IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA, Plaintiff,

v.

THE NAHDREE GROUP, LTD., a corporation, Defendant.

Civil Action No.

CONSENT DECREE

WHEREAS: Plaintiff, the United States of America, has commenced this action by filing the complaint herein; defendant has waived service of the summons and complaint; the parties have been represented by the attorneys whose names appear hereafter; and the parties have agreed to settlement of this action upon the following terms and conditions, without adjudication of any issue of fact or law and without defendant admitting liability for any of the matters alleged in the complaint;

THEREFORE, on the joint motion of plaintiff and defendant, it is hereby ORDERED, ADJUDGED, and DECREED as follows:

1. This Court has jurisdiction of the subject matter and of the parties.
2. The complaint states a claim upon which relief may be granted against the defendant under Sections 5(a)(1), 5(m)(1)(A), 9, 13(b), 16(a) and 19 of the Federal Trade Commission Act, 15 U.S.C. §§ 45(a)(1), 45(m)(1)(A), 49, 53(b), 56(a) and 57b.

CIVIL PENALTY

3. Defendant The Nahdree Group, Ltd., its successors and assigns, shall pay to plaintiff a civil penalty, pursuant to Section 5(m)(1)(A) of the Federal Trade Commission Act, 15 U.S.C. § 45(m)(1)(A), in the amount of $200,000. Based on defendant's sworn representations in the Form 10-K filed with the United States Securities and Exchange Commission for the years 1997 and 1998, and the Form 10-Q filed with the United States Securities and Exchange Commission for the quarters ending August 31, 1998 and November 30, 1998, hereinafter together designated "Financial Disclosure Statements," payment of the foregoing monetary settlement is waived except for $10,000, contingent upon the accuracy and completeness of the Financial Disclosure Statements.
4. Defendant shall make the payment required by Paragraph 3 within five (5) days of the date defendant receives notice from plaintiff of entry of this consent decree by certified or cashier's check made payable to the Treasurer of the United States and delivered to: The Office of Consumer Litigation, Civil Division, U.S. Department of Justice, Washington, D.C. 20530 for appropriate disposition.
5. In the event of any default in payment, which default continues for ten (10) days beyond the due date of payment, the entire unpaid penalty, together with interest, as computed pursuant to 28 U.S.C. § 1961, from the date of default to the date of payment, shall immediately become due and payable.
6. The plaintiff's agreement to this consent decree is expressly premised upon the truthfulness, accuracy, and completeness of the financial condition of defendant, as represented in the Financial Disclosure Statements referenced above, which contain material information upon which the plaintiff relied in negotiating and agreeing to the waiver of all but $10,000 of the $200,000 monetary civil penalty stated in the consent decree. If, upon motion by the Federal Trade Commission, this Court finds that the defendant made any material misrepresentation in or omission from the Financial Disclosure Statements, the entire remaining amount of the $200,000 suspended judgment entered against defendant will be immediately due and payable. In connection with any such motion, the only issue shall be whether the financial information defendant provided in the Financial Disclosure Statements was fradulent, misleading, inaccurate or incomplete in any material respect. For purposes of this paragraph, and any subsequent proceedings to enforce payment, including but not limited to a nondischargeability complaint filed in bankruptcy proceeding, defendant waives any right to contest any of the allegations of plaintiff's Complaint.
7. Defendant is hereby required, in accordance with 31 U.S.C. § 7701, to furnish to the Federal Trade Commission its taxpayer identification number, which shall be used for purposes of collecting and reporting on any delinquent amount arising out of defendant's relationship with the government.

PUBLIC NOTIFICATION

8. Defendant shall send the notice attached hereto as "Appendix A" to all commercial and retail entities to which defendant sold textile wearing apparel in the year preceding the date of entry of this consent decree.

INJUNCTION

9. Defendant, its successors and assigns, and its officers, agents, servants, employees and attorneys, and all persons in active concert or participation with any one or more of them who receive actual notice of this consent decree by personal service or otherwise, are hereby enjoined from ever violating, directly or through any corporation, subsidiary, division, or other device, any provision of the Federal Trade Commission's Trade Regulation Rule Concerning the Care Labeling of Textile Wearing Apparel ("the Care Labeling Rule"), 16 C.F.R. Part 423, or as the Rule may hereafter be amended. A copy of this Rule is attached hereto as "Appendix B" and incorporated herein as if fully set forth verbatim.
10. This Order shall not apply to the care labeling of any textile wearing apparel shipped by defendants within the 120 day period following the date on which defendants signed this Order.

PERSONS AFFECTED; CONTINUING JURISDICTION

11. Defendant, its successors and assigns, shall, within thirty (30) days of the entry of this consent decree, provide a copy of this consent decree, the Care Labeling Rule, and the Statement of Basis and Purpose for that Rule to each of the officers and directors of defendant The Nahdree Group, Ltd., and to all supervisory personnel responsible for compliance with the Care Labeling Rule, secure from each such person a signed statement acknowledging receipt of a copy of this consent decree, and, within ten (10) days of complying with this paragraph, file an affidavit with the Court and serve the Federal Trade Commission by mailing a copy thereof to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580, setting forth the fact and manner of its compliance, including the name and title of each person to whom a copy of the consent decree has been provided.
12. With respect to the requirement in section 423.6(c) of the Care Labeling Rule that "a manufacturer or importer must establish a reasonable basis for care information by possessing prior to sale" reliable evidence to support the care information provided on the care label, the following shall be deemed to constitute a reasonable basis for the care information provided on the care label on a garment:

A sample garment that has been cleaned according to the instructions on the care label by a qualified fabric testing laboratory or its designee, along with a report from the laboratory evaluating the garment as having negligible or no change, or slight change, in appearance and fabric handle after cleaning. The laboratory report must be signed by the person who performed or supervised the test and must be maintained by defendant for three years, along with the

actual sample garment that was cleaned and evaluated. For example, if the instructions read as follows: "Dry clean in petroleum solvent, 5 minute cycle with reduced agitation, cabinet dry, hand press," a sample garment must be cleaned as directed by a qualified fabric testing lab or its designee and evaluated by the lab. If the same components (fabric, trim, dyes, finishes, etc.) used in the sample garment tested under this paragraph are also used in other garments, whether of the same or a different style, these other garments need not be separately tested under this paragraph if they bear the same care label as the sample garment and if they do not contain additional components not contained in the sample garment. Components, whether trim or fabric, will be considered to be the "same" as the components in the tested garment if they are composed of the same material and were purchased from the same source within one year of the date of purchase of the components used in the tested garment.

13. Defendant, its successors and assigns, shall maintain the following: a record of the instructions on the care labels on all items of textile wearing apparel offered for sale by defendant; a record of any and all care instructions appearing on hangtags attached to textile wearing apparel offered for sale by defendant; a record of the reasonable basis for each such care instruction; copies of all test reports relating to the care of any textile wearing apparel offered for sale by the defendant (including tests of any component thereof), and the actual items that were tested, including the laboratory reports and sample garments referred to in Paragraph 12; all correspondence to and from customers, suppliers, and consumers relating to the accuracy, adequacy or completeness of the care instructions or any harm to textile wearing apparel which might have been caused by the inaccuracy, inadequacy or incompleteness of the care instructions; and all documents relating to defendant's compliance with each provision of this decree. All such documents and things shall be maintained for three years from the date the defendant last ships the textile wearing apparel at issue to its customers. Defendant shall have the right to destroy all such documents and things thereafter, unless defendant has received notification from the Federal Trade Commission that such documents and things are relevant to an ongoing investigation of defendant by the Federal Trade Commission. Within fifteen (15) days after receipt of a written request, the defendant shall make such documents and things available for inspection and copying by Federal Trade Commission staff during the defendant's regular business hours at defendant's offices in New York, New York.

14. Defendant, its successors and assigns, shall notify the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580, at least thirty (30) days prior to any change in defendant's business, including, but not limited to, merger, incorporation, dissolution, assignment, sale resulting in the emergence of a successor corporation, the creation or dissolution of a subsidiary or parent, or any other change that may affect defendant's obligations under this consent decree.
15. This Court shall retain jurisdiction of this matter for the purposes of enabling any of the parties to this consent decree to apply to the Court at any time for such further orders or directives as may be necessary or appropriate for the interpretation or modification of this consent decree, for the enforcement of compliance therewith, or for the punishment of violations thereof.

JUDGMENT IS THEREFORE ENTERED in favor of plaintiff and against defendant, pursuant to all the terms and conditions recited above.

Dated this _____ day of ___________, 2000.

UNITED STATES DISTRICT JUDGE

The parties, by their respective counsel, hereby consent to the terms and conditions of the consent decree as set forth above and consent to the entry thereof. Defendant waives any rights that may arise under the Equal Access to Justice Act, 28 U.S.C. § 2412, as amended by Pub. L. 104-121, 110 Stat. 847, 863-64 (1996).