000 4,087,000 3,478,000
Interest income.................. 827,000 807,000 2,515,000 2,173,000
Property management fees in
related parties.................. 724,000 841,000 1,712,000 1,924,000
Senior living revenues........... -- 35,000 -- 35,000

Equity in earnings in
affiliated entities.............. 164,000 235,000 322,000 406,000
----------- ----------- ----------- -----------
Total revenues................... 11,108,000 12,180,000 26,597,000 24,869,000
=========== =========== =========== ===========

Cost of sales.................... 10,210,000 5,661,000 18,576,000 12,894,000
Selling.......................... 1,413,000 1,140,000 3,214,000 2,586,000
Interest expense................. 948,000 943,000 2,231,000 1,839,000
General and administrative....... 1,883,000 1,575,000 3,940,000 2,993,000
Officers' compensation........... 213,000 149,000 457,000 291,000
Senior living operating
expenses......................... -- 15,000 -- 15,000

Depreciation and
amortization..................... 87,000 109,000 207,000 282,000
----------- ----------- ----------- ------------
Total costs and expenses......... 14,754,000 9,592,000 28,625,000 20,900,000
----------- ----------- ----------- -----------
Net (loss) income ............... $(3,646,000) $ 2,588,000 $(2,028,000) $ 3,969,000
=========== =========== =========== ===========

</TABLE>

<PAGE>

Sales for the three months ended July 31, 1999 were $8.6 million as
compared to $7.5 million for the three months ended July 31, 1998, representing
an increase of $1.1 million or 14.7%. The increase was attributable to the sale
of more partnership units in the three months ended July 31, 1999 as compared to
the three months ended July 31, 1998. Sales for the six months ended July 31,
1999 were $16.9 million as compared to $18.0 million for the six months ended
July 31, 1998, representing a decrease of $1.1 million or 6.1%. The decrease was
attributable to the sale of fewer partnership units in the six months ended July
31, 1999 as compared to the six months ended July 31, 1998.

The primary factors that affect the number of partnership units available
for sale are (i) the availability of senior living communities for Syndication,
(ii) the terms of the Syndications and (iii) the initial cash flow of the senior
living communities being Syndicated. More favorable Syndication terms along with
a greater initial cash flow of the Syndicated Communities will yield a greater
number of units available to be sold. Syndication terms become more favorable
for the Company if there is an increase in the ratio of (a) the purchase price
paid to the Company by the Investing Partnership for its interest in the
Operating Partnership, to (b) the initial cash flow of the Syndicated Community.
The Syndications completed in the three and six months ended July 31, 1999 had
more favorable Syndication terms as partially offset by communities with lower
initial cash flows than the Syndications completed in the three and six months
ended July 31, 1998.

Syndication fee income for the three months ended July 31, 1999 was $1.6
million as compared to $1.9 million for the three months ended July 31, 1998,
representing a decrease of $300,000 or 15.8%. The decrease is primarily
attributable to a decrease in the average commission rate resulting in less
commissions paid on a greater sales volume in the three months ended July 31,
1999 as compared to the three months ended July 31, 1998. Syndication fee income
for the six months ended July 31, 1999 was $3.5 million as compared to $4.1
million for the six months ended July 31, 1998, representing a decrease of
$600,000 or 14.6%. The decrease is primarily attributable to a decrease in the
average commission rate resulting in less commissions paid on a lower sales
volume in the six months ended July 31, 1999 as compared to the six months ended
July 31, 1998.

Interest income did not materially change in the three months ended July
31, 1999 as compared to the three months ended July 31, 1998. Interest income
was $2.2 million in the six months ended July 31, 1999 as compared to $2.5
million in the six months ended July 31, 1998, representing a decrease of
$300,000 or 12.0%. The decrease is primarily attributable to less interest
recognized on Senior Living Notes in the six months ended July 31, 1999 as
compared to the six months ended July 31, 1998 due to the sale of fewer
partnership units during the last twelve months as compared to prior periods.

Senior living revenue and senior living operating expenses of $35,000 and
$15,000, respectively, are derived from the Syndicated Community which the
Company owns a 50% general partnership interest. Due to the Company retaining a
50% general partnership interest, the Company consolidates the related Owning
Partnership into its consolidated financial statements.

<PAGE>

Cost of sales (which includes (i) the cash portion of the purchase price
for Syndicated Communities plus related transaction costs and expenses, (ii) any
payments with respect to Management Contract Obligations other than payments
relating to previously established deferred income liabilities and (iii) any
increases in deferred income liabilities established in the relevant periods)
for the three months ended July 31, 1999 was $5.7 million as compared to $10.2
million for the three months ended July 31, 1998, representing a decrease of
$4.5 million or 44.1%. Cost of sales for the six months ended July 31, 1999 was
$12.9 million as compared to $18.6 million in the six months ended July 31,
1998, representing a decrease of $5.7 million or 30.6%. The decrease is
primarily attributable to less funding of Management Contract Obligations and a
reduction in the aggregate cash portion of the purchase price plus related
transaction costs and expenses for Syndicated Communities incurred by the
Company in the three month and six month periods ended July 31, 1999 as compared
to the three month and six month periods ended July 31, 1998. Due to the Company
selling a 50% partnership interest in the Owning Partnerships for those
communities Syndicated in the three months ended July 31, 1999, the Company
recognized a lesser aggregate cash portion of the purchase price as compared to
the prior period. The Communities Syndicated in the three month and six month
periods ended July 31, 1999 had less favorable acquisition terms (in view of the
relationship between the cumulative initial cash flows generated by the
properties and the cumulative purchase pries paid for such properties) as offset
by more favorable mortgage financing than the communities Syndicated in the
three and six months ended July 31, 1998. Cost of sales and selling expenses (as
described below) as a percentage of sales and syndication fee income for the
three months ended July 31, 1999 was 66.3% as compared to 123.7% for the three
months ended July 31, 1998. Cost of sales and selling expenses as a percentage
of sales and syndication fee income for the six months ended July 31, 1999 was
76.1% as compared to 98.8% for the six months ended July 31, 1998. The decreases
are attributable to cost of sales and selling expenses decreasing more than the
decrease in sales and syndication fee income.

Several factors, including the decline of the real estate market in the
late 1980's and early 1990's, which resulted in a number of distressed property
sales and limited competition from other prospective purchasers, allowed the
Company to acquire existing senior living communities at such time on relatively
favorable terms. Mortgage financing, however, was generally either not available
or available only on relatively unattractive terms during this period, which
made acquisitions more difficult because they either required large outlays of
cash or the use of mortgage financing on relatively unfavorable terms. Several
factors have contributed towards a trend to less favorable terms for
acquisitions of senior living communities, including a recovery in the market
for senior living communities and increased competition from other prospective
purchasers of senior living communities. The Company acquired senior living
communities on less favorable terms in the three months and six months ended
July 31, 1999 as compared to the three months and six months ended July 31,
1998. The Company believes that the general trend towards less favorable
acquisition terms experienced in the past will continue in the future. In recent
years, however, the Company has been able to obtain mortgage financing for a
greater percentage of the purchase price and with more favorable terms (i.e.,
lower interest rates and longer amortization periods) than in previous years.
This factor, combined with an overall reduction of interest rates, has partially
offset the factors that have led to more unfavorable acquisition terms. A
significant change in these or other factors (including, in particular, a
significant rise in interest rates) could prevent the Company from acquiring and

<PAGE>

Syndicating senior living communities on terms favorable enough to offset the
start-up losses of the Development Communities as well as the Company's debt
service obligations, Management Contract Obligations and overhead expenses.

Selling expenses for the three months ended July 31, 1999 was $1.1 million
as compared to $1.4 million for the three months ended July 31, 1998,
representing a decrease of $300,000 or 21.4%. The decrease is primarily
attributable to a decrease in the average commission rate resulting in less
commissions paid on a greater sales volume in the three months ended July 31,
1999 as compared to the three months ended July 31, 1998. Selling expenses for
the six months ended July 31, 1999 was $2.6 million as compared to $3.2 million
in the six months ended July 31, 1998, representing a decrease of $600,000 or
18.8%. The decrease is primarily attributable to a reduction in the average
commission rates resulting in less commissions paid on lower sales volume on the
Syndications completed in the six months ended July 31, 1999 as compared to the
six months ended July 31, 1998.

o Multi-Family Properties

Revenues from this segment are comprised of interest income on the
Multi-Family Notes and recognition of deferred income from such Syndications,
which income is being recognized on the installment method.

<S> <C> <C> <C> <C>
THREE MONTHS ENDED JULY 31, SIX MONTHS ENDED JULY 31,
------------------------------------ -------------------------------------
1998 1999 1998 1999
----------------- -------------- ------------------ -------------
Deferred income earned............. $ 207,000 $ 156,000 $ 415,000 $ 311,000
Interest income.................... 2,723,000 942,000 4,465,000 2,349,000
----------- ----------- ----------- ------------
Total Revenues..................... 2,930,000 1,098,000 4,880,000 2,660,000
=========== =========== =========== ============
Selling............................ 109,000 158,000 418,000 268,000
Interest expense................... 3,712,000 4,053,000 7,284,000 7,870,000
General and administrative......... 463,000 146,000 723,000 320,000
Loss on impairment of notes
and receivables ................... -- 713,000 -- 713,000
Officers compensation.............. 53,000 14,000 84,000 31,000
Depreciation and
amortization....................... 952,000 974,000 1,756,000 2,010,000
----------- ----------- ----------- ------------
Total costs and expenses........... 5,289,000 6,058,000 10,265,000 11,212,000
----------- ----------- ----------- ------------
Net loss........................... $(2,359,000) $(4,960,000) $(5,385,000) $ (8,552,000)
=========== =========== =========== ============

</TABLE>

Interest income in the three months ended July 31, 1999 was $900,000 as
compared to $2.7 million in the three months ended July 31, 1998, representing a
decrease of $1.8 million or 66.7%. Interest income in the six months ended July
31, 1999 was $2.3 million as compared to $4.5 million in the six months ended
July 31, 1998, representing a decrease of $2.2 million or 48.9%. The decreases
are primarily attributable to (i) the decrease in the remaining amount of
investor notes, the payment of which generates interest on the related
Multi-Family Purchase Notes, in the three and six months ended July 31, 1999 as
compared to the three and six months ended July 31, 1998 and (ii) the receipt of
excess proceeds from the refinancing of the mortgage debt on six Multi-Family

<PAGE>

Properties in the three and six months ended July 31, 1998 as compared to no
such refinancings in the three and six months ended July 31, 1999.

In the three and six months ended July 31, 1999, a Multi-Family Owning
Partnership whose mortgage was previously in default became aware that it will
lose its property through mortgage foreclosure. As a result, the Company
realized a non-cash loss on impairment of notes receivables of $700,000, which
represents the recorded value of the related note and receivables, net of
established reserves. The Company's principal stockholders contributed
additional assets to the Company to provide additional collateral for this note
and the related receivables. As a result of this contribution of additional
assets, the Company recorded a capital contribution of $900,000 and believes
that the foreclosure will not effect its ability to collect this note. There was
no loss on impairment of notes and receivables in the three and six months ended
July 31, 1998.

o DEVELOPMENT COMMUNITIES

Revenues from this segment are derived from senior living rental revenues
from the Development Communities operated by the Company pursuant to long term
leases and from sales, management fees and equity earnings (losses) from the
Development Communities subject to joint venture arrangements.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
THREE MONTHS ENDED JULY 31, SIX MONTHS ENDED JULY 31,
------------------------------------ -------------------------------------
1998 1999 1998 1999
----------------- -------------- ------------------ -------------

Sales........................... $ -- $10,000,000 $ -- $ 20,000,000
Senior living revenues.......... 1,171,000 1,295,000 1,589,000 3,857,000
Other income.................... 665,000 -- 1,350,000 --
Equity in (losses) in
affiliated entities............. -- (269,000) -- (269,000)
Interest income................. 48,000 77,000 507,000 130,000
---------- ----------- ----------- -----------
Total revenues.................. 1,884,000 11,103,000 3,446,000 23,718,000
========== =========== =========== ===========
Costs of sales.................. -- 3,383,000 -- 6,294,000
Senior living operating
expenses........................ 1,219,000 2,137,000 2,165,000 5,080,000
Interest expense................ 620,000 33,000 1,235,000 1,031,000
General and administrative...... 304,000 1,455,000 511,000 2,854,000
Officers compensation........... 34,000 137,000 59,000 278,000

Depreciation and
amortization.................... 262,000 89,000 425,000 493,000
---------- ----------- ----------- -----------
Total costs and expenses........ 2,439,000 7,234,000 4,395,000 16,030,000
---------- ----------- ----------- -----------
Net (loss) income............... $ (555,000) $ 3,869,000 $ (949,000) $ 7,688,000
========== =========== =========== ===========

</TABLE>

In April 1999, the Company entered into joint venture arrangements
regarding four completed Development Communities, two of such joint venture
arrangements were effective as of April 1, 1999 and the other two arrangements
were effective as of May 1, 1999. Pursuant to each joint venture arrangement,
the Company sold a 50% interest in the Development Communities to Mr. Batchelor.
As a result, the Company recognized sales of $10.0 million in the three months
ended July 31, 1999 and $20.0 million in the six months ended July 31, 1999. The

<PAGE>

costs of such interests were $3.4 million in the three months ended July 31,
1999 and $6.3 million in the six months ended July 31, 1999. The Company no
longer consolidates the Development Communities subject to the joint venture
arrangements into its consolidated financial statements but rather reflects its
share of the loss under the equity method of accounting. In the three and six
months ended July 31, 1999, the Company's share of the losses amounted to
$269,000. The average occupancy of the Development Communities subject to joint
venture arrangements was 71.1% for the six months ended July 31, 1999.

Senior living revenues and operating expenses currently represent the
rental and ancillary revenues and expenses generated by the Development
Communities the Company operates pursuant to long-term leases. In the three and
six months ended July 31, 1998, these items also included the revenues and
expenses of the Development Communities owned by the Company prior to the
Company entering into joint venture arrangements effective in April and May of
1999. The Company realized senior living revenues of $1.3 million in the three
months ended July 31, 1999 as compared to $1.2 million in the three months ended
July 31, 1998, representing an increase of $100,000 or 8.3%. The Company
realized senior living revenues of $3.9 million in the six months ended July 31,
1999 as compared to $1.6 million in the six months ended July 31, 1998,
representing an increase of $2.3 million or 143.8%. The senior living operating
expenses were $2.1 million in the three months ended July 31, 1999 as compared
to $1.2 million in the three months ended July 31, 1998, representing an
increase of $900,000 or 75.0%. The senior living operating expenses for the six
months ended July 31, 1999 was $5.1 million as compared to $2.2 million in the
six months ended July 31, 1998, representing an increase of $2.9 million or
131.8%. The increases in senior living rental revenues and expenses are
primarily attributable to the Development Communities operated pursuant to
long-term leases being in service for all of the three and six months ended July
31, 1999 as opposed to the same Development Communities being in service for
only part of the three and six months ended July 31, 1998, as partially offset
by the Development Communities that are now subject to joint venture
arrangements no longer being consolidated into the Company's financial
statements. The average occupancy of the Development Communities operated
pursuant to long-term leases was 62.1% for the six months ended July 31, 1999.

Other income was $665,000 and $1.4 million, respectively, in the three and
six months ended July 31, 1998. The Company earned developer's fees in
connection with the four Development Communities which the Company operates
pursuant to long-term leases. There was no other income in the three and six
months ended July 31, 1999.

Expenses - Overview

The following expenses were allocated to each segment for reporting
purposes based upon either gross revenues or gross assets. The Company, however,
does not view these expenses as segment related but rather on a Company wide
basis.

General and administrative expenses were $3.2 million in the three months
ended July 31, 1999 as compared to $2.7 million in the three months ended July
31, 1998, representing an increase of $500,000 or 18.5%. General and
administrative expenses were $6.2 million in the six months ended July 31, 1999
as compared to $5.2 million in the six months ended July 31, 1998, representing
an increase of $1.0 million or 19.2%. The increases are primarily attributable

<PAGE>

to increases in salary costs, professional fees and other office costs in
arranging for the acquisition of the Company's portfolio of Syndicated
Communities, in managing the Company's portfolio of Syndicated Communities and
in developing and managing the Company's portfolio of Development Communities
which portfolios, in the aggregate, were larger in the three and six months
ended July 31, 1999 than in the three and six months ended July 31, 1998.

Interest expense did not materially change in the three and six months
ended July 31, 1999 as compared to the three and six months ended July 31, 1998.
Interest expense includes interest on debentures ("Debenture Debt") which are
secured by Multi-Family Notes (the "Purchase Note Collateral"). During the six
months ended July 31, 1999 and the six months ended July 31, 1998, the Debenture
Debt had an average interest rate of 11.8% and 12.05%, respectively. Interest
expense with respect to such debt for the six months ended July 31, 1999 and the
six months ended July 31, 1998 was $5.2 million and $3.9 million, respectively.
When the Debenture Debt was structured, cash flow generated by the Purchase Note
Collateral was not expected to fully fund the amount necessary to pay interest
on the Debenture Debt. As expected, for the six months ended July 31, 1999 and
the six months ended July 31, 1998, the cash flow generated by the Purchase Note
Collateral was less than the amount required to pay interest on the Debenture
Debt.

Depreciation and amortization consists of (i) amortization of deferred loan
costs incurred in connection with debt issuances, (ii) amortization of leasehold
costs incurred in connection with four Development Communities which the Company
operates pursuant to long-term leases, and (iii) depreciation of building,
furniture and equipment of Development Communities which the Company previously
owned directly and currently owns pursuant to joint venture arrangements.
Depreciation and amortization did not materially change in the three months
ended July 31, 1999 as compared to the three months ended July 31, 1998.
Depreciation and amortization was $2.8 million in the six months ended July 31,
1999 as compared to $2.4 million in the six months ended July 31, 1998,
representing an increase of $400,000 or 16.7%. The increase is attributable to
(i) the increase in amortization of deferred loan costs due to additional debt
incurred by the Company, (ii) the amortization of leasehold costs associated
with the four Development Communities operated by the Company pursuant to
long-term leases, and (iii) the depreciation of buildings, furniture and
equipment associated with the Development Communities owned by the Company prior
to the Company entering into joint venture arrangements.

LIQUIDITY AND CAPITAL RESOURCES

The Company historically has financed operations through cash flow
generated by operations, Syndications and borrowings consisting of investor note
debt, unsecured debt, mortgage debt and Debenture Debt. The Company's principal
liquidity requirements are for payment of operating expenses, costs associated
with development of Development Communities, debt service obligations, and
Management Contract Obligations.

Cash flows used by operating activities for the six months ended July 31,
1999 were $3.1 million and were comprised of (i) net income of $3.1 million plus
(ii) adjustments for non-cash items of $3.2 million less (iii) the net change in
operating assets and liabilities of $9.4 million. The adjustments for non-cash

<PAGE>

items is comprised of non-cash loss on impairment of notes and receivables of
$700,000, depreciation and amortization of $2.8 million, offset by deferred
income earned of $300,000. Cash flows used by operating activities for the six
months ended July 31, 1998 were $6.8 million and were comprised of (i) net loss
of $8.4 million plus (ii) adjustments for non-cash items of $2.0 million less
(iii) the net change in operating assets and liabilities of $400,000. The
adjustments for non-cash items is comprised of depreciation and amortization of
$2.4 million, offset by deferred income earned of $400,000.

Net cash used by investing activities for the six months ended July 31,
1999 of $15.1 million was comprised of an increase of building, furniture and
equipment of $9.3 million, an increase in the cost of the Development
Communities of $10.6 million, an increase in investments in general partner
interests in senior living communities of $600,000 less the recovery on cost of
investment of $5.4 million. Net cash used by investing activities for the six
months ended July 31, 1998 of $12.9 million was comprised of an increase in
building, furniture and equipment of $7.7 million, an increase in the cost of
the senior living communities the Company is constructing of $4.7 million, and
an increase in investments in general partner interests in senior living
communities of $500,000.

Net cash provided by financing activities for the six months ended July 31,
1999 of $3.8 million was comprised of (i) proceeds from the issuance of new debt
of $32.7 million less debt repayments of $24.8 million plus (ii) proceeds from
construction mortgage financing of $12.9 million less repayments of $9.2
million, less (iii) payments of notes payable of $1.7 million less (iv) the
increase in other assets of $5.0 million less (v) the purchase of treasury stock
of $1.1 million. Net cash provided by financing activities for the six months
ended July 31, 1998 of $35.3 million was comprised of (i) proceeds from the
issuance of new debt of $18.0 million less debt repayments of $11.7 million plus
(ii) proceeds from construction and mortgage financings of $6.4 million, less
(iii) payments of notes payable of $200,000 plus (iv) the decrease in other
assets of $500,000 plus (v) the net proceeds of the initial public offering of
$22.3 million.

At January 31, 1999, the Company had total indebtedness, excluding accrued
interest and construction mortgage indebtedness on the Development Communities,
of $168.8 million, consisting of $69.8 million of Debenture Debt, $72.5 million
of unsecured debt, $5.0 million of mortgage debt and $21.5 million of investor
note debt, and the Company had cash and cash equivalents at January 31, 1999 of
$22.8 million. As of July 31, 1999, the Company decreased investor note debt
from $21.5 million to $19.8 million, decreased unsecured debt from $72.5 to
$63.6 million and increased Debenture Debt from $69.8 million to $88.4 million.
As a result, the total indebtedness increased from $168.8 million to $176.8
million and the Company had cash and cash equivalents at July 31, 1999 of $8.4
million.

Of the principal amount of total indebtedness at January 31, 1999 described
above, $29.4 million becomes due in the fiscal year ending January 31, 2000;
$35.3 million becomes due in the fiscal year ending January 31, 2001; $38.3
million becomes due in the fiscal year ending January 31, 2002; $22.1 million
becomes due in the fiscal year ending January 31, 2003; $10.1 million becomes
due in the fiscal year ending January 31, 2004, and the balance of $33.6 million
becomes due thereafter. Of the amount maturing in the fiscal year ending January
31, 2000, $1.9 million is Investor Note Debt of which the Company repaid $1.8

<PAGE>

million through the collection of investor notes and intends to repay the
balance through the collection of investor notes. The balance, approximately
$27.5 million, includes $7.9 million of Debenture Debt and $19.6 million of
unsecured debt of which $17.0 million has been repaid through the issuance of
new Debenture Debt. The Company expects to repay a portion of the remaining debt
maturing in the current year with funds generated by the Company's business
operations and the balance of the indebtedness through the issuance of new debt.

First mortgage loans were obtained to finance approximately 80% of the cost
of developing seven Development Communities. The interest rate on four of the
loans equals the 30-day LIBOR plus 2 3/4% per annum. The fifth loan bears
interest at the lender's prime rate plus 1.5% per annum. The sixth and seventh
loans bear interest at the lender's prime rate for the first fifteen months and
then converts to LIBOR plus 2 3/4% per annum for the following twenty-four
months. These loans mature between November, 1999 and February, 2001. As of July
31, 1999, total funding under such first mortgage loans amounted to $34.7
million. In April, 1999, the Company entered into joint venture arrangements
regarding four completed Development Communities, two of such joint venture
arrangements being effective as of April 1, 1999 and the other two being
effective as of May 1, 1999. As a result, the Company did not reflect the
mortgages relating to Development Communities on its consolidated financial
statements as of July 31, 1999. At July 31, 1999, the total construction
mortgages reflected in the Company's consolidated financial statements was $7.3
million. The Company has guaranteed the mortgages on the Development Communities
subject to joint venture arrangements and such guarantees remain in effect. The
Company intends to pursue similar joint venture arrangements regarding the
additional Development Communities to be developed. The Company intends to
increase its construction loans payable as it pursues its Development Plan.

The Company's debt obligations contain various covenants and default
provisions, including provisions relating to, in some obligations, certain
Partnerships, Owning Partnerships or affiliates of the Company. At July 31,
1999, the Company had a net worth of $38.6 million. Pursuant to one obligation,
the Company is required to maintain a net worth of no less than $35.3 million.
Certain obligations of the Company contain covenants requiring the Company to
maintain maximum ratios of the Company's liabilities to its net worth. At July
31, 1999, the most restrictive covenant requires that the Company maintain a
ratio of liabilities to consolidated net worth of no more than 10 to 1. At July
31, 1999, the Company's ratio was 7.0 to 1. In addition, certain obligations of
the Company provide that an event of default will arise upon the occurrence of a
material adverse change in the financial condition of the Company or upon a
default in other obligations of the Company.

The Company has utilized mortgage financing and Syndications to arrange for
the acquisitions of the Syndicated Communities which it operates. It intends to
continue this practice for future acquisitions of Syndicated Communities. The
limited partners are entitled to receive for a period not to exceed five-years
specified distributions equal to 11% to 12% per annum of their then paid-in
scheduled capital contributions. Pursuant to the management contracts with the
Owning Partnerships, for such five-year period, the Company has Management
Contract Obligations. During the six months ended July 31, 1999, the Syndicated
Communities with respect to which the Company had such Management Contract
Obligations distributed to the Company, after payment of all operating expenses

25
<PAGE>

and debt service, an aggregate of $4.3 million, for application to the Company's
Management Contract Obligations. During such period, the Company's Management
Contract Obligations exceeded such distributions by an aggregate of $7.7
million. The $7.7 million of funding that was required in respect to Management
Contract Obligations in the six months ended July 31, 1999 was primarily
attributable to (i) an increase in the scheduled capital contributions by the
limited partners on which the Company is required to pay the specified rate of
return, (ii) a decrease in the average occupancy of certain Syndicated
Communities in the Company's portfolio, and (iii) an increase in operating
expenses of the same Syndicated Communities.

The aggregate gross amount (before considering the cash flow from the
properties) of Management Contract Obligations relating solely to returns to
limited partners based on existing management contracts is $10.0 million for the
remaining portion of Fiscal 1999, which will increase to $21.0 million in Fiscal
2000, and decrease to $17.5 million in Fiscal 2001, decrease to $10.2 million in
Fiscal 2002, decrease to $4.7 million in Fiscal 2003 and decrease to $1.0
million in Fiscal 2004. Such amounts of Management Contract Obligations are
calculated based upon all remaining scheduled capital contributions with respect
to fiscal years 1999 through 2004. Actual amounts of Management Contract
Obligations in respect of such contracts will vary based upon the timing and
amount of such capital contributions. Furthermore, such amounts of Management
Contract Obligations are calculated without regard to Management Contract
Obligations relating to future Syndications.

The aggregate amount of the Company's Management Contract Obligations will
depend upon a number of factors, including, among others, the expiration of such
obligations for certain partnerships, the cash flow generated by the Syndicated
Communities and the terms of future Syndications. The Company anticipates that
for at least two years the Management Contract Obligations, with respect to
existing and future Syndications, will exceed the cash flow generated by the
related Syndicated Communities, which will result in the need to utilize funds
generated by the Company from sources other than the operations of the
Syndicated Communities to make Management Contract Obligations payments. In
general, the payment of expenses arising from obligations of the Company,
including Management Contract Obligations, have priority over earnings that
might otherwise be available for distribution to shareholders. The Company
intends to structure future Syndications to minimize the likelihood that it will
be required to utilize the cash it generates to pay Management Contract
Obligations, but there can be no assurance that this will be the case.

The initial five-year term of the management contracts and the related
Management Contract Obligations have expired for thirteen Owning Partnerships
and their seventeen related Investing Partnerships. Although the Company has no
obligation to fund operating shortfalls after the five-year term of the
management contracts, as of July 31, 1999, the Company had advanced an aggregate
of approximately $3.2 million of which $954,000 was funded in the six months
ended July 31, 1999, to nine of these Owning Partnerships to fund operating
shortfalls. All such advances are recorded in the "notes and receivables" on the
Company's Consolidated Balance Sheet.

<PAGE>

In the past, limited partners have been allowed to prepay capital
contributions. The percentage of the prepayments received upon the closings of
the sales of limited partnership interests in Investing Partnerships was 75.4%
for Fiscal 1998 and 67.7% for the six months ended July 31, 1999. Prepayments of
capital contributions do not result in the prepayment of the related Purchase
Notes held by the Company. Instead, such amounts are loaned to the Company by
the Investing Partnership. As a result of such loans and the crediting
provisions of the related purchase agreements, the Company records the Purchase
Notes net of such loans. Therefore, these prepayments act to reduce the recorded
value of the Company's note receivables and reduce interest income received by
the Company. Pursuant to the terms of the Syndication offerings, the Company has
the option not to accept future prepayments by limited partners of capital
contributions. The Company has not determined to what extent it will continue to
accept prepayments by limited partners of capital contributions.

As of July 31, 1999, the Company holds 157 Purchase Notes ("Multi-Family
Notes") which are secured by controlling interests in Multi-Family Owning
Partnerships which own 118 multi-family properties that were Syndicated by the
Company prior to 1986 (the "Multi-Family Properties"). Although it has no
obligation to do so, the Company has also made advances to various Multi-Family
Owning Partnerships to support the operation of their properties, which advances
are included in the "notes and receivables" recorded on the Company's
Consolidated Balance Sheet. The Multi-Family Notes and related advances entitle
the Company to receive all cash flow and sale or refinancing proceeds generated
by the respective Multi-Family Property until the Multi-Family Note and related
advances are satisfied. As of July 31, 1999, the recorded value, net of deferred
income, of Multi-Family Notes was $100.9 million. All but approximately $4.5
million of the $63.4 million of advances included in the "notes and receivable"
recorded on the Company's Consolidated Balance Sheet as of July 31, 1999 relate
to advances to Multi-Family Owning Partnerships.

Fourteen of the Multi-Family Owning Partnerships are in default on their
respective mortgages. Seven of these Owning Partnerships have obtained workout
agreements with terms of from one to nine years. HUD's policies regarding the
granting of workout agreements have become more restrictive in recent years and
there can be no assurance that HUD will renew these workout agreements or
restructure the related mortgage debt when these workout agreements expire.
Within the last twelve months HUD has taken steps to foreclose on seven of the
defaulted mortgages. Four of the relevant Multi-Family Owning Partnerships are
negotiating with HUD to obtain mortgage restructurings to cure the defaults. The
recorded value of these receivables, net of established reserves, is $5.8
million. Two of the relevant MultiFamily Owning Partnerships are negotiating
with a mortgage lender to cure their defaults by refinancing their mortgages.
The recorded value of these receivables, net of established reserves, is $1.0
million. The seventh Multi-Family Owning Partnership will lose its property
through foreclosure. As a result, the Company realized a non-cash loss of
$700,000 in the second quarter of fiscal year of 1999, which represents the
recorded value of the note and receivable, net of established reserves. The
Company's principal stockholders contributed additional collateral for this note
and the related receivables. As a result of this contribution of additional
assets, the Company recorded a capital contribution of $900,000 and believes
that this foreclosure will not effect its ability to collect this note. It is
possible that the remaining thirteen Multi-Family Owing Partnerships currently
in default on their mortgages will also lose their properties through
foreclosure. In addition, there can be no assurance that other Multi-Family

<PAGE>

Owning Partnerships will not default on their mortgages or lose their properties
through foreclosure. As of July 31, 1999, the recorded value, net of deferred
income, of the MultiFamily Notes and related advances held by the Company
relating to the thirteen Multi-Family Owning Partnerships still in default was
$26.4 million. The Company has established reserves of $7.3 million to address
the possibility that these Multi-Family Notes and related advances may not be
collected in full. It should be noted that in Fiscal 1998 and previous years,
six Multi-Family Owning Partnerships whose mortgages had been in default cured
those defaults by refinancing their mortgages with new mortgage financings and
now have fully performing mortgages. Other Multi-Family Owning Partnerships
intend to cure their mortgage defaults by refinancing or restructuring their
mortgages in the future, although there can be no assurance that this will be
the case. The Company neither owns nor manages the Multi-Family Properties, nor
is it the general partner of any Multi-Family Partnerships but rather holds the
related MultiFamily Notes and related advances relating to Multi-Family
Properties as receivables. The Company, therefore, has no liability in
connection with these mortgage defaults.

The Multi-Family Properties were typically built or acquired with the
assistance of programs administered by HUD that provide mortgage insurance,
favorable financing terms and/or rental assistance payments to the owners. As a
condition to the receipt of assistance under these and other HUD programs, the
properties must comply with various HUD requirements, including limiting rents
on these properties to amounts approved by HUD. Most of the rental assistance
payment contracts relating to the Multi-Family Properties will expire over the
next few years. In view of the foregoing, there can be no assurance that other
MultiFamily Owning Partnerships will not default on their mortgages, file
bankruptcy petitions, and/or lose their properties through foreclosure. The
Company neither owns nor manages these properties, nor is it the general partner
of any Multi-Family Owning Partnerships, but rather, holds the Multi-Family
Notes and related advances as receivables. Any such future mortgage defaults
could, and any such future filings of bankruptcy petitions or the loss of any
such property through foreclosure would, cause the Company to realize a non-cash
loss equal to the recorded value of the applicable Multi-Family Note plus any
related advances, net of any deferred income recorded and any reserves for such
Multi-Family Note and advances previously established by the Company, which
would reduce such loss. In addition, the Company could be required to realize
such a non-cash loss even in the absence of mortgage defaults, bankruptcy
petitions or the loss of any such property through foreclosure if such note is
considered impaired. Such impairment would be measured under applicable
accounting rules. Such losses, if any, while non-cash in nature, could adversely
affect the Company's business, operating results and financial condition.

HUD has introduced various initiatives to restructure its housing subsidy
programs by increasing reliance on prevailing market rents, and by reducing
spending on future rental assistance payment contracts by, among other things,
limiting the term and rent levels when renewing expiring contracts and by
restructuring mortgage debt on those properties where a decline in rental
revenues is anticipated. Three Multi-Family Owning Partnerships have had their
HUD-insured mortgage debt restructured and other partnerships have applied for
restructurings. Due to uncertainty regarding the final policies that will result
from these initiatives and numerous other factors that affect each property,
which can change over time (including the local real estate market, the
provisions of the mortgage debt encumbering the property, prevailing interest
rates and the general state of the economy), the Company cannot determine

<PAGE>

whether these initiatives will have an impact on the Multi-Family Properties
and, if there is an impact, whether the impact will be positive or negative.

Certain of the Multi-Family Owning Partnerships intend to take advantage of
the new HUD initiatives and/or improving market conditions to either (i)
refinance their HUD-insured mortgages with conventional mortgage financing
and/or (ii) sell their Multi-Family Properties.

In some cases, the Multi-Family Owning Partnerships will make certain
improvements to the properties and may not renew rental assistance contracts as
part of a strategy to reposition those Multi-Family Properties as market-rate,
non-subsidized properties. Seventeen of such MultiFamily Owning Partnerships
have refinanced their HUD-insured mortgages with conventional mortgage financing
and a number of others have applications for commitments pending. To the extent
that any of these Multi-Family Owning Partnerships complete such actions, the
Company believes that the ability of the Investing Partnerships relating to the
Multi-Family Properties (the "Multi-Family Investing Partnerships") to make
payments to the Company on their respective Multi-Family Notes will be enhanced
and accelerated. In Fiscal 1998, the Company received $2.6 million of excess
refinancing proceeds as holder of the related MultiFamily Notes and expects to
receive excess refinancing proceeds from the refinancing of other Multi-Family
Properties in Fiscal 1999. However, there can be no assurance that these
additional Multi-Family Owning Partnerships will be able to refinance their
mortgages or will be able to successfully reposition any of the Multi-Family
Properties.

In addition, one Multi-Family Property and controlling interests in eight
Multi-Family Owning Partnerships were sold to third parties in Fiscal 1998. The
Company succeeded to these controlling interests by acquiring the collateral
securing the related Multi-Family Notes upon such Notes becoming due without
being paid and concurrently selling such collateral to Mr. Batchelor. The
Company recognized $26.4 million in sale proceeds as a result of these sales in
Fiscal 1998. A significant portion of sales proceeds were generated from sales
to Mr. Batchelor. Several Multi-Family Owning Partnerships are currently
negotiating the terms of offers to purchase their properties. The Company
expects to receive additional sale proceeds from any such transactions which
occur in Fiscal 1999. There can be no assurance, however, that additional sale
transactions will actually close.

The future growth of the Company will be based upon the continued
acquisition and Syndication of existing senior living communities and the
construction of Development Communities. The Company anticipates that it will
acquire between six and twelve existing senior living communities over the next
two years. It is anticipated that acquisitions of existing senior living
communities will be arranged by utilizing a combination of mortgage financing
and Syndications. The Company holds a contract to acquire a senior living
community in Denver, Colorado. The Company regularly obtains acquisition
mortgage financing from two different commercial mortgage lenders and, in view
of its ready access to such mortgage financing, has not sought any specific
commitments or letters of intent with regard to future, unidentified
acquisitions. Similarly, the Company believes that it has sufficient ability to
arrange for acquisitions of existing senior living communities in part by
Syndications.

In a typical Syndication, limited partners agree to pay their capital
contributions over a five-year period, and deliver notes representing the
portion of their capital contribution that has not been paid in cash. The
Company borrows against the notes delivered by limited partners to generate cash

<PAGE>

when needed, including to pursue its Development Plan and to repay debt.

The Company anticipates that the proceeds of the Company's initial public
offering, funds generated by its business operations and construction mortgage
financing will provide sufficient funds to pursue its Development Plan (as
described above) for at least six months at the projected rate of development.
The capital markets have generally been unaccessible to the Company and other
assisted living companies for the purpose of raising additional funds. The
Company is exploring additional sources of capital. Due to the fact that the
Company anticipates utilizing that portion of the capital raised in its initial
public offering and earmarked for new development within the next six months,
the Company has scaled back the projected number of Development Communities it
expects to begin construction on over the next two years. The Company may
increase the projected rate of construction of Development Communities in the
future if it is able to secure new sources of capital. The Company intends to
use the proceeds of (i) anticipated joint venture arrangements of Development
Communities, (ii) refinancings or sale-leasebacks of stabilized Development
Communities at higher principal amounts than the original construction
financing, (iii) additional long-term leases or similar forms of financing which
require the investment of little or no capital on the part of the Company,
and/or (iv) funds which may be raised through the issuance of securities, to
continue with its Development Plan for more than the next six months at its
projected rate of development. There can be no assurance that funds generated by
these potential sources will be available or sufficient to complete the
Company's Development Plan. In addition, there are a number of circumstances
beyond the Company's control and which the Company cannot predict that may
result in the Company's financial resources being inadequate to meet its needs.
A lack of available funds may require the Company to delay, scale back or
eliminate some of the Development Communities that are currently contemplated in
its Development Plan.

The first new Development Communities developed pursuant to the Company's
Development Plan are in Texas. The Company has completed construction with
mortgage financing and opened four Development Communities in Texas. The Company
has commenced construction with mortgage financing on three Development
Communities in Texas. The Company has acquired a site in Jackson, Tennessee, has
options to acquire sites in Montgomery, Alabama, Knoxville, Tennessee, and
Evansville, Indiana, and is actively negotiating to obtain control of additional
sites in the Southeast and Midwest. The Company is negotiating with several
lenders to obtain financing to develop these sites. The Company anticipates that
most of the construction mortgage loans it obtains to finance the development
and lease-up costs of new Development Communities will contain terms where the
lender will fund up to 80% of such costs, requiring the Company to contribute at
least 20% of such costs. The Company has entered into joint venture arrangements
with a third party pursuant to which it has sold 50% interests in four
Development Communities located in Texas. The Company intends to enter into
similar joint venture arrangements with regard to future Development Communities
it develops with mortgage financing.

The Company has, and may in the future, utilize long-term lease financing
arrangements to develop and operate new Development Communities. The Company has
obtained financing of $37.7 million from Capstone for 100% of the development

<PAGE>

cost of four Development Communities that are being operated by the Company
pursuant to long-term leases with Capstone.

STOCK BUYBACK

On March 22, 1999, the Board of Directors authorized the Company to
purchase up to 300,000 shares of the Company's common stock. As of September 7,
1999, the Company had purchased 254,400 shares at an average price of $5.63 per
share.

YEAR 2000 UPDATE

Year 2000 Overview - The Year 2000 issue is the result of many computer
systems and non-information technology systems which rely upon embedded computer
technology using only the last two digits to refer to a year and therefore being
unable to distinguish between the years 1900 and 2000. If not corrected, many
computer applications that are date sensitive could fail or create erroneous
results. As part of the process of upgrading its internal computer hardware and
software and in anticipation of the Year 2000 issue, the Company began to audit,
inventory, modify and replace its mission critical software and hardware
(including personal computers, spread sheets, and word processing) in its Fort
Lee, New Jersey and Boca Raton, Florida corporate offices in 1997 ("Year 2000
Project"). During 1998, the Company's Year 2000 Project was extended to include
software and hardware located at the Syndicated Communities and the Development
Communities, "embedded technology" (such as telephones, fax machines, copiers
and postage machines), property and corporate facilities (such as security/fire
systems, emergency call systems, elevators, and HVAC systems) and business
relationships with governmental agencies, utilities and material third party
vendors, and service providers.

The Company has separate computer hardware and software systems at each of
its Fort Lee, New Jersey and Boca Raton, Florida offices. Each office has an
intra-office network. None of the Syndicated Communities or Development
Communities are part of a computer network. The Company is using a multi-step
approach in conducting its Year 2000 Project. These steps are: inventory,
assessment, remediation and testing, and contingency planning. The first step,
an inventory of all systems and devices with potential Year 2000 problems has
been completed. The next step, an assessment of such inventory to determine the
state of Year 2000 readiness for material systems and devices, has also been
completed for the Company's two offices and it has been completed at the
majority of the Syndicated Communities and Development Communities. The
remediation and testing of the Company's software and hardware has already been
completed at the Company's two offices. The Company has updated or replaced the
following financial and accounting systems with Year 2000 compliant systems:
accounting servers and related hardware, accounts payable systems, accounts
receivable systems, general ledgers, cash management programs and payroll
systems. In addition, the Company has updated its construction server and data
base as well as the network software located in the Company's two offices and
replaced substantially all of the desk-top personal computers located therein.

<PAGE>

However, even if the Company is successful in becoming Year 2000 compliant,
the Company remains at risk from Year 2000 failures caused by key third parties.
The Company has therefore initiated efforts with key third parties to assess and
wherever possible remediate Year 2000 issues. In most cases, the Company will be
relying upon statements from such entities as to the Year 2000 readiness of
their systems and will not attempt any independent verification. To date, the
Company has not received sufficient information from such entities to complete
its assessment of their year 2000 compliance. In addition, the Company cannot
predict the outcome of other companies' remediation efforts.

Year 2000 Costs - The total cost associated with the Year 2000 Project to
become Year 2000 compliant is not expected to be material to the Company's
financial position. The Company currently plans to complete the Year 2000
Project by September 30, 1999. The cost of the Company's total Year 2000 Project
is based on presently available information. The Company does not separately
track the internal costs incurred for the Year 2000 Project. Such costs are
principally the related payroll costs for its information systems group. The
total remaining cost of the year 2000 Project is estimated at approximately
$25,000. Substantially all of this $25,000 is related to the cost to replace
software and computers. To date, the Company incurred approximately $40,000
related to the Year 2000 Project. Substantially all of this $40,000 is related
to the cost to replace software and computers. The costs of the project and the
date on which the Company plans to complete the Year 2000 modifications are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third parties' Year 2000 preparedness and other factors.

Risks - The failure to correct a material Year 2000 problem could result in
an interruption in, or a failure of, certain normal business activities or
operations. The Company believes that all material Year 2000 problems which are
within its control were corrected by August 31, 1999 and therefore such problems
are not anticipated to have a material adverse affect on the Company's financial
position and results of operations. Even if the Company successfully remediates
its Year 2000 issues, it can be materially and adversely affected by failures of
third parties to remediate their own Year 2000 issues. The Company believes that
the most reasonably likely worst case scenario is the loss of utility service
(telecommunications and power) at the Company's corporate offices, and all or
some of the senior living communities it operates. Based upon procedures which
are currently in place and the contingency plans which are being prepared and
anticipated to be put in place, such a scenario is not expected to have a
material adverse affect on the Company's financial position and results of
operations.

Contingency Plans - Contingency plans are anticipated to be prepared so
that the Company's critical business processes can be expected to continue to
function on January 1, 2000 and beyond. Such plans are anticipated to be
developed by September 30, 1999. These plans will attempt to mitigate both
internal risks as well as potential risks due to business relationships with
third parties.

<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

In June of 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It is effective for all fiscal quarters of fiscal years beginning after June 15,
2000. The Company's use of derivative instruments has consisted of treasury bill
locks related to two specific mortgage debt financings. While the Company has
not completed its analysis of Statement No. 133 and has not made a decision
regarding the timing of adoption, it does not believe that adoption will have a
material effect on its financial position and results of operations based on its
current use of derivative instruments.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

For a discussion of market risk sensitive instruments, see the Company's
Form 10-K for the fiscal year ended January 31, 1999. There has been no
subsequent material change to the Company's exposure to market risk.

<PAGE>

PART II - OTHER INFORMATION.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

The effective date of the registration statements (Nos. 333-05955 and
333-43331) for the Company's initial public offering of its common stock, $.01
par value, was March 13, 1998. The offering commenced on March 16, 1998. The
managing underwriter of the offering was Royce Investment Group, Inc. ("Royce").
Pursuant to the offering, the Company sold to the public 2,800,000 shares of its
common stock at an initial offering price of $9.50 per share. The aggregate
price of the offering registered by the Company was $26.6 million. On April 29,
1998, pursuant to an over-allotment option granted to the underwriters, John
Luciani and Bernard M. Rodin (the "Selling Shareholders") each sold 173,030
shares of the Company's common stock to the public at a price of $9.50 per
share. The aggregate price of the shares offered by and registered on behalf of
the Selling Shareholders was $3.3 million. Under the terms of the offering, the
Company incurred underwriting discounts of $1.6 million, and the Selling
Shareholders incurred aggregate underwriting discounts of $197,250. The Company
incurred the following expenses in connection with the offering: (i) a
non-accountable expense allowance paid to Royce in the amount of $798,000, (ii)
a consulting fee paid to Royce in the amount of $266,000, and (iii) other
expenses related to the offering in the amount of $1.5 million.

The net proceeds that the Company received as a result of the offering were
$22.3 million. As of July 31, 1999, the Company's net proceeds have been used as
follows: $11.5 million has been used for the purchase of land and towards the
construction of plant, building and facilities and $3.0 million has been used
for working capital and the remainder has been used to purchase treasury bills
pending application of the funds.

ITEM 5. OTHER.

Since June 16, 1999, George Batchelor is the beneficial owner of 6.8% of
Grand Court's common stock. Since the beginning of Fiscal 1996 and through July
31, 1999, the following transactions occurred between Mr. Batchelor and Grand
Court: (i) Grand Court borrowed $58.8 million (at stated interest rates ranging
from 12% to 15%) from Mr. Batchelor, and repaid $42.8 million of principal
amounts of loans and paid $15.4 million of interest and other loan fees to Mr.
Batchelor, (ii) Grand Court sold to Mr. Batchelor controlling interests in eight
Multi-Family Owning Partnerships for an aggregate consideration of $12.0
million, of which $5.0 million was in cash and the remaining $7.0 million was in
the form of a note on which Grand Court has received principal and interest in
the amount of $393,839, (iii) Grand Court entered into four joint venture
arrangements regarding four Development Communities in which it sold a 50%
interest in each of the four Development Communities to Mr. Batchelor for an
aggregate consideration of $20.0 million, and (iv) Grand Court sold to Mr.
Batchelor investments in Multi-Family Syndications for an aggregate
consideration of $239,425.

<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

Exhibit Number Description of Exhibit
-------------- ----------------------
4.1 Indenture, dated as of June 1, 1999,
among the Company and The Bank of
New York (the "Series B Indenture").
4.1(a) Officer's Certificate, dated as of June 1,
1999, under Sections 102, 201 and 301
of the Series B Indenture, with form of
Note attached.
21 List of subsidiaries.
27 Financial Data Schedule.

(b) Reports on Form 8-K
None.
35

<PAGE>

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

GRAND COURT LIFESTYLES, INC.
(Registrant)

/s/ Bernard M. Rodin
--------------------
Bernard M. Rodin
President
and Principal Financial Officer

Dated: September 14, 1999

<PAGE>

EXHIBIT INDEX
-------------

4.1 Indenture, dated as of June 1, 1999, among the Company and The
Bank of New York (the "Series B Indenture").

4.1(a) Officer's Certificate, dated as of June 1, 1999, under Sections
102, 201 and 301 of the Series B Indenture, with form of Note
attached.

21 List of subsidiaries.

27 Financial Data Schedule.

EXHIBIT 4.1

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

GRAND COURT LIFESTYLES, INC.,
ISSUER

THE BANK OF NEW YORK,
TRUSTEE

---------

INDENTURE

DATED AS OF JUNE 1, 1999

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

<PAGE>

TABLE OF CONTENTS

PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1
SECTION 101. Definitions . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . 2
Authorized Officer . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . 2
Commission . . . . . . . . . . . . . . . . . . 2
Company . . . . . . . . . . . . . . . . . . . 2
Company Order or Company Request . . . . . . . 2
Corporate Trust Office . . . . . . . . . . . . 3
corporation . . . . . . . . . . . . . . . . . 3
Defaulted Interest . . . . . . . . . . . . . . 3
Discount Security . . . . . . . . . . . . . . 3
Dollar or $ . . . . . . . . . . . . . . . . . 3
Eligible Obligations . . . . . . . . . . . . . 3
Event of Default . . . . . . . . . . . . . . . 3
Exchange Act . . . . . . . . . . . . . . . . . 3
Government Obligations . . . . . . . . . . . . 3
Holder . . . . . . . . . . . . . . . . . . . . 3
Indenture . . . . . . . . . . . . . . . . . . 3
interest . . . . . . . . . . . . . . . . . . . 4
Interest Payment Date . . . . . . . . . . . . 4
Maturity . . . . . . . . . . . . . . . . . . . 4
Notice of Default . . . . . . . . . . . . . . 4
Officer's Certificate . . . . . . . . . . . . 4
Opinion of Counsel . . . . . . . . . . . . . . 4
Outstanding . . . . . . . . . . . . . . . . . 4
Paying Agent . . . . . . . . . . . . . . . . . 5
Periodic Offering . . . . . . . . . . . . . . 5
Person . . . . . . . . . . . . . . . . . . . . 6
Place of Payment . . . . . . . . . . . . . . . 6
Predecessor Security . . . . . . . . . . . . . 6
Redemption Date . . . . . . . . . . . . . . . 6
Redemption Price . . . . . . . . . . . . . . . 6
Regular Record Date . . . . . . . . . . . . . 6
Required Currency . . . . . . . . . . . . . . 6
Responsible Officer . . . . . . . . . . . . . 6
Securities . . . . . . . . . . . . . . . . . . 6
Security Register and Security Registrar . . . 6
Special Record Date . . . . . . . . . . . . . 6
Stated Interest Rate . . . . . . . . . . . . . 6
Stated Maturity . . . . . . . . . . . . . . . 7
Tranche . . . . . . . . . . . . . . . . . . . 7
Trustee . . . . . . . . . . . . . . . . . . . 7
Trust Indenture Act . . . . . . . . . . . . . 7
United States . . . . . . . . . . . . . . . . 7
SECTION 102. Compliance Certificates and Opinions 7
SECTION 103. Form of Documents Delivered to Trustee 8
SECTION 104. Acts of Holders . . . . . . . . . . . 9
SECTION 105. Notices, Etc. to Trustee or Company . 10
SECTION 106. Notice to Holders of Securities;
Waiver . . . . . . . . . . . . . . . 11
SECTION 107. Conflict with Trust Indenture Act . . 12
SECTION 108. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . 12
SECTION 109. Successors and Assigns . . . . . . . 12
SECTION 110. Separability Clause . . . . . . . . . 12
SECTION 111. Benefits of Indenture . . . . . . . . 12
SECTION 112. Governing Law . . . . . . . . . . . . 12
SECTION 113. Legal Holidays . . . . . . . . . . . 12

ARTICLE TWO

SECURITY FORMS . . . . . . . . . . 13
SECTION 201. Forms Generally . . . . . . . . . . . 13
SECTION 202. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . 13

ARTICLE THREE

THE SECURITIES . . . . . . . . . . 14
SECTION 301. Amount Unlimited; Issuable in Series 14
SECTION 302. Denominations . . . . . . . . . . . . 17
SECTION 303. Execution, Authentication, Delivery
and Dating . . . . . . . . . . . . . 17
SECTION 304. Temporary Securities . . . . . . . . 19
SECTION 305. Registration, Registration of Transfer
and Exchange . . . . . . . . . . . . 20
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities . . . . . . . . . 21
SECTION 307. Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . 22
SECTION 308. Persons Deemed Owners . . . . . . . . 23
SECTION 309. Cancellation . . . . . . . . . . . . 23
SECTION 310. Computation of Interest . . . . . . . 23
SECTION 311. Payment to Be in Proper Currency . . 23
SECTION 312. CUSIP Numbers . . . . . . . . . . . . 24

ARTICLE FOUR

REDEMPTION OF SECURITIES . . . . . . . . 24
SECTION 401. Applicability of Article . . . . . . 24
SECTION 402. Election to Redeem; Notice to Trustee 24
SECTION 403. Selection of Securities to Be
Redeemed . . . . . . . . . . . . . . 24
SECTION 404. Notice of Redemption. . . . . . . . . 25
SECTION 405. Securities Payable on Redemption Date 26
SECTION 406. Securities Redeemed in Part . . . . . 26

ARTICLE FIVE

SINKING FUNDS . . . . . . . . . . . 27
SECTION 501. Applicability of Article . . . . . . 27
SECTION 502. Satisfaction of Sinking Fund
Payments with Securities . . . . . . 27
SECTION 503. Redemption of Securities for Sinking
Fund . . . . . . . . . . . . . . . . 27

ARTICLE SIX

COVENANTS . . . . . . . . . . . . 28
SECTION 601. Payment of Principal, Premium and
Interest . . . . . . . . . . . . . 28
SECTION 602. Maintenance of Office or Agency . . . 28
SECTION 603. Money for Securities Payments to Be
Held in Trust . . . . . . . . . . . 29
SECTION 604. Corporate Existence . . . . . . . . . 30
SECTION 605. Annual Officer's Certificate . . . . 30
SECTION 606. Waiver of Certain Covenants . . . . . 30
SECTION 607. Calculation of the Original Issue
Discount . . . . . . . . . . . . . . 31

ARTICLE SEVEN

SATISFACTION AND DISCHARGE . . . . . . . 31
SECTION 701. Satisfaction and Discharge of
Securities . . . . . . . . . . . . . 31
SECTION 702. Satisfaction and Discharge of
Indenture . . . . . . . . . . . . . 33
SECTION 703. Application of Trust Money . . . . . 34

ARTICLE EIGHT

EVENTS OF DEFAULT; REMEDIES . . . . . . . 34
SECTION 801. Events of Default . . . . . . . . . . 34
SECTION 802. Acceleration of Maturity; Rescission
and Annulment . . . . . . . . . . . 35
SECTION 803. Collection of Indebtedness and Suits
for Enforcement by Trustee . . . . . 36
SECTION 804. Trustee May File Proofs of Claim . . 36
SECTION 805. Trustee May Enforce Claims Without
Possession of Securities . . . . . 37
SECTION 806. Application of Money Collected . . . 37
SECTION 807. Limitation on Suits . . . . . . . . . 37
SECTION 808. Unconditional Right of Holders to
Receive Principal, Premium and
Interest . . . . . . . . . . . . . . 38
SECTION 809. Restoration of Rights and Remedies . 38
SECTION 810. Rights and Remedies Cumulative . . . 39
SECTION 811. Delay or Omission Not Waiver . . . . 39
SECTION 812. Control by Holders of Securities . . 39
SECTION 813. Waiver of Past Defaults . . . . . . . 39
SECTION 814. Undertaking for Costs . . . . . . . . 40
SECTION 815. Waiver of Usury, Stay or Extension
Laws . . . . . . . . . . . . . . . . 40

ARTICLE NINE

THE TRUSTEE . . . . . . . . . . . 40
SECTION 901. Certain Duties and Responsibilities . 40
SECTION 902. Notice of Defaults . . . . . . . . . 41
SECTION 903. Certain Rights of Trustee . . . . . . 42
SECTION 904. Not Responsible for Recitals or
Issuance of Securities . . . . . . . 43
SECTION 905. May Hold Securities . . . . . . . . . 43
SECTION 906. Money Held in Trust . . . . . . . . . 43
SECTION 907. Compensation and Reimbursement . . . 43
SECTION 908. Disqualification; Conflicting
Interests . . . . . . . . . . . . . 44
SECTION 909. Corporate Trustee Required;
Eligibility . . . . . . . . . . . . 44
SECTION 910. Resignation and Removal; Appointment
of Successor . . . . . . . . . . . . 45
SECTION 911. Acceptance of Appointment by
Successor . . . . . . . . . . . . . 46
SECTION 912. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . 47
SECTION 913. Preferential Collection of Claims
Against Company . . . . . . . . . . 48
SECTION 914. Appointment of Authenticating Agent . 48
SECTION 915. Co-trustee and Separate Trustees. . . 49

ARTICLE TEN

HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . 51
SECTION 1001. Lists of Holders. . . . . . . . . . 51
SECTION 1002. Reports by Trustee and Company. . . 51

ARTICLE ELEVEN

CONSOLIDATION, MERGER, CONVEYANCE, OR OTHER TRANSFER . 51
SECTION 1101. Company May Consolidate, Etc.,
Only on Certain Terms . . . . . . . 51
SECTION 1102. Successor Person Substituted . . . . 52
SECTION 1103. Merger into Company . . . . . . . . 52

ARTICLE TWELVE

SUPPLEMENTAL INDENTURES . . . . . . . . 52
SECTION 1201. Supplemental Indentures Without
Consent of Holders . . . . . . . . 52
SECTION 1202. Supplemental Indentures With
Consent of Holders . . . . . . . . 54
SECTION 1203. Execution of Supplemental Indentures 55
SECTION 1204. Effect of Supplemental Indentures . 56
SECTION 1205. Conformity With Trust Indenture Act 56
SECTION 1206. Reference in Securities to
Supplemental Indentures . . . . . . 56
SECTION 1207. Modification Without Supplemental
Indenture . . . . . . . . . . . . 56

ARTICLE THIRTEEN

MEETINGS OF HOLDERS; ACTION WITHOUT MEETING . . . 57
SECTION 1301. Purposes for Which Meetings May Be
Called . . . . . . . . . . . . . . 57
SECTION 1302. Call, Notice and Place of Meetings . 57
SECTION 1303. Persons Entitled to Vote at Meetings 57
SECTION 1304. Quorum; Action . . . . . . . . . . . 58
SECTION 1305. Attendance at Meetings;
Determination of Voting Rights;
Conduct and Adjournment of Meetings 58
SECTION 1306. Counting Votes and Recording Action
of Meetings . . . . . . . . . . . . 59
SECTION 1307. Action Without Meeting . . . . . . . 60

ARTICLE FOURTEEN . . . . . . . . . . . . . . . . . . . . 60

IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 1401. Liability Solely Corporate . . . . . 60

Testimonium . . . . . . . . . . . . . . . . . . . . . . 61

Signatures . . . . . . . . . . . . . . . . . . . . . . 61

GRAND COURT LIFESTYLES, INC.

Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of June 1, 1999

Trust Indenture Act Section Indenture Section

s310 (a)(1) . . . . . . . . . . 909
(a)(2) . . . . . . . . . . 909
(a)(3) . . . . . . . . . . 915
(a)(4) . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . 908
910
s311 (a) . . . . . . . . . . . 913
(b) . . . . . . . . . . . 913
(c) . . . . . . . . . . . Not Applicable
s312 (a) . . . . . . . . . . . 1001
(b) . . . . . . . . . . . 1001
(c) . . . . . . . . . . . 1001
s313 (a) . . . . . . . . . . . 1002
(b)(1) . . . . . . . . . . Not Applicable
(b)(2) . . . . . . . . . . 1002
(c) . . . . . . . . . . . 1002
(d) . . . . . . . . . . . 1002
s314 (a) . . . . . . . . . . . 1002
(a)(4) . . . . . . . . . . 605
(b) . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . 102
(c)(2) . . . . . . . . . . 102
(c)(3) . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . 102
s315 (a) . . . . . . . . . . . 901(a)
(b) . . . . . . . . . . . 902
(c) . . . . . . . . . . . 901(b)
(d) . . . . . . . . . . . 901(c)
(d)(1) . . . . . . . . . . 901(a)(1), 901(c
)(1)
(d)(2) . . . . . . . . . . 901(c)(2)
(d)(3) . . . . . . . . . . 901(c)(3)
(e) . . . . . . . . . . . 814
s316 (a) . . . . . . . . . . . 812
813
(a)(1)(A) . . . . . . . . 802
812
(a)(1)(B) . . . . . . . . 813
(a)(2) . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . 808
s317 (a)(1) . . . . . . . . . . 803
(a)(2) . . . . . . . . . . 804
(b) . . . . . . . . . . . 603
s318 (a) . . . . . . . . . . . 107

INDENTURE, dated as of June 1, 1999 among GRAND COURT
LIFESTYLES, INC., a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company"),
having its principal office at 2650 North Military Trail, Suite
350, Boca Raton, Florida 33431, and THE BANK OF NEW YORK, a New
York banking corporation, having its principal corporate trust
office at 101 Barclay Street, New York, New York 10286, as
Trustee (herein called the "Trustee").

RECITAL OF THE COMPANY

The Company has duly authorized the execution and
delivery of this Indenture to provide for the issuance from time
to time of its unsecured debentures, notes or other evidences of
indebtedness (herein called the "Securities"), to be issued in
one or more series as contemplated herein; and all acts necessary
to make this Indenture a valid agreement of the Company, in
accordance with its terms, have been performed.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the
purchase of the Securities by the Holders thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of
all Holders of the Securities or of series thereof (except as
otherwise contemplated herein), as follows:

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

SECTION 101. DEFINITIONS.

For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:

(a) the terms defined in this Article have the
meanings assigned to them in this Article and include
the plural as well as the singular;

(b) all terms used herein which are defined in
the Trust Indenture Act, either directly or by
reference therein, have the meanings assigned to them
therein;

(c) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance
with generally accepted accounting principles in the
United States of America, and, except as otherwise
herein expressly provided, the term "generally accepted
accounting principles" with respect to any computation
required or permitted hereunder shall mean such
accounting principles as are generally accepted in the
United States of America at the date of such
computation;

(d) any reference to an "Article" or a "Section"
refers to an Article or a Section, as the case may be,
of this Indenture; and

(e) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this
Indenture as a whole and not to any particular Article,
Section or other subdivision.

Certain terms, used principally in Article Nine, are
defined in that Article.

"ACT", when used with respect to any Holder of a
Security, has the meaning specified in Section 104.

"AFFILIATE" of any specified Person means any other
Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified
Person. For the purposes of this definition, "CONTROL" when used
with respect to any specified Person means the power to direct
generally the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.

"AUTHENTICATING AGENT" means any Person or Persons
authorized by the Trustee to act on behalf of the Trustee to
authenticate the Securities of one or more series.

"AUTHORIZED OFFICER" means the Chairman of the Board,
the President, any Vice President, the Treasurer, the Secretary
or any other Person duly authorized by the Company to act in
respect of matters relating to this Indenture.

"BOARD OF DIRECTORS" means either the board of
directors of the Company or any committee of that board duly
authorized to act in respect of matters relating to this
Indenture.

"BOARD RESOLUTION" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors of
the Company and to be in full force and effect on the date of
such certification, and delivered to the Trustee.

"BUSINESS DAY", when used with respect to a Place of
Payment or any other particular location specified in the
Securities or this Indenture, means any day, other than a
Saturday or Sunday, which is not a day on which banking
institutions or trust companies in such Place of Payment or other
location are generally authorized or required by law, regulation
or executive order to remain closed, except as may be otherwise
specified as contemplated by Section 301.

"COMMISSION" means the Securities and Exchange
Commission, as from time to time constituted, created under the
Exchange Act, or, if at any time after the date of execution and
delivery of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust
Indenture Act, then the body, if any, performing such duties at
such time.

"COMPANY" means the Person named as the "Company" in
the first paragraph of this Indenture until a successor Person
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Company" shall mean such
successor Person.

"COMPANY ORDER" or "COMPANY REQUEST" mean, respectively,
a written order or request, as the case may be, signed in the
name of the Company by an Authorized Officer and delivered to the
Trustee.

"CORPORATE TRUST OFFICE" means the office of the
Trustee at which at any particular time its corporate trust
business shall be principally administered, which office at the
date of execution of this Indenture is located at 101 Barclay
Street 12 East, New York, New York 10286, Attention: Corporate
Trust Administration.

"CORPORATION" means a corporation, association,
company, joint stock company or business trust.

"DEFAULTED INTEREST" has the meaning specified in
Section 307.

"DISCOUNT SECURITY" means any Security which provides
for an amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 802.

"DOLLAR" or "$" means a dollar or other equivalent unit
in such coin or currency of the United States of America as at
the time shall be legal tender for the payment of public and
private debts.

"ELIGIBLE OBLIGATIONS" means:

(a) with respect to Securities denominated in
Dollars, Government Obligations; or

(b) with respect to Securities denominated in a
currency other than Dollars or in a composite currency,
such other obligations or instruments as shall be
specified with respect to such Securities, as
contemplated by Section 301.

"EVENT OF DEFAULT" has the meaning specified in Section
801.

"EXCHANGE ACT" means the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder, as
amended from time to time.

"GOVERNMENT OBLIGATIONS" means securities which are (a)
(i) direct obligations of the United States where the payment or
payments thereunder are supported by the full faith and credit of
the United States or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the
United States where the timely payment or payments thereunder are
unconditionally guaranteed as a full faith and credit obligation
by the United States or (b) depository receipts issued by a bank
(as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of or other amount
with respect to any such Government Obligation held by such
custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific
payment of interest on or principal of or other amount with
respect to the Government Obligation evidenced by such depository
receipt.

"HOLDER" means a Person in whose name a Security is
registered in the Security Register.

"INDENTURE" means this instrument as originally
executed and as it may from time to time be supplemented or
amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this Indenture and any such
supplemental indenture, respectively. The term "Indenture" shall
also include the terms of particular series of Securities
established as contemplated by Section 301.

"INTEREST", when used with respect to a Discount
Security which by its terms bears interest only after Maturity,
means interest payable after Maturity.

"INTEREST PAYMENT DATE", when used with respect to any
Security, means the Stated Maturity of an installment of interest
on such Security.

"MATURITY", when used with respect to any Security,
means the date on which the principal of such Security or an
installment of principal becomes due and payable as provided in
such Security or in this Indenture, whether at the Stated
Maturity, by declaration of acceleration, upon call for
redemption or otherwise.

"NOTICE OF DEFAULT" means a written notice of the kind
specified in Section 801(b).

"OFFICER'S CERTIFICATE" means a certificate signed by
an Authorized Officer of the Company and who shall be acceptable
to the Trustee.

"OPINION OF COUNSEL" means a written opinion of
counsel, who may be counsel for the Company, and who shall be
acceptable to the Trustee.

"OUTSTANDING", when used with respect to Securities,
means, as of the date of determination, all Securities
theretoforeauthenticatedand deliveredunder thisIndenture, except:

(a) Securities theretofore canceled or delivered
to the Trustee for cancellation;

(b) Securities deemed to have been paid for all
purposes of this Indenture in accordance with Section
701 (whether or not the Company's indebtedness in
respect thereof shall be satisfied and discharged for
any other purpose); and

(c) Securities which have been paid pursuant to
Section 306 or in exchange for or in lieu of which
other Securities have been authenticated and delivered
pursuant to this Indenture, other than any such
Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it and
the Company that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid
obligations of the Company;

provided, however, that in determining whether or not the Holders
of the requisite principal amount of the Securities Outstanding
under this Indenture, or the Outstanding Securities of any series
or Tranche, have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or whether or not
a quorum is present at a meeting of Holders of Securities,

(x) Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the
Company or of such other obligor (unless the Company,
such Affiliate or such obligor owns all Securities
Outstanding under this Indenture, or all Outstanding
Securities of each such series and each such Tranche,
as the case may be, determined without regard to this
clause (x)) shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice,
consent or waiver or upon any such determination as to
the presence of a quorum, only Securities which a
Responsible Officer of the Trustee actually knows to be
so owned shall be so disregarded; provided, however,
that Securities so owned which have been pledged in
good faith may be regarded as Outstanding if it is
established to the reasonable satisfaction of the
Trustee that the pledgee, and not the Company, or any
such other obligor or Affiliate of either thereof, has
the right so to act with respect to such Securities and
that the pledgee is not the Company or any other
obligor upon the Securities or any Affiliate of the
Company or of such other obligor;

(y) the principal amount of a Discount Security
that shall be deemed to be Outstanding for such
purposes shall be the amount of the principal thereof
that would be due and payable as of the date of such
determination upon a declaration of acceleration of the
Maturity thereof pursuant to Section 802; and

(z) the principal amount of any Security which is
denominated in a currency other than Dollars or in a
composite currency that shall be deemed to be
Outstanding for such purposes shall be the amount of
Dollars which could have been purchased by the
principal amount (or, in the case of a Discount
Security, the Dollar equivalent on the date determined
as set forth below of the amount determined as provided
in (y) above) of such currency or composite currency
evidenced by such Security, in each such case certified
to the Trustee in an Officer's Certificate, based (i)
on the average of the mean of the buying and selling
spot rates quoted by three banks which are members of
the New York Clearing House Association selected by the
Company in effect at 11:00 A.M. (New York time) in The
City of New York on the fifth Business Day preceding
any such determination or (ii) if on such fifth
Business Day it shall not be possible or practicable to
obtain such quotations from such three banks, on such
other quotations or alternative methods of
determination which shall be as consistent as
practicable with the method set forth in (i) above;

provided, further, that in the case of any Security the principal
of which is payable from time to time without presentment or
surrender, the principal amount of such Security that shall be
deemed to be Outstanding at any time for all purposes of this
Indenture shall be the original principal amount thereof less the
aggregate amount of principal thereof theretofore paid.

"PAYING AGENT" means any Person, including the Company,
authorized by the Company to pay the principal of, and premium,
if any, or interest, if any, on any Securities on behalf of the
Company.

"PERIODIC OFFERING" means an offering of Securities of
a series from time to time any or all of the specific terms of
which Securities, including without limitation the rate or rates
of interest, if any, thereon, the Stated Maturity or Maturities
thereof and the redemption provisions, if any, with respect
thereto, are to be determined by the Company or its agents from
time to time subsequent to the initial request for the
authentication and delivery of such Securities by the Trustee, as
contemplated in Section 301 and clause (b) of Section 303.

"PERSON" means any individual, corporation, partnership,
limited liability company, joint venture, trust or unincorporated
organization or any government or any political subdivision,
instrumentality or agency thereof.

"PLACE OF PAYMENT", when used with respect to the
Securities of any series, or Tranche thereof, means the place or
places, specified as contemplated by Section 301, at which,
subject to Section 602, principal of and premium, if any, and
interest, if any, on the Securities of such series or Tranche are
payable.

"PREDECESSOR SECURITY" of any particular Security means
every previous Security evidencing all or a portion of the same
debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and
delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or
stolen Security.

"REDEMPTION DATE", when used with respect to any
Security to be redeemed, means the date fixed for such redemption
by or pursuant to this Indenture.

"REDEMPTION PRICE", when used with respect to any
Security to be redeemed, means the price at which it is to be
redeemed pursuant to this Indenture.

"REGULAR RECORD DATE" for the interest payable on any
Interest Payment Date on the Securities of any series means the
date specified for that purpose as contemplated by Section 301.

"REQUIRED CURRENCY" has the meaning specified in
Section 311.

"RESPONSIBLE OFFICER", when used with respect to the
Trustee, means any officer within the Corporate Trust Office of
the Trustee including, without limitation, any vice president,
any assistant vice president, any assistant secretary, any
assistant treasurer, any corporate trust officer, or any other
officer of the Trustee customarily performing functions similar
to those performed by any of the above designated officers also
means, with respect to a particular corporate trust matter, any
other officer of the Trustee to whom such matter is referred
because of his knowledge of and familiarity with the particular
subject.

"SECURITIES" has the meaning stated in the first
recital of this Indenture and more particularly means any
securities authenticated and delivered under this Indenture.

"SECURITIES ACT" means the Securities Act of 1933, and
the rules and regulations promulgated thereunder, as amended from
time to time.

"SECURITY REGISTER" and "SECURITY REGISTRAR" have the
respective meanings specified in Section 305.

"SPECIAL RECORD DATE" for the payment of any Defaulted
Interest on the Securities of any series means a date fixed by
the Trustee pursuant to Section 307.

"STATED INTEREST RATE" means a rate (whether fixed or
variable) at which an obligation by its terms is stated to bear
simple interest. Any calculation or other determination to be
made under this Indenture by reference to the Stated Interest
Rate on a Security shall be made without regard to the effective
interest cost to the Company of such Security and without regard
to the Stated Interest Rate on, or the effective cost to the
Company of, any other indebtedness the Company's obligations in
respect of which are evidenced or secured in whole or in part by
such Security.

"STATED MATURITY", when used with respect to any
Security or any obligation or any installment of principal
thereof or interest thereon, means the date on which the
principal of such obligation or such installment of principal or
interest is stated to be due and payable (without regard to any
provisions for redemption, prepayment, acceleration, purchase or
extension).

"TRANCHE" means a group of Securities which (a) are of
the same series and (b) have identical terms except as to
principal amount and/or date of issuance.

"TRUSTEE" means the Person named as the "Trustee" in
the first paragraph of this Indenture until a successor Trustee
shall have become such with respect to one or more series of
Securities pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean or include each
Person who is then a Trustee hereunder, and if at any time there
is more than one such Person, "Trustee" as used with respect to
the Securities of any series shall mean the Trustee with respect
to Securities of that series.

"TRUST INDENTURE ACT" means, as of any time, the Trust
Indenture Act of 1939 as in force at such time.

"UNITED STATES" means the United States of America, its
territories, its possessions and other areas subject to its
jurisdiction.

SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.

Except as otherwise expressly provided in this
Indenture, upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Trustee an Officer's Certificate
stating that all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied
with and an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or
request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating
to such particular application or request, no additional
certificate or opinion need be furnished.

Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall
include:

(a) a statement that each individual signing such
certificate or opinion has read such covenant or
condition and the definitions herein relating thereto;

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

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

(d) a statement as to whether, in the opinion of
each such individual, such condition or covenant has
been complied with.

SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.

(a) Any Officer's Certificate may be based (without
further examination or investigation), insofar as it relates to
or is dependent upon legal matters, upon an opinion of, or
representations by, counsel, unless, in any case, such officer
has actual knowledge that the certificate or opinion or
representations with respect to the matters upon which such
Officer's Certificate may be based as aforesaid are erroneous.

Any Opinion of Counsel may be based (without further
examination or investigation), insofar as it relates to or is
dependent upon factual matters, information with respect to which
is in the possession of the Company, upon a certificate of, or
representations by, an officer or officers of the Company unless
such counsel has actual knowledge that the certificate or opinion
or representations with respect to the matters upon which his
opinion may be based as aforesaid are erroneous. In addition,
any Opinion of Counsel may be based (without further examination
or investigation), insofar as it relates to or is dependent upon
matters covered in an Opinion of Counsel rendered by other
counsel, upon such other Opinion of Counsel, unless such counsel
has actual knowledge that the Opinion of Counsel rendered by such
other counsel with respect to the matters upon which his Opinion
of Counsel may be based as aforesaid are erroneous. If, in order
to render any Opinion of Counsel provided for herein, the signer
thereof shall deem it necessary that additional facts or matters
be stated in any Officer's Certificate provided for herein, then
such certificate may state all such additional facts or matters
as the signer of such Opinion of Counsel may request.

(b) In any case where several matters are required to
be certified by, or covered by an opinion of, any specified
Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some
matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such
matters in one or several documents. Where (i) any Person is
required to make, give or execute two or more applications,
requests, consents, certificates, statements, opinions or other
instruments under this Indenture, or (ii) two or more Persons are
each required to make, give or execute any such application,
request, consent, certificate, statement, opinion or other
instrument, any such applications, requests, consents,
certificates, statements, opinions or other instruments may, but
need not, be consolidated and form one instrument.

(c) Whenever, subsequent to the receipt by the Trustee
of any Board Resolution, Officer's Certificate, Opinion of
Counsel or other document or instrument, a clerical,
typographical or other inadvertent or unintentional error or
omission shall be discovered therein, a new document or
instrument may be substituted therefor in corrected form with the
same force and effect as if originally filed in the corrected
form and, irrespective of the date or dates of the actual
execution and/or delivery thereof, such substitute document or
instrument shall be deemed to have been executed and/or delivered
as of the date or dates required with respect to the document or
instrument for which it is substituted. Anything in this
Indenture to the contrary notwithstanding, if any such corrective
document or instrument indicates that action has been taken by or
at the request of the Company which could not have been taken had
the original document or instrument not contained such error or
omission, the action so taken shall not be invalidated or
otherwise rendered ineffective but shall be and remain in full
force and effect, except to the extent that such action was a
result of willful misconduct or bad faith. Without limiting the
generality of the foregoing, any Securities issued under the
authority of such defective document or instrument shall
nevertheless be the valid obligations of the Company entitled to
the benefits of this Indenture equally and ratably with all other
Outstanding Securities, except as aforesaid.

SECTION 104. ACTS OF HOLDERS.

(a) Any request, demand, authorization, direction,
notice, consent, election, waiver or other action provided by
this Indenture to be made, given or taken by Holders may be
embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing or, alternatively, may be
embodied in and evidenced by the record of Holders voting in
favor thereof, either in person or by proxies duly appointed in
writing, at any meeting of Holders duly called and held in
accordance with the provisions of Article Thirteen, or a
combination of such instruments and any such record. Except as
herein otherwise expressly provided, such action shall become
effective when such instrument or instruments or record or both
are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments and any
such record (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments and so voting at
any such meeting. Proof of execution of any such instrument or
of a writing appointing any such agent, or of the holding by any
Person of a Security, shall be sufficient for any purpose of this
Indenture and (subject to Section 901) conclusive in favor of the
Trustee and the Company, if made in the manner provided in this
Section. The record of any meeting of Holders shall be proved in
the manner provided in Section 1306.

(b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the affidavit
of a witness of such execution or by a certificate of a notary
public or other officer authorized by law to take acknowledgments
of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof or may be
proved in any other manner which the Trustee and the Company deem
sufficient. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his
authority.

(c) The ownership, principal amount (except as
otherwise contemplated in clause (y) of the first proviso to the
definition of Outstanding) and serial numbers of Securities held
by any Person, and the date of holding the same, shall be proved
by the Security Register.

(d) Any request, demand, authorization, direction,
notice, consent, election, waiver or other Act of a Holder shall
bind every future Holder of the same Security and the Holder of
every Security issued upon the registration of transfer thereof
or in exchange therefor or in lieu thereof in respect of anything
done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such
action is made upon such Security.

(e) Until such time as written instruments shall have
been delivered to the Trustee with respect to the requisite
percentage of principal amount of Securities for the action
contemplated by such instruments, any such instrument executed
and delivered by or on behalf of a Holder may be revoked with
respect to any or all of such Securities by written notice by
such Holder or any subsequent Holder, proven in the manner in
which such instrument was proven.

(f) Securities of any series, or any Tranche thereof,
authenticated and delivered after any Act of Holders may, and
shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any action taken by such Act of
Holders. If the Company shall so determine, new Securities of
any series, or any Tranche thereof, so modified as to conform, in
the opinion of the Trustee and the Company, to such action may be
prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities
of such series or Tranche.

(g) The Company may, at its option, by Company Order
fix in advance a record date for the determination of Holders
entitled to give any request, demand, authorization, direction,
notice, consent, waiver or other Act solicited by the Company,
but the Company shall not have any obligation to do so; provided,
however, that the Company may not fix a record date for the
giving or making of any notice, declaration, request or direction
referred to in the next sentence. In addition, the Trustee may,
at its option, fix in advance a record date for the determination
of Holders entitled to join in the giving or making of any Notice
of Default, any declaration of acceleration referred to in
Section 802, any request to institute proceedings referred to in
Section 807 or any direction referred to in Section 812. If any
such record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act, or such notice,
declaration, request or direction, may be given before or after
such record date, but only the Holders of record at the close of
business on the record date shall be deemed to be Holders for the
purposes of determining (i) whether Holders of the requisite
proportion of the Outstanding Securities have authorized or
agreed or consented to such Act (and for that purpose the
Outstanding Securities shall be computed as of the record date)
and/or (ii) which Holders may revoke any such Act
(notwithstanding subsection (e) of this Section ); and any such
Act, given as aforesaid, shall be effective whether or not the
Holders which authorized or agreed or consented to such Act
remain Holders after such record date and whether or not the
Securities held by such Holders remain Outstanding after such
record date.

SECTION 105. NOTICES, ETC. TO TRUSTEE OR COMPANY.

Any request, demand, authorization, direction, notice,
consent, election, waiver or Act of Holders or other document
provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with, the Trustee by any Holder or by the
Company, or the Company by the Trustee or by any Holder, shall be
sufficient for every purpose hereunder (unless otherwise
expressly provided herein) if in writing and delivered personally
to an officer or other responsible employee of the addressee, or
transmitted by facsimile transmission, or transmitted by
registered mail, charges prepaid, to the applicable address set
forth for such party below or to such other address as any party
hereto may from time to time designate:

If to the Trustee, to:

The Bank of New York
101 Barclay Street
New York, New York 10286

Attention: Corporate Trust Administration
Telephone: (212) 815-5736
Telecopy: (212) 815-7157

If to the Company, to:

Grand Court Lifestyles, Inc.
One Executive Drive
Fort Lee, New Jersey 07024

Attention: Secretary
Telephone: (201) 947-7322
Telecopy: (201) 947-6663

Any communication contemplated herein shall be deemed
to have been made, given, furnished and filed if personally
delivered, on the date of delivery, if transmitted by facsimile
transmission, on the date of transmission, and if transmitted by
registered mail, on the date of receipt.

SECTION 106. NOTICE TO HOLDERS OF SECURITIES; WAIVER.

Except as otherwise expressly provided herein, where
this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given, and shall be deemed given, to
Holders if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at the address of such Holder
as it appears in the Security Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the
giving of such notice.

In case by reason of the suspension of regular mail
service or by reason of any other cause it shall be impracticable
to give such notice to Holders by mail, then such notification as
shall be made with the approval of the Trustee shall constitute a
sufficient notification for every purpose hereunder. In any case
where notice to Holders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice
with respect to other Holders.

Any notice required by this Indenture may be waived in
writing by the Person entitled to receive such notice, either
before or after the event otherwise to be specified therein, and
such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver.

SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.

If any provision of this Indenture limits, qualifies or
conflicts with another provision hereof which is required or
deemed to be included in this Indenture by, or is otherwise
governed by, any provision of the Trust Indenture Act, such other
provision shall control; and if any provision hereof otherwise
conflicts with the Trust Indenture Act, the Trust Indenture Act
shall control.

SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.

The Article and Section headings in this Indenture and
the Table of Contents are for convenience only and shall not
affect the construction hereof.

SECTION 109. SUCCESSORS AND ASSIGNS.

All covenants and agreements in this Indenture by the
Company shall bind its successors and assigns, whether so
expressed or not.

SECTION 110. SEPARABILITY CLAUSE.

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

SECTION 111. BENEFITS OF INDENTURE.

Nothing in this Indenture or the Securities, express or
implied, shall give to any Person, other than the parties hereto,
their successors hereunder and the Holders, any benefit or any
legal or equitable right, remedy or claim under this Indenture.

SECTION 112. GOVERNING LAW.

This Indenture and the Securities shall be governed by
and construed in accordance with the law of the State of New York
(including without limitation Section 5-1401 of the New York
General Obligations Law or any successor to such statute), except
to the extent that the Trust Indenture Act shall be applicable.

SECTION 113. LEGAL HOLIDAYS.

In any case where any Interest Payment Date, Redemption
Date or Stated Maturity of any Security shall not be a Business
Day at any Place of Payment, then (notwithstanding any other
provision of this Indenture or of the Securities other than a
provision in Securities of any series, or any Tranche thereof, or
in the indenture supplemental hereto, Board Resolution or
Officer's Certificate which establishes the terms of the
Securities of such series or Tranche, which specifically states
that such provision shall apply in lieu of this Section) payment
of interest or principal and premium, if any, need not be made at
such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same
force and effect as if made on the Interest Payment Date,
Redemption Date, or Stated Maturity, and, if such payment is made
or duly provided for on such Business Day, no interest shall
accrue on the amount so payable for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be, to such Business Day.

ARTICLE TWO

SECURITY FORMS

SECTION 201. FORMS GENERALLY.

The definitive Securities of each series shall be in
substantially the form or forms thereof established in the
indenture supplemental hereto establishing such series or in a
Board Resolution establishing such series, or in an Officer's
Certificate pursuant to such a supplemental indenture or Board
Resolution, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be
determined by the officers executing such Securities, as
evidenced by their execution thereof. If the form or forms of
Securities of any series are established in a Board Resolution or
in an Officer's Certificate pursuant to a Board Resolution, such
Board Resolution and Officer's Certificate, if any, shall be
delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication
and delivery of such Securities.

Unless otherwise specified as contemplated by Section
301, the Securities of each series shall be issuable in
registered form without coupons. The definitive Securities shall
be produced in such manner as shall be determined by the officers
executing such Securities, as evidenced by their execution
thereof.

SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.

The Trustee's certificate of authentication shall be in
substantially the form set forth below:

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

THE BANK OF NEW YORK,
as Trustee

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

ARTICLE THREE

THE SECURITIES

SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.

The aggregate principal amount of Securities which may
be authenticated and delivered under this Indenture is unlimited.

The Securities may be issued in one or more series.
Subject to the last paragraph of this Section, prior to the
authentication and delivery of Securities of any series there
shall be established by specification in a supplemental indenture
or in a Board Resolution of the Company or in an Officer's
Certificate of the Company (which need not, comply with Section
102) pursuant to a supplemental indenture or a Board Resolution:

(a) the title of the Securities of such series
(which shall distinguish the Securities of such series
from Securities of all other series);

(b) any limit upon the aggregate principal amount
of the Securities of such series which may be
authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in
lieu of, other Securities of such series pursuant to
Section 304, 305, 306, 406 or 1206 and except for any
Securities which, pursuant to Section 303, are deemed
never to have been authenticated and delivered
hereunder);

(c) the Person or Persons (without specific
identification) to whom any interest on Securities of
such series, or any Tranche thereof, shall be payable,
if other than the Person in whose name that Security
(or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for
such interest;

(d) the date or dates on which the principal of
the Securities of such series or any Tranche thereof,
is payable or any formulary or other method or other
means by which such date or dates shall be determined,
by reference to an index or other fact or event
ascertainable outside of this Indenture or otherwise
(without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension);

(e) the rate or rates at which the Securities of
such series, or any Tranche thereof, shall bear
interest, if any (including the rate or rates at which
overdue principal shall bear interest after Maturity if
different from the rate or rates at which such
Securities shall bear interest prior to Maturity, and,
if applicable, the rate or rates at which overdue
premium or interest shall bear interest, if any), or
any formulary or other method or other means by which
such rate or rates shall be determined by reference to
an index or other fact or event ascertainable outside
of this Indenture or otherwise, the date or dates from
which such interest shall accrue; the Interest Payment
Dates and the Regular Record Dates, if any, for the
interest payable on such Securities on any Interest
Payment Date; and the basis of computation of interest,
if other than as provided in Section 310;

(f) the place or places at which or methods (if
other than as provided elsewhere in this Indenture) by
which (i) the principal of and premium, if any, and
interest, if any, on Securities of such series, or any
Tranche thereof, shall be payable, (ii) registration of
transfer of Securities of such series, or any Tranche
thereof, may be effected, (iii) exchanges of Securities
of such series, or any Tranche thereof, may be effected
and (iv) notices and demands to or upon the Company in
respect of the Securities of such series, or any
Tranche thereof, and this Indenture may be served; the
Security Registrar and any Paying Agent or Agents for
such series or Tranche; and if such is the case, that
the principal of such Securities shall be payable
without presentment or surrender thereof;

(g) the period or periods within which, or the
date or dates on which, the price or prices at which
and the terms and conditions upon which the Securities
of such series, or any Tranche thereof, may be
redeemed, in whole or in part, at the option of the
Company and any restrictions on such redemptions;

(h) the obligation, if any, of the Company to
redeem or purchase or repay the Securities of such
series, or any Tranche thereof, pursuant to any sinking
fund or other mandatory redemption provisions or at the
option of a Holder thereof and the period or periods
within which or the date or dates on which, the price
or prices at which and the terms and conditions upon
which such Securities shall be redeemed or purchased or
repaid, in whole or in part, pursuant to such
obligation and applicable exceptions to the
requirements of Section 404 in the case of mandatory
redemption or redemption or repayment at the option of
the Holder;

(i) the denominations in which Securities of such
series, or any Tranche thereof, shall be issuable if
other than denominations of $1,000 and any integral
multiple thereof;

(j) if the principal of or premium, if any, or
interest, if any, on the Securities of such series, or
any Tranche thereof, are to be payable, at the election
of the Company or a Holder thereof, in a coin or
currency other than that in which the Securities are
stated to be payable, the period or periods within
which, and the terms and conditions upon which, such
election may be made and the manner in which the amount
of such coin or currency payable is to be determined;

(k) the currency or currencies, including
composite currencies, in which payment of the principal
of and premium, if any, and interest, if any, on the
Securities of such series, or any Tranche thereof,
shall be payable (if other than Dollars) and the manner
in which the equivalent of the principal amount thereof
in Dollars is to be determined for any purpose,
including for the purpose of determining the principal
amount deemed to be Outstanding at any time;

(l) if the principal of or premium, if any, or
interest on the Securities of such series, or any
Tranche thereof, are to be payable, or are to be
payable at the election of the Company or a Holder
thereof, in securities or other property, the type and
amount of such securities or other property, or the
formulary or other method or other means by which such
amount shall be determined, and the period or periods
within which, and the terms and conditions upon which,
any such election may be made;

(m) if the amount payable in respect of principal
of or premium, if any, or interest, if any, on the
Securities of such series, or any Tranche thereof, may
be determined with reference to an index or other fact
or event ascertainable outside this Indenture, the
manner in which such amounts shall be determined to the
extent not established pursuant to clause (e) of this
paragraph;

(n) if other than the entire principal amount
thereof, the portion of the principal amount of
Securities of such series, or any Tranche thereof,
which shall be payable upon declaration of acceleration
of the Maturity thereof pursuant to Section 802;

(o) any Events of Default, in addition to those
specified in Section 801, or any exceptions to those
specified in Section 801, with respect to the
Securities of such series, and any covenants of the
Company for the benefit of the Holders of the
Securities of such series, or any Tranche thereof, in
addition to those set forth in Article Six, or any
exceptions to those set forth in Article Six;

(p) the terms, if any, pursuant to which the
Securities of such series, or any Tranche thereof, may
be converted into or exchanged for shares of capital
stock or other securities of the Company or any other
Person;

(q) the obligations or instruments, if any, which
shall be considered to be Eligible Obligations in
respect of the Securities of such series, or any
Tranche thereof, denominated in a currency other than
Dollars or in a composite currency, and any provisions
for satisfaction and discharge of Securities of any
series, in addition to those set forth in Section 701,
or any exceptions to those set forth in Section 701;

(r) if the Securities of such series, or any
Tranche thereof, are to be issued in global form, (i)
any limitations on the rights of the Holder or Holders
of such Securities to transfer or exchange the same or
to obtain the registration of transfer thereof, (ii)
any limitations on the rights of the Holder or Holders
thereof to obtain certificates therefor in definitive
form in lieu of global form and (iii) any other matters
incidental to such Securities;

(s) if the Securities of such series, or any
Tranche thereof, are to be issuable as bearer
securities, any and all matters incidental thereto
which are not specifically addressed in a supplemental
indenture as contemplated by clause (g) of Section
1201;

(t) to the extent not established pursuant to
clause (r) of this paragraph, any limitations on the
rights of the Holders of the Securities of such Series,
or any Tranche thereof, to transfer or exchange such
Securities or to obtain the registration of transfer
thereof; and if a service charge will be made for the
registration of transfer or exchange of Securities of
such series, or any Tranche thereof, the amount or
terms thereof;

(u) any exceptions to Section 113, or variation
in the definition of Business Day, with respect to the
Securities of such series, or any Tranche thereof; and

(v) any other terms of the Securities of such
series, or any Tranche thereof.

With respect to Securities of a series subject to a
Periodic Offering, the indenture supplemental hereto or the Board
Resolution which establishes such series, or the Officer's
Certificate pursuant to such supplemental indenture or Board
Resolution, as the case may be, may provide general terms or
parameters for Securities of such series and provide either that
the specific terms of Securities of such series, or any Tranche
thereof, shall be specified in a Company Order or that such terms
shall be determined by the Company or its agents in accordance
with procedures specified in a Company Order as contemplated in
clause (b) of Section 303.

Unless otherwise provided with respect to a series of
Securities as contemplated in Section 301(b), the aggregate
principal amount of a series of Securities may be increased and
additional Securities of such series may be issued up to the
maximum aggregate principal amount authorized with respect to
such series as increased.

SECTION 302. DENOMINATIONS.

Unless otherwise provided as contemplated by Section
301 with respect to any series of Securities, or any Tranche
thereof, the Securities of each series shall be issuable in
denominations of $1,000 and any integral multiple thereof.

SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

Unless otherwise provided as contemplated by Section
301 with respect to any series of Securities or any Tranche
thereof, the Securities shall be executed on behalf of the
Company by an Authorized Officer of the Company, and may have the
corporate seal of the Company affixed thereto or reproduced
thereon attested by its Secretary, one of its Assistant
Secretaries or any other Authorized Officer. The signature of
any or all of these officers on the Securities may be manual or
facsimile.

A Security bearing the manual or facsimile signature of
an individual who was at the time of execution an Authorized
Officer of the Company shall bind the Company, notwithstanding
that any such individual has ceased to be an Authorized Officer
prior to the authentication and delivery of the Security or did
not hold such office at the date of such Security.

The Trustee shall authenticate and deliver Securities
of a series for original issue, at one time or from time to time
in accordance with the Company Order referred to below, upon
receipt by the Trustee of:

(a) the instrument or instruments establishing the
form or forms and terms of the Securities of such series, as
provided in Sections 201 and 301;

(b) a Company Order requesting the authentication and
delivery of such Securities and, to the extent that the
terms of such Securities shall not have been established in
an indenture supplemental hereto or in a Board Resolution,
or in an Officer's Certificate pursuant to a supplemental
indenture or Board Resolution, all as contemplated by
Sections 201 and 301, either (i) establishing such terms or
(ii) in the case of Securities of a series subject to a
Periodic Offering, specifying procedures, acceptable to the
Trustee, by which such terms are to be established (which
procedures may provide, to the extent acceptable to the
Trustee, for authentication and delivery pursuant to oral or
electronic instructions from the Company or any agent or
agents thereof, which oral instructions are to be promptly
confirmed electronically or in writing), in either case in
accordance with the instrument or instruments delivered
pursuant to clause (a) above;

(d) an Opinion of Counsel to the effect that:

(i) (A) the forms of such Securities have been duly
authorized by the Company and (B) the forms of the
Securities have been established in conformity with the
provisions of this Indenture;

(ii) (A) the terms of such Securities have been duly
authorized by the Company and (B) the terms of the
Securities have been established in conformity with the
provisions of this Indenture; and

(iii) such Securities, when authenticated and
delivered by the Trustee and issued and delivered by the
Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will have been duly
issued under this Indenture and will constitute valid and
legally binding obligations of the Company, entitled to the
benefits provided by this Indenture, and enforceable in
accordance with their terms, subject, as to enforcement, to
laws relating to or affecting generally the enforcement of
creditors' rights, including, without limitation, bankruptcy
and insolvency laws and to general principles of equity
(regardless of whether such enforceability is considered in
a proceeding in equity as at law);

provided, however, that, with respect to Securities of a series
subject to a Periodic Offering, the Trustee shall be entitled to
receive such Opinion of Counsel only once at or prior to the time
of the first authentication and delivery of Securities of such
series, and that in lieu of the opinions described in clauses
(ii) and (iii) above such Opinion of Counsel may, alternatively,
state, respectively,

(x) that, when the terms of such Securities shall have
been established pursuant to a Company Order or Orders or
pursuant to such procedures as may be specified from time to
time by a Company Order or Orders all as contemplated by and
in accordance with the instrument or instruments delivered
pursuant to clause (a) above, such terms will have been duly
authorized by the Company, respectively, and will have been
established in conformity with the provisions of this
Indenture; and

(y) that such Securities, when (1) executed by the
Company, (2) authenticated and delivered by the Trustee in
accordance with this Indenture, (3) issued and delivered by
the Company and (4) paid for, all as contemplated by and in
accordance with the aforesaid Company Order or Orders or
specified procedures, as the case may be, will have been
duly issued under this Indenture and will constitute valid
and legally binding obligations of the Company, entitled to
the benefits provided by the Indenture, and enforceable in
accordance with their terms, subject, as to enforcement, to
laws relating to or affecting generally the enforcement of
creditors' rights, including, without limitation, bankruptcy
and insolvency laws and to general principles of equity
(regardless of whether such enforceability is considered in
a proceeding in equity or at law).

With respect to Securities of a series subject to a
Periodic Offering, the Trustee may conclusively rely, as to the
authorization by the Company of any of such Securities, the forms
and terms thereof and the legality, validity, binding effect and
enforceability thereof, upon the Opinion of Counsel and other
documents delivered pursuant to Sections 201 and 301 and this
Section, as applicable, at or prior to the time of the first
authentication of Securities of such series, unless and until
such opinion or other documents have been superseded or revoked
or expire by their terms. In connection with the authentication
and delivery of Securities of a series, pursuant to a Periodic
Offering, the Trustee shall be entitled to assume that the
Company's instructions to authenticate and deliver such
Securities do not violate any applicable law or any applicable
rule, regulation or order of any governmental agency or
commission having jurisdiction over the Company.

If the forms or terms of the Securities of any series
have been established by or pursuant to a Board Resolution or an
Officer's Certificate as permitted by Sections 201 or 301, the
Trustee shall not be required to authenticate such Securities if
the issuance of such Securities pursuant to this Indenture will
affect the Trustee's own rights, duties or immunities under the
Securities and this Indenture or otherwise in a manner which is
not reasonably acceptable to the Trustee.

Except as otherwise specified as contemplated by
Section 301 with respect to any series of securities, or any
Tranche thereof, each Security shall each be dated the date of
its authentication.

Except as otherwise specified as contemplated by
Section 301 with respect to any series of Securities, or any
Tranche thereof, no Security shall be entitled to any benefit
under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of
authentication substantially in the form provided for herein
executed by the Trustee or its agent by manual signature of an
authorized signatory thereof, and such certificate upon any
Security shall be conclusive evidence, and the only evidence,
that such Security has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture.
Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder to the Company, or any
Person acting on its behalf, but shall never have been issued and
sold by the Company, and the Company shall deliver such Security
to the Trustee for cancellation as provided in Section 309
together with a written statement (which need not comply with
Section 102 and need not be accompanied by an Opinion of Counsel)
stating that such Security has never been issued and sold by the
Company, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits hereof.

SECTION 304. TEMPORARY SECURITIES.

Pending the preparation of definitive Securities of any
series, or any Tranche thereof, the Company may execute, and upon
Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued, with such
appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities;
provided, however, that temporary Securities need not recite
specific redemption, sinking fund, conversion or exchange
provisions.

If temporary Securities of any series or Tranche are
issued, the Company shall cause definitive Securities of such
series or Tranche to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series or
Tranche, the temporary Securities of such series or Tranche shall
be exchangeable for definitive Securities of such series or
Tranche upon surrender of the temporary Securities of such series
or Tranche at the office or agency of the Company maintained
pursuant to Section 602 in a Place of Payment for such series or
Tranche, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities of any
series or Tranche, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor definitive
Securities of the same series or Tranche, of authorized
denominations and of like tenor and aggregate principal amount.

Until exchanged in full as hereinabove provided,
temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities of
the same series and Tranche and of like tenor authenticated and
delivered hereunder.

SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

The Company shall cause to be kept in one of the
offices or agencies designated pursuant to Section 602, with
respect to the Securities of each series or any Tranche thereof,
a register (the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities of such series or
Tranche and the registration of transfer thereof. The Company
shall designate one Person to maintain the Security Register for
the Securities of each series, and such Person is referred to
herein, with respect to such series, as the "Security Registrar."
Anything herein to the contrary notwithstanding, the Company may
designate one or more of its offices or an office of any
Affiliate as an office in which a register with respect to the
Securities of one or more series, or any Tranche or Tranches
thereof, shall be maintained, and the Company may designate
itself or any Affiliate as the Security Registrar with respect to
one or more of such series. The Security Register shall be open
for inspection by the Trustee and the Company at all reasonable
times.

Except as otherwise specified as contemplated by
Section 301 with respect to the Securities of any series, or any
Tranche thereof, upon surrender for registration of transfer of
any Security of such series or Tranche at the office or agency of
the Company maintained pursuant to Section 602 in a Place of
Payment for such series or Tranche, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new
Securities of the same series and Tranche, of authorized
denominations and of like tenor and aggregate principal amount.

Except as otherwise specified as contemplated by
Section 301 with respect to the Securities of any series, or any
Tranche thereof, any Security of such series or Tranche may be
exchanged at the option of the Holder for one or more new
Securities of the same series and Tranche, of authorized
denominations and of like tenor and aggregate principal amount,
upon surrender of the Securities to be exchanged at any such
office or agency. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making
the exchange is entitled to receive.

All Securities delivered upon any registration of
transfer or exchange of Securities shall be valid obligations of
the Company evidencing the same obligation, and entitled to the
same benefits under this Indenture, as the Securities surrendered
upon such registration of transfer or exchange.

Every Security presented or surrendered for
registration of transfer or for exchange shall (if so required by
the Company or the Trustee) be duly endorsed or shall be
accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee, duly executed by the
Holder thereof or his attorney duly authorized in writing.

Unless otherwise specified as contemplated by Section
301, with respect to Securities of any series, or any Tranche
thereof, no service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 406 or 1206 not involving any
transfer.

The Company shall not be required to execute or to
provide for the registration of transfer of or the exchange of
(a) Securities of any series, or any Tranche thereof, during a
period of 15 days immediately preceding the date notice is to be
given identifying the serial numbers of the Securities of such
series or Tranche called for redemption or (b) any Security so
selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.

SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.

If any mutilated Security is surrendered to the
Trustee, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of
the same series and Tranche, and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.

If there shall be delivered to the Company and the
Trustee (a) evidence to their satisfaction of the ownership of
and the destruction, loss or theft of any Security and (b) such
security or indemnity as may be reasonably required by them to
save each of them and any agent of any of them harmless, then, in
the absence of notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company
shall execute and, upon its written request, the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security, a new Security of the same series and Tranche,
and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.

Notwithstanding the foregoing, in case any such
mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.

Upon the issuance of any new Security under this
Section, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed
in relation thereto and any other reasonable expenses (including
the fees and expenses of the Trustee) in connection therewith.

Every new Security of any series issued pursuant to
this Section in lieu of any destroyed, lost or stolen Security
shall constitute an original additional contractual obligation of
the Company whether or not the destroyed, lost or stolen Security
shall be at any time enforceable by anyone other than the Holder
of such new security, and any such new Security shall be entitled
to all the benefits of this Indenture equally and proportionately
with any and all other Securities of such series duly issued
hereunder.

The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.

SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.

Unless otherwise provided as contemplated by Section
301 with respect to the Securities of any series, or any Tranche
thereof, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Security (or
one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest.

Any interest on any Security of any series which is
payable, but is not punctually paid or duly provided for, on any
Interest Payment Date (herein called "Defaulted Interest") shall
forthwith cease to be payable to the Holder on the related
Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in clause (a) or (b) below:

(a) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the
Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on a
date (a "Special Record Date") for the payment of such
Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each
Security of such series and the date of the proposed
payment, and at the same time the Company, shall deposit
with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and
not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company,
shall promptly cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder of
Securities of such series at the address of such Holder as
it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities
of such series (or their respective Predecessor Securities)
are registered at the close of business on such Special
Record Date.

(b) The Company may make payment of any Defaulted
Interest on the Securities of any series in any other lawful
manner not inconsistent with the requirements of any
securities exchange on which such Securities may be listed,
and upon such notice as may be required by such exchange,
if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.

Subject to the foregoing provisions of this Section and
Section 305, each Security delivered under this Indenture upon
registration of transfer of or in exchange for or in lieu of any
other Security shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.

SECTION 308. PERSONS DEEMED OWNERS.

Prior to due presentment of a Security for registration
of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name such
Security is registered as the absolute owner of such Security for
the purpose of receiving payment of principal of and premium, if
any, and (subject to Sections 305 and 307) interest, if any, on
such Security and for all other purposes whatsoever, whether or
not such Security be overdue, and none of the Company, the
Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.

SECTION 309. CANCELLATION.

All Securities surrendered for payment, redemption,
registration of transfer or exchange or for credit against any
sinking fund payment shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and, if not
theretofore canceled, shall be promptly canceled by the Trustee.
The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any
manner whatsoever or which the Company shall not have issued and
sold, and all Securities so delivered shall be promptly canceled
by the Trustee. No Securities shall be authenticated in lieu of
or in exchange for any Securities canceled as provided in this
Section, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee shall be disposed of in
accordance with the Trustee's customary procedures, and the
Trustee shall deliver, monthly, to the Company a statement of
transactions with respect to the Securities.

SECTION 310. COMPUTATION OF INTEREST.

Except as otherwise specified as contemplated by
Section 301 for Securities of any series, or Tranche thereof,
interest on the Securities of each series shall be computed on
the basis of a 360-day year consisting of twelve 30-day months,
and with respect to any period less than a full calendar month,
on the basis of the actual number of days elapsed during such
period (also based on a 30-day month).

SECTION 311. PAYMENT TO BE IN PROPER CURRENCY.

In the case of any Security denominated in any currency
other than Dollars or in a composite currency (the "Required
Currency"), except as otherwise specified with respect to such
Security as contemplated by Section 301, the obligation of the
Company to make any payment of the principal thereof, or the
premium or interest thereon, shall not be discharged or satisfied
by any tender by the Company, or recovery by the Trustee, in any
currency other than the Required Currency, except to the extent
that such tender or recovery shall result in the Trustee timely
holding the full amount of the Required Currency then due and
payable. If any such tender or recovery is in a currency other
than the Required Currency, the Trustee may take such actions as
it considers appropriate to exchange such currency for the
Required Currency. The costs and risks of any such exchange,
including without limitation the risks of delay and exchange rate
fluctuation, shall be borne by the Company, the Company shall
remain fully liable for any shortfall or delinquency in the full
amount of Required Currency then due and payable, and in no
circumstances shall the Trustee be liable therefor except in the
case of its negligence or willful misconduct. The Company hereby
waive any defense of payment based upon any such tender or
recovery which is not in the Required Currency, or which, when
exchanged for the Required Currency by the Trustee, is less than
the full amount of Required Currency then due and payable.

SECTION 312. CUSIP NUMBERS.

The Company in issuing the Securities may use "CUSIP"
numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided that any such notice may state that no
representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice
of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of
such numbers. The Company will promptly notify the Trustee of
any change in the "CUSIP" numbers.

ARTICLE FOUR

REDEMPTION OF SECURITIES

SECTION 401. APPLICABILITY OF ARTICLE.

Securities of any series, or any Tranche thereof, which
are redeemable before their Stated Maturity shall be redeemable
in accordance with their terms and (except as otherwise specified
as contemplated by Section 301 for Securities of such series or
Tranche) in accordance with this Article.

SECTION 402. ELECTION TO REDEEM; NOTICE TO TRUSTEE.

The election of the Company to redeem any Securities
shall be evidenced by a Board Resolution or an Officer's
Certificate. The Company shall, at least 35 days prior to the
Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee in
writing of such Redemption Date and of the principal amount of
such Securities to be redeemed. In the case of any redemption of
Securities (a) prior to the expiration of any restriction on such
redemption provided in the terms of such Securities or elsewhere
in this Indenture or (b) pursuant to an election of the Company
which is subject to a condition specified in the terms of such
Securities and the Company shall furnish the Trustee with an
Officer's Certificate evidencing compliance with such restriction
or condition.

SECTION 403. SELECTION OF SECURITIES TO BE REDEEMED.

If less than all the Securities of any series, or any
Tranche thereof, are to be redeemed, the particular Securities to
be redeemed shall be selected by the Trustee from the Outstanding
Securities of such series or Tranche not previously called for
redemption, by such method as shall be provided for such
particular series or Tranche, or in the absence of any such
provision, by such method of random selection as the Trustee
shall deem fair and appropriate and which may, in any case,
provide for the selection for redemption of portions (equal to
any authorized denomination for Securities of such series or
Tranche) of the principal amount of Securities of such series or
Tranche of a denomination larger than the minimum authorized
denomination for Securities of such series or Tranche; provided,
however, that if, as indicated in an Officer's Certificate, the
Company shall have offered to purchase all or any principal
amount of the Securities then Outstanding of any series, or any
Tranche thereof, and less than all of such Securities as to which
such offer was made shall have been tendered to the Company for
such purchase, the Trustee, if so directed by Company Order,
shall select for redemption all or any principal amount of such
Securities which have not been so tendered.

The Trustee shall promptly notify the Company in
writing of the Securities selected for redemption and, in the
case of any Securities selected to be redeemed in part, the
principal amount thereof to be redeemed.

For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed
or to be redeemed only in part, to the portion of the principal
amount of such Securities which has been or is to be redeemed.

SECTION 404. NOTICE OF REDEMPTION.

Notice of redemption shall be given in the manner
provided in Section 106 to the Holders of Securities to be
redeemed not less than 20 nor more than 60 days prior to the
Redemption Date.

All notices of redemption shall state:

(a) the Redemption Date,

(b) the Redemption Price,

(c) if less than all the Securities of any series
or Tranche are to be redeemed, the identification of
the particular Securities to be redeemed and the
portion of the principal amount of any Security to be
redeemed in part,

(d) that on the Redemption Date the Redemption
Price, together with accrued interest, if any, to the
Redemption Date, will become due and payable upon each
such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said
date,

(e) the place or places where such Securities are
to be surrendered for payment of the Redemption Price
and accrued interest, if any, unless it shall have been
specified as contemplated by Section 301 with respect
to such Securities that such surrender shall not be
required,

(f) that the redemption is for a sinking or other
fund, if such is the case, and

(g) the CUSIP numbers, if any, of such Securities,
and

(h) such other matters as the Company shall deem
desirable or appropriate.

Unless otherwise specified with respect to any
Securities in accordance with Section 301, with respect to any
notice of redemption of Securities at the election of the
Company, unless, upon the giving of such notice, such Securities
shall be deemed to have been paid in accordance with Section 701,
such notice may state that such redemption shall be conditional
upon the receipt by the Paying Agent or Agents for such
Securities, on or prior to the date fixed for such redemption, of
money sufficient to pay the principal of and premium, if any, and
interest, if any, on such Securities and that if such money shall
not have been so received such notice shall be of no force or
effect and the Company shall not be required to redeem such
Securities. In the event that such notice of redemption contains
such a condition and such money is not so received, the
redemption shall not be made and within a reasonable time
thereafter notice shall be given, in the manner in which the
notice of redemption was given, that such money was not so
received and such redemption was not required to be made.

Notice of redemption of Securities to be redeemed at
the election of the Company, and any notice of non-satisfaction
of a condition for redemption as aforesaid, shall be given by the
Company or, on Company Request, by the Trustee in the name and at
the expense of the Company.

SECTION 405. SECURITIES PAYABLE ON REDEMPTION DATE.

Notice of redemption having been given as aforesaid,
and the conditions, if any, set forth in such notice having been
satisfied, the Securities or portions thereof so to be redeemed
shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date
(unless, in the case of an unconditional notice of redemption,
the Company shall default in the payment of the Redemption Price
and accrued interest, if any) such Securities or portions
thereof, if interest-bearing, shall cease to bear interest. Upon
surrender of any such Security for redemption in accordance with
such notice, such Security or portion thereof shall be paid by
the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided, however, that
no such surrender shall be a condition to such payment if so
specified as contemplated by Section 301 with respect to such
Security; and provided, further, that except as otherwise
specified as contemplated by Section 301 with respect to such
Security, any installment of interest on any Security the Stated
Maturity of which installment is on or prior to the Redemption
Date shall be payable to the Holder of such Security, or one or
more Predecessor Securities, registered as such at the close of
business on the related Regular Record Date according to the
terms of such Security and subject to the provisions of Sections
305 and 307.

SECTION 406. SECURITIES REDEEMED IN PART.

Upon the surrender of any Security which is to be
redeemed only in part at a Place of Payment therefor (with, if
the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or
his attorney duly authorized in writing), the Company shall
execute, and the Trustee shall authenticate and deliver to the
Holder of such Security, without service charge, a new Security
or Securities of the same series and Tranche, of any authorized
denomination requested by such Holder and of like tenor and in
aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so
surrendered.

ARTICLE FIVE

SINKING FUNDS

SECTION 501. APPLICABILITY OF ARTICLE.

The provisions of this Article shall be applicable to
any sinking fund for the retirement of the Securities of any
series, or any Tranche thereof, except as otherwise specified as
contemplated by Section 301 for Securities of such series or
Tranche.

The minimum amount of any sinking fund payment provided
for by the terms of Securities of any series, or any Tranche
thereof, is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount
provided for by the terms of Securities of any series, or any
Tranche thereof, is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any
series, or any Tranche thereof, the cash amount of any sinking
fund payment may be subject to reduction as provided in Section
502. Each sinking fund payment shall be applied to the
redemption of Securities of the series or Tranche in respect of
which it was made as provided for by the terms of such
Securities.

SECTION 502. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.

The Company (a) may deliver to the Trustee Outstanding
Securities (other than any previously called for redemption) of a
series or Tranche in respect of which a mandatory sinking fund
payment is to be made and (b) may apply as a credit Securities of
such series or Tranche which have been redeemed either at the
election of the Company pursuant to the terms of such Securities
or through the application of permitted optional sinking fund
payments pursuant to the terms of such Securities, in each case
in satisfaction of all or any part of such mandatory sinking fund
payment; provided, however, that no Securities shall be applied
in satisfaction of a mandatory sinking fund payment if such
Securities shall have been previously so applied. Securities so
applied shall be received and credited for such purpose by the
Trustee at the Redemption Price specified in such Securities for
redemption through operation of the sinking fund and the amount
of such mandatory sinking fund payment shall be reduced
accordingly.

SECTION 503. REDEMPTION OF SECURITIES FOR SINKING FUND.

Not less than 45 days prior to each sinking fund
payment date for the Securities of any series, or any Tranche
thereof, the Company shall deliver to the Trustee an Officer's
Certificate specifying:

(a) the amount of the next succeeding mandatory
sinking fund payment for such series or Tranche;

(b) the amount, if any, of the optional sinking fund
payment to be made together with such mandatory sinking fund
payment;

(d) the portion, if any, of such aggregate sinking
fund payment which is to be satisfied by the payment of
cash;

(e) the portion, if any, of such aggregate sinking
fund payment which is to be satisfied by delivering and
crediting Securities of such series or Tranche pursuant to
Section 502 and stating the basis for such credit and that
such Securities have not previously been so credited, and
the Company shall also deliver to the Trustee any Securities
to be so delivered. If the Company shall not deliver such
Officer's Certificate, the next succeeding sinking fund
payment for such series or Tranche shall be made entirely in
cash in the amount of the mandatory sinking fund payment.
Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed
upon such sinking fund payment date in the manner specified
in Section 403 and cause notice of the redemption thereof to
be given in the name of and at the expense of the Company in
the manner provided in Section 404. Such notice having been
duly given, the redemption of such Securities shall be made
upon the terms and in the manner stated in Sections 405 and
406.

ARTICLE SIX

COVENANTS

SECTION 601. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.

The Company shall pay the principal of and premium, if
any, and interest, if any, on the Securities of each series in
accordance with the terms of such Securities and this Indenture.

SECTION 602. MAINTENANCE OF OFFICE OR AGENCY.

The Company shall maintain in each Place of Payment for
the Securities of each series, or any Tranche thereof, an office
or agency where payment of such Securities shall be made or
surrendered for payment, where registration of transfer or
exchange of such Securities may be effected and where notices and
demands to or upon the Company in respect of such Securities and
this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in
the location, of each such office or agency and prompt notice to
the Holders of any such change in the manner specified in Section
106. If at any time the Company shall fail to maintain any such
required office or agency in respect of Securities of any series,
or any Tranche thereof, or shall fail to furnish the Trustee with
the address thereof, payment of such Securities may be made,
registration of transfer or exchange thereof may be effected and
notices and demands in respect thereby may be served at the
Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent for all such purposes in any
such event.

The Company may also from time to time designate one or
more other offices or agencies with respect to the Securities of
one or more series, or any Tranche thereof, for any or all of the
foregoing purposes and may from time to time rescind such
designations; provided, however, that, unless otherwise specified
as contemplated by Section 301 with respect to the Securities of
such series or Tranche, no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain
an office or agency for such purposes in each Place of Payment
for such Securities in accordance with the requirements set forth
above. The Company shall give prompt written notice to the
Trustee, and prompt notice to the Holders in the manner specified
in Section 106, of any such designation or rescission and of any
change in the location of any such other office or agency.

Anything herein to the contrary notwithstanding, any
office or agency required by this Section may be maintained at an
office of the Company or any Affiliate of either of them, in
which event the Company or such Affiliate, as the case may be,
shall perform all functions to be performed at such office or
agency.

SECTION 603. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.

If the Company shall at any time act as its own Paying
Agent with respect to the Securities of any series, or any
Tranche thereof, it shall, on or before each due date of the
principal of and premium, if any, or interest, if any, on any of
such Securities, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the
principal and premium or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided and shall promptly notify the Trustee of its action or
failure so to act.

Whenever the Company shall have one or more Paying
Agents for the Securities of any series, or any Tranche thereof,
it shall, prior to each due date of the principal of and premium,
if any, or interest, if any, on such Securities, deposit with
such Paying Agents sums sufficient (without duplication) to pay
the principal and premium or interest so becoming due, such sum
to be held in trust for the benefit of the Persons entitled to
such principal, premium or interest, and (unless such Paying
Agent is the Trustee) the Company shall promptly notify the
Trustee of its action or failure so to act.

The Company shall cause each Paying Agent for the
Securities of any series, or any Tranche thereof, other than the
Company or the Trustee, to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section, that such
Paying Agent shall:

(a) hold all sums held by it for the payment of the
principal of and premium, if any, or interest, if any, on
Securities of such series or Tranche in trust for the
benefit of the Persons entitled thereto until such sums
shall be paid to such Persons or otherwise disposed of as
herein provided;

(b) give the Trustee notice of any default by the
Company (or any other obligor upon the Securities of such
series) in the making of any payment of principal of and
premium, if any, or interest, if any, on the Securities of
such series or Tranche; and

(c) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith
pay to the Trustee all sums so held in trust by such Paying
Agent.

The Company may at any time pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held
by the Trustee upon the same trusts as those upon which such sums
were held by the Company or such Paying Agent and, if as stated
in a Company Order delivered to the Trustee, in accordance with
the provisions of Article Seven; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.

Any money deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of
the principal of and premium, if any, or interest, if any, on any
Security and remaining unclaimed for two years after such
principal and premium, if any, or interest has become due and
payable shall be paid to the Company on Company Request, or, if
then held by the Company, shall be discharged from such trust;
and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that
the Trustee or such Paying Agent, before being required to make
any such payment to the Company, may at the expense of the
Company, either (a) cause to be mailed, on one occasion only,
notice to such Holder that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30
days from the date of such mailing, any unclaimed balance of such
money then remaining will be paid to the Company or (b) cause to
be published once, in a newspaper published in the English
language, customarily published on each Business Day and of
general circulation in the Borough of Manhattan, The City of New
York, notice that such money remains unclaimed and that after a
date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money
then remaining will be paid to the Company.

SECTION 604. CORPORATE EXISTENCE.

Subject to the rights of the Company under Article
Eleven, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its
corporate existence.

SECTION 605. ANNUAL OFFICER'S CERTIFICATE

Not later than November 30 in each year, commencing
November 30, 1999, the Company shall deliver to the Trustee an
Officer's Certificate which need not comply with Section 102,
executed by its principal executive officer, principal financial
officer or principal accounting officer, as to such officer's
knowledge of such obligor's compliance with all conditions and
covenants under this Indenture, such compliance to be determined
without regard to any period of grace or requirement of notice
under this Indenture.

SECTION 606. WAIVER OF CERTAIN COVENANTS.

The Company may omit in any particular instance to
comply with any term, provision or condition set forth in

(a) any covenant or restriction specified with respect
to the Securities of any series, or any Tranche thereof, as
contemplated by Section 301 or by Section 1201(b) if before
the time for such compliance the Holders of a majority in
aggregate principal amount of the Outstanding Securities of
all series and Tranches with respect to which compliance
with such covenant or restriction is to be omitted,
considered as one class, shall, by Act of such Holders,
either waive such compliance in such instance or generally
waive compliance with such term, provision or condition; and

(b) Section 1101(b) if before the time for such
compliance the Holders of a majority in principal amount of
Securities Outstanding under this Indenture shall, by Act of
such Holders, either waive such compliance in such instance
or generally waive compliance with such term, provision or
condition;

but, in either case, no such waiver shall extend to or affect
such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in
full force and effect.

SECTION 607. CALCULATION OF THE ORIGINAL ISSUE DISCOUNT.

In the event that the Securities of any series or
Tranche are issued with original issue discount, the Company
shall timely file with the Trustee such specific information
relating to the original issue discount as may then be required
under the Internal Revenue Code of 1986, as amended from time to
time, or under any successor statute, to be furnished to the
Holders of such Securities by the Company or by the Trustee.

ARTICLE SEVEN

SATISFACTION AND DISCHARGE

SECTION 701. SATISFACTION AND DISCHARGE OF SECURITIES.

Any Security or Securities, or any portion of the
principal amount thereof, shall be deemed to have been paid for
all purposes of this Indenture, and the entire indebtedness of
the Company in respect thereof shall be satisfied and discharged,
if there shall have been irrevocably deposited with the Trustee
or any Paying Agent (other than the Company), in trust:

(a) money in an amount which shall be sufficient, or

(b) in the case of a deposit made prior to the
Maturity of such Securities or portions thereof, Eligible
Obligations, which shall not contain provisions permitting
the redemption or other prepayment thereof at the option of
the issuer thereof, the principal of and the interest on
which when due, without any regard to reinvestment thereof,
will provide moneys which, together with the money, if any,
deposited with or held by the Trustee or such Paying Agent,
shall be sufficient, or

to pay when due the principal of and premium, if any, and
interest, if any, due and to become due on such Securities or
portions thereof; provided, however, that in the case of the
provision for payment or redemption of less than all the
Securities of any series or Tranche, such Securities or portions
thereof shall have been selected by the Trustee as provided
herein and, in the case of a redemption, the notice requisite to
the validity of such redemption shall have been given or
irrevocable authority shall have been given by the Company to the
Trustee to give such notice, under arrangements satisfactory to
the Trustee; and provided, further, that the Company shall have
delivered to the Trustee and such Paying Agent:

(x) if such deposit shall have been made prior to the
Maturity of such Securities, a Company Order stating that
the money and Eligible Obligations deposited in accordance
with this Section shall be held in trust, as provided in
Section 603;

(y) if Eligible Obligations shall have been deposited,
an Opinion of Counsel to the effect that such obligations
constitute Eligible Obligations and do not contain
provisions permitting the redemption or other prepayment
thereof at the option of the issuer thereof, and an opinion
of an independent public accountant of nationally recognized
standing, selected by the Company, to the effect that the
other requirements set forth in clause (b) and (c) above
have been satisfied; and

(z) if such deposit shall have been made prior to the
Maturity of such Securities, an Officer's Certificate
stating the Company's intention that, upon delivery of such
Officer's Certificate, its indebtedness in respect of such
Securities or portions thereof will have been satisfied and
discharged as contemplated in this Section.

Upon the deposit of money or Eligible Obligations, or
both, in accordance with this Section, together with the
documents required by clauses (x), (y) and (z) above, the Trustee
shall, upon Company Request, acknowledge in writing that such
Securities or portions thereof are deemed to have been paid for
all purposes of this Indenture and that the entire indebtedness
of the Company in respect thereof has been satisfied and
discharged as contemplated in this Section. In the event that
all of the conditions set forth in the preceding paragraph shall
have been satisfied in respect of any Securities or portions
thereof except that, for any reason, the Officer's Certificate
specified in clause (z) (if otherwise required) shall not have
been delivered, such Securities or portions thereof shall
nevertheless be deemed to have been paid for all purposes of this
Indenture, and the Holders of such Securities or portions thereof
shall nevertheless be no longer entitled to the benefits provided
by this Indenture or of any of the covenants of the Company under
Article Six (except the covenants contained in Sections 602 and
603) or any other covenants made in respect of such Securities or
portions thereof as contemplated by Section 301 or Section
1201(b), but the indebtedness of the Company in respect of such
Securities or portions thereof shall not be deemed to have been
satisfied and discharged prior to Maturity for any other purpose;
and, upon Company Request, the Trustee shall acknowledge in
writing that such Securities or portions thereof are deemed to
have been paid for all purposes of this Indenture.

If payment at Stated Maturity of less than all of the
Securities of any series, or any Tranche thereof, is to be
provided for in the manner and with the effect provided in this
Section, the Trustee shall select such Securities, or portions of
principal amount thereof, in the manner specified by Section 403
for selection for redemption of less than all the Securities of a
series or Tranche.

In the event that Securities which shall be deemed to
have been paid for purposes of this Indenture, and, if such is
the case, in respect of which the Company's indebtedness shall
have been satisfied and discharged, all as provided in this
Section, do not mature and are not to be redeemed within the
sixty (60) day period commencing with the date of the deposit of
moneys or Eligible Obligations, as aforesaid, the Company shall,
as promptly as practicable, give a notice, in the same manner as
a notice of redemption with respect to such Securities, to the
Holders of such Securities to the effect that such deposit has
been made and the effect thereof.

Notwithstanding that any Securities shall be deemed to
have been paid for purposes of this Indenture, as aforesaid, the
obligations of the Company and the Trustee in respect of such
Securities under Sections 304, 305, 306, 404, 602, 603, 907 and
914 and this Article shall survive.

The Company shall pay, and shall indemnify the Trustee
or any Paying Agent with which Eligible Obligations shall have
been deposited as provided in this Section against, any tax, fee
or other charge imposed on or assessed against such Eligible
Obligations or the principal or interest received in respect of
such Eligible Obligations, including, but not limited to, any
such tax payable by any entity deemed, for tax purposes, to have
been created as a result of such deposit.

Anything herein to the contrary notwithstanding, (a)
if, at any time after a Security would be deemed to have been
paid for purposes of this Indenture, and, if such is the case,
the Company's indebtedness in respect thereof would be deemed to
have been satisfied and discharged, pursuant to this Section
(without regard to the provisions of this paragraph), the Trustee
or any Paying Agent, as the case may be, (i) shall be required to
return the money or Eligible Obligations, or combination thereof,
deposited with it as aforesaid to the Company or its
representative under any applicable Federal or State bankruptcy,
insolvency or other similar law, or (ii) are unable to apply any
money in accordance with this Article with respect to any
Securities by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise
prohibiting such application, such Security shall thereupon be
deemed retroactively not to have been paid and any satisfaction
and discharge of the Company's indebtedness in respect thereof
shall retroactively be deemed not to have been effected, and such
Security shall be deemed to remain Outstanding and (b) any
satisfaction and discharge of the Company's indebtedness in
respect of any Security shall be subject to the provisions of the
last paragraph of Section 603.

SECTION 702. SATISFACTION AND DISCHARGE OF INDENTURE.

This Indenture shall upon Company Request cease to be
of further effect (except as hereinafter expressly provided), and
the Trustee, at the expense of the Company, shall execute such
instruments as the Company shall reasonably request to evidence
and acknowledge the satisfaction and discharge of this Indenture,
when:

(a) no Securities remain Outstanding hereunder; and

(b) the Company has paid or caused to be paid all
other sums payable hereunder by the Company;

provided, however, that if, in accordance with the last paragraph
of Section 701, any Security, previously deemed to have been paid
for purposes of this Indenture, shall be deemed retroactively not
to have been so paid, this Indenture shall thereupon be deemed
retroactively not to have been satisfied and discharged, as
aforesaid, and to remain in full force and effect, and the
Company shall execute and deliver such instruments as the Trustee
shall reasonably request to evidence and acknowledge the same.

Notwithstanding the satisfaction and discharge of this
Indenture as aforesaid, the obligations of the Company, and the
Trustee under Sections 304, 305, 306, 404, 602, 603, 907 and 914
and this Article shall survive.

Upon satisfaction and discharge of this Indenture as
provided in this Section, the Trustee shall turn over to the
Company any and all money, securities and other property then
held by the Trustee for the benefit of the Holders of the
Securities (other than money and Eligible Obligations held by the
Trustee pursuant to Section 703) and shall execute and deliver to
the Company such instruments as, in the judgment of the Company,
shall be necessary, desirable or appropriate to effect or
evidence the satisfaction and discharge of this Indenture.

SECTION 703. APPLICATION OF TRUST MONEY.

Neither the Eligible Obligations nor the money
deposited pursuant to Section 701, nor the principal or interest
payments on any such Eligible Obligations, shall be withdrawn or
used for any purpose other than, and shall be held in trust for,
the payment of the principal of and premium, if any, and
interest, if any, on the Securities or portions of principal
amount thereof in respect of which such deposit was made, all
subject, however, to the provisions of Section 603; provided,
however, that any cash received from such principal or interest
payments on such Eligible Obligations, if not then needed for
such purpose, shall, to the extent practicable and upon Company
Request and delivery to the Trustee of the documents referred to
in clause (y) in the first paragraph of Section 701, be invested
in Eligible Obligations of the type described in clause (b) in
the first paragraph of Section 701 maturing at such times and in
such amounts as shall be sufficient, together with any other
moneys and the proceeds of any other Eligible Obligations then
held by the Trustee, to pay when due the principal of and
premium, if any, and interest, if any, due and to become due on
such Securities or portions thereof on and prior to the Maturity
thereof, and interest earned from such reinvestment shall be paid
over to the Company as received, free and clear of any trust,
lien or pledge under this Indenture (except the lien provided by
Section 907); and provided, further, that any moneys held in
accordance with this Section on the Maturity of all such
Securities in excess of the amount required to pay the principal
of and premium, if any, and interest, if any, then due on such
Securities shall be paid over to the Company free and clear of
any trust, lien or pledge under this Indenture (except the lien
provided by Section 907); and provided, further, that if an Event
of Default shall have occurred and be continuing, moneys to be
paid over to the Company pursuant to this Section shall be held
until such Event of Default shall have been waived or cured.

ARTICLE EIGHT

EVENTS OF DEFAULT; REMEDIES

SECTION 801. EVENTS OF DEFAULT.

"Event of Default", wherever used herein with respect
to Securities of any series, means any one of the following
events:

(a) default in the payment of principal of or premium,
if any, or interest on any Security of such series when it
becomes due and payable and continuance of such default for
a period of 30 days; or

(b) default in the performance of, or breach of, any
covenant or warranty of the Company in this Indenture (other
than a covenant or warranty a default in the performance of
which or breach of which is elsewhere in this Section
specifically dealt with or which has expressly been included
in this Indenture solely for the benefit of one or more
series of Securities other than such series) and continuance
of such default or breach for a period of 90 days after
there has been given, by registered or certified mail, to
the Company by the Trustee, or to the Company and the
Trustee by the Holders of at least 75% in principal amount
of the Outstanding Securities of such series, a written
notice specifying such default or breach and requiring it to
be remedied and stating that such notice is a "Notice of
Default" hereunder, unless the Trustee, or the Trustee and
the Holders of a principal amount of Securities of such
series not less than the principal amount of Securities the
Holders of which gave such notice, as the case may be, shall
agree in writing to an extension of such period prior to its
expiration; provided, however, that the Trustee, or the
Trustee and the Holders of such principal amount of
Securities of such series, as the case may be, shall be
deemed to have agreed to an extension of such period if
corrective action is initiated by the Company within such
period and is being diligently pursued; or

SECTION 802. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

If an Event of Default shall have occurred and be
continuing with respect to Securities of any series at the time
Outstanding, then in every such case the Holders of not less than
75% in principal amount of the Outstanding Securities of such
series may declare the principal amount (or, if any of the
Securities of such series are Discount Securities, such portion
of the principal amount of such Securities as may be specified in
the terms thereof as contemplated by Section 301) of all of the
Securities of such series to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by
Holders), and upon receipt by the Company of notice of such
declaration such principal amount (or specified amount) shall
become immediately due and payable; provided, however, that if an
Event of Default shall have occurred and be continuing with
respect to more than one series of Securities, the Holders of not
less than 75% in aggregate principal amount of the Outstanding
Securities of all such series, considered as one class, may make
such declaration of acceleration, and not the Holders of the
Securities of any one of such series.

At any time after such a declaration of acceleration
with respect to Securities of any series shall have been made and
before a judgment or decree for payment of the money due shall
have been obtained by the Trustee as hereinafter in this Article
provided, such declaration and its consequences shall, without
further act, be deemed to have been rescinded and annulled, if

(a) the Company shall have paid or deposited with
the Trustee a sum sufficient to pay

(1) all overdue interest, if any, on all
Securities of such series then Outstanding;

(2) the principal of and premium, if any, on
any Securities of such series then Outstanding
which have become due otherwise than by such
declaration of acceleration and interest thereon
at the rate or rates prescribed therefor in such
Securities;

(3) to the extent that payment of such
interest is lawful, interest upon overdue interest
at the rate or rates prescribed therefor in such
Securities;

(4) all amounts due to the Trustee under
Section 907;

and

(b) all Events of Default with respect to
Securities of such series, other than the non payment
of the principal of Securities of such series which
shall have become due solely by such declaration of
acceleration, shall have been cured or waived as
provided in Section 813.

No such rescission shall affect any subsequent Event of Default
or impair any right consequent thereon.

SECTION 803. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE.

If an Event of Default described in clause (a) of
Section 801 shall have occurred, the Company shall, upon demand
of the Trustee, pay to it, for the benefit of the Holders of the
Securities of the series with respect to which such Event of
Default shall have occurred, the whole amount then due and
payable on such Securities for principal and premium, if any, and
interest, if any, and, to the extent permitted by law, interest
on premium, if any, and on any overdue principal and interest, at
the rate or rates prescribed therefor in such Securities, and, in
addition thereto, such further amount as shall be sufficient to
cover any amounts due to the Trustee under Section 907.

If the Company shall fail to pay such amounts forthwith
upon such demand, the Trustee, in its own name and as trustee of
an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and
collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any
other obligor upon such Securities, wherever situated.

If an Event of Default with respect to Securities of
any series shall have occurred and be continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and
the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy.

SECTION 804. TRUSTEE MAY FILE PROOFS OF CLAIM.

In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the
property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of
the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment
of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise,

(a) to file and prove a claim for the whole amount of
principal, premium, if any, and interest, if any, owing and
unpaid in respect of the Securities and to file such other
papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim
for amounts due to the Trustee under Section 907) and of the
Holders allowed in such judicial proceeding, and

(b) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute the same;

and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders,
to pay to the Trustee any amounts due it under Section 907.

Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights
of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding;
provided, however, that the Trustee may, on behalf of the
Holders, be a member of a creditors' or similar other committee.

SECTION 805. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.

All rights of action and claims under this Indenture,
the Securities may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of
the Holders in respect of which such judgment has been recovered.

SECTION 806. APPLICATION OF MONEY COLLECTED.

Any money collected by the Trustee pursuant to this
Article shall be applied in the following order, to the extent
permitted by law, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal
or premium, if any, or interest, if any, upon presentation of the
Securities in respect of which or for the benefit of which such
money shall have been collected and the notation thereon of the
payment if only partially paid and upon surrender thereof if
fully paid:

FIRST: To the payment of all amounts due the Trustee
under Section 907;

SECOND: To the payment of the amounts then due and
unpaid upon the Securities for principal of and premium, if
any, and interest, if any, in respect of which or for the
benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal,
premium, if any, and interest, if any, respectively;

THIRD: To the payment of the remainder, if any, to the
Company or to whomsoever may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct.

SECTION 807. LIMITATION ON SUITS.

No Holder shall have any right to institute any
proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless:

(a) such Holder shall have previously given written
notice conforming to the requirements of Section 105 hereof,
to the Trustee of a continuing Event of Default with respect
to the Securities of such series;

(b) the Holders of 75% in aggregate principal amount
of the Outstanding Securities of all series in respect of
which an Event of Default shall have occurred and be
continuing, considered as one class, shall have made written
request to the Trustee to institute proceedings in respect
of such Event of Default in its own name as Trustee
hereunder;

(c) such Holder or Holders shall have offered to the
Trustee indemnity reasonably satisfactory to the Trustee,
against the costs, expenses and liabilities to be incurred
in compliance with such request;

(d) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity shall have failed to
institute any such proceeding; and

(e) no direction inconsistent with such written
request shall have been given to the Trustee during such 60-
day period by the Holders of a majority in aggregate
principal amount of the Outstanding Securities of all series
in respect of which an Event of Default shall have occurred
and be continuing, considered as one class;

it being understood and intended that no one or more of such
Holders shall have any right in any manner whatever by virtue of,
or by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other of such Holders or
to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal
and ratable benefit of all of such Holders.

SECTION 808. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.

Notwithstanding any other provision in this Indenture,
the Holder of any Security shall have the right, which is
absolute and unconditional, to receive payment of the principal
of and premium, if any, and (subject to Section 307) interest, if
any, on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any
such payment, and such rights shall not be impaired without the
consent of such Holder.

SECTION 809. RESTORATION OF RIGHTS AND REMEDIES.

If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Indenture
and such proceeding shall have been discontinued or abandoned for
any reason, or shall have been determined adversely to the
Trustee or to such Holder, then and in every such case, subject
to any determination in such proceeding, the Company, the Trustee
and such Holder shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and
remedies of the Trustee and such Holder shall continue as though
no such proceeding had been instituted.

SECTION 810. RIGHTS AND REMEDIES CUMULATIVE.

Except as otherwise provided in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

SECTION 811. DELAY OR OMISSION NOT WAIVER.

No delay or omission of the Trustee or of any Holder to
exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every
right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.

SECTION 812. CONTROL BY HOLDERS OF SECURITIES.

If an Event of Default shall have occurred and be
continuing in respect of a series of Securities, the Holders of a
majority in principal amount of the Outstanding Securities of
such series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Securities of such series; provided,
however, that if an Event of Default shall have occurred and be
continuing with respect to more than one series of Securities,
the Holders of a majority in aggregate principal amount of the
Outstanding Securities of all such series, considered as one
class, shall have the right to make such direction, and not the
Holders of the Securities of any one of such series; and
provided, further, that

(a) such direction shall not be in conflict with any
rule of law or with this Indenture, and could not involve
the Trustee in personal liability in circumstances where
indemnity would not, in the Trustee's sole discretion, be
adequate, and

(b) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction.

SECTION 813. WAIVER OF PAST DEFAULTS.

The Holders of not less than a majority in principal
amount of the Outstanding Securities of any series may on behalf
of the Holders of all the Securities of such series waive any
past default hereunder with respect to such series and its
consequences, except a default

(a) in the payment of the principal of or premium, if
any, or interest, if any, on any Security of such series, or

(b) in respect of a covenant or provision hereof which
under Section 1202 cannot be modified or amended without the
consent of the Holder of each Outstanding Security of such
series affected.

Upon any such waiver, such default shall cease to
exist, and any and all Events of Default arising therefrom shall
be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.

SECTION 814. UNDERTAKING FOR COSTS.

The Company and the Trustee agree, and each Holder by
his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in
any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any
party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant,
but the provisions of this Section shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee,
to any suit instituted by any Holder, or group of Holders,
holding in the aggregate more than 10% in aggregate principal
amount of the Outstanding Securities of all series in respect of
which such suit may be brought, considered as one class, or to
any suit instituted by any Holder for the enforcement of the
payment of the principal of or premium, if any, or interest, if
any, on any Security on or after the Stated Maturity or
Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).

SECTION 815. WAIVER OF USURY, STAY OR EXTENSION LAWS.

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

ARTICLE NINE

THE TRUSTEE

SECTION 901. CERTAIN DUTIES AND RESPONSIBILITIES.

(a) Except during the continuance of an Event of
Default with respect to Securities of any series,

(1) the Trustee undertakes to perform, with respect to
Securities of such series, such duties and only such duties
as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this
Indenture against the Trustee; and

(2) in the absence of bad faith on its part, the
Trustee may, with respect to Securities of such series,
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the
case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Indenture.

(b) In case an Event of Default with respect to
Securities of any series shall have occurred and be continuing,
the Trustee shall exercise, with respect to Securities of such
series, such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.

(c) No provision of this Indenture shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own wilful
misconduct, except that

(1) this subsection shall not be construed to limit
the effect of subsection (a) of this Section;

(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;

(3) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of a
majority in principal amount of the Outstanding Securities
of any one or more series, as provided herein, relating to
the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture
with respect to the Securities of such series; and

(4) no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.

(d) Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.

SECTION 902. NOTICE OF DEFAULTS.

The Trustee shall give notice of any default hereunder
with respect to the Securities of any series to the Holders of
Securities of such series in the manner and to the extent
required to do so by the Trust Indenture Act, unless such default
shall have been cured or waived; provided, however, that in the
case of any default of the character specified in Section 801(b),
no such notice to Holders shall be given until at least 75 days
after the occurrence thereof. For the purpose of this Section,
the term "default" means any event which is, or after notice or
lapse of time, or both, would become, an Event of Default with
respect to the Securities of such series.

SECTION 903. CERTAIN RIGHTS OF TRUSTEE.

Subject to the provisions of Section 901 and to the
applicable provisions of the Trust Indenture Act:

(a) the Trustee may conclusively rely and shall be
protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;

(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request
or Company Order, or as otherwise expressly provided herein,
and any resolution of the Board of Directors of the Company
may be sufficiently evidenced by a Board Resolution thereof;

(c) whenever in the administration of this Indenture
the Trustee shall deem it desirable that a matter be proved
or established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate of the
Company;

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

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

(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it
shall (subject to applicable legal requirements) be entitled
to examine, during normal business hours, the books, records
and premises of the Company, personally or by agent or
attorney;

(g) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed
with due care by it hereunder;

(h) the Trustee shall not be charged with knowledge of
any Event of Default with respect to the Securities of any
series for which it is acting as Trustee unless either (1) a
Responsible Officer of the Trustee assigned to the Corporate
Trust Administration and agency group of the Trustee (or any
successor division or department of the Trustee) shall have
actual knowledge of the Event of Default or (2) written
notice of such Event of Default shall have been given to the
Trustee by the Company or any other obligor on such
Securities, or by any Holder of such Securities;

(i) the Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith
and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this
Indenture; and

(j) the rights, privileges, protections, immunities
and benefits given to the Trustee, including, without
limitation, its right to be indemnified, are extended to,
and shall be enforceable by, the Trustee in each of its
capacities hereunder.

SECTION 904. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES.

The recitals contained herein and in the Securities
(except the Trustee's certificates of authentication) shall be
taken as the statements of the Company and neither the Trustee
nor any Authenticating Agent assumes responsibility for their
correctness. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities.
Neither Trustee nor any Authenticating Agent shall be accountable
for the use or application by the Company of Securities or the
proceeds thereof.

SECTION 905. MAY HOLD SECURITIES.

Each of the Trustee, any Authenticating Agent, any
Paying Agent, any Security Registrar or any other agent of the
Company, in its individual or any other capacity, may become the
owner or pledgee of Securities and, subject to Sections 908 and
913, may otherwise deal with the Company with the same rights it
would have if it were not the Trustee, Authenticating Agent,
Paying Agent, Security Registrar or such other agent.

SECTION 906. MONEY HELD IN TRUST.

Money held by the Trustee in trust hereunder need not
be segregated from other funds, except to the extent required by
law. The Trustee shall be under no liability for interest on or
investment of any money received by it hereunder except as
expressly provided herein or otherwise agreed with in writing,
and for the sole benefit of, the Company.

SECTION 907. COMPENSATION AND REIMBURSEMENT.

The Company agrees

(a) to pay to the Trustee from time to time such
compensation for all services rendered by it hereunder as
the Company and the Trustee shall from time to time agree in
writing (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee
of an express trust);

(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances reasonably incurred or
made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be
attributable to its negligence, wilful misconduct or bad
faith; and

(c) to indemnify the Trustee and hold it harmless from
and against, any loss, liability or expense reasonably
incurred without negligence, wilful misconduct or bad faith
on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending
itself against any claim (whether asserted by the Company,
any Holder or any other Person) or liability in connection
with the exercise or performance of any of its powers or
duties hereunder.

As security for the performance of the obligations of
the Company under this Section, the Trustee shall have a lien
prior to the Securities upon all property and funds held or
collected by the Trustee as such, other than property and funds
held in trust under Section 703 (except moneys payable to the
Company as provided in Section 703).

The provisions of this Section 907 shall survive the
termination of this Indenture.

SECTION 908. DISQUALIFICATION; CONFLICTING INTERESTS.

If the Trustee shall have or acquire any conflicting
interest within the meaning of the Trust Indenture Act, it shall
either eliminate such conflicting interest or resign to the
extent, in the manner and with the effect, and subject to the
conditions, provided in the Trust Indenture Act and this
Indenture. For purposes of Section 310(b)(1) of the Trust
Indenture Act and to the extent permitted thereby, the Trustee,
in its capacity as trustee in respect of the Securities of any
series, shall not be deemed to have a conflicting interest
arising from its capacity as trustee in respect of the Securities
of any other series.

SECTION 909. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

There shall at all times be a Trustee hereunder which
shall be

(a) a corporation organized and doing business under
the laws of the United States of America, any State thereof or
the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of
at least $50,000,000 and subject to supervision or examination by
Federal, State or District of Columbia authority, or

(b) if and to the extent permitted by the Commission
by rule, regulation or order upon application, a corporation or
other Person organized and doing business under the laws of a
foreign government, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of
at least $50,000,000 or the Dollar equivalent of the applicable
foreign currency and subject to supervision or examination by
authority of such foreign government or a political subdivision
thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees
and, in either case, qualified and eligible under this Article
and the Trust Indenture Act. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of such supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section and the Trust
Indenture Act, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.

SECTION 910. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee in accordance with the applicable requirements
of Section 911.

(b) The Trustee may resign at any time with respect to
the Securities of one or more series by giving written notice
thereof to the Company. If the instrument of acceptance by a
successor Trustee required by Section 911 shall not have been
delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such series.

(c) The Trustee may be removed at any time with
respect to the Securities of any series by Act of the Holders of
a majority in principal amount of the Outstanding Securities of
such series delivered to the Trustee and the Company. If the
instrument of acceptance by a successor Trustee required by
Section 911 shall not have been delivered to the Trustee within
30 days after the giving of such notice of removal, the Trustee
being removed may petition any court of competent jurisdiction
for the appointment of a successor Trustee with respect to the
Securities of such series.

(d) If at any time:

(1) the Trustee shall fail to comply with Section 908
after written request therefor by the Company or by any
Holder who has been a bona fide Holder for at least six
months, or

(2) the Trustee shall cease to be eligible under
Section 909 or Section 310(a) of the Trust Indenture Act and
shall fail to resign after written request therefor by the
Company or by any such Holder, or

(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,

then, in any such case, (x) the Company by Board Resolution may
remove the Trustee with respect to all Securities or (y) subject
to Section 814, any Holder who has been a bona fide Holder for at
least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee with respect to all Securities and
the appointment of a successor Trustee or Trustees.

(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause (other than as contemplated by clause (y)
in subsection (d) or this Section), with respect to the
Securities of one or more series, the Company, by Board
Resolutions, shall promptly appoint a successor Trustee or
Trustees with respect to the Securities of that or those series
(it being understood that any such successor Trustee may be
appointed with respect to the Securities of one or more or all of
such series and that at any time (subject to Section 915) there
shall be only one Trustee with respect to the Securities of any
particular series) and shall comply with the applicable
requirements of Section 911. If, within one year after such
resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee with respect to the Securities of
any series shall be appointed by Act of the Holders of a majority
in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of
Section 911, become the successor Trustee with respect to the
Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor
Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 911, any Holder who
has been a bona fide Holder of a Security of such series for at
least six months may, on behalf of itself and all others
similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee with respect to the
Securities of such series.

(f) So long as no event which is, or after notice or
lapse of time, or both, would become, an Event of Default shall
have occurred and be continuing, and except with respect to a
Trustee appointed by Act of the Holders of a majority in
principal amount of the Outstanding Securities pursuant to
subsection (e) of this Section, if the Company shall have
delivered to the Trustee (i) Board Resolutions of the Company
appointing a successor Trustee, effective as of a date specified
therein, and (ii) an instrument of acceptance of such
appointment, effective as of such date, by such successor Trustee
in accordance with Section 911, the Trustee shall be deemed to
have resigned as contemplated in subsection (b) of this Section,
the successor Trustee shall be deemed to have been appointed by
the Company pursuant to subsection (e) of this Section and such
appointment shall be deemed to have been accepted as contemplated
in Section 911, all as of such date, and all other provisions of
this Section and Section 911 shall be applicable to such
resignation, appointment and acceptance except to the extent
inconsistent with this subsection (f).

(g) The Company shall give notice of each resignation
and each removal of the Trustee with respect to the Securities of
any series and each appointment of a successor Trustee with
respect to the Securities of any series to all Holders of
Securities of such series in the manner provided in Section 106.
Each notice shall include the name of the successor Trustee with
respect to the Securities of such series and the address of its
Corporate Trust Office.

SECTION 911. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

(a) In case of the appointment hereunder of a
successor Trustee with respect to the Securities of all series,
every such successor Trustee so appointed shall execute,
acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the
request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of all sums owed to it, execute and
deliver an instrument transferring to such successor Trustee all
the rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder.

(b) In case of the appointment hereunder of a
successor Trustee with respect to the Securities of one or more
(but not all) series, the Company, the retiring Trustee and each
successor Trustee with respect to the Securities of one or more
series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and
which (1) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of
the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee
relates, (2) if the retiring Trustee is not retiring with respect
to all Securities, shall contain such provisions as shall be
deemed necessary or desirable to confirm that all the rights,
powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the
retiring Trustee and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for
or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in
such supplemental indenture shall constitute such Trustees co-
trustees of the same trust and that each such Trustee shall be
trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such
Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each
such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of
such successor Trustee relates; but, on request of the Company or
any successor Trustee, such retiring Trustee, upon payment of all
sums owed to it, shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring
Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee
relates.

(c) Upon request of any such successor Trustee, the
Company shall execute any instruments for more fully and
certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts referred to in subsection (a) or
(b) of this Section, as the case may be.

(d) No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee
shall be qualified and eligible under this Article.

SECTION 912. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.

Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution
or filing of any paper or any further act on the part of any of
the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver
the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.

SECTION 913. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

If the Trustee shall be or become a creditor of the
Company or any other obligor upon the Securities (other than by
reason of a relationship described in Section 311(b) of the Trust
Indenture Act), the Trustee shall be subject to any and all
applicable provisions of the Trust Indenture Act regarding the
collection of claims against the Company or such other obligor.
For purposes of Section 311(b) of the Trust Indenture Act (a) the
term "cash transaction" shall have the meaning provided in Rule
11b-4 under the Trust Indenture Act, and (b) the term "self-
liquidating paper" shall have the meaning provided in Rule 11b-6
under the Trust Indenture Act.

SECTION 914. APPOINTMENT OF AUTHENTICATING AGENT.

The Trustee may appoint an Authenticating Agent or
Agents with respect to the Securities of one or more series, or
any Tranche thereof, which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series or
Tranche issued upon original issuance, exchange, registration of
transfer or partial redemption thereof or pursuant to Section
306, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States
of America, any State or territory thereof or the District of
Columbia or the Commonwealth of Puerto Rico, authorized under
such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $50,000,000 and subject to
supervision or examination by Federal or State authority. If
such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Authenticating
Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and
with the effect specified in this Section.

Any corporation into which an Authenticating Agent may
be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a
party, or any corporation succeeding to all of substantially all
the corporate agency or corporate trust business of an
Authenticating Agent, shall continue to be an Authenticating
Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper
or any further act on the part of the Trustee or the
Authenticating Agent.

An Authenticating Agent may resign at any time by
giving written notice thereof to the Trustee and the Company.
The Trustee may at any time terminate the agency of an
Authenticating Agent by giving written notice thereof to such
Authenticating Agent and the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be
acceptable to the Company. Any successor Authenticating Agent
upon acceptance of its appointment hereunder shall become vested
with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.

The Company agrees to pay to each Authenticating Agent
from time to time reasonable compensation for its services under
this Section.

The provisions of Sections 308, 904 and 905 shall be
applicable to each Authenticating Agent.

If an appointment with respect to the Securities of one
or more series, or any Tranche thereof, shall be made pursuant to
this Section, the Securities of such series or Tranche may have
endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication
substantially in the following form:

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

THE BANK OF NEW YORK
As Trustee

By
----------------------
As Authenticating
Agent

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

If all of the Securities of a series may not be
originally issued at one time, and if the Trustee does not have
an office capable of authenticating Securities upon original
issuance located in a Place of Payment where the Company wishes
to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested by the Company in writing
(which writing need not comply with Section 102 and need not be
accompanied by an Opinion of Counsel), shall appoint, in
accordance with this Section and in accordance with such
procedures as shall be acceptable to the Trustee, an
Authenticating Agent having an office in a Place of Payment
designated by the Company with respect to such series of
Securities.

SECTION 915. CO-TRUSTEE AND SEPARATE TRUSTEES.

At any time or times, for the purpose of meeting the
legal requirements of any applicable jurisdiction, the Company
and the Trustee shall have power to appoint, and, upon the
written request of the Trustee or of the Holders of at least 33%
in principal amount of the Securities then Outstanding, the
Company shall for such purpose join with the Trustee in the
execution and delivery of all instruments and agreements
necessary or proper to appoint, one or more Persons approved by
the Trustee either to act as co-trustee, jointly with the
Trustee, or to act as separate trustee, in either case with such
powers as may be provided in the instrument of appointment, and
to vest in such Person or Persons, in the capacity aforesaid, and
for the benefit of the Holders, any property, title, right or
power deemed necessary or desirable, subject to the other
provisions of this Section. If the Company does not join in such
appointment within 15 days after the receipt by it of a request
so to do, or if an Event of Default shall have occurred and be
continuing, the Trustee alone shall have power to make such
appointment.

Should any written instrument or instruments from the
Company be required by any co-trustee or separate trustee to more
fully confirm to such co-trustee or separate trustee such
property, title, right or power, any and all such instruments
shall, on request, be executed, acknowledged and delivered by the
Company.

Every co-trustee or separate trustee shall, to the
extent permitted by law, but to such extent only, be appointed
subject to the following conditions:

(a) the Securities shall be authenticated and
delivered, and all rights, powers, duties and obligations
hereunder in respect of the custody of securities, cash and other
personal property held by, or required to be deposited or pledged
with, the Trustee hereunder, shall be exercised solely, by the
Trustee;

(b) the rights, powers, duties and obligations hereby
conferred or imposed upon the Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon
and exercised or performed either by the Trustee or by the
Trustee and such co-trustee or separate trustee jointly, as shall
be provided in the instrument appointing such co-trustee or
separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the
Trustee shall be incompetent or unqualified to perform such act,
in which event such rights, powers, duties and obligations shall
be exercised and performed singly by such co-trustee or separate
trustee.

(c) the Trustee at any time, by an instrument in
writing executed by it, with the concurrence of the Company, may
accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section, and, if an Event of Default
shall have occurred and be continuing, the Trustee shall have
power to accept the resignation of, or remove, any such co-
trustee or separate trustee without the concurrence of the
Company. Upon the written request of the Trustee, the Company
shall join with the Trustee in the execution and delivery of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or
separate trustee so resigned or removed may be appointed in the
manner provided in this Section;

(d) no co-trustee or separate trustee hereunder shall
be personally liable by reason of any act or omission of the
Trustee, or any other such trustee hereunder, and the Trustee
shall not be personally liable by reason of any act or omission
of any such co-trustee or separate trustee;

(e) any Act of Holders delivered to the Trustee shall
be deemed to have been delivered to each such co-trustee and
separate trustee; and

(f) Any separate trustee or co-trustee may at any time
appoint the Trustee as its agent or attorney-in-fact with full
power and authority, to the extent not prohibited by law, to do
any lawful act under or in respect of this Indenture on its
behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted
by law, without the appointment of a new successor trustee.

ARTICLE TEN

HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 1001. LISTS OF HOLDERS.

Semiannually, not later than May 1 and November 1 in
each year, commencing November 1, 1999 and at such other times as
the Trustee may request in writing, the Company shall furnish or
cause to be furnished to the Trustee information as to the names
and addresses of the Holders, and the Trustee shall preserve such
information and similar information received by it in any other
capacity and afford to the Holders access to information so
preserved by it, all to such extent, if any, and in such manner
as shall be required by the Trust Indenture Act; provided,
however, that no such list need be furnished so long as the
Trustee shall be the Security Registrar.

SECTION 1002. REPORTS BY TRUSTEE AND COMPANY.

The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as
may be required pursuant to the Trust Indenture Act at the time
and in the manner provided pursuant thereto. Reports so required
to be transmitted at stated intervals of not more than 12 months
shall be transmitted no later than May 15 in each calendar year
with respect to the 12-month period ending on the preceding March
15, commencing May 15, 2000. A copy of each such report shall,
at the time of such transmission to Holders, be filed by the
Trustee with each stock exchange upon which any Securities are
listed, with the Commission and with the Company. The Company
will promptly notify the Trustee when any Securities are listed
on any stock exchange and of any delisting thereof.

The Company shall file with the Trustee (within thirty
(30) days after filing with the Commission in the case of reports
that pursuant to the Trust Indenture Act must be filed with the
Commission and furnished to the Trustee) and transmit to the
Holders, such other information, reports and other documents, if
any, at such times and in such manner, as shall be required by
the Trust Indenture Act. Delivery of such reports, information
and documents to the Trustee is for informational purposes only
and the Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or
determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder.

ARTICLE ELEVEN

CONSOLIDATION, MERGER, CONVEYANCE, OR OTHER TRANSFER

SECTION 1101. COMPANY MAY CONSOLIDATE, ETC.,
ONLY ON CERTAIN TERMS.

The Company shall not consolidate with or merge into
any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, unless

(a) the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be
a Person organized and existing under the laws of the United
States, any State thereof or the District of Columbia, and
shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory
to the Trustee, the due and punctual payment of the
principal of and premium, if any, and interest, if any, on
all Outstanding Securities and the performance of every
covenant of this Indenture on the part of the Company to be
performed or observed;

(b) immediately after giving effect to such
transaction and treating any indebtedness for borrowed money
which becomes an obligation of the Company as a result of
such transaction as having been incurred by the Company at
the time of such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be
continuing; and

(c) the Company, as the case may be, shall have
delivered to the Trustee an Officer's Certificate and an
Opinion of Counsel, each stating that such consolidation,
merger, conveyance or other transfer or lease and such
indenture supplemental hereto complies with this Article and
that all conditions precedent herein provided for relating
to such transactions have been complied with.

SECTION 1102. SUCCESSOR PERSON SUBSTITUTED.

Upon any consolidation by the Company with or merger by
the Company into any other Person or any conveyance or other
transfer or lease of the properties and assets of the Company
substantially as an entirety in accordance with Section 1101, the
successor Person formed by such consolidation or into which the
Company is merged or the Person to which such conveyance, or
other transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and
thereafter, except in the case of a lease, the predecessor Person
shall be relieved of all obligations and covenants under this
Indenture and the Securities Outstanding hereunder.

SECTION 1103. MERGER INTO COMPANY.

Nothing in this Indenture shall be deemed to prevent or
restrict any consolidation or merger after the consummation of
which the Company would be the surviving or resulting corporation
or any conveyance or other transfer, or lease of any part of the
properties of the Company which does not constitute the entirety,
or substantially the entirety, thereof.

ARTICLE TWELVE

SUPPLEMENTAL INDENTURES

SECTION 1201. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS.

Without the consent of any Holders, the Company and the
Trustee, at any time and from time to time, may enter into one or
more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:

(a) to evidence the succession of another Person to
the Company and the assumption by any such successor of the
covenants of the Company herein and in the Securities, all
as provided in Article Eleven; or

(b) to add one or more covenants of the Company or
other provisions for the benefit of the Holders of all or
any series of Securities, or any Tranche thereof or to
surrender any right or power herein conferred upon the
Company (and if such covenants are to be for the benefit of
less than all series of Securities, stating that such
covenants are expressly being included solely for the
benefit of such series); or

(c) to add any additional Events of Default with
respect to all or any series of Securities Outstanding
hereunder (and if such additional Events of Default are to
be for the benefit of less than all series of Securities,
stating that such additional Events of Default are expressly
being included solely for the benefit of such series); or

(d) to change or eliminate any provision of this
Indenture or to add any new provision to this Indenture;
provided, however, that if such change, elimination or
addition shall adversely affect the interests of the Holders
of Securities of any series or Tranche Outstanding on the
date of such supplemental indenture in any material respect,
such change, elimination or addition shall become effective
with respect to such series or Tranche only pursuant to the
provisions of Section 1202 hereof or when no Security of
such series or Tranche remains Outstanding; or

(e) to provide collateral security for the Securities
of any series; or

(f) to establish the form or terms of Securities of
any series or Tranche as contemplated by Sections 201 and
301; or

(g) to provide for the authentication and delivery of
bearer securities and coupons appertaining thereto
representing interest, if any, thereon and for the
procedures for the registration, exchange and replacement
thereof and for the giving of notice to, and the
solicitation of the vote or consent of, the holders thereof,
and for any and all other matters incidental thereto; or

(h) to evidence and provide for the acceptance of
appointment hereunder by a separate or successor Trustee
with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as
shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 911(b); or

(i) to provide for the procedures required to permit
the Company to utilize, at its option, a non certificated
system of registration for all, or any series or Tranche of,
the Securities; or

(j) to change any place or places where (1) the
principal of and premium, if any, and interest, if any, on
all or any series of Securities, or any Tranche thereof,
shall be payable, (2) all or any series of Securities, or
any Tranche thereof, may be surrendered for registration of
transfer, (3) all or any series of Securities, or any
Tranche thereof, may be surrendered for exchange and (4)
notices and demands to or upon the Company in respect of all
or any series of Securities, or any Tranche thereof, and
this Indenture may be served; or

(k) to cure any ambiguity, to correct or supplement
any provision herein which may be defective or inconsistent
with any other provision herein, or to make any other
changes to the provisions hereof or to add other provisions
with respect to matters or questions arising under this
Indenture, provided that such other changes or additions
shall not adversely affect the interests of the Holders of
Securities of any series or Tranche in any material respect.

Without limiting the generality of the foregoing, if
the Trust Indenture Act as in effect at the date of the execution
and delivery of this Indenture or at any time thereafter shall be
amended and

(x) if any such amendment shall require one or more
changes to any provisions hereof or the inclusion herein of
any additional provisions, or shall by operation of law be
deemed to effect such changes or incorporate such provisions
by reference or otherwise, this Indenture shall be deemed to
have been amended so as to conform to such amendment to the
Trust Indenture Act, and the Company and the Trustee may,
without the consent of any Holders, enter into an indenture
supplemental hereto to evidence such amendment hereof; or

(y) if any such amendment shall permit one or more
changes to, or the elimination of, any provisions hereof
which, at the date of the execution and delivery hereof or
at any time thereafter, are required by the Trust Indenture
Act to be contained herein or are contained herein to
reflect any provision of the Trust Indenture Act as in
effect at such date, this Indenture shall be deemed to have
been amended to effect such changes or elimination, and the
Company and the Trustee may, without the consent of any
Holders, enter into an indenture supplemental hereto to this
Indenture to effect such changes or elimination or evidence
such amendment.

SECTION 1202. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.

Subject to the provisions of Section 1201, with the
consent of the Holders of not less than a majority in aggregate
principal amount of the Securities of all series then Outstanding
under this Indenture, considered as one class, by Act of said
Holders delivered to the Company and the Trustee, the Company,
when authorized by Board Resolutions, and the Trustee may enter
into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture; provided,
however, that if there shall be Securities of more than one
series Outstanding hereunder and if a proposed supplemental
indenture shall directly affect the rights of the Holders of
Securities of one or more, but less than all, of such series,
then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of all series so
directly affected, considered as one class, shall be required;
and provided, further, that if the Securities of any series shall
have been issued in more than one Tranche and if the proposed
supplemental indenture shall directly affect the rights of the
Holders of Securities of one or more, but less than all, of such
Tranches, then the consent only of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all
Tranches so directly affected, considered as one class, shall be
required; and provided, further, that no such supplemental
indenture shall, without the consent of the Holder of each
Outstanding Security of each series or Tranche so directly
affected,

(a) change the Stated Maturity of the principal of, or
any installment of principal of or interest on, any Security
(other than pursuant to the terms thereof), or reduce the
principal amount thereof or the rate of interest thereon (or
the amount of any installment of interest thereon) or change
the method of calculating such rate or reduce any premium
payable upon the redemption thereof, or reduce the amount of
the principal of a Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 802, or change the coin or
currency (or other property), in which any Security or any
premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date), or

(b) reduce the percentage in principal amount of the
Outstanding Securities of any series or any Tranche thereof,
the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of
which is required for any waiver of compliance with any
provision of this Indenture or of any default hereunder and
its consequences, or reduce the requirements of Section 1304
for quorum or voting, or

(c) modify any of the provisions of this Section,
Section 606 or Section 813 with respect to the Securities of
any series or any Tranche thereof, except to increase the
percentages in principal amount referred to in this Section
or such other Sections or to provide that other provisions
of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected
thereby; provided, however, that this clause shall not be
deemed to require the consent of any Holder with respect to
changes in the references to "the Trustee" and concomitant
changes in this Section, or the deletion of this proviso, in
accordance with the requirements of Sections 911(b) and
1201(h).

A supplemental indenture which (x) changes or eliminates any
covenant or other provision of this Indenture which has expressly
been included solely for the benefit of the Holders of, or which
is to remain in effect only so long as there shall be
Outstanding, Securities of one or more particular series, or one
or more Tranches thereof, or (y) modifies the rights of the
Holders of Securities of such series or Tranches with respect to
such covenant or other provision, shall be deemed not to affect
the rights under this Indenture of the Holders of Securities of
any other series or Tranche.

It shall not be necessary for any Act of Holders under
this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.

SECTION 1203. EXECUTION OF SUPPLEMENTAL INDENTURES.

In executing, or accepting the additional trusts
created by, any supplemental indenture permitted by this Article
or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject
to Section 901) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter
into any such supplemental indenture which affects the Trustee's
own rights, duties, immunities or liabilities under this
Indenture or otherwise.

SECTION 1204. EFFECT OF SUPPLEMENTAL INDENTURES.

Upon the execution of any supplemental indenture under
this Article this Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby. Any supplemental indenture permitted by
this Article may restate this Indenture in its entirety, and,
upon the execution and delivery thereof, any such restatement
shall supersede this Indenture as theretofore in effect for all
purposes.

SECTION 1205. CONFORMITY WITH TRUST INDENTURE ACT.

Every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture
Act as then in effect.

SECTION 1206. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.

Securities of any series, or any Tranche thereof,
authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities of
any series, or any Tranche thereof, so modified as to conform, in
the opinion of the Trustee, the Company, to any such supplemental
indenture may be prepared and executed by the Company, and
authenticated and delivered by the Trustee in exchange for
Outstanding Securities of such series or Tranche.

SECTION 1207. MODIFICATION WITHOUT SUPPLEMENTAL INDENTURE.

To the extent, if any, that the terms of any particular
series of Securities shall have been established in or pursuant
to a Board Resolution or an Officer's Certificate pursuant to a
supplemental indenture or Board Resolution as contemplated by
Section 301, and not in an indenture supplemental hereto,
additions to, changes in or the elimination of any of such terms
may be effected by means of a supplemental Board Resolution or
Officer's Certificate, as the case may be, delivered to, and
accepted by, the Trustee; provided, however, that such
supplemental Board Resolution or Officer's Certificate shall not
be accepted by the Trustee or otherwise be effective unless all
conditions set forth in this Indenture which would be required to
be satisfied if such additions, changes or elimination were
contained in a supplemental indenture shall have been
appropriately satisfied. Upon the acceptance thereof by the
Trustee, any such supplemental Board Resolution or Officer's
Certificate shall be deemed to be a "supplemental indenture" for
purposes of Section 1204 and 1206.

ARTICLE THIRTEEN

MEETINGS OF HOLDERS; ACTION WITHOUT MEETING

SECTION 1301. PURPOSES FOR WHICH MEETINGS MAY BE CALLED.

A meeting of Holders of Securities of one or more, or
all, series, or any Tranche or Tranches thereof, may be called at
any time and from time to time pursuant to this Article to make,
give or take any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this
Indenture to be made, given or taken by Holders of Securities of
such series or Tranches.

SECTION 1302. CALL, NOTICE AND PLACE OF MEETINGS.

(a) The Trustee may at any time call a meeting of
Holders of Securities of one or more, or all, series, or any
Tranche or Tranches thereof, for any purpose specified in Section
1301, to be held at such time and at such place in the Borough of
Manhattan, The City of New York, as the Trustee shall determine,
or, with the approval of the Company, at any other place. Notice
of every such meeting, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken
at such meeting, shall be given, in the manner provided in
Section 106, not less than 21 nor more than 180 days prior to the
date fixed for the meeting.

(b) If the Trustee shall have been requested to call a
meeting of the Holders of Securities of one or more, or all,
series, or any Tranche or Tranches thereof, by the Company or by
the Holders of a majority in aggregate principal amount of all of
such series and Tranches, considered as one class, for any
purpose specified in Section 1301, by written request setting
forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have given the notice of such
meeting within 21 days after receipt of such request or shall not
thereafter proceed to cause the meeting to be held as provided
herein, then the Company or the Holders of Securities of such
series and Tranches in the amount above specified, as the case
may be, may determine the time and the place in the Borough of
Manhattan, The City of New York, or in such other place as shall
be determined or approved by the Company, for such meeting and
may call such meeting for such purposes by giving notice thereof
as provided in subsection (a) of this Section.

(c) Any meeting of Holders of Securities of one or
more, or all, series, or any Tranche or Tranches thereof, shall
be valid without notice if the Holders of all Outstanding
Securities of such series or Tranches are present in person or by
proxy and if representatives of the Company and the Trustee are
present, or if notice is waived in writing before or after the
meeting by the Holders of all Outstanding Securities of such
series, or by such of them as are not present at the meeting in
person or by proxy, and by the Company and the Trustee.

SECTION 1303. PERSONS ENTITLED TO VOTE AT MEETINGS.

To be entitled to vote at any meeting of Holders of
Securities of one or more, or all, series, or any Tranche or
Tranches thereof, a Person shall be (a) a Holder of one or more
Outstanding Securities of such series or Tranches, or (b) a
Person appointed by an instrument in writing as proxy for a
Holder or Holders of one or more Outstanding Securities of such
series or Tranches by such Holder or Holders. The only Persons
who shall be entitled to attend any meeting of Holders of
Securities of any series or Tranche shall be the Persons entitled
to vote at such meeting and their counsel, any representatives of
the Trustee and its counsel and any representatives of the
Company and its counsel.

SECTION 1304. QUORUM; ACTION.

The Persons entitled to vote a majority in aggregate
principal amount of the Outstanding Securities of the series and
Tranches with respect to which a meeting shall have been called
as hereinbefore provided, considered as one class, shall
constitute a quorum for a meeting of Holders of Securities of
such series and Tranches; provided, however, that if any action
is to be taken at such meeting which this Indenture expressly
provides may be taken by the Holders of a specified percentage,
which is less than a majority, in principal amount of the
Outstanding Securities of such series and Tranches, considered as
one class, the Persons entitled to vote such specified percentage
in principal amount of the Outstanding Securities of such series
and Tranches, considered as one class, shall constitute a quorum.
In the absence of a quorum within one hour of the time appointed
for any such meeting, the meeting shall, if convened at the
request of Holders of Securities of such series and Tranches, be
dissolved. In any other case the meeting may be adjourned for
such period as may be determined by the chairman of the meeting
prior to the adjournment of such meeting. In the absence of a
quorum at any such adjourned meeting, such adjourned meeting may
be further adjourned for such period as may be determined by the
chairman of the meeting prior to the adjournment of such
adjourned meeting. Except as provided by Section 1305(e), notice
of the reconvening of any meeting adjourned for more than 30 days
shall be given as provided in Section 1302(a) not less than ten
days prior to the date on which the meeting is scheduled to be
reconvened. Notice of the reconvening of an adjourned meeting
shall state expressly the percentage, as provided above, of the
principal amount of the Outstanding Securities of such series and
Tranches which shall constitute a quorum.

Except as limited by Section 1202, any resolution
presented to a meeting or adjourned meeting duly reconvened at
which a quorum is present as aforesaid may be adopted only by the
affirmative vote of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of the series and
Tranches with respect to which such meeting shall have been
called, considered as one class; provided, however, that, except
as so limited, any resolution with respect to any action which
this Indenture expressly provides may be taken by the Holders of
a specified percentage, which is less than a majority, in
principal amount of the Outstanding Securities of such series and
Tranches, considered as one class, may be adopted at a meeting or
an adjourned meeting duly reconvened and at which a quorum is
present as aforesaid by the affirmative vote of the Holders of
such specified percentage in principal amount of the Outstanding
Securities of such series and Tranches, considered as one class.

Any resolution passed or decision taken at any meeting
of Holders of Securities duly held in accordance with this
Section shall be binding on all the Holders of Securities of the
series and Tranches with respect to which such meeting shall have
been held, whether or not present or represented at the meeting.

SECTION 1305. ATTENDANCE AT MEETINGS; DETERMINATION OF VOTING
RIGHTS; CONDUCT AND ADJOURNMENT OF MEETINGS.

(a) Attendance at meetings of Holders of Securities
may be in person or by proxy; and, to the extent permitted by
law, any such proxy shall remain in effect and be binding upon
any future Holder of the Securities with respect to which it was
given unless and until specifically revoked by the Holder or
future Holder of such Securities before being voted.

(b) Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it
may deem advisable for any meeting of Holders of Securities in
regard to proof of the holding of such Securities and of the
appointment of proxies and in regard to the appointment and
duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as
it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Securities shall
be proved in the manner specified in Section 104 and the
appointment of any proxy shall be proved in the manner specified
in Section 104. Such regulations may provide that written
instruments appointing proxies, regular on their face, may be
presumed valid and genuine without the proof specified in Section
104 or other proof.

(c) The Trustee shall, by an instrument in writing,
appoint a temporary chairman of the meeting, unless the meeting
shall have been called by the Company or by Holders as provided
in Section 1302(b), in which case the Company or the Holders of
Securities of the series and Tranches calling the meeting, as the
case may be, shall in like manner appoint a temporary chairman.
A permanent chairman and a permanent secretary of the meeting
shall be elected by vote of the Persons entitled to vote a
majority in aggregate principal amount of the Outstanding
Securities of all series and Tranches represented at the meeting,
considered as one class.

(d) At any meeting each Holder or proxy shall be
entitled to one vote for each $1,000 principal amount of
Securities held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any
Security challenged as not Outstanding and ruled by the chairman
of the meeting to be not Outstanding. The chairman of the
meeting shall have no right to vote, except as a Holder of a
Security or proxy.

(e) Any meeting duly called pursuant to Section 1302
at which a quorum is present may be adjourned from time to time
by Persons entitled to vote a majority in aggregate principal
amount of the Outstanding Securities of all series and Tranches
represented at the meeting, considered as one class; and the
meeting may be held as so adjourned without further notice.

SECTION 1306. COUNTING VOTES AND RECORDING ACTION OF MEETINGS.

The vote upon any resolution submitted to any meeting
of Holders shall be by written ballots on which shall be
subscribed the signatures of the Holders or of their
representatives by proxy and the principal amounts and serial
numbers of the Outstanding Securities, of the series and Tranches
with respect to which the meeting shall have been called, held or
represented by them. The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at
the meeting for or against any resolution and who shall make and
file with the secretary of the meeting their verified written
reports of all votes cast at the meeting. A record, in
duplicate, of the proceedings of each meeting of Holders shall be
prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one
or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice
was given as provided in Section 1302 and, if applicable, Section
1304. Each copy shall be signed and verified by the affidavits
of the permanent chairman and secretary of the meeting and one
such copy shall be delivered to the Company, and another to the
Trustee to be preserved by the Trustee, the latter to have
attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters
therein stated.

SECTION 1307. ACTION WITHOUT MEETING.

In lieu of a vote of Holders at a meeting as
hereinbefore contemplated in this Article, any request, demand,
authorization, direction, notice, consent, waiver or other action
may be made, given or taken by Holders by written instruments as
provided in Section 104.

ARTICLE FOURTEEN

IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

SECTION 1401. LIABILITY SOLELY CORPORATE.

No recourse shall be had for the payment of the
principal of or premium, if any, or interest, if any, on any
Securities or any part thereof, or for any claim based thereon or
otherwise in respect thereof, or of the indebtedness represented
thereby, or upon any obligation, covenant or agreement under this
Indenture, against any incorporator, stockholder, officer or
director, as such, past, present or future of the Company or of
any predecessor or successor of it (either directly or through
the Company or a predecessor or successor of it), whether by
virtue of any constitutional provision, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise;
it being expressly agreed and understood that this Indenture and
all the Securities are solely corporate obligations, and that no
personal liability whatsoever shall attach to, or be incurred by,
any incorporator, stockholder, officer or director, past, present
or future, of the Company or of any predecessor or successor of
it, either directly or indirectly through the Company or any
predecessor or successor of it, because of the indebtedness
hereby authorized or under or by reason of any of the
obligations, covenants or agreements contained in this Indenture
or in any of the Securities or to be implied herefrom or
therefrom, and that any such personal liability is hereby
expressly waived and released as a condition of, and as part of
the consideration for, the execution of this Indenture and the
issuance of the Securities.

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

This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same instrument.

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

GRAND COURT LIFESTYLES, INC.

By: /s/Bernard M. Rodin
--------------------------

THE BANK OF NEW YORK,
as Trustee

By: /s/Lucille Firrincieli
----------------------
Lucille Firrincieli
Vice President

EXHIBIT 4.1(A)

GRAND COURT LIFESTYLES, INC.

OFFICER'S CERTIFICATE
(Under Sections 102, 201 and 301 of the Indenture,
dated as of June 1, 1999)

I, the undersigned Catherine Merlino, a Vice President
of GRAND COURT LIFESTYLES, INC. (the "Company"), in accordance
with Sections 102, 201 and 301 of the Indenture, dated as of June
1, 1999 (the "Indenture", capitalized terms used herein and not
defined herein having the meanings specified in the Indenture),
of the Company to The Bank of New York, trustee (the "Trustee"),
do hereby establish a series of Securities having the terms and
characteristics set forth below (the lettered clauses set forth
below corresponding to the lettered subsections of Section 301 of
the Indenture):

(a) the title of the Securities of such series shall
be "11% Series B Notes due June 15, 2007 (the "Notes of the
First Series");

(b) [not applicable];

(c) interest on the Notes of the First Series shall be
payable to the Person or Persons in whose names the Notes of
the First Series are registered at the close of business on
the Regular Record Date for such interest, except as
otherwise expressly provided in the form of Note of the
First Series attached hereto and hereby authorized and
approved;

(d) the principal of the Notes of the First Series
shall be payable on June 15, 2007;

(e) (i) the Notes of the First Series shall bear
interest at the rate of 11% per annum of the principal
amount thereof, payable monthly in arrears on the 15th day
of each month of each year (each, an "Interest Payment
Date"), commencing with the Interest Payment Date next
succeeding the Original Issue Date (as defined below) and at
Maturity; provided, however, that if the Original Issue Date
of the Notes of the First Series is after a Regular Record
Date (as defined in the form of the Notes of the First
Series) and before the corresponding Interest Payment Date,
interest so payable for the period from and including the
Original Issue Date to but excluding such Interest Payment
Date shall be paid on the next succeeding Interest Payment
Date to the Holder hereof on the related Regular Record
Date;

(ii) interest on the Notes of the First
Series shall accrue from, and including, the Original Issue
Date and will accrue to, but excluding, the first Interest
Payment Date, and thereafter will accrue from, and
including, the most recent Interest Payment Date to which
interest has been paid or duly provided for to, but
excluding, the next succeeding Interest Payment Date. In
the event that any Interest Payment Date is not a Business
Day, then payment of the interest payable on such date shall
be made on the next succeeding Business Day; and, if such
payment is made or duly provided for on such next succeeding
Business Day, no interest shall accrue on such amount for
the period from and after such Interest Payment Date to such
Business Day;

(iii) the Original Issue Date of each Note of
the First Series shall be the date of the first issuance of
such Note of the First Series and shall be communicated by
the Company to the Trustee by a written order pursuant to
the Company Order No. 1 of even date herewith;

(f) the corporate trust office of The Bank of New York
in New York, New York shall be the place at which (i) the
principal of and interest, if any, on the Notes of the First
Series at Maturity shall be payable upon presentment,
interest prior to Maturity to be paid as specified in the
form of Note of the First Series attached hereto, (ii)
registration of transfer of the Notes of the First Series
may be effected, (iii) exchanges of Notes of the First
Series may be effected and (iv) notices and demands to or
upon the Company in respect of the Notes of the First Series
and the Indenture may be served; and The Bank of New York
shall be the Security Registrar and a Paying Agent for the
Notes of the First Series; provided, however, that the
Company reserves the right to change, by one or more
Officer's Certificates supplemental to this Officer's
Certificate, any such place or the Security Registrar or
such Paying Agent; and provided, further, that the Company
reserves the right to designate, by one or more Officer's
Certificates supplemental to this Officer's Certificate, its
corporate office in Fort Lee, New Jersey 07024 as any such
place or itself as the Security Registrar;

(g) the Notes of the First Series shall be subject to
redemption, in whole at any time or in part from time to
time, at the election of the Company, at a redemption price
equal to 100% of the principal amount thereof plus accrued
interest, if any, to the date fixed for redemption;

(h) [not applicable];

(i) [not applicable];

(j) [not applicable];

(k) [not applicable];

(l) [not applicable];

(m) [not applicable];

(n) [not applicable];

(o) the Company reserves the right to provide by one
or more Officer's Certificates supplemental to this Officer's
Certificate, any additional covenants of the Company for the
benefit of the Holders of the Notes of the First Series, or any
Tranche thereof, or any additional Events of Default with respect
to all or any series of Securities Outstanding;

(p) [not applicable];

(q) (i) the only obligations or instruments which
shall be considered Eligible Obligations with respect to the
Notes of the First Series shall be Government Obligations;
(ii) if the Company shall make any deposit of
money and/or Eligible Obligations with respect to any Notes of
the First Series, or any portion of the principal amount thereof,
as contemplated by Section 701 of the Indenture, the Company
shall not deliver an Officer's Certificate described in clause
(z) in the first paragraph of said Section 701 unless the Company
shall also deliver to the Trustee, together with such Officer's
Certificate, either:

(A) an instrument wherein the Company,
notwithstanding the satisfaction and discharge of its
indebtedness in respect of the Notes of the First
Series, shall assume the obligation (which shall be
absolute and unconditional) to irrevocably deposit with
the Trustee or Paying Agent such additional sums of
money, if any, or additional Eligible Obligations
(meeting the requirements of Section 701), if any, or
any combination thereof, at such time or times, as
shall be necessary, together with the money and/or
Eligible Obligations theretofore so deposited, to pay
when due the principal of and interest due and to
become due on such Notes of the First Series or
portions thereof, all in accordance with and subject to
the provisions of said Section 701; provided, however,
that such instrument may state that the obligation of
the Company to make additional deposits as aforesaid
shall be subject to the delivery to the Company by the
Trustee of a notice asserting the deficiency
accompanied by an opinion of an independent public
accountant of nationally recognized standing, selected
by the Trustee, showing the calculation thereof; or

(B) an Opinion of Counsel to the effect that the
Holders of such Notes of the First Series, or portions
of the principal amount thereof, will not recognize
income, gain or loss for United States federal income
tax purposes as a result of the satisfaction and
discharge of the Company's indebtedness in respect
thereof and will be subject to United States federal
income tax on the same amounts, at the same times and
in the same manner as if such satisfaction and
discharge had not been effected;

(r) The Notes of the First Series shall contain
restrictions on transfer, substantially as described in the form
of the Note of the First Series attached hereto. Each Note of
the First Series shall bear a non registration legend and the
registration rights legend in substantially the form set forth in
such form, unless otherwise agreed by the Company, such agreement
to be confirmed in writing by the Trustee. Nothing in the
Indenture, the Notes of the First Series or this Officer's
Certificate shall be construed to require the Company to register
any Notes of the First Series under the Securities Act, unless
otherwise expressly agreed by the Company, confirmed in writing
to the Trustee, or make any transfer of such Notes of the First
Series in violation of the applicable law. The Company will enter
into a registration rights agreement in favor of the Holders of
the Notes of the First Series pursuant to which, among other
things, the Notes of the First Series may be exchanged for the
Securities to be issued under the Indenture which will be
registered under the Securities Act.

(s) [not applicable];

(t) no service charge shall be made for the
registration of transfer or exchange of Notes of the First
Series; provided, however, that the Company may require payment
of a sum sufficient to cover any tax or other governmental charge
payable in connection with the exchange or transfer;

(u) [not applicable];

(v) the Notes of the First Series shall be
substantially in the form of the Note of the First Series
attached hereto and hereby authorized and approved and shall have
such further terms as are set forth in such form.

The undersigned has read all of the covenants and conditions
contained in the Indenture relating to the issuance of the Notes
of the First Series and the definitions in the Indenture relating
thereto and in respect of which this certificate is made;

The statements contained in this certificate are based upon
the familiarity of the undersigned with the Indenture, the
documents accompanying this certificate, and upon discussions by
the undersigned with officers and employees of the Company
familiar with the matters set forth herein;

In the opinion of the undersigned, she has made such
examination or investigation as is necessary to enable her to
express an informed opinion whether or not such covenants and
conditions have been complied with; and

In the opinion of the undersigned, such conditions and
covenants and conditions precedent, if any (including any
covenants compliance with which constitutes a condition
precedent) to the authentication and delivery of the Notes of the
First Series requested in the accompanying Company Order No. 1
have been complied with.

IN WITNESS WHEREOF, I have executed this Officer's
Certificate this 14th day of
June, 1999.

/s/Catherine Merlino
-----------------------
Catherine Merlino
Vice President

<PAGE>

FORM OF THE FACE OF NOTE

[non-registration legend]

THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND ARE BEING
OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE SECURITIES
MAY NOT BE TRANSFERRED OR RESOLD WITHOUT REGISTRATION UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, UNLESS IN
THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH
LAWS IS THEN AVAILABLE.

[registration rights legend]

The Holder of this Security, by acceptance hereof, will be deemed
to have agreed to be bound by the provisions of the Registration
Rights Agreement dated as of June 1, 1999, of the Company in
favor of the Holder of this Security.

GRAND COURT LIFE STYLES, INC.
11% Series B Notes due June 15, 2007

Original Issue Date: --------------- Redemption Price: 100%
Stated Maturity: June 15, 2007
Interest Rate: 11% per annum
Interest Payment Dates: 15th day of each month

Regular Record Dates: 6th calendar day prior to
relevant Interest Payment Date

-----------------------------------------------------------------
This Security is not a Discount Security
within the meaning of the within-mentioned Indenture.

Principal Amount: Registered No.
$

GRAND COURT LIFESTYLES, INC., a corporation duly organized
and existing under the laws of the State of Delaware (herein
called the "Company," which term includes any successor
corporation under the Indenture referred to below), for value
received, hereby promises to pay to

or registered assigns, the principal sum of
DOLLARS

on the Stated Maturity specified above, and to pay interest
thereon from the Original Issue Date specified above or from the
most recent Interest Payment Date to which interest has been paid
or duly provided for, monthly in arrears on the Interest Payment
Dates specified above in each year, commencing with the Interest
Payment Date next succeeding the Original Issue Date specified
above, and at Maturity, at the Interest Rate per annum specified
above, until the principal hereof is paid or duly provided for.
The interest so payable, and paid or duly provided for, on any
Interest Payment Date shall, as provided in such Indenture, be
paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
the Regular Record Date specified above (whether or not a
Business Day) next preceding such Interest Payment Date;
provided, that if the Original Issue Date of this Security is
after a Regular Record Date and before the corresponding Interest
Payment Date, interest so payable for the period from and
including the Original Issue Date to but excluding such Interest
Payment Date shall be paid on the next succeeding Interest
Payment Date to the Holder hereof on the related Regular Record
Date; and provided, further, that interest payable at Maturity
shall be paid to the Person to whom principal shall be paid.
Except as otherwise provided in said Indenture, any such interest
not so paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either
be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Trustee, notice of which shall be given to
Holders of Securities of this series not more than fifteen days
not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in
said Indenture. Interest on this Security shall be computed on
the basis of a 360-day year consisting of twelve 30-day months,
and with respect to any period less than a full calendar month,
on the basis of the actual number of days elapsed during such
period, based on a 360-day year (also based on a 30-day month).

Payment of the principal of this Security and interest
hereon at Maturity shall be made upon presentation of this
Security at the corporate trust office of The Bank of New York in
New York, New York or at such other office or agency as may be
designated for such purpose by the Company from time to time.
Payment of interest, if any, on this Security (other than
interest at Maturity) shall be made by check mailed to the
address of the Person entitled thereto as such address shall
appear in the Security Register, except that (a) if such Person
shall be a securities depositary, such payment may be made by
such other means in lieu of check as shall be agreed upon by the
Company, the Trustee or other Paying Agent and such Person and
(b) if such Person is a Holder of $1,000,000 or more in aggregate
principal amount of Securities of this series such payment may be
in immediately available funds by wire transfer to such account
as may have been designated in writing by the Person entitled
thereto as set forth herein in time for the Paying Agent to make
such payments in accordance with its normal procedures. Any such
designation for wire transfer purposes shall be made by filing
the appropriate information with the Trustee at its Corporate
Trust Office in The City of New York not less than fifteen
calendar days prior to the applicable payment date and, unless
revoked by written notice to the Trustee received on or prior to
the Regular Record Date immediately preceding the applicable
Interest Payment Date, shall remain in effect with respect to any
further interest payments (other than interest payments at
Maturity) with respect to this Security payable to such Holder.
Payment of the principal of and interest, if any, on this
Security, as aforesaid, shall be made in such coin or currency of
the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.

<PAGE>

[FORM OF REVERSE OF NOTE]

This Security is one of a duly authorized issue of
securities of the Company (herein called the "Securities"),
issued and issuable in one or more series under and equally
secured by an Indenture, dated as of June 1, 1999 (such Indenture
as originally executed and delivered and as supplemented or
amended from time to time thereafter, together with any
constituent instruments establishing the terms of particular
Securities, being herein called the "Indenture"), between the
Company and The Bank of New York, as trustee (herein called the
"Trustee," which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the
respective rights, limitations of rights, duties and immunities
of the Company, the Trustee and the Holders of the Securities
thereunder and of the terms and conditions upon which the
Securities are, and are to be, authenticated and delivered. The
acceptance of this Security shall be deemed to constitute the
consent and agreement by the Holder hereof to all of the terms
and provisions of the Indenture. This Security is one of the
series designated above.

If any Interest Payment Date, any Redemption Date or the
Stated Maturity shall not be a Business Day (as hereinafter
defined), payment of the amounts due on this Security on such
date may be made on the next succeeding Business Day, and, if
such payment is made or duly provided for on such next succeeding
Business Day, no interest shall accrue on such amounts for the
period from and after such Interest Payment Date, Redemption Date
or Stated Maturity, as the case may be, to such Business Day.

The Securities of this series are subject to redemption at
any time, in whole or in part, at the election of the Company, at
a redemption price equal to 100% of the principal amount thereof
plus accrued interest, if any, to the date fixed for redemption.

Notice of redemption shall be given by mail to Holders of
Securities, not less than 20 days nor more than 60 days prior to
the date fixed for redemption, all as provided in the Indenture.
As provided in the Indenture, notice of redemption at the
election of the Company as aforesaid may state that such
redemption shall be conditional upon the receipt by the Paying
Agent of money sufficient to pay the principal of and interest,
if any, on this Security on or prior to the date fixed for such
redemption; a notice of redemption so conditioned shall be of no
force or effect if such money is not so received and, in such
event, the Company shall not be required to redeem this Security.

Notice of redemption having been given as aforesaid, and the
conditions, if any, set forth in such notice having been
satisfied, the Securities of this series or portions thereof so
to be redeemed shall, on the date fixed for redemption, become
due and payable at the redemption price therein specified, and
from and after such date (unless, in the case of an unconditional
notice of redemption, the Company shall default in the payment of
the redemption price and accrued interest, if any) such
Securities of this series or portions thereof shall cease to bear
interest.

In the event of redemption of this Security in part only, a
new Security or Securities of this series, of like tenor,
representing the unredeemed portion hereof shall be issued in the
name of the Holder hereof upon the cancellation hereof.

If an Event of Default with respect to the Securities of
this series shall occur and be continuing, the principal of this
Security may be declared due and payable in the manner and with
the effect provided in the Indenture.

The Indenture permits, with certain exceptions as therein
provided, the Trustee to enter into one or more supplemental
indentures for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of,
the Indenture with the consent of the Holders of not less than a
majority in aggregate principal amount of the Securities of all
series then Outstanding under the Indenture, considered as one
class; provided, however, that if there shall be Securities of
more than one series Outstanding under the Indenture and if a
proposed supplemental indenture shall directly affect the rights
of the Holders of Securities of one or more, but less than all,
of such series, then the consent only of the Holders of a
majority in aggregate principal amount of the Outstanding
Securities of all series so directly affected, considered as one
class, shall be required; and provided, further, that if the
Securities of any series shall have been issued in more than one
Tranche and if the proposed supplemental indenture shall directly
affect the rights of the Holders of Securities of one or more,
but less than all, of such Tranches, then the consent only of the
Holders of a majority in aggregate principal amount of the
Outstanding Securities of all Tranches so directly affected,
considered as one class, shall be required; and provided,
further, that the Indenture permits the Trustee to enter into one
or more supplemental indentures for limited purposes without the
consent of any Holders of Securities. The Indenture also
contains provisions permitting the Holders of a majority in
principal amount of the Securities then Outstanding, on behalf of
the Holders of all Securities, 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 Security shall be
conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange therefor or in
lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.

No reference herein to the Indenture and no provision of
this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest, if any, on this Security at
the times, place and rate, in the coin or currency, and in the
manner, herein prescribed.

As provided in the Indenture and subject to certain
limitations therein set forth, this Security or any portion of
the principal amount hereof will be deemed to have been paid for
all purposes of the Indenture and to be no longer Outstanding
thereunder, and, at the election of the Company, the Company's
entire indebtedness in respect thereof will be satisfied and
discharged, if there has been irrevocably deposited with the
Trustee or any Paying Agent (other than the Company), in trust,
money in an amount which will be sufficient and/or Eligible
Obligations, the principal of and interest on which when due,
without regard to any reinvestment thereof, will provide moneys
which, together with moneys so deposited, will be sufficient to
pay when due the principal of and interest on this Security when
due.

The Indenture contains terms, provisions and conditions
relating to the consolidation or merger of the Company with or
into, and the conveyance or other transfer, or lease, of assets
to, another Person, to the assumption by such other Person, in
certain circumstances, of all of the obligations of the Company
under the Indenture and on the Securities and to the release and
discharge of the Company, in certain circumstances, from such
obligation.

As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registrable in the Security Register, upon surrender of this
Security for registration of transfer at the office of The Bank
of New York in New York, New York or such other office or agency
as may be designated by the Company from time to time, duly
endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar
duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities
of this series of authorized denominations and of like tenor and
aggregate principal amount, will be issued to the designated
transferee or transferees.

The Securities of this series are issuable only as
registered Securities, without coupons, and in denominations of
$1,000 and integral multiples thereof. As provided in the
Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate
principal amount of Securities of the same series and Tranche, of
any authorized denominations, as requested by the Holder
surrendering the same, and of like tenor upon surrender of the
Security or Securities to be exchanged at the office of The Bank
of New York in New York, New York or such other office or agency
as may be designated by the Company from time to time.

The Company shall not be required to execute and the
Security Registrar shall not be required to register the transfer
of or exchange of (a) Securities of this series during a period
of 15 days immediately preceding the date notice is given
identifying the serial numbers of the Securities of this series
called for redemption or (b) any Security so selected for
redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.

No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge
payable in connection therewith.

Prior to due presentment of this Security for registration
of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this
Security is registered as the absolute owner hereof for all
purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.

The Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State New York.

As used herein, "Business Day" means any day, other than a
Saturday or Sunday, that is not a day on which banking
institutions or trust companies are generally authorized or
required by law, regulation or executive order to close in The
City of New York or other city in which any Paying Agent for the
Securities of this series is located. All other terms used in
this Security which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.

As provided in the Indenture, no recourse shall be had for
the payment of the principal of or interest on any Securities, or
any part thereof, or for any claim based thereon or otherwise in
respect thereof, or of the indebtedness represented thereby, or
upon any obligation, covenant or agreement under the Indenture,
against, and no personal liability whatsoever shall attach to, or
be incurred by, any incorporator, shareholder, officer or
director, as such, past, present or future of the Company or of
any predecessor or successor of it (either directly or through
the Company or a predecessor or successor of it), whether by
virtue of any constitutional provision, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise;
it being expressly agreed and understood that the Indenture and
all the Securities are solely corporate obligations and that any
such personal liability is hereby expressly waived and released
as a condition of, and as part of the consideration for, the
execution of the Indenture and the issuance of the Securities.

Unless the certificate of authentication hereon has been
executed by the Trustee or an Authenticating Agent by manual
signature, this Security shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.

<PAGE>

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

GRAND COURT LIFESTYLES, INC.

By: --------------------------
[Title]

[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]

TRUSTEE'S CERTIFICATE OF AUTHENTICATION

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

Dated: ------------------

THE BANK OF NEW YORK, as
Trustee

By:----------------------
Authorized Officer

<PAGE>

FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto

-----------------------------------------------------------------
[please insert social security or other identifying number of
assignee]

-----------------------------------------------------------------
[please print or typewrite name and address of assignee]

-----------------------------------------------------------------
the within Security of GRAND COURT LIFESTYLES, INC. and does
hereby irrevocably constitute and appoint _______________________
__________________, Attorney, to transfer said Security on the
books of the within-mentioned Company, with full power of
substitution in the premises.

Dated:
--------------------

Signature_______________________________

Signature Guarantee_____________________

Notice: The signature to this assignment must correspond with
the name as written upon the face of the Security in every
particular without alteration or enlargement or any change
whatsoever.

SIGNATURE GUARANTEE

Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Security Registrar,
which requirements include membership or participation in the
Security Transfer Agent Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the
Security Registrar in addition to, or in substitution for, STAMP.

EXHIBIT 21

LIST OF SUBSIDIARIES
FOR
GRAND COURT LIFESTYLES, INC.

FL Executive Financing Corp.

GCGP I, Inc.

GCGP II, Inc.

GCGP, Inc. III

GCGP IV, Inc.

GCGP V, Inc.

Grand Court-Amarillo, L.P.

Grand Court-Greatwood, L.P.

Grand Court-Jackson, LLC

Grand Court-Overland Park, LLC

Grand Court-South Shore Harbour, L.P.

Grand Court Development Corp.

Grand Court Lifestyles Payroll Corp.

Grand Court Facilities, Inc.

Grand Court Facilities, Inc., II

Grand Court Facilities, Inc., III

Grand Court Facilities, Inc., IV

Grand Court Facilities, Inc., V

Grand Court Facilities, Inc., VI

Grand Court Facilities, Inc., VII

Grand Court Facilities, Inc., VIII

Grand Court Facilities, Inc., IX

Grand Court Facilities, Inc., X

Grand Court Facilities, Inc., XI

Grand Court Facilities, Inc., XII

Grand Court Facilities, Inc., XIII

Grand Court Facilities, Inc, XIV

Grand Court Facilities, Inc., XV

Grand Court Facilities, Inc., XVI

Grand Court Facilities, Inc., XVII

Grand Court Facilities, Inc., XVIII

Grand Court Facilities, Inc., XIX

Grand Court Facilities, Inc., XX

Grand Court Facilities, Inc., XXI

Grand Court Facilities, Inc., XXII

Grand Court Facilities, Inc., XXIII

Grand Court Facilities, Inc., XXIV

Grand Court Facilities, Inc., XXV

Grand Court Facilities, Inc., XXVI

Grand Court Facilities, Inc., XXVII

Grand Court Facilities, Inc., XXVIII

Grand Court Facilities, Inc., XXIX

Grand Court Facilities, Inc., XXX

J&B Financing, LLC

Leisure Centers, LLC-I

Leisure Centers, LLC-II

Leisure Centers, LLC-III

Leisure Centers, LLC-IV

Leisure Facilities, Inc.

Leisure Facilities, Inc., II

Leisure Facilities, Inc., III

Leisure Facilities, Inc., IV

Leisure Facilities, Inc., V

Leisure Facilities, Inc., VI

Leisure Facilities, Inc., VII

Leisure Facilities, Inc., IX

Leisure Facilities, Inc., X

Leisure Facilities, Inc., XII

Leisure Facilities, Inc. XV

T Lakes L.C.

Texas Properties, Inc.

<ARTICLE> 5
<MULTIPLIER> 1,000

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