AMERON
INTERNATIONAL CORPORATION


245
South Los Robles Avenue


Pasadena,
California  91101-3638




$50,000,000
5.36% Senior Secured Notes due November 30, 2009











January
24, 2003




TO EACH
OF THE PURCHASERS LISTED ON


THE
ATTACHED SIGNATURE PAGES:




Ladies
and Gentlemen:




Ameron
International Corporation, a Delaware corporation (the “Company”), agrees with you as
follows:




1.           AUTHORIZATION OF NOTES.




The
Company will authorize the issue and sale of $50,000,000 aggregate principal
amount of its 5.36% Senior Secured Notes due November 30, 2009 (the “Notes”, such term to include
any such notes issued in substitution therefor pursuant to Section 13 of this
Agreement). The Notes shall be substantially in the form set out in Exhibit 1, with such
changes therefrom, if any, as may be approved by you and the
Company.  The Notes shall be secured by the Collateral pursuant to the
Collateral Documents and guaranteed by the Subsidiary Guarantors pursuant to the
Subsidiary Guaranty.  Certain capitalized terms used in this Agreement
are defined in Schedule B;
references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a
Schedule or an Exhibit attached to this Agreement.




2.           SALEAND PURCHASE OF NOTES.




Subject
to the terms and conditions of this Agreement, the Company will issue and sell
to you and you will purchase from the Company, at the Closing provided for in
Section 3, Notes in the principal amount specified opposite your name in Schedule A at the
purchase price of 100% of the principal amount thereof.  Each of your
obligations hereunder are several and not joint obligations and you shall have
no obligation and no liability to any Person for the performance or
non-performance by any Other Purchaser hereunder.




3.           CLOSING.




The sale
and purchase of the Notes to be purchased by you and the Other Purchasers shall
occur at the offices of O’Melveny & Myers LLP, 400 South Hope Street, Los
Angeles, California 90071-2899, at 9:00 a.m., Los Angeles time, at a closing
(the “Closing”) on
January 24, 2003 or on such other Business Day thereafter on or prior to January
31, 2003 as may be agreed upon by the Company and you and the Other
Purchasers.  At the Closing the Company will deliver to you the Notes
to be purchased by you in the form of a single Note (or such greater number of
Notes in denominations of at least $500,000 as you may request) dated the date
of the Closing and registered in your name (or in the name of your nominee),
against delivery by you to the Company or its order of immediately available
funds in the amount of the purchase price therefor by wire transfer of
immediately available funds as directed by the Company in a funding instruction
letter delivered to you at least two Business Days prior to
Closing.  If at the Closing the Company shall fail to tender such
Notes to you as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.







4.           CONDITIONS TO CLOSING.




Your
obligation to purchase and pay for the Notes to be sold to you at the Closing is
subject to the fulfillment to your satisfaction, prior to or at the Closing, of
the following conditions:




4.1.        Representations and
Warranties.




The
representations and warranties of the Note Parties in the Note Documents shall
be correct when made and at the time of the Closing.




4.2.        Performance; No Default.




Each Note
Party shall have performed and complied with all agreements and conditions
contained in the Note Documents required to be performed or complied with by it
prior to or at the Closing and after giving effect to the issue and sale of the
Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14) no
Default or Event of Default shall have occurred and be
continuing.  Neither the Company nor any Subsidiary shall have entered
into any transaction since August 31, 2002 that would have been prohibited by
Section 10 hereof had such Section applied since such date.




4.3.        Compliance Certificate.




The
Company shall have delivered to you an Officer’s Certificate, dated the date of
the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and
4.9 have been fulfilled.




4.4.        Opinions of Counsel.




You shall
have received opinions in form and substance satisfactory to you, dated the date
of the Closing (a) from Javier Solis,
Esq. and Gibson, Dunn & Crutcher LLP, General Counsel and Special Counsel,
respectively, for the Company and the other Note Parties, covering the matters
set forth in Exhibit
2(a) and Exhibit 2(b),
respectively, and covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to you) and (b) from
O’Melveny & Myers LLP, your special counsel in connection with such
transactions, covering such matters incident to such transactions as you may
reasonably request.




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4.5.        Purchase Permitted By Applicable Law,
etc.




On the
date of the Closing your purchase of Notes shall (i) be permitted
by the laws and regulations of each jurisdiction to which you are subject,
without recourse to provisions (such as Section 1405(a)(8) of the New York
Insurance Law) permitting limited investments by insurance companies without
restriction as to the character of the particular investment, (ii) not violate
any applicable law or regulation (including, without limitation, Regulation T, U
or X of the Board of Governors of the Federal Reserve System) and (iii) not subject you
to any tax, penalty or liability under or pursuant to any applicable law or
regulation, which law or regulation was not in effect on the date
hereof.  If requested by you, you shall have received an Officer’s
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.




4.6.        Saleof Other Notes.




Contemporaneously
with the Closing the Company shall sell to the Other Purchasers and the Other
Purchasers shall purchase the Notes to be purchased by them at the Closing as
specified in Schedule
A.




4.7.        Payment of Special Counsel
Fees.




Without
limiting the provisions of Section 15.1, the Company shall have paid on or
before the Closing the fees, charges and disbursements of your special counsel
referred to in Section 4.4 to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior to the
Closing.




4.8.        Private Placement Number.




A Private
Placement number issued by Standard & Poor’s CUSIP Service Bureau (in
cooperation with the Securities Valuation Office of the National Association of
Insurance Commissioners) shall have been obtained for the Notes.




4.9.        Changes in Corporate
Structure.




Except as
specified in Schedule
4.9, the Company shall not have changed its jurisdiction of incorporation
or been a party to any merger or consolidation and shall not have succeeded to
all or any substantial part of the liabilities of any other entity, at any time
following the date of the most recent financial statements referred to in
Section 5.5.




4.10.      Security Interests in Personal and
Mixed Property.




To the
extent not otherwise satisfied pursuant to Section 4.11, you shall have received
evidence satisfactory to you that the Note Parties shall have taken or caused to
be taken all such actions, executed and delivered or caused to be executed and
delivered all such agreements, documents and instruments, and made or caused to
be made all such filings and recordings (other than the filing or recording of
items described in clauses (b), (c) and (d) below) that may be necessary or, in
your opinion or the opinion of the Collateral Agent, desirable in order to
create in favor of the Collateral Agent, for the benefit of the Intercreditor
Lenders, a valid and (upon such filing and recording) perfected First Priority
security interest in the entire personal and mixed property
Collateral.  Such actions shall include the following:




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(a)           Stock
Certificates.  Delivery to the Collateral Agent
of  certificates (which certificates shall be accompanied by
irrevocable undated stock powers, duly endorsed in blank and otherwise
satisfactory in form and substance to the Collateral Agent) representing all
Capital Stock pledged pursuant to the Security Agreement;




(b)           Lien Searches and UCC
Termination Statements.  Delivery to the Collateral Agent of
(a) the results of a recent search, by a Person satisfactory to the Collateral
Agent, of all effective UCC financing statements and fixture filings and all
judgment and tax lien filings which may have been made with respect to any
personal or mixed property of any Note Party, together with copies of all such
filings disclosed by such search, and (b) UCC termination statements duly
executed by all applicable Persons for filing in all applicable jurisdictions as
may be necessary to terminate any effective UCC financing statements or fixture
filings disclosed in such search (other than any such financing statements or
fixture filings in respect of Liens permitted to remain outstanding pursuant to
the terms of this Agreement);




(c)           UCC Financing Statements and
Fixture Filings.  Delivery to the Collateral Agent of UCC
financing statements and, where appropriate, fixture filings, identifying each
applicable Note Party, as debtor, with respect to all personal and mixed
property Collateral of such Note Party, for filing in all jurisdictions as may
be necessary or, in the opinion of the Collateral Agent, desirable to perfect
the security interests created in such Collateral pursuant to the
Collateral Documents;




(d)           PTO Cover Sheets,
Etc.  Delivery to the Collateral Agent of all cover sheets or
other documents or instruments required to be filed with the United States
Patent and Trademark Office in order to create or perfect Liens in respect of
any Collateral; and




(e)           Opinions of Local
Counsel.  Delivery to you and the Collateral Agent of an
opinion of counsel (which counsel shall be reasonably satisfactory to you and
the Collateral Agent) under the laws of each jurisdiction in which any Note
Party or any real property Collateral is located with respect to the creation
and perfection of the security interests in favor of the Collateral Agent in
such Collateral and such other matters governed by the laws of such jurisdiction
regarding such security interests as you or the Collateral Agent may reasonably
request, in each case in form and substance reasonably satisfactory to you and
the Collateral Agent.




4.11.      Mortgages.




The
Collateral Agent shall have received from the Company:




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(a)           Mortgages.  Fully
executed and notarized Mortgages in proper form for recording in all appropriate
places in all applicable jurisdictions, encumbering the Mortgaged
Property.




(b)           Title
Insurance.  (a) Title insurance policies in ALTA form (standard
lenders’ policy with survey exception) or unconditional commitments therefor
(the “Mortgage
Policies”) issued by the Title Company with respect to the Mortgaged
Property, including a 1970 policy jacket or a policy jacket of later date which
includes a waiver of arbitration, in amounts not less than the respective
amounts designated therein with respect to the Mortgaged Property, insuring fee
simple title to the Mortgaged Property vested in the applicable Note Party and
insuring that the Mortgages create a valid and enforceable First Priority
mortgage Lien on the Mortgaged Property encumbered thereby, subject only to
Liens permitted by this Agreement and the other Note Documents, which Mortgage
Policies shall provide for affirmative insurance and such reinsurance and
endorsements as the Collateral Agent may reasonably request, all of the
foregoing in form and substance reasonably satisfactory to the Collateral Agent;
and (b) evidence satisfactory to the Collateral Agent that the Company has paid
to the Title Company or to the appropriate governmental authorities all expenses
and premiums of the Title Company in connection with the issuance of the
Mortgage Policies and all recording and stamp taxes (including mortgage
recording and intangible taxes) payable in connection with recording the
Mortgages in the appropriate real estate records.




4.12.      Evidence of Insurance.




You and
the Collateral Agent shall have received a certificate from the Company’s
insurance broker or other evidence satisfactory to you that all insurance
required to be maintained pursuant to the Collateral Documents is in full force
and effect and that the Collateral Agent has been named as additional insured
and/or loss payee thereunder to the extent required under the Collateral
Documents.




4.13.      Note Party Documents.




On or
before the date of the Closing, the Company shall, and shall cause each other
Note Party, to have delivered to you with respect to the Company or such Note
Party, as the case may be, each, unless otherwise noted, dated the date of the
Closing:




(a)           Certified
copies of the Organizational Documents of such Person, together with a good
standing certificate from the Secretary of State of its jurisdiction of
organization, and each other state in which the Company or such Subsidiary
Guarantor has major operations or manufacturing facilities and, to the extent
generally available, a certificate or other evidence of good standing as to
payment of any applicable franchise or similar taxes from the appropriate taxing
authority of each of such states, each to be dated a recent date prior to the
date of the Closing;




(b)           Resolutions
of the Governing Body of such Person approving and authorizing the execution,
delivery and performance of the Note Documents to which it is a party, certified
as of the date of the Closing by the secretary or similar officer of such Person
as being in full force and effect without modification or
amendment;




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(c)           Signature
and incumbency certificates of the officers of the Note Party executing the
documents referred to in item (b) above, and any other documents, instruments
and certificates required to be executed by such Note Party in connection
herewith or therewith;




(d)           Copies
of the Note Documents, duly executed by each party thereto; and




(e)           Such
other documents or certificates as you may reasonably request.




4.14.      Collateral Agency and Intercreditor
Agreement.




On
or before the date of the Closing, the Collateral Agency and Intercreditor
Agreement shall have been duly executed and delivered by the parties
thereto.




4.15.      Structuring Fee.




In
connection with this transaction, and as set forth in that certain commitment
letter dated December 27, 2002, the Company shall have paid to the Purchasers a
structuring fee in the aggregate amount of $50,000, and the Purchasers hereby
confirm receipt of such structuring fee.





4.16.      Proceedings and Documents.




All
corporate and other proceedings in connection with the transactions contemplated
by this Agreement and all documents and instruments incident to such
transactions shall be satisfactory to you and your special counsel, and you and
your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.




5.           REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.




The
Company represents and warrants to you that:




5.1.           Organization; Power and
Authority.




The
Company and each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.  Each of the Company and
its Subsidiaries has the corporate power and authority to own or hold under
lease the properties it purports to own or hold under lease, to transact the
business it transacts and proposes to transact, to execute and deliver this
Agreement, the Notes and the other Note Documents to which it is a party and to
perform the provisions hereof and thereof.




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5.2.           Authorization,
etc.




This
Agreement, the Notes and the other Note Documents have been duly authorized by
all necessary corporate action on the part of each Note Party party thereto, and
this Agreement and the other Note Documents constitute, and upon execution and
delivery thereof each Note will constitute, a legal, valid and binding
obligation of the each Note Party party thereto enforceable against such Note
Party in accordance with its terms, except as such enforceability may be limited
by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors’ rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).




5.3.           Disclosure.




This
Agreement, the documents, certificates or other writings delivered to you by or
on behalf of the Company in connection with the transactions contemplated hereby
and the financial statements listed in Section 5.5, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made.  Except as otherwise
disclosed in Schedule
5.3, since November 30, 2001 there has been no change in the financial
condition, operations, business, properties or prospects of the Company or any
Subsidiary except changes that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect.  There is no
fact known to the Company that could reasonably be expected to have a Material
Adverse Effect that has not been set forth herein or in the other documents,
certificates and other writings delivered to you by or on behalf of the Company
specifically for use in connection with the transactions contemplated
hereby.




5.4.           Organization and Ownership of Shares
of Subsidiaries; Affiliates.




(a)           Schedule 5.4 contains
(except as noted therein) complete and correct lists (i) of the Company’s
Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the
jurisdiction of its organization, and the percentage of shares of each class of
its capital stock or similar equity interests outstanding owned by the Company
and each other Subsidiary, (ii) of the Company’s
Affiliates, other than Subsidiaries, and (iii) of the Company’s
directors and senior officers.  As of the date of this Agreement, all
such Subsidiaries are Restricted Subsidiaries.




(b)           All
of the outstanding shares of capital stock or similar equity interests of each
Subsidiary shown in Schedule 5.4 as being
owned by the Company and its Subsidiaries have been validly issued, are fully
paid and nonassessable and are owned by the Company or another Subsidiary free
and clear of any Lien (except as otherwise disclosed in Schedule
5.4).




(c)           Each
Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and is duly
qualified as a foreign corporation or other legal entity and is in good standing
in each jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.  Each such Subsidiary has the
corporate or other power and authority to own or hold under lease the properties
it purports to own or hold under lease and to transact the business it transacts
and proposes to transact.




7


(d)           No
Subsidiary is a party to, or otherwise subject to any legal restriction or any
agreement (other than this Agreement, the agreements listed on Schedule 5.4 and
customary limitations imposed by corporate law statutes) restricting the ability
of such Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to the Company or any of its Subsidiaries that owns
outstanding shares of capital stock or similar equity interests of such
Subsidiary.




5.5.           Financial Statements.




The
Company has delivered to each Purchaser copies of (i) audited financial
statements of the Company and its Restricted Subsidiaries for the fiscal years
ended November 30, 2000 and 2001 and (ii) unaudited financial statements of the
Company and its Restricted Subsidiaries for the fiscal quarter ended August 31,
2002 with figures in comparative form for the corresponding period in the
preceding fiscal year.  All such financial statements (including in
each case the related schedules and notes) fairly present in all material
respects the consolidated financial position of the Company and its Restricted
Subsidiaries as of the respective dates specified and the consolidated results
of their operations and cash flows for the respective periods so specified and
have been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end
adjustments).




5.6.           Compliance with Laws, Other
Instruments, etc.




The
execution, delivery and performance of the Note Documents by each Note Party
party thereto will not (i) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company or any Subsidiary
under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, Organizational Document, or any other agreement or instrument
to which the Company or any Subsidiary is bound or by which the Company or any
Subsidiary or any of their respective properties may be bound or affected,
(ii) conflict
with or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Subsidiary.




5.7.           Governmental Authorizations,
etc.




No
consent, approval or authorization of, or registration, filing or declaration
with, any Governmental Authority is required in connection with the execution,
delivery or performance by any Note Party of any Note Document.




8


5.8.           Litigation; Observance of Agreements,
Statutes and Orders.




(a)           Except
as disclosed on Schedule 5.8, there
are no actions, suits or proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company or any Subsidiary or any
property of the Company or any Subsidiary in any court or before any arbitrator
of any kind or before or by any Governmental Authority that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse
Effect.




(b)           Neither
the Company nor any Subsidiary is in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority or
is in violation of any applicable law, ordinance, rule or regulation (including
without limitation Environmental Laws) of any Governmental Authority, which
default or violation, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.




5.9.           Taxes.




The
Company and its Subsidiaries have filed all tax returns that are required to
have been filed in any jurisdiction, and have paid all taxes shown to be due and
payable on such returns and all other taxes and assessments levied upon them or
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (i) the amount of
which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with
GAAP.  The Company knows of no basis for any other tax or assessment
that could reasonably be expected to have a Material Adverse
Effect.  The charges, accruals and reserves on the books of the
Company and its Subsidiaries in respect of Federal, state or other taxes for all
fiscal periods are adequate in accordance with GAAP.




5.10.         Title to Property; Leases.




The
Company and its Subsidiaries have good and sufficient title to their respective
properties that individually or in the aggregate are Material, including all
such properties reflected in the most recent audited balance sheet referred to
in Section 5.5 or purported to have been acquired by the Company or any
Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement or any other Note Document.  All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.




5.11.         Licenses, Permits, etc.




(a)           The
Company and its Subsidiaries own or possess all licenses, permits, franchises,
authorizations, patents, copyrights, service marks, trademarks and trade names,
or rights thereto, that individually or in the aggregate are Material, without
known conflict with the rights of others.




9


(b)           To
the best knowledge of the Company, no product of the Company infringes in any
material respect any license, permit, franchise, authorization, patent,
copyright, service mark, trademark, trade name or other right owned by any other
Person.




(c)           To
the best knowledge of the Company, there is no Material violation by any Person
of any right of the Company or any of its Subsidiaries with respect to any
patent, copyright, service mark, trademark, trade name or other right owned or
used by the Company or any of its Subsidiaries.




5.12.         Compliance with ERISA.




(a)           The
Company and each ERISA Affiliate have operated and administered each Plan in
compliance with all applicable laws except for such instances of noncompliance
as have not resulted in and could not reasonably be expected to result in a
Material Adverse Effect.  Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the aggregate
Material.




(b)           The
present value of the aggregate benefit liabilities under each of the Plans
(other than Multiemployer Plans), determined as of the end of such Plan’s most
recently ended plan year on the basis of the actuarial assumptions specified for
funding purposes in such Plan’s most recent actuarial valuation report, did not
exceed the aggregate current value of the assets of such Plan allocable to such
benefit liabilities.  The term “benefit liabilities” has the
meaning specified in section 4001 of ERISA and the terms “current value” and “present value” have the
meaning specified in section 3 of ERISA.




(c)           The
Company and its ERISA Affiliates have not incurred withdrawal liabilities (and
are not subject to contingent withdrawal liabilities) under section 4201 or 4204
of ERISA in respect of Multiemployer Plans that individually or in the aggregate
are Material.




(d)           The
expected postretirement benefit obligation (determined as of the last day of the
Company’s most recently ended fiscal year in accordance with Financial
Accounting Standards Board Statement No. 106, without regard to liabilities
attributable to continuation coverage mandated by section 4980B of the Code) of
the Company and its Subsidiaries is not Material.




(e)           The
execution and delivery of this Agreement and the other Note Documents, and the
issuance and sale of the Notes hereunder will not involve any transaction that
is subject to the prohibitions of section 406 of ERISA or in connection with
which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the
Code.  The representation by the Company in the first sentence of this
Section 5.12(e) is made in reliance upon and subject to the accuracy of your
representation in Section 6.2 as to the sources of the funds used to pay the
purchase price of the Notes to be purchased by you.




10


5.13.         Private Offering by the
Company.




Neither
the Company nor anyone acting on its behalf has offered the Notes or any similar
securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any person other
than you and the Other Purchasers, each of which has been offered the Notes at a
private sale for investment.  Neither the Company nor anyone acting on
its behalf has taken, or will take, any action that would subject the issuance
or sale of the Notes to the registration requirements of Section 5 of the
Securities Act.




5.14.         Use of Proceeds; Margin
Regulations.




The
Company will apply the proceeds of the sale of the Notes as set forth in Schedule
5.14.  No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System (12 CFR 221), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220).  The Company and its Subsidiaries do not own any margin
stock and the Company does not have any present intention of acquiring margin
stock.  As used in this Section, the terms “margin stock” and “purpose of buying or
carrying” shall have the meanings assigned to them in said Regulation
U.




5.15.         Existing Debt; Future
Liens.




(a)           Schedule 5.15 sets
forth a complete and correct list of all outstanding Debt of the Company and its
Subsidiaries as of December 31, 2002.  Neither the Company nor any
Subsidiary is in default and no waiver of default is currently in effect, in the
payment of any principal or interest on any Debt of the Company or such
Subsidiary and no event or condition exists with respect to any Debt of the
Company or any Subsidiary that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such Debt to become
due and payable before its stated maturity or before its regularly scheduled
dates of payment.




(b)           Except
as disclosed in Schedule 5.15,
neither the Company nor any Subsidiary has agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of
its property, whether now owned or hereafter acquired, to be subject to a
Lien.




11


5.16.         Foreign Assets Control Regulations,
etc.




Neither
the sale of the Notes by the Company hereunder nor its use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.  Without limiting the foregoing, neither the
Company nor any of its Subsidiaries or its Affiliates (a) is or will become a
Person whose property or interests in property are blocked pursuant to Section 1
of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
(66 Fed.  Reg.  49079 (2001)) or (b) engages or will engage
in any dealings or transactions, or be otherwise associated, with any such
Person.  The Company and its Subsidiaries and its Affiliates are in
compliance, in all Material respects, with the Uniting And Strengthening America
By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA
Patriot Act of 2001).  No part of the proceeds from the sale of the
Notes hereunder will be used, directly or indirectly, for any payments to any
governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any improper
advantage, in violation of the United States Foreign Corrupt Practices Act of
1977, as amended.





5.17.         Status under Certain
Statutes.




Neither
the Company nor any Subsidiary is subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935,
as amended, the Interstate Commerce Act, as amended, or the Federal Power Act,
as amended.




5.18.         Environmental Matters.




Neither
the Company nor any Subsidiary has knowledge of any claim or has received any
notice of any claim, and no proceeding has been instituted raising any claim
against the Company or any of its Subsidiaries or any of their respective real
properties now or formerly owned, leased or operated by any of them or other
assets, alleging any damage to the environment or violation of any Environmental
Laws, except, in each case, such as could not reasonably be expected to result
in a Material Adverse Effect.  Except as otherwise disclosed to you in
writing,




(a) neither
the Company nor any Subsidiary has knowledge of any facts which would give rise
to any claim, public or private, of violation of Environmental Laws or damage to
the environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them or to other
assets or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;




(b) neither
the Company nor any of its Subsidiaries has stored, transported or disposed of
any Hazardous Materials on or from any real properties now or formerly owned,
leased or operated by any of them in a manner contrary to any Environmental Laws
in each case in any manner that could reasonably be expected to result in a
Material Adverse Effect; and




(c) all
buildings on all real properties now owned, leased or operated by the Company or
any of its Subsidiaries are in compliance with applicable Environmental Laws,
except where failure to comply could not reasonably be expected to result in a
Material Adverse Effect.





12





5.19.
            Creation, Perfection and
      Priority of Liens.





The
execution and delivery of the Collateral Documents by the Note Parties, together
with the actions taken on or prior to the date hereof pursuant to Section 4.10,
are effective to create in favor of the Collateral Agent for the benefit of the
Intercreditor Lenders, as security for the Intercreditor Indebtedness, a valid
First Priority Lien on all of the Collateral, and all filings and other actions
necessary or desirable to perfect and maintain the perfection and First Priority
status of such Liens have been duly made or taken and remain in full force and
effect, other than (i) the filing of any UCC financing statements delivered to
the Collateral Agent for filing (but not yet filed), (ii) the periodic filing of
UCC continuation statements in respect of UCC financing statements filed by or
on behalf of the Collateral Agent, (iii) the recordation of PTO cover sheets or
other documents and instruments with the United States Patent and Trademark
Office to perfect Liens in the intellectual property described therein, (iv) the
recordations of the Mortgage in the county in which the corresponding Mortgaged
Property is located, (v) any actions that may be required under Section 9.12,
and (vi) as to any deposit account not maintained with the Collateral Agent, the
execution and delivery of a control agreement relating to such deposit account
if such control agreement is required to be delivered.





6.           REPRESENTATIONS OF THE
PURCHASER.





6.1.           Purchase for Investment.




Each of
you represents that you are an institutional “accredited investor” within the
meaning of subparagraphs (1), (2), (3) or (7) of Rule 501(a) promulgated under
the Securities Act.  Each of you represents that you are purchasing
the Notes to be purchased by you for your own account or for one or more
separate accounts maintained by you or for the account of one or more pension or
trust funds and not with a view to the distribution thereof, provided that the
disposition of your or their property shall at all times be within your or their
control.  You understand that the Notes have not been registered under
the Securities Act and may be resold only if registered pursuant to the
provisions of the Securities Act or if an exemption from registration is
available, except under circumstances where neither such registration nor such
an exemption is required by law, and that the Company is not required to
register the Notes.




6.2.           Source of Funds.




Each of
you represents that at least one of the following statements is an accurate
representation as to each source of funds (a “Source”) to be used by you to
pay the purchase price of the Notes to be purchased by you
hereunder:




(i) the
Source is an “insurance company general account” (as the term is defined in the
United States Department of Labor’s Prohibited Transaction Exemption (“PTE”) 95-60) in respect of
which the reserves and liabilities (as defined by the annual statement for life
insurance companies approved by the National Association of Insurance
Commissioners (the “NAIC Annual
Statement”)) for the general account contract(s) held by or on behalf of
any employee benefit plan together with the amount of the reserves and
liabilities for the general account contract(s) held by or on behalf of any
other employee benefit plans maintained by the same employer (or affiliate
thereof as defined in PTE 95-60) or by the same employee organization in the
general account do not exceed 10% of the total reserves and liabilities of the
general account (exclusive of separate account liabilities) plus surplus as set
forth in the NAIC Annual Statement filed with your state of domicile;
or





13


(ii) the
Source is a separate account that is maintained solely in connection with your
fixed contractual obligations under which the amounts payable, or credited, to
any employee benefit plan (or its related trust) that has any interest in such
separate account (or to any participant or beneficiary of such plan (including
any annuitant)) are not affected in any manner by the investment performance of
the separate account; or




(iii) the
Source is either (a) an insurance company pooled separate account, within the
meaning of PTE 90-1 or (b) a bank collective investment fund, within the meaning
of the PTE 91-38 and, except as disclosed by you to the Company in writing
pursuant to this clause (iii), no employee benefit plan or group of plans
maintained by the same employer or employee organization beneficially owns more
than 10% of all assets allocated to such pooled separate account or collective
investment fund; or





(iv) the
Source constitutes assets of an “investment fund” (within the meaning of Part V
of PTE 84-14 (the “QPAM
Exemption”)) managed by a “qualified professional asset manager” or
“QPAM” (within the meaning of Part V of the QPAM Exemption), no employee benefit
plan’s assets that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and managed by
such QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the
QPAM nor a person controlling or controlled by the QPAM (applying the definition
of “control” in Section V(e) of the QPAM Exemption) owns a 5% or more interest
in the Company and (a) the identity of such QPAM and (b) the names of all
employee benefit plans whose assets are included in such investment fund have
been disclosed to the Company in writing pursuant to this clause (iv);
or





(v) the
Source constitutes assets of a “plan(s)” (within the meaning of Section IV of
PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset manager” or
“INHAM” (within the meaning of Part IV of the INHAM exemption), the conditions
of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the
INHAM nor a person controlling or controlled by the INHAM (applying the
definition of “control” in Section IV(h) of the INHAM Exemption) owns a 5% or
more interest in the Company and (a) the identity of such INHAM and (b) the
name(s) of the employee benefit plan(s) whose assets constitute the Source have
been disclosed to the Company in writing pursuant to this clause (v);
or





14


(vi)           the
Source is a governmental plan; or





(vii)          the
Source is one or more employee benefit plans, or a separate account or trust
fund comprised of one or more employee benefit plans, each of which has been
identified to the Company in writing pursuant to this clause (vii);
or





(viii)         the
Source does not include assets of any employee benefit plan, other than a plan
exempt from the coverage of ERISA.





As used
in this Section 6.2, the terms “employee benefit plan”, “governmental plan”, “party in interest” and “separate account” shall have
the respective meanings assigned to such terms in Section 3 of
ERISA.




7.           INFORMATION AS TO COMPANY.




7.1.           Financial and Business
Information.




The
Company shall deliver to each holder of Notes that is an Institutional
Investor:




(a)           Quarterly Statements
— as soon as practicable and in any event within 45 days after the end of each
quarterly period (other than the last quarterly period) in each fiscal year,
consolidated statements of income and cash flows of the Company and its
Restricted Subsidiaries for the period from the beginning of the current fiscal
year to the end of such quarterly period, and a consolidated balance sheet of
the Company and its Restricted Subsidiaries as at the end of such quarterly
period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year, all in reasonable detail,
prepared in accordance with GAAP, satisfactory in form to the Required Holders
and certified by a Senior Financial Officer as fairly presenting, in all
material respects, the financial position of the companies being reported on and
their results of operations and cash flows, subject to changes resulting from
year-end adjustments; provided, however, that
delivery pursuant to Section 7.1(d) below of copies of the Quarterly Report on
Form 10-Q of the Company for such quarterly period filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this Section
7.1(a) if such Quarterly Report contains consolidated financial statements only
with regard to the Company and its Restricted Subsidiaries;




15


(b)           Annual Statements —
as soon as practicable and in any event within 90 days after the end of each
fiscal year, consolidated statements of income, cash flows and stockholders’
equity of the Company and its Restricted Subsidiaries for such year, and a
consolidated balance sheet of the Company and its Restricted Subsidiaries as at
the end of such year, setting forth in each case in comparative form
corresponding consolidated figures from the preceding annual audit, all in
reasonable detail, prepared in accordance with GAAP, satisfactory in form to the
Required Holders, and accompanied




(i) by
an opinion thereon of independent certified public accountants of recognized
international standing, which opinion shall state that such financial statements
present fairly, in all material respects, the financial position of the
companies being reported upon and their results of operations and cash flows and
have been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances,
and




(ii) a
certificate of such accountants stating that they have reviewed this Agreement
and stating further whether, in making their audit, they have become aware of
any condition or event that then constitutes a Default or an Event of Default,
and, if they are aware that any such condition or event then exists, specifying
the nature and period of the existence thereof (it being understood that such
accountants shall not be liable, directly or indirectly, for any failure to
obtain knowledge of any Default or Event of Default unless such accountants
should have obtained knowledge thereof in making an audit in accordance with
generally accepted auditing standards or did not make such an
audit)




; provided, however, that
delivery pursuant to Section 7.1(d) below of copies of the Annual Report on Form
10-K of the Company for such fiscal year filed with the Securities and Exchange
Commission and Annual Report to Stockholders shall be deemed to satisfy the
requirements of this Section 7.1(b) if such Annual Reports contain consolidated
financial statements only with regard to the Company and its Restricted
Subsidiaries;




(c)           Restricted Subsidiary
Financial Statements — promptly upon their becoming available, notice
that the Company has, at its election, arranged for the preparation of any
independently audited consolidated balance sheet and consolidated statements of
income, cash flows and stockholders’ equity of a Restricted Subsidiary for any
fiscal year, and promptly following the Company’s receipt from any holder of any
Note of a written request for copies of any such financial statements, copies
thereof together with any report thereon by the independent public accountants
auditing such financial statements;




(d)           SEC and Other Reports
— promptly upon their becoming available, one copy of (i) each financial
statement, report, notice or proxy statement sent by the Company or any
Restricted Subsidiary to public securities holders generally, (ii) each regular or
periodic report, each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all amendments
thereto filed by the Company or any Restricted Subsidiary with the Securities
and Exchange Commission and of all press releases and other statements made
available generally by the Company or any Restricted Subsidiary to the public
concerning developments that are Material, and (iii) each other
report submitted to the Company or any Restricted Subsidiary that is a
Significant Subsidiary by independent accountants in connection with any
material special audit made by them of the books of the Company or any such
Significant Subsidiary;




16


(e)           Notice of Default or Event
of Default — promptly, and in any event within five days after a
Responsible Officer becoming aware of the existence of any Default or Event of
Default or that any Person has given any notice or taken any action with respect
to a claimed default hereunder or that any Person has given any notice or taken
any action with respect to a claimed default of the type referred to in Section
11(f), a written notice specifying the nature and period of existence thereof
and what action the Company is taking or proposes to take with respect
thereto;




(f)           ERISA Matters —
promptly, and in any event within five days after a Responsible Officer becoming
aware of any of the following, a written notice setting forth the nature thereof
and the action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:




(i) with
respect to any Plan, any reportable event, as defined in section 4043(c) of
ERISA and the regulations thereunder, for which notice thereof has not been
waived pursuant to such regulations as in effect on the date hereof;
or




(ii) the
taking by the PBGC of steps to institute, or the threatening by the PBGC of the
institution of, proceedings under section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Plan, or the receipt by the
Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such Multiemployer Plan;
or




(iii) any
event, transaction or condition that could result in the incurrence of any
liability by the Company or any ERISA Affiliate pursuan to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or such penalty or excise tax provisions, if such liability or Lien, taken
together with any other such liabilities or Liens then existing, could
reasonably be expected to have a Material Adverse Effect;




17


(g)           Notices from Governmental
Authority — promptly, and in any event within 30 days of receipt thereof,
copies of any notice to the Company or any Subsidiary from any Federal or state
Governmental Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse
Effect;




(h)           Requested Information
— with reasonable promptness, such other data and information relating to the
business, operations, affairs, financial condition, assets or properties of the
Company or any of its Subsidiaries or relating to the ability of any of the Note
Parties to perform their respective obligations hereunder, under the other Note
Documents and under the Notes as from time to time may be reasonably requested
by any such holder of Notes; and




(i)           Additional Reporting
— if any Unrestricted Subsidiaries exist on the last day of a fiscal quarter, as
soon as available, but in any event within 45 days (other than the fourth fiscal
quarter, in which case 90 days) after the end of such fiscal quarter of the
Company, a consolidating balance sheet of the Company and its Subsidiaries as at
the end of such fiscal quarter, and the related consolidating statements of
income or operations and cash flows for such fiscal quarter and for the portion
of the Company’s fiscal year then ended, setting forth in each case in
comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal year,
all in reasonable detail and certified by a Responsible Officer of the Company
as fairly presenting in all material respects the financial condition, results
of operations, shareholders’ equity and cash flows of the Company and its
Subsidiaries in accordance with GAAP.





7.2.           Officer’s Certificate.




Each set
of financial statements delivered to a holder of Notes pursuant to Section
7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a
Senior Financial Officer setting forth:




(a)           Covenant Compliance —
the information (including detailed calculations) required in order to establish
whether the Company was in compliance with the requirements of Sections
10.2(a)(i), 10.2(a)(ii), 10.3(h), 10.4, 10.5, 10.7 and 10.15 hereof during the
quarterly or annual period covered by the statements then being furnished
(including with respect to each such Section, where applicable, the calculations
of the maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation of the amount,
ratio or percentage then in existence); and




(b)           Event of Default — a
statement that such officer has reviewed the relevant terms hereof and has made,
or caused to be made, under his or her supervision, a review of the transactions
and conditions of the Company and its Restricted Subsidiaries from the beginning
of the quarterly or annual period covered by the statements then being furnished
to the date of the certificate and that such review shall not have disclosed the
existence during such period of any condition or event that constitutes a
Default or an Event of Default or, if any such condition or event existed or
exists (including, without limitation, any such event or condition resulting
from the failure of the Company or any Restricted Subsidiary to comply with the
provisions of any Environmental Laws where such non-compliance could reasonably
be expected to result in a Material Adverse Effect), specifying the nature and
period of existence thereof and what action the Company shall have taken or
proposes to take with respect thereto.




18


7.3.           Inspection.




The
Company shall permit the representatives of each holder of Notes that is an
Institutional Investor:




(a)           No Default — if no
Default or Event of Default then exists, at the expense of such holder and upon
reasonable prior notice to the Company, to visit the principal executive office
of the Company, to discuss the affairs, finances and accounts of the Company and
its Restricted Subsidiaries with the Company’s officers, and (with the consent
of the Company, which consent will not be unreasonably withheld) its independent
public accountants, and (with the consent of the Company, which consent will not
be unreasonably withheld) to visit the other offices and properties of the
Company and each Restricted Subsidiary, all at such reasonable times and as
often as may be reasonably requested in writing; and




(b)           Default — if a
Default or Event of Default then exists, at the expense of the Company to visit
and inspect any of the offices or properties of the Company or any Restricted
Subsidiary, to examine all their respective books of account, records, reports
and other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company authorizes
said accountants to discuss the affairs, finances and accounts of the Company
and its Restricted Subsidiaries), all at such times and as often as may be
requested.





8.           PREPAYMENT OF THE NOTES.





8.1.           Required Prepayments.


On
November 30, 2005 and on each November 30 thereafter to and including November
30, 2008 the Company will prepay $10,000,000 principal amount (or such lesser
principal amount as shall then be outstanding) of the Notes at par and without
payment of the Make-Whole Amount or any premium, provided, that upon
any partial prepayment of the Notes pursuant to Section 8.2, the principal
amount of each required prepayment of the Notes becoming due under this Section
8.1 on and after the date of any such partial prepayment shall be reduced in the
same proportion as the aggregate unpaid principal amount of the Notes is reduced
as a result of such prepayment or purchase.




19


8.2.           Optional Prepayments with Make-Whole
Amount.




The
Company may, at its option, upon notice as provided below, prepay at any time
all, or from time to time any part of, the Notes, in an amount not less than
$1,000,000 of the aggregate principal amount of the Notes then outstanding in
the case of a partial prepayment, at 100% of the principal amount so prepaid,
plus the
Make-Whole Amount determined for the prepayment date with respect to such
principal amount.  The Company will give each holder of Notes written
notice of each optional prepayment under this Section 8.2 not less than 30 days
and not more than 60 days prior to the date fixed for such
prepayment.  Each such notice shall specify such date, the aggregate
principal amount of the Notes to be prepaid on such date and the principal
amount of each Note held by such holder to be prepaid (determined in accordance
with Section 8.3).




8.3.           Allocation of Partial
Prepayments.




In the
case of each partial prepayment of the Notes, the principal amount of the Notes
to be prepaid shall be allocated among all of the Notes at the time outstanding
in proportion, as nearly as practicable, to the respective unpaid principal
amounts thereof not theretofore called for prepayment.




8.4.           Maturity; Surrender,
etc.





In the
case of each prepayment of Notes pursuant to this Section 8, the principal
amount of each Note to be prepaid shall mature and become due and payable on the
date fixed for such prepayment, together with interest on such principal amount
accrued to such date and the applicable Make-Whole Amount, if
any.  From and after such date, unless the Company shall fail to pay
such principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue.  Any Note paid or prepaid in full shall be
surrendered to the Company and cancelled and shall not be reissued, and no Note
shall be issued in lieu of any prepaid principal amount of any
Note.





8.5.           [Intentionally Omitted].





8.6.           Make-Whole Amount.





The term
“Make-Whole Amount”
means, with respect to any Note, an amount equal to the excess, if any, of the
Discounted Value of the Remaining Scheduled Payments with respect to the Called
Principal of such Note over the amount of such Called Principal, provided that the
Make-Whole Amount may in no event be less than zero.  For the purposes
of determining the Make-Whole Amount, the following terms have the following
meanings:





“Called Principal” means, with
respect to any Note, the principal of such Note that is to be prepaid pursuant
to Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.





“Discounted Value” means, with
respect to the Called Principal of any Note, the amount obtained by discounting
all Remaining Scheduled Payments with respect to such Called Principal from
their respective scheduled due dates to the Settlement Date with respect to such
Called Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which interest on
the Notes is payable) equal to the Reinvestment Yield with respect to such
Called Principal.





20


“Reinvestment Yield” shall
mean, with respect to the Called Principal of any Note, 0.50% (provided that upon
the occurrence of an Unsecured Refinancing Event, such percentage shall be
increased to 2.00%) over the yield to maturity implied by (i) the yields
reported as of 10:00 a.m. (New York City local time) on the Business Day next
preceding the Settlement Date with respect to such Called Principal for actively
traded U.S. Treasury securities having a maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date on the Treasury Yield
Monitor page of Standard & Poor’s MMS – Treasury Market Insight (or, if
Standard & Poor’s shall cease to report such yields in MMS – Treasury Market
Insight or shall cease to be Prudential Capital Group’s customary source of
information for calculating yield-maintenance amounts on privately placed notes,
then such source as is then Prudential Capital Group’s customary source of such
information), or if such yields shall not be reported as of such time or the
yields reported as of such time shall not be ascertainable, or (ii) the Treasury
Constant Maturity Series yields reported, for the latest day for which such
yields shall have been so reported as of the Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15(519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date.  Such implied yield shall be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond equivalent yields in accordance
with accepted financial practice and (b) interpolating linearly between yields
reported for various maturities.  The Reinvestment Yield shall be
rounded to that number of decimal places as appears in the coupon of the
applicable Note.  For purposes hereof, an “Unsecured Refinancing Event”shall occur if (x) at the request of the Company, the lenders party to
the Credit Agreement agree to release the Collateral and refinance, restate or
replace the Credit Agreement with an unsecured credit facility, (y) within
fifteen (15) Business Days following receipt of a written request from the
Company, the holders of the Notes hereunder do not agree to release such
Collateral, and (z) as a result thereof, the Company prepays in full the
outstanding principal amount of the Notes, together with accrued interest
thereon and the applicable Make-Whole Amount, with the proceeds of such
unsecured credit facility and another unsecured debt facility concurrently with
closing of such unsecured credit facility, which in no event shall be later than
forty-five (45) days after the date of the notice referenced in clause (y)
above.





“Remaining Average
Life”  means, with respect to any Called Principal, the number
of years (calculated to the nearest one-twelfth year) obtained by dividing
(i) such Called
Principal into (ii) the sum of the
products obtained by multiplying (a) the principal
component of each Remaining Scheduled Payment with respect to such Called
Principal by (b) the number of
years (calculated to the nearest one-twelfth year) that will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.





21


“Remaining Scheduled Payments”
means, with respect to the Called Principal of any Note, all payments of such
Called Principal and interest thereon that would be due after the Settlement
Date with respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be made
under the terms of the Notes, then the amount of the next succeeding scheduled
interest payment will be reduced by the amount of interest accrued to such
Settlement Date and required to be paid on such Settlement Date pursuant to
Section 8.2 or 12.1.





“Settlement Date” means, with
respect to the Called Principal of any Note, the date on which such Called
Principal is to be prepaid pursuant to Section 8.2 or has become or is declared
to be immediately due and payable pursuant to Section 12.1, as the context
requires.





8.7.           Prepayments
under the Collateral Agency and Intercreditor Agreement.




Any
prepayments of the Notes in accordance with the Collateral Agency and
Intercreditor Agreement under circumstances in which the Notes have not been
declared due and payable under Section 11 hereof shall be treated as optional
prepayments under this Section 8 for purposes of calculating any Make-Whole
Amount due in connection with such prepayment.




9.           AFFIRMATIVE COVENANTS.





The
Company covenants that so long as any of the Notes are outstanding:





9.1.           Compliance with Law.





The
Company will and will cause each of its Subsidiaries to comply with all laws,
ordinances or governmental rules or regulations to which each of them is
subject, including, without limitation, Environmental Laws, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.




9.2.           Insurance.




The
Company will and will cause each of its Subsidiaries to maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated and
upon request of any holder of Notes, the Company will deliver an Officer’s
Certificate specifying the details of such insurance in effect at that
time.




22


9.3.           Maintenance of Properties.




The
Company will and will cause each of its Restricted Subsidiaries to maintain and
keep, or cause to be maintained and kept, their respective properties in good
repair, working order and condition (other than ordinary wear and tear), so that
the business carried on in connection therewith may be properly conducted at all
times, provided
that this Section shall not prevent the Company or any Restricted Subsidiary
from discontinuing the operation and the maintenance of any of its properties if
such discontinuance is desirable in the conduct of its business and the Company
has concluded that such discontinuance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.




9.4.           Payment of Taxes and
Claims.




The
Company will and will cause each of its Subsidiaries to file all tax returns
required to be filed in any jurisdiction and to pay and discharge all taxes
shown to be due and payable on such returns and all other taxes, assessments,
governmental charges, or levies imposed on them or any of their properties,
assets, income or franchises, to the extent such taxes and assessments have
become due and payable and before they have become delinquent and all claims for
which sums have become due and payable that have or might become a Lien on
properties or assets of the Company or any Subsidiary, provided that neither
the Company nor any Subsidiary need pay any such tax or assessment or claims if
(i) the
amount, applicability or validity thereof is contested by the Company or such
Subsidiary on a timely basis in good faith and in appropriate proceedings, and
the Company or a Subsidiary has established adequate reserves therefor in
accordance with GAAP on the books of the Company or such Subsidiary or (ii) the
nonpayment of all such taxes and assessments in the aggregate could not
reasonably be expected to have a Material Adverse Effect.




9.5.           Corporate Existence,
etc.




The
Company will at all times preserve and keep in full force and effect its
corporate existence.  Subject to Section 10.2(a), the Company will at
all times preserve and keep in full force and effect the corporate existence of
each of its Restricted Subsidiaries (unless merged into the Company or a
Restricted Subsidiary) and all rights and franchises of the Company and its
Restricted Subsidiaries unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.




9.6.           Environmental and Safety
Laws.




The
Company will, and will cause each Subsidiary to, deliver promptly to each holder
of Notes any notice of (a) any material
enforcement, cleanup, removal or other material governmental, regulatory or
other actions instituted, completed or, to the Company’s or such Subsidiary’s
best knowledge, threatened pursuant to any Environmental Laws; (b) all material
Environmental Liabilities and Costs against or in respect of any property, the
Company or any Subsidiary; and (c) the Company’s or
any Subsidiary’s discovery of any occurrence or condition on any real property
adjoining or in the vicinity of any property that such Company or Subsidiary has
reason to believe could cause any property or any material part thereof to be
subject to any material restrictions on its ownership, occupancy,
transferability or use under any Environmental Laws.




23


9.7.           Information Required by Rule
144A.




The
Company will, upon the request of the holder of any Note, provide such holder,
and any qualified institutional buyer designated by such holder, such financial
and other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of Notes, except at such times
as the Company is subject to the reporting requirements of section 13 or 15(d)
of the Exchange Act.  For the purpose of this Section 9.7, the term
“qualified institutional buyer” shall have the meaning specified in Rule 144A
under the Securities Act, but shall not include any Person who is engaged in
businesses of the type then being engaged in by the Company or any of its
Subsidiaries.




9.8.           Execution of Subsidiary Guaranty and
Collateral Documents.




In the
event that after the date of the Closing the Company forms or acquires a
Domestic Subsidiary that is a Restricted Subsidiary, the Company will promptly
notify the holders of the Notes of that fact and, promptly (and in no event
later than its execution and delivery of a guaranty or co-obligor agreement
under the Credit Agreement) cause each such Domestic Restricted Subsidiary to
execute and deliver to the holders of the Notes a counterpart of the Subsidiary
Guaranty and all such further documents and instruments as may be necessary or,
in the opinion of the Required Holders or the Collateral Agent, desirable to
create in favor of the Collateral Agent, for the benefit of the Intercreditor
Lenders, a valid and perfected First Priority Lien on all of the personal and
mixed property assets of such Subsidiary Guarantor described in the applicable
forms of Collateral Documents.  The Company shall deliver to the
holders of the Notes, together with such counterpart of the Subsidiary Guaranty
and other documents and instruments, (i) certified copies
of such Subsidiary Guarantor’s Organizational Documents, together with a good
standing certificate from the Secretary of State of the jurisdiction of its
organization, each to be dated a recent date prior to their delivery to the
holders of the Notes, (ii) a certificate
executed by the secretary or an assistant secretary of such Subsidiary Guarantor
as to (a) the
incumbency and signatures of the officers of such Subsidiary Guarantor executing
the counterpart of the Subsidiary Guaranty and such other documents and
instruments executed in connection therewith and (b) the fact that the
attached resolutions of the Governing Body of such Subsidiary Guarantor
authorizing the execution, delivery and performance of the counterpart of the
Subsidiary Guaranty and such other documents and instruments are in full force
and effect and have not been modified or rescinded and (iii) a favorable
opinion of counsel to the Company and such Subsidiary Guarantor, in form and
substance reasonably satisfactory to the Required Holders and their counsel, as
to (a) the due
formation, valid existence and good standing of such Subsidiary Guarantor,
(b) the due
authorization, execution and delivery by such Subsidiary Guarantor of the
counterpart of the Subsidiary Guaranty and such other documents and instruments,
(c) the
enforceability of the counterpart of the Subsidiary Guaranty and such other
documents and instruments and (d) any other matters
set forth in Exhibit
2(a) and Exhibit 2(b), all of
the foregoing to be satisfactory in form and substance to the Required Holders
and their counsel.




24


9.9.           Credit Agreement
Availability.




The
Company shall at all times maintain a committed bank line or lines with
aggregate commitments of not less than $50,000,000 and having a termination date
or dates of not less than nine (9) months from any date of
determination.





9.10.         Annual Perfection Opinion.




Within
90 days after the end of fiscal year 2003 and each fiscal year thereafter, the
Company shall provide to the holders of the Notes and the Collateral Agent an
opinion or opinions of counsel addressed to the holders of the Notes and the
Collateral Agent (i) stating that all action has been taken with respect to the
filing, recording, and refiling of the Collateral Documents and/or financing
statements and continuation statements as is necessary to maintain the
perfection of the Liens on and in the Collateral created by the Collateral
Documents and reciting the details of such action or referring to prior opinions
of counsel in which such details are given; provided, however, that no such
opinion shall be required as to the perfection of any Liens by any means other
than the filing, recording and refiling of the Collateral Documents and/or
financing statements and continuation statements or with respect to any Lien on
or in any patents, trademarks, copyrights or Mortgaged Property; and (ii)
stating what, if any, action of the foregoing nature may reasonably be expected
to become necessary during the next 15 months in order to maintain the
perfection of the Liens in and to such Collateral.




9.11.         Pledged Collateral.




Each
Note Party will (i) cause all of its owned real and personal property other
than Excluded Property to be subject at all times to a First Priority Lien and,
in the case of owned real property, a title insured Lien, in favor of the
Collateral Agent to secure the Obligations pursuant to the terms and conditions
of the Collateral Documents or, with respect to any such property acquired
subsequent to the date of the Closing, such other additional security documents
as the Required Holders shall reasonably request, subject in any case to
Permitted Liens and (ii) deliver such other documentation as the Required
Holders may reasonably request in connection with the foregoing, including,
without limitation, appropriate UCC-1 financing statements, real estate title
insurance policies, landlord’s waivers, certified resolutions and other
organizational and authorizing documents of such Person, favorable opinions of
counsel to such Person (which shall cover, among other things, the legality,
validity, binding effect and enforceability of the documentation referred to
above and the perfection of the Collateral Agent’s Liens thereunder) and other
items of the types required to be delivered pursuant to Section 4.10 and
4.11, all in form, content and scope reasonably satisfactory to the Required
Holders.  Without limiting the generality of the above, the Note
Parties will cause (A) 100% of the issued and outstanding Capital Stock of
each direct Domestic Subsidiary of a Note Party and (B) 65% (or such
greater percentage that, due to a change in an applicable law after the date
hereof, (1) could not reasonably be expected to cause the undistributed
earnings of such Foreign Subsidiary as determined for United States federal
income tax purposes to be treated as a deemed dividend to such Foreign
Subsidiary’s United States parent and (2) could not reasonably be expected
to cause any material adverse tax consequences) of the issued and outstanding
Capital Stock entitled to vote (within the meaning of Treas. Reg.
Section 1.956-2(c)(2)) and 100% of the issued and outstanding Capital Stock
not entitled to vote (within the meaning of Treas. Reg.
Section 1.956-2(c)(2)) in each Foreign Subsidiary directly owned by the
Company or any Domestic Restricted Subsidiary to be subject at all times to a
First Priority Lien in favor of the Collateral Agent (it being recognized that
perfection actions need only be taken in foreign countries as set forth in
Section 9.12 hereof) pursuant to the terms and conditions of the Collateral
Documents or such other security documents as the Required Holders shall
reasonably request.





25


9.12.         Further Assurances.




Within
90 days following the date of the Closing (or such later date as the Required
Holders may determine in their reasonable discretion), the Note Parties shall
deliver to the Collateral Agent pledge agreements (or similar documents)
effective under the laws of the respective jurisdictions of organization of the
following Foreign Restricted Subsidiaries, together with a legal opinion of
special foreign counsel for such jurisdiction:  Ameron (Pte.) Ltd.,
Ameron B.V., Ameron (Australia) PTY Limited, Ameron Holdings (NZ) Limited and
Ameron (UK) Limited.  All such documents shall be in form and
substance reasonably satisfactory to the Required Holders.




9.13.         Control Agreements.




Upon
the request of the Collateral Agent (at the direction of the Required Holders),
with respect to any deposit account, the Company hereby agrees to (a) deliver to
the Collateral Agent an agreement (including a control agreement), satisfactory
in form and substance to the Required Holders and executed by the financial
institution at which such deposit account is maintained, pursuant to which such
financial institution confirms and acknowledges the Collateral Agent’s security
interest in, and control over, such deposit account and waives its rights to
set-off with respect to amounts in such deposit account, and (b) take all other
steps necessary or, in the opinion of the Required Holders or the Collateral
Agent, desirable to ensure that the Collateral Agent has control over such
deposit account.




10.           NEGATIVE COVENANTS.




The
Company covenants that so long as any of the Notes are outstanding:




10.1.         Related Party
Transactions.




The
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly engage in any transaction, including the purchase, sale, exchange or
other transfer of property or other assets or the rendering of any services, or
otherwise deal with, any Shareholder, officer, director or any other Affiliate
of the Company (including Unrestricted Subsidiaries) other than with respect to
(a) intercompany transactions expressly permitted by this Agreement, (b) normal
compensation and reimbursement of expenses and indemnities of officers and
directors, and (c) except as otherwise expressly limited in this Agreement,
other transactions which are entered into in the ordinary course of business and
upon terms that are materially no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than those that might be obtained in
an arm’s-length transaction with an unrelated third party.




26


10.2.         Merger and Sale of Assets.




(a)           The
Company will not, and will not permit any Restricted Subsidiary to, merge with
or into or consolidate with any other Person or sell, lease or transfer to any
Person or otherwise dispose of assets, which together with all other assets
sold, leased, transferred or otherwise disposed of (including deemed
dispositions of assets as described in clause (b)(iii) of the definition of
“Unrestricted Subsidiary” set forth in Schedule B) during
(i) the
immediately preceding 12 months, have an aggregate net book value exceeding 15%
of Consolidated Tangible Assets (measured as at the fiscal quarter end
immediately preceding such sale or disposition) or (ii) the period
beginning on the date hereof and ending on the date of any such proposed sale or
disposition, have an aggregate net book value exceeding 40% of Consolidated
Tangible Assets (measured as at the fiscal quarter end immediately preceding
such sale or disposition) and in each case, no Default or Event of Default would
occur after giving effect thereto, except that:




(A)           any
Restricted Subsidiary may merge with the Company (provided that the
Company shall be the continuing or surviving corporation) or with any one or
more wholly owned Restricted Subsidiaries organized in the United
States;




(B)           any
Restricted Subsidiary organized in the United States may sell, lease, transfer
or otherwise dispose of any of its assets to the Company or to any wholly owned
Restricted Subsidiary organized in the United States;




(C)           any
Restricted Subsidiary organized outside the United States may sell, lease,
transfer or otherwise dispose of any of its assets on arm’s-length terms to the
Company or to any wholly owned Restricted Subsidiary;




(D)           the
Company may merge or consolidate with another Person so long as (1) the Company will
be the surviving corporation and (2) immediately after
such merger or consolidation and after giving effect thereto, no Event of
Default or Default shall have occurred; and




(E)           the
Company and any Restricted Subsidiary may engage in normal sales or other
dispositions of (1) inventory and
(2) vehicles or
equipment with little or no remaining useful life in each case on arm’s-length
terms and otherwise in the ordinary course of business.




(b)           If
the net amount of consideration received by the Company or any Restricted
Subsidiary pursuant to any sale or other disposition of assets described in
clauses (i) or (ii) of Section 10.2(a) is applied to the acquisition by the
Company or such Restricted Subsidiary, within 365 days after such sale or
disposition, of similar assets of the Company or such Restricted Subsidiary to
be used in the ordinary course of business of the Company or such Restricted
Subsidiary, then such sale or disposition shall not be deemed to be a sale or
disposition of assets for the purpose of determining compliance with clauses (i)
or (ii) of Section 10.2(a).  Within 30 days of such acquisition of
similar assets (or, if earlier, at the time an officer’s compliance certificate
is delivered pursuant to Sections 7.1(a) or (b)), the Company shall deliver to
each holder of Notes an Officer’s Certificate certifying in reasonable detail as
to such acquisition of similar assets.




27


(c)           For
purposes of determining compliance by the Company with the provisions of Section
10.2(a), sales or other dispositions of assets described in clauses (B), (C) and
(E) of Section 10.2(a) are not included in making the calculations required for
clauses (i) and (ii) of Section 10.2(a).




10.3.         Liens.




The
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, create, assume or permit to exist at any time any Lien of any kind
(unless prior written consent to the creation or assumption thereof shall have
been obtained pursuant to Section 17) on or with respect to any of its property
or assets, whether now owned or hereafter acquired, except




(a)           Liens
for taxes not yet delinquent or which are being actively contested in good faith
by appropriate proceedings diligently conducted, if adequate reserves with
respect thereto are maintained on the books of the applicable Person in
accordance with GAAP;




(b)           statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of business for sums not yet due or
being actively contested in good faith by appropriate proceedings diligently
conducted, if adequate reserves with respect thereto are maintained on the books
of the applicable Person in accordance with GAAP;




(c)           Liens
(other than any Lien imposed by ERISA) incurred or deposits made in the ordinary
course of business (i) in connection with
workers’ compensation, unemployment insurance and other types of social security
or (ii) to
secure (or to obtain letters of credit that secure) the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, performance bonds,
purchase, construction or sales contracts and other similar obligations; provided, that in
each case such Liens are not incurred or made in connection with the borrowing
of money, the obtaining of advances or credit or the payment of the deferred
purchase price of property, and such Liens do not in the aggregate materially
detract from the value of the Company’s or any Restricted Subsidiary’s property
or assets or materially impair the use thereof in the operation of its
business;




(d)           Liens
on property or assets of a Restricted Subsidiary to secure obligations of such
Restricted Subsidiary to the Company or a wholly-owned Restricted
Subsidiary;




28


(e)           
Liens existing on the date hereof as specified by the Company on Schedule 10.3
attached hereto; provided, however, that all
Debt secured by such Liens permitted by this Section 10.3(e) shall be permitted
under Section 10.4(e);




(f)           any
Lien created to secure all or any part of the purchase price, or to secure Debt
incurred or assumed to pay all or any part of the purchase price, of property
acquired by the Company or a Restricted Subsidiary after the date hereof; provided, however, that (i) any such Lien
shall be confined solely to the item or items of property so acquired and, if
expressly required by the terms of the instrument originally creating such Lien,
other property which is an improvement to or is acquired for specific use in
connection with such acquired property or which is real property being improved
by such acquired property, (ii) the principal
amount of the Debt secured by any such Lien shall (exclusive of capitalized
interest that is treated as Debt for purposes of Sections 10.4(e)) at no time
exceed an amount equal to 100% of the cost to the Company or such Restricted
Subsidiary of the property so acquired, (iii) any such Lien
shall be created within 12 months after, in the case of property, its
acquisition, or, in the case of improvements, their completion and (iv) all Debt secured
by Liens created or existing pursuant to this Section 10.3(f) shall be permitted
under Section 10.4(e);




(g)           any
Lien existing on property of a Person immediately prior to its being
consolidated with or merged into the Company or a Restricted Subsidiary or its
becoming a Restricted Subsidiary, or any Lien existing on any property acquired
by the Company or any Restricted Subsidiary at the time of such acquisition
(whether or not the Debt secured thereby shall have been assumed), provided, however, that (i) no
such Lien shall have been created or assumed in contemplation of such
consolidation or merger or such Person’s becoming a Restricted Subsidiary or
such acquisition of property, (ii) each such Lien shall at all times be confined
solely to the item or items of property so acquired and, if required by the
terms of the instrument originally creating such Lien, other property which is
an improvement to or is acquired for specific use in connection with such
acquired property and (iii) all Debt secured by Liens created or existing
pursuant to this Section 10.3(g) shall be permitted under Section
10.4(e);




(h)           any
other Liens securing Debt; provided that all
Debt secured by Liens created or existing pursuant to this Section 10.3(h) shall
be permitted under Section 10.4(e);




(i)           Liens
granted pursuant to the Collateral Documents;




(j)           minor
survey exceptions and the like which do not Materially detract from the value of
the Company’s and its Subsidiaries’ properties taken as a whole;




(k)           leases,
subleases, easements, rights-of-way, restrictions and other similar charges or
encumbrances incidental to the ownership of property or assets or the ordinary
conduct of the Company’s and each of its Subsidiaries’ businesses, provided that
the aggregate of such Liens do not Materially detract from the value of the
Company’s and such Subsidiaries’ properties taken as a whole;




29


(l)           judgment
Liens securing judgments for the payment of money not constituting an Event of
Default under Section 11(j);




(m)         any
interest of title of a lessor under, and Liens arising from UCC financing
statements (or equivalent filings, registrations or agreements in foreign
jurisdictions) relating to, leases permitted by this Agreement;





(n)          normal
and customary rights of setoff upon deposits of cash in favor of banks or other
depository institutions;





(o)          Liens
of a collection bank arising under Section 4-210 of the Uniform Commercial
Code on items in the course of collection; and





(p)          Lien
renewing, extending or refunding any Lien permitted by clauses (d), (e), (f),
(g), (h), (i) or (j) of this Section 10.3; provided, however, that (i) the
principal amount of Debt secured by such Lien immediately prior thereto is not
increased, the maturity thereof is not shortened and such Lien is not extended
to any other assets or property and (ii) all Debt secured by Liens created or
existing pursuant to this Section 10.3(p) shall be permitted under Section
10.4(e).





If,
notwithstanding the prohibition contained herein, the Company shall create,
incur, or suffer to be incurred or to exist any Lien upon any of its property or
assets, or the property or assets of any of its Restricted Subsidiaries, whether
now owned or hereafter acquired, or transfer any property for the purpose of
subjecting the same to the payment of obligations in priority to the payment of
its or their general creditors, or acquire or permit any Restricted Subsidiary
to acquire, any property or assets upon conditional sales agreements or other
title retention devices, other than as permitted by the provisions of clauses
(a) through (p) of this Section 10.3, then the Company shall make or cause to be
made effective provision whereby the Notes will be secured equally and ratably
with any and all other obligations thereby secured, such security to be pursuant
to agreements reasonably satisfactory to the Required Holders and, in any such
case, the Notes shall have the benefit, to the fullest extent that, and with
such priority as, the holders of the Notes may be entitled under applicable law,
of an equitable Lien on such property, and the holders of the Notes shall
receive an opinion of nationally recognized independent counsel selected by the
Company reasonably satisfactory to the Required Holders that the holders of the
Notes are so secured.  Such violation of this Section 10.3 will
constitute an Event of Default, whether or not provision is made for an equal
and ratable Lien pursuant to this Section 10.3.





10.4.         Financial Covenants.




(a)           Consolidated Tangible Net
Worth Requirement.  The Company will not permit Consolidated
Tangible Net Worth at any time to be less than the sum of (i) $181,400,000,
plus (ii) 50%
of Consolidated Net Income (but only if a positive number) for each fiscal
quarter ending after the date of Closing, plus (iii) 75% of the
net cash proceeds of any Equity Issuance by the Company or a Restricted
Subsidiary (other than issuances by a Restricted Subsidiary to the Company or a
wholly-owned Restricted Subsidiary) after the date of Closing.





30


(b)           Maximum Consolidated
Leverage Ratio.  The Company will not at any time permit the
Consolidated Leverage Ratio to exceed 3.00 to 1.00.







(c)           Minimum Fixed Charge
Coverage Ratio.   The Company will not permit the ratio of
(i) Consolidated EBITDAR to (ii) Consolidated Fixed Charges for any four
consecutive fiscal quarter period to be less than 3.50 to 1.00.




(d)           Minimum Margined Tangible
Assets Coverage Ratio.  The Company will not permit the
Margined Tangible Assets Coverage Ratio at any time to be less than 1.00 to
1.00.




(e)           Limitation on Certain
Debt.  The Company will not, at any time, permit the sum
(without duplication) of (i) Debt of Restricted
Subsidiaries (including, without limitation, Debt resulting from any Guaranty by
a Restricted Subsidiary of the obligations of the Company) plus (ii) Debt secured by
Liens of the type described in Sections 10.3(e), (f), (g), (h) and (p), to
exceed 20% of Consolidated Tangible Net Worth at such time; provided that this
limitation shall exclude any Debt constituting Intercreditor
Indebtedness.




10.5.         Limitation on Certain
Investments.




The
Company will not, and will not permit any Restricted Subsidiary to, at any time,
make or permit to remain outstanding any loan or advance to, or own, purchase or
acquire stock, obligations or securities of, or any other interest in, or make
or commit to make any capital contribution to, any Person, except that the
Company and its Restricted Subsidiaries may:




(a)           permit
to remain outstanding investments existing on the date hereof as specified by
the Company on Schedule 10.5
attached hereto;




(b)           make
loans, investments and advances in and to the Company and Restricted
Subsidiaries, and any investment in a corporation or the purchase of Capital
Stock of a corporation which, after giving effect to such investment, will
become a Restricted Subsidiary;




(c)           make
investments in any money market fund the aggregate asset value of which is at
least $500,000,000, which is managed by a fund manager of recognized national
standing, and the investment in which, in accordance with GAAP, is classified as
a current asset on the balance sheet of the Company or a Restricted Subsidiary,
as the case may be;




(d)           own,
purchase or acquire direct obligations of the United States or any of its
agencies or obligations fully guaranteed by the United States, provided that such
obligations mature within one year from the date acquired;




(e)           own,
purchase or acquire certificates of deposit which mature within one year from
the date of purchase and are issued by any commercial bank or trust company (i)
organized under the laws of the United States or any of its states, (ii) having
consolidated capital, surplus and undivided profits aggregating at least
$500,000,000 and (iii) whose senior debt securities are rated “A” or better by
S&P or an equivalent rating from another nationally recognized credit rating
agency;




31


(f)           own,
purchase or acquire commercial paper given an “A-1” rating or better by S&P
or an equivalent rating by another nationally recognized credit rating agency
and maturing not more than 360 days from the date acquired;




(g)           make
or permit to remain outstanding any other loans, advances or investments,
including additional investments in Affiliated Companies or similar joint
ventures or Unrestricted Subsidiaries, so long as the aggregate original cost of
or expenditures for all such additional loans, advances or investments does not
exceed at any time 15% of Consolidated Tangible Net Worth (net of any cash
return on such loans, advances or investments); provided, however, that
increases or decreases in the Company’s or a Restricted Subsidiary’s equity in
an Affiliated Company resulting from such company’s earnings or losses shall not
be included in computing compliance with this clause (g);




(h)           make
investments consisting of advances or loans to directors, officers, employees,
agents, customers or suppliers in an aggregate principal amount (including any
investments of such type set forth on Schedule 10.5) not to
exceed $1,000,000 at any time outstanding, provided that such
loans shall be in compliance with the Sarbanes-Oxley Act of 2002;




(i)           make
investments consisting of extensions of credit in nature of accounts receivable
or notes receivable arising from the grant of trade credit in the ordinary
course of business, and investments received in satisfaction or partial
satisfaction thereof from financially troubled account debtors to the extent
reasonably necessary in order to prevent or limit loss;




(j)           (i)
make investments in any Person that is a Note Party prior to giving effect to
such investment and (ii) make investments in connection with the formation of
(but not the Acquisition of) a new Subsidiary Guarantor, so long as the Note
Parties have complied with Section 9.8. and 9.11;




(k)           make
investments in life insurance policies maintained for the benefit of members of
the executive management of the Company; and




(l)           make
investments of a nature not otherwise contemplated in this Section 10.5 in an
amount not to exceed 10% of Consolidated Tangible Net Worth in the aggregate at
any time outstanding.




10.6.         Sale and Lease-back.




The
Company will not, and will not permit any Restricted Subsidiary to, enter into
any arrangement providing for the leasing by the Company or any Restricted
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Company or any Restricted Subsidiary to a lender or investor
or to any Person to whom funds have been or are to be advanced by such lender or
investor on the security of such property or rental obligations of the Company
or any Restricted Subsidiary; provided, however that the
Company or any Restricted Subsidiary may enter into such sale/lease-back
transactions (other than in respect of assets sold to the lessor by an
Unrestricted Subsidiary) only if (a) the assets to be
so sold may be sold in compliance with Section 10.2 (provided, however, that
compliance with Section 10.2 shall not be required with regard to assets (other
than any assets acquired upon the application of any consideration received by
the Company or any Restricted Subsidiary pursuant to a disposition of assets as
described in Section 10.2(b)) if the sale-leaseback transaction occurs within 24
months of the date the property that is the subject of such sale/lease-back
transaction is acquired, or in the case of improvements thereto, of the date
completed, whichever event occurs later); and (b) the rental
obligations payable pursuant to such leaseback are permitted under Section 10.15
(whether or not such lease is characterized as a “true lease” in accordance with
GAAP).




32


10.7.         Sale or Discount of
Receivables.




The
Company will not permit any Foreign Restricted Subsidiary to sell with recourse,
or discount or otherwise sell any of its notes receivable or accounts receivable
for less than the face value thereof (other than sales of accounts or notes
receivable where the discount applied does not exceed the net present value of
the receivables sold for the period of time equal to the estimated collection
period and using a discount factor no greater than prevailing market
rates).




10.8.         [Intentionally Omitted].




10.9.         Limitation on Restricted
Payments.




The
Company will not, and will not permit any Restricted Subsidiary to, make any
Restricted Payment if any Default or Event of Default then exists or would
result after giving effect to such Restricted Payment.




10.10.       Burdensome Agreements.





The
Company will not, and will not permit any Restricted Subsidiary to, enter into
any Contractual Obligation that encumbers or restricts on the ability of any
such Person to (i) (a) make any dividend payments or other distributions of
cash, assets, properties, obligations or securities on account of any shares of
any class of such Restricted Subsidiary’s Capital Stock (other than restrictions
on payments or distributions in connection with minority interests), or (b) make
any repurchases, redemptions, retirement or other acquisitions of such
Restricted Subsidiary’s Capital Stock or the establishment of any sinking fund
or other fund for any such purpose, to repay loans or advances, or to otherwise
transfer property or other assets, to the Company or any Restricted Subsidiary
that is a parent of such Restricted Subsidiary, (ii) pay any Debt or other
obligation owed to any Note Party, (iii) make loans or advances to any Note
Party, (iv) sell, lease or transfer any of its property to any Note Party
or (v) except in respect of any Restricted Subsidiary which is not a Note
Party, (A) pledge its property (other than Excluded Property) pursuant to
the Note Documents or any renewals, refinancings, exchanges, refundings or
extension thereof or (B) act as a Note Party pursuant to the Note Documents
or any renewals, refinancings, exchanges, refundings or extension thereof,
except (in respect of any of the matters referred to in clauses (i)-(v)(A)
above) for (1) this Agreement and the other Note Documents, (2) the
Credit Agreement and the 1996 Note Agreement in effect as of the date of
Closing, (3) any document or instrument governing Debt incurred pursuant to
Section 10.4(e), provided that any
such restriction contained therein relates only to the asset or assets
constructed or acquired in connection therewith, (4) any Permitted Lien or
any document or instrument governing any Permitted Lien, provided that any
such restriction contained therein relates only to the asset or assets subject
to such Permitted Lien, (5) customary restrictions and conditions contained
in any agreement relating to the sale of any property permitted under Section
10.2, pending the consummation of such sale, (6) customary restrictions on
transferability set forth in real property leaseholder, (7) customary provisions
restricting assignment of any Contractual Obligations entered into by the
Company or any Restricted Subsidiary in the ordinary course of
business.





33


10.11.       Change in Nature of
Business.





The
Company will not, and will not permit any Restricted Subsidiary to, engage in
any material line of business substantially different from those lines of
business conducted by the Company or such Restricted Subsidiary on the date
hereof or any business substantially related or incidental thereto.





10.12.       Fiscal Year.





The
Company will not, and will not permit any Restricted Subsidiary to, change its
fiscal year.





10.13.       Ownership of Subsidiaries.





Notwithstanding
any other provisions of this Agreement to the contrary, the Company will not,
and will not permit any Restricted Subsidiary to, (i) permit any Person
(other than the Company or any Wholly Owned Restricted Subsidiary of the
Company) to own any Capital Stock of any Restricted Subsidiary of the Company,
except (A) to qualify directors where required by applicable law or to
satisfy other requirements of applicable law with respect to the ownership of
Capital Stock of Foreign Restricted Subsidiaries or (B) as a result of or
in connection with a dissolution, merger, consolidation or disposition of a
Restricted Subsidiary not prohibited by Section 10.2, (ii) permit any
Restricted Subsidiary of the Company to issue or have outstanding any shares of
preferred Capital Stock or (iii) permit, create, incur, assume or suffer to
exist any Lien on any Capital Stock of any Restricted Subsidiary of the Company,
except for Permitted Liens.




10.14.       Amendments or Modifications to Other
Debt.




The
Company will not, and will not permit any Restricted Subsidiary to, amend or
modify any of the terms of any Debt of the Company or such Restricted Subsidiary
if such amendment or modification would add or change terms in a manner, when
taken together with all other amendments or modifications made in connection
therewith, materially adverse to the Company, such Restricted Subsidiary or the
holders of the Notes.





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10.15.       Restricted Leases.




The
Company will not, and will not permit any Restricted Subsidiary to, incur or
permit to exist at any time any obligation, direct or indirect, for rental
payments under a Restricted Lease if, after giving effect thereto, the aggregate
amount of all minimum noncancellable rental payments under Restricted Leases to
which the Company and its Restricted Subsidiaries are parties or otherwise
obligated exceeds for any fiscal year 10% of Consolidated Tangible Net Worth as
at the end of the immediately preceding fiscal quarter.





11.           EVENTS OF DEFAULT.




An “Event of Default” shall exist
if any of the following conditions or events shall occur and be
continuing:




(a)           the
Company defaults in the payment of any principal or Make-Whole Amount, if any,
on any Note when the same becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration or otherwise; or




(b)           the
Company defaults in the payment of (i) any interest on any Note for more than
five Business Days after the same becomes due and payable, or (ii) the
Collateral Agent fee set forth in Section 4.03 of the Collateral Agency and
Intercreditor Agreement, to the Collateral Agent; or




(c)           the
Company defaults in the performance of or compliance with any term contained in
Section 10; or




(d)           the
Company defaults in the performance of or compliance with any term contained
herein (other than those referred to in paragraphs (a), (b) and (c) of this
Section 11) and such default is not remedied within 30 days after the earlier of
(i) a
Responsible Officer obtaining actual knowledge of such default and (ii) the Company
receiving written notice of such default from any holder of a Note (any such
written notice to be identified as a “notice of default” and to refer
specifically to this paragraph (d) of Section 11); or




(e)           any
Note Party defaults in the performance of or compliance with any term contained
in any Note Document other than this Agreement (other than those referred to in
paragraph (b) of this Section 11) and such default is not remedied within 30
days after the earlier of (i) a Responsible
Officer obtaining actual knowledge of such default and (ii) the Company
receiving written notice of such default from any holder of a Note (any such
written notice to be identified as a “notice of default” and to refer
specifically to this paragraph (e) of Section 11); or




35


(f)           (i)
any representation or warranty made in writing by or on behalf of the Company or
any Note Party or by any officer of the Company or any Note Party in this
Agreement, any other Note Document or in any writing furnished in connection
with the transactions contemplated hereby or thereby proves to have been false
or incorrect in any material respect on the date as of which made, (ii) the
Subsidiary Guaranty for any reason, other than in satisfaction in full of all
Intercreditor Indebtedness evidenced by this Agreement, the Notes, the 1996 Note
Purchase Agreement and the Existing Notes, shall cease to be in full force and
effect with respect to any Subsidiary Guarantor (other than in accordance with
its terms) or shall be declared null and void with respect to any Subsidiary
Guarantor, (iii) any Collateral Document shall for any reason cease to be in
full force and effect (other than by reason of a release of Collateral
thereunder in accordance with the terms hereof or thereof, the satisfaction in
full of all Intercreditor Indebtedness, or any other termination of such
Collateral Document in accordance with the terms hereof or thereof ) or shall be
declared null and void, or the Collateral Agent shall not have or shall cease to
have a valid and perfected First Priority Lien in any Collateral purported to be
covered thereby (subject to the express limitations set forth in the Security
Agreement), or (iv) any Note Party shall contest the validity or enforceability
of any Note Document in writing or deny in writing that it has any further
liability under any Note Document to which it is a party; or




(g)           (i) the Company or any
Restricted Subsidiary is in default (as principal or as guarantor or other
surety) in the payment of any principal of or premium or make-whole amount or
interest on any Debt beyond any period of grace provided with respect thereto,
or (ii) the
Company or any Restricted Subsidiary is in default in the performance of or
compliance with any term of any evidence of any Debt or of any mortgage,
indenture or other agreement relating thereto or any other condition exists, and
as a consequence of such default or condition such Debt has become, or has been
declared (or one or more Persons are entitled to declare such Debt to be), due
and payable before its stated maturity or before its regularly scheduled dates
of payment, or (iii) as a consequence
of the occurrence or continuation of any event or condition (other than the
passage of time, the sale of assets on which the holder of applicable Debt has a
Lien, the sale of Capital Stock, or the right of the holder of Debt to convert
such Debt into equity interests), (x) the Company or any
Restricted Subsidiary has become obligated to purchase or repay Debt before its
regular maturity or before its regularly scheduled dates of payment, or (y) one or more
Persons have the right to require the Company or any Restricted Subsidiary so to
purchase or repay such Debt; provided that, except
in the case of Debt under the Credit Agreement, the aggregate outstanding
principal amount of all Debt referred to in clauses (i) through (iii),
inclusive, is at least $5,000,000; or




(h)           the
Company or any Restricted Subsidiary (i) is generally
not paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or
consents by answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate
action for the purpose of any of the foregoing; or




36


(i)           a
court or governmental authority of competent jurisdiction enters an order
appointing, without consent by the Company or any of its Restricted
Subsidiaries, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Company or any of its
Restricted Subsidiaries, or any such petition shall be filed against the Company
or any of its Restricted Subsidiaries and such petition shall not be dismissed
within 60 days; or




(j)           (i)
a final judgment or judgments for the payment of money aggregating in excess of
$5,000,000 (to the extent not covered by an independent third-party insurance
carrier with a rating of “A-” or better by S&P or an equivalent rating from
another nationally recognized credit rating agency and as to which such insurer
has acknowledged coverage with respect to such judgment or judgments) are
rendered against one or more of the Company and its Restricted Subsidiaries and
which judgments are not, within 30 days after entry thereof, bonded, discharged
or stayed pending appeal, or are not discharged within 30 days after the
expiration of such stay, or (ii) a final judgment or judgments for the payment
of money aggregating in excess of $5,000,000 (whether or not covered by
insurance) are rendered against one or more of the Company and its Restricted
Subsidiaries and enforcement proceedings are commenced by any creditor upon such
judgment or judgments; or




(k)           if
(i) any
Plan shall fail to satisfy the minimum funding standards of ERISA or the Code
for any plan year or part thereof or a waiver of such standards or extension of
any amortization period is sought or granted under section 412 of the Code,
(ii) a notice
of intent to terminate any Plan shall have been or is reasonably expected to be
filed with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or the
PBGC shall have notified the Company or any ERISA Affiliate that a Plan may
become a subject of any such proceedings, (iii) the
aggregate “amount of unfunded benefit liabilities” (within the meaning of
section 4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $5,000,000, (iv) the Company
or any ERISA Affiliate shall have incurred or is reasonably expected to incur
any liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) the Company or any
ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or
any Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary thereunder; and any such event or
events described in clauses (i) through (vi) above, either individually or
together with any other such event or events, could reasonably be expected to
have a Material Adverse Effect; or





37


(l)           a
Change in Control shall occur.




As used
in Section 11(k), the terms “employee benefit plan” and
“employee welfare benefit
plan” shall have the respective meanings assigned to such terms in
Section 3 of ERISA.




12.           REMEDIES ON DEFAULT,
ETC.




12.1.        Acceleration.




(a)           If
an Event of Default with respect to the Company described in paragraph (h) or
(i) of Section 11 (other than an Event of Default described in clause (i) of
paragraph (h) or described in clause (vi) of paragraph (h) by virtue of the fact
that such clause encompasses clause (i) of paragraph (h)) has occurred, all the
Notes then outstanding shall automatically become immediately due and
payable.




(b)           If
any other Event of Default has occurred and is continuing, any holder or holders
of more than 51% in principal amount of the Notes at the time outstanding may at
any time at its or their option, by notice or notices to the Company, declare
all the Notes then outstanding to be immediately due and payable.




Upon any
Notes becoming due and payable under this Section 12.1, whether automatically or
by declaration, such Notes will forthwith mature and the entire unpaid principal
amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole
Amount determined in respect of such principal amount (to the full extent
permitted by applicable law), shall all be immediately due and payable, in each
and every case without presentment, demand, protest or further notice, all of
which are hereby waived.  The Company acknowledges, and the parties
hereto agree, that each holder of a Note has the right to maintain its
investment in the Notes free from repayment by the Company (except as herein
specifically provided for) and that the provision for payment of a Make-Whole
Amount by the Company in the event that the Notes are prepaid or are accelerated
as a result of an Event of Default, is intended to provide compensation for the
deprivation of such right under such circumstances.




12.2.        Other Remedies.




If any
Default or Event of Default has occurred and is continuing, and irrespective of
whether any Notes have become or have been declared immediately due and payable
under Section 12.1, the holder of any Note at the time outstanding may proceed
to protect and enforce the rights of such holder by an action at law, suit in
equity or other appropriate proceeding, whether for the specific performance of
any agreement contained herein, in any Note or in any other Note Document, or
for an injunction against a violation of any of the terms hereof or thereof, or
in aid of the exercise of any power granted hereby or thereby or by law or
otherwise, subject to Section 2.06 of the Collateral Agency and Intercreditor
Agreement.  Any breach by any holder of any Note of Section 2.06 of
the Collateral Agency and Intercreditor Agreement shall not in any way limit
such holder’s rights hereunder or result in a claim by the Company against such
holder.




38


12.3.        Rescission.




At any
time after any Notes have been declared due and payable pursuant to clause (b)
or (c) of Section 12.1, the holders of not less than 51% in principal amount of
the Notes then outstanding, by written notice to the Company, may rescind and
annul any such declaration and its consequences if (a) the Company
has paid all overdue interest on the Notes, all principal of and Make-Whole
Amount, if any, on any Notes that are due and payable and are unpaid other than
by reason of such declaration, and all interest on such overdue principal and
Make-Whole Amount, if any, and (to the extent permitted by applicable law) any
overdue interest in respect of the Notes, at the Default Rate, (b) all Events of
Default and Defaults, other than non-payment of amounts that have become due
solely by reason of such declaration, have been cured or have been waived
pursuant to Section 17, and (c) no judgment
or decree has been entered and no foreclosure remedy with respect to the
Collateral has been consummated for the payment of any monies due pursuant
hereto or to the Notes.  No rescission and annulment under this
Section 12.3 will extend to or affect any subsequent Event of Default or Default
or impair any right consequent thereon.




12.4.        No Waivers or Election of Remedies,
Expenses, etc.




No course
of dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder’s rights, powers or remedies.  No right, power or remedy
conferred by this Agreement, by any Note or any other Note Document upon any
holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise.  Without limiting the obligations of the Company under
Section 15, the Company will pay to the holder of each Note on demand such
further amount as shall be sufficient to cover all costs and expenses of such
holder incurred in any enforcement or collection under this Section 12,
including, without limitation, reasonable attorneys’ fees, expenses and
disbursements.




13.           REGISTRATION; EXCHANGE; SUBSTITUTION
OF NOTES.




13.1.        Registration of Notes.




The
Company shall keep at its principal executive office a register for the
registration and registration of transfers of Notes.  The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register.  Prior to due presentment for registration of transfer, the
Person in whose name any Note shall be registered shall be deemed and treated as
the owner and holder thereof for all purposes hereof, and the Company shall not
be affected by any notice or knowledge to the contrary.  The Company
shall give to any holder of a Note that is an Institutional Investor promptly
upon request therefor, a complete and correct copy of the names and addresses of
all registered holders of Notes.




39


13.2.        Transfer and Exchange of Notes;
Transferee to Become Party to Collateral Agency and Intercreditor
Agreement.




Upon
surrender of any Note at the principal executive office of the Company for
registration of transfer or exchange (and in the case of a surrender for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder of such Note or his attorney
duly authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Company shall execute and deliver,
at the Company’s expense (except as provided below), one or more new Notes (as
requested by the holder thereof) in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the surrendered
Note.  Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1.  Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon.  The
Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of
Notes.  Notes shall not be transferred in denominations of less than
$500,000, provided that if
necessary to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than
$500,000.  Any transferee, by its acceptance of a Note registered in
its name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.2.  Each transferee of Note
shall, as a condition to transfer, simultaneously become a party to the
Collateral Agency and Intercreditor Agreement.




13.3.        Replacement of Notes.




Upon
receipt by the Company of evidence reasonably satisfactory to the Company of the
ownership of and the loss, theft, destruction or mutilation of any Note (which
evidence shall be, in the case of an Institutional Investor, notice from such
Institutional Investor of such ownership and such loss, theft, destruction or
mutilation), and




(a)           in
the case of loss, theft or destruction, of indemnity reasonably satisfactory to
it (provided
that if the holder of such Note is, or is a nominee for, an original Purchaser
or another holder of a Note with a minimum net worth of at least $100,000,000,
such Person’s own unsecured agreement of indemnity shall be deemed to be
satisfactory), or




(b)           in
the case of mutilation, upon surrender and cancellation thereof,






the
Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.




40


14.           PAYMENTS ON NOTES.




14.1.        Place of Payment.




Subject
to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest
becoming due and payable on the Notes shall be made in the State of New York at
the principal office of The Bank of New York in such
jurisdiction.  The Company may at any time, by notice to each holder
of a Note, change the place of payment of the Notes so long as such place of
payment shall be either the principal office of the Company in such jurisdiction
or the principal office of a bank or trust company in such
jurisdiction.




14.2.        Home Office Payment.




So long
as you or your nominee shall be the holder of any Note, and notwithstanding
anything contained in Section 14.1 or in such Note to the contrary, the Company
will pay all sums becoming due on such Note for principal, Make-Whole Amount, if
any, and interest by the method and at the address specified for such purpose
below your name in Schedule A, or by
such other method or at such other address as you shall have from time to time
specified to the Company in writing for such purpose, without the presentation
or surrender of such Note or the making of any notation thereon, except that
upon written request of the Company made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, you shall surrender
such Note for cancellation, reasonably promptly after any such request, to the
Company at its principal executive office or at the place of payment most
recently designated by the Company pursuant to Section 14.1.  Prior to
any sale or other disposition of any Note held by you or your nominee you will,
at your election, either endorse thereon the amount of principal paid thereon
and the last date to which interest has been paid thereon or surrender such Note
to the Company in exchange for a new Note or Notes pursuant to Section
13.2.  The Company will afford the benefits of this Section 14.2 to
any Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.




15.           EXPENSES, ETC.




15.1.        Transaction Expenses.




Whether
or not the transactions contemplated hereby are consummated, the Company will
pay all costs and expenses (including reasonable attorneys’ fees of a special
counsel and, if reasonably required, local or other counsel) incurred by you and
each Other Purchaser or holder of a Note in connection with such transactions
and in connection with any amendments, waivers or consents under or in respect
of this Agreement, the Notes or any other Note Document (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs
and expenses incurred in enforcing or defending (or determining whether or how
to enforce or defend) any rights under this Agreement, the Notes or any other
Note Document or in responding to any subpoena or other legal process or
informal investigative demand issued in connection with this Agreement, the
Notes or any other Note Document, or by reason of being a holder of any Note,
and (b) the
costs and expenses, including financial advisors’ fees, incurred in connection
with the insolvency or bankruptcy of the Company or any Subsidiary or in
connection with any work-out or restructuring of the transactions contemplated
hereby, by the Notes and by any other Note Document.  The Company will
pay, and will save you and each other holder of a Note harmless from, all claims
in respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).




41


15.2.        Survival.




The
obligations of the Company under this Section 15 will survive the payment or
transfer of any Note, the enforcement, amendment or waiver of any provision of
this Agreement, the Notes or any other Note Document, and the termination of
this Agreement and the other Note Documents.




16.
            SURVIVAL OF REPRESENTATIONS AND
      WARRANTIES; ENTIRE AGREEMENT.




All
representations and warranties contained herein and in the other Note Documents
shall survive the execution and delivery of this Agreement, the Notes or the
other Note Documents, the purchase or transfer by you of any Note or portion
thereof or interest therein and the payment of any Note, and may be relied upon
by any subsequent holder of a Note, regardless of any investigation made at any
time by or on behalf of you or any other holder of a Note.  All
statements contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant to this Agreement  or any other Note
Document shall be deemed representations and warranties of the Company under
this Agreement or any other Note Document.  Subject to the preceding
sentence, this Agreement, the Notes and the other Note Documents embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter
hereof.




17.           AMENDMENT AND WAIVER.




17.1.        Requirements.




This
Agreement and the Notes may be amended, and the observance of any term hereof or
of the Notes may be waived (either retroactively or prospectively), with (and
only with) the written consent of the Company and the Required Holders, except
that (a) no
amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or
21 hereof, or any defined term (as it is used therein), will be effective as to
you unless consented to by you in writing, and (b) no such amendment
or waiver may, without the written consent of the holder of each Note at the
time outstanding affected thereby, (i) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the
percentage of the principal amount of the Notes the holders of which are
required to consent to any such amendment or waiver, or (iii) amend any of
Sections 8, 11(a), 11(b), 12, 17 or 20.




17.2.        Solicitation of Holders of
Notes.




The
Company will provide each holder of the Notes (irrespective of the amount of
Notes then owned by it) with sufficient information, sufficiently far in advance
of the date a decision is required, to enable such holder to make an informed
and considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the
Notes.  The Company will deliver executed or true and correct copies
of each amendment, waiver or consent effected pursuant to the provisions of this
Section 17 to each holder of outstanding Notes promptly following the date on
which it is executed and delivered by, or receives the consent or approval of,
the requisite holders of Notes.




42


17.3.        Binding Effect,
etc.




Any
amendment or waiver consented to as provided in this Section 17 applies equally
to all holders of Notes and is binding upon them and upon each future holder of
any Note and upon the Company without regard to whether such Note has been
marked to indicate such amendment or waiver.  No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon.  No course of dealing between the Company and the holder of
any Note nor any delay in exercising any rights hereunder or under any Note
shall operate as a waiver of any rights of any holder of such
Note.  As used herein, the term “this Agreement” and “the Note Documents”and
references thereto shall mean this Agreement and the Note Documents,
respectively, as they may from time to time be amended or
supplemented.




17.4.        Notes held by Company,
etc.




Solely
for the purpose of determining whether the holders of the requisite percentage
of the aggregate principal amount of Notes then outstanding approved or
consented to any amendment, waiver or consent to be given under this Agreement
or the Notes, or have directed the taking of any action provided herein or in
the Notes to be taken upon the direction of the holders of a specified
percentage of the aggregate principal amount of Notes then outstanding, Notes
directly or indirectly owned by the Company or any of its Subsidiaries and
Affiliates shall be deemed not to be outstanding.




18.           NOTICES.




All
notices and communications provided for hereunder shall be in writing and sent
(a) by
telecopy if the sender on the same day sends a confirming copy of such notice by
a recognized overnight delivery service (charges prepaid), or (b) by registered
or certified mail with return receipt requested (postage prepaid), or (c) by a
recognized overnight delivery service (with charges prepaid).  Any
such notice must be sent:




(i)           if
to you or your nominee, to you or it at the address specified for such
communications in Schedule A, or at
such other address as you or it shall have specified to the Company in
writing,




(ii)           if
to any other holder of any Note, to such holder at such address as such other
holder shall have specified to the Company in writing, or




(iii)           if
to the Company, to the Company at its address set forth at the beginning hereof
to the attention of Chief Financial Officer, or at such other address as the
Company shall have specified to the holder of each Note in writing.




43


Notices
under this Section 18 will be deemed given only when actually
received.




19.           REPRODUCTION OF DOCUMENTS.




This
Agreement, the other Note Documents and all documents relating thereto,
including, without limitation, (a) consents, waivers
and modifications that may hereafter be executed, (b) documents received
by you at the Closing (except the Notes themselves), and (c) financial
statements, certificates and other information previously or hereafter furnished
to you, may be reproduced by you by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and you may destroy
any original document so reproduced.  The Company agrees and
stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence.  This
Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.




20.           CONFIDENTIAL INFORMATION.




For the
purposes of this Section 20, “Confidential Information”
means information delivered to you by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by you as
being confidential information of the Company or such Subsidiary, provided that such
term does not include information that (a) was publicly known
or otherwise known to you prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by you or any person acting on
your behalf, (c) otherwise becomes
known to you other than through disclosure by the Company or any Subsidiary or
(d) constitutes
financial statements delivered to you under Section 7.1 that are otherwise
publicly available.  You will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by you in good
faith to protect confidential information of third parties delivered to you,
provided that
you may deliver or disclose Confidential Information to (i) your directors,
officers, employees, agents, attorneys and affiliates (to the extent such
disclosure reasonably relates to the administration of the investment
represented by your Notes), (ii) your financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iii) any other holder
of any Note, (iv) any Institutional
Investor to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
20), (v) any
Person from which you offer to purchase any security of the Company (if such
Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (vi) any federal or
state regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other
Person to which such delivery or disclosure may be necessary or appropriate
(w) to
effect compliance with any law, rule, regulation or order applicable to you,
(x) in
response to any subpoena or other legal process, (y) in connection
with any litigation to which you are a party or (z) if an Event
of Default has occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under your Notes
and this Agreement.  Each holder of a Note, by its acceptance of a
Note, will be deemed to have agreed to be bound by and to be entitled to the
benefits of this Section 20 as though it were a party to this
Agreement.  On reasonable request by the Company in connection with
the delivery to any holder of a Note of information required to be delivered to
such holder under this Agreement or requested by such holder (other than a
holder that is a party to this Agreement or its nominee), such holder will enter
into an agreement with the Company embodying the provisions of this Section
20.  You acknowledge and agree that you are aware (and that your
directors, officers, employees, agents, attorneys, affiliates and advisors who
are apprised of this matter have been or will be advised) that the United States
securities laws may prohibit any person who has material non-public information
about a company from purchasing or selling securities of that company and from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such other person is likely to purchase or
sell such securities.




44


21.           SUBSTITUTION OF PURCHASER.




You shall
have the right to substitute any one of your Affiliates as the purchaser of the
Notes that you have agreed to purchase hereunder, by written notice to the
Company, which notice shall be signed by both you and such Affiliate, shall
contain such Affiliate’s agreement to be bound by this Agreement and shall
contain a confirmation by such Affiliate of the accuracy with respect to it of
the representations set forth in Section 6.  Upon receipt of such
notice, wherever the word “you” is used in this Agreement (other than in this
Section 21), such word shall be deemed to refer to such Affiliate in lieu of
you.  In the event that such Affiliate is so substituted as a
purchaser hereunder and such Affiliate thereafter transfers to you all of the
Notes then held by such Affiliate, upon receipt by the Company of notice of such
transfer, wherever the word “you” is used in this Agreement (other than in this
Section 21), such word shall no longer be deemed to refer to such Affiliate, but
shall refer to you, and you shall have all the rights of an original holder of
the Notes under this Agreement.




22.           MISCELLANEOUS.




22.1.        Successors and Assigns.




All
covenants and other agreements contained in this Agreement and the other Note
Documents by or on behalf of any of the parties hereto or thereto bind and inure
to the benefit of their respective successors and assigns (including, without
limitation, any subsequent holder of a Note) whether so expressed or
not.




22.2.        Payments Due on Non-Business
Days.




Anything
in this Agreement, the Collateral Documents or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole Amount or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business
Day.




45


22.3.        Severability.




Any
provision of this Agreement or the other Note Documents that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.




22.4.        Construction.




Each
covenant contained herein shall be construed (absent express provision to the
contrary) as being independent of each other covenant contained herein, so that
compliance with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other
covenant.  Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.




22.5.        Counterparts.




This
Agreement may be executed in any number of counterparts, each of which shall be
an original but all of which together shall constitute one
instrument.  Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.




22.6.        Governing Law.




This
Agreement shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the law of the State of New York excluding
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.




22.7.        Collateral Release Date.




Each
holder of a Note hereby agrees to instruct the Collateral Agent to release any
Lien on any Collateral (i) upon the payment and satisfaction in full by the
Company of all the Notes and any other obligations under this Agreement, (ii)
constituting property being sold or disposed of if a release is required in
connection therewith and the Required Holders have confirmed in writing that
such sale or disposition is permitted hereby, (iii) constituting property in
which neither the Company nor any Subsidiary Guarantor owned an interest at the
time the security interest was granted or at any time thereafter, or (iv)
constituting property leased to the Company or any Subsidiary Guarantor under a
lease that has expired or is terminated in a transaction permitted under this
Agreement.




*    *    *    *    *




46


If you
are in agreement with the foregoing, please sign the form of agreement on the
accompanying counterpart of this Agreement and return it to the Company,
whereupon the foregoing shall become a binding agreement between you and the
Company.






Very
      truly yours,AMERON
      INTERNATIONAL CORPORATIONBy:
      /s/ Gary WagnerName:   Gary
      WagnerTitle:  Senior
      Vice President & CFOBy:
      /s/ Javier SolisName: Javier
      SolisTitle:  Senior
      Vice President & Secretary








S-1


The
foregoing is hereby


agreed to
as of the


date
thereof.




THE
PRUDENTIAL INSURANCE


COMPANY
OF AMERICA




By: /s/ Joseph Y. Alouf


Name:  Joseph
Y.
Alouf


Title:  Vice
President









S-2





SCHEDULE
A




INFORMATION RELATING TO
PURCHASERS




Name
      and Address of Purchaser
              Principal
                Amount
      of Notes
                to
      be Purchased
                at
      Closing$50,000,0001.
      All payments by wire transfer of immediately available
                funds
      to:
                
                Bank
      of New York
                ABA
      021 000 018
                Acct
      # 890-0304-391
                Ref:
      Ameron International Corporation
                PPN
      ________/P&I Breakdown
                
                with
      sufficient information to identify the source and application of such
      funds.2.
      All notices of payments and written confirmations of such wire
      transfers:
                
                The
      Prudential Insurance Company of America
                c/o
      Prudential Capital Group
                Gateway
      Center Three
                100
      Mulberry Street
                Newark,
      New Jersey 07102
                Attention:  Manager,
      Investment Operations Group
                Telephone
      No.:  (973) 802-5260
                Telecopy
      No.:  (973) 802-80553.
      All other communications:
                
                The
      Prudential Insurance Company of America
                c/o
      Prudential Capital Group - Corporate Finance
                Four
      Embarcadero Center
                Suite
      2700
                San
      Francisco, California 94111
                Attention:  Managing
      Director
                Telecopy
      No.:  (415) 421-62334.  Tax
      ID Number:  22-1211670







Schedule
A-1


SCHEDULE
B




DEFINED
TERMS




Unless
otherwise specified herein or in the Note Purchase Agreement to which this Schedule B is
attached, all accounting terms used herein and in the Note Purchase Agreement
shall be interpreted, and all accounting determinations hereunder shall be made,
in accordance with GAAP.  As used in the Note Purchase Agreement, the
following terms have the respective meanings set forth below or set forth in the
Section of the Note Purchase Agreement following such term:




“1996 Note Purchase Agreement”means those certain Note Purchase Agreements dated August 28, 1996 among
the Company and the holders of the notes party thereto, as the same may be
amended, modified, restated or supplemented and in effect from time to time in
accordance with the terms hereof.




“Account”means, with respect
to any Person, all present and future rights of such Person to payment for goods
sold or leased or for services rendered (except those evidenced by instruments
or chattel paper), whether now existing or hereafter arising and wherever
arising, and whether or not they have been earned by performance.




“Affiliate” means, at
any time, and with respect to any Person, (a) any other Person (other than a
Restricted Subsidiary) that at such time directly or indirectly through one or
more intermediaries Controls, or is Controlled by, or is under common Control
with, such first Person, and (b) any Person beneficially owning or holding,
directly or indirectly, 10% or more of any class of voting or equity interests
of the Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests.  As used in
this definition, “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Unless the context
otherwise clearly requires, any reference to an “Affiliate” is a reference to an
Affiliate of the Company.




“Affiliated Companies” shall
mean those Persons listed as “Affiliated Companies” on Schedule 5.4 to the
Note Purchase Agreement.




“Agreement” means this Note
Purchase Agreement by and among the Company and the Purchasers listed on the
signatures pages hereof.




“Appraised Real Estate Amount”means, as of any date of determination, the appraised value of owned real
property of the Company and its Domestic Restricted Subsidiaries which is
subject to a valid First Priority Lien in favor of the Collateral
Agent.




“Attributable Indebtedness”means, on any date, (a) in respect of any Capital Lease of any
Person, the capitalized amount thereof that would appear on a balance sheet of
such Person prepared as of such date in accordance with GAAP, and (b) in
respect of any Synthetic Lease Obligation, the capitalized amount of the
remaining lease payments under the relevant lease that would appear on a balance
sheet of such Person prepared as of such date in accordance with GAAP if such
lease were accounted for as a Capital Lease.





Schedule
B-1


“Bank Lenders” means the
lenders from time to time under the Credit Agreement.




“Business Day” means (a) for the purposes
of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which
commercial banks in New York City are required or authorized to be closed, and
(b) for the
purposes of any other provision of this Agreement, any day other than a
Saturday, a Sunday or a day on which commercial banks in Los Angeles, California
or New York, New York are required or authorized to be closed.




“Capital Lease” means, at any
time, a lease with respect to which the lessee is required concurrently to
recognize the acquisition of an asset and the incurrence of a liability in
accordance with GAAP.




“Capitalized Lease
Obligations” shall mean any rental obligation which, under GAAP, is or
will be required to be capitalized on the books of the Company or any Restricted
Subsidiary, taken at the amount thereof accounted for as indebtedness (net of
interest expense) in accordance with such principles.





“Capital Stock”means
(i) in the case of a corporation, capital stock, (ii) in the case of
an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of capital
stock, (iii) in the case of a partnership, partnership interests (whether
general or limited), (iv) in the case of a limited liability company,
membership interests and (v) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.





“Change of Control” means the
occurrence of any of the following events:  (i) a “person” or
“group” (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) shall have acquired beneficial ownership,
directly or indirectly, of, or shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement that, upon consummation, will
result in its or their acquisition of, or control over, 30% or more of the
outstanding Voting Stock of the Company, or (ii) the occurrence of a “Change of
Control” (or any comparable term) under, and as defined in, the Credit Agreement
or the 1996 Note Agreement or in any indenture or agreement in respect of
Material Indebtedness to which the Company or any Restricted Subsidiary is a
party.  As used herein, “beneficial ownership”shall
have the meaning provided in Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act.  As used herein, “Material Indebtedness”
shall  mean Debt (other than Intercreditor Indebtedness) of any one or
more of the Company and the Restricted Subsidiaries in an aggregate principal
amount exceeding $10,000,000.





“Closing” is defined in
Section 3.




“Code” means the Internal
Revenue Code of 1986, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time.




Schedule
B-2


“Collateral” means,
collectively, all of the real, personal and mixed property (including capital
stock) (other than Excluded Property) in which Liens are purported to be granted
pursuant to the Collateral Documents as security for the Intercreditor
Indebtedness.




“Collateral Agency and Intercreditor
Agreement” means the Collateral Agency and Intercreditor Agreement dated
as of even date herewith among the Collateral Agent, you, each Other Purchaser
and the senior lenders listed on the signature pages thereto, substantially in
the form of Exhibit
3 to this Agreement, as the same may be amended, supplemented and
modified from time to time.




“Collateral Agent” means Bank
of America, N.A., acting in its capacity as collateral agent under the
Collateral Agency and Intercreditor Agreement, together with its successors and
assigns.




“Collateral Documents” means
the Security Agreement, the Mortgages and all other instruments or documents
delivered by any Note Party pursuant to this Agreement or any of the other Note
Documents in order to grant to the Collateral Agent, on behalf of holders, a
Lien on any real, personal or mixed property of that Note Party as security for
the Intercreditor Indebtedness.




“Company” means Ameron
International Corporation, a Delaware corporation.




“Confidential
Information”  is defined in Section 20.




“Consolidated Debt” means,
without duplication, (a) any obligation of the Company or any Restricted
Subsidiary for borrowed money (including the Intercreditor Indebtedness and
other obligations evidenced by notes, bonds, debentures or similar written
instruments), (b) any liabilities for deferred purchase price of property
acquired by the Company or any Restricted Subsidiary (excluding accounts payable
arising in the ordinary course of business but including all liabilities created
or arising under any conditional sale or other title retention agreement with
respect to any such property), (c) the Attributable Indebtedness of the Company
or any Restricted Subsidiary with respect to Capital Leases and Synthetic Lease
Obligations, (d) the principal portion of all obligations of the Company or any
Restricted Subsidiary as an account party in respect of financial letters of
credit and bankers’ acceptances, including, without duplication, all
unreimbursed drafts drawn thereunder, (e) the aggregate amount of uncollected
accounts receivable of the Company or any Restricted Subsidiary subject at such
time to a sale of receivables (or similar transaction) to the extent such
transaction is effected with recourse to the Company or such Restricted
Subsidiary (whether or not such transaction would be reflected on the balance
sheet of the Company or such Restricted Subsidiary in accordance with GAAP), (f)
Off-Balance Sheet Debt, (g) obligations secured by a Lien on, or payable out of
the proceeds of production from, property of the Company or any Restricted
Subsidiary whether or not such obligation shall be assumed by the Company or
such Restricted Subsidiary, (h) any Guaranty of the Company or any Restricted
Subsidiary with respect to liabilities of a type described in clauses (a), (b),
(c), (d), (e), (f) and (g) above, and (i) all renewals and extensions of any of
the foregoing, all on a consolidated basis in accordance with GAAP.





Schedule
B-3


“Consolidated EBITDA”means,
for any period, for the Company and its Restricted Subsidiaries on a
consolidated basis, determined in accordance with GAAP, an amount equal to the
sum of, without duplication, (a) Consolidated Net Income plus
(b) Consolidated Interest Charges and all amounts treated as expenses for
depreciation and the amortization of intangibles of any kind to the extent
included in the determination of Consolidated Net Income plus (c) all tax
expense on or measured by income or capital to the extent included in the
determination of Consolidated Net Income plus (d) amounts
received as dividends or other distributions in respect of equity from
Affiliates and Unconsolidated Subsidiaries to the extent not included in the
determination of Consolidated Net Income minus (e) equity
earnings from Affiliates and Unrestricted Subsidiaries to the extent included in
the determination of Consolidated Net Income minus (f) gains
on the sale or other disposition of assets to the extent included in the
determination of Consolidated Net Income plus (g) losses
on the sale or other disposition of assets to the extent included in the
determination of Consolidated Net Income.




“Consolidated EBITDAR” means,
for any period, Consolidated EBITDA plus, to the extent
deducted in the calculation of Consolidated Net Income, operating lease and
rental payments for such period as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in accordance with GAAP.




“Consolidated Fixed Charges”means, for any period, the sum (without duplication) of (a) interest
expense and (b) operating lease and rental payments, as determined on a
consolidated basis for the Company and its Restricted Subsidiaries in accordance
with GAAP.




“Consolidated Interest
Charges” means for any period for the Company and its Restricted
Subsidiaries on a consolidated basis, interest expense (including the
amortization of debt discount and premium, the interest component under Capital
Leases and the implied interest component of Synthetic Lease Obligations), as
determined in accordance with GAAP.





“Consolidated Leverage Ratio”means, as at any date, the ratio of (a) Consolidated Debt as at such date
to (b) Consolidated EBITDA for the four consecutive fiscal quarter period then
most recently ended.




“Consolidated Net Income”
means, for any period, the net income (or loss) of the Company and its
Restricted Subsidiaries for such period (taken as a cumulative whole), as
determined in accordance with GAAP, and giving effect in any event to
extraordinary items.




“Consolidated Tangible Assets”
shall mean the net book value of all assets of the Company and its Restricted
Subsidiaries on a consolidated basis, net of (a) the net book value
of all Intangibles; (b) all reserves
relating to such assets; and (c) any write-up in
the carrying values of such assets, all determined in accordance with
GAAP.




“Consolidated Tangible Net
Worth” shall mean all items that in accordance with GAAP would be
included in the stockholders’ or shareholders’ equity portion of the
consolidated balance sheet of the Company and its Restricted Subsidiaries,
including Capital Stock of any class (net of treasury stock), capital surplus
and retained earnings, less (a) the net book value
of all Intangibles and (b) minority
interests.  For the purpose of calculating Consolidated Tangible Net
Worth, such calculation shall exclude (i.e., there will be added back to
Consolidated Tangible Net Worth) any year-end non-cash adjustment (on an
after-tax basis) to shareholders’ equity to reflect any Additional Minimum
Liability; provided, however, the
aggregate incremental amount of all such charges added back to Consolidated
Tangible Net Worth after the 2001 fiscal year (i.e. excluding any such charges
for fiscal year 2001 and prior years) shall not exceed $45,000,000 on an
after-tax basis.  For purposes hereof, “Additional Minimum Liability”means, with respect to any Plan, the sum of the absolute values of (x)
the unfunded accumulated benefit obligation existing as of the end of the most
recently ended fiscal year, plus (y) the Company’s prepaid pension asset
position existing as of the end of the most recently ended fiscal
year.





Schedule
B-4


“Contractual Obligation”means, as to any Person, any provision of any security issued by such
Person or of any agreement, instrument or other undertaking to which such Person
is a party or by which it or any of its property is bound.




“Credit Agreement” means that
certain Credit Agreement dated as of January 24, 2003 among the Company,
Bank of America, N.A., as Administrative Agent, and the lenders thereunder, as
amended, supplemented or otherwise modified from time to time (including any
amended and restated credit agreement), together with any other credit agreement
or loan agreement which replaces such credit agreement.




“Debt”, as to any Person, has
the same meaning as Consolidated Debt (treating such Person as the
Company).




“Default” means an event or
condition the occurrence or existence of which would, with the lapse of time or
the giving of notice or both, become an Event of Default.




“Default Rate” means that rate
of interest that is the greater of (i) 2% per annum
above the rate of interest stated in clause (a) of the first paragraph of the
Notes or (ii) 2% over the
rate of interest publicly announced by The Bank of New York as its “base” or
“prime” rate.




“Domestic Restricted Subsidiary”means any Restricted Subsidiary that is a Domestic
Subsidiary.





“Domestic Subsidiary”means a
Subsidiary of the Company which is created, organized or domesticated in the
United States or under the law of the United States or any state or territory
thereof.




“Eligible Accounts Receivable”means Accounts of the Company and its Domestic Restricted Subsidiaries
which are Note Parties; provided that an
Account shall not be an Eligible Account Receivable if (a) the account debtor
for such Account is located outside the continental United States, (b) such
Account is not subject to a valid and perfected First Priority Lien in favor of
the Collateral Agent, or (c) the account debtor for such account is an
Unrestricted Subsidiary.




“Eligible Inventory”means the aggregate
amount of Inventory of the Company and its Domestic Restricted Subsidiaries
which are Note Parties.  In determining the amount to be so included,
Inventory shall be valued at the lower of cost or market on a basis consistent
with GAAP and the Company’s current and historical accounting
practice.  An item of Inventory shall not be included in Eligible
Inventory if (a) it is not located in the United States or (b) it is not subject
to a valid and perfected First Priority Lien in favor of the Collateral
Agent.




Schedule
B-5


“Environmental Laws” means any
and all federal, state, local, and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to
pollution and the protection of the environment or the release of any materials
into the environment, including but not limited to those related to hazardous
substances or wastes, air emissions and discharges to waste or public
systems.




“Environmental Liabilities and
Costs” means, as to any Person, all liabilities, obligations,
responsibilities, remedial actions, losses, damages, punitive damages,
consequential damages, treble damages, contribution, cost recovery, costs and
expenses (including all fees, disbursements and expenses of counsel, expert and
consulting fees, and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand,
by any Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute, permit, order or agreement with any
federal, state or local governmental authority or other Person, arising from
environmental, health or safety conditions, or the release or threatened release
of any contaminant, pollutant or Hazardous Materials into the environment,
resulting from the operations of such person or its subsidiaries, or breach of
any Environmental Laws or for which such Person or its subsidiaries is otherwise
liable or responsible.




“Equipment” means the
aggregate net book value of all domestic equipment of the Company and its
Domestic Restricted Subsidiaries which is subject to a valid and perfected First
Priority Lien in favor of the Collateral Agent.




“Equity Issuance” means any
issuance by the Company or any Restricted Subsidiary to any Person of
(a) shares of its Capital Stock, (b) any shares of its Capital Stock
pursuant to the exercise of options or warrants, (c) shares of its Capital Stock
pursuant to the conversion of any debt securities to equity or the conversion of
any class equity securities to any other class of equity securities or
(d) any options or warrants relating to its Capital Stock.





“ERISA” means the Employee
Retirement Income  Security Act of 1974, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.





“ERISA Affiliate” means any
trade or business  (whether or not incorporated) that is treated as a
single employer together with the Company under section 414 of the
Code.




“Event of Default” is defined
in Section 11.




“Exchange Act” means the
Securities Exchange Act of 1934, as amended.




Schedule
B-6


“Excluded Property” means,
with respect to any Note Party, including any Person that becomes a Note Party
after the date of the Closing as contemplated by Section 9.8 hereof,
(a) any owned real property that is not a Mortgaged Property, (b) any
leased real property, (c) any leased personal property, (d) any
personal property (including, without limitation, motor vehicles) in respect of
which perfection of a Lien is not either (i) governed by the Uniform
Commercial Code or (ii) effected by appropriate evidence of the Lien being
filed in either the United States Copyright Office or the United States Patent
and Trademark Office, (e) any property which, subject to the terms of
Section 10.10, is subject to a Lien of the type described in 10.3(f) pursuant to
documents which prohibit such Note Party from granting any other Liens in such
property and (f) rights in any agreement (i) the grant of a security interest in
which would violate the agreement under which such right arises except to the
extent provided under Sections 9-406, 9-407 and 9-408 of the Uniform Commercial
Code, or (ii) to the extent that the pledge or assignment of such agreement
requires the consent of any third party unless such third party has consented
thereto except to the extent provided under Sections 9-406, 9-407 and 9-408 of
the Uniform Commercial Code.





“Existing Notes”means those
certain 7.92% Senior Notes due September 1, 2006 in the aggregate original
principal amount of $50,000,000 issued by the Company pursuant to the 1996 Note
Purchase Agreement.





“First Priority” means, with
respect to any Lien purported to be created in any Collateral pursuant to any
Collateral Document, that (i) such Lien is perfected and has priority over any
other Lien on such Collateral (other than Liens permitted under this Agreement)
and (ii) such Lien is the only Lien (other than Liens permitted under this
Agreement) to which such Collateral is subject.




“Fixed Charge Coverage Ratio”means, as of any date of determination, for the Company and its
Restricted Subsidiaries on a consolidated basis, the ratio of (a) Consolidated
EBITDAR for the four fiscal quarters ending or immediately preceding such date
to (b) Consolidated Fixed Charges for such four fiscal quarters.




“Foreign Restricted Subsidiary”means any Foreign Subsidiary that is a Restricted
Subsidiary.





“Foreign Subsidiary” means any
Subsidiary that is not a Domestic Subsidiary.




“GAAP”  means
generally accepted accounting principles as in effect from time to time in the
United States of America.




“Governing Body” means the
board of directors or other body having the power to direct or cause the
direction of the management and policies of a Person that is a corporation,
partnership, trust or limited liability company.




“Governmental
Authority”  means




(a)           the
government of




Schedule
B-7




(i) the
United States of America or any State or other political subdivision thereof,
or




(ii) any
jurisdiction in which the Company or any Subsidiary conducts all or any part of
its business, or which asserts jurisdiction over any properties of the Company
or any Subsidiary, or




(b)           any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government.




“Guaranty”  means,
with respect to any Person, any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person in any manner, whether directly or
indirectly, including (without limitation) obligations incurred through an
agreement, contingent or otherwise, by such Person:




(a)           to
purchase such indebtedness or obligation or any property constituting security
therefor;




(b)           to
advance or supply funds (i) for the purchase
or payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available funds
for the purchase or payment of such indebtedness or obligation;




(c)           to
lease properties or to purchase properties or services primarily for the purpose
of assuring the owner of such indebtedness or obligation of the ability of any
other Person to make payment of the indebtedness or obligation; or




(d)           otherwise
to assure the owner of such indebtedness or obligation against loss in respect
thereof.




In any
computation of the indebtedness or other liabilities of the obligor under any
Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.




“Hazardous Material” means any
and all pollutants, toxic or hazardous wastes or any other substances that might
pose a hazard to health or safety, the removal of which may be required or the
generation, manufacture, refining, production, processing, treatment, storage,
handling, transportation, transfer, use, disposal, release, discharge, spillage,
seepage, or filtration of which is or shall be restricted, prohibited or
penalized by any applicable law (including, without limitation, asbestos, urea
formaldehyde foam insulation and polycholorinated biphenyls).




“holder” means, with respect
to any Note, the Person in whose name such Note is registered in the register
maintained by the Company pursuant to Section 13.1.




Schedule
B-8


“including” means, unless the
context clearly requires otherwise, “including, without
limitation.”




“Institutional Investor” means
(a) any
original purchaser of a Note or any Affiliate thereof, (b) any holder of
a Note holding more than 5% of the aggregate principal amount of the Notes then
outstanding, and (c) any bank, trust
company, savings and loan association or other financial institution, any
pension plan, any investment company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form.




“Intangibles” means any
Intellectual Properties (including any amounts, however designated, representing
the cost of acquisition of business and investments in excess of the book value
thereof), unamortized debt discount and expense, deferred research and
development costs, any write-up of asset value after November 30, 2001 and any
other assets treated as intangible assets under GAAP.




“Intellectual Properties”
means any material patents, patent applications, copyrights, copyright
applications, trade secrets, trade names and trademarks, technologies, methods,
processes or other proprietary properties or information.




“Intercreditor Indebtedness”
means Debt owing by the Company or any of its Restricted Subsidiaries to any
Intercreditor Lender pursuant to the Credit Agreement, the 1996 Note Purchase
Agreement and this Agreement.




“Intercreditor Lenders”means,
collectively, the holders of the Notes, the Bank Lenders, and the holders of the
Existing Notes.




“Inventory”means, with respect to any
Note Party, all goods, merchandise and other personal property which are held by
such Note Party for sale or lease, including those held for display or
demonstration.




“Lien” means, with respect to
any Person, any mortgage, lien, pledge, charge, security interest or other
encumbrance, or any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other title
retention agreement or Capital Lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).




“Make-Whole Amount” is defined
in Section 8.6.




“Margined Tangible Assets Coverage
Ratio”means the ratio of (A) (i) the sum of 85% of Eligible Accounts
Receivable, plus (ii) 60% of
Eligible Inventory, plus (iii) 50% of
Equipment, plus
(iv) 80% of Appraised Real Estate Amount, plus (v) the Value of
Pledged Foreign Subsidiary Stock to (B) the outstanding principal amount of
Intercreditor Indebtedness.  As used herein, the “Value of Pledged Foreign Subsidiary
Stock”means, with respect to the Capital Stock of each Foreign
Subsidiary that has been pledged by the Note Parties as Collateral hereunder and
is subject to a valid and perfected First Priority Lien in favor of the
Collateral Agent (including the taking of actions described in Section 9.11 with
respect to each such Foreign Subsidiary, subject to the percentage limitations
set forth therein), an amount equal to (x) the trailing four quarter
Consolidated EBITDA for such Foreign Subsidiary multiplied by 1.625, in the
event only 65% of the issued and outstanding Capital Stock of such Foreign
Subsidiary has been pledged, or (y) the trailing four quarter Consolidated
EBITDA for such Foreign Subsidiary multiplied by 2.5, in the event
100% of the issued and outstanding Capital Stock of such Foreign Subsidiary has
been pledged.




Schedule
B-9


“Material” means
material in relation to the business, operations, affairs, financial condition,
assets, properties, or prospects of the Company and its Restricted Subsidiaries
taken as a whole.




“Material Adverse Effect”
means a material adverse effect on (a) the business,
operations, affairs, financial condition, assets or properties of the Company
and its Restricted Subsidiaries taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement and the Notes, or (c) the validity or
enforceability of this Agreement or the Notes.




“Mortgage” means (i) a
security instrument (whether designated as a deed of trust or a mortgage or by
any similar title) executed and delivered by any Note Party, substantially in
the form of Exhibit
4 to this Agreement or in such other form as may be approved by the
Required Holders, in each case with such changes thereto as may be required by
the Required Holders based on local laws or customary local mortgage or deed of
trust practices or (ii) at the Required Holders’ option, in the case of property
that is mortgaged after the date of the Closing pursuant to Section 9.6, an
amendment to an existing Mortgage, in form satisfactory to the Required Holders,
in either case as such security instrument or amendment may be amended,
supplemented or otherwise modified from time to time.




“Mortgage Policies” is defined
in Section 4.11(b).




“Mortgaged Property” shall
have the meaning assigned to such term in the Mortgages.




“Multiemployer Plan” means any
Plan that is a “multiemployer plan” (as such term is defined in section
4001(a)(3) of ERISA).




“Note Documents” means this
Agreement, the Notes, the Subsidiary Guaranty, the Collateral Documents and the
Collateral Agency and Intercreditor Agreement.




“Note Party” means each of the
Company and the Subsidiary Guarantors, and “Note Parties” means all such
Persons, collectively.




“Notes” is defined in Section
1.




“Obligations”shall have the
meaning assigned to such term in the Collateral Agency and Intercreditor
Agreement.





“Off-Balance Sheet Debt” means
all Debt of any partnership or joint venture of which the Company or any
Subsidiary is a general partner or joint venturer, recourse with respect to
which may be had against the Company or any Restricted Subsidiary or any of
their respective assets.




Schedule
B-10


“Officer’s Certificate” means
a certificate of a Senior Financial Officer or of any other officer of the
Company whose responsibilities extend to the subject matter of such
certificate.




“Organizational Documents”
means the documents (including bylaws, if applicable) pursuant to which a Person
that is a corporation, partnership, trust or limited liability company is
organized.




“Other Purchasers” means each
of the other purchasers of Notes in the principal amount specified opposite its
name in Schedule
A to this Agreement.




“PBGC” means the Pension
Benefit Guaranty Corporation referred to and defined in ERISA or any successor
thereto.




“Permitted Liens”means, at
any time, Liens in respect of property of the Note Parties permitted to exist at
such time pursuant to the terms of Section 10.3.





“Person” means an individual,
partnership, corporation, limited liability company, association, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.




“Plan” means an “employee
benefit plan” (as defined in section 3(3) of ERISA) that is or, within the
preceding five years, has been established or maintained, or to which
contributions are or, within the preceding five years, have been made or
required to be made, by the Company or any ERISA Affiliate or with respect to
which the Company or any ERISA Affiliate may have any liability.




“Purchasers”means,
collectively, you and the Other Purchasers party to this Agreement.




“property” or “properties” means, unless
otherwise specifically limited, real or personal property of any kind, tangible
or intangible, choate or inchoate.




“QPAM Exemption” means
Prohibited Transaction Class Exemption 84-14 issued by the United States
Department of Labor.




“Required Holders” means, at
any time, the holders of at least 51% in principal amount of the Notes at the
time outstanding (exclusive of Notes then owned by the Company, any Restricted
Subsidiary or any of their Affiliates).




“Responsible Officer” means
any Senior Financial Officer and any other officer of the Company with
responsibility for the administration of the relevant portion of this
agreement.




“Restricted Lease” means any
lease for real property other than a Capitalized Lease Obligation with an
initial lease term (as defined under GAAP) (or a term that is extendable or
renewable at either party’s option for a total lease term) of one year or more
from the date of creation thereof.




Schedule
B-11


“Restricted Payment” means (i)
the declaration or payment of any dividend on, or any distribution to the
holders of, any shares of any class of capital stock of the Company or any
Restricted Subsidiary, (ii) any purchase, redemption or other acquisition of
shares of any class of capital stock of the Company or any Restricted Subsidiary
(for consideration other than shares of Capital Stock (other than redeemable
Capital Stock) of the Company or such Restricted Subsidiary), and (iii) any
payment on account of any of the items in clauses (i) through (ii); provided that
dividends paid by a Restricted Subsidiary to the Company or a Restricted
Subsidiary shall not constitute Restricted Payments.




“Restricted Subsidiary” means,
at any time, any Subsidiary of the Company which is not then designated an
Unrestricted Subsidiary by the Board of Directors of the Company.




“S&P” means Standard &
Poors Ratings Group, a division of McGraw Hill, Inc. and any successor
thereto.




“Securities Act” means the
Securities Act of 1933, as amended from time to time.





“Security Agreement” means the
Security Agreement dated as of even date herewith among the Collateral Agent,
the Company and the Subsidiary Guarantors, substantially in the form of Exhibit 5 to this
Agreement, as the same may be amended, supplemented and modified from time to
time.





“Senior Financial Officer”
means the chief financial officer, principal accounting officer, treasurer or
comptroller of the Company.




“Shareholder” shall mean any
record or beneficial holder of 5% or more of any class of the Company’s capital
stock.  For purposes of making this computation, all warrants, rights,
options, convertible securities and other rights to purchase or acquire a class
of Company capital stock shall be deemed to be exercised.




“Significant Subsidiary” shall
mean any Subsidiary with total assets (a) with a net book
value in excess of 20% of Consolidated Tangible Assets as at the end of the
immediately preceding fiscal quarter or (b) that generated in
excess of 20% of Consolidated Net Income before interest and income taxes for
any of the three most recently ended fiscal years.




“Subsidiary” means, as to any
Person, any corporation or other Person of which more than 50% of the
outstanding Voting Stock or other voting ownership interests are owned or
controlled, directly or indirectly, by such Person either directly or through
such Person’s Subsidiaries.  Unless the context otherwise clearly
requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the
Company.




Schedule
B-12


“Subsidiary Guarantor” means
each Domestic Subsidiary in existence on the date of Closing and each Domestic
Subsidiary that executes the applicable Note Documents pursuant to Section 9.8
hereof.




“Subsidiary Guaranty” means
the Subsidiary Guaranty dated as of even date herewith, executed by the
Subsidiary Guarantors, substantially in the form of Exhibit 6 to this
Agreement, as the same may be amended, supplemented and modified from time to
time.




“Synthetic Lease Obligation”means the monetary obligation of a Person under (a) a so-called
synthetic, off-balance sheet or tax retention lease, or (b) an agreement
for the use or possession of property creating obligations that do not appear on
the balance sheet of such Person but which, upon the insolvency or bankruptcy of
such Person, would be characterized as the indebtedness of such Person (without
regard to accounting treatment).





“Title Company” means,
collectively, one or more title insurance companies satisfactory to the
Collateral Agent and the Required Holders.




“Unrestricted Subsidiary”
shall mean each Subsidiary of the Company which is so designated by the Board of
Directors of the Company; provided, however, that no such
designation shall be effective unless (a) at the time of
such designation, such Subsidiary does not own any shares of capital stock or
Debt of the Company or any other Restricted Subsidiary which is not
simultaneously being designated an Unrestricted Subsidiary, (b) immediately after
giving effect to such designation, and after deducting from all covenant
calculations made in respect of the immediately preceding four fiscal quarters
the assets, liabilities, revenues and costs attributable to such Subsidiary
(i) no Default
or Event of Default would either occur and be continuing or would have occurred
at any time during the immediately preceding four fiscal quarters; (ii) the Company would
be permitted to make the investment in such Subsidiary resulting from such
designation in compliance with Section 10.5(g); and (iii) such designation
is treated at the time of designation and at all times thereafter as a sale of
assets for purposes of Section 10.2 and the Company would be permitted to make
such asset sale in compliance with such Section.  Any Subsidiary which
has been designated as an Unrestricted Subsidiary pursuant to the preceding
sentence may, at any time thereafter, be redesignated as a Restricted Subsidiary
by resolution of the Board of Directors of the Company (a certified copy of
which shall promptly be delivered to each holder of the Notes) if, immediately
after giving effect to such redesignation and all other simultaneous
designations and redesignations, if any, of other Subsidiaries pursuant to this
definition, no Default or Event of Default shall exist.  Any
Subsidiary which has been redesignated as a Restricted Subsidiary as provided in
the preceding sentence of this definition may not thereafter be designated or
redesignated as an Unrestricted Subsidiary.  No (x) Domestic
Subsidiary or (y) Foreign Subsidiary whose Capital Stock has been pledged by the
Note Parties as Collateral hereunder may be, or may be designated as, an
Unrestricted Subsidiary; provided, however, the Company
may designate a Domestic Subsidiary as an Unrestricted Subsidiary if such
designation is either made at the time of acquisition or formation of such
Domestic Subsidiary.




“Voting Stock”means, with
respect to any Person, Capital Stock issued by such Person the holders of which
are ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the happening of such a
contingency.





Schedule
B-13





EXHIBIT
1




[FORM
OF 5.36% SENIOR SECURED NOTE DUE 2009]




THIS
NOTE IS SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN A COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT THAT, AMONG OTHER THINGS, ESTABLISHES CERTAIN RIGHTS
WITH RESPECT TO THE SECURITY FOR THIS NOTE AND THE SHARING OF PROCEEDS THEREOF
WITH CERTAIN OTHER SECURED CREDITORS (AS DEFINED IN THE COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT).  AS A CONDITION TO TRANSFER, ANY TRANSFEREE
OF A NOTE MUST BECOME A PARTY TO THE COLLATERAL AGENCY AND INTERCREDITOR
AGREEMENT.  COPIES OF SUCH COLLATERAL AGENCY AND INTERCREDITOR
AGREEMENT WILL BE FURNISHED TO ANY HOLDER OF THIS NOTE UPON REQUEST TO THE
COMPANY.




AMERON
INTERNATIONAL CORPORATION




5.36%
SENIOR SECURED NOTE DUE NOVEMBER 30, 2009






No.
[_____]
            [Date]$[_______]
            PPN 030710 C*
      6






FOR VALUE
RECEIVED, the undersigned, AMERON INTERNATIONAL CORPORATION (herein called the
“Company”), a corporation organized and existing under the laws of the State of
Delaware, hereby promises to pay to [],
or registered assigns, the principal sum of [] DOLLARS on November 30, 2009 (or such amount thereof that remains
outstanding), with interest (computed on the basis of a 360-day year of twelve
30-day months) (a) on the unpaid
balance thereof at the rate of 5.36% per annum from the date hereof, payable
semiannually, on the 30th day of May and November in each year, commencing with
May 30, 2003, until the principal hereof shall have become due and payable, and
(b) to the
extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 7.36% or
(ii) 2%
over the rate of interest publicly announced by The Bank of New York from time
to time in New York, New York as its “base” or “prime” rate.




Payments
of principal of, interest on and any Make-Whole Amount with respect to this Note
are to be made in lawful money of the United States of America in the State of
California at the principal office of the Company in such jurisdiction or at
such other place as the Company shall have designated by written notice to the
holder of this Note as provided in the Note Purchase Agreement referred to
below.




Exhibit
1-1


This Note
is one of a series of Senior Secured Notes (herein called the “Notes”) issued
pursuant to the Note Purchase Agreement, dated as of ________, 2003 (as from
time to time amended, the “Note Purchase Agreement”), between the Company and
the respective Purchasers named therein and is entitled to the benefits
thereof.  Each holder of this Note will be deemed, by its acceptance
hereof, (i) to
have agreed to the confidentiality provisions set forth in Section 20 of the
Note Purchase Agreement, (ii) to have become a
party to the Collateral Agency and Intercreditor Agreement (as defined in the
Note Purchase Agreement) and (iii) to have made the
representation set forth in Section 6.2 of the Note Purchase
Agreement.  This Note is secured by the Collateral Documents and is
guaranteed by the Subsidiary Guarantors pursuant to the Subsidiary
Guaranty.




This Note
is a registered Note and, as provided in the Note Purchase Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder’s attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee.  Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company will not be affected by any notice to the
contrary.




The
Company will make required prepayments of principal on the dates and in the
amounts specified in the Note Purchase Agreement.  This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.




If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner, at the price (including any applicable Make-Whole
Amount) and with the effect provided in the Note Purchase
Agreement.




This Note
shall be construed and enforced in accordance with the law of the State of New
York excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such
State.




AMERON
      INTERNATIONAL CORPORATIONBy:Name:Title:By:Name:Title:







Exhibit
1-2




TABLE OF
CONTENTS




Section
                                                                                                                                                                                                    
                                                                                                                                                                                                    Page1.
                                                                                                                                                                                                    AUTHORIZATION
      OF NOTES
                                                                                                                                                                                                    12.
                                                                                                                                                                                                    SALE
      AND PURCHASE OF NOTES
                                                                                                                                                                                                    13.
                                                                                                                                                                                                    CLOSING
                                                                                                                                                                                                    14.
                                                                                                                                                                                                    CONDITIONS
      TO CLOSING
                                                                                                                                                                                                    24.1.
                                                                                                                                                                                                    Representations
      and Warranties
                                                                                                                                                                                                    24.2.
                                                                                                                                                                                                    Performance;
      No Default
                                                                                                                                                                                                    24.3.
                                                                                                                                                                                                    Compliance
      Certificate
                                                                                                                                                                                                    24.4.
                                                                                                                                                                                                    Opinions
      of Counsel
                                                                                                                                                                                                    24.5.
                                                                                                                                                                                                    Purchase
      Permitted By Applicable Law, etc.
                                                                                                                                                                                                    34.6.
                                                                                                                                                                                                    Sale
      of Other Notes
                                                                                                                                                                                                    34.7.
                                                                                                                                                                                                    Payment
      of Special Counsel Fees
                                                                                                                                                                                                    34.8.
                                                                                                                                                                                                    Private
      Placement Number
                                                                                                                                                                                                    34.9.
                                                                                                                                                                                                    Changes
      in Corporate Structure
                                                                                                                                                                                                    34.10.
                                                                                                                                                                                                    Security
      Interests in Personal and Mixed Property
                                                                                                                                                                                                    34.11.
                                                                                                                                                                                                    Mortgages
                                                                                                                                                                                                    44.12.
                                                                                                                                                                                                    Evidence
      of Insurance
                                                                                                                                                                                                    54.13.
                                                                                                                                                                                                    Note
      Party Documents
                                                                                                                                                                                                    54.14.
                                                                                                                                                                                                    Collateral
      Agency and Intercreditor Agreement
                                                                                                                                                                                                    64.15.
                                                                                                                                                                                                    Structuring
      Fee
                                                                                                                                                                                                    64.16.
                                                                                                                                                                                                    Proceedings
      and Documents
                                                                                                                                                                                                    65.
                                                                                                                                                                                                    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY
                                                                                                                                                                                                    65.1.
                                                                                                                                                                                                    Organization;
      Power and Authority
                                                                                                                                                                                                    65.2.
                                                                                                                                                                                                    Authorization,
      etc.
                                                                                                                                                                                                    75.3.
                                                                                                                                                                                                    Disclosure
                                                                                                                                                                                                    75.4.
                                                                                                                                                                                                    Organization
      and Ownership of Shares of Subsidiaries; Affiliates
                                                                                                                                                                                                    75.5.
                                                                                                                                                                                                    Financial
      Statements
                                                                                                                                                                                                    85.6.
                                                                                                                                                                                                    Compliance
      with Laws, Other Instruments, etc.
                                                                                                                                                                                                    85.7.
                                                                                                                                                                                                    Governmental
      Authorizations, etc.
                                                                                                                                                                                                    85.8.
                                                                                                                                                                                                    Litigation;
      Observance of Agreements, Statutes and Orders
                                                                                                                                                                                                    95.9.
                                                                                                                                                                                                    Taxes
                                                                                                                                                                                                    9
    
  5.10.
                                                                                                                                                                                                      Title
      to Property; Leases
                                                                                                                                                                                                      95.11.
                                                                                                                                                                                                      Licenses,
      Permits, etc
                                                                                                                                                                                                      95.12.
                                                                                                                                                                                                      Compliance
      with ERISA
                                                                                                                                                                                                      105.13.
                                                                                                                                                                                                      Private
      Offering by the Company
                                                                                                                                                                                                      115.14.
                                                                                                                                                                                                      Use
      of Proceeds; Margin Regulations
                                                                                                                                                                                                      115.15.
                                                                                                                                                                                                      Existing
      Debt; Future Liens
                                                                                                                                                                                                      115.16.
                                                                                                                                                                                                      Foreign
      Assets Control Regulations, etc.
                                                                                                                                                                                                      115.17.
                                                                                                                                                                                                      Status
      under Certain Statutes
                                                                                                                                                                                                      125.18.
                                                                                                                                                                                                      Environmental
      Matters
                                                                                                                                                                                                      125.19.
                                                                                                                                                                                                      Creation,
      Perfection and Priority of Liens
                                                                                                                                                                                                      136.
                                                                                                                                                                                                      REPRESENTATIONS
      OF THE PURCHASER
                                                                                                                                                                                                      136.1.
                                                                                                                                                                                                      Purchase
      for Investment
                                                                                                                                                                                                      136.2.
                                                                                                                                                                                                      Source
      of Funds
                                                                                                                                                                                                      137.
                                                                                                                                                                                                      INFORMATION
      AS TO COMPANY
                                                                                                                                                                                                      157.1.
                                                                                                                                                                                                      Financial
      and Business Information
                                                                                                                                                                                                      157.2.
                                                                                                                                                                                                      Officer’s
      Certificate
                                                                                                                                                                                                      187.3.
                                                                                                                                                                                                      Inspection
                                                                                                                                                                                                      198.
                                                                                                                                                                                                      PREPAYMENT
      OF THE NOTES
                                                                                                                                                                                                      198.1.
                                                                                                                                                                                                      Required
      Prepayments
                                                                                                                                                                                                      198.2.
                                                                                                                                                                                                      Optional
      Prepayments with Make-Whole Amount
                                                                                                                                                                                                      198.3.
                                                                                                                                                                                                      Allocation
      of Partial Prepayments
                                                                                                                                                                                                      208.4.
                                                                                                                                                                                                      Maturity;
      Surrender, etc.
                                                                                                                                                                                                      208.5.
                                                                                                                                                                                                      [Intentionally
      Omitted]
                                                                                                                                                                                                      208.6.
                                                                                                                                                                                                      Make-Whole
      Amount
                                                                                                                                                                                                      208.7.
                                                                                                                                                                                                      Prepayments
      under the Collateral Agency and Intercreditor Agreement.
                                                                                                                                                                                                      229.
                                                                                                                                                                                                      AFFIRMATIVE
      COVENANTS
                                                                                                                                                                                                      229.1.
                                                                                                                                                                                                      Compliance
      with Law
                                                                                                                                                                                                      229.2.
                                                                                                                                                                                                      Insurance
                                                                                                                                                                                                      229.3.
                                                                                                                                                                                                      Maintenance
      of Properties
                                                                                                                                                                                                      239.4.
                                                                                                                                                                                                      Payment
      of Taxes and Claims
                                                                                                                                                                                                      239.5.
                                                                                                                                                                                                      Corporate
      Existence, etc.
                                                                                                                                                                                                      239.6.
                                                                                                                                                                                                      Environmental
      and Safety Laws
                                                                                                                                                                                                      239.7.
                                                                                                                                                                                                      Information
      Required by Rule 144A
                                                                                                                                                                                                      24
   
  9.8.
                                                                                                                                                                                                        Execution
      of Subsidiary Guaranty and Collateral Documents
                                                                                                                                                                                                        249.9.
                                                                                                                                                                                                        Credit
      Agreement Availability
                                                                                                                                                                                                        259.10.
                                                                                                                                                                                                        Annual
      Perfection Opinion
                                                                                                                                                                                                        259.11.
                                                                                                                                                                                                        Pledged
      Collateral
                                                                                                                                                                                                        259.12.
                                                                                                                                                                                                        Further
      Assurances
                                                                                                                                                                                                        269.13.
                                                                                                                                                                                                        Control
      Agreements
                                                                                                                                                                                                        2610.
                                                                                                                                                                                                        NEGATIVE
      COVENANTS
                                                                                                                                                                                                        2610.1.
                                                                                                                                                                                                        Related
      Party Transactions
                                                                                                                                                                                                        2610.2.
                                                                                                                                                                                                        Merger
      and Sale of Assets
                                                                                                                                                                                                        2710.3.
                                                                                                                                                                                                        Liens
                                                                                                                                                                                                        2810.4.
                                                                                                                                                                                                        Financial
      Covenants
                                                                                                                                                                                                        3010.5.
                                                                                                                                                                                                        Limitation
      on Certain Investments
                                                                                                                                                                                                        3110.6.
                                                                                                                                                                                                        Sale
      and Lease-back
                                                                                                                                                                                                        3210.7.
                                                                                                                                                                                                        Sale
      or Discount of Receivables
                                                                                                                                                                                                        3310.8.
                                                                                                                                                                                                        [Intentionally
      Omitted]
                                                                                                                                                                                                        3310.9.
                                                                                                                                                                                                        Limitation
      on Restricted Payments
                                                                                                                                                                                                        3310.10.
                                                                                                                                                                                                        Burdensome
      Agreements
                                                                                                                                                                                                        3310.11.
                                                                                                                                                                                                        Change
      in Nature of Business
                                                                                                                                                                                                        3410.12.
                                                                                                                                                                                                        Fiscal
      Year
                                                                                                                                                                                                        3410.13.
                                                                                                                                                                                                        Ownership
      of Subsidiaries
                                                                                                                                                                                                        3410.14.
                                                                                                                                                                                                        Amendments
      or Modifications to Other Debt
                                                                                                                                                                                                        3410.15.
                                                                                                                                                                                                        Restricted
      Leases
                                                                                                                                                                                                        3511.
                                                                                                                                                                                                        EVENTS
      OF DEFAULT
                                                                                                                                                                                                        3512.
                                                                                                                                                                                                        REMEDIES
      ON DEFAULT, ETC.
                                                                                                                                                                                                        3812.1.
                                                                                                                                                                                                        Acceleration
                                                                                                                                                                                                        3812.2.
                                                                                                                                                                                                        Other
      Remedies
                                                                                                                                                                                                        3812.3.
                                                                                                                                                                                                        Rescission
                                                                                                                                                                                                        3912.4.
                                                                                                                                                                                                        No
      Waivers or Election of Remedies, Expenses, etc.
                                                                                                                                                                                                        3913.
                                                                                                                                                                                                        REGISTRATION;
      EXCHANGE; SUBSTITUTION OF NOTES
                                                                                                                                                                                                        3913.1.
                                                                                                                                                                                                        Registration
      of Notes
                                                                                                                                                                                                        3913.2.
                                                                                                                                                                                                        Transfer
      and Exchange of Notes; Transferee to Become Party to Collateral Agency and
      Intercreditor Agreement
                                                                                                                                                                                                        4013.3.
                                                                                                                                                                                                        Replacement
      of Notes
                                                                                                                                                                                                        40
    
 14.
                                                                                                                                                                                                                        PAYMENTS
      ON NOTES
                                                                                                                                                                                                                        4114.1.
                                                                                                                                                                                                                        Place
      of Payment
                                                                                                                                                                                                                        4114.2.
                                                                                                                                                                                                                        Home
      Office Payment
                                                                                                                                                                                                                        4115.
                                                                                                                                                                                                                        EXPENSES,
      ETC
                                                                                                                                                                                                                        4115.1.
                                                                                                                                                                                                                        Transaction
      Expenses
                                                                                                                                                                                                                        4115.2.
                                                                                                                                                                                                                        Survival
                                                                                                                                                                                                                        4216.
                                                                                                                                                                                                                        SURVIVAL
      OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
                                                                                                                                                                                                                        4217.
                                                                                                                                                                                                                        AMENDMENT
      AND WAIVER
                                                                                                                                                                                                                        4217.1.
                                                                                                                                                                                                                        Requirements
                                                                                                                                                                                                                        4217.2.
                                                                                                                                                                                                                        Solicitation
      of Holders of Notes
                                                                                                                                                                                                                        4217.3.
                                                                                                                                                                                                                        Binding
      Effect, etc.
                                                                                                                                                                                                                        4317.4.
                                                                                                                                                                                                                        Notes
      held by Company, etc.
                                                                                                                                                                                                                        4318.
                                                                                                                                                                                                                        NOTICES
                                                                                                                                                                                                                        4319.
                                                                                                                                                                                                                        REPRODUCTION
      OF DOCUMENTS
                                                                                                                                                                                                                        4420.
                                                                                                                                                                                                                        CONFIDENTIAL
      INFORMATION
                                                                                                                                                                                                                        4421.
                                                                                                                                                                                                                        SUBSTITUTION
      OF PURCHASER
                                                                                                                                                                                                                        4522.
                                                                                                                                                                                                                        MISCELLANEOUS
                                                                                                                                                                                                                        4522.1.
                                                                                                                                                                                                                        Successors
      and Assigns
                                                                                                                                                                                                                        4522.2.
                                                                                                                                                                                                                        Payments
      Due on Non-Business Days
                                                                                                                                                                                                                        4522.3.
                                                                                                                                                                                                                        Severability
                                                                                                                                                                                                                        4622.4.
                                                                                                                                                                                                                        Construction
                                                                                                                                                                                                                        4622.5.
                                                                                                                                                                                                                        Counterparts
                                                                                                                                                                                                                        4622.6.
                                                                                                                                                                                                                        Governing
      Law
                                                                                                                                                                                                                        4622.7.
                                                                                                                                                                                                                        Collateral
      Release Date
                                                                                                                                                                                                                        46
    
  SCHEDULE
      A
                  -
                  INFORMATION
      RELATING TO PURCHASERSSCHEDULE
      B
                  -
                  DEFINED
      TERMSSCHEDULE
      4.9
                  -
                  Changes
      in Corporate StructureSCHEDULE
      5.3
                  -
                  Disclosure
      MaterialsSCHEDULE
      5.4
                  -
                  Subsidiaries
      of the Company and Ownership of Subsidiary StockSCHEDULE
      5.8
                  -
                  Litigation;
      Observance of Agreements, Statutes and OrdersSCHEDULE
      5.14
                  -
                  Use
      of ProceedsSCHEDULE
      5.15
                  -
                  Existing
      Debt; Future LiensSCHEDULE
      10.3
                  -
                  Existing
      LiensSCHEDULE
      10.5
                  -
                  Limitation
      on Certain InvestmentsEXHIBIT
      1
                  -
                  Form
      of 5.36% Senior Secured Note due November 30, 2009EXHIBIT
      2(a)
                  -
                  Form
      of Opinion of General Counsel for the CompanyEXHIBIT
      2(b)
                  -
                  Form
      of Opinion of Special Counsel for the CompanyEXHIBIT
      3
                  -
                  Form
      of Collateral Agency and Intercreditor AgreementEXHIBIT
      4
                  -
                  Form
      of MortgageEXHIBIT
      5
                  -
                  Form
      of Security AgreementEXHIBIT
      6
                  -
                  Form
      of Subsidiary
Guaranty
































AMERON
INTERNATIONAL CORPORATION
















$50,000,000
5.36% Senior Secured Notes due November 30, 2009






















NOTE
PURCHASE AGREEMENT














Dated
January 24, 2003

































January
24, 2007
  Ameron
International Corporation
 245 South
Los Robles Avenue
 Pasadena,
California  91101-3638
 
 Re:  Note Purchase Agreement
dated as of January 24, 2003
  Ladies
and Gentlemen:
  Reference
is made to the Note Purchase Agreement, dated as of January 24, 2003 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Agreement”), by and
between Ameron International Corporation, a Delaware corporation (the “Company”), on the one hand,
and the Purchasers named therein, on the other hand.  Capitalized
terms not defined herein shall have the meanings given to such terms in the
Agreement.
  1.           Amendments to Agreement; Limited
Consent.  Pursuant to the request of the Company and Section 17
of the Agreement, the Purchasers agree as follows:
 
 1.1           Clause
(A) of Section 10.2(a) is amended and restated, as follows:
 
 “(A)           any
Restricted Subsidiary may merge with the Company or with any one or more wholly
owned Restricted Subsidiaries so long as, in the case of any transaction
involving the Company or a Subsidiary Guarantor (or a Person required to become
a Subsidiary Guarantor), the Company or such Subsidiary Guarantor (or such
Person required to become a Subsidiary Guarantor) shall be the continuing or
surviving Person.”
 
 1.2           Section
10.2(a) is further amended to delete the “and” at the end of clause (D) thereof;
to delete the period at the end of clause (E) thereof and replace such period
with a “; and”; and to insert a new clause (F) thereof, as follows:
 
 “(F)           the
Company may transfer all of the Capital Stock of Ameron (Pte) Ltd. to Ameron
Singapore Brazil Holdings Pte. Ltd., a wholly-owned Subsidiary of the
Company.”
 
 1.3           Section
10.2(c) is amended to delete the language “clauses (B), (C) and (E)” and to
replace such language with “clauses (B), (C), (E) and (F)”.
 
 1.4           Notwithstanding
anything to the contrary in Section 10.14 of the Agreement, the Purchasers
hereby consent to the Third Amendment to Credit Agreement, dated as of the date
of this letter agreement, by and among the Company and the other parties
thereto, in the form of Exhibit
A to this letter agreement.
 
 1.5           The
amendments and consent set forth in this letter agreement shall be limited
precisely as written and shall not be deemed to be (i) an amendment, waiver,
release or other modification of any other terms or conditions of any of the
Note Documents or any other agreement or document related to the Note Documents,
or (ii) a consent to any future amendment, consent, waiver, release or other
modification.  Except as expressly set forth in this letter agreement,
each of the Note Documents and the other agreements and documents related to the
Note Documents shall continue in full force and effect.
  
 2.           Representations and
Warranties.In order to induce the
undersigned Purchasers to enter into this letter agreement, the Company hereby
represents, warrants and covenants that (i) each of the representations and
warranties set forth in Section 5 of the Agreement is true, correct and
complete, except to the extent such representations and warranties expressly
relate to an earlier date, in which case such representations and warranties are
true, correct and complete as of such earlier date, (ii) no Default or Event of
Default is in existence, (iii) the Company and each Subsidiary Guarantor has
taken all necessary action to duly authorize the execution, delivery and
performance of this letter agreement, (iv) this letter agreement has been duly
executed and delivered by the Company and each Subsidiary Guarantor, and this
letter agreement (and the Agreement as modified hereby) constitute the Company’s
and the Subsidiary Guarantors’ legal, valid and binding obligations, enforceable
in accordance with their terms, except as such enforceability may be subject to
(a) insolvency laws and (b) general principles of equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity), and (v)
no consent, approval, authorization or order of, or filing, registration or
qualification with, any court of Governmental Authority or other third party is
required in connection with the execution, delivery or performance by the
Company or any Subsidiary Guarantor of this letter agreement.
  3.           Other
Agreements.  Within ninety (90) days of the effective date of
this letter agreement (or such later date as the Required Holders shall
determine in their reasonable discretion), the Company shall cause to be
delivered to the Collateral Agent (with a copy thereof to the Purchasers) a
pledge agreement (or similar document) with respect to 65% of the Capital Stock
of Ameron Singapore Brazil Holdings Pte. Ltd. governed by the laws of Singapore,
together with a legal opinion of Singapore counsel for the Company, each in form
and substance reasonably satisfactory to the Required Holders.
  4.           Effectiveness.  The
foregoing amendments and consent shall be effective, subject to the accuracy of
the above representations and warranties, when:  (a) the Purchasers
shall have received (i) a fully executed and delivered counterpart of this
letter agreement, (ii) a duly executed copy of the Third Amendment to Credit
Agreement, dated as of the date of this letter agreement, by and among the
Company and the other parties thereof, in the form of Exhibit A to this letter
agreement; (b) none of the Company’s other lenders shall have received any
compensation for providing any consents, waivers, amendments or other
modifications in connection with the amendments and consent effected by this
letter agreement; and (c) Bingham McCutchen LLP shall have received, by wire
transfer of immediately available funds, payment of all its unpaid legal fees
and disbursements as of the date hereof.
  5.           Counterparts.  This
letter agreement may be executed in one or more counterparts by the undersigned
Purchasers, the Company and the Subsidiary Guarantors and all such counterparts
shall be read together as a single instrument.
  2
 6.           Governing Law.  This
letter agreement shall be governed and construed in accordance with the laws of
the State of New York.
  
  [Signature
pages follow.]
           3
  Sincerely,
  The
Prudential Insurance Company of America
  
  By:  
/s/ Matt Douglass
 Name: 
Matt
Douglass
 Title:   Vice
President
      
 4
  Accepted
and agreed to effective
 the date
first appearing above:
  Ameron
International Corporation
  By: /s/ James R. McLaughlin
 Name:
James R. McLaughlin
 Title: 
Sr. Vice President - Chief Financial Officer
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
EVP & Chief Operating Officer
       5
  Each of
the following entities hereby consents to the modification effected in this
letter agreement and the transactions contemplated hereby, reaffirms its
obligations under the Subsidiary Guaranty and its waivers, as set forth in the
Subsidiary Guaranty, of each and every one of the possible defenses to such
obligations.  In addition, each of the following entities reaffirms
that its obligations under the Subsidiary Guaranty are separate and distinct
from the Company’s obligations.
  Island
Ready-Mix Concrete, Inc.
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President
  Centron
International Inc.
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President
 American
Pipe And Construction
 International
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
  Contrad
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
  Amercoat
Corporation
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
  Bondstrand
Corporation
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
  6
 Psx
Corporation
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
  Ameron
Composites, Inc.
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
  Bolenco
Corporation
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President
  7
  Exhibit
A




June 28,
2006
  Ameron
International Corporation
 245 South
Los Robles Avenue
 Pasadena,
California  91101-3638
 
 Re:  Note Purchase Agreement
dated as of January 24, 2003
  Ladies
and Gentlemen:
  Reference
is made to  the Note Purchase Agreement, dated as of January 24, 2003 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Agreement”), by and
between Ameron International Corporation, a Delaware corporation (the “Company” or “Ameron”), on the one hand, and
the Purchasers named therein, on the other hand.  Capitalized terms
not defined herein shall have the meanings given to such terms in the
Agreement.
  1.           Background.  The
Company and certain of its affiliates party thereto as sellers (collectively,
the “Sellers”) propose
to enter into a certain Asset Purchase Agreement, dated as of June 28, 2006
(the “Purchase
Agreement”), with PPG Industries, Inc., a Pennsylvania corporation (the
“Buyer”), whereby the
Sellers will sell to the Buyer the Purchased Assets (as such term is defined in
the Purchase Agreement) relating to the Sellers’ coatings and finishes business
for a sales price of approximately $115 million, and license to the Buyer
certain intellectual property (the “Coatings Asset
Disposition”).  The Coatings Asset Disposition will not include
the Excluded Assets (as such term is defined in the Purchase Agreement), which
assets include, among others, certain real property of the Sellers identified as
“Owned Property” on Schedule 2.2(j) of the Purchase Agreement (the “Retained Real
Property”).  The Sellers intend to dispose of the Retained Real
Property in one or more separate transactions within one year of the date hereof
(collectively, the “Real
Property Dispositions”).
 
 2.           Limited Waivers and Authorization to
Release Certain Liens.
 
 (a)           Subject
to the provisions of Section 4 hereof, the undersigned, constituting the
Required Holders, hereby (i) waive (A) Section 10.7 of the Agreement to the
extent such Section would be violated upon consummation of the Coatings Asset
Disposition, and (B) any requirement of the Company under the Agreement to (I)
include any of the proceeds of the Coatings Asset Disposition and the Real
Property Dispositions, or any one of them, in the calculation of the financial
tests set forth in clause (i) and clause (ii) of Section 10.2(a) of the
Agreement, or (II) deliver an Officer’s Certificate describing the use of
proceeds from such dispositions, as contemplated by Section 10.2(b) of the
Agreement, and (ii) authorize the Collateral Agent, upon consummation of the
Coatings Asset Disposition or any Real Property Disposition, to release any of
its Liens in or upon the assets comprising such disposition, as the case may be;
provided, however, that (i)
such waiver and authorization to release Liens relating to the Coatings Asset
Disposition shall only be effective so long as such disposition is effected
within 90 days of the date hereof, and (ii) such waiver and authorization to
release Liens relating to the Real Property Dispositions shall only be effective
so long as, and to the extent that, the Real Property Dispositions are effected
within 365 days of the date hereof; and provided, further, that such
waiver and authorization to release Liens relating to either the Coatings Asset
Disposition or the Real Property Dispositions shall only be effective if (i) no
Default or Event Default exists immediately prior to the consummation of the
Coatings Asset Disposition or the applicable Real Property Disposition, as
applicable, and after giving effect to such disposition, and (ii) neither the
Bank Lenders under the Credit Agreement nor the holders of the notes under each
of the other note purchase agreements shall be entitled to receive any amendment
or similar fee as consideration for entering into the applicable consent or
waiver relating to the Coatings Asset Disposition or any Real Property
Disposition, as the case may be, unless the foregoing creditors and the holders
of Notes under the Agreement are each offered an amendment or similar fee in
proportion to the unpaid principal amount owing to such creditor at such
time.
 
 
 (b)           Subject
to the provisions of Section 4 hereof, the undersigned, constituting the
Required Holders, hereby waive any default that may have occurred under the
Agreement in connection with the formation of certain Subsidiaries since
November 25, 2005; provided, however, that such
waiver shall only be effective so long as each relevant Note Party has
fulfilled, no later than July 30, 2006, its obligations under Section 9.8 and
Section 9.11 of the Agreement, as applicable, relating to the formation of such
Subsidiaries.
 
 (c)           The
limited waivers and authorization to release certain liens set forth in this
letter agreement shall be limited precisely as written and shall not be deemed
to be (i) an amendment, waiver, release or other modification of any other terms
or conditions of any of the Note Documents or any other agreement or document
related to the Note Documents, or (ii) a consent to any future amendment,
consent, waiver, release or other modification.  Except as expressly
set forth in this letter agreement, each of the Note Documents and the other
agreements and documents related to the Note Documents shall continue in full
force and effect.
  3.           Representations, Warranties and
Covenants.In order to induce the
undersigned Required Holders to enter into this letter agreement, the Company
hereby represents, warrants and covenants that:
  (a)           each
of the representations and warranties set forth in Section 5 of the Agreement is
true, correct and complete, except to the extent such representations and
warranties expressly relate to (i) an earlier date, in which case such
representations and warranties are true, correct and complete as of such earlier
date, and (ii) the information set forth on Schedule 5.4 of the Agreement, in
which case such representations and warranties are true, correct and complete
with respect to the information set forth on the revised Schedule 5.4 attached
hereto as Exhibit
A; and
  (b)           no
Default or Event of Default is in existence.
  4.           Effectiveness.  The
foregoing waiver shall be effective, subject to the accuracy of the above
representations and warranties, when: (a) each of the undersigned shall have
received (i) a fully executed and delivered counterpart of this letter
agreement, (ii) evidence satisfactory to it that the Company and the Subsidiary
Guarantors have entered into, or simultaneously herewith are entering into, a
substantially similar consent or waiver with the requisite Bank Lenders under
the Credit Agreement and the requisite holders of the notes under each of the
other note purchase agreements, and none of the foregoing creditors shall be
entitled to receive any amendment or similar fee as consideration for entering
into the applicable consent or waiver; and (b) Bingham McCutchen LLP shall have
received, by wire transfer of immediately available funds, payment of all its
unpaid legal fees and disbursements as of the date hereof.  This
waiver may be executed in one or more counterparts by the undersigned, the
Company and the Subsidiary Guarantors and all such counterparts shall be read
together as a single instrument.
 
  [Signature
      pages follow.]
   2
  Sincerely,
  The
Prudential Insurance Company of America
  
  By:  
/s/ Matt Douglass
 Name: 
Matt
Douglass
 Title:   Vice
President
    
 3
  Accepted
and agreed to effective
 the date
first appearing above:
  Ameron
International Corporation
  By: /s/ James R. McLaughlin
 Name:
James R. McLaughlin
 Title: 
Sr. V.P. - CFO & Treasurer
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
EVP & Chief Operating Officer
      4
 Each of
the following entities hereby consents to the modification effected in this
letter agreement and the transactions contemplated hereby, reaffirms its
obligations under the Subsidiary Guaranty and its waivers, as set forth in the
Subsidiary Guaranty, of each and every one of the possible defenses to such
obligations.  In addition, each of the following entities reaffirms
that its obligations under the Subsidiary Guaranty are separate and distinct
from the Company’s obligations.
  Island
Ready-Mix Concrete, Inc.
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President
 Centron
International Inc.
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President
 American
Pipe And Construction
 International
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
  Contrad
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
  Amercoat
Corporation
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
  Bondstrand
Corporation
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
   5
 Psx
Corporation
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
  Ameron
Composites, Inc.
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President - Treasurer
  Bolenco
Corporation
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
Vice President
   6
  Exhibit
A




November 25, 2005
 
 Ameron
International Corporation
 245 South
Los Robles Avenue
 Pasadena,
California 91101-3638
 
  Re:           First
Amendment to 2003 Note Purchase Agreement
 
 Ladies
and Gentlemen:
  Reference
is made to that certain Note Purchase Agreement, dated as of January 24, 2003,
between Ameron International Corporation, a Delaware corporation (the “Company”), on the one hand,
and The Prudential Insurance Company of America (the “Purchaser”), on the other hand
(as amended, restated, supplemented or otherwise modified from time to time,
collectively, the “Note
Agreement”).  Capitalized terms used herein without definition
have the meanings ascribed to such terms in the Note Agreement.
  The
Company has requested that the Purchaser amend certain provisions of the Note
Agreement as set forth herein, subject to the conditions and in reliance on the
representations and warranties set forth herein.
  In
consideration of the foregoing recital, the parties hereto agree as
follows:
  1.           Amendments to the Note
Agreement.  Pursuant to Section 17.1 of the Note Agreement, the
Note Agreement is hereby amended as follows:
  1.1           Section
10.10 of the Note Agreement is hereby amended by deleting clause (2) in its
entirety and inserting the following in lieu thereof:
  “(2) any other credit, loan, note,
guaranty or other similar agreement pursuant to which financing constituting
Intercreditor Indebtedness is or may be made available to, or guaranteed by, the
Company or any Restricted Subsidiary,”
  1.2           Section
11(l) of the Note Agreement is hereby amended and restated in its entirety to
read as follows:
  “(l)           a
Change of Control shall occur.”
  1.3           Schedule
B to the Note Agreement ishereby amended by adding
the following new definitions in their proper alphabetical order:
  “2005 Note Purchase Agreement”
means that certain Note Purchase Agreement dated as of November 25, 2005 among
Ameron (Pte) Ltd. and each of the purchasers named on Schedule A thereto, as the
same may be amended, modified, restated or supplemented and in effect from time
to time.
  
 “2005 Notes” means those
certain 4.245% senior secured notes due November 25, 2012 issued by Ameron (Pte)
Ltd. pursuant to the terms and provisions of the 2005 Note Purchase
Agreement.
  1.4           Clause
(ii) of the definition of “Change of Control” set forth on Schedule B to the
Note Agreement is hereby amended and restated in its entirety to read as
follows:
  “(ii) the
occurrence of a “Change of Control” (or any comparable term) under, and as
defined in, (A) the Credit Agreement, the 1996 Note Purchase Agreement, the 2005
Note Purchase Agreement or any other credit, loan, note, guaranty or other
similar agreement pursuant to which financing constituting Intercreditor
Indebtedness is or may be made available to, or guaranteed by, the Company or
any Restricted Subsidiary, or (B) any indenture or agreement in respect of
Material Indebtedness to which the Company or any Restricted Subsidiary is a
party.”
  1.5           The
definition of “Collateral Agency and Intercreditor Agreement” set forth on
Schedule B to the Note Agreement is hereby amended and restated in its entirety
to read as follows:
  “Collateral Agency and Intercreditor
Agreement” means the Amended and Restated Collateral Agency and
Intercreditor Agreement dated as of November 25, 2005 among the Collateral
Agent, the holders of the Notes and the senior lenders listed on the signature
pages thereto, substantially in the form of Exhibit 3 to this
Agreement, as the same may be amended, amended and restated, supplemented and
modified from time to time.
  1.6           The
definition of “Intercreditor Indebtedness” set forth on Schedule B to the Note
Agreement is hereby amended and restated in its entirety to read as
follows:
  “Intercreditor Indebtedness”
means Debt owing by the Company or any of its Restricted Subsidiaries to any
Intercreditor Lender pursuant to the Credit Agreement, the 2003 Note Purchase
Agreement, the 2005 Note Purchase Agreement, this Agreement or any other credit,
loan, note, guaranty or other similar agreement pursuant to which financing is
or may be made available to, or guaranteed by, the Company or any Restricted
Subsidiary so long as such Debt constitutes “Obligations” under, and as defined
in, the Collateral Agency and Intercreditor Agreement.
  1.7           The
definition of “Intercreditor Lenders” set forth on Schedule B to the Note
Agreement is hereby amended and restated in its entirety to read as
follows:
  “Intercreditor Lenders”means,
collectively, the holders of the Notes, the Bank Lenders, the holders of the
2003 Notes, the holders of the 2005 Notes and any other Secured Creditor (as
such term is defined in the Collateral Agency and Intercreditor
Agreement).
  2
 1.8           Exhibit
3 to the Note Agreement is hereby amended and restated in its entirety as set
forth on Exhibit
A attached hereto and made a part hereof.
  1.9           Schedule
5.4 to the Note Agreement is hereby amended and restated in its entirety as set
forth on Exhibit
B attached hereto and made a part hereof.
  2.           Representations and
Warranties.  The Company hereby certifies that as of the date
hereof (a) after giving effect to the amendment set forth in Section 1.9 above,
the representations and warranties of the Company contained in Section 5 of the
Note Agreement are true and correct as though made on and as of such date and
(b) no Default or Event of Default under the Note Agreement exists or will exist
after giving effect to the amendments and the waiver set forth herein and the
transactions contemplated hereby.
  3.           Conditions to
Effectiveness.  The effectiveness of the amendments set forth
in Section 1 of this letter agreement is subject to the following:
  (a)           receipt
by the holders of the Notes of a counterpart of this letter agreement, duly
executed and delivered by the Company and the Required Holders;
  (b)           the
Company shall have delivered to each holder of the Notes fully executed copies
of (i)  the Amended and Restated Collateral Agency and Intercreditor
Agreement dated as of the date hereof among the Collateral Agent, the holders of
the Notes, Bank of America, N.A., as Administrative Agent under the Credit
Agreement, the Bank Lenders, the holders of the Existing Notes and the holders
of the 2005 Notes and acknowledged and consented to by the Company, each of the
other Note Parties and Ameron (Pte) Ltd., (ii) amendments to the Security
Agreement and the Mortgages granting Liens in favor of the Collateral Agent to
secure the obligations of the Note Parties under and in respect of the 2005 Note
Purchase Agreement and the 2005 Notes, which collectively shall have been duly
executed on behalf of each Note Party party thereto and the Collateral Agent and
(iii) appropriate endorsements to the Mortgage Policies in form and substance
reasonably satisfactory to the holders of the Notes;
  (c)           the
Company shall have delivered to each holder of the Notes a fully executed copy
of the 2005 Note Purchase Agreement and any amendment to the 1996 Note Purchase
Agreement executed in connection therewith, each as originally executed and
delivered, together with all exhibits and schedules thereto; and
  (d)           the
Company shall have paid all costs and expenses incurred by the Purchaser
(including, without limitation, reasonable attorneys’ fees and expenses) in
connection with this letter agreement and the transactions contemplated
hereby.
  4.           No Waiver.  The
amendments set forth in this letter agreement shall be limited precisely as
written and shall not be deemed to be (a) an amendment, consent or waiver of any
other terms or conditions of the Note Agreement or any other document related to
the Note Agreement or any other credit arrangement between any holder of the
Notes or any of their respective affiliates and the Company and its affiliates,
(b) a waiver of any right or remedy of the holders of the Notes issued under the
Note Agreement, or (c) a consent to any future amendment, consent or waiver of
the Note Agreement or any future transaction, event or condition which would
constitute a Default or Event of Default under the Note
Agreement.  Except as expressly set forth in this letter agreement,
the Note Agreement and all related documents shall continue in full force and
effect and shall not be impaired or otherwise affected by the execution of this
letter agreement.
  3
 5.           Counterpart.                                This
letter agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one
instrument.  Execution of this letter agreement by any of the parties
may be evidenced by way of a faxed transmission of such party’s signature and
such faxed signature shall be deemed to constitute the original signature of
such party to this letter agreement.
  6.           Governing Law.  This
letter agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of New York,
excluding choice of law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such
State.
  [Remainder
of page intentionally left blank; next page is signature page.]
     4
  If you
are in agreement with the foregoing, please sign the form of acceptance on the
enclosed counterparts of this letter agreement, whereupon, subject to
satisfaction of the conditions set forth in paragraph 3 above, this letter
agreement will become a binding agreement among the Company and the
Purchaser.
  Very
      truly yours,THE
      PRUDENTIAL INSURANCE COMPANY OF AMERICABy: 
      /s/ Matt
  DouglassName:
      Matt DouglassTitle:
      Vice President
  The
foregoing letter agreement is hereby accepted as of the date first above
written.
 
 AMERON
INTERNATIONAL CORPORATION
 
 
 By: /s/ James R. McLaughlin
 Name:
James R. McLaughlin
 Title: 
Sr. V.P. - CFO & Treasurer
  By: /s/ Gary Wagner
 Name:
Gary Wagner
 Title:
EVP & Chief Operating Officer
 
    
 [Signature
Page to First Amendment to 2003 Note Purchase Agreement]
  EXHIBIT
A
 
 AMENDED
AND RESTATED
 COLLATERAL
AGENCY AND INTERCREDITOR AGREEMENT
 
 
 
 See
attached
     Exhibit
A-1
  EXHIBIT
B
 
 SUBSIDIARIES
 
 
 
 See
attached
     Exhibit
B-1