PRE 14A

SCHEDULE 14A INFORMATION

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Wellman, Inc.
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Preliminary Copy

WELLMAN, INC.

595 Shrewsbury Avenue
Shrewsbury, New Jersey 07702

_______________, 2003

Dear Stockholder:

We are pleased to enclose information about a Special Meeting of our Stockholders to be held on___________, 2003 at the Oyster Point Hotel, 146 Bodman Place, Red Bank, New Jersey. The meeting will begin promptly at 10:00 a.m., local time.

At the special meeting we will ask you to consider and vote on a proposed equity investment of up to $125.4 million by Warburg Pincus Private Equity VIII, L.P., a private equity fund managed by Warburg Pincus LLC. This investment is to be made on the terms, and subject to various conditions, set forth in a securities purchase agreement dated as of February 12, 2003. Under this agreement, the investor has already purchased a convertible subordinated note in the initial principal amount of $20 million at par and received a warrant to purchase 1,250,000 shares of our Common Stock, which together are initially convertible (subject to certain requirements for conversion) and exercisable for approximately 8.7% of our outstanding Common Stock, and a director designated by the investor has been appointed to our board.

Our board believes that it is in our best interests and the best interests of our stockholders to approve the issuance and sale of up to $125.4 million of preferred stock and warrants to the investor by (a) converting the note in the initial principal amount of $20 million that we have already issued to the investor into preferred stock and (b) issuing up to $75.4 million of additional preferred stock and an additional warrant to the investor. The preferred stock (subject to certain requirements for conversion) and warrants will be convertible into and exercisable for Common Stock totaling approximately 30% of our outstanding Common Stock (and under certain circumstances could possibly be convertible into and exercisable for up to approximately 49% of our outstanding Common Stock within the next five years). The rules of the New York Stock Exchange require us to obtain stockholder approval before we issue Common Stock, or other securities convertible into or exercisable for Common Stock, r epresenting 20% or more of our outstanding Common Stock, so we need your approval to complete this investment. We also need your approval to amend our Certificate of Incorporation to (a) increase the number of authorized shares of our Common Stock, (b) authorize the two new series of preferred stock necessary to consummate the investment and (c) permit amendments to the terms of the preferred stock with only the approval of the Board of Directors and the holders of preferred stock.

If we obtain your approval and subject to the satisfaction of certain other closing conditions, we will:

• convert the $20 million initial principal amount (plus accrued but unpaid interest thereon) of the already-issued note into our Series A Convertible Preferred Stock at a price of $11.25 per share,
• issue 2,666,666 additional shares of our Series A Convertible Preferred Stock at a purchase price of $11.25 per share for $30 million, so that the investor will own approximately 4,500,000 shares of Series A Convertible Preferred Stock in total (including the shares of Series A Convertible Preferred Stock issued upon conversion of the outstanding note),
• issue 6,700,000 shares of our Series B Convertible Preferred Stock at a per share price equal to $11.25 per share, or if lower, 110% of the volume-weighted average closing price of our Common Stock over a specified 20-day trading period for an aggregate additional investment of up to $75.4 million,
• issue an additional warrant to purchase 1,250,000 shares of our Common Stock in addition to the warrant to purchase 1,250,000 shares of our Common Stock previously issued to the investor, and
• appoint a second director designated by the investor to our board of directors.

If the amendment to our Certificate of Incorporation and the issuances described above are not approved by the stockholders, we will instead, subject to various conditions, issue to the investor an additional note in an initial principal amount of $29.95 million at par, and we will appoint an additional director designated by the investor to our board. In this case, all the notes will be convertible, subject to certain requirements for conversion, into Common Stock.

Our board believes that this preferred stock investment is in our best interests and in the best interests of our stockholders for the following reasons:

• This investment would enable us to reduce our high leverage by paying down a portion of our existing debt, resulting in a strengthened balance sheet and improved liquidity. The additional equity investment is expected to be beneficial to our credit ratings by Standard & Poor's and Moody's based upon our discussions with them.
• On or before July 31, 2004, we have substantial amounts of our debt and other obligations maturing that we will need to refinance. We believe that a stronger balance sheet will allow us to refinance this debt with higher certainty and on better terms and conditions, including lower interest costs, than we could without the equity investment.
• Although neither we nor any of our employees has been charged by any governmental authority with any wrongdoing, as a result of the on-going government investigation of pricing practices in the polyester staple fiber industry, our current ability to access the public capital markets is sharply curtailed.
• If we approach significant debt maturities without new financing in place then the equity markets may perceive that we do not have sufficient liquidity, and the price of our Common Stock may decline substantially.
• We do not expect to pay preferred stock dividends in cash for five years, if at all.
• We will have access to the expertise and strategic relationships of this investor who, due to its substantial investment in us, will have a strong incentive to help us build stockholder value.
• The preferred stock investment is a more attractive investment than the notes because it provides more financial flexibility, a stronger balance sheet and higher earnings. In addition, the preferred stock investment represents a larger investment by Warburg Pincus VIII (up to $75.4 million more than the maximum initial aggregate principal amount of the notes).
• After conducting a thorough and competitive auction process in which more than 20 potential investors were contacted, our board determined that the terms and conditions of the Warburg Pincus VIII investment were more favorable than the other investment proposals.

The enclosed Notice of Special Meeting of Stockholders and Proxy Statement provides details of the proposed investment and related information. We urge you to read all of the enclosed materials carefully.

Your board of directors has determined that the terms of the investment are fair to us and in our best interests and the best interests of our stockholders. Your board has unanimously approved and unanimously recommends that you vote FOR the proposals at the special meeting.

Your vote is important. Whether or not you plan to attend the special meeting, please indicate your vote, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you attend the special meeting and prefer to vote your shares in person, you will be able to do so.

On behalf of your board of directors, thank you for your continued support of and interest in us.

Sincerely yours,



Thomas M. Duff
Chairman and Chief Executive Officer

WELLMAN, INC.

595 Shrewsbury Avenue
Shrewsbury, New Jersey 07702

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ____________, 2003

Oyster Point Hotel, 146 Bodman Place, Red Bank, New Jersey
10:00 AM, Local Time

To the Stockholders of
Wellman, Inc.

You are cordially invited to attend a Special Meeting of our Stockholders to:

1. Approve the issuance of up to 5,000,000 shares of Series A Convertible Preferred Stock, 6,700,000 shares of Series B Convertible Preferred Stock and a warrant to purchase 1,250,000 shares of Common Stock, and to ratify the prior issuance of the warrant to purchase 1,250,000 shares of Common Stock, to Warburg Pincus Private Equity VIII, L.P., and the potential issuance of Common Stock upon conversion of such Preferred Stock and exercise of such warrants; and

2. Approve an amendment to our Certificate of Incorporation (a) increasing our authorized Common Stock from 55,000,000 to 100,000,000 shares, (b) authorizing 5,000,000 shares of Series A Convertible Preferred Stock and 6,700,000 shares of Series B Convertible Preferred Stock and (c) permitting amendments to the terms of a class or series of Preferred Stock with only the approval of our Board of Directors and the holders of such class or series; and

3. Conduct other business properly brought before the meeting.

The effectiveness of proposals 1 and 2 are each contingent upon the approval of the other. We will take no action on either of proposals 1 or 2 unless both proposals are approved.

Only stockholders of record at the close of business on _____________, 2003 will be entitled to vote at the meeting.

By Order of the Board of Directors,


David K. Duffell
Secretary

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE INDICATE YOUR VOTE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE SPECIAL MEETING AND PREFER TO VOTE IN PERSON, YOU WILL BE ABLE TO DO SO.

WELLMAN, INC.

595 Shrewsbury Avenue
Shrewsbury, New Jersey 07702

PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
To Be Held _______________, 2003

The Special Meeting of our Stockholders will be held on _____________, 2003 at the Oyster Point Hotel, 146 Bodman Place, Red Bank, New Jersey, beginning promptly at 10:00 AM, local time. The enclosed proxy to vote at the special meeting and at any adjournment or postponement of the special meeting is solicited by our board of directors. It is anticipated that this proxy statement and the accompanying proxy card will be mailed, beginning __________, 2003, to owners of record of shares of our Common Stock. Our board of directors encourages you to read this document thoroughly and to take this opportunity to vote on the matters submitted at the special meeting.

TABLE OF CONTENTS

Page

Questions and Answers Summary of the Proxy Statement Statements Regarding Forward-Looking Information Information Concerning the Special Meeting and Voting Proposal 1 -- Approval of the Issuance of Series A Preferred Stock, Series B Preferred Stock Upon Conversion and Exercise Thereof Proposal 2 -- Approval of an Amendment to Our Certificate of Incorporation Stock Ownership by Management and Principal Stockholders Stockholder Proposals for 2003 Annual Meeting Other Matters Incorporation of Information by Reference Where You Can Find More Information

2 7 17 18 21 42 45 47 47 47 48

Exhibit 1 - Securities Purchase Agreement dated as of February 12, 2003

Exhibit 2 - Proposed Amendment to our Certificate of Incorporation

Exhibit 3 - Form of Warrant

QUESTIONS AND ANSWERS

Although we encourage you to read this entire proxy statement, we have included the following questions and answers to provide background information and brief answers to several questions that you may have about the proposals. Please read the rest of this proxy statement for full information about the proposals.

What am I being asked to approve?

You are being asked to approve two related proposals. The approval of each proposal is contingent upon the approval of the other. Therefore, we will take no action on either of these proposals unless both of them are approved.

The first proposal for you to consider is our issuance and sale to Warburg Pincus Private Equity VIII, L.P. ("Warburg Pincus VIII"), a private equity fund managed by Warburg Pincus LLC, of up to 5,000,000 shares of our Series A Convertible Preferred Stock ("Series A Preferred Stock"), 6,700,000 shares of our Series B Convertible Preferred Stock ("Series B Preferred Stock"; the Series B Preferred Stock and the Series A Preferred Stock are referred to together as the "Preferred Stock") and warrants to purchase 2,500,000 shares of Common Stock of which a warrant to purchase 1,250,000 shares of Common Stock has already been issued. As part of this proposal, we are also asking you to approve at this time the issuance of shares of our Common Stock upon conversion of the Preferred Stock and the exercise of the warrants in accordance with their terms.

We entered into a securities purchase agreement with Warburg Pincus VIII on February 12, 2003. At that time Warburg Pincus VIII purchased a Note in the initial principal amount of $20 million at par (the "Initial Note") and we issued to Warburg Pincus VIII a warrant to purchase 1,250,000 shares of our Common Stock at an exercise price of $11.25 per share (the "Initial Warrant"). In addition, we appointed Oliver Goldstein, a Vice President of Warburg Pincus LLC, to our board of directors as a designee of Warburg Pincus VIII. When certain conditions are met, including our obtaining stockholder approval of the proposals set forth in this proxy statement and securing a new $175 million senior revolving credit facility, the following will occur:

• the outstanding Initial Note in the principal amount of $20 million plus accrued and unpaid interest thereon will automatically convert into shares of Series A Preferred Stock at a price of $11.25 per share, and Warburg Pincus VIII will purchase for $30 million an additional 2,666,666 shares of Series A Preferred Stock at $11.25 per share so that it will own an aggregate of approximately 4,500,000 shares of Series A Preferred Stock;
• Warburg Pincus VIII will purchase 6,700,000 shares of our Series B Preferred Stock at $11.25 per share or, if lower, 110% of the volume-weighted average closing price of our Common Stock over a specified 20 day trading period (the "Series B Purchase Price");
• we will issue to Warburg Pincus VIII an additional warrant to purchase 1,250,000 shares of our Common Stock at an exercise price equal to the Series B Purchase Price (the "Additional Warrant"; the Initial Warrant and the Additional Warrant are referred to together as the "Warrants"); and
• we will appoint a second director designated by Warburg Pincus VIII to our board.

The second proposal for you to consider, which is related to the first, is an amendment to our Certificate of Incorporation to (a) increase the number of authorized shares of Common Stock from 55,000,000 to 100,000,000, (b) authorize 5,000,000 shares of Series A Preferred Stock and 6,700,000 shares of Series B Preferred Stock, so that we will have the authorized capital to make the issuances described above and (c) permit amendments to the terms of a class or series of Preferred Stock with only the approval of our board and the holders of such class or series.

What does our board of directors recommend?

After careful consideration, our board of directors has determined that the terms of the investment are fair to us and in our best interests and the best interests of our stockholders. Our board has unanimously approved and unanimously recommends that you vote FOR the proposals at the special meeting.

Our board believes that the Warburg Pincus VIII investment is in our best interests and the best interests of our stockholders for the following reasons:

• This investment will enable us to reduce our high leverage by paying down a portion of our existing debt, resulting in a strengthened balance sheet and improved liquidity. The additional equity investment is expected to be beneficial to our credit ratings by Standard & Poor's and Moody's based upon our discussions with them.
• On or before July 31, 2004, we have substantial amounts of our debt and other obligations maturing that we will need to refinance. We believe that a stronger balance sheet will allow us to refinance this debt with higher certainty and on better terms and conditions, including lower interest costs, than we could without the equity investment.
• Although neither we nor any of our employees has been charged by any governmental authority with any wrongdoing, as a result of the on-going government investigation of pricing practices in the polyester staple fiber industry, our current ability to access the public capital markets is sharply curtailed.
• If we approach significant debt maturities without new financing in place then the equity markets may perceive that we do not have sufficient liquidity, and the price of our Common Stock may decline substantially.
• We do not expect to pay Preferred Stock dividends in cash for five years, if at all.
• We will have access to the expertise and strategic relationships of this investor who, due to its substantial investment in us, will have a strong incentive to help us build stockholder value.
• The Preferred Stock investment is a more attractive investment than the notes because it provides more financial flexibility, a stronger balance sheet and higher earnings. In addition, the Preferred Stock investment represents a larger investment by Warburg Pincus VIII (up to $75.4 million more than the maximum initial aggregate principal amount of the notes).
• After conducting a thorough and competitive auction process in which more than 20 potential investors were contacted, our board determined that the terms and conditions of the Warburg Pincus VIII investment were more favorable than the other investment proposals.

Who is Warburg Pincus?

Warburg Pincus LLC is a leading private equity investment firm. The firm currently has nearly $10 billion under management, with approximately $6 billion available for investment in a range of industries. Since 1971, Warburg Pincus LLC has sponsored ten private equity investment funds with committed capital in excess of $19 billion. These funds have invested more than $15 billion in 469 companies in 29 countries.

Warburg Pincus VIII, a private equity fund managed by Warburg Pincus LLC, will make the proposed investment.

Why are we seeking stockholder approval for these proposals?

The rules of the New York Stock Exchange require us to obtain stockholder approval before issuing Common Stock, or other securities convertible into or exercisable for Common Stock, representing 20% or more of our outstanding Common Stock. Since the Preferred Stock (subject to certain requirements for conversion) and Warrants in the aggregate will be initially convertible into or exercisable for approximately 30% of our outstanding Common Stock (and under certain circumstances could possibly be convertible into and exercisable for up to approximately 49% of our outstanding Common Stock within the next five years), we are seeking your approval of the issuance of the Preferred Stock and Warrants, as well as the Common Stock issuable upon their conversion or exercise.

We do not currently have any shares of preferred stock authorized or issued and we do not have enough shares of Common Stock authorized to permit the conversion of the Preferred Stock and the exercise of the Warrants.

What will happen if the proposals are not approved by the stockholders?

If the proposals are not approved by the stockholders, the Series A Preferred Stock and Series B Preferred Stock will not be issued to Warburg Pincus VIII and, subject to certain exceptions, the Additional Warrant will not be issued to Warburg Pincus VIII. Subject to certain conditions, including our obtaining a new $150 million senior revolving credit facility, Warburg Pincus VIII will purchase an additional note in an initial principal amount of $29.95 million at par (the "Additional Note" and, together with the Initial Note, the "Notes") and a second director designated by Warburg Pincus VIII will be appointed to our board. The Notes in an initial aggregate principal amount of $49.95 million then outstanding will not be convertible into Series A Preferred Stock but will instead be convertible only into our Common Stock at an initial conversion price of $11.25 per share. The conversion price of the Notes is subject to the same market price based adjustments and anti-dilution adju stments as the conversion price of each series of Preferred Stock are subject. Warburg Pincus VIII will continue to hold the Initial Warrant. However, the Common Stock issuable upon conversion or exercise of the $49.95 million in principal amount of Notes and the Warrants would be limited to 19.99% of our Common Stock outstanding on February 12, 2003. If more than that amount of Common Stock would otherwise be issuable under the Notes and Warrants, the excess shares (the "Excess Shares") would not be issued. Instead, upon conversion, Warburg Pincus VIII would be entitled to receive a cash payment (the "Excess Share Payment") in an amount equal to the excess of the then current market value of our Common Stock over the conversion price of the Notes then in effect for the Excess Shares. In this event, additional interest expense will be recorded for any increase in the value of the Excess Shares above the conversion price.

Warburg Pincus VIII (or, under certain circumstances, its transferee) will continue to have the right to (i) appoint two directors to our board and to designate one observer to attend all board meetings so long as it continues to hold at least $25 million in aggregate principal amount of the Notes and (ii) appoint one director so long as it continues to hold Common Stock or Notes representing at least 5% of our outstanding Common Stock. As a result of these provisions, Oliver Goldstein, a vice president of Warburg Pincus LLC, became a member of our board in February 2003. In addition, each holder of 10% or more of the outstanding principal amount of the Notes will generally have the right to purchase its pro rata amount of new equity securities issued, subject to certain customary exceptions. We are also required to file a shelf registration statement on Form S-3 with the SEC to register the Notes and the Warrants and the Common Stock issuable upon conversion or exercise thereof.

How many votes are required to approve the proposals?

Proposal 1 requires a majority of the total votes cast at the special meeting; and

Proposal 2 requires the affirmative vote of a majority of the outstanding shares of Common Stock entitled to vote thereon.

Although they have different voting requirements, each proposal is contingent upon the approval of the other. Therefore, both proposals must be approved for either to be effective. This means that for either proposal to be effective there must be an affirmative vote of the majority of the outstanding shares of Common Stock entitled to vote thereon. Proxies that are not submitted or reflect abstentions have the effect of a vote against both proposals.

Who can vote?

Only the stockholders of record at the close of business on _______________, 2003, are entitled to vote at the special meeting. On that day, approximately ________ shares of our Common Stock were outstanding and eligible to vote. Each share is entitled to one vote on each matter presented at the special meeting.

What do I need to do now?

After you read and consider the information in this proxy statement, just mail your signed proxy card indicating your vote in the enclosed postage-paid envelope as soon as possible, so that your shares may be represented at the special meeting. You should return your proxy card whether or not you plan to attend the special meeting. If you attend the special meeting, you may revoke your proxy at any time before it is voted and vote in person if you wish.

If my shares are held in "street name" by my broker, will my broker vote my shares for me?

Your broker will vote your shares only if you provide instructions on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares.

What do I do if I want to change my vote after I have sent in my proxy card?

You can change your vote at any time before your proxy is voted at the special meeting. You can do this in one of three ways. You can send a written notice stating that you would like to revoke your proxy. You can also complete and submit a new proxy card at a later date. If you choose either of these methods, you must submit your notice of revocation or your new proxy card to our Investor Relations Officer before the special meeting. Finally, you can attend the special meeting and vote in person. However, simply attending the meeting, by itself, will not revoke your proxy. If you have instructed a broker to vote your shares, you must follow your broker's directions on how to change your vote.

How are votes counted?

A quorum must exist for the transaction of business at the special meeting. A quorum is a majority of the outstanding shares entitled to vote which are present or represented by proxy at the special meeting. If you submit a properly executed proxy card, even if you abstain from voting, your shares will be considered part of the quorum. Broker non-votes (which are shares held by a broker or nominee that are represented at the special meeting, but with respect to which the broker or nominee is not empowered to vote on a proposal) and abstentions will be included in determining the presence of a quorum. Since the first proposal requires a majority of the votes cast, broker non-votes and abstentions will have no effect on the outcome of this proposal. However, since the second proposal requires the affirmative vote of a majority of the outstanding shares entitled to vote and each proposal is contingent upon the approval of the other proposal, broker non-votes and abstentions will have the effect of a vote against both proposals.

Who can help answer my questions about the transactions and the other proposals?

If you have additional questions about the transactions and the other proposals, you should contact Dennis Sabourin, our Investor Relations Officer at (732) 212-3321 or call Georgeson Shareholder Services, Inc. at (866) 775-2752.

SUMMARY OF THE PROXY STATEMENT

This summary of the proxy statement, together with the previous question and answer section, provide an overview of the transactions discussed in this proxy statement but does not contain all of the information that is important to you. You should carefully read this entire proxy statement and the attached exhibits in their entirety for a more complete understanding of the proposals.

The Special Meeting (see pages 18 to 20)

The enclosed proxy is solicited on behalf of our Board of Directors for use at our special meeting of stockholders to be held on ___________, _________, 2003 at 10:00 AM local time, or at any adjournment or postponement of the meeting. The special meeting will be held at the Oyster Point Hotel located at 146 Bodman Place, Red Bank, New Jersey.

Background (see pages 21 through 23)

Recognizing that substantial amounts of our debt and other obligations would be maturing on or before July 31, 2004 and that the financial markets may continue to be volatile, in April 2002 we engaged financial advisors to evaluate our refinancing alternatives. As a result of this evaluation, management and the board concluded that a private equity investment was needed to strengthen our balance sheet and improve our liquidity. After conducting a vigorous, competitive auction process, we entered into a non-binding letter of intent on November 4, 2002 with Warburg Pincus VIII that provided the basic economic framework for and the material terms of an investment valued at $11.25 per share for the initial portion of their investment and $11.25 per share, or if lower, 110% of the volume-weighted average closing price of our Common Stock over a specified 20 trading day period for the balance of their investment. The $11.25 per share price represented a $0.59 (5.5%) premium over the closing price of our Common Stock on that date. After the completion of due diligence and documentation, we entered into a definitive securities purchase agreement with Warburg Pincus VIII on February 12, 2003 on substantially the same terms agreed to in the letter of intent providing for the issuance of the Notes, up to 5,000,000 shares of Series A Preferred Stock, 6,700,000 shares of Series B Preferred Stock and Warrants to purchase 2,500,000 shares of Common Stock for up to $125.4 million in cash (exclusive of the exercise price of the Warrants). Upon consummation of the transaction for which we are requesting stockholder approval, and assuming exercise of all Warrants by Warburg Pincus VIII for cash, Warburg Pincus VIII will own approximately 30% of our outstanding voting securities. This amount is subject to increase under certain conditions to a maximum of approximately 49% of our outstanding Common Stock during the next five years.

At the time of signing the agreement, we issued to Warburg Pincus VIII the Initial Warrant to purchase 1,250,000 shares of our Common Stock at an exercise price of $11.25 per share and Warburg Pincus VIII purchased a Note in an initial principal amount of $20 million at par. In addition, we appointed Oliver Goldstein, a vice president of Warburg Pincus LLC, to our board as a designee of Warburg Pincus VIII. When certain conditions are met, including stockholder approval of the proposals set forth in this proxy statement and our obtaining a new $175 million senior revolving credit facility, the following will occur:

• the outstanding Initial Note will automatically convert into shares of Series A Preferred Stock and Warburg Pincus VIII will purchase for $30 million in cash an additional 2,666,666 shares of Series A Preferred Stock at $11.25 per share so that it will own an aggregate of approximately 4,500,000 shares of Series A Preferred Stock;
• Warburg Pincus VIII will purchase 6,700,000 shares of Series B Preferred Stock at a price per share equal to the Series B Purchase Price;
• we will issue to Warburg Pincus VIII the Additional Warrant to purchase 1,250,000 shares of our Common Stock at an exercise price equal to the Series B Purchase Price; and
• we will appoint a second director designated by Warburg Pincus VIII to our board.

If such conditions are not met, the Preferred Stock and, subject to certain exceptions, the Additional Warrant will not be issued to Warburg Pincus VIII. In such case, subject to certain conditions, including our obtaining a new $150 million senior revolving credit facility, Warburg Pincus VIII will purchase the Additional Note in the initial principal amount of $29.95 million at par and a second director designated by Warburg Pincus VIII will be appointed to our board. The resulting $49.95 million in initial aggregate principal amount of the Notes then outstanding, by their terms, will not be convertible into Series A Preferred Stock but will instead be convertible only into our Common Stock at a conversion price of $11.25 per share. Warburg Pincus VIII will continue to hold the Initial Warrant. The amount of Common Stock issuable upon conversion or exercise of the $49.95 million in initial principal amount of Notes and the Warrants would be limited to 19.99% of the Common Stock outstandi ng on February 12, 2003. If more than that amount of Common Stock would otherwise be issuable upon conversion or exercise of the Notes and Warrants, the Excess Shares would not be issued. Instead, upon conversion, Warburg Pincus VIII would be entitled to receive the cash Excess Share Payment in an amount equal to the excess of the current market value of our Common Stock over the conversion price in effect under the Notes for the unissued Excess Shares. Since the number of shares issuable would be less than 20% of the number of shares of Common Stock outstanding on February 12, 2003, the issuance of the Notes and Warrants would not require stockholder approval under the New York Stock Exchange rules.

Use of Proceeds (see pages 25 to 26)

We intend to use the proceeds from the Warburg Pincus VIII investment to repay indebtedness and to pay certain transaction costs. The indebtedness to be retired is not associated with any specific asset, however we incurred significant indebtedness for capital expenditures and working capital purposes between 1996 and 2000 during the construction of our Pearl River facility.

Material Terms of the Preferred Stock (see pages 26 to 30)

The following description summarizes the material terms of the Preferred Stock. You are urged to read carefully in its entirety the proposed amendment to our Certificate of Incorporation attached hereto as Exhibit B which fully sets forth the terms of the Preferred Stock.

Dividends (see page 26). If specified consolidated net earnings levels are met, the Preferred Stock will receive dividends and distributions declared on the Common Stock on an as-converted basis. Since we do not expect to meet these earnings levels for at least the next four years, we do not currently anticipate that such dividends will be paid for at least four years, if at all.

After five years, shares of the Preferred Stock will be entitled to dividends equal to 8.75% per annum (10% if the Common Stock quarterly dividend is less than $.045 per share or if the consolidated net earnings levels are not met) of their liquidation preference. These dividends will be payable quarterly in cash or will continue to accrue (at the holder's option).

Liquidation Preference (see page 27). The initial liquidation preference for the Series A Preferred Stock is $11.25 per share and the initial liquidation preference for the Series B Preferred Stock is the Series B Purchase Price ($11.25 per share or, if lower, 110% of the volume-weighted average closing price of the Common Stock over a specified 20 day trading period). The liquidation preference of both series accretes at 7.25% (8.5% if the Common Stock quarterly dividend is less than $.045 per share or if specified consolidated net earnings levels are not met) per annum, compounded quarterly, through the first five years. The liquidation preference is subject to adjustment upon a Change in Control within five years of the issuance of the Preferred Stock.

Initial Conversion Price (see page 27). The initial price at which the Series A Preferred Stock may be converted into shares of our Common Stock is $11.25. The initial conversion price of the Series B Preferred Stock is the Series B Purchase Price.

Market Price Based Adjustments of Conversion Price (see pages 27 to 28). The conversion price of each series of Preferred Stock will be reduced on the fourth anniversary of the issuance of the Preferred Stock if the volume-weighted average price of the Common Stock for the immediately preceding 60 consecutive trading days does not equal or exceed $23.00. The reduction will be equal to the excess of $23.00 over such average price. However, in no event will the conversion price be reduced by more than $4.50 or 40% of the initial conversion price of such series as a result of this market price adjustment. As a result, an initial conversion price of $11.25 could be reduced to as low as $6.75 per share, which would result in substantially more dilution for the holders of Common Stock. See "Dilutive Effects of the Preferred Stock and Warrants" below. Upon the occurrence of certain Changes in Control prior to the fourth anniversary of the issuance of the Preferred Stock, the conversion pri ces are subject to similar adjustments (and the 40% maximum adjustment limitation), based on a comparison of the average price of the Common Stock over a specified period against specified target prices ranging from $14.00 in the first year to $23.00 in the fourth year. In addition, the conversion price of each series of Preferred Stock is subject to customary weighted average anti-dilution adjustments for issuances of Common Stock or Common Stock equivalents at below market prices (subject to certain exceptions), as described below.

Conversion by Investors (see page 28). The holders of the Preferred Stock may convert the Preferred Stock into Common Stock (i) at any time after a Conversion Event, as defined below, (ii) if the volume-weighted average price of the Common Stock for the 60 consecutive trading days prior to the date of conversion is $23.00 or more per share, or (iii) upon consent of our board (excluding the directors appointed by Warburg Pincus VIII). The number of shares of Common Stock issued upon conversion will be equal to the liquidation preference then in effect divided by the then current conversion price. A Conversion Event is the first to occur of the following:

• we publicly report that our cash earnings per share (as defined) for the four calendar quarters prior to such report are or will be less than $1.50;
• an extraordinary charge or charges in any calendar year results in or is expected to result in cash payments of more than $50 million;
• the first date following the fourth anniversary of the issuance of the Preferred Stock that the highest price of the Common Stock is at least 110% of the lowest price on a trading day not more than 20 trading days before such anniversary selected by the holders of a majority of the Preferred Stock or if no such date is selected, the fourth anniversary;
• a Change in Control (as defined below) occurs or we enter into an agreement that would cause such occurrence or a notice of redemption is given; and
• the date on which a majority of the directors then in office (excluding directors designated by Warburg Pincus VIII) adopts a resolution that a Conversion Event has occurred.

Conversion by Us (see page 28). We can require conversion of the Preferred Stock at any time after the fifth anniversary of the issuance date of the Preferred Stock if the closing price of the Common Stock exceeds 125% of the conversion price for 30 consecutive trading days.

Change in Control (see pages 28 to 29). If a transaction occurs where (i) 50% or more of our Common Stock is acquired or held by any person other than our stockholders prior to the transaction, (ii) we sell in excess of 50% of our assets or (iii) individuals who were members of our board as of the issuance date of the Preferred Stock (together with directors whose election or appointment to the board is approved by the directors then in office) cease to constitute a majority of the board of the surviving entity (a "Change in Control"), the holders of the Preferred Stock will have the right to:

• convert the Preferred Stock and receive the consideration from the Change in Control transaction upon conversion; or
• continue to hold the Preferred Stock in the surviving entity; or
• request us to redeem the Preferred Stock for cash in an amount equal to the liquidation preference of each such series of Preferred Stock plus any declared and unpaid dividends, in which case we will have the right either to redeem the Preferred Stock or to remarket the Preferred Stock for the holders pursuant to the remarketing provisions described below.

If a Change in Control occurs within five years of the issuance of the Preferred Stock, the liquidation preference will automatically increase to include accretion at 8.5% per annum for the balance of such five-year period. See also "Market Price Based Adjustments of Conversion Price".

Anti-Dilution (see page 29). The conversion price of each series of Preferred Stock will be subject to customary weighted average anti-dilution adjustments for issuances or deemed issuances of Common Stock at below the then current market price and other customary adjustments for stock splits, extraordinary dividends and similar transactions.

Remarketing (see page 29). On the seventh anniversary of the issuance of the Preferred Stock, if certain dividend payment defaults occur, or in the event of a Change in Control (in lieu of the holders of Preferred Stock receiving the Change in Control consideration), we are required to use our reasonable best efforts, together with the remarketing agent, to facilitate the remarketing of the Preferred Stock. We will be required to increase the dividend rate to the rate necessary to resell all of the Preferred Stock at a price not less than 100% of the liquidation preference then in effect. Upon such adjustment, we have the option of either reselling the Preferred Stock for the holders or redeeming the Preferred Stock for cash in the amount of the liquidation preference then in effect.

Redemption (see page 29). The Preferred Stock is not subject to redemption at the option of the holders of the Preferred Stock. We may redeem the Preferred Stock in lieu of affecting a remarketing of the Preferred Stock as described above by paying the holders of Preferred Stock a redemption price in cash equal to the liquidation preference of the Preferred Stock in effect on the date of the redemption.

Board Seats (see pages 29 to 30). Pursuant to the terms of the Preferred Stock, so long as Warburg Pincus VIII (or under certain circumstances, its transferees) owns at least one third of the Preferred Stock, the holders of a majority of the outstanding Preferred Stock have the right to designate two directors to our board and, so long as Warburg Pincus VIII (or under certain circumstances, its transferees) owns Preferred Stock representing at least 5% of the outstanding Common Stock (calculated on a fully diluted basis assuming that the Preferred Stock is then currently convertible) but less than one third of the Preferred Stock, the holders of a majority of the outstanding Preferred Stock have the right to designate one director to our board. Pursuant to the terms of the purchase agreement, at any time after the conversion of the Preferred Stock into shares of Common Stock, Warburg Pincus VIII has the right to appoint (i) two directors to our board so long as it continues to own at least one third of the Common Stock issuable upon conversion or exercise of the Preferred Stock and Warrants and (ii) one director to our board so long as it continues to own more than 5% of the outstanding Common Stock but less than one third of the Common Stock issuable upon conversion or exercise of the Preferred Stock and Warrants.

In addition, pursuant to the terms of the purchase agreement, whenever Warburg Pincus VIII (or under certain circumstances, its transferees) has the right to appoint two directors to our board, it also has the right to appoint one observer to attend board meetings.

Voting Rights (see page 30). The holders of the Preferred Stock generally have the right to vote with the holders of our Common Stock on an as-converted basis. For the first five years, the holders of the Preferred Stock will not participate in the election of directors, other than the right of the holders of a majority of the Preferred Stock to designate up to two directors as discussed above under "Board Seats." In addition, the approval of holders of a majority of the Preferred Stock is required to approve:

• changes to our certificate of incorporation or bylaws adverse to the rights of the holders of the Preferred Stock;
• offers, sales or issuances of equity securities ranking at the same level as or senior to the Preferred Stock with respect to dividend or liquidation rights; or
• repurchases or redemptions of equity securities or extraordinary dividends on our Common Stock, subject to certain exceptions.

Material Terms of the Warrants (see pages 30 to 31)

The following description summarizes the material terms of the Warrants. You are urged to read carefully in its entirety the form of Warrant attached hereto as Exhibit C that fully sets forth the terms of the Warrants.

Number of Shares and Exercise Price (see page 30). On February 12, 2003 we issued to Warburg Pincus VIII the Initial Warrant to purchase 1,250,000 shares of our Common Stock at an exercise price of $11.25 per share. The Additional Warrant, which will be issued to Warburg Pincus VIII if the proposals are approved, will grant Warburg Pincus VIII the right to purchase an additional 1,250,000 shares of our Common Stock at an exercise price equal to the Series B Purchase Price. The Warrants are exercisable, in whole or in part, at any time.

Expiration (see page 30). The Warrants will automatically expire on the seventh anniversary of their issuance dates. The Initial Warrant will expire sooner if the securities purchase agreement is terminated under certain circumstances.

Adjustments to the Exercise Price (see page 31). The exercise price and the number of shares issuable upon exercise of the Warrants will be subject to customary weighted average anti-dilution adjustments for issuances or deemed issuances of Common Stock at below the then current market price and other customary adjustments for stock splits, extraordinary dividends and similar transactions.

Dilutive Effects of the Preferred Stock and Warrants (see pages 31 to 34)

If shares of Common Stock are issued upon conversion of the Preferred Stock or exercise of the Warrants, existing stockholders will have their ownership percentage diluted. Upon exercise of the Warrants, 2,500,000 shares of Common Stock are issuable. The exact number of shares of Common Stock ultimately issuable upon conversion of the Preferred Stock cannot be determined at this time. The number of shares issuable upon conversion of the Preferred Stock will be determined by dividing the liquidation preference then in effect by the conversion price then in effect. As described more fully above, the liquidation preference accretes for the first five years and possibly for subsequent years as well. This has the effect of increasing the number of shares issuable upon conversion. Also, the conversion price of each series of Preferred Stock is subject to reduction to as low as 60% of the initial issuance price per share (a reduction to as low as $6.75 for the Series A Preferred Stock) if our stock price does not achieve certain levels by specified time periods. In addition, the conversion prices are subject to customary weighted average anti-dilution adjustments for below market issuances of Common Stock. This also has the effect of increasing the number of shares issuable upon conversion. Based on the 31,868,809 shares outstanding as of March 3, 2003, the Common Stock issuable to Warburg Pincus VIII upon conversion of the Preferred Stock (subject to certain requirements for conversion) and exercise of the Warrants would represent from a minimum of approximately 30% to a maximum of approximately 49% of our outstanding Common Stock by the fifth anniversary of its issuance. After the fifth anniversary of the issuance of the Preferred Stock and the termination of the standstill provisions, it is possible that Warburg Pincus VIII may own more than 50% of our outstanding Common Stock on an as-converted and as-exercised basis if they (i) purchase further Common Stock in the market, or (ii) elect to have the dividends on the Preferred Stock continue to accrue and in lieu of receiving cash dividends and we cannot require conversion of the Preferred Stock due to our market price not exceeding the required level for mandatory conversion.

The number of shares of Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants will also affect our earnings per share. The larger the number of shares deemed outstanding, the lower our earnings per share will be. The actual effect of the Preferred Stock and Warrants on our earnings per share will depend on the level of our earnings in future periods, the actual liquidation preference, the actual conversion price and the accounting treatment of the Preferred Stock and Warrants (discussed below).

If the Preferred Stock is not issued, the shares of Common Stock issuable upon conversion of the Notes would have similar dilutive effects on the ownership percentage of existing stockholders and on our earnings per share. Although the total Common Stock issuable to Warburg Pincus VIII is limited to 19.99% of the shares of Common Stock outstanding on February 12, 2003, any Excess Share Payment would be treated as interest which would have the effect of lowering our earnings per share.

Accounting Treatment (see pages 34 to 38)

The Preferred Stock will not be included in computing the number of shares outstanding unless and until it becomes convertible into Common Stock. The Preferred Stock is convertible to Common Stock during the periods described in "Material Terms of the Preferred Stock" above. If the Preferred Stock becomes convertible into Common Stock, it would result in significant increases in the number of shares outstanding, which in turn could significantly decrease our earnings per share.

The Warrants will be accounted for using the treasury stock method, and therefore they become dilutive only when the market price of the Common Stock is above their exercise price.

The Preferred Stock may be issued at a price that, without regard to the restrictions on conversion, allows the holders of Preferred Stock to convert the Preferred Stock into Common Stock at a conversion price that is less than the market price of the Common Stock on the date of issuance of the Preferred Stock. Therefore, we may incur a non-cash beneficial conversion feature ("BCF") which would be recorded in the financial statements at the time that the Preferred Stock becomes convertible to Common Stock and would result in a non-cash reduction of earnings per share at that time. A BCF may also result if the conversion price of the Preferred Stock is reduced on the fourth anniversary of its issuance because our Common Stock price did not exceed $23.00 (see "Market Price Based Adjustment of Conversion Price" above). Additionally, a BCF could result upon accretion of the liquidation preference of the Preferred Stock over time.

The accounting treatment of the Notes is comparable to that of the Preferred Stock except that any BCF would be treated as interest expense, resulting in a decrease in net earnings as opposed to earnings available for common stockholders. Because the market price of our Common Stock was higher than the conversion price of the Initial Note on the date of its issuance, there is a potential BCF equal to the product of (a) the difference between the market price and the conversion price on such date times (b) the number of shares of Common Stock issuable upon conversion of the Initial Note. Based on the closing price of our Common Stock on February 12, 2003, this portion of potential BCF totaled approximately $1.9 million. In addition, at the end of each reporting period, we are required to record interest expense in an amount equal to the product of (i) the number of Excess Shares times (ii) any positive difference between the market price of our Common Stock less $11.25, reduced by an y amounts previously recorded. These amounts could significantly affect our net earnings and earnings per share if the Preferred Stock investment is not consummated and the Notes remain outstanding.

Other Agreements (see pages 38 through 39)

No Solicitation (see page 38). The securities purchase agreement contains non-solicitation provisions which prohibit us from soliciting or engaging in discussions or negotiations regarding an alternative equity financing or a transaction that would result in a change of control prior to the consummation of Warburg Pincus VIII's equity investment.

Preemptive Rights (see page 38). Each holder of more than 10% of the outstanding Preferred Stock will generally have a right to purchase its pro rata amount of new issuances of our equity securities, subject to customary exceptions.

Registration (see pages 38 to 39). We are required to file a shelf registration statement on Form S-3 with the SEC promptly after the issuance of the Preferred Stock. Once the registration statement is effective the holders of the Preferred Stock, the Warrants and any Common Stock issued on conversion of the securities will have the right to publicly resell their securities.

Out-of-Pocket Expenses (see page 39). We will reimburse Warburg Pincus VIII for its out-of-pocket expenses up to $1,500,000 regardless of whether the transactions close. However, we will not be obligated to pay more than $500,000 if the transactions fail to close solely as a result of Warburg Pincus VIII's breach.

Restrictions on Transfer (see page 39). Warburg Pincus VIII generally can transfer the Preferred Stock, the Warrants and the Common Stock to its affiliates, the public or to a private investor, provided that as a result of any transfer to a private investor no one person or group would beneficially own more than 20% of our then outstanding Common Stock.

Standstill Provisions and Other Matters (see page 39). Until the fifth anniversary of the issuance of the Preferred Stock, Warburg Pincus VIII may not, without our consent, acquire any securities other than (i) securities issuable upon conversion or exercise of the Notes, Preferred Stock or Warrants and (ii) up to an aggregate of an additional 5% of our Common Stock; provided in no event may acquisitions of Common Stock pursuant to clause (ii) result in it beneficially owning more than 49.9% of our then outstanding voting power. In addition, during the same period, Warburg Pincus VIII may not solicit proxies or influence any person with respect to the voting of our securities or enter into any business combination transaction relating to us or our assets.

Terms of Notes (see page 40)

If the stockholders approve the proposals, all outstanding Notes will automatically convert into shares of Series A Preferred Stock. If stockholder approval for the proposals is not obtained, the outstanding Initial Note in the initial principal amount of $20 million will remain outstanding and, subject to the satisfaction of certain closing conditions, Warburg Pincus VIII will purchase the Additional Note.

The Notes generally become due and payable either upon the occurrence of an event of default or six years after issuance. Interest on the Notes accrues at the rate of 8.775%, compounded annually, for the first five years, and 10.38% thereafter. During the first five years, up to 40% of the interest is payable in cash, at the election of the holder. Any interest not paid in cash will be added to the principal amount of the Notes (i.e., accreted). The Notes are subordinated and subject in right of payment to the prior payment in full of all of our outstanding indebtedness and certain contractual payment obligations other than certain accounts payable, inter-company debt and debt evidenced by certain equity interests.

If our stockholders do not approve the proposals, the Notes will remain outstanding and convertible at the option of the holders into Common Stock, subject to certain requirements for conversion. The number of shares of Common Stock issuable upon conversion is equal to the accreted principal amount of the Notes then in effect divided by the then current conversion price (initially, $11.25). The Common Stock issuable upon conversion or exercise of the Notes and Warrants would be limited to 19.99% of our Common Stock outstanding on February 12, 2003. Warburg Pincus VIII is entitled to the cash Excess Share Payment in lieu of receiving the Excess Shares. The provisions of the Notes regarding the conversion price, market price based conversion price adjustments and weighted average anti-dilution adjustments, conversions by the holders and mandatory conversions at our option are substantially similar to those described above for the Series A Preferred Stock.

In addition, we are subject to certain negative covenants pursuant to the terms of the Notes. Without the consent of the holders of a majority of the value of the Notes then outstanding, we cannot:

• change our certificate of incorporation or bylaws to adversely affect the rights of the holders of the Notes;
• sell or issue debt convertible into or exchangeable for equity securities ranking prior in right of payment to the Notes;
• repurchase or redeem equity securities in excess of $20 million per year, subject to certain exceptions;
• declare or pay extraordinary dividends on our Common Stock; and
• permit our consolidated indebtedness and securitizations to exceed $626 million at the end of any quarter.

No Appraisal Rights (see page 20)

Stockholders will have no rights of appraisal in connection with the Warburg Pincus VIII investment or the amendment of our certificate of incorporation.

Recommendation of the Board of Directors (see pages 23 through 25; and page 43)

Our board of directors has determined that the terms of the investment are fair to us and in our best interests and the best interests of our stockholders. Your board has unanimously approved and unanimously recommends that you vote FOR the proposals at the special meeting.

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This proxy statement and the documents we incorporate by reference in this proxy statement contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to the financial condition, results of operations, cash flows, financing plans, business strategies, capital and other expenditures, outlook, markets, and other matters. Statements in this document that are not historical facts are hereby identified as forward-looking statements for the purpose of the safe harbors provided by Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933.

When we use the words "anticipate," "estimate," "project," "intend," "expect," "plan," "believe," "should," "likely" and similar expressions, we are making forward-looking statements. These forward-looking statements are found at various places throughout this proxy statement and the other documents we incorporate by reference in this proxy statement. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this proxy statement or to reflect the occurrence of unanticipated events.

These forward-looking statements are estimates reflecting our best judgment. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in this proxy statement. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include the following:

• economic conditions that affect the supply and demand and competition for our PET resins and polyester staple fiber products;
• the impact on our profitability of the financial condition of our customers;
• fiber and textile imports continue to adversely impact our margins;
• dependence of our operations on the availability and cost of our raw materials;
• the availability and costs of financing could adversely affect our profitability;
• changes in financial markets, interest rates, credit ratings and foreign currency exchange rates could adversely affect our profitability;
• regulatory changes may affect the demand for our products;
• additional liabilities may be proposed by tax authorities;
• increases in energy costs could adversely affect our profitability;
• actual costs for environmental matters may vary from our estimates; and
• the impact of a governmental investigation of pricing practices in the polyester staple fiber industry may adversely affect our profitability.

INFORMATION CONCERNING THE SPECIAL MEETING AND VOTING

General

The enclosed proxy is solicited by our board of directors for use at our special meeting and any adjournment or postponement of that meeting for the purposes set forth in this proxy statement and in the accompanying notice. This proxy statement is first being mailed to all stockholders entitled to vote at the meeting on or about _____________, 2003.

Date, Time and Place

Our special meeting of stockholders will be held at the Oyster Point Hotel, 146 Bodman Place, Red Bank, New Jersey, on _______________, 2003 at 10:00 AM, local time.

Matters to be Considered at the Special Meeting

At the special meeting and any adjournment or postponement, our stockholders will be asked to:

1. Approve the issuance of up to 5,000,000 shares of Series A Convertible Preferred Stock, 6,700,000 shares of Series B Convertible Preferred Stock and a warrant to purchase 1,250,000 shares of Common Stock, and to ratify the prior issuance of the warrant to purchase 1,250,000 shares of Common Stock, to Warburg Pincus VIII and to approve the potential issuance of Common Stock upon conversion of such Preferred Stock and exercise of such warrants; and

2. Approve an amendment to our Certificate of Incorporation (a) increasing our authorized Common Stock from 55,000,000 to 100,000,000 shares, (b) authorizing 5,000,000 shares of Series A Convertible Preferred Stock and 6,700,000 of Series B Convertible Preferred Stock and (c) permitting amendments to the terms of a class or series of Preferred Stock with only the approval of our board of Directors and the holders of such class or series; and

3. Conduct other business properly brought before the meeting.

The effectiveness of proposals 1 and 2 are each contingent upon the approval of the other. We will take no action on either of proposals 1 and 2 unless both proposals are approved.

Record Date and Voting Rights

Only the holders of record of our Common Stock at the close of business on _______________, 2003 are entitled to notice of and to vote at the special meeting. As of the record date, _______________ shares of Common Stock were issued, outstanding, and entitled to vote at the special meeting. Each holder of record of our Common Stock on that date will be entitled to one vote for each share held on all matters to be voted upon at the special meeting.

Proxies properly executed, duly returned to us and not revoked will be voted in accordance with the specifications made in the proxy card. Where no specifications are given, the proxies will be voted in favor of the proposals. If any matter not described in this proxy statement is properly presented for action at the meeting, the persons named on the enclosed proxy card will have discretionary authority to vote according to their best judgment. All votes will be tabulated by the inspector of stockholder votes appointed for the meeting, who will separately tabulate affirmative and negative votes. Proxy holders may adjourn the special meeting to solicit additional proxies if necessary.

Votes Required for Approval

Proposal 1 requires a majority of the total votes cast at the special meeting.

Proposal 2 requires the affirmative vote of a majority of the outstanding shares of Common Stock entitled to vote thereon.

Although they have different voting requirements, each proposal is contingent upon the approval of the other. Therefore, both proposals must be approved for either to be effective. This means for either proposal to be effective there must be an affirmative vote of the majority of the outstanding shares of Common Stock entitled to vote thereon.

Quorum, Abstentions and Broker Non-Votes

The required quorum for the transaction of business at the special meeting is a majority of our outstanding shares as of the record date. Abstentions and broker non-votes (meaning proxies submitted by brokers as holders of record on behalf of their customers that do not indicate how to vote on the proposal) will be included in determining the presence of a quorum.

While shares reflecting abstentions and broker non-votes will be counted as shares that are present for purposes of determining the presence of a quorum, proxies that reflect abstentions have the following effects on the outcome of each of the proposals to be considered at the special meeting:

(a) Proposal 1: no impact on the outcome of the vote; and

(b) Proposal 2: the same effect as a vote AGAINST the proposal.

Because each proposal is conditioned on the other, proxies that are not submitted or reflect abstentions have the same effect as a vote against both proposals.

Revocability of Proxies

Any person giving a proxy in response to this solicitation has the power to revoke it at any time prior to the time that the proxy is voted at the special meeting. Proxies may be revoked by any of the following actions:

• delivering a written notice stating that the proxy is revoked to our Investor Relations Officer at our principal executive offices (595 Shrewsbury Avenue, Shrewsbury, NJ 07702) bearing a date later than the date of the proxy;
• signing and delivering a later-dated proxy relating to the same shares to our Investor Relations Officer at our principal executive offices; or
• attending the special meeting and voting in person (although attendance at the meeting will not, by itself, revoke a proxy).

If your shares are held in "street name" by your broker, you must follow the directions received from your broker to change your vote.

Independent Auditors

The firm of Ernst & Young, LLP, our independent auditors, is expected to be present at the special meeting and will have the opportunity to make a statement if they so decide and will be available to respond to appropriate questions.

Multiple Stockholders Sharing One Address

In some instances we may deliver to multiple stockholders sharing a common address only one copy of this proxy statement. If requested by phone or in writing, we will promptly provide a separate copy of the proxy statement to a stockholder sharing an address with another stockholder. Requests by phone should be directed to our Investor Relations Officer at (732) 212-3321, and requests in writing should be sent to Wellman, Inc., Attention: Investor Relations Officer, 595 Shrewsbury Avenue, Shrewsbury, NJ 07702. Stockholders sharing an address who currently receive multiple copies and wish to receive only a single copy should contact their broker or send a signed, written request to us at the address above.

No Appraisal Rights

Stockholders will have no rights of appraisal in connection with the proposals to be considered at the special meeting.

PROPOSAL 1 - APPROVAL OF THE ISSUANCE OF SERIES A PREFERRED STOCK, SERIES B PREFERRED STOCK, WARRANTS AND COMMON STOCK ISSUABLE UPON CONVERSION AND EXERCISE THEREOF

At the special meeting, our stockholders will be asked to approve the issuance and sale to Warburg Pincus VIII of up to 5,000,000 shares of Series A Preferred Stock, 6,700,000 shares of Series B Preferred Stock and the Additional Warrant to purchase 1,250,000 shares of Common Stock, to ratify the prior issuance of the Initial Warrant to purchase 1,250,000 shares of Common Stock and to approve the potential issuance of Common Stock upon conversion of such Preferred Stock and the exercise of such Warrants. The terms of the Preferred Stock and Warrants are set forth below.

Proposals 1 and 2 are each contingent upon the approval of the other. No action will be taken on either proposal unless both proposals are approved.

Background

Recognizing that a substantial amount of our debt was scheduled to mature on or before July 31, 2004, in April 2002 we engaged J.P. Morgan Securities, Inc., Bear, Stearns & Co. Inc. and Fleet Securities, Inc. to evaluate the company's refinancing alternatives. Several factors affect our ability to refinance our debt:

• Both of our primary businesses, polyester staple fiber and PET resins, are in highly competitive markets. Our profitability is dependent on demand, selling prices and raw material costs. We have not always been able to pass through raw materials cost increases to our customers. As a result, the operating margins of both our businesses are volatile.
• The bank and commercial paper markets, which traditionally have been our primary source of financing, are uncertain. Economic conditions and an adverse credit environment, particularly for the polyester industry, have adversely affected both the availability of financing to us and the interest rates in these markets.
• Our credit ratings have been declining. Although we were rated investment grade by both rating agencies in 2001, Standard & Poor's lowered our rating to BB+ with a negative outlook in October 2002 (the negative outlook was removed as a result of this transaction) and Moody's lowered our rating to Ba2 with a stable outlook in January 2003 and, as a result, our debt currently is rated non-investment grade.
• In January 2001 we received a document subpoena in connection with a federal grand jury investigation of pricing practices in the polyester staple fiber industry. We are cooperating with the investigation by producing documents in response to this subpoena. In September 2002, the U.S. Department of Justice announced the indictment of a former sales manager of one of our competitors for conspiring to fix prices and allocate customers for polyester staple beginning as early as September 1999 until at least January 2001. On October 31, 2002, the Department of Justice announced that another competitor and one of its former employees had agreed to plead guilty for participating in a conspiracy to fix prices and allocate customers in the polyester staple industry. The federal grand jury investigation is ongoing and additional indictments may result. Although neither we nor any of our employees has been charged with any wrongdoing, the producers of polyester fiber, including us, have become s ubject to various lawsuits under federal and state antitrust and unfair competition laws.

As a result of these factors, management determined that refinancing solely with either senior bank debt or publicly-issued debt or equity was not feasible. In addition, they determined that it was not feasible to raise the amounts necessary in the private placement debt market or through asset sales. Based in part on the advice of their advisors, management and the board concluded that the best course of action was to find a private equity investor. J.P. Morgan Securities Inc., Bear, Stearns & Co. Inc. and Fleet Securities, Inc. conducted an auction process in which 20 potential private equity investors were approached. Following these initial inquiries, we entered into confidentiality agreements with 11 potential investors who then conducted limited due diligence investigations of our company. In October 2002, three of the potential investors submitted detailed term sheets for making an equity investment. Following review and consideration of the terms and conditions of these proposa ls, the board authorized management to enter into a non-binding letter of intent with Warburg Pincus VIII that provided for an investment at $11.25 per share for the initial portion of their investment and at the lower of $11.25 per share or 110% of the volume weighted average closing price of our Common Stock over a specified 20 trading day period for the balance of the investment. The $11.25 per share price represented a $0.59 (5.5%) premium over the closing price of our Common Stock on November 4, 2002, the date the term sheet was executed. After the letter of intent was signed, Warburg Pincus VIII conducted an extensive due diligence review and we and Warburg Pincus VIII began to negotiate agreements relating to the proposed investment. As Warburg Pincus VIII's investment was conditioned on our obtaining a new senior revolving credit facility, we have been and continue to separately negotiate a new senior revolving credit facility. Numerous board meetings were held during this time period to review the s tatus of the negotiations and to discuss the terms and conditions of the transactions with management and its advisors. We considered the following in establishing the terms and conditions of the agreements for the investment:

• the advice of our financial advisors,
• term sheets from the alternative sources of equity financing,
• the general financing environment,
• the viability of other financing alternatives,
• the impact on stockholder dilution and earnings per share and the accounting treatment of the Preferred Stock and Warrants,
• the feedback received from discussions with potential investors,
• the potential impact of the on-going Department of Justice investigation of pricing practices in the polyester staple fiber industry on our ability to access the public capital markets, and
• the potential impact on the stock price of a real or perceived lack of liquidity.

On February 12, 2003, after a thorough review of the final terms and conditions and advice from our advisors, our board unanimously determined that the Warburg Pincus VIII investment was in the best interests of our company and our stockholders. On February 12, 2003 we entered into the definitive securities purchase agreement after the close of business. The investment was publicly announced on February 13, 2003.

Recommendation of our Board of Directors

Our board of directors has unanimously determined that the Warburg Pincus VIII investment is fair to and in the best interests of our company and our stockholders and has unanimously approved the issuance and sale to Warburg Pincus VIII of no more than 5,000,000 shares of Series A Preferred Stock, 6,700,000 shares of Series B Preferred Stock and the Additional Warrant to purchase up to 1,250,000 shares of Common Stock, recommends the ratification of the prior issuance of the Initial Warrant to purchase 1,250,000 shares of Common Stock, and has approved the potential issuance of Common Stock upon conversion of such Preferred Stock and the exercise of such Warrants. Our board unanimously recommends that you vote FOR the approval of the proposal.

In approving the Warburg Pincus VIII investment, our board considered, among other things, each of the following favorable factors:

• The investment will enable us to reduce our high leverage by paying down a portion of our existing debt, resulting in a strengthened balance sheet and improved liquidity.
• On or before July 31, 2004, we have substantial amounts of our debt and other obligations maturing that we will need to refinance. We believe that a stronger balance sheet will allow us to refinance this debt with higher certainty and on better terms and conditions, including lower interest costs, than we could without the equity investment.
• Although neither we nor any of our employees has been charged by any governmental authority with any wrongdoing, as a result of the on-going governmental investigation of pricing practices in the polyester staple fiber industry, our ability to access the public capital markets is sharply curtailed.
• If we approach significant debt maturities without new financing in place then the equity markets may perceive that we do not have sufficient liquidity, and the price of our Common Stock may decline substantially.
• We expect that Warburg Pincus VIII's equity investment will be beneficial to our credit ratings by Standard & Poor's and Moody's based upon our discussions with them.
• We do not expect to pay Preferred Stock dividends in cash for at least five years, if at all.
• Our board will be strengthened with the addition of two new members designated by the investor.
• We will have access to the expertise and strategic relationships of Warburg Pincus VIII which, due to its substantial investment in us, will have a strong incentive to help us build stockholder value.
• After conducting a thorough and competitive auction process in which more than 20 potential investors were contacted, our board determined that the terms and conditions of the Warburg Pincus VIII investment were more favorable than the other investment proposals.

Our board also considered certain adverse factors in their deliberations concerning the Warburg Pincus VIII investment, including the following:

• Although the $11.25 per share initial conversion price and exercise price of the Preferred Stock and Warrants represented a premium over the closing price of our Common Stock on the date the non-binding letter of intent related to the investment was signed, it was less than the price of our Common Stock on the date we signed the securities purchase agreement.
• The investment dilutes the ownership interests of our existing stockholders. Warburg Pincus VIII currently holds approximately 8.7% of our Common Stock on an as-converted and as-exercised basis as a result of its purchase of the Initial Note in an initial principal amount of $20 million and the Initial Warrant to purchase 1,250,000 shares of Common Stock. Upon issuance of the Preferred Stock and the Additional Warrant, the investor would initially hold approximately 30% of our Common Stock on an as-converted and as-exercised basis. As a result of the accretion feature of the Preferred Stock, this percentage will increase over time.
• The dilutive effect of the investment may be further increased because the conversion price is subject to reduction if our average stock price is not $23.00 or more on the fourth anniversary of the issuance of the Preferred Stock, or upon an earlier Change in Control if our stock price is not above targeted levels. If this target price is not met, Warburg Pincus VIII may have the ability by converting their Preferred Stock at a conversion price as low as $6.75 per share (assuming an initial conversion price of $11.25) to own approximately 45% of our Common Stock after four years.
• Even if the stockholders do not approve the proposals and assuming the closing conditions are met and Warburg Pincus VIII purchases the Additional Note in the initial principal amount of $29.95 million, Warburg Pincus VIII will still have the right to designate two members of our board under the terms of the Notes and the purchase agreement and will initially own approximately 15% of our Common Stock on an as-converted and as-exercised basis, which could increase to as much as 19.99%. If the Notes remain outstanding and the principal amount of the Notes plus the accrued interest exceeds approximately 5,100,000 shares on an as-converted basis then any increase in the price of our stock will result in additional interest expense.
• The issuance of the Preferred Stock will constitute a "change of control" under the terms of our employee and director stock option plans. As a result, unvested options to acquire approximately 900,000 shares of Common Stock held by our employees and directors will vest as a result of the Warburg Pincus VIII equity investment. Options to acquire approximately 90,000 shares of Common Stock that vest as a result of this transaction are in the money.

The foregoing discussion concerning the information and factors considered by our board is not intended to be exhaustive, but includes all of the material factors considered by our board in making its determination. In view of the variety of factors considered in connection with its evaluation of the Warburg Pincus VIII investment, our board did not quantify or otherwise attempt to assign relative weights to the specific factors it considered in reaching its determinations. In addition, individual directors may have given different weight to different factors.

Use of Proceeds

We intend to use the proceeds of the Warburg Pincus VIII investment to repay debt and to pay related transaction costs. The table below summarizes the estimated uses of proceeds from the equity investment and the senior debt refinancing (in the amount and form currently contemplated). The indebtedness to be retired is not associated with any specific asset, however, we incurred significant further indebtedness for capital expenditures and working capital purposes between 1996 and 2000 during the construction of our Pearl River facility.

	-----Before Equity Investment-----			-----After Equity Investment------
	as of December 31, 2002			as of December 31, 2002
	Committed	Used	Available	Committed	Used	Available
	($ in millions)			($ in millions)
Uncommitted Lines of Credit	$26	$26	$0	$26	$0	$26
Multi Year Bank Facility	$275	$5	$270	$175	$0	$175
Private Placements	$150	$150	$0	$100	$100	$0
Industrial Revenue Bonds	$51	$51	$0	$41	$41	$0
Financial Instruments	$5	$5	$0	$5	$5	$0
Total Balance Sheet Debt	$507	$237	$270	$347	$146	$201
Asset Securitization	$80	$64	$16	$80	$37	$43
Synthetic Lease	$150	$150	$0	$150	$150	$0
Total Debt & Securitizations	$737	$451	$286	$577	$333	$244

The table above assumes that net proceeds of $118 million are received as a result of the equity investment. On a pro forma basis we will use $50 million to reduce private placement borrowings incurred to retire indebtedness to the Prudential Life Insurance Company which earned an annual interest rate of 8.41% and matured February 7, 2003, $10 million to repay Industrial Revenue Bonds ("IRBs") that financed our Marion facility and would be required to be repaid when the facility is sold which is expected to be in the first quarter of 2003, and the remaining $58 million to repay our short term borrowings (uncommitted lines of credit, and borrowing under our current bank facility) and reduce our receivables securitizations. These IRBs, short-term borrowings and costs related to the receivable securitization facility all have pricing that changes with increases and decreases in LIBOR interest rates, for which we have assumed a total cost of approximately 3.5% for these borrowings. The weighte d average annual interest rate of all the borrowings repaid in the pro forma calculations is 5.75%.

The new senior revolving credit facility that is a condition to the consummation of Warburg Pincus VIII's additional investment is expected to have a minimum size of $175 million and a term of three years. The facility is expected to have a covenant requiring a minimum EBITDA to Interest ratio (as defined) of 3.5 and a covenant limiting the maximum amount of balance sheet debt to 3.5 times EBITDA at the inception of the facility, decreasing to 3.0 times EBITDA after one year. In addition, there are expected to be other covenants that limit total indebtedness and contractual obligations, capital expenditures, cash acquisitions and stock repurchases. Security is expected to be provided to the lenders under the senior credit facility before March 31, 2004 unless we regain our investment grade ratings. There are also expected to be other terms, conditions and covenants typical for this type of senior revolving credit facility.

Terms of the Preferred Stock

The following description summarizes the material terms of the Preferred Stock. You are urged to read carefully the entire amendment to our certificate of incorporation carefully, a copy of which is attached as Exhibit B.

Dividends. If our consolidated net earnings exceed $160,000,000 for the previous 24 quarters (the "Net Earnings Test"), the Preferred Stock will receive dividends and distributions declared on the Common Stock on an as-converted basis. Since we do not expect to be able to meet this test for at least the next four years, we do not currently anticipate that such dividends will be paid for at least four years, if at all.

After five years, shares of the Preferred Stock will be entitled to dividends equal to 8.75% per annum (or 10% if the Common Stock quarterly dividend is less than $.045 per share or if the Net Earnings Test is not met) of their liquidation preference. These dividends are payable quarterly in cash or will continue to accrue (at the holder's option).

Liquidation Preference. Upon our liquidation, the holders of each series of Preferred Stock would be entitled to be paid out of the assets available for distribution to the stockholders, but before any amounts are paid to the holders of the Common Stock, cash in an amount equal to the greater of the liquidation preference of such series then in effect or the amount receivable if the Preferred Stock held by such holders were converted into Common Stock on the liquidation date. After the earlier of 10 years after the issuance of the Preferred Stock or the completion of a remarketing (as described below), the holders of each series of Preferred Stock would only be entitled to receive the liquidation preference of such series upon liquidation.

The initial liquidation preference for the Series A Preferred Stock is $11.25 per share and the initial liquidation preference for the Series B Preferred Stock is the Series B Purchase Price ($11.25 per share or, if lower, 110% of the volume-weighted average closing price of the Common Stock over a specified 20 day trading period). The liquidation preference of both series accretes at 7.25% per annum (8.5% if the Common Stock quarterly dividend is less than $.045 per share or if the Net Earnings Test is not met), compounded quarterly, through the first five years, and includes accrued but unpaid dividends, if any, on the Preferred Stock. If a liquidation or a Change in Control occurs within 5 years of the issuance of the Preferred Stock, the liquidation preference will automatically increase to include accretion at 8.5% per annum for the balance of such five-year period. As discussed below, for accounting purposes this accretion is treated as dividends.

Initial Conversion Price. The initial price at which the Series A Preferred Stock may be converted into shares of our Common Stock is $11.25. The initial conversion price of the Series B Preferred Stock is the Series B Purchase Price ($11.25 per share or, if lower, 110% of the volume-weighted average closing price of the Common Stock over a specified 20 day trading period).

Market Price Based Adjustment of Conversion Price. The conversion price of each series of Preferred Stock will be reduced on the fourth anniversary of the issuance of the Preferred Stock if the volume-weighted average price of the Common Stock for the immediately preceding 60 consecutive trading days does not equal or exceed $23.00. The reduction will be equal to the difference between $23.00 and such average price. However, in no event will the conversion price be reduced by more than $4.50 or 40% of the initial conversion price of such series (e.g., by $4.50 for the Series A Preferred Stock) as a result of the market price adjustment. As a result, a conversion price that was initially $11.25 could be reduced to as low as $6.75 per share, which would result in substantially more dilution for the holders of Common Stock. See "Dilutive Effects of the Preferred Stock and Warrants" below. Upon the occurrence of a Change in Control prior to the fourth anniversary of the Preferred Stock issuance, the conversion price of each series of Preferred Stock is subject to similar adjustments (and subject to a similar 40% adjustment limitation), based on a comparison of the average price of the Common Stock over a specified period against target prices of $14.00 in the first year, $17.00 for the second year, $20.00 for the third year and $23.00 for the fourth year after the issuance of the Preferred Stock. The conversion price of each series of Preferred Stock is also subject to customary weighted average anti-dilution adjustments for issuances of Common Stock or Common Stock equivalents at below market as described below.

Conversion by Investors. The holders of the Preferred Stock may convert shares of Preferred Stock into Common Stock (i) at any time after a Conversion Event, as defined below, (ii) if the volume-weighted average price of the Common Stock for the 60 consecutive trading days prior to the date of conversion is at least $23.00 per share, or (iii) upon consent of our board (excluding any director designated by Warburg Pincus VIII). The number of shares of Common Stock issued upon conversion will be equal to the liquidation preference then in effect divided by the then current conversion price. A Conversion Event is the first to occur of the following:

• we publicly report that our cash earnings per share (as defined) for four calendar quarters prior to such report are or will be less than $1.50;
• an extraordinary charge or charges in any calendar year results in or is expected to result in cash payments of more than $50 million;
• the first date following the fourth anniversary of the issuance of the Preferred Stock that the highest price of the Common Stock is at least 110% of the lowest price on a trading day not more than 20 trading days before such anniversary selected by the holders of a majority of the Preferred Stock or if no such date is selected, such fourth anniversary;
• a Change in Control (as defined) occurs or we enter into an agreement that would cause such occurrence or a notice of redemption is given; and
• the date on which a majority of the directors then in office (excluding directors designated by Warburg Pincus VIII) adopts a resolution that a Conversion Event has occurred.

Conversion by Us. We can require conversion of the Preferred Stock at any time after the fifth anniversary of the issuance of the Preferred Stock if the closing price of the Common Stock exceeds 125% of the then applicable conversion price for 30 consecutive trading days.

Change in Control. Upon a Change in Control, the holders of the Preferred Stock will have the right to:

• convert the Preferred Stock and receive the consideration from the Change in Control transaction upon conversion; or
• continue to hold the Preferred Stock in the surviving entity; or
• request us to redeem the Preferred Stock for cash in an amount equal to the liquidation preference of such series of Preferred Stock plus any declared and unpaid dividends, in which case we will have the right either to redeem the Preferred Stock or to remarket the Preferred Stock for the holders pursuant to the remarketing provisions described below.

If a Change in Control occurs within five years of the issuance of the Preferred Stock, the liquidation preference will automatically increase to include accretion at 8.5% per annum for the balance of such five-year period. See "Dilutive Effects of the Preferred Stock and Warrants" below.

A "Change in Control" is defined as (i) a business combination or other transaction where generally 50% or more of our Common Stock is acquired or held by any person other than our stockholders prior to the transaction, (ii) our sale of in excess of 50% of our assets or (iii) individuals who were members of our board as of the issuance date of the Preferred Stock (together with directors whose election or appointment was approved by the directors then in office) cease to constitute a majority of the board of the surviving entity.

Anti-Dilution. The conversion price of each series of Preferred Stock will be subject to customary weighted average anti-dilution adjustments upon certain issuances and deemed issuances of equity and equity-linked securities at prices below the then current market value and other customary adjustments for stock splits, extraordinary dividends and similar transactions.

Remarketing. On the seventh anniversary of the initial issuance of the Preferred Stock, upon request of the holders of the Preferred Stock if we fail to cure any dividend payment default, and in the event of a Change in Control (in lieu of the holders of Preferred Stock receiving the Change in Control consideration), we are required to use our reasonable best efforts, together with the remarketing agent, to facilitate the remarketing of the Preferred Stock. We will be required to increase the dividend rate to the rate necessary to resell all of the Preferred Stock at a price not less than 100% of the liquidation preference then in effect. Upon such adjustment, we have the option of either reselling the Preferred Stock for the holders or redeeming the Preferred Stock for cash in the amount of the liquidation preference then in effect.

Redemption. The Preferred Stock is not subject to redemption at the option of the holders of Preferred Stock. We may redeem the Preferred Stock in lieu of affecting a remarketing of the Preferred Stock as described above by paying the holders of Preferred Stock a redemption price in cash equal to the liquidation preference of the Preferred Stock in effect on the date of the redemption.

Board Seats. Pursuant to the terms of the Preferred Stock, so long as Warburg Pincus VIII (or under certain circumstances, its transferees) owns at least one third of the Preferred Stock, the holders of a majority of the outstanding Preferred Stock have the right to designate two directors to our board and so long as Warburg Pincus VIII (or in certain circumstances, its transferees) owns Preferred Stock representing at least 5% of the outstanding Common Stock (calculated on a fully diluted basis assuming that the Preferred Stock is then currently convertible) but less than one third of the Preferred Stock, the holders of a majority of the outstanding Preferred Stock have the right to designate one director to our board. Pursuant to the terms of the purchase agreement, at any time after the conversion of the Preferred Stock into shares of Common Stock, Warburg Pincus VIII has the right to appoint (i) two directors to our board so long as it continues to own at least one third of the Common Stock issuable upon conversion or exercise of the Preferred Stock and Warrants and (ii) one director to our board so long as it continues to own more than 5% of the outstanding Common Stock but less than one third of the Common Stock issuable upon conversion or exercise of the Preferred Stock and Warrants.

In addition, pursuant to the terms of the purchase agreement, whenever Warburg Pincus VIII (or under certain circumstances, its transferees) has the right to appoint two directors to our board, it also has the right to appoint one observer to attend board meetings.

Under these provisions, Oliver Goldstein, a Vice President of Warburg Pincus LLC, became a member of our board in February 2003. Mr. Goldstein has been with Warburg Pincus LLC since July 1999, serving as a Vice President since January 2001 and as an Associate from July 1999 to December 2000. He was an Associate of Fenway Partners, Inc., a private equity investment firm, from June 1997 to June 1999 and an Analyst at Goldman, Sachs & Co., an investment bank, from June 1993 to July 1995.

Voting Rights. The holders of the Preferred Stock generally have the right to vote with our Common Stockholders on an as-converted basis. For the first five years after the issuance of the Preferred Stock, the holders of the Preferred Stock will not participate in the election of directors, other than the right of the holders of a majority of the outstanding Preferred Stock to designate up to two directors as discussed above under "Board Seats." In addition, the approval of holders of a majority of the Preferred Stock is required to approve:

• changes to our Certificate of Incorporation or bylaws adverse to the rights of the holders of the Preferred Stock;
• offers, sales or issuances of equity securities ranking at the same level as or senior to the Preferred Stock with respect to dividend or liquidation rights; or
• repurchases or redemptions of equity securities or extraordinary dividends on our Common Stock, subject to certain exceptions.

Terms of the Warrants

The following description summarizes the material terms of the Warrants. You are urged to read carefully the form of Warrant in its entirety, a copy of which is attached as Exhibit C.

Number of Shares and Exercise Price. On February 12, 2003 we issued to Warburg Pincus VIII the Initial Warrant to purchase 1,250,000 shares of our Common Stock at an exercise price of $11.25 per share. The Additional Warrant, which will be issued to Warburg Pincus VIII if the proposals are approved, will grant Warburg Pincus VIII the right to purchase an additional 1,250,000 shares of our Common Stock at an exercise price of $11.25 or, if lower, 110% of the volume-weighted average closing price of the Common Stock over a specified 20 day trading period. The Warrants are exercisable, in whole or in part, at any time.

Expiration. The Warrants will automatically expire on the seventh anniversary of their issuance dates. The Initial Warrant will expire sooner if the securities purchase agreement is terminated and Warburg Pincus VIII does not invest in the Additional Note under certain circumstances.

Adjustments to the Exercise Price. The exercise price and the number of shares issuable upon exercise of the Warrants will be subject to customary weighted average anti-dilution adjustments for issuances or deemed issuances of Common Stock at below the then current market price and other customary adjustments for stock splits, extraordinary dividends and similar transactions.

Dilutive Effects of the Preferred Stock and Warrants

If shares of Common Stock are issued upon conversion of the Preferred Stock or exercise of the Warrants, existing stockholders will have their ownership percentage diluted. Upon exercise of the Warrants, 2,500,000 shares of Common Stock are issuable (subject to weighted-average anti-dilution adjustments for issuances of Common Stock and equity linked securities at below market prices, subject to certain exceptions). The exact number of shares of Common Stock that may be issued ultimately upon conversion of the Preferred Stock cannot be determined at this time. The number of shares issued upon conversion of the Preferred Stock will be determined by dividing the liquidation preference then in effect by the conversion price then in effect. As described more fully above, the liquidation preference accretes for the first five years and, if the Preferred Stock is still outstanding and if elected by the holder of the Preferred Stock, for subsequent years as well. This has the effect of increa sing the number of shares issuable upon conversion. Also, the conversion price of each series of Preferred Stock is subject to reduction by up to 40% of the initial conversion price of such series if our stock price does not achieve certain levels by specified time periods. This also has the effect of increasing the number of shares issuable upon conversion.

The following table illustrates the number of shares of Common Stock that would be issued upon conversion of the Preferred Stock at assumed conversion prices of $11.25 and $6.75 (the conversion price of the Series A Preferred Stock assuming the maximum market price based adjustment) and upon exercise of all of the Warrants for cash, at three points in time: (i) upon consummation of the investment; (ii) the third anniversary of the issuance of the Preferred Stock; and (iii) the fifth anniversary of the Preferred Stock. The table also indicates the approximate percentage that the shares issuable upon conversion of the Preferred Stock and exercise of the Warrants represent of the outstanding shares of Common Stock based on approximately 31,868,809 shares outstanding as of February 28, 2003.

		End of	End of
	Initially	Third Year	Fifth Year
Issued and Outstanding Common Stock	31,868,809	31,868,809	31,868,809
Liquidation Preference - Preferred Stock	$125,375,000	$161,359,961	$188,594,258
Number of Common Shares
(On an as converted basis using $11.25	13,644,444	16,843,108	19,263,934
Conversion price and assuming all Warrants are exercised for cash)
% Ownership - $11.25 conversion price	30.0%	34.6%	37.7%
Number of Common Shares
(On an as converted basis using $6.75	21,074,074	26,405,179	30,439,890
Conversion price and assuming all Warrants are exercised for cash)
% Ownership - $6.75 conversion price	39.8%	45.3%	48.9%
Assumes that (i) shares of Series A Preferred Stock and Series B Preferred Stock are both issued at $11.25, (ii) there is no conversion during the indicated periods and (iii) there are no participating dividends for the first four years but participating dividends are paid in the fifth year. Excludes accretion on the Note in the principal amount of $20 million prior to the conversion of the Initial Note into Series A Preferred Stock.

In addition, customary anti-dilution adjustments to the conversion price of the Preferred Stock or the exercise price of the Warrants could further dilute the ownership interests of existing stockholders. After the fifth anniversary of the issuance of the Preferred Stock and the termination of the standstill provisions, it is possible that Warburg Pincus VIII may own more than 50% of our outstanding Common Stock on an as-converted and as-exercised basis if they (i) purchase further Common Stock in the market or (ii) elect to have the dividends on the Preferred Stock continue to accrue in lieu of receiving cash dividends and we cannot require conversion of the Preferred Stock due to our market price not exceeding the required level for mandatory conversion. The preferred Stock investment will also accelerate the vesting of employee and director options to acquire approximately 900,000 shares of Common Stock, of which options to acquire approximately 90,000 shares of Common Stock are current ly in the money, which may further dilute the ownership interests of our existing stockholders. The effect of this acceleration is not expected to be significant.

The number of shares of Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants will also affect our earnings per share. The larger the number of shares deemed outstanding, the lower our earnings per share will be. The actual effect of the Preferred Stock and Warrants on our earnings per share will depend on the level of our earnings in future periods, the liquidation preference then applicable, the actual conversion prices and the impact of the accounting treatment discussed below. The following table indicates the pro forma effect of this transaction on our earnings from continuing operations for the year ended December 31, 2002, assuming that (i) the Preferred Stock and Warrants were issued and were convertible and exercisable at January 1, 2002, (ii) the initial conversion price of the Series B Preferred Stock was $11.25, and (iii) the dividends on the Preferred Stock accreted at 8.50% for the year.

			2002	2002
			$11.25	$6.75 (1)
	2002	Pro forma	Conversion	Conversion
	Actual	Adjustments	Price	Price
		(dollars in millions, except per share data)
Operating Income	$45.7		$45.7	$45.7
Interest Expense, Net	$10.3	($6.8)(2)	$3.5	$3.5
Earnings From Continuing Operations
Before Income Taxes	$35.4	($6.8)	$42.2	$42.2
Income Taxes	$9.0	$2.4(3)	$11.4	$11.4
Earnings From Continuing Operations	$26.4	$4.4	$30.8	$30.8
Accretion of Preferred Stock Liquidation Preference			$11.0	$11.0
Earnings from Continuing Operations Available to
Common Stockholders	$26.4		$19.8	$19.8
Weighted Average Shares (Basic)	31.6		31.6	31.6
Effect of Dilutive Shares:
Employee Stock Options and Restricted Stock	0.4		0.4	0.4
Assumed Conversion of Preferred Stock	0.0		11.6	19.3
Warrants	0.0		0.6	0.6
Weighted Average Shares (Diluted)	32.0		44.2	51.9
Basic Earnings From Continuing Operations
Per Common Share	$0.84		$0.63	$0.63
Diluted Earnings From Continuing Operations
Per Common Share	$0.83		$0.63	$0.59

1. Assumes that $6.75 represents the maximum market price based conversion price adjustment of each series of Preferred Stock.
2. Reduction in annual interest expense resulting from the assumed use of net proceeds of $118 million from the sale of the Preferred Stock to repay debt with an average interest rate of 5.75%.
3. Federal and state income taxes attributable to interest savings.
4. The above table does not reflect the reduction in earnings available to common stockholders for the accretion of the discount related to the valuation of the warrants (see Accounting Treatment below).

If the Preferred Stock is not issued, the shares of Common Stock issuable upon conversion of the Notes would have a similar proportionate dilutive effect on the ownership percentage of existing stockholders and on our earnings per share. Although the total Common Stock issuable to Warburg Pincus VIII is limited to 19.99% of the shares of Common Stock outstanding on February 12, 2003, any Excess Share Payment would be treated as interest which would have the effect of lowering our earnings per share.

Accounting Treatment

Under generally accepted accounting principles in the United States ("GAAP"), we will be required to allocate the proceeds from the sale of the Preferred Stock between Warrants and Preferred Stock based on their relative fair values. Each of these securities will be considered in the calculation of earnings per share as follows:

Potential Effects on Number of Shares (the denominator of Earnings per Share)

The Preferred Stock will not be included in computing the number of shares of Common Stock outstanding unless the Preferred Stock is convertible into Common Stock. The effects on dilution are different depending on the reason the Preferred Stock can be converted into Common Stock. The conditions under which the Preferred Stock can be converted into Common Stock are described below:

1. If a Conversion Event occurs prior to the fourth anniversary of the issuance of the Preferred Stock because the volume-weighted average price of the Common Stock for the immediately preceding 60 consecutive trading days is greater than $23.00, then the earnings per share for the period will be computed assuming that the Preferred Stock was converted using $11.25 for the Series A Preferred Stock conversion price and the Series B Purchase Price for the Series B Preferred Stock conversion price (each, as adjusted for any anti-dilution adjustments and any market price based conversion adjustment) for the number of days that the Preferred Stock may be converted. If the Preferred Stock is convertible because the market price of our Common Stock is greater than $23.00, there will be no adjustment in the number of shares that the Preferred Stock is convertible into based on the market price of our Common Stock.
2. If a Conversion Event occurs because our board waives the requirements for conversion for a period of time, then the earnings per share for the period will be computed assuming that the Preferred Stock has converted using $11.25 for the Series A Preferred Stock conversion price and the Series B Purchase Price for the Series B Preferred Stock conversion price (each, as adjusted for any anti-dilution adjustments) both adjusted based on the conversion adjustment (if any) that is required based on the market price during the number of days that the requirements for conversion are waived.
3. If the Preferred Stock is permanently convertible after the fourth anniversary of the issuance of the Preferred Stock because the highest market price of our Common Stock is greater than 110% of the lowest market price on one of the last 20 days (selected by the holders of a majority of the Preferred Stock) preceding such fourth anniversary, then at all times after the date of that event the earnings per share will be computed using $11.25 for the Series A Preferred Stock conversion price and the Series B Purchase Price for the Series B Preferred Stock conversion price (each, as adjusted for any anti-dilution adjustments and adjusted for any market price based conversion adjustment on the fourth anniversary of the issuance of the Preferred Stock).
4. If the Preferred Stock is permanently convertible because either:

• our board has permanently waived the requirements for conversion, or
• we publicly report that our cash earnings per share for the four quarters prior to such report are or will be less than $1.50, or
• an extraordinary charge or charges in any calendar year results in or is expected to result in cash payments of more than $50 million, or
• a Change in Control occurs or we enter into an agreement that would cause such an occurrence or a notice of redemption is given,

then at all times after the date of that event the earnings per share will be computed using $11.25 for the Series A Preferred Stock conversion price and the Series B Purchase Price for the Series B Preferred Stock conversion price, both assuming that the market price during the last 60 days of the period was the market price during the last 60 days prior to the fourth anniversary for purposes of computing the market price based conversion price adjustment and with each conversion price adjusted for any anti-dilution adjustments.

The Warrants are exercisable at any time and will be immediately included in the computation of diluted earnings per share using the treasury stock method only if they are dilutive (i.e., our market price is greater than the exercise price of the Warrants). Therefore, they become dilutive only when the market price is above $11.25 for the Initial Warrant and the Series B Preferred Stock Purchase Price for the Additional Warrant.

Potential Effects on Income Available to Common Shareholders (the numerator of Earnings per Share)

If, upon issuance, the amount of proceeds allocated to the Preferred Stock is less than the underlying value of our Common Stock (assuming the Preferred Stock were immediately converted), then a beneficial conversion feature (BCF) will exist. A BCF is the intrinsic value or potential intrinsic value of a conversion right embedded in a convertible security at issuance. If and when a BCF exists, the value of that BCF is treated as a non-cash deduction from income available to common stockholders, the numerator of earnings per share calculations, for purposes of computing basic and diluted earnings per share, similar to a preferred dividend. If a BCF exists at the initial issuance of the Preferred Stock, then the reduction in income available to common stockholders is recognized at the time the Preferred Stock becomes convertible. To illustrate this, if the liquidation preference of the Preferred Stock is $125 million at issuance and assuming that the conversion price of each series o f Preferred Stock is $11.25, the initial number of shares of Common Stock that the Preferred Stock is convertible into is approximately 11,100,000 shares. If the market price of a share of Common Stock upon the issuance date of the Preferred Stock was $11.00, then the 11,100,000 shares of Preferred Stock are worth, at issuance, $122.2 million. If the proceeds allocated to the Preferred Stock are $120 million, then the potential BCF is $122.2 million less $120 million, or $2.2 million. This amount would be a non-cash reduction of income available to common stockholders for purposes of computing earnings per share in the period when the Preferred Stock first becomes convertible. Based upon the closing price of our Common Stock on March 10, 2003 ($9.46) and the expected valuation of the Warrants, we do not expect that a BCF would occur upon issuance of the Preferred Stock.

The terms of the Preferred Stock do not require Wellman to pay a Preferred Stock dividend in cash for the first five years following the issuance of the Preferred Stock. During this time, the liquidation preference accretes (economically equivalent to a paid in kind dividend) which has the effect of increasing the number of shares of Common Stock deliverable upon a conversion of the Preferred Stock. Because the Preferred Stock is perpetual (not mandatorily redeemable), the fair value of the Preferred Stock dividend when declared will reduce income available to common stockholders for the purposes of computing basic and diluted earnings per share. This fair value of the dividend will reduce earnings per share even if the Preferred Stock is not currently convertible.

During the first five years after the issuance of the Preferred Stock, when a paid in kind dividend increases the liquidation preference, thereby increasing the number of shares of Common Stock issuable on conversion of the Preferred Stock, we must determine whether there is an additional BCF that must be recognized. The measurement of the BCF on each paid in kind dividend is the difference between the market price of our Common Stock at the time that the dividend is issued and the conversion price of the Preferred Stock times the number of shares of Common Stock into which each dividend could be converted. If the Preferred Stock is not yet convertible when the dividend is declared, the potential BCF is not recognized until the Preferred Stock becomes convertible.

As noted above, the carrying value of the Preferred Stock will initially be recorded on our balance sheet at less than the total proceeds received because we are required to attribute a portion of the proceeds to the fair value of the Warrants issued at the same time. Due to the terms of a potential remarketing of the Preferred Stock (in which the dividend rate will be reset to a market rate in order to provide the holder of Preferred Stock with proceeds equal to the liquidation preference of the Preferred Stock), the difference between the proceeds allocated to the Preferred Stock and the liquidation preference at issuance must be charged ratably as a reduction of income available to common stockholders over the period from issuance to the potential remarketing date. This additional accretion will further reduce earnings available to common stockholders and earnings per share in each of the first seven years.

If the volume-weighted average price of our Common Stock for the 60 trading days immediately before the fourth anniversary of the issuance of the Preferred Stock does not equal or exceed $23.00, then the conversion price of each series of Preferred Stock is reduced by the excess of $23.00 over such price during that 60-day period, up to a maximum of 40% of the initial issuance price of each series. This feature potentially increases the number of shares of Common Stock that may be received on conversion of the Preferred Stock and may create another BCF that must be recognized at the later of its creation date or the date that the Preferred Stock becomes convertible. The measurement of this BCF is the product of the market value of the Common Stock on the date that the Preferred Stock is issued times the number of additional shares of Common Stock issued as a result of the change in the conversion price.

After the fifth anniversary of the issuance of the Preferred Stock, the holder(s) of the Preferred Stock may choose to receive dividends in cash rather than as an increase in the liquidation preference. For the portion of the dividend after the fifth anniversary that is paid in kind, the BCF will be determined based on the market price of our Common Stock at that time, rather than at issuance. If the market price of our Common Stock is higher than the effective conversion price at the time of election, a BCF will be created. If the holder elects cash, the amount of the cash dividend paid will be the measure of the reduction of income available to common stockholders.

Potential Effects of Computing Earnings per Share Using the Two-Class Method

The Preferred Stock requires that if certain contingencies are met, the stated dividend is reduced and the holders of Preferred Stock are permitted to receive the same dividends that we pay on our outstanding Common Stock. When a class of security holders is able to participate in dividends along with common stockholders, GAAP requires the use of the "two-class method" of determining earnings per share, which may affect both basic and diluted earnings per share.

The two-class method is an earnings allocation method that calculates earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Under the two-class method: (a) for each class of stock and participating security, income from continuing operations (and net income) is reduced by the amount of dividends declared in the current period and by the contractual amount of dividends (or interest on participating income bonds) that must be paid for the current period (for example, unpaid cumulative dividends); (b) the remaining earnings are allocated to common stock and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. The total earnings allocated to each security are determined by adding together the amount allocated for dividends and the amount allocated for the participation feature; (c) the total earnings allocated to each security are divided by the weighted-average of outstanding shares of the security to determine the earnings per share for the security; and (d) basic and diluted earnings per share data are presented for each class of common stock. Earnings per share data is not required to be presented for other types of participating securities, such as participating preferred stock.

If the two-class method is required to be used, the earnings per share will be diluted more than is presented in the pro forma dilution on page 33. We do not expect the Preferred Stock to be able to participate in Common Stock dividends for at least four years, if at all, and therefore we do not expect to have to use the two-class method for at least four years, if at all.

Other

Under certain conditions, such as a Change in Control, the remarketing feature in the Preferred Stock may be accelerated, additional dividends may be payable and there may be an adjustment in the conversion price of the Preferred Stock, if certain price targets have not been met. No accounting recognition will be given to these features until the contingencies are met.

The accounting treatment of the Notes is comparable to that of the Preferred Stock except that the BCFs will be treated as interest expense, resulting in a decrease in net income as opposed to income available to our common stockholders. In addition, the Excess Share Payment will be recorded at the market price of our Common Stock at the end of each reporting period, with any changes in the market price from period to period being recorded as interest expense. These amounts could significantly affect our net income and earnings per share.

Other Agreements with Warburg Pincus VIII

No Solicitation. The securities purchase agreement contains non-solicitation provisions which prohibit us from soliciting or engaging in discussions or negotiations regarding an alternative equity financing or change of control prior to the consummation of Warburg Pincus VIII's investment. However, if we receive an unsolicited proposal for a change of control transaction from a third party, we may respond if our board determines in good faith, after consultation with our financial advisors, that such proposal is more favorable to our stockholders than the Warburg Pincus VIII investment and, after consultation with our legal advisors, that failure to respond is reasonably likely to cause a breach of its duties to our stockholders. In the event that our board withdraws its recommendation of the proposals, we are required to issue the Additional Warrant to Warburg Pincus VIII at an exercise price of $11.25 per share.

Preemptive Rights. Each holder of more than 10% of the outstanding Preferred Stock will generally have a right to purchase its pro rata amount of any new issuances of our equity securities (excluding, among other things, stock issued as consideration for mergers and acquisitions, employee stock options and in some registered public offerings).

Registration. We are required to file a shelf registration statement on Form S-3 with the SEC promptly after the issuance of the Preferred Stock and use our best efforts to cause such registration statement to become effective. Upon the effectiveness of the registration statement, the holders of Preferred Stock, Warrants and Common Stock issuable upon conversion or exercise of such securities will have the right to resell their Preferred Stock, Warrants, and any shares of Common Stock issuable upon conversion or exercise of the Preferred Stock and Warrants. We are responsible for the costs of such registration.

Out-of-Pocket Expenses. We will reimburse Warburg Pincus VIII for their out-of-pocket expenses up to $1,500,000 regardless of whether the transactions close. However, we will not be obligated to pay more than $500,000 if the transactions fail to close solely as a result of Warburg Pincus VIII's breach.

Restrictions on Transfer. Unless otherwise approved by our board and subject to customary exceptions, Warburg Pincus VIII can transfer the Preferred Stock, the Warrants and the Common Stock to its affiliates, the public or to a private investor, provided that as a result of any transfer to a private investor no one person or group would hold, to the knowledge of Warburg Pincus VIII, more than 20% of our then outstanding Common Stock. Transfers pursuant to certain tender and exchange offers is also permitted. However, Warburg Pincus VIII cannot, subject to certain exceptions, transfer the Warrants or the Common Stock issuable under the Warrants before February 12, 2004, and from February 13, 2004 through February 12, 2005 it cannot transfer more than half of them. In addition, for five years if Warburg Pincus VIII proposes to transfer Preferred Stock and it would own less than a majority of the Preferred Stock, Warburg Pincus VIII is required to obtain an irrevocable proxy from each transferee in connection with the right of the holders of a majority of the Preferred Stock to designate directors to the board.

Standstill Provisions and Other Matters. Until the fifth anniversary of the issuance of the Preferred Stock, Warburg Pincus VIII may not, without our consent, acquire any securities other than (i) securities issuable upon conversion or exercise of the Preferred Stock, the Notes or the Warrants and (ii) up to an aggregate of an additional 5% of our Common Stock; provided that in no event may acquisitions of Common Stock pursuant to clause (ii) result in their beneficially owning more than 49.9% of our then outstanding voting power. In addition, during the same period, Warburg Pincus VIII may not solicit proxies or influence any person with respect to the voting of our securities, make any public announcement regarding any transaction involving them and us or our stockholders, enter into or be involved in an acquisition or business combination transaction relating to us or our assets, participate in or form any group generally for the purpose of acting jointly or in concert with respe ct to our voting securities, or seek to influence our management policies (other than as a stockholder voting on matters brought before our stockholders generally or through their board nominees). Warburg Pincus VIII also may not sell short our Common Stock except as part of a program to dispose of its securities, provided that no such program may occur during the 90 trading days prior to the fourth anniversary of the issuance of the Preferred Stock (on which date the conversion price is subject to adjustments based on the market price of our Common Stock) or 30 days prior to the date of the consummation of a Change in Control. (See "Terms of the Preferred Stock - Market Price Based Adjustment of Conversion Price".)

Restriction on Increase in Size of Board. The securities purchase agreement contains a restriction restricting our ability to amend our by-laws to increase the size of our board above 10 members.

Terms of Notes

If the stockholders approve the proposals, all outstanding Notes will automatically convert into shares of Series A Preferred Stock. If stockholder approval for the proposals is not obtained, the outstanding Initial Note in the initial principal amount of $20 million will remain outstanding and, subject to the satisfaction of certain closing conditions, Warburg Pincus VIII will purchase the Additional Note in the initial principal amount of $29.95 million.

The Notes generally become due and payable either upon the occurrence of an event of default or six years after issuance. Interest on the Notes accrues at the rate of 8.775%, compounded annually, for the first five years, and 10.38% thereafter. During the first five years, up to 40% of the interest is payable in cash, at the election of the holder. Any interest not paid in cash will be added to the principal amount of the Notes (i.e., accreted). The Notes are subordinated and subject in right of payment to the prior payment in full of all of our outstanding indebtedness and certain contractual payment obligations other than certain accounts payable, inter-company debt and debt evidenced by certain equity interests.

If our stockholders do not approve the proposals, the Notes will remain outstanding and convertible at the option of the holders into Common Stock, subject to certain requirements for conversion. The number of shares of Common Stock issuable upon conversion is equal to the accreted principal amount of the Notes then in effect divided by the then current conversion price (initially, $11.25). The Common Stock issuable upon conversion or exercise of the Notes and Warrants would be limited to 19.99% of our Common Stock outstanding on February 12, 2003. Warburg Pincus VIII is entitled to the cash Excess Share Payment in lieu of receiving the Excess Shares. The provisions of the Notes regarding the conversion price, market price based conversion price adjustments and weighted average anti-dilution adjustments, conversions by the holders and mandatory conversions at our option are substantially similar to those described above for the Series A Preferred Stock.

In addition, we are subject to certain negative covenants pursuant to the terms of the Notes. Without the consent of the holders of a majority of the value of the Notes then outstanding, we cannot:

• change our certificate of incorporation or bylaws to adversely affect the rights of the holders of the Notes;
• sell or issue debt convertible into or exchangeable for equity securities ranking prior in right of payment to the Notes;
• repurchase or redeem equity securities in excess of $20 million per year, subject to certain exceptions;
• declare or pay extraordinary dividends on our Common Stock; and
• permit our consolidated indebtedness and securitizations to exceed $626 million at the end of any quarter.

Warburg Pincus LLC

Warburg Pincus VIII is a private equity fund managed by Warburg Pincus LLC, a leading private equity investment fund. The firm currently has nearly $10 billion under management, with approximately $6 billion available for investment in a range of industries. Since 1971, Warburg Pincus LLC has sponsored ten private equity investment funds with committed capital in excess of $19 billion. These funds have invested more than $15 billion in 469 companies in 29 countries.

Financial Advisors

J.P. Morgan Securities Inc., Bear, Stearns & Co. Inc. and Fleet Securities, Inc. acted as our financial advisors in our negotiations with Warburg Pincus VIII. For their advisory services we expect to pay aggregate fees of $5.7 million on closing and reimburse their expenses arising in connection with the transaction.

PROPOSAL 2 - APPROVAL OF AN AMENDMENT TO
OUR CERTIFICATE OF INCORPORATION TO
INCREASE AUTHORIZED SHARES OF COMMON STOCK, AUTHORIZE TWO SERIES OF CONVERTIBLE PREFERRED STOCK AND PROVIDE THAT AMENDMENTS TO THE TERMS OF A CLASS OR SERIES OF PREFERRED STOCK MAY BE APPROVED BY THE HOLDERS OF SUCH CLASS OR SERIES

At the special meeting, our stockholders will be asked to approve an amendment to our Certificate of Incorporation to (a) increase our authorized shares of Common Stock, $0.001 par value, from 55,000,000 shares to 100,000,000 shares, (b) authorize 5,000,000 shares of Series A Preferred Stock and 6,700,000 shares of Series B Preferred Stock and (c) permit amendments to the terms of one or more class or series of Preferred Stock with only the approval of our Board of Directors and the holders of such class or series but without the approval of the holders of Common Stock. The terms of the Preferred Stock are described above under Proposal 1. The text of the proposed amendment to our Certificate of Incorporation is set forth in Exhibit B attached hereto. We urge you to read the amendment carefully in its entirety.

Proposals 1 and 2 are each contingent upon the approval of the other. No action will be taken on either proposal unless both proposals are approved.

Reasons for the Amendment

We do not currently have any shares of preferred stock authorized or issued and we do not have enough shares of Common Stock authorized to permit the conversion of the Preferred Stock and the exercise of the Warrants. If the stockholders do not approve this proposal, we will not be able to sell the Preferred Stock and issue the Additional Warrant to Warburg Pincus VIII. In connection with its approval of the Warburg Pincus VIII investment, our board unanimously declared the advisability of and approved an amendment to our Certificate of Incorporation to (i) increase the number of shares of Common Stock that we are authorized to issue to 100,000,000 (ii) authorize 5,000,000 shares of Series A Preferred Stock and 6,700,000 shares of Series B Preferred Stock, and (iii) permit amendments to the terms of one or more class or series of Preferred Stock with only the approval of our board and the holders of such class or series, and resolved to submit the proposed amendment to our stockholders .

Although the principal purpose for increasing the authorized shares of Common Stock is to permit the conversion of the Preferred Stock and the exercise of the Warrants, the increase would also provide us with approximately 36,000,000 additional authorized shares for issuance in other financing and acquisition transactions that we may determine to pursue in the future, stock dividends or splits, employee benefit plans and other corporate purposes. Once authorized, the additional shares of Common Stock may be issued with approval of our board and without further approval of the stockholders unless such approval is required by applicable law, rule or regulation. The existing issued and outstanding shares of Common Stock will not change as a result of the proposed amendment to our Certificate of Incorporation and holders of the Common Stock will not receive new stock certificates.

The purpose of the amendment to permit amendments to the terms of a series or class of Preferred Stock with only the approval of our board and the holders of such class or series is to give the board the ability to react quickly to future events by giving us the flexibility to negotiate revised terms of the Preferred Stock with the holders of the Preferred Stock in response to such future events and implement the revised terms on an expedited basis. This is particularly true because of the need to respond quickly to a rapidly changing environment and the complexity of the terms of the Preferred Stock.

Recommendation of our Board of Directors

Our board of directors unanimously recommends a vote FOR the approval and adoption of the amendment of the Certificate of Incorporation.

Anti-Takeover Effects of the Amendment and Purchase Agreement

We do not believe that the proposed amendment to our Certificate of Incorporation to increase the number of authorized shares and to authorize the Preferred Stock will have a material anti-takeover effect. however, it will affect the Company's financial position and the Preferred Stock will have certain rights that may be a factor in any proposal to acquire us.

Our principal anti-takeover device, designed to allow us to obtain the highest possible price for our stockholders in the event of a proposed acquisition, is our stockholders rights plan. The plan provides each stockholder of record one common stock purchase right for each share of Common Stock. The rights are represented by the Common Stock certificates and are not separately traded from the Common Stock and are not currently exercisable. The rights become exercisable only if a person acquires beneficial ownership at 20% or more of our Common Stock or announces a tender offer or exchange offer that would result in beneficial ownership of 20% or more of our Common Stock, at which time each right would enable the holder to buy shares of the Common Stock at a discount to the then market price. We may redeem the rights for $.01 per right, subject to adjustment, at any time before the acquisition by a person or group of 20% or more of our Common Stock. The rights have a 10-year term. This plan may have the effect of delaying, deferring or preventing a change in control of our Common Stock. This may discourage bids for the Common Stock at a premium over the market price of the Common Stock and may adversely affect the market price of the Common Stock. With the approval of our board, we amended the terms of the rights plan to provide that the rights are not exercisable in connection with this investment.

One example of how the amendment to our Certificate of Incorporation could either positively or negatively affect an unsolicited attempt by a third party to acquire control of us is that the issuance of the Preferred Stock and the issuance of Common Stock upon conversion of the Preferred Stock and exercise of the Warrants have the effect of diluting the voting power of the other outstanding shares.

In addition, the amendment to our Certificate of Incorporation contains other provisions that may increase the cost to acquire us. the holders of Preferred Stock have the right to require us to use our reasonable best efforts, together with the remarketing agent, to remarket the Preferred Stock by increasing the dividend rate of the Preferred Stock to the rate necessary to resell the Preferred Stock at a price not less than 100% of the liquidation preference then in effect. We may redeem the Preferred Stock in lieu of effecting a remarketing by paying the holders of Preferred Stock a redemption price in cash equal to the liquidation preference of the Preferred Stock then in effect. Upon the occurrence of a Change in Control prior to the fifth anniversary of the issuance of the Preferred Stock, the liquidation preference will automatically increase to include accretion at 8.5% per annum for the balance of such five-year period. Further, in the event of a Change in Control prior to the fourt h anniversary of the issuance of the Preferred Stock, there may be a market price based adjustment to the conversion prices of each series of Preferred Stock depending upon whether the average price of the Common Stock over a specified period is below specified target prices ranging from $14.00 in the first year to $23.00 in the fourth year.

Other existing provisions of our Certificate of Incorporation may have the effect of preventing, discouraging or delaying any change in the control of our company. The following provisions may have anti-takeover effects: (a) mergers and certain other business combinations of us with any holder of 40% or more of our capital stock (a "Related Person") must be approved by a majority of the then outstanding Common Stock held by stockholders other than the Related Person and its affiliates and associates; and (b) if any person or group acquires 75% or more of our capital stock (a "Control Group"), we must offer to purchase for cash all of our outstanding capital stock (including shares issuable upon exercise of outstanding options and warrants and upon conversion of convertible securities) not owned by the Control Group at the highest price per share paid by the Control Group in acquiring our stock. The approval of the proposals shall be deemed to be approval of the issuances of the Preferr ed Stock, Warrants and Common Stock issuable upon conversion and exercise of the Preferred Stock and Warrants to Warburg Pincus VIII as a Related Person to the extent the foregoing provision is applicable to this transaction.

In addition, we agreed in the Purchase Agreement that we would not amend our by-laws to increase the size of our board above 10 members.

We are also governed by Section 203 of the Delaware General Corporation Law which provides that certain "business combinations" between us and an "interested stockholder," which is generally defined as a stockholder beneficially owning 15% or more of our voting stock, are generally prohibited for a three-year period following the date that the acquiror became an interested stockholder. The term "business combination" is defined generally to include mergers, tender offers and transactions that increase an interested stockholder's percentage ownership of stock in a Delaware corporation. Because our board of directors has approved the equity investment by Warburg Pincus VIII, it will not be subject to the restrictions of Section 203.

STOCK OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS

The following table shows, as of March 3, 2003, our Common Stock owned beneficially by our directors and executive officers and by any person or group known to us to be the beneficial owner of more than 5% of the Common Stock. Unless indicated otherwise, all persons and groups have sole voting and investment power over the shares listed. The following table shows, as of March 3, 2003, all persons we know to be "beneficial owners (1)" of more than 5% of our Common Stock. The information on 5% holders is based on reports on Schedule 13G filed with the Securities and Exchange Commission ("SEC") by the firms listed in the table below. If you wish, you may obtain copies of these reports from the SEC.

Name	Amount Beneficially Owned (1)	Percentage of Common      Stock
Wellington Management Company, LLP 75 State Street Boston, MA 02109	2,855,700	8.96%
Dimensional Fund Advisors Inc. 1299 Ocean Avenue Santa Monica, CA 90401	2,498,100	7.84%
Thomas M. Duff	897,866	2.82
James B. Baker	75,265 (3)	-
Clifford J. Christenson	441,527	1.39%
Oliver Goldstein	-	-
Richard F. Heitmiller	39,446	-
Gerard J. Kerins	14,786	-
James E. Rogers	46,019	-
Marvin O. Schlanger	18,630	-
Roger A. Vandenberg	92,651	-
John R. Hobson	210,475	-
Keith R. Phillips	229,318	-
Joseph C. Tucker	192,595	-
Ernest Taylor	138,951	-
Mark J. Rosenblum	138,990	-
Michael Dewsbury	128,422	-
Audrey L. Goodman	31,765	-
All Directors and Executive Officers as a Group (16 persons)	2,696,706	8.5%

(1) "Beneficial ownership" is a technical term broadly defined by the SEC to mean more than ownership in the usual sense. So, for example, a person "beneficially" owns our Common Stock not only if he holds it directly, but also if he indirectly (through a relationship, a position as a director or trustee, or a contract or understanding) has or shares the power to vote the stock, or to sell it, or has the right to acquire it within 60 days.

(2) Wellington Management Company, LLP has shared voting power over 1,389,500 shares and shared investment power over 2,855,700 shares.

(3) Dimensional Fund Advisors Inc. has sole voting and investment power over the shares listed in its role as investment advisor or manager of various investment companies, commingled group trusts and separate accounts. Dimensional Fund Advisors, Inc. disclaims beneficial ownership of these securities.

(4) Of the shares listed for Mr. Baker, 200 are owned by his wife and of the shares listed for Ms. Goodman, 250 are owned by her husband.

(5) The number of shares shown for each non-employee director includes the following shares that may be acquired upon exercise of stock options that were exercisable as of March 3, 2003 or that will become exercisable within 60 days of that date: Mr. Baker, 8,000; Mr. Heitmiller, 10,000; Mr. Kerins, 3,000; Mr. Rogers, 9,000; Mr. Schlanger, 4,000; and Mr. Vandenberg, 10,000.

The number of shares shown for each non-employee director also includes the following restricted shares that were awarded under the Deferred Compensation and Restricted Stock Plan: Mr. Baker, 32,339; Mr. Heitmiller, 12,682; Mr. Kerins, 4,519; Mr. Rogers, 16,200; Mr. Schlanger, 5,691; and Mr. Vandenberg, 39,609.

(6) The number of shares shown for each executive officer includes the following shares that may be acquired upon exercise of stock options that were exercisable as of March 3, 2003 or that will become exercisable within 60 days of that date: Mr. Duff, 397,080; Mr. Christenson, 303,280; Mr. Hobson, 171,320; Mr. Phillips, 168,280; Dr. Tucker, 137,520; Mr. Taylor, 113,080; Mr. Rosenblum, 108,200; Mr. Dewsbury, 95,000; and Ms. Goodman, 28,600.

The number of shares shown for each executive officer also includes the following restricted shares that were acquired under the Deferred Compensation and Restricted Stock Plan: Mr. Duff, 41,348; Mr. Christenson, 38,566; Mr. Hobson, 11,597; Mr. Phillips, 23,936; Dr. Tucker, 19,305; Mr. Taylor, 4,411; Mr. Rosenblum, 12,155; and Mr. Dewsbury, 3,635.

The number of shares shown for each executive officer also includes the number of shares of our Common Stock beneficially owned indirectly as of March 3, 2003 by such officer in our Employee Stock Ownership Plan and Retirement Plan: Mr. Duff, 4,549 and 34,541; Mr. Christenson, 4,545 and 56,567; Mr. Hobson, 5,158 and 11,655; Mr. Phillips, 3,884 and 9,282; Dr. Tucker, 4,863 and 10,951; Mr. Taylor, 4,774 and 7,430; Mr. Rosenblum, 4,871 and 192; Mr. Dewsbury, 4,317 and 17,535; and Ms. Goodman, 2,915 and 0.

STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING

Under the regulations of the SEC, a record or beneficial owner of shares of Wellman's Common Stock may submit proposals to be included in the proxy statement on proper subjects for action at Wellman's Annual Meeting of Stockholders. All such proposals to be included in the proxy statement relating to the 2003 Annual Meeting of Stockholders must have been mailed to the Investor Relations Officer at Wellman, Inc. at 595 Shrewsbury Avenue, Shrewsbury, New Jersey 07702 and must have been received at that address on or before December 23, 2002, in order to be included in the proxy relating to the 2003 Annual Meeting. A record or beneficial owner of shares of Wellman's Common Stock may also submit proposals on proper subjects for action at the 2003 Annual Meeting without including such proposals in the proxy statement for such meeting. We must be notified of such owner's intention to do this no later than April 20, 2003.

OTHER MATTERS

Other Matters

Our board of directors knows of no other matters to be brought before the special meeting. However, if any other matters arise, it is the intention of the persons named on the accompanying proxy to vote on those matters in accordance with any recommendation by the board of directors.

Expenses of Solicitation

We will bear the cost of solicitation of proxies. We have retained Georgeson Shareholder Services Inc. to assist with the solicitation of proxies at an estimated fee of approximately $25,000 plus expenses. In an effort to have as large a representation at the meeting as possible, special solicitation of proxies may, in certain instances, be made personally or by telephone, telegraph or mail by one or more of our employees. We also will reimburse brokers, banks, nominees and other fiduciaries for postage and reasonable clerical expenses of forwarding the proxy material to their principals who are beneficial owners of our Common Stock.

INCORPORATION OF INFORMATION BY REFERENCE

We file periodic reports, proxy statements and information statements with the SEC and we can "incorporate by reference" into this proxy statement information already filed by us with the SEC. This means that we can disclose important information to you by referring you directly to those documents. The information incorporated by reference is considered part of this proxy statement. We incorporate by reference the documents or portions thereof listed below:

• Annual Report on Form 10-K for the year ended December 31, 2002; and
• Form 8-K dated February 13, 2003.

All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this proxy statement and prior to the special meeting, shall be deemed incorporated by reference and be a part of this proxy statement from their respective filing dates. Any statement contained in this proxy statement or in any document incorporated or deemed to be incorporated by reference in this proxy statement will be deemed to be modified or superseded for the purpose of this proxy statement to the extent that a subsequent statement contained in this proxy statement or in any subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes the statement. Any statement so modified or superseded will not be deemed to be part of this proxy statement.

The documents incorporated by reference into this proxy statement are available from us upon request. We will provide a copy of any and all of the information that is incorporated by reference in this proxy statement to any person, without charge, upon written or oral request. If exhibits to the documents incorporated by reference in this proxy statement are not themselves specifically incorporated by reference, then exhibits will not be provided.

Requests for documents should be directed to Wellman, Inc., 595 Shrewsbury Avenue, Shrewsbury, New Jersey 07702, Attention: Investor Relations Officer, telephone (732) 212-3321.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information that we file at the SEC's public reference rooms at 450 Fifth Street, Washington, D.C., 20549 or at the SEC's other public reference rooms in New York City and Chicago. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, at prescribed rates. Our public filings with the SEC are also available from commercial document retrieval services and at the website maintained by the SEC at http://www.sec.gov. The proxy statement and these other documents may also be obtained free from us.

You should rely on the information contained in this proxy statement to vote on the proposals. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. You should not assume that the information contained in the proxy statement is accurate as of any date other than the date hereof, and the mailing of this proxy statement to our stockholder shall not create any implication to the contrary.

PROXY

WELLMAN, INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON ____________, 2003

The undersigned hereby appoints Thomas M. Duff, Clifford J. Christenson and David K. Duffell or any one or more of them, attorneys with full power of substitution to each for and in the name of the undersigned, with all powers the undersigned would possess if personally present to vote the Common Stock of the undersigned in Wellman, Inc. at the Special Meeting of Stockholders to be held on ___________, 2003, at 10:00 AM local time, at the Oyster Point Hotel, 146 Bodman Place, Shrewsbury, New Jersey, or at any adjournment thereof, upon the matters described in the accompanying Notice of Special Meeting of Stockholders and Proxy Statement for the Special Meeting of Stockholders, receipt of which is hereby acknowledged, and upon any other business that may properly come before the Special Meeting of Stockholders or any adjournment thereof. Said proxies are directed to vote on the matters described in the Special Meeting of Stockholders and Proxy Statement for the Special Meeting of Stockh olders as follows, and otherwise in their discretion upon such other business as may properly come before the Special Meeting of Stockholders or any adjournment thereof.

(1) (a) To approve the issuance and sale to Warburg Pincus VIII Pincus Private Equity VIII, L.P. of (i) no more than 5,000,000 shares of newly created Series A Convertible Preferred Stock, (ii) 6,700,000 shares of newly created Series B Convertible Preferred Stock, and (iii) a warrant to purchase 1,250,000 shares of Common Stock, (b) to ratify the prior issuance of the warrant to purchase 1,250,000 shares of Common Stock and (c) to approve the issuance of shares of Common Stock issuable upon the conversion of such Preferred Stock and exercise of such warrants.

__FOR              ___ AGAINST              ___ ABSTAIN

(2) To approve an amendment to the our Certificate of Incorporation to (i) increase the Company's authorized shares of Common Stock, $0.001 par value, from 55,000,000 shares to 100,000,000 shares, and (ii) authorize two newly created series of preferred stock, one designated as "Series A Convertible Preferred Stock," consisting of 5,000,000 shares, and the other designated as "Series B Convertible Preferred Stock," consisting of 6,700,000 shares, and (iii) permit amendments to the terms of a class or series of Preferred Stock with only the approval of our Board of Directors and the holders of such class or series of Preferred Stock.

___ FOR              ___ AGAINST              ___ ABSTAIN

(3) To transact such other business as may properly come before the meeting or any adjournment thereof.

___ FOR              ___ AGAINST              ____ ABSTAIN

THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THE PROXY WILL BE VOTED FOR THE ABOVE-STATED PROPOSALS.

Date: _____________________, 2003

____________________________________
Please sign exactly as your name or names appear hereon. For more than one owner as shown above, each should sign. When signing in a fiduciary or representative capacity, please give full title. If this proxy is submitted by a corporation, it should be executed in the full corporate name by a duly authorized officer; if a partnership, please sign in partnership name by an authorized person.

PLEASE COMPLETE, INDICATE YOUR VOTE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING ON , 2003. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.

EX-1

SECURITIES PURCHASE AGREEMENT

BY AND BETWEEN

WELLMAN, INC.

AND

WARBURG PINCUS PRIVATE EQUITY VIII, L.P.

February 12, 2003

TABLE OF CONTENTS

		Page
1. 2. 3. 4. 5. 6. 7. 8. 9.	Definitions Authorization, Purchase and Sale of Notes, Shares and Warrants 2.1. Authorization of Securities 2.2. Purchase and Sale of Preferred Stock and Notes 2.3. Issuance of Warrants 2.4. Closings 2.5. Use of Proceeds Representations and Warranties of the Company 3.1. Incorporation 3.2. Subsidiaries 3.3. Capitalization 3.4. Authorization 3.5. Valid Issuance 3.6. Financial Statements 3.7. Absence of Certain Changes 3.8. Compliance with Law 3.9. Absence of Litigation 3.10. Intellectual Property 3.11. Disclosure Documents 3.12. Material Contracts 3.13. Books and Records 3.14. Consents 3.15. No Conflict 3.16. Brokers or Finders 3.17. New York Stock Exchange 3.18. No Manipulation of Stock 3.19. Company Not an "Investment Company" 3.20. Title to Property and Assets 3.21. Labor Relations 3.22. Employee Benefits 3.23. Environmental Matters 3.24. Taxes 3.25. Insurance 3.26. Transactions with Related Parties 3.27. Interest in Competitors 3.28. General Solicitation; No Integration 3.29. Accounting Controls 3.30. Material Customers Representations and Warranties of the Purchaser 4.1. Organization 4.2. Authorization 4.3. Purchase Entirely for Own Account, Etc. 4.4. Investor Status; Etc. 4.5. Securities Not Registered 4.6. Absence of Litigation 4.7. Consents 4.8. No Conflict 4.9. Brokers or Finders 4.10. Accuracy of Information Supplied for Proxy Statement Covenants 5.1. Conduct of Business 5.2. HSR Act Filings 5.3. Other Governmental Approvals 5.4. Covenants Pending Each Closing 5.5. Special Meeting/Proxy Statement 5.6. Subscription Right 5.7. Standstill 5.8. By-Laws 5.9. Board Representation 5.10. No Solicitation 5.11. Further Assurances 5.12. Tax Treatment of Preferred Stock 5.13. Holding Company 5.14. Non-Disclosure of Base Date Conditions Precedent 6.1. Conditions to the Obligations of the Purchaser to Consummate each Closing 6.2. Conditions to the Obligations of the Company to Consummate each Closing 6.3. Conditions Precedent to the Second Closing Registration of the Securities; Compliance with the Securities Act 7.1. Transfer Restrictions 7.2. Legends 7.3. Registration Procedures and Other Matters 7.4. Transfer of Securities; Suspension 7.5. Indemnification 7.6. Information Available Termination 8.1. Conditions of Termination 8.2. Effect of Termination Miscellaneous Provisions 9.1. Rights Cumulative 9.2. Pronouns 9.3. Notices 9.4. Captions 9.5. Severability 9.6. Governing Law; Injunctive Relief 9.7. Waiver 9.8. Expenses 9.9. Assignment 9.10. Survival 9.11. Counterparts 9.12. Entire Agreement	1 4 4 5 5 6 7 7 7 7 8 8 9 9 10 10 10 10 11 11 12 12 12 12 13 13 13 13 13 14 15 16 16 16 17 17 17 17 17 17 18 18 18 18 19 19 19 19 19 19 20 20 20 20 21 21 23 25 26 27 27 27 28 28 28 28 29 30 30 30 31 31 33 35 38 38 38 39 39 39 39 39 40 40 40 41 41 41 41 42 42

EXHIBITS

EXHIBIT A FORM OF NOTE

EXHIBIT B CHARTER AMENDMENT

EXHIBIT C FORM OF WARRANT

EXHIBIT D FORM OF LEGAL OPINION OF EDWARDS & ANGELL, LLP

This SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of the 12th day of February, 2003 by and among Wellman, Inc., a Delaware corporation (the "Company"), and Warburg Pincus Private Equity VIII, L.P. (the "Purchaser").

R E C I T A L S

WHEREAS, (A) subject to the approval of the Proposals (as defined below) by the Company's stockholders with respect to this clause (A), the Company intends to authorize the issuance of (i) up to 5,000,000 shares of its Series A Convertible Preferred Stock, $.001 par value per share (the "Series A Preferred Stock"), which shares of Series A Preferred Stock will be, upon issuance, convertible into authorized but unissued shares of common stock, $.001 par value per share, of the Company (the "Common Stock"), (ii) 6,700,000 shares of its Series B Convertible Preferred Stock, $.001 par value per share (the "Series B Preferred Stock" and together with the Series A Preferred Stock, the "Preferred Stock") which shares of Series B Preferred Stock will be, upon issuance, convertible into authorized but unissued shares of Common Stock, and (B) the Company has authorized the issuance of (i) its convertible subordinated notes in an aggregate principal amount at issuance of $4 9,950,000 (subject to accretion), exchangeable for shares of Series A Preferred Stock (subject to the approval of the Proposals by the Company's stockholders) and/or convertible into shares of Common Stock on the terms set forth in the form of note attached hereto as Exhibit A and as otherwise provided therein (the "Notes") and (ii) warrants to purchase a total of 2,500,000 shares of Common Stock (the "Warrants").

WHEREAS, the Company desires to issue and sell to the Purchaser pursuant to this Agreement, and the Purchaser desires to purchase from the Company (i) shares of Series A Preferred Stock, (ii) shares of Series B Preferred Stock, (iii) the Warrants and (iv) the Notes, in each case, upon the terms and subject to the conditions of this Agreement.

NOW THEREFORE, in consideration of the mutual agreements, representations, warranties and covenants herein contained, the parties hereto agree as follows:

1. Definitions. As used in this Agreement, the following terms shall have the following respective meanings:

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

1.2. "Alternate Senior Credit Facility" shall mean a revolving credit or similar facility from a commercial lender or syndicate of commercial lenders in the principal amount of at least $150,000,000, with economic terms and financial covenants not more adverse to the Company individually or in the aggregate than those described on Schedule 1.21 attached hereto and on other terms and conditions not materially more adverse to the Company in the aggregate than those terms and conditions described on such schedule.

1.3. "Board of Directors" shall mean the Board of Directors of the Company.

1.4. "Certificate of Incorporation" means the Restated Certificate of Incorporation of the Company, as amended, restated or supplemented as of the date hereof.

1.5. "Change in Control Transaction" shall mean any acquisition or proposed acquisition (whether by merger, consolidation, recapitalization, tender offer, exchange offer or other business combination) by a single person or a group of related persons, directly or indirectly (including through any option, right to acquire or other beneficial ownership), of a majority of the equity securities, on a fully diluted basis, of the Company, or all or substantially all of the assets of the Company, other than any of the transactions contemplated by this Agreement.

1.6. "Code" means the Internal Revenue Code of 1986, as amended from time to time.

1.7. "Disclosure Documents" means the Company's Annual Report on Form 10-K for the year ended December 31, 2001, the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002, June 30, 2002 and September 30, 2002, the Company's Schedule 14A Proxy Statement for its Annual Meeting of Stockholders, dated May 14, 2002 and any periodic or current reports filed by the Company with the SEC after the date hereof, together in each case with any documents incorporated by reference therein.

1.8. "Equity Transaction" shall mean any acquisition or proposed acquisition in any manner by a single person or a group of related persons, directly or indirectly (including through any option, right to acquire or other beneficial ownership), of more than 10% of the equity securities, on a fully diluted basis, of the Company, or all or substantially all of the assets of the Company, other than any of the transactions contemplated by this Agreement or any Change in Control Transaction.

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

1.10. "Indebtedness" has the meaning given such term in the form of Note attached hereto as Exhibit A.

1.11. "Knowledge" shall mean, with respect to the Company, the actual knowledge of the (a) Chief Executive Officer, (b) President, (c) the Chief Financial Officer, (d) Chief Accounting Officer, (e) the Vice President, PET Resins Division - U.S., (f) the Vice President, Fibers and Recycled Products Group or (g) members of the Board of Directors and any knowledge such individuals would have after due inquiry of senior personnel of the Company and its subsidiaries having responsibility over the subject matter in question.

1.12. "Material Adverse Effect" means, collectively, a material adverse effect on, or a material adverse change in, or group of such effects on or changes in (a) the business, financial condition or results of operations, of the Company and its subsidiaries, taken as a whole or (b) the ability of the Company to perform its obligations under this Agreement or the Securities, other than any change, event or occurrence resulting from (i) conditions in the United States or foreign economies or securities markets in general (so long as any such condition does not disproportionately affect the business of the Company and its subsidiaries), (ii) the public announcement of the transaction contemplated by this Agreement, or (iii) arising out of any material breach by the Purchaser of its obligations hereunder or under that certain Confidentiality Agreement, dated April 29, 2002, between the Company and Warburg Pincus LLC.

1.13. "NYSE" means the New York Stock Exchange, Inc.

1.14. "Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association or joint venture.

1.15. "Plan" means all "employee benefit plans" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (other than Foreign Plans, as defined below) and all other employee benefit practices, agreements or arrangements, including, without limitation, any such practices or arrangements providing severance pay, change in control benefits, sick leave, vacation pay, salary continuation for disability, retirement benefits, deferred compensation, bonus pay, incentive pay, stock options or other stock-based compensation, hospitalization insurance, medical insurance, life insurance, scholarships or tuition reimbursements, maintained by the Company or any of its subsidiaries or to which the Company or any of its subsidiaries is obligated to contribute for Employees or individuals other than Employees (as defined below) who at any time prior to the date of this Agreement performed services as an Employee primarily for the Company ("Former Emplo yees").

1.16. "Registrable Securities" shall mean (a) the shares of Series A Preferred Stock, (b) the shares of Series B Preferred Stock, (c) the Notes, (d) the Warrants, (e) the shares of Common Stock issuable upon the conversion of the Shares and the Notes and the exercise of the Warrants, and (f) any other securities of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of (including but not limited to securities issued upon a stock split), the securities listed in (a) through (e).

1.17. "Rights Plan" has the meaning given such term in Section 3.4(b).

1.18. "SEC" shall mean the Securities and Exchange Commission.

1.19. "Securities" shall mean the shares of Series A Preferred Stock, the shares of Series B Preferred Stock, the Notes, the Warrants, the shares of Common Stock issuable upon conversion of the Shares or the Notes or the exercise of the Warrants.

1.20. "Securities Act" shall mean the Securities Act of 1933, as amended, and all of the rules and regulations promulgated thereunder.

1.21. "Senior Credit Facility" shall mean a revolving credit or similar facility from a commercial lender or syndicate of commercial lenders in the principal amount of at least $175,000,000, with economic terms and financial covenants not more adverse to the Company individually or in the aggregate than those described on Schedule 1.21 attached hereto and on other terms and conditions not materially more adverse to the Company in the aggregate than those terms and conditions described on such schedule.

1.22. "Series B Purchase Price" shall mean the price per share of Series B Preferred Stock, which shall be equal to the lower of (a) $11.25 (as adjusted for any stock splits, subdivisions, stock dividends, combinations, reclassifications or similar events occurring after the date hereof) and (b) 110% of the volume-weighted average closing price of the Common Stock on the NYSE for the 20 trading days ending on the trading day prior to the Second Closing Date (as defined below).

1.23. "Shares" shall mean the shares of Preferred Stock issued pursuant to this Agreement.

1.24. "Special Meeting" shall have the meaning given such term in Section 2.4(b).

1.25. "Superior Proposal" means an unsolicited written proposal involving a Change of Control Transaction made by a Person, and (i) on terms which the Board of Directors determines in good faith to be more favorable to the Company's stockholders than the transactions contemplated by this Agreement (determined after consultation with the Company's independent financial advisors), (ii) for which financing, to the extent required, is then committed or which in the good faith judgment of the Board of Directors is reasonably likely to be obtained by such Person, (iii) which, in the good faith reasonable judgment of the Board of Directors, is reasonably likely to be consummated and (iv) the failure to provide information or to engage in discussions or negotiations with respect to which proposal, in the good faith reasonable judgment of the Board of Directors after receiving advice from outside legal counsel of the Company, is reasonably likely to cause the Board of Directors to breach its duties to th e Company's stockholders under applicable law.

1.26. "Tax Returns" shall mean returns, reports, information statements and other documentation (including any additional or supporting material) filed, or required to be filed or maintained, in connection with the calculation, determination, assessment or collection of any Tax and shall include any amended returns required as a result of examination adjustments made by the Internal Revenue Service or other Tax authority.

1.27. "Taxes" shall mean any and all federal, state, local, foreign and other taxes, levies, fees, imposts, duties and charges of whatever kind (including any interest, penalties or additions to the tax imposed in connection therewith or with respect thereto), whether or not imposed on the Company, including, without limitation, taxes imposed on, or measured by, income, franchise, profits or gross receipts, and also ad valorem, value added, sales, use, service, real or personal property, capital stock, license, payroll, withholding, employment, social security, workers' compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer and gains taxes and customs duties.

2. Authorization, Purchase and Sale of Notes, Shares and Warrants.

2.1. Authorization of Securities.

1. On or before the date hereof, the Company has (i) authorized the Notes, (ii) authorized the Warrants, and (iii) authorized the issuance of the shares of Common Stock issuable upon conversion of the Notes and the exercise of the Warrants.
2. Subject to stockholder approval of the Proposals on or before the Second Closing (as defined below), the Company will (i) amend its Certificate of Incorporation to provide for the authorization, creation and issuance of the Series A Preferred Stock and the Series B Preferred Stock pursuant to the terms of the Certificate of Amendment to the Certificate of Incorporation in substantially the form attached hereto as Exhibit B (the "Charter Amendment"), which will have been filed on or before the Second Closing Date with the Secretary of State of the State of Delaware, (ii) authorize the issuance to the Purchaser of the Preferred Stock and (iii) authorize the issuance of the shares of Common Stock issuable upon conversion of the Preferred Stock.

2.2. Purchase and Sale of Preferred Stock and Notes.

(a)

(i) Subject to and upon the terms and conditions set forth in this Agreement, on the date hereof, the Company shall issue and sell to the Purchaser and the Purchaser shall purchase from the Company Notes in an aggregate principal amount on the date hereof of $20,000,000 at a purchase price equal to $20,000,000, provided that the Purchaser has received an opinion as set forth in Section 6.1(e) hereof, the consents referred to in Section 6.1(j) shall have been obtained and one Purchaser Designee (as defined below) shall have become a member of the Board of Directors. On the date hereof, the Company shall deliver to the Purchaser one or more Note(s) in the aggregate principal amount of $20,000,000 against payment to the Company of $20,000,000 by wire transfer to the Company of immediately available funds.

(ii) Subject to and upon the terms and conditions set forth in this Agreement, at the Note Closing (as defined below) the Company shall issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, Notes in an aggregate principal amount at the Note Closing of $29,950,000 at a purchase price equal to $29,950,000.

(b) Subject to and upon the terms and conditions set forth in this Agreement, including stockholder approval of the Proposals, at the Second Closing (as defined below) the Company shall (i) issue and sell to the Purchaser, and Purchaser shall purchase from the Company, 6,700,000 shares of Series B Preferred Stock at a purchase price per share equal to the Series B Purchase Price and (ii)(x) if the Note Closing shall not have occurred, issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, 2,666,666 shares of Series A Preferred Stock at an aggregate purchase price of $30,000,000 and issue shares of Series A Preferred Stock in exchange for the Notes issued on the date hereof in accordance with the terms of such Notes or (y) if the Note Closing shall have occurred, issue shares of Series A Preferred Stock in exchange for the Notes in accordance with the terms of the Notes.

2.3. Issuance of Warrants. Subject to the terms and conditions of this Agreement, the Company hereby agrees to issue to the Purchaser, as part of its inducement to purchase the Shares or Notes being purchased by the Purchaser: (a) on the date hereof, warrants entitling it to purchase 1,250,000 shares of Common Stock at an exercise price of $11.25 per share (subject to adjustments and termination as provided therein) (the "Initial Warrants"), a nd (b) on the earlier to occur of (x) the Second Closing Date (as defined below), or (y) the date on which the Board of Directors shall withdraw or amend in a manner adverse to the Purchaser its recommendation under Section 5.5(a)(iii)(B), warrants entitling it to purchase 1,250,000 shares of Common Stock at an exercise price per share equal to the Series B Purchase Price (subject to adjustment as provided therein) or, in the event there is no Second Closing, $11.25 per share (the "Second Closing Warrants"). The Warrants shall contain the same terms and conditions and have the same exercise features as are set forth in the form of Warrant attached hereto as Exhibit C.< A NAME="_Toc26631084">

2.4. Closings.

(a) The note closing (the "Note Closing") shall take place at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New York, NY 10019 on the tenth (10^th) business day after the date on which the conditions set forth in Sections 6.1 and 6.2 are met, or, to the extent permitted by law, waived or such earlier date as may be requested in writing by the Purchaser that is not less than three (3) business days after the date that such conditions are so met or waived. The date of the Note Closing is referred to herein as the "Note Closing Date". At the Note Closing, the Company shall deliver to the Purchaser one or more Note(s) in the aggregate principal amount at the Note Closing of $29,950,000 against payment to the Company of $29,950,000 by wire transfer to the Company of immediately available funds. If, at the Special Meeting (as defined below), the stockholders of the Company do not approve the issuance of the shares of Series A Preferred Stock issuable in exchange for the Notes and the issuance of the shares of Series B Preferred Stock, then no Second Closing shall occur and the Notes, the Initial Warrants and any other Warrants theretofore issued shall remain outstanding in accordance with their terms.

(b) Subject to the satisfaction (or, to the extent permitted by law, waiver) of the conditions set forth in Sections 6.1, 6.2 and 6.3, the second closing (the "Second Closing") shall take place at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New York, NY 10019 on the tenth (10^th) business day following the date of the special meeting of stockholders of the Company or any adjournment thereof called to approve the transactions contemplated by this Agreement, including the Charter Amendment and the issuance of the Preferred Stock, the Notes and the Warrants (the "Special Meeting") or such earlier date as is mutually agreed between the Purchaser and the Company. The date of such Second Closing is referred to herein as the "Second Closing Date". At the Second Closing, the Company shall deliver to the Purchaser (x) a certificate registered in the name of the Purchaser for the shares of Series A Preferred Stock purchased by it at the Second Closing and the s hares of Series A Preferred Stock issuable in exchange for the Notes issued on the date hereof (or issuable in exchange for the Notes held by the Purchaser if the Note Closing shall have occurred), (y) a certificate registered in the name of the Purchaser for the 6,700,000 shares of Series B Preferred Stock being purchased by it at the Second Closing and (z) to the extent not previously issued, the Second Closing Warrants, against payment therefor by the Purchaser of (A)(1) if the Note Closing did not occur, $30,000,000 as the aggregate purchase price of the Series A Preferred Stock to be purchased by and issued to the Purchaser at the Second Closing by wire transfer to the Company in immediately available funds or (2) if the Note Closing occurred, delivery by the Purchaser of the Notes duly endorsed or otherwise in appropriate form for transfer and (B) the aggregate Series B Purchase Price for such shares of Series B Preferred Stock by wire transfer to the Company in immediately available funds. Each of the Note Closing Date and the Second Closing Date is referred to as a "Closing Date" and are together referred to as the "Closing Dates." Each of the Note Closing and the Second Closing is referred to as a "Closing" and are together referred to as "Closings."

2.5. Use of Proceeds. The Company will primarily apply the net proceeds from the sale of the Shares and the Notes to repay indebtedness and for general corporate purposes.

3. Representations and Warranties of the Company. The Company has made available to the Purchaser true and complete copies of the Disclosure Documents filed with the SEC prior to the date hereof. Except as set forth in the Disclosure Documents filed with the SEC prior to the date hereof or in a correspondingly numbered section of the disclosure schedule delivered to the Purchaser prior to the execution of this Agreement (the "Disclosure Schedule"), the Company hereby represents and warrants to the Purchaser as follows:

3.1. Incorporation. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification, except where the failure to so qualify would not have a Material Adverse Effect. The Company has all requisite corporate power and authority to carry on its b usiness as now conducted.

3.2. Subsidiaries. Each entity of which the Company owns, directly or indirectly, at least a majority of the outstanding capital stock or other voting securities entitled to vote generally (each, a "subsidiary") has been duly organized, is validly existing in good standing under the laws of the jurisdiction of its organization, and has the power and authority to own its properties and to conduct its business. Each subsidiary of the Company is duly re gistered, qualified and authorized to transact business and is in good standing in each jurisdiction (other than the jurisdiction of its organization) in which the conduct of its business or the nature of its properties requires such registration, qualification or authorization, except where such failure to so qualify, register or be in good standing would not be reasonably likely to have a Material Adverse Effect. All of the issued and outstanding capital stock of each subsidiary has been duly authorized and validly issued, is fully paid and non-assessable, and is owned, directly or indirectly, by the Company free and clear of any mortgage, pledge, lien, encumbrance, security interest, adverse claim or equity. None of the Company's subsidiaries has any existing options, warrants, calls, preemptive (or similar) rights, subscriptions or other rights, agreements, arrangements or commitments of any character (other than those held by wholly owned subsidiar ies of the Company), obligating such subsidiary to issue, transfer or sell, or cause to be issued, transferred or sold, any shares of its capital stock or other equity interests or any securities convertible or exchangeable for such shares of capital stock or other equity interests and there are no outstanding obligation of any subsidiary to repurchase, redeem or otherwise acquire any shares of its capital stock or other equity interests.< /A>

3.3. Capitalization.

(a)As of the date of this Agreement, the authorized capital stock of the Company consists of 55,000,000 shares of Common Stock and 5,500,000 shares of class B common stock, par value $.001 per share (the "Class B Common Stock"). As of the date of this Agreement, there are no shares of Class B Common Stock issued and outstanding. The number of outstanding shares of Common Stock as of December 31, 2002 was 31,868,809 and the total number of shares of Common Stock issuable pursuant to stock options outstanding at December 31, 2002, was 3,665,768. All such shares of Common Stock have been duly authorized, and all such issued and outstanding shares of Common Stock have been validly issued, are fully paid and nonassessable. No such outstanding shares of Common Stock were issued in violation of any preemptive rights, "poison pill" provisions, rights of first offer or refusal or similar rights.

(b)Except for the issuance of shares of Common Stock pursuant to any restricted stockplans or to any qualified retirement plans (in the case of such qualified retirement plans, in an aggregate amount not exceeding 400,000 shares annually) or the exercise of outstanding options granted pursuant to the Company's option plans as in effect on the date hereof, including any such options granted after December 31, 2002, the Company has not issued any capital stock since December 31, 2002, except as contemplated by this Agreement. Except as set forth in or contemplated by this Agreement or the Rights Plan, and except for the issuance of options to purchase shares of Common Stock, restricted stock or other purchase rights pursuant to the Company's equity incentive plans or qualified retirement plans as in effect on the date hereof and agreements entered into in connection with such equity incentive plans and qualified retirement plans, there are (i) no existing options, warrants, calls, preemptive (or similar) ri ghts, subscriptions or other rights, agreements, arrangements or commitments of any character obligating the Company to issue, transfer or sell, or cause to be issued, transferred or sold, any shares of the capital stock of the Company or other equity interests in the Company or any securities convertible into or exchangeable for such shares of capital stock or other equity interests, and (ii) no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of its capital stock or other equity interests.

3.4. Authorization.

(a) All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization of the Notes (other than with respect to the conversion of the Notes into Series A Preferred Stock) and the Warrants, the authorization, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein (other than to the extent set forth in the next sentence) has been taken. Except for the approval of the Proposals (as defined below) by the Company's stockholders and the filing of the Charter Amendment, all corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization and issuance of the Securities (other than the Notes and the Warrants) has been taken.

(b) This Agreement constitutes, and when executed and delivered by the Company, the Notes and the Warrants shall constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, and except as may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors' rights generally and by general equitable principles. The Company has all requisite corporate power to enter into this Agreement, the Notes and the Warrants and to carry out and perform its obligations under the terms of this Agreement, the Notes and the Warrants. The Board of Directors has taken all action necessary to render inapplicable, as it relates to the Purchaser (i) the provisions of Section 203 of the General Corporation Law of the State of Delaware and (ii) the provisions of the Company's Rights Agreem ent with First Union National as Rights Agent, dated August 31, 2001, as amended from time to time (the "Rights Plan"), in each case, however, solely with respect to transactions (x) contemplated hereby or (y) as would be permitted under Section 5.7.

(c) The Company has reserved for issuance the shares of Common Stock initially issuable upon conversion of the Notes and the exercise of the Initial Warrants. At or prior to the Second Closing, subject to approval of the Proposals, the Company will have reserved for issuance (i) the shares of Common Stock initially issuable upon conversion of the Shares and the exercise of the Second Closing Warrants and (ii) the Shares.

3.5. Valid Issuance.

(a) The Shares being purchased by the Purchaser hereunder will, upon issuance pursuant to the terms hereof, be duly authorized and validly issued, fully paid and non-assessable shares of Preferred Stock, free of preemptive or similar rights. Upon their issuance in accordance with the terms of the Preferred Stock, the Notes or the Warrants, as the case may be, the shares of Common Stock issued upon conversion of the Shares or the Notes or exercise of the Warrants, as the case may be, will be duly authorized, validly issued, fully paid and non-assessable shares of Common Stock, free of all preemptive or similar rights. Upon their issuance in accordance with the terms of the Notes, the shares of Series A Preferred Stock issued in exchange for the Notes will be duly authorized, validly issued, fully paid and non-assessable shares of Series A Preferred Stock, free of all preemptive or similar rights.

(b) Subject to the accuracy of the representations made by the Purchaser in Section 4 ereof, the Securities will be issued to the Purchaser in compliance with applicable exemptions from (i) the registration and prospectus delivery requirements of the Securities Act and (ii) the registration and qualification requirements of all applicable securities laws of the states of the United States. As of the date hereof, the Company is eligible to file a registration statement on Form S-3 under the Securities Act and is current in its filings with the SEC under Section 13(a) of the Exchange Act.

3.6. Financial Statements. The financial statements of the Company included in the Disclosure Documents (collectively, the "Financial Statements") present fairly in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates indicated, and the results of its operations and cash flows for the periods therein specified, in accordance with U.S. generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the period therein specified (except in the case of quarterly financial statements for the absence of footnote disclosure and subject, in the case of interim periods, to normal year-end adjustments which, in the aggregate, would not be material).

3.7. Absence of Certain Changes. Since September 30, 2002, the Company and its subsidiaries have conducted their business only in the ordinary course of such business consistent with past practice. Since September 30, 2002, there has not been (a) any Material Adverse Effect or any event which is reasonably likely to have a Material Adverse Effect, (b) any action taken which, if taken after the date hereof, would constitute a breach of any covenant he rein, or (c) any material change in the Company's accounting principles, practices or methods which is not required by GAAP. From September 30, 2002 to the date hereof, there has not been any material commitment, contractual obligation, borrowing, capital expenditure or transaction (each, a "Commitment") entered into by the Company or any of its subsidiaries, other than Commitments in the ordinary course of business.

3.8. Compliance with Law.

(a) Neither the Company nor any of its subsidiaries has been or is in violation of any laws, ordinances, governmental rules or regulations to which it is subject, except where such violation would not be reasonably expected to have a Material Adverse Effect.

(b) The Company and its subsidiaries have all licenses, permits, franchises or other governmental authorizations necessary to the ownership of their property or to the conduct of their respective businesses, except those which the failure to hold or obtain would not be reasonably likely to result in a Material Adverse Effect.

(c) To the Company's Knowledge, since January 1, 2000, no formal or informal inquiries have been received by the Company or any of its subsidiaries from any governmental entity regarding the failure or potential failure by the Company or any such subsidiary to comply in all material respects with any material securities laws or accounting practices other than any such deficiencies which have been cured for at least 12 months or routine "comment letters" from the SEC.

3.9. Absence of Litigation. There is no legal action, suit, proceeding, arbitration, claim, or to the Company's Knowledge, investigation or inquiry pending or threatened by or before any court or other governmental body or arbitrator by or against the Company or any of its subsidiaries in which an unfavorable outcome is reasonably possible and in which an unfavorable outcome, ruling or finding in any said matter, or for all such matters taken as a whole, would reasonably be expected to have a Material Adverse Effect. The foregoing includes, without limitation, any such action, suit, proceeding or investigation that questions this Agreement, the Notes or the Warrants, or seeks to delay or prevent the consummation of the transactions contemplate d hereunder or thereunder, or the right of the Company to execute, deliver and perform under same. Neither the Company nor any of its subsidiaries is a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality that is reasonably likely to have a Material Adverse Effect. Neither the Company nor any subsidiary intends to initiate any action, suit, proceeding, claim, investigation or inquiry that is reasonably likely to have a Material Adverse Effect.

3.10. Intellectual Property. (a) The Company or any of its subsidiaries owns or possesses sufficient rights to use all (i) material patents (and any renewals and extensions thereof), patent rights (and any applications therefor), rights of priority and other rights in inventions; (ii) trademarks, service marks, trade names and trade dress, and all registrations and applications therefor and all legal or common-law equivalents of any of the foregoing; (iii) copyrights and rights in mask works (and any applications or registrations for the foregoing, and all renewals and extensions thereof), common-law copyrights and rights of authorship including all rights to exploit any of the foregoing in any media and by any manner and means now known or hereafter devised; (iv) industrial design rights, and all registrations and applications therefor; (v) rights in data, collections of data and databases, and all legal or common-law equivalents thereof; (vi) rights in domain names and domain name reservations; (vii) rights in trade secrets, proprietary information and know-how (collectively with all licenses and other agreements providing Company with the right to use any item of the type referred to in clauses (i) through (vii), "Intellectual Property") that are necessary for the conduct of its business as now conducted except where the failure to currently own or possess would not be reasonably likely to have a Materia l Adverse Effect; (b) the Intellectual Property (other than Intellectual Property licensed to the Company) is valid, subsisting, in proper form and enforceable, other than where the failure to be so would not reasonably be likely to have a Material Adverse Effect; (c) the Company and each of its subsidiaries are in compliance with all contractual obligations relating to the use and protection of such of the Intellectual Property as is used pursuant to license or other agreement except where a failure to be in compliance would not reasonably be expected to have a Material Adverse Effect; and (d) to the Company's Knowledge, (i) the present business activities and products of the Company and each of its subsidiaries have not and do not infringe any known intellectual property or other proprietary rights of any third party, (ii) neither the Company nor any of its subsidiaries is making unauthorized use of any confidential information or trade secrets of any third party, and (iii) neither the Compa ny nor any of its subsidiaries have received any notice of any asserted infringement (nor is there any reasonable basis for any third party asserting an infringement) by the Company or any of its subsidiaries of, any rights of a third party with respect to any Intellectual Property, except with respect to clause (i), (ii) or (iii), individually or in the aggregate, as would be reasonably likely to have a Material Adverse Effect.

3.11. Disclosure Documents. The information contained or incorporated by reference in the Disclosure Documents was true and correct in all material respects as of the respective dates of the filing thereof with the SEC; and, as of such respective dates, the Disclosure Documents did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

3.12. Material Contracts. As of the date hereof, neither the Company nor any of its subsidiaries is a party to any Contract not filed as an exhibit to any Disclosure Document. Each Contract is valid, binding and enforceable against the Company or such subsidiary and, to the Company's Knowledge, the other parties thereto, in accordance with its terms, and is in full force and effect on the date hereof except to the extent that a failure to be in full force and effect would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. For purposes of this Agreement, "Contract" shall mean any material contract, agreement or other arrangement that is required to be filed with the SEC as an exhibit to any Disclosure Document.

3.13. Books and Records. The minute books and other records of the Company and its subsidiaries contain in all material respects accurate records of all meetings and accurately reflect in all material respects all other corporate action of the stockholders and directors and any committees thereof of the Company and its subsidiaries and all actions of the directors of the Company's subsidiaries.

3.14. Consents.

(a) All material consents, approvals, orders and authorizations required on the part of the Company in connection with the execution, delivery or performance of this Agreement and the consummation of the transactions contemplated herein have been obtained and will be effective as of the Note Closing Date, other than, (i) in connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the regulations promulgated thereunder, (ii) stockholder approval as set forth more specifically in Section 5.5(a) below, and (iii) the filing of the Charter Amendment with the Secretary of State of the State of Delaware.

(b) On or prior to the Second Closing and assuming the Company's stockholders approve the Proposals referred to in Section 5.5(a), all material consents, approvals, orders and authorizations required on the part of the Company in connection with the execution, delivery or performance of this Agreement and the consummation of the transactions contemplated herein will have been obtained and will be effective on the Second Closing, other than any required filing of a Form D under applicable federal securities laws and any required filing under any state securities laws.

3.15. No Conflict. The execution and delivery of this Agreement, the Notes, and/or the Warrants, as the case may be, do not, and the fulfillment of the terms hereof and thereof by the Company, and the issuance of the Shares (and the Common Stock issuable upon conversion of the Shares) will not, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cance llation or acceleration of any obligation or to a loss of a material benefit under (a) any Contract or any other indenture, mortgage, deed of trust, credit agreement, note or other evidence of indebtedness, or any other material agreement of the Company or any of its subsidiaries which imposes an aggregate annual commitment by the Company, any subsidiary or any other contract party exceeding $1,000,000 (collectively the "Key Agreements and Instruments"), (b) any provision of the Certificate of Incorporation or By-laws of the Company or (c) any permit, franchise, license, judgment, order, statute, law, ordinance, rule or regulations, applicable to the Company or its subsidiaries, properties or assets, except, in the case of clauses (a) and (c), as would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect. No event has occurred and no condition exists which, upon notice or the passage of time (or both), wou ld constitute a default under any such Key Agreements and Instruments other than defaults which individually or in the aggregate would not be reasonably likely to have a Material Adverse Effect.

3.16. Brokers or Finders. Other than with respect to those Persons disclosed in the Disclosure Schedule with respect to this Section, the Company has not incurred, and shall not incur, directly or indirectly, any liability for any brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. The Company has furn ished to the Purchaser true and correct copies of all arrangements between the Company and each such Persons disclosed in the Disclosure Schedule with respect to this Section.

3.17. New York Stock Exchange. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the NYSE, nor has the Company received any notification that the SEC or the NYSE is contemplating terminating such registration or listing.

3.18. No Manipulation of Stock. The Company has not taken and will not take, in violation of applicable law, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the transactions contemplated hereby or the sale or resale of the shares of Common Stock or, since September 30, 2002, has not purchased or authorized and will not purchase or authorize the repurchase of any shares of Common Stock.

3.19. Company Not an "Investment Company". The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Company is not, and based upon the accuracy of Purchaser's representations immediately after receipt of payment for the Notes, the Shares and the Warrants will not be, an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act and shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

3.20. Title to Property and Assets. The Company and each of its subsidiaries owns or possesses the necessary rights to use all material properties, assets, licenses, permits and the like required to operate its business as currently operated. The properties and assets of the Company and each of its subsidiaries are owned by the Company or its subsidiaries free and clear of all mortgages, deeds of trust, liens, charges, encumbrances and security inter ests ("Liens") except for Liens permitted under the Loan Agreement dated September 29, 1999 among the Company, Fleet National Bank, as Administrative Agent, Arranger and a Bank, and the other institutions party thereto, as amended to the date hereof. With respect to the material property and assets it leases, the Company and each of its subsidiaries is in compliance with such leases in all material respects.

3.21. Labor Relations. There are no controversies or unfair labor practice proceedings pending or, to the Company's Knowledge, threatened, between the Company or any of its subsidiaries and individuals who perform services as employees primarily for the Company or any of its subsidiaries (including such persons who are on an approved leave of absence, vacation, short-term disability or otherwise treated as an active employee of the Company or any of its s ubsidiaries, "Employees") or former Employees or any labor or other collective bargaining unit representing any current or former Employee of the Company or any of its subsidiaries, that would reasonably be expected to result in a labor strike or work stoppage or otherwise have a Material Adverse Effect. To the Company's Knowledge, no organizational effort is presently being made or threatened with respect to any non-union Employees.

3.22. Employee Benefits.

(a) Copies of the following documents, with respect to each of the Plans, as applicable, have been made available to Purchaser by the Company: (i) all plan and related trust documents, and amendments thereto; (ii) the most recent IRS Form 5500; (iii) the most recent IRS determination letter and (iv) summary plan descriptions.

(b) None of the Plans is a "single-employer plan," as defined in Section 4001(a)(15) of ERISA (a "Pension Plan"). With respect to each Pension Plan sponsored by, or to which contributions are required of, the Company or any trade or business (whether or not incorporated) which has been under common control or treated as a single employer with the Company under Section 414(b), (c) or (m) of the Code (an "ERISA Affiliate"), there does not exist any accumulated funding deficiency within the meaning of Section 412 of the Code, whether or not waived. Neither the Company nor any ERISA Affiliate has incurred, or is reasonably likely to incur, any liability under Title IV of ERISA or Section 412 of the Code (other than required premiums to Pension Benefit Guaranty Corporation).

(c) None of the Pension Plans is a "multiemployer plan," as defined in Section 3(37) of ERISA (a "Multiemployer Plan"). Neither the Company nor any ERISA Affiliate has incurred any material liability due to a complete or partial withdrawal from a Multiemployer Plan or due to the termination or reorganization of a Multiemployer Plan (except for any such liability as has been satisfied in full), and no events have occurred and no circumstances exist that could reasonably be likely to result in any such material liability to the Company or any ERISA Affiliate.

(d) Each Plan has been administered in material compliance with its terms, and other applicable laws, rules and regulations including, without limitation, the provisions of ERISA and the Code (including rules and regulations promulgated thereunder), and no event has occurred, and to the Company's Knowledge, there exists no condition or sets of conditions, in connection with which the Company would be subject to liability under the terms of such Plan, ERISA, the Code or any other applicable law other than as would not be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect.

(e) The most recent actuarial valuation report prepared for each Pension Plan prior to December 31, 2002, setting forth the funding status of each such Plan on a SFAS 87 basis, a copy of which has been provided or made available to the Purchaser, sets forth the fair value of the assets and liabilities (based on the actuarial assumptions contained in such report, of each such plan), and, since the date of such report, no event has occurred that has had, or would reasonably be likely to have, a materially adverse impact on the funded status of any such Plan (excluding any effects resulting from general developments in the equity markets and the decline in prevailing interest rates).

(f) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will: (i) result in any payment becoming due to any Employee or Former Employee of the Company or the beneficiary or dependent of any such Employee or Former Employee, (ii) increase any benefits otherwise payable under any of the Plans, (iii) result in the acceleration of the time of payment or vesting of any benefits provided under any of the Plans, (iv) constitute a "change in control" under any Plan, or (v) result in any payments by the Company that will not be deductible under Section 162(m) or Section 280G of the Code. The consummation of the transactions contemplated hereby will not result in any increase in the amount of compensation or benefits or accelerate the vesting or timing of payment of any compensation or benefits payable by the Company to or in respect of any Employee or Former Employee.

(g) All employee benefits practices or arrangements which are maintained by the Company or any of its subsidiaries for the benefit of their non-United States Employees or United States Employees located in a foreign jurisdiction (collectively, the "Foreign Plans") have been maintained in all material respects in accordance with the applicable laws of such foreign jurisdiction, and all Foreign Plans required to be registered with any governmental agency have been registered and have been maintained in good standing with such governmental agency (other than where the failure to do so could not reasonably be likely to have a Material Adverse Effect).

3.23. Environmental Matters.

(a) Except as would not reasonably be likely to result in a Material Adverse Effect, individually or in the aggregate, no underground storage tanks and no amount of any substance that has been designated by any governmental agency or by applicable federal, state or local law to be radioactive, toxic, hazardous or otherwise a danger to health or the environment, including without limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous substances pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to the United States Resource Conservation and Recovery Act of 1976, as amended, and the regulations promulgated pursuant to said laws, but excluding routine quantities of office and janitorial supplies (a "Hazardous Material"), are present in, on or under any property, including the land and the improvements, ground water and surface water thereof, that the Company or a ny of its subsidiaries currently owns, operates, occupies or leases, or to the Company's Knowledge, has at any time owned, operated, occupied or leased.

(b) Except as would not reasonably be likely to result in a Material Adverse Effect, individually or in the aggregate, neither the Company nor any of its subsidiaries has transported, stored, used, manufactured, disposed of or arranged for the disposal of, released or exposed its employees or others to Hazardous Materials in violation of any federal, state or local law, rule, regulation, treaty, statute or agreement related to protection of human health, safety, and the environment, including natural resources (collectively, "Environmental Law"), or in a manner that could result in a Material Adverse Effect, individually or in the aggregate.

(c) Except as would not reasonably be likely to result in a Material Adverse Effect, individually or in the aggregate, the Company and its subsidiaries currently hold and are in compliance with all approvals, permits, licenses, clearances and consents required under Environmental Laws for the conduct of the Company's and its subsidiaries' businesses.

(d) No action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending, or to the Company's Knowledge, threatened alleging that the Company or its subsidiaries are in violation of or liable under any Environmental Law except those that individually or in the aggregate would not be reasonably likely to result in a Material Adverse Effect.

(e) Except as would not reasonably be likely to result in a Material Adverse Effect, individually or in the aggregate, the Company and its subsidiaries are and have been in compliance with all applicable Environmental Laws.

(f) The Company has provided copies or made available to the Purchaser or the Purchaser's consultant all material reports, studies, analyses, and other environmental documents related to the Company and its subsidiaries.

3.24. Taxes

(a) (i) The Company and each of its subsidiaries have filed (or joined in the filing of) when due all material Tax Returns required by applicable law to be filed with respect to the Company or such subsidiary and all Taxes shown to be due on such Tax Returns have been paid; (ii) all such Tax Returns were true, correct and complete in all material respects as of the time of such filing; and (iii) all Taxes relating to periods ending on or before each Closing Date owed by the Company or any subsidiary (whether or not shown on any Tax Return) or for which the Company may be liable at any time on or prior to each Closing Date, if required to have been paid, have been paid (except for Taxes which are being contested in good faith or for which an adequate reserve has been made on its Financial Statements) and any liability of the Company or any subsidiary for Taxes not yet due and payable has been provided for on the Financial Statements in accordance with GAAP.

(b) Since January 1, 1995, no current or former subsidiary of the Company has ever been a member of any "affiliated group" (within the meaning of Section 1504(a) of the Code) included in any consolidated federal income Tax Return filed with the Internal Revenue Service other than an affiliated group of which the Company is the common parent.

(c) The Company's net operating losses and other tax attributes are not subject to any current limitation under Section 382 or Section 384 of the Code. The transactions contemplated hereby will not result in an "ownership change" within the meaning of Section 382(g) of the Code.

3.25. Insurance. The Company has provided to the Purchaser a true and complete list of all material insurance policies other than title insurance policies on real property (the "Insurance Policies") carried by or covering the Company's and each of its subsidiaries' properties as of the date hereof, together with, in respect of each such policy, the name of the insurer, the type of policy, the amount of such coverage and the deductible and has made available true and complete copies of the Insurance Policies to the Purchaser. As of the date hereof, all such policies are in full force and effect, no notice of cancellation has been given wi th respect to any such policy and the Company and each of its subsidiaries have complied in all material respects with the terms and provisions of such policies.

3.26. Transactions with Related Parties. Neither the Company nor any subsidiary of the Company is a party to any agreement with any of the Company's or such subsidiary's directors, executive officers or any Affiliate or immediate family member of any of the foregoing under which it: (a) leases any real or personal property (either to or from such Person), (b) licenses technology (either to or from such Person), (c) is obligated to purchase any tangible or intangible asset from or sell such asset to such Person, (d) purchases products or services from such Person or (e) has borrowed money from or lent money to such Person (other than in connection with customary travel and entertainment expenses). To the Knowledge of the Company, there exist no agreements among stockholders of the Company or any subsidiary to act in concert with respect to their voting or holding of Company or such subsidiary's securities.

3.27. Interest in Competitors. To the Knowledge of the Company, neither the Company nor any of its officers or directors has any interest, either by way of contract or by way of investment (other th an as holder of not more than 2% of the outstanding capital stock of a publicly traded Person) or otherwise, directly or indirectly, in any Person other than the Company that (a) provides any services or designs, produces or sells any product or product lines or engages in any activity competitive with any activity currently proposed to be conducted by the Company or any of its subsidiaries or (b) has any direct or indirect interest in any asset or property, real or personal, tangible or intangible, of the Company.

3.28. General Solicitation; No Integration. Neither the Company nor any other Person authorized by the Company to act on its behalf has engaged in a general solicitation or general advertising (within the meaning of Regulation D of the Securities Act) of investors with respect to offers or sales of the Notes, the Shares and the Warrants. The Company has not, directly or indirectly, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act) which, to its Knowledge, is or will be integrated with the Notes, the Shares and the Warrants sold pursuant to this Agreement.

3.29. Accounting Controls. The Company and each subsidiary of the Company maintains a system of internal accounting controls and have information systems sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management's general or specific authorizations, (b) transactions are recorded as necessary to permit preparation of financial statements in accordanc e with generally accepted accounting principles and to maintain accountability for assets, (c) access to assets is permitted only in accordance with management's general or specific authorization and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

3.30. Material Customers. As of the date hereof, no customer of the Company or any subsidiary that accounted for more than $10,000,000 in sales during 2002 has terminated its relationship with the Company or any subsidiary or substantially reduced its purchases from the Company or any subsidiary, or, to the Knowledge of the Company, has an intention to do so.

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

4.1. Organization. The Purchaser is duly organized, validly existing and in good standing under the jurisdiction of its organization.

4.2. Authorization. All action on the part of the Purchaser necessary for the authorization, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein has been taken. This Agreement constitutes the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors' rights generally and by general equitable principles. The Purchaser has all requisite power to enter into this Agreement and to carry out and perform its obligations under the terms of this Agreement.

4.3. Purchase Entirely for Own Account, Etc. The Purchaser is acquiring the Securities for its own account, and not with a view to, or for sale in connection with, any distribution of the Securities in violation of the Securities Act. Except as contemplated by this Agreement, the Purchaser has no present agreement, undertaking, arrangement, obligation or commitment providing for the disposition of the Securities. The Purchaser has not been organized, reorganized or recapitalized specifically for the purpose of investing in the Securities.

4.4. Investor Status; Etc. The Purchaser certifies and represents to the Company that at the time the Purchaser acquires any of the Notes, the Shares or Warrants, the Purchaser (a) will be an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act and (b) will not be an "investment company" or an entity controlled by and "investment company" within the meaning of the Investment Company Act. The Purchaser's fi nancial condition is such that it is able to bear the risk of holding the Notes, the Shares or Warrants for an indefinite period of time and the risk of loss of its entire investment. The Purchaser has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company's stage of development so as to be able to evaluate the risks and merits of its investment in the Company. Without in any way limiting or qualifying any representations and warranties of the Company in this Agreement, the Purchaser acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the transactions contemplated hereby and the merits and risks of investing in the Securities and (ii) access to information about the Company and the Company's business sufficient to enable it to evaluate its inve stment.

4.5. Securities Not Registered. The Purchaser understands that the Securities have not been registered under the Securities Act, by reason of their issuance by the Company in a transaction exempt from the registration requirements of the Securities Act, and that the Securities must continue to be held by the Purchaser unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration. The Purchaser unde rstands that the exemptions from registration afforded by Rule 144 (the provisions of which are known to it) promulgated under the Securities Act depend on the satisfaction of various conditions, and that, if applicable, Rule 144 may afford the basis for sales only in limited amounts. Prior to any proposed transfer of the Securities, unless such transfer is made pursuant to an effective registration statement under the Securities Act, the Purchaser will deliver to the Company an opinion of counsel to the effect that the Securities may be sold or otherwise transferred without registration under the Securities Act. The Company will remove the legend relating to Securities Act restrictions from any Securities if the Purchaser delivers to the Company an opinion of counsel, reasonably satisfactory in form and substance to the Company, to the effect that such Securities are no longer subject to transfer restrictions under the Securities Act.

4.6. Absence of Litigation. As of the date hereof, there is no action, suit, proceeding, arbitration, claim or, to the Purchaser's knowledge, investigation or inquiry pending or threatened by or before any court or other governmental body or arbitrator against the Purchaser or any of its Affiliates in which an unfavorable outcome, ruling or finding in any said matter, or for all such matters taken as a whole, questions this Agreement, the Notes or the Warrants or seeks to or would reasonably be expected to delay or prevent the consummation of the transactions contemplated hereunder or thereunder, or the right of the Purchaser to execute, deliver and perform under this Agreement.

4.7. Consents. All material consents, approvals, orders and authorizations required on the part of the Purchaser in connection with the execution, delivery or performance of this Agreement and the consummation of the transactions contemplated herein have been obtained and will be effective as of the Note Closing Date, other than in connection with the HSR Act and the regulations promulgated thereunder.

4.8. No Conflict. The execution and delivery of this Agreement does not, and the fulfillment of the terms hereof and the terms of the Notes and the Warrants by the Purchaser will not, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under (a) any indenture, mortgage, deed of trust, credit agreement, note or other evidence of indebtedness, or other material agreement of the Purchaser, (b) any provision of the Purchaser's limited partnership agreement or (c) any instrument, permit, franchise, license, judgment, order, statute, law, ordinance, rule or regulations, applicable to the Purc haser, properties or assets, except, in the case of clauses (a) and (c), as would not, individually or in the aggregate, be reasonably expected to have, a material adverse effect on, or a material adverse change in, the ability of the Purchaser to perform its obligations under this Agreement.

4.9. Brokers or Finders. The Purchaser has not incurred, and shall not incur, directly or indirectly, any liability for any finder's fee, brokerage or agents' commission or similar payment in connection with this Agreement or any transaction contemplated hereby that would give rise to any valid claim by any Person against the Company for a finder's fee, brokerage or agents' commission or similar payment.

4.10. Accuracy of Information Supplied for Proxy Statement. The information regarding the Purchaser and its Affiliates supplied or to be supplied by it in writing specifically for inclusion or incorporation by reference into the Proxy Statement (as defined below) will not, as of the date such Proxy Statement is first mailed to the stockholders of the Company and as of the date of the Special Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

5. Covenants.

5.1. Conduct of Business.

(a) From the date of this Agreement until the Second Closing Date, except as expressly contemplated by this Agreement, the Company shall, and shall cause each of its subsidiaries to, (i) carry on in all material respects its respective business in the ordinary course, (ii) use all commercially reasonable efforts to preserve intact its current business organizations and to keep available the services of its current officers and key employees, (iii) use all commercially reasonable efforts to preserve its relationships with customers, suppliers and other Persons with which it has business dealings, and (iv) comply in all material respects with all laws and regulations applicable to it or to any of its properties, assets or business. Without limiting the generality of the foregoing, from the date of this Agreement until the Second Closing Date, the Company shall not, and shall not permit any subsidiary to, take any action that would cause any of the representations and warranties contained in Section 3 to become untrue in any material respect or purchase or authorize the repurchase of any shares of Common Stock (other than not more than an aggregate of 100,000 shares that may be repurchased from employees of the Company or any subsidiary in connection with the termination of employment of such employees).

(b) From and after the date of this Agreement until the Second Closing Date, the Company shall maintain the Insurance Policies in full force and effect or replace the same with policies from reputable insurers providing substantially similar coverage in all material respects under substantially similar terms and conditions in all material respects.

5.2. HSR Act Filings. The Company and the Purchaser shall file with the proper authorities all forms and other documents necessary to be filed pursuant to the HSR Act, and the regulations promulgated thereunder, as promptly as possible and shall cooperate with each other in promptly producing such additional information as those authorities may reasonably require to allow early termination of the notice period provided by the HSR Act or as otherwise necessary to comply with statutory requirements of the Federal Trade Commission or the Department of Justice.

5.3. Other Governmental Approvals. As soon as practicable after the execution of this Agreement, the Company and the Purchaser shall file all applications and reports and take such other action (in addition to filings required under the HSR Act) which is reasonably required to be taken or filed with any governmental authority in connection with the transactions contemplated by this Agreement. The Company and the Purchaser shall give all additional no tices to third parties and take other action reasonably required to be taken by it under any material authorization, lease, note, mortgage, indenture, agreement or other instrument or any law, rule, regulation, demand or court or administrative order in connection with the transactions contemplated by this Agreement.

5.4. Covenants Pending Each Closing. Between the date of this Agreemen t and each Closing Date, the Company will (a) except to the extent set forth on Section 5.4 of the Disclosure Schedule, promptly advise the Purchaser of any action or event of which it has Knowledge which has the effect of making incorrect, in any material respect, any of the Company's representations or warranties or which has the effect of rendering any of the Company's covenants incapable of performance and (b) promptly provide the Purchaser with copies of any correspondence received by the Company from the SEC.

5.5. Special Meeting/Proxy Statement.

(a) The Company shall: (i) use its best efforts to prepare and file with the SEC, promptly after the date hereof, preliminary proxy materials with respect to the Special Meeting called for the purpose of approving the (A) the Charter Amendment, and (B) the authorization and issuance of the shares of Series A Preferred Stock and the shares of Series B Preferred Stock, the Notes and the Warrants and the shares issuable upon conversion or exercise thereof, as contemplated by this Agreement (collectively, the "Proposals"); (ii) file with the SEC the definitive proxy statement (the "Proxy Statement") promptly after comments, if any, are received from the SEC with respect to the preliminary proxy materials and after the furnishing by the Company of all information required to be contained therein; (iii) acting through its Board of Directors, (A) call the Special Meeting for the purpose of voting upon approving the Proposals and (B) include in the proxy statement the unanimous recommendation of its Board of Directors that holders of the Common Stock approve the Proposals, and (iv) not withdraw or amend in a manner that is adverse to the Purchaser the recommendation set forth in 5.5(a)(iii)(B); unless, in the case of clauses (i) through (iv), the Board of Directors determines in good faith after consultation with outside legal counsel, that to refrain from so withdrawing or amending such recommendation would be reasonably likely to breach its fiduciary duties under applicable law. The Company shall cause the Proxy Statement and the information contained therein to comply in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder. The Company shall cause the Proxy Statement at the time the Proxy Statement (or any amendment or supplement thereto) is filed with the SEC or first sent to stockholders, or at the time the Special Meeting is held, not to contain any untrue statement of a material fact or omit to state any material fact required to be stated therein, or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(b) At the Special Meeting, the Purchaser shall vote any Securities owned by it at the time of such meeting and entitled to vote in favor of the Proposals, unless otherwise required by law or by the rules of the NYSE.

5.6. Subscription Right.

(a) If at any time after the Note Closing, the Company proposes to issue equity securities of any kind (the term "equity securities" shall include for these purposes any warrants, options or other rights to acquire equity securities and debt securities convertible into equity securities) of the Company, other than (i) shares of Common Stock issuable upon conversion of the Notes or the Shares or upon exercise of the Warrants, (ii) warrants issued to lenders of non-convertible debt and the Common Stock issuable upon exercise thereof, (iii) shares of Common Stock, Options (as such term is defined in the Charter Amendment) and Convertible Securities (as such term is defined in the Charter Amendment) issued as consideration for bona fide acquisitions, mergers, joint venture or similar transactions, the terms of which are approved by the Board of Directors, (iv) Options, Convertible Securities and shares of Common Stock (A) issued pursuant to any stock option, stock purchase or similar plan or arrangement fo r the benefit of the employees, officers, directors and/or consultants of the Company or its subsidiaries, duly adopted by the Board of Directors, or (B) contributed to qualified Plans, duly adopted by the Board of Directors provided such Plan contributions do not exceed 500,000 shares per annum in the aggregate, (v) pursuant to the terms of this Agreement, (vi) shares of Common Stock issuable pursuant to the Rights Plan or (vii) equity securities issued pursuant to any securities split, securities dividend, recapitalization or reorganization or other event that does not dilute the economic interest of any Eligible Holder, then the Company shall:

(i) give written notice to each holder of record of more than 10% of the outstanding shares of Preferred Stock or more than 10% of the Notes who qualifies as an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act (each an "Eligible Holder") (no less than ten (10) business days prior to the closing of such issuance) setting forth in reasonable detail (A) the designation and all of the terms and provisions of the securities proposed to be issued (the "Proposed Securities"), including, where applicable, the voting powers, preferences and relative participating, optional or other special rights, and the qualification, limitations or restrictions thereof and interest rate and maturity; (B) the price and other terms of the proposed sale of such securities; (C) the amount of such securities proposed to be issued; and (D) such other information as any Eligible Holder may reasonably request in order to evaluate the proposed issuance; and

(ii) offer to issue and sell to each Eligible Holder, on such terms as the Proposed Securities are issued and upon full payment by the Eligible Holder, a portion of the Proposed Securities equal to a percentage determined by dividing (A) the number of shares of Common Stock owned by the Eligible Holder that were issued or are issuable to it upon the conversion or exercise of the Securities by (B) the total number of shares of Common Stock then outstanding, including for purposes of this calculation all shares of Common Stock issuable upon conversion or exercise in full of any convertible or exercisable securities including the Securities (other than employee stock options granted after the date hereof) then outstanding.

(b) Any Eligible Holder must exercise its purchase rights hereunder within ten (10) business days after receipt of such written notice from the Company. To the extent that the Company offers two or more securities in units, such Eligible Holder must purchase such units as a whole and will not be given the opportunity to purchase only one of the securities making up such unit. The closing of the exercise of such subscription right shall take place simultaneously with the closing of the sale of the Proposed Securities giving rise to such subscription right.

(c) Upon the expiration of the 10-day offering period described above, the Company will be free to sell such Proposed Securities that the Eligible Holders have not elected to purchase during the one hundred twenty (120) days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to such holders. Any Proposed Securities offered or sold by the Company after such 120-day period must be reoffered to the Eligible Holders pursuant to this Section 5.6.

(d) The election by any Eligible Holder not to exercise its subscription rights under this Section 5.6 in any one instance shall not affect its right (other than in respect of a reduction in its percentage holdings) as to any subsequent proposed issuance. Any sale of such securities by the Company without first giving the Eligible Holders the rights described in this Section 5.6 shall be void and of no force and effect.

5.7. Standstill.

(a) For the purpose of this Section 5.7, the following terms shall have the following meanings:

"Beneficially Own" with respect to any securities means having "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act, as in effect on the date hereof). The terms "Beneficial Ownership" and "Beneficial Owner" have correlative meanings.

"Derivative Security" shall mean any subscription, option, conversion right, warrant, phantom stock right or other agreement, security or commitment of any kind obligating the Company or any of its subsidiaries to issue, grant, deliver or sell, or cause to be issued, granted, delivered or sold, (i) any Voting Securities or any other equity security of the Company, (ii) any securities convertible into, or exchangeable for, any Voting Securities or other equity security of the Company or (iii) any obligations measured by the price or value of any shares of capital stock of the Company.

"Group" shall mean any group of Persons who, with respect to those acquiring, holding, voting or disposing of Voting Securities would, assuming ownership of the requisite percentage thereof, be required under Section 13(d) of the Exchange Act to file a statement on Schedule 13D with the SEC as a "person" within the meaning of Section 13(d)(3) of the Exchange Act, or who would be considered a "person" for purposes of Section 13(g)(3) of the Exchange Act.

"Independent Director" shall mean a member of the Board of Directors (i) who is not an officer or employee of the Company, the Purchaser or any of its Affiliates, or of an entity that derived more than 5% of its revenues or earnings in its most recent fiscal year from transactions involving the Company, the Purchaser or any of their respective Affiliates and (ii) who has no relationship or affiliation or compensation, consulting or contracting arrangement with the Company, the Purchaser or any of its Affiliates or any other entity such that a reasonable person could regard such director as likely to be unduly influenced by the Company, the Purchaser or its Affiliates.

"Requisite Independent Directors" shall mean, at any time of determination, a majority of the Independent Directors.

"Voting Securities" means the shares of the Company's Common Stock and any other capital stock or equity securities of the Company having the general voting power under ordinary circumstances to elect members of the Board of Directors, and any other securities which are convertible into, or exchangeable for, Voting Securities. Notwithstanding the foregoing, the Shares shall be deemed Voting Securities for purposes of this Agreement.

"Voting Power" shall mean, calculated at a particular point in time, the aggregate votes represented by all the then outstanding Voting Securities.

(b) During the Standstill Period (as defined below), the Purchaser shall not, and shall cause Warburg Pincus & Co. (its sole general partner), any other investment funds for which such general partner acts as general partner, and Warburg Pincus LLC (collectively, the "Purchaser Group") not to, without the prior written consent of the Requisite Independent Directors, either directly or indirectly (including in a manner willfully designed to circumvent the following provisions), alone or in concert with others:

(i) in any manner acquire, agree to acquire or make any public proposal to acquire (whether directly or indirectly, by purchase, tender or exchange offer);

(a) any material assets of the Company or any subsidiary of the Company; or

(b) any Common Stock, Voting Securities or Derivative Securities of the Company except (x) pursuant to the conversion of the Preferred Stock or the Notes and the exercise of Warrants and (y) for acquisitions from and after the date hereof that do not, in the aggregate, together with all previous acquisitions (other than with respect to the acquisition of the Securities hereunder and acquisitions pursuant to clause (x)) constitute more than 5% of the Company's outstanding shares of Common Stock on a fully diluted basis; provided, in no event shall any such acquisition pursuant to clause (y) result in the Purchaser Group Beneficially Owning more than 49.9% of the Voting Power (with the Purchaser Group being deemed to have Beneficial Ownership of all shares that such Group has a right to acquire, whether such right is exercisable immediately or with the passage of time, and assuming, prior to the fourth anniversary of the Second Closing, the issuance of the maximum number of shares of Common Stock issuable pursuant to the terms of the Preferred Stock after reduction of the Conversion Price (as defined in the Charter Amendment) to the lowest amount to which it may be adjusted under Section C.7(h) and (i) of the Charter Amendment); provided further, that the Purchaser Group will not make any such acquisition pursuant to this clause (y) if it reasonably believes, after consultation with the Company, that such acquisition would cause the Company to undergo an "ownership change" within the meaning of Section 382(g) of the Code and that such ownership change would reduce the net operating loss carryforwards available to the Company during the taxable period immediately following the taxable period that includes the ownership change by more than $25,000,000;

(ii) engage in selling short or enter into or hold any short position with respect to any Common Stock of the Company or buy or hold put options or any similar financial obligations of the Company, other than pursuant to a disposition program with respect to its Securities (provided that in no event shall the Purchaser effect any such transactions (x) prior to the earlier of July 31, 2003 and the Second Closing or (y) during the ninety (90) trading days prior to the Adjustment Date or the thirty (30) trading days prior to the Change in Control Date (in each case, as defined in the Charter Amendment or the Note));

(iii) propose to any Person (other than to a member of the Board of Directors or senior management of the Company by means that would not cause public dissemination thereof) or take substantial steps to effect or enter into any business combination, restructuring, recapitalization or the sale or other disposition outside the ordinary course of business of any material portion of the assets of the Company or other extraordinary transaction involving the Company or any of its subsidiaries;

(iv) seek election to or seek to place a representative on the Board of Directors except pursuant to the rights granted pursuant to Section 5.9 hereof, Section C.4(b) of the Charter Amendment or the Notes;

(v) solicit proxies or shareholder consents or participate in any such solicitation for any purpose or otherwise seek to control or influence the Board of Directors except pursuant to the rights granted pursuant to Section 5.9 hereof, Section C.4(b) of the Charter Amendment or the Notes;

(vi) form, join or participate in a Group in connection with any of the foregoing;

(vii) assist or encourage any other Person in connection with any of the foregoing; or

(viii) make or cause the Company to make a public announcement regarding any intention of the Purchaser to take an action which would be prohibited by any of the foregoing.

Notwithstanding any of the foregoing, the provisions set forth in this Section 5.7 shall in no way limit the ability of the Purchaser Designees (as defined below) to take any actions (or to refrain from taking any actions) in their capacity as directors of the Company.

(c) The term "Standstill Period" shall mean the period beginning on the date hereof and ending on the earliest to occur of (i) the date on which the Company amends its Rights Plan to permit any Person (other than the Purchaser Group) to acquire more than 20% of the Common Stock or waives the provisions of Section 203 of the General Corporation Law of the State of Delaware for any Person (other than the Purchaser), (ii) the fifth anniversary of the Second Closing (or if no Second Closing occurs prior to May 25, 2003, the fifth anniversary of the Note Closing); or (iii) in the event this Agreement is terminated in accordance with its terms prior to the Note Closing, May 4, 2004.

5.8. By-Laws. Without the prior consent of the Purchaser, the Company's By-Laws shall not be amended to provide for more than ten (10) directors for as long as the Purchaser shall have the right to designate at least one director pursuant to Sections 5.9(a) or Section 5.9(b) hereof or as a holder of the Notes or the Preferred Stock.

5.9. Board Representation.

(a) From and after the date on which the Purchaser converts the Notes or Preferred Stock, as the case may be, into shares of Common Stock, the Company shall nominate and use its best efforts to have (i) two directors appointed by the Purchaser (the "Purchaser Designees") elected to the Board of Directors for as long as the Purchaser Beneficially Owns at least 33-1/3% of the shares of Common Stock acquired by it hereunder and (ii) one Purchaser Designee elected to the Board of Directors for as long as the Purchaser Beneficially Owns less than 33-1/3% of the shares of Common Stock acquired by it hereunder, but at least 5% of the Common Stock. For so long as such membership does not conflict with any applicable law or regulation or listing requirement of the NYSE, at least one such Purchaser Designee shall serve as a member of each of the principal committees of the Board of Directors, except for any committee formed to consider a transaction between the Company and the Purchaser or an Affiliate of Purchaser. Any vacancy in the position of a Purchaser Designee may be filled only with another designee designated by the Purchaser in accordance with the terms hereof. Any vacancy created by any removal of a Purchaser Designee may also be filled at the direction of the Purchaser.

(b) The Purchaser shall have the right to have one observer (the "Board Observer") attend all meetings of the Board of Directors commencing immediately and in addition to the Purchaser Designees for so long as the Purchaser has the right to appoint at least two directors pursuant to Section 5.9(a) or as a holder of the Notes or the Preferred Stock. For so long as such attendance does not conflict with any applicable law or regulation or listing requirement of the NYSE the Board Observer shall have the right to attend meetings of each of the principal committees of the Board of Directors, except for any committee formed to consider a transaction between the Company and the Purchaser or an Affiliate of Purchaser. The Board Observer shall receive a copy of all notices, agendas and other materials distributed to the Board of Directors, whether provided to directors in advance or, during or after any meeting, regardless of whether the Board Observer shall be in attendance at the meeting; provide d, however, that the Company shall have the right to withhold any information from the Board Observer and to exclude the Board Observer from any meeting or portion thereof if access to such information or attendance at such meeting could, in the reasonable judgment of the Company's outside counsel, adversely affect the attorney-client privilege between the Company and its counsel or the Company's attorneys' work product. The Company will use its best efforts to ensure that withholding of information or restricting attendance is strictly limited only to the extent set forth in the preceding sentence. The Board Observer shall be reimbursed for reasonable out-of-pocket expenses incurred in connection with attending meetings, in a manner consistent with the Company's policies for reimbursement of outside directors. The Board Observer shall execute a confidentiality agreement reasonably satisfactory to the Company as a condition to the Board Observer attendance at meetings of the Board of Directors. As a conditio n to his election or appointment to the Board of Directors pursuant to the terms of the Certificate of Incorporation, the Notes or this Agreement, each Purchaser Designee , Warburg Designee (as defined in the Note) and Preferred Stock Director (as defined in the Charter Amendment) shall ratify in writing the resolutions unanimously adopted by the Board of Directors regarding the obligation of directors to maintain the confidentiality of matters subject to the attorney-client privilege between the Company and its counsel and the Company's attorneys' work product, substantially in the form attached as Schedule 5.9 hereto.

(c) During the Standstill Period, the rights to appoint Purchaser Designees shall not be transferable or assignable by Warburg Pincus Private Equity VIII, L.P. other than to a member of the Purchaser Group pursuant to Section 7.1(c) below. Thereafter, in connection with a transfer of its Securities, the Purchaser may transfer or assign (i) its rights pursuant to Section 5.9(a)(i) to any one Person or Group acquiring at least 33-1/3% of the shares of Common Stock acquired by Purchaser hereunder or (ii) its rights pursuant to Section 5.9(a)(ii) to any one Person or Group who would Beneficially Own at least 5% of the Common Stock of the Company solely as a result of the acquisition of shares of Common Stock acquired from the Purchaser that were acquired hereunder.

5.10. No Solicitation. Prior to the Second Closing, the Company shall not, and shall cause its subsidiaries and the officers, directors, employees, agents and representatives of the Company or any of its subsidiaries not to, (a) solicit or initiate any inquiries regarding, or the submission of, any Equity Transaction or Change in Control Transaction, (b) participate in any discussions or negotiations regarding, or furnish to any Person any information which the Company Representative could reasonably anticipate could be used with respect to, any Equity Transaction or Change in Control Transaction, or (c) enter into any agreement with respect to any Equity Transaction or Change in Control Transaction, or approve any Equity Transaction or Change in Control Transaction; < U>provided, however, that nothing contained in this Section 5.10 shall prohibit the Company or the Board of Directors (i) from taking and disclosing to the Company's stockholders a position with respect to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act or (ii) from furnishing information to any Person concerning a Superior Proposal or participating in discussions and negotiations with such Person concerning a Superior Proposal. The Company shall promptly notify the Purchaser of the existence and material terms of any proposal or inquiry received by the Company from any Person after the date hereof with respect to any Equity Transaction or Change in Control Transaction, and shall promptly notify the Purchaser prior to furnishing any non-public information to, or entering into discussions or negotiations with, such Person.

5.11. Further Assurances. Each party shall use its commercially reasonable efforts to timely effectuate the intents and purposes of this Agreement and the consummation of the transactions contemplated hereby, including, but not limited to, the approval of the Charter Amendment at the Special Meeting and taking any action to facilitate the filing of any document or the taking of any action to assist the other parties hereto in complying with the terms of Sections 5.1 through 5.10 hereof.

5.12. Tax Treatment of Preferred Stock. The Purchaser and the Company agree not to treat the Preferred Stock as "preferred stock" within the meaning of Treasury Regulation Section 1.305-5 for United States income tax purposes, and to take no position contrary thereto on any Tax Return. The Purchaser and the Company further agree (i) to report no "distribution" under Section 305(b)(2) of the Code to the holders of the Preferred Stock attributable to the declaration and payment of any taxable dividend to holders of Common Stock during any taxable period in which the Company satisfies the Participation Condition (as defined in the Charter Amendment); and (ii) to report no "distribution" under Section 305(b)(2) of the Code to the holders of the Preferred Stock during any other taxable period in excess of the Ordinary Dividend (as defined in the Charter Amendment) per share of Preferred Stock for United St ates federal income tax purposes and to take no position contrary thereto on any Tax Return. Notwithstanding the foregoing, neither the Purchaser nor the Company shall be required to take any action pursuant to this Section 5.12 if doing so would be reasonably likely, based upon advice of the Company's tax advisers, to be unfounded, unlawful or potentially subject the Purchaser or the Company to a material penalty.

5.13. Holding Company. If, at any time after the Second Closing Date and for so long as any Preferred Stock is outstanding, the Company contributes all or substantially all of the assets of the Company (including its subsidiaries) to a holding company, the Company shall cause the provisions set forth in Section 4(c) of the Certificate of Incorporation to apply to such holding company.

5.14. Non-Disclosure of Base Date. The Company shall not disclose the Base Date (as defined in the Charter Amendment and the Note) prior to the business day following the Base Date, except as required by law or the regulations of the NYSE.

6. Conditions Precedent.

6.1. Conditions to the Obligations of the Purchaser to Consummate each Closing. The obligations of the Purchaser to consummate the transactions to be consummated at each of the Note Closings and the Second Closing, and to purchase and pay for the Securities being purchased by it at such Closing pursuant to this Agreement, are subject to the satisfaction or, to the extent permitted by law, waiver, of the following conditions precedent:

(a) The representations and warranties contained herein of the Company shall be true and correct on and as of the date hereof and on and as of each Closing Date with the same force and effect as though made on and as of such date (it being understood and agreed by the Purchaser that, in the case of any representation and warranty of the Company contained herein (i) which is not hereinabove qualified by application thereto of a materiality standard, such representation and warranty need be true and correct only in all material respects or (ii) which is made as of a specific date, such representation and warranty need be true and correct only as of such specific date).

(b) The Company shall have performed in all material respects all obligations and conditions herein required to be performed or observed by the Company on or prior to the applicable Closing Date.

(c) The Purchaser shall have received a certificate, dated each Closing Date, signed by the Chief Executive Officer, President or the Chief Financial Officer of the Company, certifying on behalf of the Company that the conditions specified in the foregoing Sections 6.1(a) and (b) have been fulfilled.

(d) The purchase of and payment for the Securities being purchased on such date by the Purchaser shall not be prohibited or enjoined by any law or governmental or court order or regulation.

(e) The Purchaser shall have received from the Company's counsel, Edwards & Angell, LLP, an opinion substantially in the form of Exhibit D hereto.

(f) There shall not have been any change, event or occurrence which, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

(g) All corporate proceedings to be taken by the Company in connection with the authorization of the transactions contemplated hereby and all documentation thereof shall be reasonably satisfactory in form and substance to the Purchaser and the Purchaser shall have received all such counterpart originals or certified or other copies of such documents as it may reasonably request.

(h) A second Purchaser Designee shall have become a member of the Board of Directors effective upon such Closing.

(i) All consents and waivers identified on Schedule 6.1(i) of the Disclosure Schedule shall have been obtained.

(j) The Company shall have obtained consents from the individuals listed on Schedule 6.1(j) of the Disclosure Schedule, necessary to ensure that the execution of this Agreement, the issuance of the Preferred Stock, the Notes and/or the Warrants and any other actions and transactions contemplated hereby and thereby will not constitute a "change in control" under items 1 through 8 on Schedule 3.22(f).

(k) In case of the Note Closing, the Company shall have closed the transactions contemplated by the Alternate Senior Credit Facility, or all conditions to the obligations of the lenders thereunder shall have been satisfied and the closing of such transactions shall occur simultaneously with the Note Closing.

(l) In case of the Second Closing, the Company shall have closed the transactions contemplated by the Senior Credit Facility, or all conditions to the obligations of the lenders thereunder shall have been satisfied and the closing of such transactions shall occur simultaneously with the Second Closing.

6.2. Conditions to the Obligations of the Company to Consummate each Closing. The obligations of the Company to consummate the transactions to be consummated at each of the Note Closing and the Second Closing, and to issue and sell to the Purchaser the Securities to be purchased by it at the date of such Closing pursuant to this Agreement, is subject to the satisfaction or, to the extent permitted by law, waiver, of the following conditions precedent :

(a) The representations and warranties contained herein of the Purchaser shall be true and correct on and as of the date hereof and on and as of each Closing Date, with the same force and effect as though made on and as of such Closing Date (it being understood and agreed by the Company that, in the case of any representation and warranty of the Purchaser contained herein which is not hereinabove qualified by application thereto of a materiality standard, such representation and warranty need be true and correct only in all material respects).

(b) The Purchaser shall have performed in all material respects all obligations and conditions herein required to be performed or observed by the Purchaser on or prior to the applicable Closing Date.

(c) The sale of the Securities by the Company being sold on such date shall not be prohibited or enjoined by any law or governmental or court order or regulation.

6.3. Conditions Precedent to the Second Closing. The Second Closing shall be subject to satisfaction or, to the extent permitted by law, waiver, of the following additional conditions precedent:

(a) The Company's stockholders have approved the Proposals.

(b) The Charter Amendment shall have been filed by the Company with the Secretary of State of the State of Delaware, and satisfactory evidence of such filing shall have been delivered to the Purchaser.

(c) The waiting period under the HSR Act shall have expired or notice of early termination of the waiting period shall have been received by the Company and the Purchaser.

7. Registration of the Securities; Compliance with the Securities Act.

7.1 Transfer Restrictions. During the Standstill Period, the Purchaser shall not sell, assign, pledge, transfer or otherwise dispose or encumber (each, a "Transfer") any of the Securities being purchased by it hereunder, except (a) pursuant to a registered public offering and effecting a broad distribution of the offered Securities, (b) in accordance with Rule 144 of the Securities Act, (c) to members of the Purchaser Group provided any Person agrees with the Company to be bound by the provisions and give the representations and warranties contained in Section 4.1 through Section 4.5 of this Agreement, (d) to the Purchaser's general and limited partners pursuant to a substantially pro rata distribution under the Purchaser's partnership agreement, (e) pursuant to privately negotiated transactions, provided however, no such disposition shall be made to a Person if such Person (together with its Affiliates) would, to the Purchaser's knowledge after due inquiry, Beneficially Own (as su ch term is defined in Section 5.7) more than 20% of the Company's Voting Securities (as such term is defined in Section 5.7), (f) to the Company or (g) pursuant to forward sale or hedging transactions permitted under Section 5.7(b)(ii). Notwithstanding the foregoing, disposition by the Purchaser pursuant to tender and exchange offers also shall be permitted if the tender or exchange is for more than 50% of the Company's Voting Securities; provided that the Company shall not be obligated to amend or waive its Rights Plan to permit an acquisition of shares under such offer. The Company may, and may instruct any transfer agent for the Company to, place such stop transfer orders as may be required on the transfer books of the Company in order to ensure compliance with the provisions of this Section 7.1. If, during the Standstill Period, the Purchaser proposes to Transfer shares of Preferred Stock (other than pursuant to clause (c) above, provided such parties are bound by this Section 7.1), and the Purcha ser would own less than a majority of the then outstanding shares of Preferred Stock the Purchaser shall cause the transferee of such shares to grant the Purchaser an irrevocable proxy in accordance with the provisions of Section 212 of the General Corporation Law of the State of Delaware which shall be effective until the end of the Standstill Period and binding on transferees until the end of such period with respect to the exercise of rights under Section 4(b) of the Certificate of Incorporation. In addition to the other transfer restrictions contained in this Section 7.1, the Purchaser shall not Transfer any Warrants or any shares of Common Stock issuable upon exercise of the Warrants until the 12-month anniversary of the date hereof, the Purchaser shall not Transfer in the aggregate more than half of the Warrants and half of the shares of Common Stock issuable upon exercise of the Warrants; provided however that the restrictions on Transfer contained in this sentence shall terminate on (x) July 3 0, 2003 if the Second Closing shall not have occurred on or before that date or (y) the date on which the Company enters into an agreement providing for a Change in Control (as defined in the Note) or the date on which a Change in Control occurs.

7.2. Legends. Each certificate representing any of the Securities shall be endorsed with the legend set forth below, and the Purchaser covenants that, except to the extent such restrictions are waived by the Company, it shall not transfer the shares represented by any such certificate without complying with the restrictions on transfer described in this Agreement and the legends endorsed on such certificate:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT OR SUCH LAWS AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR SUCH LAWS.

THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AGREEMENTS, COVENANTS AND RESTRICTIONS IN REGARD TO THE TRANSFER OF SUCH SECURITIES AS PROVIDED IN (A) THE PROVISIONS OF THAT CERTAIN SECURITIES PURCHASE AGREEMENT DATED AS OF FEBRUARY 12, 2003 BY AND BETWEEN THE COMPANY AND WARBURG PINCUS PRIVATE EQUITY VIII, L.P., A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY OF THE COMPANY AND (B) SECTION 8 OF PARAGRAPH (C) OF ARTICLE FOURTH OF THE COMPANY'S CERTIFICATE OF INCORPORATION, AS AMENDED FROM TIME TO TIME."

7.3. Registration Procedures and Other Matters. The Company shall:

(a) subject to receipt of necessary information from the Purchaser for inclusion in such filing, prepare and file with the SEC, as promptly after the Second Closing Date as practicable, a registration statement on Form S-3 (the "Registration Statement") to enable the resale of the Registrable Securities by the Purchaser or the Holders (as defined below), from time to time, in compliance with the Securities Act; provided, however, that in the event the Note Closing shall have occurred but the Second Closing shall not have occurred by May 25, 2003, the Company shall, if requested by the Purchaser, file the Registration Statement covering the Notes, the Initial Warrants and the Common Stock underlying the Notes, and/or the Warrants, as the case may be, as promptly as practicable after the date of such request;

(b) use its reasonable best efforts to cause the Registration Statement to become effective as promptly as practicable (but in no event later than 120 days after the Second Closing Date) after filing, such efforts to include, without limiting the generality of the foregoing, preparing and filing with the SEC any financial statements that are required to be filed prior to the effectiveness of such Registration Statement;

(c) use its reasonable best efforts to prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection therewith (the "Prospectus") as may be necessary to keep the Registration Statement current, effective and free from any material misstatement or omission to state a material fact for a period not exceeding, with respect to each Holder's Securities, the earlier of (i)  the date on which each Holder may sell all Registrable Securities then held by such Holder in any 90-day period pursuant to Rule 144 under the Securities Act (without giving effect to the provisions of Rule 144(k) as to the Purchaser but not as to subsequent Transferees (as defined below)) or (ii) such time as all Registrable Securities purchased by such Holder have been sold pursuant to a registration statement, Section 4(1) of the Securities Act or Rule 144 under the Securities Act, or otherwise sold, transferred or assigned in any manner to any Person who is not entitled to the rights provided by this Section 7.3;

(d) furnish to each Holder with respect to the Securities registered under the Registration Statement such number of copies of the Registration Statement, Prospectuses and preliminary prospectuses (if any) in conformity with the requirements of the Securities Act and such other documents as such Holder may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Securities by such Holder;

(e) include in the plan of distribution for the Prospectus a potential underwritten offering and, if requested by Holders representing a majority of the Registrable Securities (by common share equivalence) (the "Majority Holders"), enter into a underwriting agreement in customary form with the representative of the underwriter or underwriters selected for such underwriting by such Holders and reasonably acceptable to the Company; provided, however, that the Purchaser acknowledges that the Company shall not be required to disclose to the underwriters or any of their representatives information that would be reasonably likely to violate the Company's attorney-client privilege relating to any material matter;

(f) if requested by the Majority Holders, supplement the Prospectus as may be reasonably requested by the underwriter to enable the underwriter to distribute and sell the Registrable Securities, participate with the underwriter in roadshows or similar presentations and otherwise cooperate with the underwriters; provided, however, that the Purchaser acknowledges that the Company shall not be required to disclose to the underwriters or any of their representatives information that would be reasonably likely to violate the Company's attorney-client privilege relating to any material matter;

(g) file documents required of the Company for normal blue sky clearance in states reasonably requested in writing by each Holder named in the Registration Statement and use its reasonable best efforts to maintain such blue sky qualifications during the period the Company is required to maintain the effectiveness of the Registration Statement pursuant to Section 7.3(c); provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented;

(h) bear all expenses in connection with the procedures in this Section 7.3 and the registration of the Securities pursuant to the Registration Statement (provided that the Holders shall bear the cost of all underwriting discounts and selling commissions and similar fees applicable to the sale of Securities and all fees and expenses of legal counsel for any Holder and all transfer taxes);

(i) advise each Holder promptly after it shall receive notice or obtain knowledge of the issuance of any stop order by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation or threat of any proceeding for that purpose; and it will promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued; and

(j) use its reasonable best efforts to cause the Common Stock underlying the Notes, the Shares and/or the Warrants, as the case may be, to be listed on the NYSE in connection with the filing of the Registration Statement.

Notwithstanding anything to the contrary herein, the Registration Statement shall cover only the Registrable Securities. In no event at any time before the Registration Statement becomes effective with respect to the Securities shall the Company publicly announce or file any other registration statement, other than registration statements on Form S-4 or Form S-8 or any similar successor form, without the prior written consent of a majority in interest of the Holders.

7.4. Transfer of Securities; Suspension.

(a) The Purchaser agrees that in case of any disposition of its Securities to (i) a third party who agrees to be bound by the provisions of this Section 7 and makes the representations to the Company contained in Sections 4.1 through Section 4.5 hereof or (ii) the Purchaser's partners as part of a distribution of all or part of the Securities (in each case a "Transferee", and together with the Purchaser, the "Holders"), the Purchaser will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding the Holders or their plans of distribution. The Company agrees, in case of such sale, transfer or distribution (to the extent made in accordance with Section 7.1), to promptly file one or more post-effective amendments to the Registration Statement or a supplement to the related Prospectus, naming each Transferee as a Selling Stockholder (as defined below) in accordance with the provisions of the Securities Act.

(b) Except in the event that paragraph (c) below applies, the Company shall (i) prepare and file from time to time with the SEC a post-effective amendment to the Registration Statement or a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that such Registration Statement will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and so that, as thereafter delivered to the purchasers of Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) provide each Holder copies of any documents filed pursuant to Section 7.4(b)(i); and (iii)&nbs p;inform each Holder that the Company has complied with its obligations in Section 7.4(b)(i) (or that, if the Company has filed a post-effective amendment to the Registration Statement which has not yet been declared effective, the Company will notify each Holder to that effect, will use its reasonable best efforts to secure the effectiveness of such post-effective amendment as promptly as possible and will promptly notify each Holder pursuant to Section 7.4(b)(i) hereof when the amendment has become effective).

(c) Subject to paragraph (d) below, in the event (i) of any request by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to a Registration Statement or related Prospectus or for additional information; (ii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) of any event or circumstance not otherwise covered by clause (v) below which, upon the advice of its counsel, necessitates the making of any changes in the Registration Statement or Prospectus, or any document i ncorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (v) the Company determines in good faith that offers and sales pursuant to the Registration Statement should not be made by reason of the presence of material undisclosed circumstances or developments with respect to which the disclosure that would be required in such a Registration Statement or related Prospectus, is reasonably likely to have a seriously detrimental effect on the Company, then the Company shall deli ver a certificate in writing to each Holder (the "Suspension Notice") to the effect of the foregoing and, upon receipt of such Suspension Notice, such Holder will refrain from selling any Securities pursuant to the Registration Statement (a "Suspension") until such Holder's receipt of copies of a supplemented or amended Prospectus prepared and filed by the Company, or until it is advised in writing by the Company that the current Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such Prospectus. In the event of any Suspension, the Company will use its best efforts to cause the use of the Prospectus so suspended to be resumed as soon as reasonably practicable after the delivery of a Suspension Notice to each Holder. In addition to and without limiting any other remedies (including, without limitation, at law or at equity) available to such Holder, such Holder shall be entitled to specific per formance in the event that the Company fails to comply with the provisions of this Section 7.4(c).

(d) Notwithstanding the foregoing paragraphs of this Section 7.4, no Suspension under clause (v) of Section 7.4(c) shall continue for more than thirty (30) days and the Company shall not deliver more than one Suspension Notice under such clause in any twelve-month period.

(e) Provided that a Suspension is not then in effect, each Holder may sell Registrable Securities under the Registration Statement, provided, to the extent required by applicable law, that it arranges for delivery of a current Prospectus to the transferee of such Securities. Upon receipt of a request therefor, the Company will provide an adequate number of current Prospectuses to such Holder and to supply copies to any other parties requiring such Prospectuses.

(f) Each Holder acknowledges and agrees that the Registrable Securities sold pursuant to the Registration Statement are not transferable on the books of the Company unless the stock certificate submitted to the transfer agent evidencing such Securities is accompanied by a certificate reasonably satisfactory to the Company to the effect that (i) the Registrable Securities have been sold in accordance with such Registration Statement and (ii) any applicable requirement of delivering a current Prospectus has been satisfied.

(g) In the event of a sale of Registrable Securities by any Holder pursuant to the Registration Statement, such Holder shall deliver to the Company's transfer agent an appropriate notification of the sale, so that the Securities may be properly transferred.

7.5. Indemnification.

(a) For purposes hereof:

(i) the term "Selling Stockholder" shall include each Holder and any Affiliate of such Holder; and

(ii) the term "Registration Statement" shall include the Prospectus in the form first filed with the SEC pursuant to Rule 424(b) of the Securities Act or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required, together with any exhibit, supplement or amendment included in or relating to the Registration Statement referred to in Section 7.3.

(b) The Company agrees to indemnify and hold harmless each Selling Stockholder and its officers, directors and partners and each underwriter of Registrable Securities, if any, and each person who controls any such underwriter from and against any losses, claims, damages or liabilities to which such Person may become subject (under the Securities Act or otherwise) and each Person who controls any such underwriter, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon any untrue statement of a material fact contained in the Registration Statement as amended at the time of effectiveness or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will reimburse such Selling Stockholder for any reasonable legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim, or prepa ring to defend any such action, proceeding or claim, provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon, an untrue statement made in such Registration Statement or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Selling Stockholder specifically for use in preparation of the Registration Statement or the failure of such Selling Stockholder to comply with its covenants and agreements contained in Section 7.4 hereof respecting sale of the Securities or any statement or omission in any Prospectus that is corrected in any subsequent Prospectus or amendment or supplement thereof that was delivered to the Selling Stockholder prior to the pertinent sale or sales by the Selling Stockholder. The Company shall reimbur se each Selling Stockholder for the amounts provided for herein on demand as such expenses are incurred.

(c) Each Selling Stockholder, severally and not jointly, agrees to indemnify and hold harmless the Company (and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, each officer of the Company who signs the Registration Statement and each director of the Company) from and against any losses, claims, damages or liabilities to which the Company (or any such officer, director or controlling Person) may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon any untrue statement of a material fact contained in the Registration Statement or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading if and to the extent that such untrue statement or omission was made in reliance upon and in conformity with written information furnished by or on behalf of any Sell ing Stockholder specifically for use in preparation of the Registration Statement, and each Selling Stockholder, severally and not jointly, will reimburse the Company (or such officer, director or controlling Person), as the case may be, for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that the obligation of each Selling Stockholder to indemnify the Company shall be limited to the net amount received by such Selling Stockholder from the sale of its Securities. Each Selling Stockholder shall reimburse the Company for amounts provided for herein on demand as such expenses are incurred.

(d) Promptly after receipt by any indemnified Person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an indemnifying Person pursuant to this Section 7.5, such indemnified Person shall notify the indemnifying Person in writing of such claim or of the commencement of such action, but the omission to so notify the indemnifying Person will not relieve it from any liability which it may have to any indemnified Person under this Section 7.5 (except to the extent that such omission materially prejudices the indemnifying Person's ability to defend such action) or from any liability otherwise than under this Section 7.5. Subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified Person, the indemnifying Person shall be entitled to participate therein, and, to the extent that it shall elect by written notice delivered to the indemnified Person promptly after receiving the aforesaid notice from such indemnified Person, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified Person. After notice from the indemnifying Person to such indemnified Person of its election to assume the defense thereof, such indemnifying Person shall not be liable to such indemnified Person for any legal expenses subsequently incurred by such indemnified Person in connection with the defense thereof, provided, however, that if there exists or shall exist a conflict of interest that would make it inappropriate, in the opinion of counsel to the indemnified Person, for the same counsel to represent both the indemnified Person and such indemnifying Person or any affiliate or associate thereof, the indemnified Person shall be entitled to retain its own counsel at the expense of such indemnifying Person; provided, further, that no indemnifying Person shall be responsible for the fees and expenses of more than one separate counsel for all indemnif ied parties. In no event shall any indemnifying Person be liable in respect of any amounts paid in settlement of any action unless the indemnifying Person shall have approved the terms of such settlement; provided, however, that such consent shall not be unreasonably withheld. No indemnifying Person shall, without the prior written consent of the indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any indemnified Person is or could have been a party and indemnification could have been sought hereunder by such indemnified Person, unless such settlement includes an unconditional release of such indemnified Person from all liability on claims that are the subject matter of such proceeding.

(e) If the indemnification provided for in this Section 7.5 is unavailable to or insufficient to hold harmless an indemnified Person under subsection (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying Person shall contribute to the amount paid or payable by such indemnified Person as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Purchaser, as well as any other Selling Shareholders under such registration statement on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, in the case of an untrue sta tement, whether the untrue statement relates to information supplied by the Company on the one hand or the Purchaser or other Selling Shareholder on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement. The Company and the Purchaser agree that it would not be just and equitable if contribution pursuant to this subsection (e) were determined by pro rata allocation (even if the Purchaser and other Selling Shareholders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this subsection (e). The amount paid or payable by an indemnified Person as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified Person in connection with investigating or defending an y such action or claim. Notwithstanding the provisions of this subsection (e), no Selling Stockholder shall be required to contribute any amount in excess of the amount by which the net amount received by such Selling Stockholder from the sale of the Securities to which such loss relates exceeds the amount of any damages which such Selling Stockholder has otherwise been required to pay by reason of such untrue statement (except in the event of fraud by such Selling Stockholder). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The Selling Stockholder's obligations in this subsection to contribute shall be in proportion to the respective sale of Securities of such Selling Stockholder to which such loss relates and shall not be joint with any other Selling Shareholders.

(f) The parties to this Agreement hereby acknowledge that they are sophisticated business Persons who were represented by counsel during the negotiations regarding the provisions hereof including, without limitation, the provisions of this Section 7.5, and are fully informed regarding said provisions. They further acknowledge that the provisions of this Section 7.5 fairly allocate the risks in light of the ability of the parties to investigate the Company and its business in order to assure that adequate disclosure is made in the Registration Statement as required by the Securities Act and the Exchange Act. The parties are advised that federal or state public policy as interpreted by the courts in certain jurisdictions may be contrary to certain of the provisions of this Section 7.5, and the parties hereto hereby expressly waive and relinquish any right or ability to assert such public policy as a defense to a claim under this Section 7.5 and further agree not to attempt to assert a ny such defense.

7.6. Information Available. So long as the Registration Statement is effective covering the resale of Securities owned by each Holder, the Company will furnish to each Holder, upon the reasonable request of such Holder, an adequate number of copies of the Prospectuses to supply to any other party requiring such Prospectuses; and upon the reasonable request of the Majority Holders, the Chief Financial Officer of the Company (or an appropriate designee thereof) will meet with such Holders or a representative thereof at the Company's headquarters to discuss all information relevant for disclosure in the Registration Statement covering the Securities and will otherwise cooperate with such Holders' conducting an investigation for the purpose of reducing or eliminating such Holders' exposure to liability under the Securities Act, including the reasonable production of information at the Company's headquarters; provided, that the Company shall not be required to (x) disclose any confidential information to the Holders or meet at its headquarters with such Holders until and unless such Holders shall have entered into a confidentiality agreement in form and substance reasonably satisfactory to the Company with the Company with respect thereto or (y) disclose any information of the type not required to be disclosed under Section 7.3(f).

8. Termination.

8.1. Conditions of Termination. Notwithstanding anything to the contrary contained herein, this Agreement may be terminated (a) as to all obligations of the Purchaser and the C ompany to be performed at the Second Closing (but not as to any obligation of the Company and the Purchaser to be performed at the Note Closing), (i) by the Purchaser or the Company if the stockholders of the Company have failed to approve the Proposals at the Special Meeting, or (ii) by the Purchaser if the Second Closing has not occurred on or prior to May 25, 2003, (b) at any time by mutual consent of the Company and the Purchaser, (c) by either party hereto if neither the Note Closing nor the Second Closing shall have occurred on or prior to July 30, 2003, (d) by either the Company or the Purchaser, if any court of competent jurisdiction or other competent governmental entity shall have issued an order making illegal or otherwise restricting, preventing or prohibiting the consummation of this Agreement or any of the transactions contemplated hereby and such order shall have become final and nonappealable, or (e) by the Purchaser, in the event that the Board of Directors shall have withdrawn, modifie d in a manner adverse to the Purchaser or failed to make or refrained from making its recommendation that the stockholders of the Company approve the Proposals.

8.2. Effect of Termination. In the event of termination pursuant to Section 8.1, this Agreement shall become null and void and have no effect, with no liability on the part of the Company or the Purchaser, or their direc tors, officers, agents or stockholders, with respect to this Agreement, except for the liability of any party for any breach of this Agreement. Notwithstanding the foregoing, (a)  in the event of any termination of this Agreement, the provisions of Section 5.7 and Section 9 (other than Section 9.10 which shall survive for the period stated therein) shall survive and (b) in the event of any termination of this Agreement after the Note Closing but before the Second Closing, the provisions of Section 2.5, Section 3 (subject to Section 9.10), Section 4, Section 5.6, Section 5.9 and Section 7 shall also survive.

9. Miscellaneous Provisions.

9.1. Rights Cumulative. Each and all of the various rights, powers and remedies of the parties shall be considered to be cumulative with and in addition to any other rights, powers and remedies which such parties may have at law or in equity in the event of the breach of any of the terms of this Agreement. The exercise or partial exercise of any right, power or remedy shall neither constitute the exclusive election thereof nor the waiver of any other right, power or remedy available to such party.

9.2. Pronouns. All pronouns or any variation thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the Person, Persons, entity or entities may require.

9.3. Notices.

(a) Any notices, reports or other correspondence (hereinafter collectively referred to as "correspondence") required or permitted to be given hereunder shall be sent by postage prepaid first class mail, courier or facsimile or delivered by hand to the party to whom such correspondence is required or permitted to be given hereunder. The date of giving any notice shall be the date of its actual receipt.

(b) All correspondence to the Company shall be addressed as follows:

Wellman, Inc.
595 Shrewsbury Avenue
Shrewsbury, NJ 07702
Attention: Keith R. Phillips
Facsimile: (732) 212-3349

with a copy to:

Edwards & Angell, LLP
2800 Financial Plaza
Providence, RI 02903-2499
Attention: David K. Duffell, Esq.
Elizabeth S. Small, Esq.
Facsimile: (401) 276-6602

(c) All correspondence to the Purchaser shall be sent to the Purchaser at the address below:

Warburg Pincus Private Equity VIII, L.P.
466 Lexington Avenue
New York, NY 10017
Attention: Kewsong Lee
Oliver Goldstein
Facsimile: 212-599-5617

with a copy to:

Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attention: Steven J. Gartner, Esq.
David K. Boston, Esq.
Facsimile: (212) 728-8111

(d) Any Person may change the address to which correspondence to it is to be addressed by notification as provided for herein.

9.4. Captions. The captions and paragraph headings of this Agreement are solely for the convenience of reference and shall not affect its interpretation.

9.5. Severability. Should any part or provision of this Agreement be held unenforceable or in conflict with the applicable laws or regulations of any jurisdiction, the invalid or unenforceable part or provisions shall be replaced with a provision which accomplishes, to the extent possible, the original business purpose of such part or provision in a valid and enforceable manner, and the remainder of this Agreement shall remain binding upon the partie s hereto.

9.6. Governing Law; Injunctive Relief.

(a) This Agreement shall be governed by and construed in accordance with the internal and substantive laws of the State of New York and without regard to any conflicts of laws concepts which would apply the substantive law of some other jurisdiction.

(b) Each of the parties hereto acknowledges and agrees that damages will not be an adequate remedy for any material breach or violation of this Agreement (a "Breach"). Accordingly, in the event of a threatened or ongoing Breach, each party hereto shall be entitled to seek, in any state or federal court in the State of New York, equitable relief of a kind appropriate in light of the nature of the ongoing or threatened Breach, which relief may include, without limitation, specific performance or injunctive relief. Such remedies shall not be the parties' exclusive remedies, but shall be in addition to all other remedies provided in this Agreement.

9.7. Waiver. No waiver of any term, provision or condition of this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or be construed as, a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Agreement.

9.8. Expenses. The Company shall pay the fees and expenses incurred by the Purchaser in connection with the transactions contemplated hereby including, without limitation, legal, consulting and accounting fees (but excluding any attorneys' and other fees and expenses incurred in connection with any action or suit brought against the Company by the Purchaser) ("Transaction Fees") up to a total amount of $1,500,000 irrespective whether the trans actions contemplated herein are consummated, provided that the Company shall not be obligated to pay in excess of $500,000 in Transaction Fees if the transactions contemplated herein are not consummated solely as a result of the Purchaser's breach of its obligations hereunder. In addition to the Transaction Fees, the Company shall pay any filing fee required to be paid under the HSR Act, whether or not the transactions contemplated hereby are consummated, such fee to be paid at the time of the filings by the parties under the HSR Act. Payments due pursuant to this Section 9.8 (other than the filing fee under the HSR Act) will be made at the Note Closing, in the event the Note Closing occurs, or if the Note Closing does not occur then upon termination of this Agreement, and in any event, any remaining payments will be made not later than thirty (30) days after a bill for such fees and expenses together with reasonable supporting documentation has been sent by Warburg to the Company.

9.9. Assignment. The rights and obligations of the parties hereto shall inure to the benefit of and shall be binding upon the authorized successors and permitted assigns of each party. Except as provided in Sections 5.9 and 7.4, none of the parties may assign its rights or obligations under this Agreement or designate another Person (a)  to perform all or part of its obligations under this Agreement or (b) to have all or part of its rights and benefits under this Agreement, in each case without the prior written consent of the other party, provided, however, that so long as Warburg retains the obligation to purchase a majority of the Securities being sold pursuant to this Agreement, it shall have the right to assign and transfer its remaining rights (other than, prior to the termination of the Standstill Period, rights under Section 5.9) and obligations under this Agreement to one or more of its Affiliates and to not more than five of its limited partners, provided such partners make substantially the same representations as set forth in Section 4. In the event of any assignment in accordance with the terms of this Agreement, the assignee shall specifically assume and be bound by the provisions of this Agreement by executing and agreeing to an assumption agreement reasonably acceptable to the Company and, in the case of an assignment to limited partners of the Purchaser, such limited partners shall be deemed to be members of the Purchaser Grou p for purposes of Section 5.7.

9.10. Survival. The respective representations and warranties given by the parties hereto shall survive the Closings and the consummation of the transactions contemplated herein for a period of thirty-six (36) months from the date hereof, without regard to any investigation made by any party, provided, however, to the extent any claim is asserted with respect to any representation or warranty pr ior to the end of such thirty-six (36) month period, such representation or warranty shall survive until the resolution of the matter.

9.11. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

9.12. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto respecting the subject matter hereof and supersedes all prior agreements, negotiations, understandings, representations and statements respecting the subject matter hereof, whether written or oral. No modification, alteration, waiver or change in any of the terms of this Agreement shall be valid or binding upon the parties hereto unless made in writing and duly executed by the Company and the Purchaser.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

WELLMAN, INC.

By:/s/Keith R. Phillips 
Name: Keith R. Phillips
Title: Chief Financial Officer

PURCHASER:

WARBURG PINCUS PRIVATE EQUITY VIII, L.P.

By: WARBURG PINCUS & CO.,
its General Partner

By:/s/David A. Barr
Name: David A. Barr
Title:

Exhibit A

FORM OF NOTE

Exhibit B

CHARTER AMENDMENT

Exhibit C

FORM OF WARRANT

Exhibit D

FORM OF LEGAL OPINION OF EDWARDS & ANGELL, LLP

EX-2

EXHIBIT 2

STATE OF DELAWARE

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATION

OF

WELLMAN, INC.

Pursuant to Section 242 of the General Corporation Law of the State of Delaware

THE UNDERSIGNED, being a duly appointed officer of Wellman, Inc. (the "Corporation"), a corporation organized and existing under and by virtue of the Delaware General Corporation Law of the State of Delaware (the "DGCL"), for the purpose of amending the Corporation's Restated Certificate of Incorporation, as amended to the date hereof (the "Certificate of Incorporation") filed pursuant to Section 102 of the DGCL, hereby certifies, pursuant to Sections 242 and 103 of the DGCL, as follows:

FIRST: The amendments effected hereby have been duly adopted in accordance with the provisions of Section 242 of the DGCL.

SECOND: That the first paragraph of Article Fourth of the Corporation's Certificate of Incorporation is hereby amended in its entirety to read as follows:

Capital Stock. The total number of shares of stock which the Corporation is authorized to issue is 117,200,000 as follows: 100,000,000 shares of Common Stock with a par value of $.001 per share, 5,500,000 shares of Class B Common Stock with a par value of $.001 per share, 5,000,000 shares of Series A Convertible Preferred Stock with a par value of $.001 per share and 6,700,000 shares of Series B Convertible Preferred Stock with a par value of $.001 per share.

THIRD: That paragraph 1 of Section A of Article Fourth of the Corporation's Certificate of Incorporation is hereby amended by adding the following to the end thereof:

(c) Limitation. Except as otherwise required by law, holders of Common Stock and Class B Common Stock, as such, shall not be entitled to vote on any amendment to this Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation or pursuant to the DGCL.

FOURTH: That Article Fourth of the Corporation's Certificate of Incorporation is hereby amended by adding the following to the end thereof:

C. Series A Convertible Preferred Stock and Series B Convertible Preferred Stock.

1. DESIGNATION AND AMOUNT. 5,000,000 shares of Preferred Stock shall be designated "Series A Convertible Preferred Stock" (the "Series A Preferred Stock"), which shall constitute the entire number of shares of such series and 6,700,000 shares of Preferred Stock shall be designated "Series B Convertible Preferred Stock" (the "Series B Preferred Stock"), which shall constitute the entire number of shares of such series.
2. DIVIDENDS.
1. Participating Dividends. The holders of Series A Preferred Stock and Series B Preferred Stock (collectively, the "Preferred Stock") shall be entitled to receive, on a pari passu basis, out of funds legally available therefor, when, as and if dividends are declared on shares of Common Stock by the Board of Directors of the Corporation (the "Board of Directors"), Participating Dividends (as defined below) per share of Preferred Stock in such amount as the holders of the Preferred Stock would have received had such holders converted the Preferred Stock into Common Stock immediately prior to the record date for such dividends, provided, however, that no such dividend shall be payable on the Preferred Stock if the Consolidated Net Earnings (as defined below) for the period of twenty-four (24) consecutive quarters ending on the last day of the most recent quarter that ends at least forty-five (45) days prior to the payment date for such dividend is less than $160,0 00,000 (the "Participation Condition"). All dividends declared upon Preferred Stock shall be declared pro rata per share. For the purposes hereof, "Consolidated Net Earnings" shall mean, for any period, the aggregate net earnings (or loss) of the Corporation for such period on a consolidated basis determined in accordance with U.S. generally accepted accounting principles (excluding (A) the cumulative effect of any changes in accounting principles implemented after September 30, 2002, (B) any beneficial conversion charges and (C) any dividends paid on preferred stock); "Extraordinary Dividends" shall mean all dividends paid to the holders of Common Stock (other than Ordinary Dividends and dividends payable solely in shares of Common Stock), whether paid in cash or otherwise (including without limitation in connection with a spin-off or distribution), but excluding any dividends which result in an adjustment to the Conversion Price (as defined below) pursuant to Section 7; "Ordinary Di vidend" shall mean, with respect to any quarter, ordinary cash dividends in an amount per share of Common Stock not exceeding the sum of (x) $0.09 and (y) the Dividend Increase Amount in respect of such quarter, or such greater amount as has been consented to in writing by the Majority Holders (as defined below); "Dividend Increase Amount" shall mean, with respect to any quarter, an amount equal to the product of (A) $0.01 and (B) the number of complete years elapsed from January 1, 2003 to the date on which the dividend is paid; and "Participating Dividends" shall mean Extraordinary Dividends and Ordinary Dividends. In determining the amount of any Participating Dividend to which the holders of Preferred Stock are entitled pursuant to this Section 2(a), the holders of Preferred Stock will be deemed entitled to convert the Preferred Stock into Common Stock in accordance with Section 5 hereof (determined without giving effect to the provisions of Sections 7(h) and (i) hereof unless the Conversion Price has been adjusted pursuant to such Sections) as if a Conversion Event (as defined in Section 5(a)) had occurred.
2. Preferred Dividends.
1. After the fifth anniversary of the Initial Issuance Date (as defined below), the holders of the respective Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors (subject to Section 2(b)(iii) below), out of funds legally available therefor, on a pari passu basis, dividends per share at a rate of 8.75% per annum of the Liquidation Preference as of the Dividend Payment Date (as defined below), compounded quarterly to the extent not previously paid, before any dividends shall be declared, set apart for or paid upon the Common Stock or any other stock ranking with respect to dividends or on Liquidation junior to the Preferred Stock (such stock being referred to hereinafter collectively as "Junior Stock") in any year, provided, however, that if (A) the Ordinary Dividend for any quarter after such fifth anniversary is less than $0.045 per share of Common Stock or (B) the holders of the Preferred Stock are not entitled to receive Ordinary Dividen ds because the Participation Condition has not been met (each, a "Shortfall Event"), such dividend rate shall increase to 10% per annum of the Liquidation Preference as of the Dividend Payment Date, compounded quarterly to the extent not previously paid, beginning on the first day of the next succeeding quarter after the quarter with respect to which the Shortfall Event relates and continuing each quarter thereafter until the first day of the quarter succeeding the quarter as of which there is no Shortfall Event. Dividends pursuant to this Section 2(b)(i) shall be payable quarterly, in arrears on each April 5, July 5, October 5 and January 5 (each, a "Dividend Payment Date") or, if any Dividend Payment Date is not a Business Day, then the Dividend Payment Date shall be the next succeeding Business Day. The amount of dividends payable on the Preferred Stock for any period shorter than a full quarter shall be computed on the basis of a 360-day year of twelve 30-day months. As used herein, the ter m "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks in the State of New York are legally authorized to close.
2. Dividends on the Preferred Stock provided for in this Section 2(b) shall be cumulative and shall continue to accrue on a daily basis whether or not declared and whether or not in any fiscal year there shall be funds legally available therefor, so that if in any fiscal year or years, dividends in whole or in part are not paid upon the Preferred Stock, unpaid dividends shall accumulate as against the holders of the Junior Stock.
3. Dividends on the Preferred Stock provided for in this Section 2(b) shall be payable in cash or continue to accrue, at the election of the holders of a majority of the outstanding shares of Preferred Stock voting together as a single class (the "Majority Holders"), such election to be made in writing to the Corporation at least ten (10) Business Days prior to such Dividend Payment Date. If no such election is made, the dividends provided for in this Section 2(b) will be payable in cash.
4. For so long as the Preferred Stock remains outstanding, the Corporation shall not, without the prior consent of the Majority Holders, pay any dividend upon the Junior Stock, whether in cash or other property (other than solely in shares of Junior Stock) unless all dividends theretofore required to have been paid to the holders of Preferred Stock in respect of all prior dividend periods shall have been paid.
3. In the event (each a "Default") that the Corporation fails for any reason to pay any Participating Dividend required to be paid to the holders of the Preferred Stock pursuant to Section 2(a) (other than because the Participation Condition has not been met), or any dividend payable pursuant to Section 2(b) for two consecutive quarters, then, in any such case, upon written notice from any holder of Preferred Stock to the Corporation (a "Default Notice") given at any time following the Default and the failure of the Corporation to cure such Default in full within thirty (30) days of the receipt of such Default Notice from any holder of Preferred Stock, any holder of Preferred Stock may request the Remarketing (as defined below) of all of the shares of Preferred Stock held by such holder in accordance with Section 8 hereof. Failure by any holder of Preferred Stock to issue a Default Notice promptly upon the occurrence of a given Default shall not be deemed to be a waiver of such rights, such ri ghts being exercisable at any time that a Default shall have occurred and be continuing.
4. For the purposes hereof "Initial Issuance Date" shall mean the date the first share of Series A Preferred Stock or Series B Preferred Stock is issued by the Corporation.
5. The dividend rates referred to in this Section 2 are subject to adjustment as provided in Section 8 hereof.
3. LIQUIDATION, BANKRUPTCY, DISSOLUTION OR WINDING UP.
1. In the event of any Liquidation (as defined below) of the Corporation, the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, on a pari passu basis, after and subject to the payment in full of all amounts required to be distributed to the holders of any other preferred stock of the Corporation ranking on Liquidation prior and in preference to the Preferred Stock (such preferred stock being referred to hereinafter as "Senior Preferred Stock") upon such Liquidation, but before any payment shall be made to the holders of any Junior Stock, an amount per share in cash equal to the greater of (x) the Liquidation Preference (as defined below) and (y) the amount such holder would receive if the Preferred Stock were converted into Common Stock on the date of, or the record date for, such Liquidation; provided, however, that in the event of a Liquidation resulting fro m the liquidation, dissolution or winding up of the Corporation occurring after the earlier of (i) the tenth anniversary of the Initial Issuance Date and (ii) the completion of any Remarketing, holders of Preferred Stock shall only be entitled to receive an amount per share in cash equal to the Liquidation Preference.
2. If upon any Liquidation of the Corporation the remaining assets of the Corporation available for the distribution to its stockholders after payment in full of amounts required to be paid or distributed to holders of Senior Preferred Stock shall be insufficient to pay the holders of shares of Preferred Stock the full amount to which they shall be entitled, the holders of shares of Preferred Stock, and any class or series of stock ranking on Liquidation on a parity with the Preferred Stock, shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. After the payment of all preferential amounts required to be paid to the holders of Senior Preferred Stock, the holders of Preferred Stock and any other class or series of preferred stock upon Liquidation of the Corporatio n, the holders of shares of Junior Stock then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders.
3. Definitions.
1. "Liquidation Preference" shall mean (x) the Stated Value (as defined below) per share at the Initial Issuance Date, which amount shall thereafter accrete at the annual rate of 7.25%, compounded quarterly from the Initial Issuance Date through the fifth anniversary of the Initial Issuance Date, provided, however, that if a Shortfall Event occurs during such period, such annual accretion rate shall increase to 8.5% per annum, compounded quarterly, beginning on the first day of the next succeeding quarter after the quarter with respect to which the Shortfall Event relates and continuing each quarter thereafter until the first day of the quarter succeeding the quarter as of which there is no Shortfall Event plus (y) any accrued but unpaid dividends thereon (excluding any Participating Dividends declared but not previously paid to the holders of the Common Stock). Liquidation Preference shall be determined, (i) in the case of any dividend payment, as of the record date for holders of Comm on Stock for any dividend pursuant to Section 2(a) and as of the Dividend Payment Date for any dividend pursuant to Section 2(b), (ii) in the case of a Liquidation, on the date of such Liquidation, (iii) in the case of a Change in Control (as defined below), on the date of such Change in Control, (iv) upon conversion of the Preferred Stock, on the date of such conversion, and (v) upon any redemption of the Preferred Stock in accordance with Section 9, on the applicable Redemption Date (as herein defined). Notwithstanding the foregoing, upon any Liquidation or Change in Control consummated within five (5) years after the Initial Issuance Date, the Liquidation Preference shall be calculated for all purposes hereof assuming (x) that any Preferred Stock outstanding at the date of such consummation has been outstanding for five (5) years after the date of the Initial Issuance Date and (y) assuming that, from such date and continuing thereafter for the remainder of such five year period, the annual accretion rate is 8.5%.
2. "Stated Value" shall mean with respect to the Series A Preferred Stock, $11.25(1) per share, and with respect to the Series B Preferred Stock, $[___](2) per share.

__________________________

(1) As adjusted for any stocks splits, subdivisions, stock dividends, combinations, reclassifications or similar events occuring prior to the Initial Issuance Date.

(2) The Series B Purchase Price (as defined in the Securities Purchase Agreement).

3. "Liquidation" shall mean (x) any liquidation, dissolution or winding up of the Corporation, (y) the filing by the Corporation of any bankruptcy or insolvency petition under federal or state law, or (z) the commencement of any involuntary bankruptcy proceeding against the Corporation which remains unstayed for a period of sixty (60) days.

The merger or consolidation of the Corporation with or into another person or entity, the merger or consolidation of any other person or entity with or into the Corporation, or the sale, conveyance, mortgage, pledge or lease of all or substantially all of the assets of the Corporation to a person or entity shall not be deemed to be a Liquidation for purposes of this Section 3.

4. VOTING.
1. Each issued and outstanding share of Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which each such share of Preferred Stock is then convertible (assuming for the purposes of this Section 4(a) that a Conversion Event has occurred), at each meeting of stockholders of the Corporation (or pursuant to any action by written consent) with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration, other than, prior to the fifth anniversary of the Initial Issuance Date, the election of directors by the holders of Common Stock, provided, however, that at any time the voting power of all shares of Common Stock and Preferred Stock beneficially owned (within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934) by the Warburg Parties (as defined below) (the "Warburg Voting Power") would otherwise exceed 49.9% of the total voting power of the Common St ock and the Preferred Stock (determined without giving effect to the provisions of Section 7(h) and (i) unless the Conversion Price has been actually adjusted pursuant to such sections) as of the record date for any action to be taken by stockholders of the Corporation, then, during any such period, the voting power of each issued and outstanding share of Preferred Stock held by the Warburg Parties shall be reduced proportionately to the extent necessary to result in the Warburg Voting Power equaling 49.9% of the total voting power of the Common Stock and Preferred Stock(determined without giving effect to the provisions of Section 7(h) and (i) unless the Conversion Price has been adjusted pursuant to such sections). Except as provided by law, by the provisions of this Section 4 or by the provisions establishing any other class or series of preferred stock, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class. For the purposes hereof, the "Warburg Parties" shall mean, collectively, Warburg Pincus Private Equity VIII, L.P ("Warburg Pincus"), Warburg Pincus & Co. ("WPC") and any other investment funds for which WPC acts as general partner and Warburg Pincus LLC ("WPLLC").
1. For so long as Warburg Pincus or its Qualified Transferee (as defined below) owns at least one third of the shares of Preferred Stock issued to Warburg Pincus pursuant to the Securities Purchase Agreement, dated as of February 12, 2003 (as the same may be modified or amended, the "Purchase Agreement"), between Warburg Pincus and the Corporation, the Majority Holders shall have the exclusive right to appoint two (2) directors to the Board of Directors.
2. In the event that Warburg Pincus or its Qualified Transferee owns less than one third of the shares of Preferred Stock issued to Warburg Pincus pursuant to the Purchase Agreement but the shares of Preferred Stock held by Warburg Pincus or its Qualified Transferee represent greater than 5% of the outstanding Common Stock (calculated on a fully diluted basis and assuming the occurrence of a Conversion Event and the conversion of the Preferred Stock, determined without regard to the provisions of Sections 7(h) and (i) unless the Conversion Price (as defined below) has been actually adjusted pursuant to such sections), the Majority Holders shall have the exclusive right to appoint one (1) director to the Board of Directors.
3. Each Preferred Stock Director (as defined below) shall be duly appointed in accordance with the Corporation's by-laws, Certificate of Incorporation and the General Corporation Law of Delaware. Each Preferred Stock Director so elected shall serve for a term of one year or until his successor is duly elected and qualified. For so long as such membership does not conflict with any applicable law or regulation or listing requirement of the New York Stock Exchange, Inc. (the "NYSE"), at least one such Preferred Stock Director shall serve as a member of each of the principal committees of the Board of Directors, except for any committee formed to consider a transaction between the Corporation and Warburg Pincus or, if applicable, its Qualified Transferee, or any affiliate thereof. Any vacancy in the position of a Preferred Stock Director may be filled only by the Majority Holders. Each Preferred Stock Director may be removed at any time, with or without cause, by the Majority Holders. Any vacancy create d by such removal may be filled by the Majority Holders.
4. "Qualified Transferee" shall mean one Person (or group (as such term is used in Section 13(d) of the Securities Exchange Act of 1934)) to which Warburg Pincus transfers, sells or assigns (A) at least one third of the shares of Preferred Stock issued to Warburg Pincus pursuant to the Purchase Agreement with respect to Section 4(b)(i) or (B) shares of Preferred Stock issued to Warburg Pincus pursuant to the Purchase Agreement representing greater than 5% of the outstanding Common Stock (calculated on a fully diluted basis and assuming the occurrence of a Conversion Event (as defined below) and the conversion of the Preferred Stock, determined without regard to the provisions of Sections 7(h) and (i) unless the Conversion Price has been actually adjusted pursuant to such sections) with respect to Section 4(b)(ii). Notwithstanding the foregoing, such Person or group shall only be deemed a Qualified Transferee after the fifth anniversary of the Initial Issuance Date.
5. "Preferred Stock Director" shall mean any director appointed pursuant to Section 4(b)(i) or (ii) above.
6. Prior to the fifth anniversary of the Initial Issuance Date, the holders of the Common Stock, voting separately as a class, shall elect all of the directors of the Corporation other than those the Majority Holders are entitled to designate pursuant to Sections 4(b)(i) and (ii) above.
3. In addition to any other rights provided by law, the Corporation shall not, without first obtaining the affirmative vote or written consent of the Majority Holders:
1. change or amend the Corporation's Certificate of Incorporation or Bylaws in a manner which adversely affect the rights, preferences or privileges of the holders of the Preferred Stock, including any such changes to the terms of the Preferred Stock made in connection with a merger or consolidation of the Corporation;
2. offer, sell or issue any equity or equity-linked securities of the Corporation (including, without limitation, warrants issued in connection with debt or stock appreciation or similar rights) which have preference or priority over, or which are on a parity with, the Preferred Stock (including the issuance of additional shares of Preferred Stock after the Initial Issuance Date) with respect to dividend or Liquidation rights;
3. repurchase or redeem or permit any of its subsidiaries to repurchase or redeem, directly or indirectly, any equity securities of the Corporation (including, without limitation, securities convertible into or exchangeable for equity securities or stock appreciation or similar rights) for an aggregate consideration in excess of $10 million in any 12-month period, other than in connection with (A) repurchases of restricted stock from an employee or consultant following such person's termination, in an aggregate amount not to exceed $2 million in any 12-month period, (B) the repurchase of Junior Stock to the extent that after giving effect to such repurchase the ratio of the Corporation's Indebtedness to Annualized EBITDA (in each case as defined in Exhibit A to the Purchase Agreement and in each case as of the date of such repurchase) is not greater than 2.5 to 1, and (C) repurchases made with the proceeds from a contemporaneous exercise of the warrants issued pursuant to the Purchase Agreement (the "War rants"), or a contemporaneous issuance of Junior Stock after the Initial Issuance Date; or
4. declare or pay any Extraordinary Dividend on the Common Stock.
5. OPTIONAL CONVERSION.
1. Each share of Preferred Stock may be converted at any time, at the option of the holder thereof, into the number of fully-paid and nonassessable shares of Common Stock obtained by dividing the Liquidation Preference then in effect by the Conversion Price of such series then in effect, provided, however, that the Preferred Stock may not be converted to Common Stock unless (i) a Conversion Event has occurred, (ii) the Average Price on the conversion date is at least $23.00 or (iii) the Board of Directors shall have consented to the conversion of such shares of Preferred Stock (whether limited to a conversion during a specified period or at any time), and provided further that on any redemption of any Preferred Stock, the right of conversion shall terminate at the close of business on the full Business Day next preceding the date fixed for such redemption. The number of shares of Common Stock into which a share of each series of the Preferred Stock is convertible is referr ed to herein as the "Conversion Rate" for such series. Each of the applicable Conversion Prices and Conversion Rates, from time to time in effect, is subject to adjustment as hereinafter provided. The initial conversion price of the Series A Preferred Stock is equal to $11.25(3) (the "Series A Conversion Price") and the initial conversion price of the Series B Preferred Stock is equal to [____](4) (the "Series B Conversion Price" and each such price applicable to each such series as the same may be adjusted in accordance with Section 7 below, the "Conversion Price" for such series). When used herein the following terms shall have the meaning indicated:
1. "Average Price" shall mean, with respect to any day, the volume-weighted average price of the Common Stock on the NYSE for the sixty (60) consecutive trading days prior to such day (or, if not listed or admitted to trading on any national securities exchange, the average of the reported bid and asked prices during such 60 trading day period in the over-the-counter market as furnished by the National Quotation Bureau, Inc., or, if such firm is not then engaged in the business of reporting such prices, as furnished by any member of the National Association of Securities Dealers, Inc. (the "NASD") selected by the Corporation or, if the shares of Common Stock are not publicly traded, the Private Value).
2. "Base Date" shall mean (a) a date, selected by the Majority Holders in their sole discretion, that is a trading day and is no more than twenty (20) trading days prior to the Adjustment Date (as defined below), provided that the Majority Holders shall have given the Corporation written notice of the date they selected as the Base Date at least one (1) day prior to the date so selected or (b) if no date is so selected by the Majority Holders prior to the Adjustment Date, the Adjustment Date.
3. "Cash Earnings per Share" shall mean, for any period, the quotient of (x) the sum of (A) the net earnings of the Corporation from continuing operations and (B) sixty-five percent (65%) of any depreciation and amortization of the Corporation, each as publicly reported on the Corporation's consolidated statement of cash flows prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), and (y) the diluted weighted average common shares outstanding, as such share amount is publicly reported on the Corporation's consolidated statements of operations prepared in accordance with GAAP.
4. "Conversion Event" shall mean the first to occur of the following: (i) following the Adjustment Date (as defined in Section 7(h)), the first date upon which the highest price of the Common Stock on the NYSE (or, if not listed or admitted to trading on any national securities exchange, the average of the reported bid and asked prices during such trading day in the over-the-counter market, as furnished by the National Quotation Bureau, Inc., or, if such firm is not then engaged in the business of reporting

__________________________

(3)As adjusted for stocks splits, subdivisions, stock dividends, combinations, reclassifications or similar events occurring prior to the Initial Issuance Date.

(4)The Series B Purchase Price.

such prices, as furnished by any member of the NASD selected by the Corporation or, if the shares of Common Stock are not publicly traded, the Private Value) is at least 110% of the lowest price on the NYSE on the Base Date (or, if not listed or admitted to trading on any national securities exchange, the average of the lowest reported bid and asked prices on the Base Date in the over-the-counter market, as furnished by the National Quotation Bureau, Inc., or, if such firm is not then engaged in the business of reporting such prices, as furnished by any member of the NASD selected by the Corporation or, if the shares of Common Stock are not publicly traded, the Private Value); or (ii) the date on which the Corporation publicly reports or announces that its Cash Earnings per Share for the four calendar quarters ending prior to such report or announcement are or will be less than $1.50; or (iii) the date on which the Corporation publicly reports or announces that it has taken or will take an extraord inary charge or charges in any calendar year that have or are expected to result in cash payments of more than $50 million; or (iv) the date on which a majority of the directors then in office (excluding the Preferred Stock Directors) shall have adopted a resolution declaring that a Conversion Event shall have occurred; or (v) the date on which the Corporation enters into an agreement providing for a Change in Control or the date on which a Change in Control occurs; or (vi) the date on which a Redemption Notice (as defined below) has been given.

5. "Private Value" shall mean the fair market value of a share of Common Stock determined jointly by the Corporation and the Majority Holders; provided, however, that if such parties are unable to reach agreement within a reasonable period of time, the Private Value shall be determined in good faith by an independent investment banking firm selected jointly by the Corporation and such Majority Holders or, if that selection cannot be made within 20 days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules.
2. The Corporation shall not issue fractions of shares of Common Stock upon any conversion of Preferred Stock or scrip in lieu thereof. If any fraction of a share of Common Stock would, except for the provisions of this Section 5(b), be issuable upon conversion of any Preferred Stock, the Corporation shall in lieu thereof pay to the person entitled thereto an amount in cash equal to such fraction, calculated to the nearest one-hundredth (1/100) of a share, multiplied by the Market Price (as defined below) for the Common Stock. Whenever the Conversion Rate and Conversion Price of either series of Preferred Stock shall be adjusted as provided in Section 7 hereof, the Corporation shall forthwith file at each office designated for the conversion of Preferred Stock, a statement, signed by the Chairman of the Board, the President, any Vice President or Treasurer of the Corporation, showing in reasonable detail the facts requiring such adjustment and the Conversion Rate for such series that will be effective a fter such adjustment. The Corporation shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to each record holder of Preferred Stock at his or its address appearing on the stock register.
3. In order to exercise the conversion privilege, the holder of any shares of Preferred Stock to be converted shall surrender his or its certificate or certificates therefor to the principal office of the transfer agent for the Preferred Stock (or if no transfer agent be at the time appointed, then the Corporation at its principal office), and shall give written notice to the Corporation at such office that the holder elects to convert the Preferred Stock represented by such certificates, or any number thereof. Such notice shall also state the name or names (with address) in which the certificate or certificates for shares of Common Stock which shall be issuable on such conversion shall be issued, subject to any restrictions on transfer relating to shares of the Preferred Stock or shares of Common Stock upon conversion thereof. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory t o the Corporation, duly authorized in writing. The date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of the certificates and notice shall be the conversion date. As soon as practicable after receipt of such notice and the surrender of the certificate or certificates for Preferred Stock as aforesaid, the Corporation shall cause to be issued and delivered at such office to such holder, or on his or its written order, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, cash as provided in Section 5(b) hereof in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion and, if less than all shares of Preferred Stock represented by the certificate or certificates so surrendered are being converted, a residual certificate or certificates representing the shares of Preferred Stock not converted.
4. The Corporation shall at all times when the Preferred Stock shall be outstanding reserve and keep available out of its authorized but unissued stock, for the purposes of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock. Before taking any action that would cause an adjustment reducing the Conversion Price of either series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of such Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully-paid and nonassessable shares of such Common Stock at such adjusted conversion price.
5. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to the Preferred Stock so converted will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefor, to receive certificates for the number of shares of Common Stock into which such share of Preferred Stock has been converted. Any shares of Preferred Stock so converted shall, automatically and without further action, be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized shares of each series of Preferred Stock accordingly.
6. MANDATORY CONVERSION.
1. If the closing price of the Common Stock on the NYSE exceeds 125% of the applicable Conversion Price of a series of Preferred Stock for any thirty (30) consecutive trading days (any such period, a "Measurement Period") at any time after the fifth anniversary of the Initial Issuance Date (or, if not listed or admitted to trading on any national securities exchange, the average of the reported bid and asked prices during such Measurement Period in the over-the-counter market as furnished by the National Quotation Bureau, Inc., or, if such firm is not then engaged in the business of reporting such prices, as furnished by any member of the NASD selected by the Corporation or, if the shares of Common Stock are not publicly traded, the Private Value), the Corporation shall have the right to require the holders of such series of Preferred Stock to convert such shares into the number of shares of Common Stock obtained by dividing the Liquidation Preference then in effect by the Conversion Price of suc h series then in effect.
2. All holders of record of shares of the series of Preferred Stock to be converted will be given at least ten (10) Business Days' prior written notice by the Corporation of the date fixed and the place designated for such mandatory conversion of all of such shares of Preferred Stock pursuant to this Section 6; provided that such written notice must be provided to such holders not later than ten (10) Business Days after the end of the Measurement Period selected by the Corporation that is the basis for requiring the conversion of such series of Preferred Stock to Common Stock. Such written notice will be sent by mail, first class, postage prepaid, to each record holder of shares of such series of Preferred Stock at such holder's address appearing on the stock register. On or before the date fixed for conversion each holder of shares of such series of Preferred Stock shall surrender his or its certificate or certificates for all such shares to the Corporation at the place designated in such notice, an d shall thereafter receive certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Section 6.
3. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his attorneys duly authorized in writing. All shares of Preferred Stock the certificates for which are required to be surrendered for conversion in accordance with the provisions hereof shall, from and after the date such certificates are so required to be surrendered, be deemed to have been converted into the number of shares of Common Stock into which such shares of Preferred Stock are so convertible, notwithstanding the failure of the holder or holders thereof to surrender such certificates on or prior to such date, and such certificates shall thereafter represent for all purposes the shares of Common Stock into which such shares of Preferred Stock have been converted.
4. As soon as practicable after the date of such mandatory conversion and the surrender of the certificate or certificates for such series of Preferred Stock as aforesaid, the Corporation shall cause to be issued and delivered to such holder, or on his or its written order, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and cash as provided in Section 5(b) hereof in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion.
7. CONVERSION PRICE ADJUSTMENTS.
1. In order to protect against dilution of the rights granted to the Preferred Stock hereunder, the applicable Conversion Price of the Preferred Stock shall be subject to adjustment from time to time in accordance with this Section 7. Except as provided in Sections 7(c), 7(e) and 7(f) hereof, if and whenever on or after the Initial Issuance Date, the Corporation shall issue or sell, or shall in accordance with paragraphs (i) to (ix) of Section 7(b), inclusive, be deemed to have issued or sold, any shares of its Common Stock for a consideration per share less than the Market Price immediately prior to such issuance or sale or if such issue or sale is pursuant to any contract or agreement (excluding Options (as defined below)), the Market Price as of the date the Corporation became legally bound to issue or sell, then, forthwith upon such issue or sale (the "Triggering Transaction"), the Conversion Price of such series in effect immediately prior to the time of such Triggering Transaction shall (su bject to paragraphs (i) to (ix) of Section 7(b)), be reduced to the Conversion Price (calculated to the nearest tenth of a cent) determined by multiplying the Conversion Price in effect immediately prior to the time of such issue or sale by a fraction, the numerator of which shall be the sum of (x) the Number of Shares Outstanding immediately prior to such Triggering Transaction multiplied by the Market Price immediately prior to such Triggering Transaction plus (y) the consideration received by the Corporation upon such Triggering Transaction, and the denominator of which shall be the product of (x) the Number of Shares Outstanding immediately prior to such Triggering Transaction plus the number of shares issued or deemed to be issued pursuant to Section 7(b) in such Triggering Transaction, multiplied by (y) the Market Price immediately prior to such Triggering Transaction.

For purposes of Section 5(b) and this Section 7, (A) the term "Market Price" shall mean, with respect to any day, the volume weighted average price of a share of Common Stock on the trading day preceding such day on the principal national securities exchange on which the shares of Common Stock or securities are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the average of the reported bid and asked prices on such trading day in the over-the-counter market as furnished by the National Quotation Bureau, Inc., or, if such firm is not then engaged in the business of reporting such prices, as furnished by any member of the NASD selected by the Corporation or, if the shares of Common Stock or securities are not publicly traded, the Private Value and (B) the term "Number of Shares Outstanding" means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus, after the occurrence of a Conversion Event, the number of shares of Common Stock issuable upon conversion of the Preferred Stock (without regard to the provisions of Sections 7(h) and (i) unless the Conversion Price has been actually adjusted pursuant to such sections, but assuming a Conversion Event had occurred), plus the number of shares of Common Stock issuable upon the conversion or exercise in full of all Convertible Securities and Options (including Convertible Securities and Options outstanding on the date hereof) whether or not the Convertible Securities or Options are convertible into or exercisable for Common Stock at such time, but shall not include (a) any shares of Common Stock or Convertible Securities in the treasury of the Corporation or held for the account of the Corporation or any of its subsidiaries, and (b) any shares of Common Stock issued or reserved for issuance under stock option, restricted stock, retirement or executive ownership plans to the extent that such shares or Options to purchase such shares are issued or granted after the Initial Issuance Date.

2. For purposes of determining the adjusted Conversion Price for the Series A Preferred Stock and/or the Series B Preferred Stock under Section 7(a), the following paragraphs (i) to (ix), inclusive, shall be applicable:
1. In case the Corporation, at any time after the Initial Issuance Date, shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (such rights or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities"), whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which the Common Stock is issuable upon exercise, conversion or exchange (determined by dividing (x) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the exercise of such Options (including, without limitation, by means of accretion or accrual of interest or dividends) or the conversion or exchange of such Convertible Securities) shall be less than the Market Price immediately prior to the time of the granting of such Option, then the total maximum amount of Common Stock issuable upon the exercise of such Options or in the case of Options for Convertible Securities, upon the conversion or exchange of such Convertible Securities shall (as of the date of granting of such Options) be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. No adjustment of the Conversion Price for such series of Preferred Stock s hall be made upon the actual issue of such shares of Common Stock or such Convertible Securities upon the exercise of such Options, except as otherwise provided in paragraph (iii) below.
2. In case the Corporation, at any time after the Initial Issuance Date, shall in any manner issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Market Price immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securit ies shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. No adjustment of the Conversion Price for such series of Preferred Stock shall be made upon the actual issue of such Common Stock upon exercise of the rights to exchange or convert under such Convertible Securities, except as otherwise provided in paragraph (iii) below.
3. If the additional consideration payable upon the exercise of any Options referred to in paragraph (i), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in paragraphs (i) or (ii), or the rate at which any Convertible Securities referred to in paragraphs (i) or (ii) are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of provisions providing for a weighted average anti-dilution adjustment, whether based on issuances at below the applicable conversion or exercise price or below market value), the Conversion Price for such series of Preferred Stock in effect at the time of such change shall forthwith be readjusted to the Conversion Price which would have been in effect for such series of Preferred Stock at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or conversion rate, as the case may be, at the time initi ally granted, issued or sold.
4. On the expiration of any Option or the termination of any right to convert or exchange any Convertible Securities as to which an adjustment to the Conversion Price was made pursuant to clause (i) or (ii) above, the Conversion Price for such series of Preferred Stock then in effect hereunder shall forthwith be increased to the Conversion Price for such series of Preferred Stock which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued.
5. In case any Options shall be issued in connection with the issue or sale of other securities of the Corporation, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for the consideration determined in good faith by the Board of Directors to be attributable to such Options.
6. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Corporation therefor. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be the fair value of such consideration as determined in good faith by the Board of Directors. In case any shares of Common Stock, Options or Convertible Securities shall be issued in connection with any merger in which the Corporation is the surviving corporation (including the assumption or exchange of Options and Convertible Securities of the non-surviving corporation), the amount of consideration received by the Corporation therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as shall be attributed by the Board of Directors in good faith to such Common Stock, Options or Convertible Securities, as the case may be. The consideration received by the Corporation in connection with the issuance and sale or deemed issuance and sale of any Common Stock, Options or Convertible Securities shall be computed based upon the total consideration received or determined to be received by the Corporation in accordance with the terms hereof before giving effect to any customary underwriting discounts or commissions, placement agency fees or other customary transaction expenses typically borne by an issuer but after giving effect to any other discounts or fees.
7. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Corporation, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock for the purpose of this Section 7(b).
8. In case the Corporation shall declare a dividend or make any other distribution upon the stock of the Corporation payable in Options or Convertible Securities, then, unless the holders of Preferred Stock receive their pro rata share of such dividend or distribution, any Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration.
9. For purposes of this Section 7(b), in case the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them (x) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities, or (y) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right or subscription or purchase, as the case may be.
3. In case the Corporation shall at any time (A) subdivide the outstanding Common Stock or (B) issue a dividend on its outstanding Common Stock payable in shares of Common Stock, the applicable Conversion Rate of the Preferred Stock in effect immediately prior to such dividend or subdivision shall be proportionately increased by the same ratio as the subdivision or dividend (with appropriate adjustments to the Conversion Price for such series of Preferred Stock in effect immediately prior to such subdivision or dividend). In case the Corporation shall at any time combine its outstanding Common Stock, the applicable Conversion Rate of the Preferred Stock in effect immediately prior to such combination shall be proportionately decreased by the same ratio as the combination (with appropriate adjustments to the Conversion Price for such series of Preferred Stock in effect immediately prior to such combination).
1. If any Change in Control (as defined below) shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for Common Stock, then, as a condition of the consummation of such Change in Control, lawful and adequate provision shall be made whereby the holders of the shares of Preferred Stock that thereafter remain outstanding, if any, shall have the right to acquire and receive upon conversion of the Preferred Stock, which right shall be prior to the rights of the holders of Junior Stock (but after and subject to the rights of holders of Senior Preferred Stock, if any), such shares of stock, securities, cash or other property issuable or payable (as part of any reorganization, reclassification, consolidation, merger or sale in connection with the Change in Control) with respect to or in exchange for such number of outstanding shares of Common Stock as would have been received upon conversion of the Preferred Stock at the Conversion Price for such series of Preferred Stock then in effect (the "Change in Control Consideration").
2. The Corporation will not effect any such Change in Control unless prior to the consummation thereof the successor entity (if other than the Corporation) resulting from such Change in Control or, in the case of a sale of the Corporation's assets which constitutes a Change in Control, the entity purchasing such assets shall assume by written instrument mailed or delivered to the holders of the Preferred Stock at the last address of each such holder appearing on the books of the Corporation, the obligation to deliver to each such holder such Change in Control Consideration such holder may be entitled to purchase in accordance with the foregoing provisions, unless such holder has elected to continue to hold Preferred Stock in the surviving entity pursuant to Section 10(b) hereof.

For purposes hereof, the term "Change in Control" shall mean (i) a consolidation, merger, reorganization or other form of acquisition of or by the Corporation in which the Corporation's stockholders immediately prior to the transaction retain less than 50% of the voting power of or economic interest in the surviving or resulting entity (or its parent), (ii) a sale of the Corporation's assets in excess of a majority of the Corporation's assets (valued at fair market value as determined in good faith by the Board of Directors), or (iii) the individuals who were directors of the Corporation as of the Initial Issuance Date (together with any Preferred Stock Director and any new directors whose election or appointment was approved by the directors then in office who were either directors as of the Initial Issuance Date or whose election or appointment was previously so approved) ceasing to constitute a majority of the Board of Directors or the board of directors of any surviving or resulting entity (or its parent).

4. The provisions of this Section 7 shall not apply to the following shares of Common Stock issued, issuable or deemed outstanding under paragraphs (i) to (ix) of Section 7(b) inclusive: (A) shares of Common Stock issuable upon conversion of the shares of Preferred Stock, (B) the Warrants (as defined in the Purchase Agreement) and shares of Common Stock issued or issuable upon exercise thereof, (C) warrants issued to lenders of non-convertible debt and the Common Stock issuable upon exercise thereof; provided such warrants do not exceed, in the aggregate, 5% of the issued and outstanding shares of Common Stock and the terms thereof have been approved by the Board of Directors, (D) shares of Common Stock issued in consideration for bona fide acquisitions, mergers, joint ventures or similar transactions provided that the terms thereof are approved by the Board of Directors, (E) shares of Common Stock issued or issuable pursuant to any stock option, restricted stock, retirement, stock purchase or similar plan or arrangement for the benefit of the employees, directors or consultants of the Corporation or its subsidiaries, duly adopted by the Board of Directors and (F) shares of Common Stock issued in a bona fide underwritten public offering underwritten by a nationally recognized investment bank pursuant to an effective registration under the Securities Act of 1933, as amended, or any similar federal statute then in force.
5. If at any time or from time to time on or after the Initial Issuance Date, the Corporation shall grant, issue or sell any Options, Convertible Securities or rights to purchase property (the "Purchase Rights") pro rata to the record holders of any class of Common Stock and such grants, issuances or sales do not result in an adjustment of the Conversion Price of the Preferred Stock under Section 7(a) hereof, then each holder of such series of Preferred Stock that did not have an adjustment made to its Conversion Price shall be entitled to acquire (within thirty (30) days after the later to occur of the initial exercise date of such Purchase Rights or receipt by such holder of the notice concerning Purchase Rights to which such holder shall be entitled under Section 7(b)) upon the terms applicable to such Purchase Rights either:
1. the aggregate Purchase Rights which such holder could have acquired if it had held the number of shares of Common Stock acquirable (assuming a Conversion Event had occurred) upon conversion of such series of Preferred Stock immediately before the grant, issuance or sale of such Purchase Rights; provided that if any Purchase Rights were distributed to holders of Common Stock without the payment of additional consideration by such holders, corresponding Purchase Rights shall be distributed to the exercising holders of such series of Preferred Stock as soon as possible after such exercise and it shall not be necessary for the exercising holder of such series of Preferred Stock specifically to request delivery of such rights; or
2. in the event that any such Purchase Rights shall have expired or shall expire prior to the end of said thirty (30) day period, the number of shares of Common Stock or the amount of property which such holder could have acquired upon such exercise at the time or times at which the Corporation granted, issued or sold such expired Purchase Rights.
6. If any event occurs as to which, in the opinion of the Board of Directors, the provisions of this Section 7 are not strictly applicable or if strictly applicable would not fairly protect the rights of the holders of the Series A Preferred Stock and/or the holders of Series B Preferred Stock in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights as aforesaid, but in no event shall any such adjustment have the effect of increasing the Conversion Price of such series of Preferred Stock as otherwise determined pursuant to any of the provisions of this Section 7, except in the case of a combination of shares of a type contemplated in Section 7(d) hereof and then in no event to an amount larger than the Conversion Price as adjusted pursuant to Section 7(d) hereof.
7. The Conversion Price will be reduced on the fourth anniversary of the Initial Issuance Date (the "Adjustment Date"), as set forth in this paragraph (h), if the Average Price on the Adjustment Date is less than $23.00 per share (subject to appropriate adjustments for stock splits, subdivisions, stock dividends, combinations, reclassifications or similar events) (the "Target Price"). In the event an adjustment to the Conversion Price is required to be made pursuant to this Section 7(h), it shall be made as follows:
1. the Series A Conversion Price will be reduced by an amount equal to the excess of the Target Price over the Average Price on the Adjustment Date; provided, however, that in no event shall the Series A Conversion Price be reduced by more than a total of $4.50 per share pursuant to Sections 7(h)(i) and Section 7(i) (subject to appropriate adjustments for stock splits, subdivisions, stock dividends, combinations, reclassifications or similar events); and
2. the Series B Conversion Price will be reduced by an amount equal to the product of (x) the excess of the Target Price over the Average Price on the Adjustment Date and (y) [insert an amount equal to the quotient obtained by dividing 40% of the initial Series B Conversion Price by $4.50] (subject to appropriate adjustments for stock splits, subdivisions, stock dividends, combinations, reclassifications or similar events); provided, however, that in no event shall the Series B Conversion Price be reduced by more than [insert an amount equal to 40% of the initial Series B Conversion Price] pursuant to Sections 7(h)(ii) and Section 7(i) (subject to appropriate adjustments for stock splits, subdivisions, stock dividends, combinations, reclassifications or similar events).
8. The Conversion Price will be reduced on the first (but not any subsequent) occurrence of a Change in Control consummated prior to the Adjustment Date (the date of such consummation, the "Change in Control Date"), as set forth in this paragraph (i), if the Average Price (calculated for all purposes of this Section 7(i) on the basis of thirty (30) trading days rather than sixty (60) trading days) on the Change in Control Date is less than (i) $14.00 per share in the case of a Change in Control consummated on or prior to the first anniversary of the Initial Issuance Date, (ii) $17.00 per share in the case of a Change in Control consummated after the first anniversary of the Initial Issuance Date but on or prior to the second anniversary thereof, (iii) $20.00 per share in the case of a Change of Control consummated after the second anniversary of the Initial Issuance Date but on or prior to the third anniversary thereof, or (iv) $23.00 per share in the case of a Change in Control consummated after the third anniversary of the Initial Issuance Date but on or prior to the fourth anniversary thereof (each such price, a "Change in Control Target Price"). In the event a reduction in the Conversion Price is required pursuant to this Section 7(i), it shall be made as follows:
1. The Series A Conversion Price will be reduced by an amount equal to the excess of the applicable Change in Control Target Price over the Average Price on the Change in Control Date; provided, however, that in no event shall the Series A Conversion Price be reduced by more than a total of $4.50 per share pursuant to Sections 7(h) and (i)(i) (subject to appropriate adjustments for stock splits, subdivisions, stock dividends, combinations, reclassifications or similar events); and
2. The Series B Conversion Price will be reduced by an amount equal to the product of (x) the excess of the applicable Change in Control Target Price over the Average Price on the Change in Control Date and (y) [insert an amount equal to the quotient obtained by dividing 40% of the initial Series B Conversion Price by $4.50] (subject to appropriate adjustments for stock splits, subdivisions, stock dividends, combinations, reclassifications or similar events); provided, however, that in no event shall the Series B Conversion Price be reduced by more than a total of [insert an amount equal to 40% of the initial Series B Conversion Price] pursuant to Sections 7(h) and (i)(ii) (subject to appropriate adjustments for stock splits, subdivisions, stock dividends, combinations, reclassifications or similar events).
9. For the ninety (90) day period prior to the Adjustment Date or the Change in Control Date, as the case may be, the Corporation shall not, directly or indirectly, repurchase or acquire more than 200,000 shares of Common Stock or such greater number of shares as agreed to in writing by the Majority Holders, whether by means of open market repurchases, tender offer or otherwise, nor shall it announce any intention to do so.
10. In the event that:
1. the Corporation shall declare any Extraordinary Dividend upon its Common Stock, or
2. the Corporation shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights, or
3. there shall be a Change in Control;

then, in connection with such event, the Corporation shall give to the holders of Preferred Stock:

(A) at least twenty (20) days' prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such Change in Control; and

(B) in the case of any Change in Control to the extent possible, at least twenty (20) days' prior written notice of the date when the same shall take place.

Such notice in accordance with the foregoing clause (A) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (B) shall also specify the date, if any, on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon Change in Control. Each such written notice shall be given by first class mail, postage prepaid, addressed to the holder at the address of the holder as shown on the books of the Corporation.

8. REMARKETING.
1. Upon the delivery of a Default Notice or upon the written request (the "Reset Notice") of the Majority Holders given not earlier than thirty (30) days prior to the seventh anniversary of the Initial Issuance Date, the Corporation shall, subject to its redemption rights set forth in Section 9 hereof, adjust the dividend rate on the Preferred Stock to the rate necessary in the opinion of a nationally recognized investment banking firm (selected by the Corporation) (the "Remarketing Agent") to allow the Remarketing Agent to resell all of the Preferred Stock on behalf of the holders thereof (such resale, the "Remarketing") at a price of not less than 100% (after deduction of fees for the Remarketing Agent) of the then applicable Liquidation Preference (such adjusted dividend rate, the "Adjusted Rate"). Notwithstanding the foregoing, within five (5) Business Days after the Remarketing Agent has established the Adjusted Rate, the Corporation may elect to redeem all of the Prefer red Stock in accordance with Section 9(a)(ii) hereof. In the event the Corporation does not elect to redeem the Preferred Stock in accordance with Section 9, the Corporation shall give written notice to the holders of Preferred Stock of the Adjusted Rate.
2. In the event the Corporation does not elect to redeem the Preferred Stock in accordance with Section 9:
1. notwithstanding any provision in this Certificate of Incorporation to the contrary, the Adjusted Rate shall be effective as of the date of the Default Notice or Reset Notice, as applicable;
2. the Corporation shall cause the Remarketing Agent to effect the Remarketing within ninety (90) days of the date of the Default Notice or Reset Notice, as applicable; and
3. the Corporation shall use its reasonable best efforts (together with the Remarketing Agent) to facilitate a Remarketing in accordance with the terms hereof.
3. Any Remarketing shall be on such terms that (i) provide for the immediate disbursement of proceeds from the Remarketing in an amount of not less than 100% (after deduction of fees for the Remarketing Agent) of the then applicable Liquidation Preference to the holders of the relevant series of Preferred Stock in cash, without any escrows, holdbacks or similar arrangements and (ii) do not contain any representations (other than with respect to ownership of the shares of Preferred Stock), indemnities, liabilities or other provisions imposing any obligation on the holders of the relevant series of Preferred Stock, other than the obligation to tender the certificates representing the relevant shares of Preferred Stock to the Remarketing Agent. Each such certificate shall bear a legend to the effect that each share of Preferred Stock shall be subject to the remarketing provisions contained in this Section 8.
9. REDEMPTION.
1. As promptly as possible after, but in no event later than (i) five (5) Business Days after the Corporation gives a Change in Control Redemption Notice (as defined below) stating that it will effect the redemption, (ii) one hundred (100) days after the Reset Notice if the Corporation elects to redeem the Preferred Stock in lieu of a Remarketing pursuant to Section 8 or (iii) thirty (30) days after the receipt of a Default Notice (if the Corporation elects to redeem in lieu of a Remarketing pursuant to Section 8), the Corporation shall redeem the relevant Preferred Stock (to the extent that such redemption shall not violate any applicable provisions of the laws of the State of Delaware) at a price in cash equal to the Liquidation Preference as of the date of such redemption (such applicable amount is hereinafter referred to as a "Redemption Price" and any such date of redemption is hereafter referred to as a "Redemption Date"). If the Corporation is unable at any Redemption Date to redeem any shares of Preferred Stock then to be redeemed because such redemption would violate the applicable laws of the State of Delaware, dividends shall continue to accrue at the applicable rate and the Corporation shall redeem such shares as soon thereafter as redemption would not violate such laws.
2. Prior to each Redemption Date, written notice shall be mailed, postage prepaid, to each holder of record of Preferred Stock to be redeemed, at his or its post office address last shown on the records of the Corporation, notifying such holder of the number of shares so to be redeemed, specifying the Redemption Date and the date on which such holder's conversion rights (pursuant to Section 5 hereof) as to such shares terminate and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, his or its certificate or certificates representing the shares to be redeemed (such notice is hereinafter referred to as the "Redemption Notice").
3. On or prior to each Redemption Date, each holder of Preferred Stock to be redeemed shall surrender his or its certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of the Preferred Stock designated for redemption in the Redemption Notice as holders of Preferred Stock (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease wi th respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever.
4. Except as provided in Section 9(a) hereof, the Corporation shall have no right to redeem the shares of Preferred Stock. Any shares of Preferred Stock so redeemed shall, automatically and without any further action, be permanently retired, shall no longer be deemed outstanding and shall not under any circumstances be reissued, and the Corporation may from time to time take such appropriate corporate action as may be necessary to reduce the authorized Preferred Stock accordingly. Nothing herein contained shall prevent or restrict the purchase by the Corporation, from time to time either at public or private sale, of the whole or any part of the Preferred Stock at such price or prices as the Corporation may determine, subject to the provisions of applicable law.
5. Each holder of Preferred Stock acknowledges that the Corporation may from time to time be a party to credit, loan and similar agreements with institutional lenders that restrict the Corporation's ability to redeem or repurchase shares of Preferred Stock (each a "Credit Agreement"). Prior to taking any action that could require the Corporation to redeem or repurchase any shares of Preferred Stock in circumstances where such repurchase or redemption would violate any Credit Agreement, the Corporation will either obtain any waivers necessary to redeem or repurchase such shares or pay or arrange to pay in full all amounts due under any Credit Agreement that would otherwise restrict or prohibit such redemption or repurchase.
10. CHANGE IN CONTROL; PROCEDURES UPON A CHANGE IN CONTROL.

Upon a Change in Control, holders of the outstanding shares of Preferred Stock may, at their election:

1. convert the Preferred Stock into Common Stock in accordance with the provisions of Sections 5 and 7 hereof and receive the Change in Control Consideration upon conversion;
2. in lieu of receiving any liquidation preference in respect of such Preferred Stock upon such Change in Control, continue to hold the Preferred Stock in any surviving entity resulting from such Change in Control or, in the case of a sale of the Corporation's assets which results in a Change in Control, the entity purchasing such assets, provided, however, that the provisions hereof (including but not limited to the provisions of Section 7, but excluding Sections 7(h) and (i) following the date of such Change in Control) shall continue to remain in effect with respect to such Preferred Stock; or
3. within sixty (60) days after the Change in Control Date, request, in lieu of receiving the Change in Control Consideration, that the Corporation redeem, out of funds lawfully available for the redemption of shares, the Preferred Stock (the "Redemption Request") for an amount in cash equal to the applicable Liquidation Preference, plus any declared and unpaid Participating Dividends as of the Redemption Date; provided, that the Corporation may, in lieu of making the redemption so requested, effect a Remarketing pursuant to Section 8. Promptly but in any event within five (5) days after receipt of the Redemption Request, the Corporation shall provide a written notice to all holders of the Preferred Stock setting forth whether it will redeem the Preferred Stock or effect a Remarketing (the "Change in Control Redemption Notice"). In the event the Corporation elects to redeem the Preferred Stock, the Preferred Stock shall be redeemed in accordance with Section 9. In the event the Corporat ion elects to effect a Remarketing, the Remarketing shall be effected in accordance with Section 8 (as long as such Remarketing is effected within ninety (90) days after making a Redemption Request), and all references to Reset Notice shall be deemed to be changed to Redemption Request.
11. ADJUSTMENTS. In the event of any stock splits, subdivisions, stock dividends, combinations, reclassifications or similar events with respect to the Preferred Stock or the Common Stock, there shall be an appropriate adjustment to any dollar amount referred to herein other than the Conversion Price, which shall be subject to adjustment as provided in Section 7.

IN WITNESS WHEREOF, the undersigned has made and signed this Certificate of Amendment this ____ day of ___________, 2003 and affirms the statements contained herein as true under penalties of perjury.

WELLMAN, INC.

By:__________________________

Name:

Title:

EX-3

EXHIBIT 3

FORM OF WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH LAWS AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS.

THIS WARRANT IS SUBJECT TO AGREEMENTS, COVENANTS AND RESTRICTIONS IN REGARD TO THE TRANSFER THEREOF AS PROVIDED IN THE PROVISIONS OF THAT CERTAIN SECURITIES PURCHASE AGREEMENT DATED AS OF FEBRUARY 12, 2003 BY AND BETWEEN THE COMPANY AND WARBURG PINCUS PRIVATE EQUITY VIII, L.P., A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.

WELLMAN, INC.

Common Stock Purchase Warrant

Wellman, Inc., a Delaware corporation (the "Company"), hereby certifies that, for value received, Warburg Pincus Private Equity VIII, L.P. ("Warburg"), or its assigns (the "Holder"), is entitled, subject to the terms set forth below, to purchase from the Company, at any time and from time to time during the period beginning on [Date of Original Issuance] and ending on [__________](1) (the "Expiration Date"), in whole or in part, an aggregate of 1,250,000(2) fully paid and non-assessable shares of the Common Stock of the Company at a purchase price, subject to the provisions of Paragraph 3 hereof, of $[11.25](3) per share (the "Purchase Price"). The Purchase Price and the number and character of such shares are subject to adjustment as provided below, and the term "Common Stock" shall mean, unless the context otherwise requires, the stock or other securities or property at the time deliverable u pon the exercise of this Warrant. This Warrant is herein called the "Warrant."

___________________________

1. The seventh anniversary of the date of issuance for each of the Initial Warrants and the Second Closing Warrants
2. As adjusted for any stocks splits, subdivisions, stock dividends, combinations, reclassifications or similar events occurring prior to each applicable Closing Date.
3. For Second Closing Warrants, insert price applicable therefor.

EXERCISE OF WARRANT. The purchase rights evidenced by this Warrant shall be exercised by the Holder surrendering this Warrant, with the form of subscription at the end hereof duly executed by the Holder, to the Company at its office in 595 Shrewsbury Avenue, Shrewsbury, NJ 07702, accompanied by payment, of an amount (the "Exercise Payment") equal to the Purchase Price multiplied by the number of shares being purchased pursuant to such exercise, payable as follows: (i) by payment to the Company in cash, by certified or official bank check, or by wire transfer of the Exercise Payment, (ii) by surrender to the Company for cancellation of securities of the Company having a Market Price (as hereinafter defined) on the date of exercise equal to the Exercise Payment; or (c) by a combination of the methods described in clauses (a) and (b) above. In lieu of exercising the Warrant, the holder may elect to receive a payment, payable by the Company to the Holder only in shares of Common Stock, valued at the Market Price on the date of exercise, equal to the difference between (i) the Market Price on the date of exercise multiplied by the number of shares as to which the Warrant is then being exercised and (ii) the Exercise Payment with respect to such shares. For purposes hereof, the term "Market Price" shall mean, with respect to any day, the volume weighted average closing price of a share of Common Stock for the 20 consecutive trading days preceding such day on the principal national securities exchange on which the shares of Common Stock or securities are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the average of the reported bid and asked prices during such 20 trading day period in the over-the-counter market as furnished by the National Quotation Bureau, Inc., or, if such firm is not then engaged in the business of reporting such prices, as furnished by any member of the National Association of Securities Dealers, Inc. ("NASD") selected by the Company or, if the shares of Common Stock or securities are not publicly traded, the fair market value thereof determined jointly by the Company and the Holder; provided, however, that if such parties are unable to reach agreement within a reasonable period of time, the fair market value shall be determined in good faith by the independent investment banking firm selected jointly by the Company and the Holder or, if that selection cannot be made within 20 days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules. In no event may this Warrant be exercised at any time after the Expiration Date.

1.1 Partial Exercise. This Warrant may be exercised for less than the full number of shares of Common Stock, in which case the number of shares receivable upon the exercise of this Warrant as a whole, and the sum payable upon the exercise of this Warrant as a whole, shall be proportionately reduced. Upon any such partial exercise, the Company at its expense will forthwith issue to the Holder a new Warrant or Warrants of like tenor calling for the number of shares of Common Stock as to which rights have not been exercised, such Warrant or Warrants to be issued in the name of the Holder hereof or his or its nominee.

2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as practicable after the exercise of this Warrant and payment of the Purchase Price, and in any event within ten (10) days thereafter, the Company, at its expense, will cause to be issued in the name of and delivered to the Holder a certificate or certificates for the number of fully paid and non-assessable shares or other securities or property to which the Holder shall be entitled upon such exercise, plus, in lieu of any fractional share to which the Holder would otherwise be entitled, cash in an amount determined in accordance with Paragraph 3.8 hereof. The Company agrees that the shares so purchased shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares as aforesaid.

3. ANTI-DILUTION PROVISIONS AND OTHER ADJUSTMENTS. In order to prevent dilution of the rights granted hereunder, the Purchase Price shall be subject to adjustment from time to time in accordance with this Paragraph 3. Upon each adjustment of the Purchase Price pursuant to this Paragraph 3, the registered Holder of this Warrant shall thereafter be entitled to acquire upon exercise, at the Purchase Price resulting from such adjustment, the number of shares of Common Stock obtainable by multiplying the Purchase Price in effect immediately prior to such adjustment by the number of shares of Common Stock acquirable immediately prior to such adjustment and dividing the product thereof by the Purchase Price resulting from such adjustment.

3.1 Adjustment for Issue or Sale of Common Stock at Less than New Security Market Price. Except as provided in Paragraph 3.4 below, if and whenever on or after the date hereof, the Company shall issue or sell, or shall in accordance with subparagraphs 3.1(1) to (9), inclusive, be deemed to have issued or sold any shares of its Common Stock for a consideration per share less than the New Security Market Price immediately prior to the time of such issue or sale, then, forthwith upon such issue or sale or if such issue or sale is pursuant to any contract or agreement (excluding Options (as defined below)), the New Security Market Price as of the date the Company became legally bound to issue or sell (the "Triggering Transaction"), the Purchase Price in effect immediately prior to the time of such Triggering Transaction shall (subject to subparagraphs 3.1(1) to (9)) be reduced to the Purchase Price (calculated to the nearest tenth of a cent) determined by multiplying the Purchase Price in eff ect immediately prior to the time of such Triggering Transaction by a fraction, the numerator of which shall be the sum of (x) the Number of Shares Outstanding immediately prior to such Triggering Transaction multiplied by the New Security Market Price immediately prior to such Triggering Transaction plus (y) the consideration received by the Company upon such Triggering Transaction, and the denominator of which shall be the product of (x) the Number of Shares Outstanding immediately prior to such Triggering Transaction plus the number of shares issued or deemed to be issued pursuant to subparagraphs 3.1(1) to (9) in such Triggering Transaction, multiplied by (y) the New Security Market Price immediately prior to such Triggering Transaction.

For purposes of this Paragraph 3.1, (A) the term "New Security Market Price" shall mean, with respect to any day, the volume weighted average price of a share of Common Stock for the trading day preceding such day on the principal national securities exchange on which the shares of Common Stock or securities are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the average of the reported bid and asked prices for such trading day in the over-the-counter market as furnished by the National Quotation Bureau, Inc., or, if such firm is not then engaged in the business of reporting such prices, as furnished by any member of the NASD selected by the Corporation or, if the shares of Common Stock or securities are not publicly traded, the Private Value; and (B) the term "Number of Shares Outstanding" means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock issu able upon conversion or exercise in full of all Convertible Securities and Options, each as defined below (including Convertible Securities and Options outstanding on the date hereof or hereinafter issued) whether or not the Convertible Securities or Options are convertible into or exercisable for Common Stock at such time, but shall not include (a) any shares of Common Stock or Convertible Securities in the treasury of the Corporation or held for the account of the Corporation or any of its Subsidiaries, (b) any shares of Common Stock issued or reserved for issuance under stock option, restricted stock, retirement or executive ownership plans to the extent that such shares or Options to purchase such shares are issued or granted after the date hereof and (c) prior to the occurrence of a Conversion Event (as defined in the terms of such Notes or such Series A Preferred Stock or Series B Preferred Stock), any shares of Common Stock issuable upon conversion of the Notes or the Series A Preferred Stock and the Series B Preferred Stock issued pursuant to the Purchase Agreement (as defined below).

For purposes of determining the adjusted Purchase Price under this Paragraph 3.1, the following subsections (1) to (9), inclusive, shall be applicable:

1. In case the Company at any time after the date hereof shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (such rights or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities"), whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which the Common Stock is issuable upon exercise, conversion or exchange (determined by dividing (x) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus, in the case of such Options whi ch relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities) shall be less than the New Security Market Price immediately prior to the time of the granting of such Option, then the total maximum amount of Common Stock issuable upon the exercise of such Options (including, without limitation, by reason of accretion or accrual of interest or dividends), or, in the case of Options for Convertible Securities, upon the conversion or exchange of such Convertible Securities, shall (as of the date of granting of such Options) be deemed to be outstanding and to have been issued and sold by the Company for such price per share. No adjustment of the Purchase Price shall be made upon the actual issue of such share s of Common Stock or such Convertible Securities upon the exercise of such Options, except as otherwise provided in subparagraph (3) below.
2. In case the Company at any time after the date hereof shall in any manner issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the New Security Market Price immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall ( as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued and sold by the Company for such price per share. No adjustment of the Purchase Price shall be made upon the actual issue of such Common Stock upon exercise of the rights to exchange or convert under such Convertible Securities, except as otherwise provided in subparagraph (3) below.
3. If the additional consideration payable upon the exercise of any Options referred to in subparagraph (1), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subparagraphs (1) or (2), or the rate at which any Convertible Securities referred to in subparagraph (1) or (2) are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of provisions providing for a weighted average anti-dilution adjustment, whether based on issuances at below the applicable conversion or exercise price or below market value), the Purchase Price in effect at the time of such change shall forthwith be readjusted to the Purchase Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold.
4. On the expiration of any Option or the termination of any right to convert or exchange any Convertible Securities as to which an adjustment to the Conversion Price was made pursuant to paragraph (1) or (2) above, the Purchase Price then in effect hereunder shall forthwith be increased to the Purchase Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued.
5. In case any Options shall be issued in connection with the issue or sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for the consideration determined in good faith by the Board of Directors of the Company (the "Board of Directors") to be attributable to such Options.
6. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration as determined in good faith by the Board of Directors. In case any shares of Common Stock, Options or Convertible Securities shall be issued in connection with any merger in which the Company is the surviving corporation (including the assumption or exchange of Options and Convertible Securities of the non-surviving corporation), the amount of consideration received by the Company therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as shall be att ributed by the Board of Directors in good faith to such Common Stock, Options or Convertible Securities, as the case may be. The consideration received by the Company in connection with the issuance and sale or deemed issuance and sale of any Common Stock, Options or Convertible Securities shall be computed based upon the total consideration received or determined to be received by the Company in accordance with the terms hereof before giving effect to any customary underwriting discounts or commissions, placement agency fees or other customary transaction expenses typically borne by an issuer but after giving effect to any other discounts or fees.
7. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock for the purpose of this Paragraph 3.1.
8. In case the Company shall declare a dividend or make any other distribution upon the stock of the Company payable in Options or Convertible Securities, then any Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration.
9. For purposes of this Paragraph 3.1, in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (x) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities, or (y) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right or subscription or purchase, as the case may be.

3.2. Subdivisions and Combinations. In case the Company shall at any time (i) subdivide the outstanding Common Stock or (ii) issue a dividend on its outstanding Common Stock payable in shares of Common Stock, the Purchase Price in effect immediately prior to such dividend or subdivision shall be proportionately reduced by the same ratio as the subdivision or dividend. In case the Company shall at any time combine its outstanding Common Stock, the Purchase Price in effect immediately prior to such combination shall be proportionately increased by the same ratio as the combination.

3.3. Reorganization, Reclassification, Consolidation, Merger or Sale of Assets. If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with or into another person, or the sale of all or substantially all of its assets to another person shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby each Holder shall have the right to acquire and receive, upon exercise of this Warrant, such shares of stock, securities, cash or other property issuable or payable (as part of the reorganization, reclassification, consolidation, merger or sale) with respect to or in exchange for such number of outstanding shares of the Common Stock as would have been received upon exerc ise of this Warrant at the Purchase Price then in effect. The Company will not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor person (if other than the Company) resulting from such consolidation or merger or the person purchasing such assets shall assume by written instrument mailed or delivered to the Holder at the last address of the Holder appearing on the books of the Company, the obligation to deliver to the Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase. Notwithstanding the foregoing, in the event of any consolidation or merger of the Company with another person in which all outstanding shares of Common Stock are converted into the right to receive cash, the Company shall have the right to extinguish the Warrant upon the consummation of such consolidation or merger if the holder of the Warrant is entitled to receive upon such consummation, in respect of each share of Common Stock for which the Warrant is then exercisable, the same amount (net of the Purchase Price) in cash as a holder of a share of Common Stock will receive in such transaction.

3.4. No Adjustment for Exercise of Certain Options, Warrants, Etc. The provisions of this Paragraph 3 shall not apply to the following shares of Common Stock issued, issuable or deemed outstanding under subparagraphs 3.1(1) to (9) inclusive: (i) shares of Common Stock issued or issuable upon (A) conversion of (x) the Company's notes (the "Notes") (and including any cash payment for Excess Shares (as such term is defined in the Notes)), (y) the Company's Series A Convertible Preferred Stock (the "Series A Preferred Stock") or (z) the Company's Series B Convertible Preferred Stock (the "Series B Preferred Stock"), and (B) the exercise of these Warrants, in each case issued or issuable under the Securities Purchase Agreement dated as of February 12, 2003 between the Company and Warburg (the "Purchase Agreement"), (ii) other warrants to purchase Common Stock issued or issuable to the Holder pursuant to the Purchase Agreement and the Common Stock issuable upon exercise the reof, (iii) warrants issued to lenders of non-convertible debt and the Common Stock issuable upon exercise thereof; provided such warrants do not exceed, in the aggregate, 5% of the issued and outstanding shares of Common Stock and the terms thereof have been approved by the Board of Directors, (iv) shares of Common Stock issued as consideration for bona fide acquisitions, mergers, joint ventures or similar transactions, provided that the terms thereof are approved by the Board of Directors, (v) shares of Common Stock issued or issuable pursuant to any stock option, stock purchase or similar plan or arrangement for the benefit of the employees, directors or consultants of the Company or its subsidiaries, duly adopted by the Board of Directors and (vi) shares of Common Stock issued in a bona fide underwritten public offering underwritten by a nationally recognized investment bank pursuant to an effective registration under the Securities Act of 1933, as amended, or any similar statute then in force.

3.5 Notices of Record Date, Etc. In the event that:

(1) the Company shall declare any cash dividend upon its Common Stock other than the Company's regular quarterly cash dividend, or

(2) the Company shall declare any dividend upon its Common Stock payable in stock or make any special dividend or other distribution to the holders of its Common Stock, or

(3) the Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights, or

(4) there shall be any (i) consolidation, merger, reorganization or other form of acquisition of or by the Company in which the Company's stockholders immediately prior to the transaction retain less than 50% of the voting power or economic interest in the surviving or resulting entity (or its parent) or (ii) the sale of the Company's assets in excess of a majority of the Company's assets (valued at fair market value as determined in good faith by the Board of Directors), or

(5) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

then, in connection with such event, the Company shall give to the Holder:

1. at least twenty (20) days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up; and
2. in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least twenty (20) days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. Each such written notice shall be given by first class mail, postage prepaid, addressed to the Holder at the address of the Holder as shown on the books of the Company.

3.6 Grant, Issue or Sale of Options, Convertible Securities, or Rights. If at any time or from time to time on or after the date of issuance hereof and prior to the Expiration Date, the Company shall grant, issue or sell any Options, Convertible Securities or rights to purchase property (the "Purchase Rights") pro rata to the record holders of any class of Common Stock and such grants, issuances or sales do not result in an adjustment of the Purchase Price under Paragraph 3.1 hereof, then the Holder shall be entitled to acquire (within thirty (30) days after the later to occur of the initial exercise date of such Purchase Rights or receipt by such holder of the notice concerning Purchase Rights to which such Holder shall be entitled under Paragraph 3.5) and upon the terms applicable to such Purchase Rights either:

(i) the aggregate Purchase Rights which the Holder could have acquired if it had held the number of shares of Common Stock acquirable upon exercise of this Warrant immediately before the grant, issuance or sale of such Purchase Rights; provided that if any Purchase Rights were distributed to holders of Common Stock without the payment of additional consideration by such holders, corresponding Purchase Rights shall be distributed to the exercising Holder as soon as possible after such exercise and it shall not be necessary for the Holder specifically to request delivery of such rights; or

(ii) in the event that any such Purchase Rights shall have expired or shall expire prior to the end of said thirty (30) day period, the number of shares of Common Stock or the amount of property which the Holder could have acquired upon such exercise at the time or times at which the Company granted, issued or sold such expired Purchase Rights.

3.7 Adjustment by Board of Directors. If any event occurs as to which, in the opinion of the Board of Directors, the provisions of this Paragraph 3 are not strictly applicable or if strictly applicable would not fairly protect the rights of the Holder in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights as aforesaid, but in no event shall any adjustment have the effect of increasing the Purchase Price as otherwise determined pursuant to any of the provisions of this Paragraph 3 except in the case of a combination of shares of a type contemplated in Paragraph 3.2 and then in no event to an amount larger than the Purchase Price as adjusted pursuant to Paragraph 3.2.

3.8 Fractional Shares. The Company shall not issue fractions of shares of Common Stock upon exercise of this Warrant or scrip in lieu thereof. If any fraction of a share of Common Stock would, except for the provisions of this Paragraph 3.8, be issuable upon exercise of this Warrant, the Company shall in lieu thereof pay to the person entitled thereto an amount in cash equal to such fraction, calculated to the nearest one-hundredth (1/100) of a share, multiplied by the New Security Market Price for the Common Stock.

3.9 Officers' Statement as to Adjustments. Whenever the Purchase Price shall be adjusted as provided in Paragraph 3 hereof, the Company shall forthwith file at each office designated for the exercise of this Warrant, a statement, signed by the President, any Vice President or Treasurer of the Company, showing in reasonable detail the facts requiring such adjustment and the Purchase Price that will be effective after such adjustment. The Company shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to the record Holder at his or its address appearing on the stock register. If such notice relates to an adjustment resulting from an event referred to in Paragraph 3.5, such notice shall be included as part of the notice required to be mailed and published under the provisions of Paragraph 3.5 hereof.

4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its certificate of incorporation or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against dilution or other impairment. Without limiting the generality of the foregoing, the Company will not increase the par value of any shares of stock receivable upon the exercise of this Warrant above the amount payable therefor upon such exercise, and at all times will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable stock upon the exercise of this Warrant.

5. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The Company shall at all times reserve and keep available out of its authorized but unissued stock, solely for the issuance and delivery upon the exercise of this Warrant and other similar Warrants, such number of its duly authorized shares of Common Stock as from time to time shall be issuable upon the exercise of this Warrant and all other similar Warrants at the time outstanding.

6. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to it, or (in the case of mutilation) upon surrender and cancellation thereof, the Company will issue, in lieu thereof, a new Warrant of like tenor.

7. REMEDIES. The Company stipulates that the remedies at law of the Holder in the event of any default by the Company in the performance of or compliance with any of the terms of this Warrant may not be adequate, and that the Holders shall have the right to seek to have the same specifically enforced.

8. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms, to all of which each taker or owner hereof consents and agrees:

8.1. Subject to (i) the legend appearing on the first page hereof and (ii) Sections 7.1 and 7.4 of the Purchase Agreement, title to this Warrant may be transferred by endorsement (by the Holder executing the form of assignment at the end hereof including guaranty of signature) and delivery in the same manner as in the case of a negotiable instrument transferable by endorsement and delivery.

8.2. Any person in possession of this Warrant properly endorsed is authorized to represent himself as absolute owner hereof and is granted power to transfer absolute title hereto by endorsement and delivery hereof to a bona fide purchaser hereof for value; each prior taker or owner waives and renounces all of his equities or rights in this Warrant in favor of every such bona fide purchaser, and every such bona fide purchaser shall acquire title hereto and to all rights represented hereby.

8.3. Until this Warrant is transferred on the books of the Company, the Company may treat the registered Holder as the absolute owner hereof for all purposes without being affected by any notice to the contrary.

8.4. Prior to the exercise of this Warrant, the Holder shall not be entitled to any rights of a shareholder of the Company with respect to shares for which this Warrant shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.

8.5. The Company shall not be required to pay any Federal or state transfer tax or charge that may be payable in respect of any transfer involved in the transfer or delivery of this Warrant or the issuance or conversion or delivery of certificates for Common Stock in a name other than that of the registered Holder or to issue or deliver any certificates for Common Stock upon the exercise of this Warrant until any and all such taxes and charges shall have been paid by the Holder or until it has been established to the Company's satisfaction that no such tax or charge is due.

9. TERMINATION OF WARRANT. Upon a termination of the Purchase Agreement in accordance with its terms, this Warrant shall automatically terminate without any further action on the part of the Holder or the Company if, at the time of such termination of the Purchase Agreement, there has been no Initial Closing (each as defined in the Purchase Agreement) and either (i) the conditions set forth in Section 6.1(f), 6.2(a) or 6.2(b) of the Purchase Agreement, or (ii) the conditions set forth in Section 6.1(k) or 6.1(l) of the Purchase Agreement as a result of a failure to satisfy the condition set forth in paragraph IV(f) of the Summary of Terms and Conditions attached as Schedule 1.21 to the Purchase Agreement, shall not have been satisfied or waived.(4)

10. SUBDIVISION OF RIGHTS. This Warrant (as well as any new warrants issued pursuant to the provisions of this paragraph) is exchangeable, upon the surrender hereof by the Holder, at the principal office of the Company for any number of new warrants of like tenor and date representing in the aggregate the right to subscribe for and purchase the number of shares of Common Stock which may be subscribed for and purchased hereunder.

(4) This Section 9 shall only be applicable to the Initial Warrants.

11. MAILING OF NOTICES, ETC. All notices and other communications from the Company to the Holder shall be mailed by first-class certified mail, postage prepaid, to the address furnished to the Company in writing by the last holder of this Warrant who shall have furnished an address to the Company in writing.

12. HEADINGS, ETC. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect the meaning hereof.

13. CHANGE, WAIVER, ETC. Neither this Warrant nor any term hereof may be changed, waived, discharged or terminated orally but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought.

14. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.

WELLMAN, INC.

By:_______________________________

Dated: __________, 2003

Attest:

__________________________

[To be signed only upon exercise of Warrant]

EXERCISE NOTICE

Wellman, Inc.
595 Shrewsbury Avenue
Shrewsbury, NJ 07702

The undersigned hereby elects to purchase, pursuant to the provisions of the Warrant to purchase shares of Common Stock, par value $0.001 per share, issued by Wellman, Inc. and held by the undersigned, the original of which is attached hereto, and (check the applicable box):

_____ Tenders herewith payment of the Exercise Payment (as defined in the Warrant) in full in the form of cash, certified check, official bank check or wire transfer or check in the amount of $__________________ for _______________ shares of such securities.

_____ Confirms that payment of the Exercise Payment (as defined in the Warrant) in full by means of a wire transfer in the amount of $__________________ for _______________ shares of such securities has been made to the Company.

_____ Elects to surrender to the Company for cancellation securities of the Company having Market Price (as defined in the Warrant) on the date hereof equal to the Exercise Payment for ________ shares of such Common Stock as to which the Warrant is being exercised.

_____ Elects to receive that number of shares of Common Stock (valued at the market Price on the date hereof) equal to the difference between the Market Price (as defined in the Warrant) multiplied by the number of shares as to which the Warrant is being exercised and the Exercise Payment (as defined in the Warrant) with respect to such shares.

The undersigned hereby represents and warrants that the undersigned is acquiring such shares for its own account for investment purposes only, and not for resale or with a view to distribution of such shares or any part thereof.

The undersigned requests that the certificates for such shares be issued in the name of, and be delivered to ______________________, whose address is ________________________.

Dated:

____________________________

______________________________

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

_____________________________
Address

[To be signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ____________________________ the right represented by the within Warrant to purchase __________________ shares of Common Stock of Wellman, Inc. to which the within Warrant relates, and appoints ____________________ attorney to transfer said right on the books of Wellman, Inc, with full power of substitution in the premises.

Dated:

________________________

___________________________

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

_____________________________
Address

In the presence of:

________________________