EXHIBIT 10.4b










                          SECURITIES PURCHASE AGREEMENT



                                 NOTES DUE 2000

                                       of

                           DIABLO COMMUNICATIONS, INC.


                                 March 20, 1997












<PAGE>






<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                                                Page
<S>      <C>                                                                                                     <C>
         1.  Issue and Sale of Securities.........................................................................1
                  1.1  Description of Securities..................................................................1
                  1.2  Purchase and Sale..........................................................................2
                  1.3  Closing....................................................................................2

         2.  Representations and Warranties of Company............................................................4
                  2.1  Organization and Business; Power and Authority.............................................4
                  2.2  Business; Financial Information............................................................5
                  2.3  Changes in Condition.......................................................................5
                  2.4  Title to Properties; Leases................................................................5
                  2.5  Compliance with Governmental Authorizations and Applicable Law.............................6
                  2.6  Related Transactions.......................................................................7
                  2.7  Tax Matters................................................................................7
                  2.8  Employment Arrangements....................................................................7
                  2.9  Ordinary Course of Business................................................................7
                  2.10  Private Sale..............................................................................9
                  2.11  Disclosure................................................................................9
                  2.12  Use of Proceeds..........................................................................10
                  2.13  Material Agreements and Private Authorizations...........................................10
                  2.14  Employee Retirement Income Security Act of 1974..........................................10
                  2.15  Authorized and Outstanding Capital Stock ................................................10
                  2.16  Inapplicability of Specified Statutes....................................................11

         3.  Representations, Warranties and Covenants of American...............................................11
                  3.1  Organization and Business; Power and Authority............................................11
                  3.2  Investment Representation.................................................................12
                  3.3  Covenant Regarding Transfer...............................................................12

         4.  Conditions of Closing...............................................................................12
                  4.1  Company's Officer's Certificate.  ........................................................12
                  4.2  Company's Secretary's Certificate.  ......................................................13
                  4.3  Opinion of Company Counsel.  .............................................................13
                  4.4  Legality; Governmental and Other Authorizations.  ........................................13

         5.  Payment and Exchange of Notes; Lost Notes...........................................................13
                  5.1  Payments..................................................................................13
                  5.2  Exchange..................................................................................14
                  5.3  Replacement of Notes......................................................................15
                  5.4  Transfer Office and Record of Holders of Notes............................................15
                  5.5  Transfer of Notes.........................................................................15
                  5.6  Registered Owners of Notes................................................................16
                  5.7 Limitation on Transfer of Notes............................................................16

         6.  Payment Provisions..................................................................................16

                                       

<PAGE>


                                                                                                               Page



                  6.1  Required Payments.........................................................................16
                  6.2  Restriction on Optional Payments..........................................................16
                  6.3  Notice of Payment and Offers to Repurchase................................................17
                  6.4  Maturity; No Reissue......................................................................17
                  6.5  Purchase of Notes.........................................................................17

         7.  Special Covenants of Company........................................................................17
                  7.1  Payments..................................................................................18
                  7.2  Prompt Payment of Taxes and Indebtedness..................................................18
                  7.3  Conduct of Business.......................................................................18
                  7.4  Maintenance of Property and Leases........................................................18
                  7.5  Maintenance of Insurance..................................................................19
                  7.6  Maintenance of Accounts and Records.......................................................19
                  7.7  Compliance With Laws......................................................................19
                  7.8  Miscellaneous Information.................................................................19
                  7.9  Information and Reports to Be Furnished by Company........................................20
                  7.10  Liens....................................................................................21
                  7.11  Distributions............................................................................21
                  7.12  Consolidation, Merger and Acquisition....................................................22
                  7.13  Prohibited Transactions..................................................................22
                  7.14  Compliance with ERISA....................................................................23
                  7.15  Indebtedness.............................................................................23
                  7.16 Operation of the Business.................................................................23
                  7.17  Issue of Equity Securities...............................................................24

         8.  Defaults.  .........................................................................................24
                  8.1  Events of Default.........................................................................24
                  8.2  Notice to the Holders.....................................................................26
                  8.3  Annulment of Defaults.....................................................................27
                  8.4  Waiver by Company; Severability of Remedies...............................................27
                  8.5  No Waiver of Rights.......................................................................27
                  8.6  Costs and Expenses of Collection..........................................................27
                  8.7  Remedies Cumulative.......................................................................28
         9.  Definitions.........................................................................................28

         10.  Miscellaneous Provisions...........................................................................39
                  10.1  Stamp and Other Taxes....................................................................39
                  10.2  Expenses.................................................................................40
                  10.3  Survival of Covenants; Successors and Assigns............................................40
                  10.4  Notices and Communications...............................................................40
                  10.5  Amendments and Waivers...................................................................41
                  10.6  Governing Law; Venue.....................................................................41

                                      -ii-

<PAGE>


                                                                                                               Page



                  10.7  Entire Agreement.........................................................................42
                  10.8  Saturdays, Sundays, Holidays, etc........................................................42
                  10.9  Brokers, etc.............................................................................42
                  10.10  Headings; Counterparts..................................................................42
                  10.11  Severability............................................................................42
                  10.12  Further Assurances......................................................................43
                  10.13  Specific Performance; Other Rights......................................................43
                  10.14  Non-Recourse Obligation.................................................................43
</TABLE>


SCHEDULES:

         DISCLOSURE SCHEDULE

EXHIBITS

         Exhibit A:        Form of Note
         Exhibit B:        Form of Additional Compensation Certificate


                                      -iii-

<PAGE>





         THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), made as of March
20, 1997, by and between Diablo  Communications,  Inc., a California corporation
(the  "Company"),  and American  Tower  Systems,  Inc.,  a Delaware  corporation
("American" or the "Purchaser").

                              W I T N E S S E T H:

         WHEREAS,  American  and the  Company are parties to a letter of intent,
dated as of December 19, 1996,  as amended as of the date hereof (the "Letter of
Intent"), relating to an asset purchase agreement to be negotiated, executed and
delivered  by the parties  (the  "Acquisition  Agreement"),  with respect to the
acquisition  (the  "Acquisition")  by  American  of  substantially  all  of  the
communications  tower  and  management  business  of the  Company  (the  "Diablo
Business");

         WHEREAS,  the  Company  proposes to issue and sell on the date hereof a
Note in the principal amount of $650,000 and American is willing to purchase the
Initial Note in order to provide funds to the Company for corporate purposes;

         WHEREAS,  American and Diablo  Communications  of Southern  California,
Inc.,  a  California  corporation  ("DCSC"),  are parties to a letter of intent,
dated as of  December  19,  1996,  as amended as of the date  hereof  (the "DCSC
Letter of Intent"),  relating to an asset  purchase  agreement to be negotiated,
executed and delivered by the parties (the "DCSC Acquisition  Agreement"),  with
respect to the acquisition (the "DCSC Acquisition") by American of substantially
all of the  property  and assets  and the  communications  tower and  management
business of DCSC (collectively, the "DCSC Business"); and

         WHEREAS,  American and DCSC have, simultaneously executed and delivered
a Note Purchase  Agreement,  substantially  in the form of this  Agreement  (the
"DCSC Note  Agreement"),  pursuant to which DCSC will issue up to Seven  Hundred
Fifty Thousand Dollars ($750,000) in aggregate principal amount of notes of like
tenor to the Notes (the "DCSC Notes") and additional  compensation  certificates
of like tenor to the Additional Compensation  Certificates (the "DCSC Additional
Compensation Certificates");

         NOW,  THEREFORE,  for and in consideration of the premises,  the mutual
covenants and agreements herein contained, and other valuable consideration, the
receipt and  adequacy  whereof  are hereby  acknowledged,  the  parties  hereto,
intending to be legally bound, do hereby covenant and agree as follows:

         1.  Issue and Sale of Securities.

         1.1  Description  of  Securities.  The Company has duly  authorized the
issue and sale, on the terms hereinafter  provided, of the Note. As used herein,
the term  "Notes"  shall  mean the Note  together  with  any  notes  issued  and
delivered  in  exchange  or  substitution  therefor or for any other Notes or on
transfer of the Initial Note or any other Notes as herein  provided and the term
"Note" shall mean any of the Notes.  The Notes shall be in or  substantially  in
the form set forth in Exhibit A hereto. Each Note shall be dated the date of its
issue,  shall mature on June 30, 2000,  shall bear interest from the date of its
issue, at an annual rate equal to the Prime Rate on the unpaid principal

                                                        

<PAGE>



balance thereof,  compounded on the last day of each calendar month,  commencing
January 31,  1997,  while such Note is  outstanding,  and  payable at  maturity,
including by way of  acceleration  or otherwise,  and interest at the rate of 2%
per annum in  excess  of what  would  otherwise  have  been paid on any  overdue
principal and, to the extent legally enforceable, any overdue interest. Interest
on the  Notes  shall be  computed  on the basis of a 360-day  year.  Subject  to
Section  8.1,  the  outstanding  principal  amount of the Notes shall be paid in
accordance  with the provisions of Section 6.1. The term "Prime Rate" shall mean
the rate,  from time to time,  published  in the Wall  Street  Journal  and each
change in the Prime Rate shall effect a simultaneous  change in the minimum rate
of interest payable on the Notes.

         The Company has duly authorized the issuance,  on the terms hereinafter
provided,  of certificates  representing rights to additional  compensation (the
"Additional  Compensation  Certificates")  as determined in accordance  with the
provisions of the Additional  Compensation  Certificates.  The term  "Additional
Compensation  Certificates" shall mean any Additional Compensation  Certificates
issued and delivered in exchange or substitution therefor or on transfer thereof
as therein provided;  and the term "Additional  Compensation  Certificate" shall
mean  any  of  the   Additional   Compensation   Certificates.   The  Additional
Compensation  Certificates shall be in or substantially in the form set forth in
Exhibit B hereto.  Each Additional  Compensation  Certificate shall be dated the
date of its issue.

         1.2  Purchase  and  Sale.  On  the  basis  of the  representations  and
warranties  and on the terms and  subject  to the  conditions  set forth in this
Agreement,  the Company  agrees to issue and deliver to  American,  and American
agrees to acquire from the  Company,  the Note and the  Additional  Compensation
Certificates  at a purchase  price (the  "Purchase  Price") equal to 100% of the
principal amount of the Note,  except that the loans evidenced by the Note shall
be advanced  not more  frequently  than once a month,  on such date (an "Advance
Date") not less than three (3) business days  subsequent to delivery to American
by the Company of a request for an advance (an "Advance Request"), in accordance
with the following schedule:

                     Month                            Cumulative Advances

                  March 1997                               $350,000
                  April 1997                               $500,000
                  May 1997                                 $600,000
                  June 1997                                $650,000

Notwithstanding  the  foregoing,  American  shall not be  obligated  to make any
advance  (a) upon the  occurrence  and during  the  continuance  of a  Potential
Default  or Event of  Default  or (b) if the Notes  shall  have  become  due and
payable  pursuant to the  provisions  of Section  6.1.  The Company and American
agree that the Purchase Price shall be allocable to the Notes and the Additional
Compensation  Certificates  in  accordance  with their  respective  fair  market
values.

         1.3 Closing.  The Closing (the  "Closing")  shall be held at such time,
place and manner not later than  January 31,  1997 as the  Company and  American
shall  agree  (the date on which the  Closing  occurs  being  herein  called the
"Closing Date").  At the Closing,  the Company will deliver to American the Note
in the principal amount of $650,000 registered in the name of American, in

                                       -2-

<PAGE>



exchange for the initial advance requested by the Company in accordance with the
provisions  of  Section  1.2 by  American  in the form of bank  wire  transfers,
evidenced by an advice of bank credit issued by a member of the Federal  Reserve
System,  in the amount of such requested  advance.  Such wire transfers shall be
made to such account as the Company shall have  designated by notice to American
at least one (1) business day in advance of the Closing.

         Upon the request of  American,  the Company  shall  prepare and file an
application  with the California  Department of  Corporations an application for
qualification of the Additional Compensation  Certificates and/or the Notes (the
"California  Application")  under the  provisions of Chapter 2 of the California
Corporate Securities Law of 1968, as amended (the "California  Securities Law").
The Company shall thereafter use its best efforts to secure the qualification of
the Additional  Compensation  Certificates and/or the Notes under the California
Securities  Law. The Company and American shall each bear fifty percent (50%) of
any and all costs and expenses of the  preparation  and filing of the California
Application,  and securing the issuance of the qualification,  including without
limitation  filing and processing  fees,  attorneys fees,  accountants  fees and
other costs and expenses.

         Promptly  after  the  effective  date  of  the   qualification  of  the
Additional  Compensation  Certificates and/or the Notes, and in any event within
three (3) days after the effective date of such qualification,  the Company will
issue and deliver to American one Additional Compensation Certificate registered
in the name of American, subject to the Company's and American's compliance with
such  terms  and   requirements  as  may  be  imposed  by  the  Commissioner  of
Corporations as a condition of the qualification.

         In the event that such  qualification  does not become effective within
six (6) weeks (or such longer  period as American  may, in its sole  discretion,
agree) after the filing of the California  Application,  American shall have the
right to  contribute  the Notes in exchange  for  interests in one or more joint
ventures  agreements with the Company with respect to the communication sites in
which the proceeds of the loans  theretofore made or to be made pursuant to this
Agreement are used.  Such joint ventures shall be on terms and conditions  which
afford  to  American  and the  Company  (i)  substantially  equivalent  economic
benefits  and  obligations  to those  which  they would  have  received  had the
Additional  Compensation  Certificates and/or the Notes been qualified under the
California  Securities  Law and  issued  and  delivered  to  American,  and (ii)
substantially  equivalent  rights and  obligations as contemplated in the Notes,
the  Additional  Compensation  Certificates  and this Agreement and otherwise on
terms and conditions reasonably acceptable to the Company and American.

         Subsequent advances by American shall be made by American in accordance
with the  provisions  of Section 1.2 upon  receipt by American of (a) an Advance
Request  accompanied  by  an  officer's  certificate  to  the  effect  that  the
representations and warranties  contained in Section 2 shall be true and correct
in all  material  respects on and as of the Advance  Date;  no Material  Adverse
Change  affecting the Company  shall be pending or, to the Company's  knowledge,
threatened;  no event  which  constitutes  an Event of  Default  or a  Potential
Default  shall have  occurred  and be  continuing  on the Advance  Date,  (b) an
officer's  certificate  specifying in reasonable detail the proposed use of such
advance,  and (c) American's  having  approved such use, such approval not to be
unreasonably withheld, delayed or conditioned.

                                       -3-

<PAGE>



         2.  Representations  and Warranties of Company.  The Company represents
and warrants that:

         2.1  Organization and Business; Power and Authority.

                  (a) The Company (i) is a corporation  duly organized,  validly
         existing and in good  standing  under the laws of its  jurisdiction  of
         organization, and (ii) has all requisite power and authority (corporate
         and other) to own or hold under lease its properties and to conduct its
         business as now conducted and as presently proposed to be conducted.

                  (b) The Company has adequate  power and  authority  (corporate
         and other) and all necessary  franchises,  permits,  licenses and other
         rights  and  privileges  to allow it to  execute  and  deliver,  and to
         perform  its  obligations   under,  this  Agreement,   the  Notes,  the
         Additional  Compensation  Certificates and each other Related Agreement
         to  which  it is a  party,  and to  issue  and  sell  the  Note and the
         Additional  Compensation  Certificates.  The  execution,  delivery  and
         performance of this Agreement,  the Notes, the Additional  Compensation
         Certificates  and each of the  other  Related  Agreements  to which the
         Company is a party have been duly authorized by all requisite corporate
         action,  including  that, if required,  of the Company's  stockholders.
         This Agreement constitutes,  and the Notes, the Additional Compensation
         Certificates  and each other  Related  Agreement to which it is a party
         when executed and delivered by the Company will  constitute,  valid and
         binding  obligations  of the Company,  enforceable  in accordance  with
         their respective terms, except as (i) the enforceability thereof may be
         limited  by  bankruptcy,  insolvency  or  similar  laws  affecting  the
         enforcement of creditors' rights generally and (ii) the availability of
         equitable  remedies may be limited by equitable  principles  of general
         applicability.  The  holders  from  time to time of the  Notes  and the
         Additional Compensation Certificates will be entitled to the rights and
         benefits set forth in the Notes, the Additional Stock  Certificates and
         this Agreement.

                  (c) The  Company  does  not own any  voting  shares  or  other
         equitable  interest in any Person,  however  organized and however such
         interest  may be  denominated  or  evidenced,  which  owns  or has  any
         interest  in the assets and  property  or business of any of the Diablo
         Assets or the Diablo  Business,  except as set forth in the  Disclosure
         Schedule.

                  (d) The Company has adequate  power and  authority  (corporate
         and other) under the laws of its  jurisdiction of organization  and all
         necessary franchises, permits, licenses and other rights and privileges
         to allow it to execute and  deliver,  and to perform  its  obligations,
         under, the Letter of Intent and the execution, delivery and performance
         of the  Letter of  Intent  has been duly  authorized  by all  requisite
         corporate action on the part of the Company.

                  (e) Except as set forth in the  Disclosure  Schedule,  neither
         the execution and delivery of this Agreement, the Notes, the Additional
         Compensation  Certificates  or any of the other  Related  Agreements to
         which it is a party, nor the offer,  issue,  sale or delivery of any or
         all of the Notes, nor the  consummation of the  transactions  herein or
         therein  contemplated,  nor compliance  with the terms,  conditions and
         provisions hereof or thereof by the Company:

                           (i) will  conflict  with,  or  result  in a breach or
                  violation  of or  constitute  a  default  in the  performance,
                  observance or fulfillment of any obligation, covenant or

                                       -4-

<PAGE>



                  condition  contained  in,  or  constitute,   or  but  for  any
                  requirement  of giving of  notice or  passage  of time or both
                  would  constitute,  a default  or an event of  default  by the
                  Company  under,  any  Applicable  Law  or,  to  the  Company's
                  knowledge,    any    Private    Authorization,    Governmental
                  Authorization or Material Contractual Obligation;

                           (ii) will, to the Company's knowledge,  result in the
                  creation or imposition of any Lien upon any of the  properties
                  of the Company; or

                           (iii) will, to the Company's  knowledge,  require any
                  approval or action of, or filing with, any  Authority,  except
                  as set forth in the Disclosure Schedule.

         2.2  Business;   Financial  Information.  The  Company  has  heretofore
furnished to American  copies of the financial  statements of the Company listed
in  the  Disclosure  Schedule  (the  "Financial   Statements").   The  Financial
Statements  have been prepared in  accordance  with CAAP applied on a consistent
basis throughout the periods covered  thereby,  except as otherwise noted in the
Disclosure Schedule, are true, complete and correct in all material respects, do
not contain any untrue  statement of a material fact or omit to state a material
fact  required by CAAP to be stated  therein or  necessary  in order to make the
statements  contained  therein not misleading,  and fairly present the financial
condition of the Company and results of operations  and cash flow of the Company
on the bases therein  stated,  as of the respective  dates thereof,  and for the
respective periods covered thereby subject,  in the case of unaudited  financial
statements,  to normal year-end audit  adjustments  and accruals.  Except as set
forth in the most recent  balance  sheet  constituting  a part of the  Financial
Statements, the Company does not have any Indebtedness for Money Borrowed. As of
the Closing Date,  after giving effect to all of the  transactions  contemplated
hereby, the Company will be Solvent.

         2.3 Changes in  Condition.  Since the date of the most  recent  balance
sheet constituting a part of the Financial  Statements (the "Most Recent Balance
Sheet"), except as contemplated by this Agreement and the Letter of Intent or as
otherwise  specifically set forth in the Disclosure Schedule, (i) there has been
no Material Adverse Change of the Company.  There is, as of the date hereof,  no
fact known to the Company  which,  in the  reasonable  judgment of the  Company,
Materially  Adversely  Affects,  or might,  in the  reasonable  judgment  of the
Company (so far as the Company can now foresee),  Materially  Adversely  Affect,
the Company.

         2.4 Title to  Properties;  Leases.  The Company has good and marketable
title  in  fee  simple  to all  real  property  owned  by it and  has  good  and
merchantable  title to all other assets,  tangible and intangible,  owned in fee
simple  by the  Company  in the  Diablo  Business  (collectively,  with the Real
Property,  the  "Diablo  Assets"),  in all  cases  free and  clear of all  Liens
securing  Indebtedness  for Money Borrowed,  except such as are set forth in the
Disclosure Schedule. All buildings,  structures, towers, antennae,  improvements
and fixtures  comprising a part of the Diablo Assets are in good and technically
sound operating condition, have no latent structural mechanical or other defects
of material significance,  are reasonably suited for the purposes for which they
are being used and each has  adequate  rights of  ingress  and  egress,  utility
service  for  telephone  and  electric  for  the  conduct  of the  business  and
operations  of the  Diablo  Business  as  presently  conducted,  except for such
exceptions  which,  individually or in the aggregate,  would not have a Material
Adverse  Effect on the  Company,  except as  otherwise  set forth in the Company
Disclosure Schedule.

                                       -5-

<PAGE>



         Each  lease or other  occupancy  or other  agreement  under  which  the
Company  holds any of the Diablo Assets has been duly  authorized,  executed and
delivered  by the Company and is a legal,  valid and binding  obligation  of the
Company, enforceable in accordance with its terms. The Company, to the Company's
knowledge, has a valid leasehold interest in and enjoys peaceful and undisturbed
possession  under all such  leases.  All of such leases  are,  to the  Company's
knowledge, valid and subsisting and in full force and effect; and the Company is
not in default in the  performance,  observance or fulfillment in any respect of
any obligation,  covenant or condition  contained in any such lease,  except for
such  exceptions  which,  individually  or in the  aggregate,  would  not have a
Material Adverse Effect on the Company.

         2.5 Compliance with Governmental  Authorizations and Applicable Law. As
of the date  hereof,  there are no  judgments,  decrees or orders  issued by any
Authority  presently  outstanding  and  unsatisfied  against  the  Company.  The
Disclosure Schedule contains a brief description of

                  (a) all Legal  Actions or other Claims which are pending or in
         which the Company or its business, operations or properties, or, to the
         Company's knowledge, any of its officers,  directors or stockholders in
         connection  therewith,  is engaged,  or which  involves  the  business,
         operations or properties of the Company or, to the Company's knowledge,
         which are  threatened  or  contemplated  against,  the  Company  or its
         business,  operations or properties, or any of such officers, directors
         or  stockholders,   in  connection   therewith,   in  all  cases  which
         individually or in the aggregate could, if adversely determined, have a
         Materially Adverse Effect on the Company; and

                  (b) each Governmental Authorization which, if not obtained and
         maintained, could singly or in the aggregate, have any Material Adverse
         Effect on the Company (a "Material Governmental Authorization").

         No Governmental  Authorization is the subject of any pending or, to the
Company's  knowledge,  threatened  attack,  revocation or termination except for
such attacks,  revocations  or  terminations  as do not and will not have in the
aggregate any Material  Adverse Effect on the Company.  Neither the Company nor,
to the Company's  knowledge,  any of its officers,  directors or stockholders in
connection with the business, operations and properties of the Company, is

                  (i)      in  breach or  violation  or,  or in  default  in the
                           performance of, or

                  (ii)     charged  with any such  breach  or  violation  of, or
                           default under, or

                  (iii)    to the Company's knowledge,  threatened with or under
                           investigation  with  respect  to any such  breach  or
                           violation of, or default under,

any Governmental Authorization or any Applicable Law, and no Event exists or has
occurred,  which constitutes,  or but for any requirement of giving of notice or
passage  of time or both  would  constitute,  such a breach or  violation  of or
default  under  any  such  other  Material  Governmental  Authorization  or  any
Applicable Law,  except for such defaults,  breaches or violations as do not and
will not have in the aggregate any Material Adverse Effect on the Company.


                                       -6-

<PAGE>



         2.6 Related  Transactions.  The Disclosure  Schedule sets forth a fair,
complete and accurate in all material  respects  description of any  Contractual
Obligation  or  transaction  relating to any of the Diablo  Assets or the Diablo
Business between the Company and any of its officers, directors or stockholders,
or any  Affiliate  of any  thereof  (other  than for  services  as, or loans and
advances in the ordinary  course of business  to, any  thereof),  now  existing,
including without  limitation any providing for the furnishing of services to or
by,  providing for rental of property,  real,  personal or mixed, to or from, or
providing  for the  lending  or  borrowing  of  money  to or  from or  otherwise
requiring  payments to or from,  any such officer,  director or  stockholder  or
Affiliate,  except  for such as (a) will not  survive  the  consummation  of the
Acquisition or (b) are on terms at least as favorable to the Company as would be
obtained with Persons who are not Affiliated with the Company.

         2.7 Tax Matters.  The Company  has, at all times during its  existence,
been and is taxable as a Subchapter S  corporation  for federal and state income
Tax  purposes.  To the  Company's  knowledge,  (a)  all  Tax  Returns  which  in
accordance  with  Applicable Law are required to be filed by or on behalf of the
Company have been filed and all Taxes which have become due and payable pursuant
to  said  returns  and  all  estimated  Taxes  due and  payable  and  all  other
governmental  charges  and  assessments  due and  payable by or on behalf of the
Company have been paid,  (b) such returns have been prepared in accordance  with
all  Applicable  Laws, and (c) all Taxes which the Company is required by law to
withhold and collect have been duly withheld and  collected,  and have been paid
over,  in a timely  manner,  to the  proper  Authorities  to the  extent due and
payable, except as otherwise set forth in the Disclosure Schedule..

         2.8 Employment Arrangements. The Company is not now and during the past
five  years  has  not  been  subject  to or  involved  in or,  to the  Company's
knowledge,  threatened  with any union  elections,  petitions  therefor or other
organizational  activities,  relating to any of the Diablo  Assets or the Diablo
Business, except as described in the Disclosure Schedule. Except as described in
the Disclosure Schedule, none of the employees of the Company involved in any of
the Diablo Assets or the Diablo  Business is  represented  by any labor union or
other employee collective bargaining  organization or is a party to any labor or
other  collective  bargaining  agreement,  and there are no pending  grievances,
disputes  or  controversies  with any  union or any other  organization  of such
employees,  or threats of strikes,  work  stoppages  or any pending  demands for
collective  bargaining  by any  union  or  organization,  or,  to the  Company's
knowledge, any active organizing or recruiting of such employees with respect to
becoming  members  of any  union  or other  employee  or  collective  bargaining
organization.

         2.9  Ordinary  Course of  Business.  With respect to each of the Diablo
Assets and the Diablo  Business,  the  Company  from the end of its Most  Recent
Fiscal Year to the date  hereof,  and until the Closing  Date,  except as may be
described on the  Disclosure  Schedule or as may be required or permitted by the
terms of this Agreement or the Letter of Intent:

                  (a) has  operated,  and will  continue to operate,  the Diablo
         Business in the normal,  usual and customary manner in the ordinary and
         regular course of business;

                  (b) has not sold or  otherwise  disposed of, and will not sell
         or otherwise  dispose of or contract to sell or  otherwise  dispose of,
         any of the  properties  or  assets of any of the  Diablo  Assets or the
         Diablo  Business,  other  than  nonmaterial  amounts of  machinery  and
         equipment

                                       -7-

<PAGE>



         sold or otherwise disposed of in the ordinary course of business and no
         longer  needed in the  operation or business or replaced with assets of
         like kind or better kind and quality;

                  (c) except in each case in the ordinary  course of business of
         each of the Diablo Assets and the Diablo Business,

                           (i)  has  not   incurred   and  will  not  incur  any
                  obligations or liabilities (fixed, contingent or other);

                           (ii) has not  entered  and will  not  enter  into any
                  commitments; and

                           (iii) has not sold or transferred,  and will not sell
                  or  transfer,  any  tangible  asset or  canceled or cancel any
                  debts or claims;

                  (d) has not made and will not make any  additions  to property
         or  any  purchases  of  machinery  or  equipment,   except  for  normal
         maintenance and replacements;

                  (e) has not discharged or satisfied, and will not discharge or
         satisfy,  any Lien or paid or pay any obligation or liability (absolute
         or contingent)  other than current  liabilities  or  obligations  under
         contracts  then  existing or  thereafter  entered  into in the ordinary
         course of business,  and commitments under leases existing on that date
         or incurred since that date in the ordinary course of business;

                  (f) has not  placed  and will not place,  or  permitted  to be
         placed or permit to be placed,  any Lien on any of the Diablo Assets or
         the Diablo Business,  and has not  Transferred,  and will not Transfer,
         any of the Diablo Assets or the Diablo Business;

                  (g) has not  committed  or  suffered  to  exist,  and will not
         commit or suffer to exist, any Act of Bankruptcy;

                  (h) has not increased  and will not increase the  compensation
         payable  or to  become  payable  to  any of  its  officers,  employees,
         advisers, consultants, salesmen or agents involved in any of the Diablo
         Assets or the Diablo  Business,  has not and will not otherwise  alter,
         modify or change in any material  respect the terms of their employment
         or  engagement,  and has not  entered  and  will  not  enter  into  new
         employment  arrangements  with any of the foregoing,  other than in the
         ordinary  course of  business of the Diablo  Business  and on terms and
         conditions consistent with prior practices;

                  (i) has not suffered any material damage,  destruction or loss
         (whether or not covered by insurance) or any  acquisition  or taking of
         property by any Authority;

                  (j)  has not  waived,  and  will  not  waive,  any  rights  of
         substantial value without fair and adequate consideration;

                  (k)  has not experienced any work stoppage;


                                       -8-

<PAGE>



                  (l) has not  amended,  and will  not  amend,  in any  material
         respect,  has not terminated or entered into, and will not terminate or
         enter into, or become (or permit any of its property to be) bound by or
         subject   to   any   lease,   Governmental    Authorization,    Private
         Authorization,  Material Agreement,  Employment  Arrangement or Plan or
         any Contractual Obligation or transaction with any Affiliate;

                  (m) has not  amended  or  terminated  and  will  not  amend or
         terminate  (unless  replaced),  and will keep in full  force and effect
         including  without  limitation  renewing  to the  extent the same would
         otherwise expire or terminate,  insurance policies and coverage meeting
         the standards of Section 7.5;

                  (n) has not done any act or failed to do any act, and will not
         do any act or fail to do any act,  if such act or  failure to act might
         result in the expiration, revocation, suspension or modification of any
         of its Governmental Authorizations or Material Private Authorizations;

                  (o) has not issued, sold or purchased or agreed to issue, sell
         or  purchase  and will not issue,  sell or  purchase or agree to issue,
         sell or purchase,  any capital stock or any  Convertible  Securities or
         Option Securities;

                  (p) has not declared,  made or paid or agreed to declare, make
         or pay, and will not have declared,  made or paid or agreed to declare,
         make or pay, any Distribution; and

                  (q) has not entered into,  and will not enter into,  any other
         transaction or series of related  transactions which individually or in
         the  aggregate  is Material  to any of the Diablo  Assets or the Diablo
         Business.

         The  Company  will notify  American  of any and all Events  which would
require any material change to be made in the Disclosure  Schedule insofar as it
relates  to it or  which  could  cause  or  result  in any  material  breach  or
inaccuracy of the Company's  representations  and warranties  including  without
limitation those set forth in this Section or which could materially  impair the
likelihood  that all of the conditions  specified in Section 4 will be satisfied
on or prior to the Closing Date.

         2.10  Private  Sale.  The Company has not,  directly or  indirectly  or
through  anyone acting on its behalf,  offered any of the Notes,  the Additional
Compensation  Certificates  or any similar  securities for sale to, or solicited
any offers to buy any thereof  from,  or otherwise  approached  or negotiated in
respect thereof with, any Person or Persons other than American, and the Company
agrees that neither it nor any agent on its behalf will offer to sell any of the
foregoing  securities,  or solicit any offers to buy any  thereof,  or otherwise
approach  or  negotiate  with any Person in respect  thereto,  or take any other
action,  so as to  bring  the  issuance  and  sale  of any of the  Notes  or the
Additional  Compensation  Certificates under the registration  provisions of the
Securities Act.

         2.11  Disclosure.  To the Company's  knowledge,  neither the Disclosure
Schedule nor any other document,  certificate or statement furnished to American
by or behalf of the company in  connection  with the  transactions  contemplated
hereby  contains  any untrue  statement  of a material  fact or omits to state a
material fact required to be stated  therein or necessary to make the statements
therein not misleading.

                                       -9-

<PAGE>



         2.12 Use of Proceeds. The Company shall use the proceeds of the sale of
the Note and the Additional  Compensation  Certificates to American hereunder to
complete the development of new communication sites and capital improvements to,
but not  personnel  costs,  maintenance  or other expense items of, its existing
communication  sites. At the election of the Company,  such proceeds may also be
used to replenish  funds used for such expenses  incurred  subsequent to October
31, 1996.

         2.13  Material  Agreements  and Private  Authorizations.  Except as set
forth on the Disclosure Schedule:

                  (a) The Company has  obtained all Private  Authorizations  and
         Material  Agreements which are necessary for the ownership by it of the
         properties and assets  constituting a part of the Diablo Assets and the
         conduct  of the  Diablo  Business  as  now  conducted  or as  presently
         proposed to be  conducted or which,  if not  obtained  and  maintained,
         could, individually or in the aggregate, have a Material Adverse Effect
         on the Company;

                  (b) As of the date hereof, all of such Material Agreements are
         valid, binding and legally enforceable  obligations of the Company and,
         to the  knowledge  of the  Company,  the other party  thereto,  and the
         Company is validly and  lawfully  operating  the business of the Diablo
         Assets and the Diablo Business and owning or using the related property
         under each of such Material Agreements;

                  (c)  No  such  Private  Authorization  is the  subject  of any
         pending or, to the Company's knowledge,  threatened attack,  revocation
         or termination; and

                  (d) As of the date  hereof,  the Company has duly  complied in
         all respects with all of the terms and conditions of each such Material
         Agreement  and  each  such  Private  Authorization  and has not done or
         performed,  or failed to do or perform (and there is no pending, or, to
         the Company's knowledge,  threatened, Claim that the Company has not so
         complied,  done and  performed or fail to do and perform) any act which
         would  invalidate  or provide  grounds for the other  party  thereto to
         terminate  (with  or  without  notice,  passage  of  time or  both)  or
         materially impair its rights or benefits of, or materially increase the
         costs to, the Company, under any of such Material Agreements or Private
         Authorizations,  except,  in all  cases,  for  such  exceptions  which,
         individually  or in the  aggregate,  would not have a Material  Adverse
         Effect on the Company.

         2.14 Employee  Retirement  Income Security Act of 1974. The Company has
not at any  time  during  the  past  five  years  made  and  is not  making  any
contribution  to any Plans and is not bound by any Plan  relating  to any of its
employees  involved in the ownership and  operations of any of the Diablo Assets
or the Diablo Business,  except as set forth in the Disclosure  Schedule.  As to
all such Plans and except as listed in the Disclosure  Schedule,  all such Plans
comply  and have been  administered  in form and in  operation  in all  material
respects with all Applicable Laws. The Company is not and never has been a party
to any Multiemployer Plan or made contributions to any such Plan.

         2.15  Authorized  and  Outstanding  Capital Stock . The  authorized and
outstanding  capital  stock of the  Company  is as set  forth in the  Disclosure
Schedule. All of such outstanding capital

                                      -10-

<PAGE>



stock  has  been  duly  authorized  and  validly  issued,   is  fully  paid  and
nonassessable and is not subject to any preemptive or similar rights.  Except as
set forth in the Disclosure  Schedule,  (i) there is neither outstanding nor has
the Company  agreed to grant or issue any shares of capital  stock or any Option
Security or  Convertible  Security  and (ii) the Company is not a party to or is
not bound by any agreement,  put or commitment pursuant to which it is obligated
to  purchase,  redeem or  otherwise  acquire any shares of capital  stock or any
Option Security or Convertible Security.

         2.16 Inapplicability of Specified Statutes.  The Company is not, to its
knowledge, a "holding company", or a "subsidiary company" or an "affiliate" of a
"holding  company",  as such terms are  defined in the  Public  Utility  Holding
Company  Act of 1935,  as  amended,  or an  "investment  company"  or a  company
"controlled"  by or acting on behalf of an "investment  company",  as defined in
the Investment Company Act of 1940, as amended, or a "carrier" or a person which
is in control of a "carrier", as defined in sections 10102 or 11301 of Title 49,
U.S.C.  The Company is not engaged in the business of  extending  credit for the
purpose of  purchasing  or  carrying  any  margin  stock  within the  meaning of
Regulations G and U of the Board of Governors of the Federal Reserve System.

         3.  Representations,  Warranties  and  Covenants of American.  American
represents and warrants that:

         3.1  Organization and Business; Power and Authority.

         (a) American (i) is a corporation duly organized,  validly existing and
in good  standing  under  the laws of the  state of  Delaware,  and (ii) has all
requisite  power and authority  (corporate and other) to own or hold under lease
its  properties  and to conduct its business as now  conducted  and as presently
proposed to be conducted.

         (b) American has adequate power and authority (corporate and other) and
all necessary franchises,  permits,  licenses and other rights and privileges to
allow it to execute and  deliver,  and to perform its  obligations  under,  this
Agreement  and each  other  Related  Agreement  to which it is a party;  and the
execution,  delivery and  performance  of this  Agreement and each other Related
Agreement  to which it is a party  have been duly  authorized  by all  requisite
corporate action. This Agreement  constitutes,  and each other Related Agreement
to which it is a party, when executed and delivered by American will constitute,
valid and binding obligations of American,  enforceable in accordance with their
respective  terms,  except as (i) the  enforceability  thereof may be limited by
bankruptcy,  insolvency or similar laws affecting the  enforcement of creditors'
rights generally and (ii) the availability of equitable  remedies may be limited
by equitable principles of general ap plicability.

         (c) Neither the execution and delivery of this  Agreement or any of the
other  Related  Agreement to which it is a party,  nor the  consummation  of the
transactions  herein or therein  contemplated,  nor  compliance  with the terms,
conditions and provisions hereof or thereof by American:

                  (i) will conflict  with, or result in a breach or violation of
         or constitute a default in the  performance,  observance or fulfillment
         of any obligation, covenant or condition

                                      -11-

<PAGE>



         contained in, or  constitute,  or but for any  requirement of giving of
         notice or  passage of time or both  would  constitute,  a default or an
         event of  default  by  American  under,  any  Applicable  Law,  Private
         Authorization, Governmental Authorization or Contractual Obligation, or

                  (ii) will  require any  approval or action of, or filing with,
         any Authority, except as United States and state securities,  antitrust
         and communications laws may apply.

         3.2  Investment Representation.

         (a) American is an "accredited investor" within the meaning of Rule 501
promulgated  under the Securities Act and has been furnished with and had access
to all  information,  financial  and  other,  and  has  the  opportunity  to ask
questions  of the  management  of the  Company  with  respect to the Company and
American's proposed investment therein.

         (b) American is  acquiring  the Notes and the  Additional  Compensation
Certificates  to be purchased by it for its own account for  investment  with no
present intention of distributing or reselling the same, subject,  nevertheless,
to its right,  subject  to the  provisions  of  Section  5.7 of the Notes and of
Section  2(d) of the  Additional  Compensation  Certificates,  to dispose of the
Notes and the Additional  Compensation  Certificates  or any part thereof in its
sole discretion; provided, however, that notwithstanding the foregoing, American
may pledge any or all of the Notes and the Additional Compensation  Certificates
to any bona fide lender to American.  American  understands  that the Company is
not  and  will  not be  required  to file a  registration  statement  under  the
Securities Act in connection with any sale, transfer or other disposition of the
Notes or the Additional Compensation Certificates.

         3.3 Covenant Regarding Transfer.  American covenants and agrees that it
will not sell, assign,  transfer or otherwise dispose of any of the Notes or the
Additional Compensation Certificates in violation of the Securities Act.

         4. Conditions of Closing.  American's  obligation to purchase the Notes
and the Additional  Compensation  Certificates shall be subject to compliance by
the Company with its agreements herein  contained,  to the truth and accuracy in
all material respects of the certificates to be furnished to it pursuant to this
Section,  the truth and accuracy in all material respects of the representations
and  warranties  made by the  Company  herein,  and to the  condition  that  all
instruments  and  corporate  and  legal  matters  incident  to the  transactions
contemplated by this Agreement shall be reasonably  satisfactory in form,  scope
and  substance to American and its counsel,  and American and its counsel  shall
have received all information and copies of all documents,  including records of
corporate  proceedings,  which  it or its  counsel  may  reasonably  request  in
connection  therewith,  such  documents  where  requested or  appropriate  to be
certified  by  proper  corporate  or  governmental   authorities,   and  to  the
satisfaction on the Closing Date of the following further conditions:

         4.1 Company's Officer's  Certificate.  Subject to the provisions of the
Letter of Intent, (a) the representations and warranties  contained in Section 2
shall be true and  correct in all  material  respects  on and as of the  Closing
Date; (b) no Material  Adverse Change affecting the Company shall be pending or,
to the Company's knowledge,  threatened; and (c) no event which if the Notes had
been outstanding immediately prior to the Closing Date would constitute an Event
of Default or a

                                      -12-

<PAGE>



Potential  Default  shall have  occurred and be  continuing on the Closing Date.
American shall have received on the Closing Date a certificate dated the Closing
Date to such effect,  and to the effect that each of the conditions set forth in
this  Section  has  been  satisfied  in  all  material  respects,  signed  by an
authorized executive officer of the Company.

         4.2 Company's Secretary's Certificate.  A certificate,  dated as of the
Closing  Date,  executed by the Company's  secretary:  (i)  certifying  that the
resolutions, as attached to such certificate,  were duly adopted by the Board of
Directors  of the  Company,  authorizing  and  approving  the  execution of this
Agreement by the Company and the  consummation of the  transaction  contemplated
hereby  and that such  resolutions  remain in full  force and  effect;  and (ii)
providing,  as attachments  thereto, a certificate of good standing certified by
an appropriate California state official as of a date not more than fifteen (15)
days before the Closing  Date and by the  Company's  secretary as of the Closing
Date, and a copy of the Company's  Articles of  Incorporation  and By-Laws as in
effect on the date  thereof,  certified  by the  Company's  secretary  as of the
Closing Date.

         4.3 Opinion of Company Counsel.  American shall have received favorable
opinions,  dated the Closing Date and reasonably satisfactory in scope, form and
substance  to it and its  counsel,  from  counsel  for the  Company,  (i) to the
effects stated in Sections  2.1(a),  2.1(b),  2.1(d) (limited to corporate power
and authority),  2.1(e) (to such counsel's knowledge), and 2.16, and (ii) to the
effect  that the  offer,  issue,  sale  and  delivery  of the  Notes  under  the
circumstances contemplated by this Agreement constitute transactions exempt from
the registration  provisions of the Securities Act, and neither the registration
thereunder  of the Notes or the  Additional  Compensation  Certificates  nor the
qualification  of this  Agreement  under the  Trust  Indenture  Act of 1939,  as
amended to date, is required.

         4.4  Legality;  Governmental  and Other  Authorizations.  Except as set
forth on the Disclosure Schedule,  the purchase of and payment for the Notes and
the Additional  Compensation  Certificates shall not be prohibited by any law or
governmental order or regulation  applicable to American,  and shall not subject
American  to any  penalty,  tax,  liability  or  other  onerous  condition.  All
necessary consents, approvals,  licenses, permits, orders and authorizations of,
or registration,  declaration or filing with, any Authority or any other Person,
with respect to the transactions contemplated hereby shall have been obtained or
made and shall be in full force and effect.

         5.  Payment and Exchange of Notes; Lost Notes.

         5.1  Payments.  Any other  provision of this  Agreement or of the Notes
notwithstanding,

                  (a) interest,  principal and any premium to be paid in respect
         of any  Note  held by  American  or its  nominee  shall be paid by wire
         transfer of  immediately  available  funds to such accounts as may from
         time to time be  designated  in writing by  American,  or in such other
         reasonable  manner, or at such other address,  as may from time to time
         be designated in writing by American by notice given in accordance with
         the provisions of this Agreement;

                  (b)  interest,  principal  and any  premium  to be paid to any
         subsequent Holder of Record that is an Institutional  Investor shall be
         paid by wire transfer (or such other reasonable  manner as requested in
         writing by such Holder of Record) of immediately

                                      -13-

<PAGE>



         available  funds to such Holder of Record at such address in the United
         States of America as may from time to time be  designated in writing to
         the Company by such Holder of Record by notice given in accordance with
         the provisions of this Agreement; and

                  (c)  interest,  principal  and any  premium  to be paid to any
         other Holder of Record shall be paid by mailing a check (in the case of
         interest)  and  certified  or bank  cashier's  check  (in  the  case of
         principal)  to such  Holder of Record,  at the  address of such  Holder
         shown on the register  maintained  pursuant to the  provisions  of this
         Agreement, or such other address in the United States of America as may
         from time to time be  designated  in  writing  to the  Company  by such
         Holder of Record by notice given in accordance  with the  provisions of
         this Agreement.

         Interest,  principal  and any premium to be paid in respect of any Note
shall be paid without any presentment or notation of payment,  and the amount of
principal  so paid on any Note shall be  regarded  as having  been  retired  and
canceled  at the time of  payment.  Each  Holder of  Record  of any Note  shall,
however, at any time during its regular business hours on any day when a payment
of principal is due, permit the Company at the office of the Holder of Record of
such Note to make  appropriate  notation on such Note of the amount of principal
which  has been paid  thereon,  if the  Company  at least  fifteen  (15) days in
advance shall have requested in writing permission to make such notation. Before
the  transfer of any Note,  the Holder of Record  thereof  shall make a notation
thereon  of the  date to which  interest  has  been  paid  and of all  principal
payments  theretofore  made thereon,  and shall in writing notify the Company of
the name and address of the transferee,  but  notwithstanding the giving of such
notice,  such transferee shall not be considered a Holder of Record of such Note
until it shall have complied  with the  provisions of Section 5.4. Any Note with
respect to which  interest,  principal and any premium has been fully paid shall
be marked paid in full and  surrendered  to the Company and shall be retired and
canceled.

         5.2 Exchange.  Subject to the  provisions of Section 5.7, the Holder of
Record  of any of the  Notes  may,  prior to  maturity  or  prepayment  thereof,
surrender  any Note  held by it for  exchange  at the  principal  office  of the
Company.  Within a reasonable time thereafter and without expense to such Holder
of Record, the Company shall, subject to the provisions of Section 5.7, issue in
exchange therefor another Note or Notes of the same issue for the same aggregate
principal  amount as the  unpaid  principal  amount of the Note so  surrendered,
having the same maturity and rate of interest,  containing  the same  provisions
and subject to the same terms and conditions as the Note so surrendered, in such
denomination or denominations as the Holder of Record making such exchange shall
request; provided,  however, that if the issue of more than one such new Note is
requested,  such new Notes shall be issued only in denominations of $10,000,  or
larger amounts which are integral multiples of $10,000,  except that one Note so
issued shall be for the amount by which the unpaid  principal amount of the Note
or Notes so surrendered exceeded an integral multiple of $10,000.  Each such new
Note shall be  payable to such  Person or  Persons,  or order,  as the Holder of
Record of such  surrendered  Note or Notes may  designate  in writing,  and such
exchange  or  transfer  shall be made in such a  manner  that no gain or loss of
principal or interest shall result  therefrom.  Any Note issued and delivered in
accordance  with the provisions of this Section shall be dated as of the date to
which interest has been paid on the Note exchanged therefor.  The Company agrees
that it will pay shipping and  insurance  charges from and to the main office of
any  Institutional  Investor  involved in any  exchange or transfer of a Note or
Notes held by it.

                                      -14-

<PAGE>



Notwithstanding the foregoing  provisions of this Section, the Company shall not
be required to issue and deliver any new Notes  pursuant to this Section  unless
it is  indemnified  against and held  harmless  from any United States and state
documentary stamp or similar excise taxes and any transfer taxes.

         5.3  Replacement  of Notes.  Upon  receipt by the  Company of  evidence
satisfactory  to it of the loss,  theft,  destruction or mutilation of any Note,
and (in case of loss, theft or destruction) of indemnity satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of any Note, if mutilated,  the Company will
make and  deliver a new Note of like  tenor in lieu of such Note in a  principal
amount equal to the sum of the then unpaid  principal  amount of,  together with
accrued and unpaid interest on, such lost, stolen,  destroyed or mutilated Note.
Any Note made and  delivered in accordance  with the  provisions of this Section
shall be dated as of the date to which  interest has been paid on the Note lost,
stolen,  destroyed or mutilated  and shall  indicate  that it is being issued in
substitution  for,  but not in  payment  of,  the  lost,  stolen,  destroyed  or
mutilated  Note.  The  term  "outstanding"  when  used  in this  Agreement  with
reference to the Notes as of any  particular  time shall not include any Note in
lieu of  which a new  Note  has  been  made  and  delivered  by the  Company  in
accordance  with the provisions of this Section or any Note held by the Company.
Notwithstanding  any  provision to the contrary  herein or in the Notes,  if any
Note of which  any  Institutional  Investor  is the  holder  is lost,  stolen or
destroyed,  then  the  affidavit  of the  principal  financial  officer  of such
Institutional  Investor,  setting forth the  circumstances  with respect to such
loss, theft or destruction,  shall be accepted as satisfactory evidence thereof,
and no indemnity  shall be required as a condition to the execution and delivery
of a new Note or Notes  for a like  aggregate  principal  amount,  other  than a
written   agreement  by  such   Institutional   Investor,   in  form  reasonably
satisfactory to the Company, to indemnify the Company against loss on account of
the making of any  payment  in  respect  of any such lost or stolen  Note to any
Person legally entitled to such payment.

         5.4 Transfer Office and Record of Holders of Notes. The Company will at
all times  keep or cause to be kept,  at the  principal  office of the  Company,
appropriate records for the registration and transfer of the Notes,  identifying
the Holders of Record,  from time to time,  of the Notes,  and shall cause to be
recorded  therein the names and  addresses of the Holders of Record of the Notes
from time to time, and any and all transfers thereof;  provided,  however,  that
the Company  shall be required to record the transfer of a Note only if and when
a  subsequent  holder  shall have (a)  presented  such Note to the  Company  for
inspection,  properly  endorsed  or  assigned  and in order  for  transfer,  (b)
delivered to the Company a written  notice of its  acquisition of such Note, and
(c) designated in writing an address to which payments on and notices in respect
of such Notes shall be transmitted.

         5.5 Transfer of Notes.  Subject to the  provisions  of this  Agreement,
including  without  limitation  Section 5.7, any Note may be  transferred at the
principal office of the Company by surrender thereof for cancellation,  endorsed
or  accompanied  by  a  written  instrument  of  transfer,  in  form  reasonably
satisfactory  to the  Company,  duly  executed  by or on behalf of the Holder of
Record,  and  thereupon  the Company will issue and deliver,  in the name of the
transferee or transferees,  a new Note, for a like aggregate  principal  amount,
dated as of the date to which interest has been paid on the Note so transferred.


                                      -15-

<PAGE>



         5.6 Registered Owners of Notes. Except as provided in Section 5.1 (with
respect to places of payment  designated  by American or a Holder of Record) and
Section  10.4 (with  respect to notices to  nominees  designated  as such),  the
Company and all other Persons may treat the registered  holder,  as shown on the
records maintained  pursuant to Section 5.4, of any Note, for the time being, as
the owner thereof for the purposes of receiving  payment of the principal of and
premium,  if any, and interest on such Note and for all other purposes,  and the
Company  shall not be  affected  by any  notice or  knowledge  to the  contrary,
whether  payments on the Notes  shall be overdue or not;  and the  Company,  and
every  successive  registered  holder and  assignee  of a Note by  accepting  or
holding  the same,  shall be deemed to have  consented  to and  agreed  with the
provisions of this Section.

         5.7  Limitation  on  Transfer of Notes.  Anything in this  Section 5 or
elsewhere  in this  Agreement  to the  contrary  notwithstanding,  prior  to the
earlier of  September  30,  1997 or the  acceleration  of the Notes by  American
pursuant to the  provisions of Section 6.1, the Notes shall not be  transferable
by American (or any of its Affiliates) except (a) to an Affiliate of American or
(b) to one or more bona fide lenders to American or any of its Affiliates.

         6.  Payment Provisions.

         6.1 Required Payments. Subject to the provisions of Section 6.2(a), the
Notes shall be paid in their entirety, without premium but with interest accrued
and unpaid  thereon to the date of  payment,  upon the  earliest to occur of (a)
consummation  of the  Acquisition  (in which event the Company  may, in its sole
discretion,  elect  to  have  the  Notes  assumed  by  American  as part of such
transaction in which event the  consideration  to be delivered by American shall
be reduced by an amount  equal to the  principal  amount of the Notes so assumed
and  accrued and unpaid  interest  thereon to the date of  assumption),  (b) the
occurrence of the  Acquisition  Termination  Date,  and either (i) the demand by
American  for payment  thereof or (ii) the election of the Company to prepay the
Notes, in either case, in its sole discretion, and (c) June 30, 2000.

         6.2 Restriction on Optional Payments. The Company may prepay the Notes,
in whole but not in part, either:

                  (a)  in  the  event  of  the  occurrence  of  the  Acquisition
         Termination  Date, the Company may, in its sole  discretion,  elect, at
         any time within ninety (90) days of the  occurrence of the  Acquisition
         Termination  Date,  to prepay the  Notes,  at their  principal  amount,
         without  premium but with  interest  accrued and unpaid  thereon to the
         date of payment,  either in cash or pursuant to an agreement  customary
         in comparable  transactions  and  reasonably  satisfactory  to American
         relating to the purchase and sale of the DCSC Business,  free and clear
         of all Liens,  except as otherwise set forth in Exhibit B to the Letter
         of Intent.  Such  agreement  shall (i) provide for a purchase price for
         the DCSC  Business  equal to (A) the sum of  $4,200,000  and an  amount
         equal to the  amount of any  capital  improvements  made by DCSC or the
         Company  to the DCSC  Assets  since  October  31,  1996,  minus (B) the
         principal  amount of the Notes and the DCSC  Notes,  plus  accrued  and
         unpaid  interest  on the  Notes  and  the  DCSC  Notes  to the  date of
         consummation of such purchase and sale (which shall be on such date not
         earlier than  December 15, 1997 and not later than December 31, 1997 as
         American  and the Company may agree),  and (ii)  contain such terms and
         conditions as are customary in comparable  transactions  and reasonably
         satisfactory to the Company and American.

                                      -16-

<PAGE>




                  (b) except as provided  in Section  6.2(a),  for cash,  at any
         time after December 31, 1997, at their  principal  amount together with
         interest  accrued to the date of payment;  provided,  however,  that it
         shall be a  condition  of the  Company's  right  to  prepay  the  Notes
         pursuant to the provisions of this Section 6.2(b) that,  simultaneously
         with such  prepayment,  DCSC shall have  prepaid in their  entirety the
         DCSC Notes.

         6.3 Notice of Payment and Offers to Repurchase. Notice of each required
or optional  payment of Notes  pursuant to Section 6.1 or 6.2 and each  optional
offer to repurchase  pursuant to Section 6.5 shall be given not less than thirty
(30) nor more than  sixty  (60) days  before  the date of  payment  or  proposed
repurchase date, and all such notices shall be given by mailing by registered or
certified  mail to each  Holder of Record of Notes to be paid or  repurchased  a
notice of intention, or offer, to pay or repurchase,  which notice shall include
statements  specifying  (a) the date of the  intended  payment  or the  proposed
repurchase  date,  (b) the  provision of this  Agreement  pursuant to which such
payment or offer is being made, (c) the aggregate  principal amount of the Notes
to be paid,  or to which such offer to  repurchase  relates,  (d) the  principal
amount  of the Notes  registered  in the name of such  Holder to be paid,  or to
which such offer to repurchase relates, and (e) the premium, if any, and accrued
interest  to be paid in respect  of the  principal  amount so to be paid,  or to
which such offer to repurchase relates.

         6.4 Maturity; No Reissue. Notes or portions thereof to be paid pursuant
to any provision of this  Agreement  shall become due and payable on the payment
date,  together  with accrued  interest and premium,  if any, and from and after
such date  (unless the  Company  shall  default in paying the amounts  then due)
interest  thereon  shall  cease  to  accrue.  Any  Note  paid in full  shall  be
surrendered  to the Company and canceled and shall not be reissued,  and no Note
shall be issued in respect of any paid principal amount of any Note, and no such
paid Note or paid portion of a Note shall be considered to be "outstanding"  for
any purpose hereof.

         6.5  Purchase of Notes.  The Company  will not, and will not permit any
Subsidiary  to,  purchase  or  otherwise  acquire  any Note except (a) by way of
payment in accordance  with the provisions of the Notes and this  Agreement,  or
(b) pursuant to a repurchase  offer made by the Company pro rata and on the same
terms  to  each  Holder  of  Record  of  Notes  to be  repurchased  at the  time
outstanding,  pursuant to a notice  given in  accordance  with Section 6.3 which
notice  shall state  whether such offer may be accepted in part or only in full,
and shall  provide that any such ac ceptance  may be given by written  notice to
the Company in  accordance  with the  provisions  of this  Agreement at any time
prior to such  date,  not less than  thirty-five  (35) days from the date of the
notice of the Company's offer under this Section as shall be specified  therein.
Any Notes repurchased pursuant to this Section shall be canceled by the Company,
and shall not be reissued or deemed to be "outstanding"  for any purpose of this
Agreement.

         7. Special Covenants of Company. Without limiting any other covenant or
provision  hereof,  the Company  covenants and agrees that so long as any of the
Notes are outstanding,  it shall comply with,  perform and observe the following
covenants  and  provisions  and shall cause each  Subsidiary,  if any, to comply
with,  perform and observe  said  covenants  and  provisions  as are  applicable
thereto  (it being  understood,  in any  event,  that to the  extent  any of the
covenants of this Section refer to

                                      -17-

<PAGE>



consolidated  financial  information they shall apply to the Company only in the
event that the Company has no Subsidiaries).

         7.1 Payments. The Company will duly and punctually pay the principal of
and premium,  if any, and interest on the Notes in accordance  with the terms of
this Agreement and the Notes.

         7.2 Prompt  Payment of Taxes and  Indebtedness.  The Company will,  and
will  cause  each of its  Subsidiaries  to,  pay  promptly,  or cause to be paid
promptly,  all taxes,  assessments and other  governmental  charges or levies of
whatever nature imposed on it, or upon it or its income or profits,  or upon any
of its property,  real, personal or mixed;  provided,  however,  that unless and
until foreclosure,  distraint sale or other similar  proceedings shall have been
commenced, nothing herein shall require the Company or any Subsidiary to pay any
such tax,  assessment,  charge or levy so long as the validity  thereof shall be
currently contested in good faith by appropriate  proceedings and if the Company
or such Subsidiary shall have set aside on its books reserves deemed adequate by
the Company's  Independent  Accountants  with respect thereto in accordance with
CAAP,   consistently  with  the  Financial   Statements  delivered  to  American
hereunder. The Company will, and will cause each of its Subsidiaries to, (a) pay
or cause to be paid  when due all  payments  of  principal  of and  premium  and
interest on  Indebtedness  for Money  Borrowed and will not permit or suffer any
such Indebtedness for Money Borrowed to become or remain in default,  (b) pay or
cause to be paid when due all lawful claims for labor and rents,  and (c) pay or
cause to be paid in a manner consistent with prudent business practice all trade
payables and pay or cause to be paid when due all other  Indebtedness upon which
it is or becomes obligated, except, in each case, other than that referred to in
clause  (a),  to the  extent  payment  is  being  contested  in  good  faith  by
appropriate  proceedings  and if the Company or such  Subsidiary  shall have set
aside  on its  books  reserves  deemed  adequate  by the  Company's  Independent
Accountants with respect thereto in accordance with CAAP,  consistently with the
Financial  Statements   delivered  to  American  hereunder,   unless  and  until
foreclosure,  distraint  sale or  other  similar  proceedings  shall  have  been
commenced.

         7.3 Conduct of  Business.  Subject to the  provisions  of the Letter of
Intent and, if executed and delivered,  the Acquisition Agreement (so long as it
shall  remain in  effect),  the  Company  (a) will,  and will  cause each of its
Subsidiaries  to, continue to engage in the business of owning and operating the
Diablo Assets and conducting the Diablo  Business and (b) will do or cause to be
done all things reasonably  necessary to preserve,  renew and keep in full force
and effect  and in good  standing  its  corporate  existence  and its rights and
franchises necessary to conduct such business. Notwithstanding clause (b) of the
preceding  sentence,  the Company may merge or cause any Subsidiary to be merged
with or into the Company or another  Subsidiary,  or may cause any  Wholly-Owned
Subsidiary which is a Wholly-Owned Subsidiary of another Subsidiary to liquidate
and distribute its assets and liabilities to such latter Subsidiary.

         7.4  Maintenance  of Property and Leases.  Subject to the provisions of
the Letter of Intent and, if executed and delivered,  the Acquisition  Agreement
(so long as it shall remain in effect), the Company will, and will cause each of
its  Subsidiaries  to: (a) keep its assets and property  relating to each of the
Diablo  Assets  and the  Diablo  Business  in good  repair,  working  order  and
condition, and from time to time will make all repairs, renewals,  replacements,
additions  and  improvements  thereto so that its  business  may be properly and
advantageously  conducted at all times; and (b) comply in all material  respects
with the provisions of all leases of real or personal property relating

                                      -18-

<PAGE>



to each of the Diablo  Assets and the Diablo  Business to which it is a party or
under  which  it oc  cupies  or  uses  property  so as to  prevent  any  loss or
forfeiture  thereof or thereunder;  provided,  however,  that the Company or any
Subsidiary  may  cancel,  surrender  or modify any such lease if such  action is
deemed to be advantageous to the Company's or such Subsidiary's business.

         7.5  Maintenance of Insurance.  Subject to the provisions of the Letter
of Intent and, if executed and delivered,  the Acquisition Agreement (so long as
it shall remain in effect), the Company will, and will cause each Subsidiary to:
(a) keep its assets and property  relating to each of the Diablo  Assets and the
Diablo  Business which are of an insurable  character and which are  customarily
insured by companies of  established  reputation  engaged in the same or similar
business  similarly situated insured by financially sound and reputable insurers
against  loss or  damage by fire,  explosion  and  hazards  insured  against  by
extended coverage in amounts sufficient to prevent the Company or any Subsidiary
from  becoming  a  co-insurer;  and (b)  maintain  with  financially  sound  and
reputable  insurers  insurance  against other hazards and risks and liability to
persons and property, to the extent and in the manner customary for companies of
established  reputation  engaged  in the same or  similar  businesses  similarly
situated.

         7.6  Maintenance  of Accounts and Records.  The Company will,  and will
cause each of its  Subsidiaries  to,  keep true  records and books of account in
which full, true and correct  entries will be made of dealings and  transactions
in relation to the  ownership and operation of the Diablo Assets and the conduct
of the Diablo Business, in accordance with CAAP consistently applied,  except as
otherwise set forth in the Disclosure Schedule,  and shall prepare the financial
statements  required to be furnished  pursuant to Section 7.9. The Company will,
and  will  cause  each  Subsidiary  to,  apply  accounting   principles  in  the
preparation  of the financial  statements  of the Company and its  Subsidiaries,
which, in the judgment of the Company,  are in accordance with CAAP consistently
applied,  except that no notes shall be required with respect thereto and except
as otherwise set forth in the Disclosure  Schedule.  In the event of a change in
any method of accounting used by the Company or any Subsidiary that is permitted
by this  Agreement,  such  change  shall  not be deemed to result in an Event of
Default if, at the time of such change, an Event of Default had not occurred and
was not then continuing, based upon the former methods of accounting used by the
Company;  provided,  however,  that,  if,  after any such  change in  accounting
methods,  either the Company or American (or the holders of the Notes) determine
in good faith that any requirements of this Agreement are substantially  altered
as a result of such change,  the Company and American agree to negotiate in good
faith with respect to a change in such requirements.

         7.7 Compliance  With Laws. The Company will, and will cause each of its
Subsidiaries  to, comply with all  Applicable  Laws in respect of the conduct of
the Diablo  Business and the  ownership of the assets and property of the Diablo
Assets,  except  such as are being  contested  in good faith and except for such
noncompliances  as will not in the aggregate  have a Material  Adverse Effect on
the Company.

         7.8  Miscellaneous  Information.  From time to time upon  request,  the
Company  will  furnish  to each  Holder  of any of the  Notes  such  information
regarding the business, properties, financial condition and results of operation
of the  Company  and its  Subsidiaries  in such  detail  as may  reason  ably be
requested;   and  the  Company   covenants   and  agrees  that  any   authorized
representative of any such Holder shall have the right,  reasonably exercisable,
to visit and inspect any of the properties

                                      -19-

<PAGE>



of the  Company  or any of its  Subsidiaries,  to examine  and to discuss  their
affairs,  finances and accounts  (including  without  limitation  any letters of
comment with respect to audits,  letters to management or  confidential  reports
relating to financial  matters  submitted to the Company or its  Subsidiaries by
independent  public  accountants)  with, and be advised as to the same by, their
officers,  all at  such  reasonable  times  and  intervals  as such  Holder  may
reasonably request.

         7.9  Information  and Reports to Be Furnished  by Company.  The Company
will furnish to each Holder of any of the Notes:

                  (a) Financial  Statements.  The following financial statements
         relating  to  each  of the  Diablo  Assets  and  the  Diablo  Business,
         substantially in the form customarily prepared by the Company:

                           (i)  Quarterly  Reports.  In  duplicate  as  soon  as
                  available and, in any event, within forty-five (45) days after
                  the end of each quarter  (including the last) of the Company's
                  fiscal year, a balance sheet, and related statements of income
                  and retained earnings and cash flow for such period (including
                  year to date),  together with  comparative  figures as at such
                  date or for the same periods of the preceding year and for the
                  Company's  budget  for such  fiscal  year,  all in  reasonable
                  detail,  accompanied  by supporting  statements and schedules,
                  normally prepared by the Company in connection therewith,  and
                  accompanied  by a certificate  of the  principal  financial or
                  accounting  officer  of the  Company  (A)  stating  that  such
                  statements have been properly prepared in accordance with CAAP
                  and are true,  correct and complete in all  material  respects
                  and fairly  present the financial  condition of the Company at
                  and as of the dates thereof and the results of its  operations
                  for  the  periods  covered  thereby  subject  only  to  normal
                  non-material year-end accounting adjustments,  and (B) stating
                  that he has reviewed  this  Agreement  and has no knowledge of
                  any breach of or default under the  provisions of Section 7.10
                  through 7.15, both  inclusive,  or Section 7.17, or, if he has
                  such  knowledge,  specifying  such  breach or default  and the
                  nature  thereof and the period of  existence  thereof and what
                  action the  Company  has taken,  is taking or proposes to take
                  with respect thereto.

                           (ii)  Monthly  Reports.   In  duplicate  as  soon  as
                  available and, in any event, within forty-five (45) days after
                  the end of each month  (including  the last) of the  Company's
                  fiscal year, a balance sheet, and related statements of income
                  and retained earnings and cash flow for such period (including
                  year to date),  together with  comparative  figures as at such
                  date or for the same periods of the preceding year and for the
                  Company's  budget  for  such  fiscal  year,  all in  the  form
                  customarily prepared for management.

                           (iii)  Annual  Statements.  In  duplicate  as soon as
                  available  and,  in any event,  within one  hundred and twenty
                  (120) days after the end of each fiscal year of the Company, a
                  balance sheet,  and related  statements of income and retained
                  earnings   and  cash  flow  for  such  year,   together   with
                  comparative  figures as at the end of and for the  immediately
                  preceding  fiscal year and for the  Company's  budget for such
                  fiscal  year,  all  in  reasonable   detail,   accompanied  by
                  supporting statements and

                                      -20-

<PAGE>



                  schedules,  normally  prepared  by the  Company in  connection
                  therewith,  and  accompanied  by (A) a  letter  from a firm of
                  certified  public  accountants  to  the  effect  that  it  has
                  reviewed  (but  not  audited)  such  statements,   and  (B)  a
                  certificate of the principal  financial or accounting  officer
                  of the Company with respect to the matters set forth in clause
                  (B) of paragraph (i) of this subdivision.

                           (iv) Annual Budget. in duplicate as soon as available
                  and,  in any event,  on or prior to March 1 of each  year,  an
                  annual budget with respect to the Diablo Assets and the Diablo
                  Business  containing,  in reasonable detail,  information with
                  respect to the balance sheet,  statements of income and retain
                  earnings,  cash flow and Capital Expenditures for the calendar
                  year,  all in a form  substantially  similar  to  those of the
                  financial  statements required to be delivered pursuant to the
                  provisions of this Section 7.9(a); and, thereafter,  promptly,
                  from time to time  during the course of such year,  amendments
                  to such annual budget.

                           (v) Reports to Stockholders  or Others.  In duplicate
                  promptly upon the sending,  making  available or filing of the
                  same, copies of all proxy statements, registration statements,
                  prospectuses,   reports  and  financial  statements  that  the
                  Company shall send or make  available to its  stockholders  or
                  file with the Securities and Exchange  Commission or any stock
                  exchange upon which its capital stock may be listed.

                  (b) Notice of Litigation, Event of Default, Potential Default,
         etc. The Company will  promptly  give notice of any  litigation  or any
         administrative  proceeding to which it or any  Subsidiary may hereafter
         become a party which  involves a potential  liability to the Company or
         any  Subsidiary  of at least  $50,000,  or which may have any  Material
         Adverse Effect on the Company.  Forthwith upon any executive officer of
         the Company  obtaining  knowledge of any of the following,  the Company
         shall give to American  prompt  written notice of any Change in Control
         or proposed  Change in Control,  any Act of Bankruptcy and any Event or
         Default  or  Potential  Default,  specifying  the  nature and period of
         existence  of any such Event of Default or  Potential  Default and what
         action  the  Company  has  taken,  is taking or  proposes  to take with
         respect thereto.

         7.10 Liens.  The Company will not,  and will not permit any  Subsidiary
to, create or incur, directly or indirectly, or suffer to be created or incurred
or to exist (except in favor of the Company or a Wholly-Owned  Subsidiary),  any
Lien  upon any of the  assets or  property  of any of the  Diablo  Assets or the
Diablo Business other than the Permitted Liens.

         7.11  Distributions.  The  Company  will not,  and will not  permit any
Subsidiary  to,  declare,  order,  pay or  make,  directly  or  indirectly,  any
Distribution  (other  than  dividends  paid by a  Subsidiary  to a  Wholly-Owned
Subsidiary or the Company) or set apart any sum or property  therefor,  or agree
to do so, other than in cash or cash  equivalents and then only if, after giving
effect  thereto,  (a) the Company has cash or cash  equivalents of not less than
$500,000,  (b) no  Default  or Event  of  Default  shall  have  occurred  and be
continuing,  and (d) a maximum  of debt to  tangible  net worth of not more than
1.00 to 1.00. For purposes of this Section, "effective tangible net worth",

                                      -21-

<PAGE>



"tangible  net  worth",  "debt  coverage"  and  "debt"  shall  be  determine  in
accordance  with the  provisions of the Sanwa Loan Agreement as in effect on the
date hereof.

         7.12 Consolidation,  Merger and Acquisition.  Subject to the provisions
of the  Letter of  Intent  and,  if  executed  and  delivered,  the  Acquisition
Agreement (so long as it shall remain in effect), the Company will not, directly
or indirectly:

                  (a) voluntarily  liquidate,  dissolve or otherwise wind up its
         business; or

                  (b) permit any  Subsidiary  to merge or  consolidate  with any
         Person (other than the Company or a Wholly-Owned Subsidiary) unless (i)
         the  surviving or resulting  Person is a Subsidiary  which is organized
         under  the laws of a state  of the  United  States  of  America  or the
         District of Columbia,  and (ii) no condition or event shall exist prior
         to, as a result of or immediately after giving effect to such merger or
         consolidation  which  constitutes  an Event of Default  or a  Potential
         Default,  including without  limitation the provisions of paragraph (c)
         of this Section; or

                  (c) consolidate  with or merge into another Person (other than
         a  Wholly-Owned  Subsidiary) or permit another Person to consolidate or
         merge  into  it,  or  acquire  (x) all or any  substantial  part of the
         assets,  property or business  of, or (y) any assets that  constitute a
         division or operating unit of the business of, any other Person, unless
         such  assets,  property  or  business  are or is,  as the  case may be,
         consolidated  with the Company for  financial  reporting  purposes  and
         unless

                           (i)  the  Person  surviving  such   consolidation  or
                  merger, is either (A) the Company,  or (B) an Entity which (I)
                  is organized under the laws of a state of the United States of
                  America, or the District of Columbia, and (II) shall expressly
                  assume the obligations of the Company under this Agreement and
                  under the Notes to the same extent and with the same effect as
                  though such  surviving  Person were a party hereto and thereto
                  and  were  named  and  defined  as the  "Company"  herein  and
                  therein;

                           (ii) no condition  or event shall exist,  either as a
                  result  of,  or  immediately  after  giving  effect  to,  such
                  consolidation,  merger or  acquisition  which  constitutes  an
                  Event of Default or a Potential Default;

                           (iii) none of the rights,  privileges or  preferences
                  of any holder of the Notes would be adversely affected by such
                  consolidation, merger or acquisition; and

                           (iv) in the case of any such acquisition,  all of the
                  assets,  property and  business to be acquired,  to the extent
                  they  relate  to any  of  the  Diablo  Assets  or  the  Diablo
                  Business,  shall  have  been made  subject  to the Lien of the
                  Security Agreement on terms and conditions satisfactory to the
                  holders of the Notes.

         7.13  Prohibited  Transactions.  Except as set forth on the  Disclosure
Schedule and marked "Permitted  Affiliated  Transactions" or as otherwise agreed
upon by the holders of the Notes, the

                                      -22-

<PAGE>



Company  will not,  and will not permit any  Subsidiary  to,  permit to exist or
enter into any agreement or arrangement  relating to any of the Diablo Assets or
the Diablo  Business  whereby it engages in a  transaction  of any kind with any
Subsidiary (other than a Wholly-Owned  Subsidiary),  or with any other Affiliate
of the  Company  or any  Subsidiary  except  on terms no less  favorable  to the
Company  as  could  be  obtained  from  Persons  who are not  Affiliates  of the
Company..

         7.14  Compliance  with ERISA.  The Company will, and will cause each if
its Subsidiaries to, fulfill the obligations under the minimum funding standards
of ERISA and the Code with  respect to each Plan  relating  to any of the Diablo
Assets or the Diablo Business,  to the extent such minimum funding standards are
applicable,  and comply in all material  respects with the presently  applicable
provisions  of ERISA  and the  Code,  and will  not,  and  will not  permit  any
Subsidiary  to, incur any material  liability to the PBGC or any such Plan under
Title IV of ERISA.

         7.15 Indebtedness. The Company will not, and will not permit any of its
Subsidiaries  to,  create,  incur,  assume or suffer to exist any  Indebtedness,
except:

                  (a) Indebtedness pursuant to this Agreement;

                  (b) Indebtedness  (other than Indebtedness for Money Borrowed)
         arising in connection with the Permitted Liens;

                  (c)  Indebtedness  incurred in the ordinary course of business
         which does not represent Indebtedness for Money Borrowed;

                  (d)  Indebtedness  existing on the date of this  Agreement and
         set forth in the Disclosure Schedule; and

                  (e) Other  Indebtedness  for Money  Borrowed so long as, after
         giving effect  thereto and  concurrent  repayment of  Indebtedness  for
         Money Borrowed,  the aggregate  principal  amount of  Indebtedness  for
         Money  Borrowed  to be  outstanding  would  not  exceed  five (5) times
         Operating  Cash Flow for the most recent  twelve  months  ending on the
         calendar  quarter for which  financial  statements are required to have
         been delivered pursuant to the provisions of Section 7.9(a)(i), so long
         as after  giving  effect to such  Indebtedness  for Money  Borrowed  no
         Potential Default or Event of Default has occurred and is continuing.

         7.16 Operation of the Business. Subject to the provisions of the Letter
of Intent and, if executed and delivered,  the Acquisition Agreement (so long as
it shall remain in effect),  the Company and each of its  Subsidiaries  will own
and  operate the Diablo  Assets and  conduct the Diablo  Business in the normal,
usual and  customary  manner in the  ordinary  and regular  course of  business.
Without  limiting the generality of the foregoing,  subject to the provisions of
the Letter of Intent and, if executed and delivered,  the Acquisition  Agreement
(so long as it shall  remain in  effect),  the  Company  will not,  and will not
permit any Subsidiary to, take any of the following  actions with respect to the
Diablo Assets and the Diablo Business:

                  (a)  Transfer or agree to Transfer  any of the  properties  or
         assets constituting a part of the Diablo Assets or the Diablo Business,
         other than nonmaterial amounts of machinery and

                                      -23-

<PAGE>



         equipment  sold or  otherwise  disposed  of in the  ordinary  course of
         business and no longer  needed in the operation or business or replaced
         with assets of like kind or better kind and quality;

                  (b) with prior practices,  (i) incur any material  obligations
         or liabilities (fixed, contingent or other); (ii) make any additions to
         its property or any  purchases of  machinery or  equipment,  except for
         normal  maintenance  and  replacements;  (iii) or agents,  and will not
         otherwise alter,  modify or change in any material respect the terms of
         their employment or engagement,  and has not entered and will not enter
         into new employment arrangements; (iv) waive, any rights of substantial
         value  without  fair  and  adequate  consideration;  (v)  amend  in any
         material  respect,  terminate or enter into or become (or permit any of
         its  property  to be) bound by or subject  to any  Lease,  Governmental
         Authorization, Private Authorization, Employment Arrangement or Plan or
         any Contractual  Obligation  which could have a Material Adverse Effect
         on the  Company;  (vi) do any act or fail to do any act, if such act or
         failure to act might result in the expiration,  revocation,  suspension
         or modification of any of its Material  Governmental  Authorizations or
         Material  Private  Authorizations;  and  (vii)  enter  into,  any other
         transaction or series of related  transactions which individually or in
         the aggregate is Material to the Company; and

                  (c) waive any condition set forth therein to consummation  of,
         or otherwise amend,  modify or terminate,  any Material  Agreement,  or
         enter into any agreement or other  arrangement which would constitute a
         Material   Agreement,   except   for  such   waivers,   amendments   or
         modifications,  or such other  agreements or arrangements as do not and
         will not have in the  aggregate  any  Material  Adverse  Effect  on the
         Company.

         The Company  shall use  reasonable  business  efforts to  preserve  the
ownership,  operation,  management,  policies and personnel of the Diablo Assets
and the  Diablo  Business,  and  shall  not  alter  such  ownership,  operation,
management,  policies, or personnel in any manner that would, individually or in
the  aggregate,  have a Materially  Adverse  Effect on the Diablo  Assets or the
Diablo Business.

         7.17 Issue of Equity  Securities.  The Company will not issue, or agree
to issue,  any shares of capital stock or any  Convertible  Securities or Option
Securities, if such issuance would result in a Change of Control of the Company.

         8.  Defaults.

         8.1 Events of Default.  If one or more of the following  events (herein
termed "Events of Default") shall have occurred, that is to say:

                  (a) if the Company shall fail to make payment of the principal
         of or  premium,  if any,  or, for a period of five (5)  business  days,
         interest on any of the Notes when and as the same shall  become due and
         payable, whether at their stated maturity, on a date fixed for payment,
         by a notice of payment or offer to pay, by declaration or otherwise; or


                                      -24-

<PAGE>



                  (b) if any representation or warranty of the Company contained
         in this  Agreement,  or any statement or  certificate  furnished by the
         Company  in  connection  with the  issue or sale of any of the Notes or
         pursuant to any  provision  of this  Agreement,  shall have been false,
         incorrect  or  misleading  in any  material  respect  when  made  or so
         certified  to,  and such  representation  and  warranty  was either (i)
         willfully and  intentionally  made as such or (ii) not so willfully and
         intentionally made, but the defect giving rise to such false, incorrect
         or misleading  representation and warranty, to the ext curable, has not
         been cured within thirty (3) days of the Company obtaining knowledge of
         the defect and,  whether or not curable,  has,  together with any other
         such false,  incorrect or misleading  representations  and  warranties,
         resulted in a Material Adverse Change in the Company; or

                  (c) if the Company or any Subsidiary  shall fail to observe or
         perform any of the  covenants,  agreements or  provisions  contained in
         Sections 7.10 through 7.13, inclusive, 7.15, 7.16 and 7.18; or

                  (d) if the  Company  or any  Subsidiary  shall  fail  duly  to
         observe or perform any other covenant, agreement or provision contained
         in this Agreement, the Notes or any other Related Agreement, other than
         those  referred  to in  subdivisions  (a),  (b) or (c) above,  and such
         failure  shall have  continued  for a period of thirty  (30) days after
         written  notice  to the  Company  from the  holders  of a  majority  in
         interest of the Notes; or

                  (e) if  the  Company  or  any  Subsidiary  shall  default,  as
         principal  or as  guarantor  or other  surety,  (i) in any  payment  of
         principal of or premium,  if any, or interest on any  Indebtedness  for
         Money  Borrowed   (other  than  the  Notes),   or  any  purchase  money
         Indebtedness in excess of $100,000,  or (ii) with respect to any of the
         terms of any evidence of such Indebtedness or of any mortgage, security
         agreement,  indenture or other  agreement  relating  thereto,  and such
         default  shall  continue  for more than the  period  of grace,  if any,
         specified therein; or

                  (f) if one or more final judgments for the payment of money in
         excess  of  $150,000  shall be  rendered  against  the  Company  or any
         Subsidiary,  and  such  judgments  shall  not be  discharged  or  their
         discharge  shall  not have been  provided  for in  accordance  with its
         terms,  or a stay of  execution  thereof  shall not have been  procured
         within thirty (30) days from the date of the entry  thereof,  or within
         said  period of thirty (30) day period (or such  longer  period  during
         which  execution on such judgment shall have been stayed),  the Company
         or such  Subsidiary  shall not have filed an appeal  therefrom (or from
         the order,  decree or  process  upon  which or  pursuant  to which said
         judgment shall have been granted, passed or entered); or

                  (g) if the  Company  or any of its  Subsidiaries  shall,  as a
         debtor, be involved in or commit an Act of Bankruptcy; or

                  (h) if a Change in Control with  respect to the Company  shall
         be pending or shall have occurred; or


                                      -25-

<PAGE>



                  (i) if the  Company  or DCSC shall  enter  into an  agreement,
         whether or not legally binding,  with respect to a Third Party Transfer
         or a Third Party Transfer shall have occurred; or

                  (j) if any  Potential  Default  or Event of  Default  (each as
         defined  in  the  DCSC  Note  Agreement)  shall  have  occurred  and be
         continuing;

then,  except as set forth below in this  Section,  (I) in the case of any event
specified in subdivision (g) of this Section,  there shall automatically  become
forthwith  due and payable the unpaid  balance of all of the Notes,  and (II) in
each and every other case  specified in this Section,  the holders of a majority
in  principal  amount  of the  Notes at the time  outstanding  may by  notice in
writing  to the  Company  declare to be  forthwith  due and  payable  the unpaid
balance of all of the Notes,  together  in any such case with  interest  accrued
thereon,  and  thereupon  such balance  shall become so due and payable  without
presentation,  protest or further demand or notice of any kind, all of which are
hereby expressly  waived by the Company;  the Holders of a majority in principal
amount of the Notes of the time  outstanding may, without being required to give
any notice  (except as may be required by law),  exercise their rights under the
Security  Agreement whether or not they elect to accelerate  payment as provided
herein;  and/or in  addition  thereto  each  Holder may  proceed to protect  and
enforce  its rights by suit in equity,  action at law and/or  other  appropriate
proceeding,  either  for  specific  performance  of any  covenant  or  provision
contained in the Notes or herein or in aid of the exercise of any power  granted
in the Notes or herein or in lieu thereof.  Notwithstanding any provision to the
contrary in this Agreement, no events other than those described in this Section
8.1 shall  constitute an Event of Default  giving rise to the  consequences  set
forth in clause (I) or (II) of the preceding sentence;  provided,  however, that
should the Event of Default giving rise to the  consequences set forth in clause
(I) or (II) of the preceding  sentence  occur prior to the  consummation  of the
transactions  contemplated by the Acquisition Agreement, the Company may, at its
sole  discretion,  elect to pay the  Notes at their  principal  amount,  without
premium,  but  including  interest  accrued  and  unpaid  thereon to the date of
payment  pursuant to an  Agreement  customary  in  comparable  transactions  and
reasonably  satisfactory  to American  relating to the  purchase and sale of the
DCSC  business,  free and clear of all liens,  except as otherwise  set forth in
Exhibit B to the Letter of Intent. Such agreement shall be on the same terms and
conditions as are set forth in Section 6.2 of this Agreement.

         8.2 Notice to the Holders.  If and  whenever  the Company  shall become
aware of the existence of any Event which constitutes,  or which after giving of
notice or passage of time or both would  constitute,  an Event of  Default,  the
Company shall  forthwith  give notice to each Holder of such  condition or event
and what  action the  Company  has  taken,  is taking or  proposes  to take with
respect thereto.  If any creditor of the Company shall take any action, of which
the  Company  shall  have  actual  knowledge,  in  respect  of any  Event  which
constitutes,  or which  after  giving  notice or  passage  of time or both would
constitute,  an Event of Default, then and in any such event, and whether or not
the Company  shall have given a notice under the first  sentence of this Section
with  respect to the  condition  or event to which such  demand or action  shall
relate,  the  Company  shall  forthwith  give to  each  Holder  written  notice,
specifying  such  action  and the  nature of such  alleged  default  or Event of
Default and what  actions  the Company has taken,  is taking or proposes to take
with respect thereto.


                                      -26-

<PAGE>



         8.3  Annulment  of Defaults.  This Section is subject to the  condition
that,  if at any time after the  principal of any or all of the Notes shall have
been declared and become due and payable,  and before any judgment or decree for
the payment of the moneys so due,  or any part  thereof,  shall be entered,  all
arrears of interest upon all the Notes and all other sums payable upon the Notes
(except the  principal of and  interest on such Notes which by such  declaration
shall have become  payable) shall have been duly paid, and every other Potential
Default  and Event of Default  shall  have been made good or cured,  then and in
every such case the  Holders of a majority in  principal  amount of the Notes at
the time  outstanding may, by written  instrument or instruments  filed with the
Company, rescind and annul such declaration and its consequences.  No rescission
or  annulment  under  this Sec tion  shall  extend to or affect  any  subsequent
Potential Default or Event of Default or impair any right consequent thereon.

         8.4 Waiver by Company;  Severability of Remedies. To the fullest extent
permitted by applicable law, the Company hereby agrees to waive, and does hereby
absolutely and irrevocably  waive and relinquish,  (a) the benefit and advantage
of any valuation, stay, appraisal,  extension or redemption laws now existing or
which may hereafter exist, which, but for this provision, might be applicable to
any sale made under the  judgment,  order or decree of any court,  or otherwise,
based on the Notes or any claim for interest on the Notes; (b) all presentments,
demands  for  performance  and notices of  nonperformance  (except to the extent
required  by the  provisions  hereof);  (c) any  requirements  of  diligence  or
promptness on the part of any Holder,  as a holder of Notes,  in the enforcement
of its rights under the provisions of this  Agreement or the Notes;  and (d) any
and all notices of every kind and description  which may be required to be given
by any  statute  or rule of law and any  defense of any kind which it may now or
hereafter have with respect to its liability  under this Agreement or the Notes.
In the event any remedy or other  provision of this  Section is not  enforceable
for any reason, no other remedy or provision shall be affected thereby,  and all
such  other  remedies  and  provisions  shall be given  full force and effect in
accordance with their terms.

         8.5 No Waiver of Rights.  No course of dealing  between  the Company or
any Subsidiary and any Holder, as a holder of Notes, and no delay or omission on
the  part of any  Holder  in  exercising  any  rights  under  the  Notes or this
Agreement,  shall operate as a waiver of the rights of such Holder,  as a holder
of Notes. No failure to insist upon the strict provisions of any covenant, term,
condition  or  other  provision  of this  Agreement  or any of the  Notes  or to
exercise any right or remedy thereunder shall constitute a waiver by any Holder,
as a holder of Notes, of any such covenant,  term,  condition or other provision
or of any  Potential  Default or Event of Default in connection  therewith.  The
waiver of any  covenant,  term,  condition or other  provision  hereof or of the
Notes or Potential  Default or Event of Default  hereunder on one occasion shall
not be  construed  as a bar to or a waiver of any right or remedy on any  future
occasion and shall not affect or alter this Agreement or the Notes except to the
extent  specifically  provided  in the  instruments  setting  forth such  waiver
delivered  under Section 10.5,  and every  covenant,  term,  condition and other
provision of this Agreement and the Notes shall, in such event, continue in full
force and effect.

         8.6 Costs and  Expenses of  Collection.  Subject to the  provisions  of
Section  10.2,  the Company  covenants and agrees that if default be made in any
payment  of  principal  of or  interest  on the  Notes,  it will,  to the extent
permitted under applicable law, pay to each Holder,  as a holder of Notes,  such
further  amount  as shall be  sufficient  to cover the  costs  and  expenses  of
collection,

                                      -27-

<PAGE>



including  reasonable  compensation  to the  attorneys  of each  Holder  for all
services rendered in that connection.

         8.7 Remedies  Cumulative.  No remedy herein conferred upon each Holder,
as a holder of Notes or  otherwise,  is  intended to be  exclusive  of any other
remedy,  and each and every remedy shall be cumulative  and shall be in addition
to every other remedy given hereunder or now or hereafter  existing at law or in
equity or by statute or otherwise.

         9. Definitions.  As used herein, unless the context otherwise requires,
the following terms have the following respective meanings. Terms defined in the
singular  shall have a  comparable  meaning  when used in the  plural,  and vice
versa,  and the  reference to any gender shall be deemed to include all genders.
Unless otherwise defined or the context  otherwise  clearly requires,  terms for
which meanings are provided in this Agreement shall have such meanings when used
in  the  Disclosure  Schedule  and  in  each  instrument,  notice,  certificate,
communication,  opinion or other  document  executed  or required to be executed
pursuant hereto or thereto or otherwise  delivered,  from time to time, pursuant
hereto or thereto. If the Company has any Subsidiaries all financial terms shall
be deemed to apply to the Company and its Consolidated Subsidiaries,  determined
in  accordance  with CAAP  consistently  applied with the  Financial  Statements
delivered to American hereunder.

         The term  "Acquisition"  is  defined  in the first  whereas  paragraph,
preceding Section 1.

         The term  "Acquisition  Agreement"  is  defined  in the  first  whereas
paragraph, preceding Section 1, and shall include all amendments,  modifications
and supplements thereto.

         The term  "Acquisition  Termination Date" shall mean the earlier of (a)
the failure of American  and the  Company to enter into a  definitive  agreement
with respect to the Acquisition,  regardless of the reason therefor,  within the
time permitted by the Letter of Intent or (b) the date on which the  Acquisition
Agreement, if executed and delivered, is terminated,  whether in accordance with
its terms or by American or the Company, and whether with or without cause.

         The term "Act of  Bankruptcy"  shall mean,  when used with reference to
any Person, any of the following events or occurrences:

                  (a) its  admitting in writing its  inability,  or being unable
         under  Applicable  Law,  or its  failing  generally,  to pay its  debts
         generally as they become due, or

                  (b) its filing a petition, answer or consent seeking relief as
         a debtor or otherwise  commencing a voluntary case under the Bankruptcy
         Code as from time to time in effect, or its authorizing, by appropriate
         proceedings of its board of directors or other governing body, any such
         petition, answer, consent or commencement of such a voluntary case; or

                  (c) the filing  against it or all or any  substantial  part of
         its  property of a petition com mencing an  involuntary  case under the
         Bankruptcy  Code which shall  remain  undismissed  for a period of more
         than thirty (30) days or which is consented to by such Person or any

                                      -28-

<PAGE>



         order or decree  approving  relief  adverse to such  Person  thereunder
         shall remain unstayed and in effect for more than forty five (45) days;
         or

                  (d) its  commencement  of  proceedings  or filing a  petition,
         answer or consent  seeking relief as a debtor under any Applicable Law,
         other than the  Bankruptcy  Code, of any  jurisdiction  relating to the
         liquidation  or  reorganization  of debtors or to the  modification  or
         alteration  of  the  rights  of  creditors,  or  its  consenting  to or
         acquiescing  in such  relief  or its  admitting  or  acquiescing  in or
         failing promptly and in any event within thirty (30) days of the filing
         thereof, in an appropriate manner, to deny the material  allegations of
         any  petition  seeking  such  relief,  any  such  involuntary  petition
         remaining undismissed for more than thirty (30) days or an order in any
         involuntary proceeding adverse to such Person remaining unstayed and in
         effect for more than forty-five (45) days; or

                  (e) the entry of an order or decree  (whether or not final) by
         a court of  competent  jurisdiction  (i)  finding it to be  bankrupt or
         insolvent,  (ii) ordering or approving its liquidation,  dissolution or
         winding up, or  reorganization or any modification or alteration of the
         rights of its creditors,  or any  composition or readjustment of debts,
         (iii)  assuming   custody  of,  or  appointing  a  receiver,   trustee,
         sequestrator,  conservator,  assignee,  custodian,  liquidator,  fiscal
         agent or similar official for, such Person or all or a substantial part
         of its property and any such order or decree  shall  continue  unstayed
         and in effect for a period of forty-five (45) days; or

                  (f) its  convening a meeting of  creditors  for the purpose of
         consummating an out-of-court  arrangement,  or making an assignment for
         the benefit of, or entering  into a  composition,  extension or similar
         arrangement  with,  its  creditors  in respect of all or a  substantial
         portion of its debt; or

                  (g)  its  seeking  or  consenting  to or  acquiescing  in  the
         appointment  of  a  receiver,   trustee,   sequestrator,   conservator,
         liquidator,  fiscal agent or other custodian of itself or of all or any
         substantial part of its property; or

                  (h)  its winding-up, liquidation or dissolution; or

                  (i) its  authorization,  by appropriate action of its board of
         directors or other governing body, of any of the foregoing.

         The term "Additional  Compensation  Certificates" is defined in Section
1.1.

         The term "Affiliate",  when used with respect to any Person, shall mean
(i) any other Person at the time directly or indirectly controlling,  controlled
by or under direct or indirect  common control with such Person,  (ii) any other
Person of which  such  Person  at the time  owns,  or has the right to  acquire,
directly or indirectly  twenty percent (20%) or more on a consolidated  basis of
the equity or  beneficial  interest,  (iii) any other  Person  which at the time
owns, or has the right to acquire,  directly or indirectly  twenty percent (20%)
or more of the equity or beneficial  interest of such Person, (iv) any executive
officer or  director of such  Person,  or any Person of which such Person or any
executive  officer or director of such Person at the time owns, or has the right
to

                                      -29-

<PAGE>



acquire,  directly or indirectly,  twenty percent (20%) of more of the equity or
beneficial  interest,  and (v) when used with  respect to an  individual,  shall
include a spouse,  any ancestor or descendant,  or any other relative (by blood,
adoption or  marriage),  within the third  degree of such  individual.  A Person
shall be deemed to be  "controlled  by" any other  Person if such  other  Person
possesses, directly or indirectly, power to direct or cause the direction of the
management  or  policies  of such  Person or the  disposition  of its  assets or
property, whether by stock, equity or other ownership,  contract, arrangement or
understanding, or otherwise.

         The term "American" is defined in the preamble of this Agreement.

         The term "Applicable Law" shall mean any Law of any Authority,  whether
domestic  or  foreign,  including  without  limitation  all  federal  and  state
securities  Laws,  to which the Person in  question is subject or by which it or
any of its property is bound.

         The term "Authority" shall mean any governmental or  quasi-governmental
authority, whether executive, legislative, judicial, administrative or other, or
any  combination  thereof,  including  without  limitation  any federal,  state,
territorial,   county,   municipal  or  other   government  or  governmental  or
quasi-governmental agency, arbitrator, board, body, branch, bureau, central bank
or comparable  agency or entity,  commission,  corporation,  court,  department,
instrumentality,  master,  mediator,  panel, referee,  system or other political
unit or subdivision or other entity of any of the foregoing, whether domestic or
foreign.

         The term  "Bankruptcy  Code" shall mean 11 U.S.C.  ss. 101 et seq.,  as
from time to time in effect,  and any  successor  law, and any  reference to any
statutory provision shall be deemed to be a reference to any successor statutory
provision.

         The term  "CAAP""  shall  mean the  accounting  principles  used by the
Company in the preparation of the Financial  Statements and described in general
terms in the Disclosure Schedule, such principles applied on a consistent basis,
except  as  otherwise  heretofore  disclosed  in the  Disclosure  Schedule.  The
requirement  that  such  principles  be  consistently  applied  means  that  the
accounting principles in a current period are comparable in all material respect
to those applied in preceding period. All accounting and financial terms used in
this Agreement and the compliance with each covenant contained in this Agreement
that relates to financial  matters shall be  determined  in accordance  with the
accounting  principles  referred  to in  this  paragraph  (except  as  otherwise
specifically  noted in certain of the definitions  where the term GAAP is used).
In the event of a change in any method of accounting  used by the Company or any
of its Subsidiaries  that is permitted by this Agreement,  such change shall not
be deemed to result in an Event of Default  if, at the time of such  change,  an
Event of Default had not  occurred and was not then  continuing,  based upon the
former methods of accounting used by the Company;  provided,  however, that, if,
after any such  change in  accounting  methods,  either the  Company or American
determine  in  good  faith  that  any   requirements   of  this   Agreement  are
substantially altered as a result of such change, the Company and American agree
to negotiate in good faith with respect to a change in such requirements.

         The term "California Application" is defined in Section 1.1.

         The term "California Securities Law" is defined in Section 1.1.

                                      -30-

<PAGE>



         The  term  "Capital  Expenditures"  shall  mean,  with  respect  to the
Company,  for any period  during which the amount  thereof is to be  determined,
without  duplication,  the  amount of all  expenses  or  liabilities  (including
without   limitation   Capital  Lease   Obligations)   incurred  or  accrued  or
expenditures  made by the Company  directly or indirectly with respect to any of
the Diablo Assets or the Diablo Business  which, in accordance with CAAP,  would
be  treated  as a  capital  expenditure,  but  shall  not  include  interest  or
amortization,  depreciation  or the like with  respect to any  previous  Capital
Expenditure.

         The term  "Capitalized  Lease  Obligation"  shall  mean  the  principal
portion  of any lease  obligation  on which in  accordance  with  CAAP  would be
characterized as a capital lease.

         The term  "Change in Control"  shall mean,  with  respect to any Person
(the "Target"), any of the following:

                  (a) the acquisition,  directly or indirectly, in a transaction
         or series of  transactions,  including  without  limitation  by merger,
         consolidation  or other  reorganization,  by any  Person  (such term to
         include  anyone  deemed a  person  under  Section  13(d)(3)  under  the
         Securities Exchange Act) of beneficial ownership (within the meaning of
         Rule 13d-3 promulgated under the Securities Exchange Act) of a majority
         or more of the capital stock or voting stock of the Target,  other than
         by (i) the Target or any of its Subsidiaries, (ii) any employee benefit
         plan or related trust of the Target or any of its  Subsidiaries,  (iii)
         any  existing  stockholder  of the  Target  who as of the  date of this
         Agreement  owns more than ten percent  (10%) of the voting stock of the
         Target  or  any  of  his  Affiliates  or  (iv)  American  or any of its
         Affiliates (an "Acquiring Person"); or

                  (b) the sale or other  disposition  of all or any  substantial
         part of the assets of the Target or, in the case of the Company, any of
         the Diablo Assets or the Diablo Business,  in one transaction or series
         of related transactions,  including by way of merger,  consolidation or
         other reorganization, other than with or to American; or

                  (c) the  adoption  of a plan  relating to the  liquidation  or
         dissolution of the Target; or

                  (d)  the  Continuing   Directors   cease  for  any  reason  to
         constitute a majority of the directors of the Target then in office.

         For purposes of this  definition,  any transfer of any capital stock or
other equity  interest of an Entity that was formed for the purpose of acquiring
voting  stock of the Target  shall be deemed to be a transfer of such portion of
such  voting  stock as  corresponds  to the portion of the equity of such Entity
that has been so transferred.

         The term "Claims" shall mean,  with respect to any Person,  any and all
debts, liabilities, obligations, losses, damages, deficiencies,  assessments and
penalties of or against such Person, together with all Legal Actions, pending or
threatened,  claims and judgments of whatever kind and nature relating  thereto,
and all fees, costs,  expenses and disbursements  (including  without limitation
reasonable  attorneys' and other legal fees, costs and expenses) relating to any
of the foregoing.


                                      -31-

<PAGE>



         The terms "Closing" and "Closing Date" are defined in Section 1.3.

         The term "Code" shall mean the United States  Internal  Revenue Code of
1986,  and the rules  and  regulations  thereunder,  all as from time to time in
effect,  or any successor  law, rules or  regulations,  and any reference to any
statutory  or  regulatory  provision  shall be deemed to be a  reference  to any
successor statutory or regulatory provision.

         The term "Company" is defined in the preamble of this Agreement.

         The term  "Continuing  Director"  shall mean any member of the Board of
Directors  of a Person  who (a) is a member  of the Board of  Directors  of such
Person as of the date hereof or (b) was nominated for election by either (i) one
or more of  stockholders  of such Person who, as of the date of this  Agreement,
owned  more than ten  percent  (10%) of the voting  stock of such  Person (or an
Affiliate  of such  Person) or (ii) the Board of  Directors,  a majority of whom
were  directors as of the date of this Agreement or whose election or nomination
for election was previously approved by one or more of such stockholders or such
directors.

         The term  "Contractual  Obligation"  shall  mean,  with  respect to any
Person, any term, condition,  provision,  representation,  warranty,  agreement,
covenant,  undertaking,  commitment,  indemnity or other obligation set forth in
the  organizational  agreements  and other  documents of such Person or which is
outstanding or existing under any agreement, contract,  arrangement,  instrument
or  understanding  to which such  Person is a party or by which it or any of its
business  is  subject  or  properties  is bound  and  which,  in the case of the
Company, relates to any of the Diablo Assets or the Diablo Business.

         The term  "Convertible  Securities"  shall  mean,  with  respect to any
Person,  any  evidences of  indebtedness,  shares of any class of capital  stock
(other than common stock which is not convertible  into or exchangeable  for any
other  shares of any class of capital  stock) or other  securities  directly  or
indirectly  convertible into or exchangeable for shares of common stock, whether
or not the right to convert or exchange thereunder is immediately exercisable or
is conditioned  upon the passage of time, the  occurrence or  non-occurrence  or
existence or non-existence of some other Event, or both.

         The term "DCSC" is defined in the third  whereas  paragraph,  preceding
Section 1.

         The term "DCSC Additional Compensation  Certificates" is defined in the
fourth whereas paragraph, preceding Section 1.

         The term "DCSC  Business"  is defined in the third  whereas  paragraph,
preceding Section 1.

         The term  "DCSC  Letter of  Intent"  is  defined  in the third  whereas
paragraph, preceding Section 1.

         The term  "DCSC  Notes" is defined  in the  fourth  whereas  paragraph,
preceding Section 1.


                                      -32-

<PAGE>



         The term  "DCSC  Note  Agreement"  is  defined  in the  fourth  whereas
paragraph, preceding Section 1.

         The term "Diablo Assets" is defined in Section 2.4.

         The term "Diablo  Business" is defined in the first whereas  paragraph,
preceding Section 1.

         The term  "Disclosure  Schedule"  shall mean the  Disclosure  Schedule,
dated as of the date  hereof,  heretofore  delivered  by the Company to American
pursuant to the provisions of this Agreement.

         The term "Distribution",  when used in reference to capital stock shall
mean:  (i) the  declaration  or payment  of any  distribution  dividend  (except
distributions payable solely in common stock of the Company) on or in respect of
any class of capital  stock of the Company,  (ii) the  purchase,  redemption  or
other  retirement  of any shares of any class of capital stock of the Company or
any  Subsidiary  owned by a Person other than the Company or a  Subsidiary,  and
(iii) any other  distribution  on or in  respect  of any  shares of any class of
capital stock of the Company or any Subsidiary  owned by a Person other than the
Company or a Subsidiary.

         The term  "Employment  Arrangement"  shall  mean,  with  respect to the
Company, any employment,  consulting,  retainer,  severance or similar contract,
agreement,  plan,  arrangement  or policy  (exclusive of any which is terminable
within ninety (90) days without liability, penalty or payment of any kind of the
Company or any of its  Affiliates),  or  providing  for  severance,  termination
payments, insurance coverage (including any self-insured arrangements),  workers
compensation,   disability   benefits,   life,   health,   medical,   dental  or
hospitalization benefits,  supplemental unemployment benefits,  vacation or sick
leave  benefits,  pension or retirement  benefits or for deferred  compensation,
profit-sharing, bonuses, stock options, stock appreciation rights or other forms
of  incentive  compensation  or  post-retirement   insurance,   compensation  or
post-retirement   insurance,   compensation  or  benefits,   or  any  collective
bargaining  or other labor  agreement,  whether or not any of the  foregoing  is
subject to the provisions of ERISA, to the extent,  in each case, it relates to,
covers  or is for the  benefit  of any  employee  involved  in the  business  or
operations of any of the Diablo Assets or the Diablo Business.

         The term "ERISA" shall mean the Employee Retirement Income Security Act
of  1974,  as from  time  to time in  effect,  and any  successor  law,  and any
reference to any  statutory  provision  shall be deemed to be a reference to any
successor provision.

         The term  "Event"  shall mean the  occurrence  or existence of any act,
action, activity, circumstance, condition, event, fact, failure to act, incident
or practice, or any set or combination of any of the foregoing.

         The term "Event of Default" is defined in Section 8.1.

         The term "GAAP" shall mean means, except to the extent that a deviation
therefrom is expressly required by this Agreement,  such principles applied on a
consistent  basis,  (i) as set forth in  Opinions of the  Accounting  Principles
Board of the American Institute of Certified Public

                                      -33-

<PAGE>



Accountants ("AICPA") and/or in statements of the Financial Accounting Standards
Board that are applicable in the circumstances as of the date in question,  (ii)
when not inconsistent  with such opinions and statements,  as set forth in other
AICPA  publications  and guidelines  and/or (iii) that otherwise arise by custom
for the  particular  industry,  all as the same shall  exist on the date of this
Agreement.

         The  term  "Governmental  Authorizations"  shall  mean  all  approvals,
concessions,  consents, franchises,  licenses, permits, plans, registrations and
other authorizations of all Authorities relating, in the case of the Company, to
the  ownership or  operation  of the Diablo  Assets or the conduct of the Diablo
Business.

         The  terms  "Guaranty"  or  "Guaranteed"  shall  mean and  include  all
liabilities  and  obligations  under  or by  reason  of any  guarantee  or other
contingent  liability  (other than  endorsements  of negotiable  instruments for
collection or deposit in the ordinary  course of business),  direct or indirect,
with respect to any Indebtedness,  obligation or other liability  (collectively,
an "obligation") of another Person, through an agreement or otherwise.

         The terms "Holder" and "Holders"  shall mean the holders,  from time to
time, of any of the Notes.  The terms "Holder of Record" and "Holders of Record"
shall mean  Holders,  from time to time as shown on the  records of the  Company
maintained for such purpose.

         The term  "Indebtedness"  shall mean, with respect,  to any Person, (a)
all items,  except items of capital  stock,  partnership  interests,  surplus or
general  contingency  or deferred tax  reserves or any minority  interest in any
Subsidiary  to  the  extent  such  interest  is  treated  as  a  liability  with
indeterminate  term on the consolidated  balance sheet of such Person,  which in
accordance with GAAP would be included in determining total liabilities as shown
on the  liability  side of a balance sheet of such Person,  (b) all  obligations
secured by any Lien to which any  property or asset owned or held by such Person
is  subject,  whether  or not the  obligation  secured  thereby  shall have been
assumed,  and (c) to the extent not otherwise  included,  all Capitalized  Lease
Obligations  of such Person and all  obligations  of such Person with respect to
leases constituting part of a sale and lease back arrangement.

         The term  "Indebtedness for Money Borrowed" shall mean, with respect to
any Person,  (a) money borrowed,  (b) Indebtedness  represented by notes payable
and drafts accepted representing extensions of credit, all obligations evidenced
by bonds,  debentures,  notes or other similar  instruments,  the maximum amount
currently or at any time thereafter  available to be drawn under all outstanding
letters of credit issued for the account of such Person,  (c) Indebtedness  upon
which interest  charges are customarily  paid by such Person,  (d)  Indebtedness
(including  Capitalized Lease Obligations)  issued or assumed as full or partial
payment  for  property  or  services,  whether  or not any such  notes,  drafts,
obligations or Indebtedness  represent  Indebtedness for money borrowed, and (e)
Guarantees  of any of the  Indebtedness  described in items (a) through (d), but
shall not include (i) trade  payables,  (ii)  expenses  accrued in the  ordinary
course of business or (iii)  customer  advance  payments and  customer  deposits
received in the ordinary course of business.

         The  term  "Law"  shall  mean  any  action,   code,   consent   decree,
constitution, decree, directive, enactment, finding, guideline, law, injunction,
interpretation, judgment, order, ordinance, policy

                                      -34-

<PAGE>



statement, proclamation,  promulgation,  regulation,  requirement, rule, rule of
law,  rule of public  policy,  settlement  agreement,  statute,  or writ, or the
common  law,  or any  particular  section,  part or  provision  thereof,  or any
interpretation, directive, guideline or request (whether or not having the force
of law), of any Authority, including without limitation (a) the judicial systems
thereof,  or any particular section,  part or provision thereof,  and (b) any of
the  foregoing  relating  to  antitrust  or  prohibiting  other  anticompetitive
business   practices,   those   relating  to  employment   practices   (such  as
discrimination,  health and  safety),  and those  relating to minority  business
enterprises.

         The term "Legal  Action"  shall mean,  with respect to any Person,  any
litigation   or   legal   or   other   actions,   arbitrations,   counterclaims,
investigations,  proceedings, requests for material information or suits, at law
or in arbitration,  equity or admiralty  (whether or not purported to be brought
on behalf of such  Person)  affecting  such  Person  or any of its  business  or
property or assets.

         The term "Letter of Intent" is defined in the first whereas  paragraph,
preceding Section 1.

         The term "Lien" shall mean any  mortgage,  lien  (statutory  or other),
preference,  priority or other  security  agreement,  arrangement  or  interest,
hypothecation,  pledge or other deposit arrange ment, assignment,  charge, levy,
executory seizure, attachment, garnishment, encumbrance (including any easement,
exception,   variance,   reservation  or  limitation,   right  of  way,   zoning
restriction, building or use restriction, and the like), conditional sale, title
retention  or other  similar  arrangement,  device,  agreement  or  restriction,
preemptive or similar right,  any financing  lease involving  substantially  the
same  economic  effect as any of the  foregoing  and the filing of any financing
statement   under  the  Uniform   Commercial  Code  or  comparable  law  of  any
jurisdiction,  or any option,  equity,  claim or right of or obligation  to, any
other Person, of whatever kind and character.

         The  terms  "Material"  or  "Materiality"   for  the  purposes  of  the
Agreement,  shall,  unless  specifically  stated to the contrary,  be determined
without  regard to the fact that various  provisions  of the Agreement set forth
specific dollar amounts.

         The term  "Material  Adverse"  when used alone or in  conjunction  with
other terms (including without limitation "Affect," "Change" and "Effect") shall
mean,  with  respect to the  Company,  any Event or set of Events which could be
expected to (a) have any material  adverse effect upon or result in any material
adverse change in the validity or  enforceability  of the Agreement or any other
agreement,  instrument or other document  executed or required to be executed by
such Person pursuant hereto or thereto,  (b) materially and adversely affect the
business,  operations,  management,  properties or prospects,  or the condition,
financial  or other,  or results of  operation of such Person or such Person and
its Subsidiaries taken as a whole, which, in the case of the Company, shall mean
each of the Diablo Assets or the Diablo  Business,  (c)  materially  impair such
Person's  ability to fulfill its  obligations  under the terms of any agreement,
instrument or other document executed or required to be executed by such Person,
(d)  materially  and adversely  affect the aggregate  rights and remedies of any
party (other than such Person) under the Agreement or any agreement,  instrument
or other  document  executed  or  required  to be  executed  pursuant  hereto or
thereto, or (e) or, in the case of the Company, adversely affects its ability to
perform this Agreement,  the Notes or any of the other Related  Agreements or to
pay when due, in accordance with the terms of this Agreement and the Notes,  the
principal of and interest and premium, if any, on the Notes.


                                      -35-

<PAGE>



         The term "Material  Agreement" shall mean, with respect to the Company,
any  agreement,  contract,  arrangement,  undertaking,  commitment,  license  or
obligation  relating to the  ownership or operation of the Diablo  Assets or the
conduct of the Diablo  Business  which (a) was not entered  into in the ordinary
course of  business,  (b) was entered  into in the  ordinary  course of business
which  (i)  involves  the  purchase,  sale or lease of  goods  or  materials  or
performance of services  aggregating more than Fifty Thousand Dollars ($50,000),
(ii) extends for more than twelve (12)  months,  or (iii) is not  terminable  on
thirty (30) days' or less notice without penalty or other payment,  (c) involves
Indebtedness for Money Borrowed in excess of Fifty Thousand  Dollars  ($50,000),
or (d) would  account for more than one percent  (1%) of revenues or expenses of
the Diablo  Business  projected to be received or incurred by the Company during
the current fiscal year.  Without limiting the generality of the foregoing,  the
term "Material Agreement" shall include the Acquisition Agreement.

         The term "Most Recent Balance Sheet" is defined in Section 2.3.

         The  term  "NSR  Rate"  is  defined  in  the  Additional   Compensation
Certificates.

         The term "Net Site Revenue" is defined in the  Additional  Compensation
Certificates.

         The term "Notes" is defined in Section 1.1.

         The term "Operating Cash Flow" shall mean, with respect to the Company,
for any period: (a) net revenues of the Company and its Subsidiaries, determined
in accordance with CAAP, for such period, less (b) operating expenses (inclusive
of taxes and corporate overhead, selling and administrative expenses). Cash Flow
shall be  adjusted  on a  consistent  basis to reflect  the  acquisition,  sale,
exchange and  disposition  of property  (other than tangible  personal  property
disposed of in the ordinary  course of  business).  Cash Flow shall  exclude all
extraordinary  gains and  losses  and all gains and  losses  from  acquisitions,
sales,  exchanges  and  dispositions  of assets  (other than  tangible  personal
property disposed of in the ordinary course of business).

         The term  "Option  Securities"  shall  mean  all  rights,  options  and
warrants,  and calls or  commitments  evidencing  the right,  to subscribe  for,
purchase  or  otherwise  acquire  shares of any class of capital  stock or other
securities or Convertible Securities, whether or not the right to subscribe for,
purchase or otherwise acquire is immediately  exercisable or is conditioned upon
the passage of time,  the  occurrence  or  non-occurrence  or the  existence  or
non-existence of some other Event.

         The term "PBGC" shall mean the Pension Benefit Guaranty Corporation and
any Person succeeding to any or all of its functions under ERISA.

         The term "Permitted Liens" shall mean:

                  (e) the security interest created under the Security Agreement
         in favor of the holders of the Notes;

                  (f)  Liens  for  taxes  if  payment  shall  not at the time be
         required to be made in accordance with the provisions of Section 7.2;

                                      -36-

<PAGE>



                  (g)  Liens of  carriers,  warehousemen,  mechanics,  laborers,
         materialmen  and landlords  incurred in the ordinary course of business
         for sums not yet due or being contested in good faith, if payment shall
         not be required to be made in accordance with the provisions of Section
         7.2;

                  (h) Liens  arising out of judgments or awards,  and appeal and
         similar bonds  incident to the conduct of legal  actions,  against such
         Person  with  respect to which such  Person  shall then be  prosecuting
         appeal or other proceedings for review (and as to which any foreclosure
         or other  enforcement  proceedings  shall not have  begun or shall have
         been fully bonded or otherwise effectively stayed);

                  (i) Liens  incurred  in the  ordinary  course of  business  in
         connection with worker's compensation and unemployment  insurance Laws,
         but  only  so  long  as no  foreclosure,  distraint,  sale  or  similar
         proceedings have been commenced with respect thereto; and

                  (j)  Liens set forth in the Disclosure Schedule.

         The term "Person" shall mean any natural individual, corporation, firm,
unincorporated  organization,   association,   partnership,   limited  liability
company,  business  trust,  joint stock company,  joint venture,  trust or other
organization,  entity or business, or any governmental authority, whether acting
in an individual, fiduciary or other capacity.

         The term  "Plan"  shall  mean,  with  respect  to any  Person  and at a
particular  time,  any  employee  benefit  plan which is covered by ERISA and in
respect of which such Person or an ERISA Affiliate (as defined in ERISA) is (or,
if such plan were terminated at such time, would under Sec tion 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of ERISA.

         The term "Potential Default" shall mean any event or circumstance which
after notice, passage of time, or both, would become an Event of Default.

         the term "Prepayment Penalty" is defined in the Additional Compensation
Certificates.

         The term "Prime Rate" is defined in Section 1.1.

         The  term   "Private   Authorizations"   shall   mean  all   approvals,
concessions,  consents, franchises,  licenses, permits, and other authorizations
of all Persons (other than  Authorities)  other than those of a nature  included
within  the  definition  of  Intellectual  Property  which,  in the  case of the
Company,  relates to the  ownership  or  operation  of the Diablo  Assets or the
conduct of the Diablo Business.

         The term "Purchase Price" is defined in Section 1.2.

         The term  "Related  Agreement"  shall mean this  Agreement,  the Notes,
Acquisition  Agreement (if executed and  delivered),  and each other  agreement,
instrument and other document executed or required to be executed by the Company
on the Closing Date or at any time thereafter,

                                      -37-

<PAGE>



in connection with the transactions contemplated by this Agreement or any of the
other Related  Agreements,  in each case, as amended,  modified or  supplemented
from time to time.

         The term  "Rental  Obligations,"  with  respect  to any  lease  for any
period,  shall mean the minimum amount of rental payments required to be made in
such period by the lessee under such Lease,  including  without  limitation  any
amounts required to be paid by such lessee,  whether or not designated as rental
or additional  rental:  (a) on account of  maintenance  and repairs,  insurance,
taxes, assessments, water and sewer rates and similar charges, and (b) which are
payable on the basis of profits, revenues or sales to be derived from the leased
property or any other index of performance.

         The term "Sanwa  Loan  Agreement"  shall mean the Term Loan  Agreement,
dated as of January 31, 1996,  by and between Sanwa Bank  California  and Diablo
Communications,  Inc. and Richard D. Spight,  Trustee of the Mary Colores Spight
Family Trust U/A/D June 16, 1983, as amended as of the date hereof.

         The term  "Securities  Act" shall mean the  Securities Act of 1933, and
the rules and regulations  promulgated  thereunder,  all as from time to time in
effect,  or any successor  law, rules or  regulations,  and any reference to any
statutory  or  regulatory  provision  shall be deemed to be a  reference  to any
successor statutory or regulatory provision.

         The term "Securities  Exchange Act" shall mean the Securities  Exchange
Act of 1934, and the rules and regulations promulgated  thereunder,  all as from
time to time in effect,  or any successor  law,  rules or  regulations,  and any
reference  to any  statutory  or  regulatory  provision  shall be deemed to be a
reference to any successor statutory or regulatory provision.

         The  term  "Solvent"  shall  mean,  with  respect  to any  Person  on a
particular  date,  that on such  date (i) the fair  value of the  assets of such
Person (both at fair  valuation and at present fair  saleable  value) is, on the
date of determination,  greater than the total amount of liabilities, including,
without  limitation,  contingent and unliquidated  liabilities,  of such Person,
(ii) such Person is able to pay all  liabilities  of such Person as they mature,
and (iii) such Person does not have  unreasonably  small  capital  with which to
carry on its business.  In computing  the amount of  contingent or  unliquidated
liabilities at any time, such  liabilities will be computed at the amount which,
in light of all the facts and  circumstances  existing at such time,  represents
the  amount  that can  reasonably  be  expected  to become an actual or  matured
liability.  For  purposes  of this  definition,  "indebtedness"  shall  mean any
liability on a claim,  and "claim"  shall mean (a) right to payment,  whether or
not  such  right  is  reduced  to  judgment,  liquidated,  unliquidated,  fixed,
contingent,  matured, unmatured,  disputed, undisputed, legal equitable, secured
or unsecured,  or (b) right to an equitable  remedy for breach of performance if
such breach  gives rise to a payment,  whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent,  matured, unmatured, disputed,
undisputed, secured or unsecured.

         The term "Subject Sites" is defined in Section 1.1.

         The term  "Subsidiary"  with respect to any corporation  (the "parent")
shall mean any Person of which such parent, at the time in respect of which such
term is used,  (a) owns directly or indirectly  more than fifty percent (50%) of
the equity or beneficial interest, on a consolidated basis,

                                      -38-

<PAGE>



and (b) owns directly or controls with power to vote,  indirectly through one or
more  Subsidiaries,  shares of capital stock or beneficial  interest  having the
power to cast at  least a  majority  of the  votes  entitled  to be cast for the
election of the directors,  trustees,  managers or other officials having powers
analogous to those of directors of a corporation.  Unless otherwise specifically
indicated,  when used  herein  the term  Subsidiary  shall  refer to a direct or
indirect Subsidiary of the Company.

         The term "Tax" (and with correlative meanings,  "Taxes" and "Taxable"),
shall mean,  with  respect to any Person,  (a) any net  income,  alternative  or
add-on minimum tax, gross income, gross receipts, gains, sales, use, ad valorem,
transfer, franchise, profits, license, withholding on amounts paid to or by such
Person  or any of its  Subsidiaries,  payroll,  employment,  excise,  severance,
stamp,  occupation,  premium,  property,  environmental  or windfall profit tax,
custom,  duty or other tax,  governmental fee or other like assessment or charge
of any kind whatsoever,  together with any interest or any penalty,  addition to
tax or  additional  amount  imposed  by any  Authority  (a  "Taxing  Authority")
responsible for the imposition of any such tax (domestic or foreign),  (b) joint
or several  liability of such Person or any of its  Subsidiaries  with any other
Person for the  payment  of any  amounts  of the type  described  in (a) and (c)
liability  of such  Person or any of its  Subsidiaries  for the  payment  of any
amounts  of the type  described  in (a) as a result of any  express  or  implied
obligation to indemnify any other Person.

         The  term  "Tax  Returns"  shall  mean  all  returns,  consolidated  or
otherwise  (including without limitation  information  returns),  required to be
filed in any jurisdiction with respect to Taxes.

         The term  "Transfer"  shall  mean  any  sale,  assignment,  conveyance,
transfer or other disposition,  mortgage, pledge or other Lien, lease, exchange,
abandonment,  parting with  control of, gift,  granting of an option or proxy or
other act of alienation.

         The term "Third Party Transfer" shall mean, with respect to any Person,
the Transfer of all or any substantial  portion of business,  property or assets
of such Person,  including in the case of the Company of all or any  substantial
portion of the Diablo  Assets or the Diablo  Business to any other  Person other
than (a) any Transfer to American or one of its  Affiliates or (b) any bona fide
mortgage,  pledge or other Lien  thereon  granted to a bank or other  recognized
financial  institution  pursuant to the incurrence of Indebtedness  and not with
the intent of avoiding Section 6.1 of this Agreement.

         The term  "Wholly-Owned  Subsidiary"  shall  mean a  Subsidiary  of the
Company,  all of the  outstanding  shares of every  class of stock  (other  than
directors'  qualifying  shares,  if required by statute,  the  certificates  for
which,  duly endorsed in blank or  accompanied by a stock power duly endorsed in
blank,  shall be held by such  Subsidiary) and all other securities of which are
at  the  time  owned,  directly  or  indirectly,   by  the  Company  or  another
Wholly-Owned Subsidiary.

         10.  Miscellaneous Provisions.

         10.1 Stamp and Other Taxes.  The Company  covenants  and agrees that it
will pay all United States and state  documentary stamp or similar excise taxes,
including  any interest or penalties  thereon,  which may be legally  payable in
connection  with or  arising  out of the  issue  of any of the  Notes  and  will
indemnify  each holder of any thereof  against,  and save it harmless  from, any
liability, cost or expense in respect of any such stamp taxes or other taxes and
any interest or penalties

                                      -39-

<PAGE>



         thereon.  The  Company's  agreement in this  connection  shall  survive
termination of this Agreement and the payment of the Notes.

         10.2  Expenses.  Whether or not the  transactions  contemplated  hereby
shall be  consummated,  the Company  will pay all of the  following  expenses in
connection  with such  transactions  and in con nection with any  amendments  or
waivers  (whether or not the same become  effective) under or in respect of this
Agreement,  the Notes and the other  Related  Agreements to which it is a party:
(a) the cost and  expenses  of its  counsel,  including  the  furnishing  of all
opinions by such counsel and all  certificates on behalf of the Company,  and of
the Company's  performance of and compliance  with all agreements and conditions
contained  herein on its part to be  performed or complied  with;  (b) the taxes
specified in Section 10.1; (c) the costs and expenses  specified in Sections 8.6
and 10.9;  and (d) the  out-of-pocket  expenses  incurred  by each holder of any
Notes in connection  with any  amendments  or waivers or in  connection  with or
arising out of any  litigation,  investigation  or proceeding  instituted by any
Authority or any other Person with respect to this  Agreement,  the Notes or the
other Related Agreements to which it is a party or the transactions contemplated
hereby and  requiring  such holder's  participation  or  involvement,  except as
otherwise provided in the Acquisition Agreement.

         Anything in this Section or elsewhere in this Agreement to the contrary
notwithstanding,  in the event of any Legal  Action  between the Company and the
holders from time to time of the Notes,  the prevailing  party shall be entitled
to be  reimbursed  for the  reasonable  legal fees and  expenses and other court
costs of such Legal Action.

         10.3  Survival of Covenants;  Successors  and Assigns.  All  covenants,
agreements  and  representations  made herein and in  certificates  delivered in
connection  herewith  shall  be  deemed  material  and  relied  on  by  American
notwithstanding any investigation made by it or in its behalf, and shall survive
the execution  and delivery of the Notes,  to it and its payment  therefor,  and
shall bind and,  subject to compliance  with the  provisions  of this  Agreement
including without limitation Section 7.12, inure to the benefit of the Company's
successors  and assigns,  whether so  expressed or not, and all such  covenants,
agreements and representations  shall inure to the benefit of the successors and
assigns of American, whether so expressed or not.

         10.4 Notices and Communications.  All notices and other  communications
which by any  provision of this  Agreement are required or permitted to be given
shall be given in writing and shall be (i) mailed by  first-class,  express mail
or other overnight mail service,  postage  prepaid,  or Federal Express or other
overnight mail courier service, (ii) sent by telex, telegram,  telecopy or other
similar  form of rapid  transmission,  confirmed  by mailing  (by first class or
express  mail,  postage  prepaid,  or Federal  Express or other  overnight  mail
courier  service) written  confirmation at  substantially  the same time as such
rapid transmission, or (iii) personally delivered to an officer of the receiving
party. All such communications shall be mailed, set or delivered:

                  (a) if to the Company, at 1220 Brickyard Cove Road, Suite 200,
         Point  Richmond,  CA  94801,  (facsimile  [510]  236-3799),  attention:
         Richard Spight,  Chairman (with a copy to Cooper,  White & Cooper, 1333
         North  California  Boulevard,   Suite  450,  Walnut  Creek,  CA  94596,
         (facsimile [510] 256-9428), attention: Keith Howard, Esq.);


                                      -40-

<PAGE>



                  (b) if to American, at 6400 North Congress Avenue, Suite 1750,
         Boca Raton, FL 33487, (facsimile: [407] 998-2278),  attention: James S.
         Eisenstein,  Chief  Operating  Officer  (with copies to American  Radio
         Systems   Corporation,   116  Huntington  Avenue,   Boston,  MA  02116,
         (facsimile [617] 375-7575),  attention: Joseph L. Winn, Chief Financial
         Officer, and Sullivan & Worcester LLP, One Post Office Square,  Boston,
         Massachusetts 02109, (facsimile [617] 338-2880),  attention:  Norman A.
         Bikales, Esq.); and

                  (c) if to any other  Holders of Notes to the address set forth
         in the Company's records;

or at such other  addresses  (including  copies) as any party may  designate  in
writing to the other parties to this Agreement.

         A notice  delivered in person shall be effective  when received or upon
refusal to accept  receipt;  a notice  sent by mail  shall not become  effective
until  received  by the  Person  to whom it is  given,  unless  it is  mailed by
registered or certified mail, in which case it shall be deemed  effective on the
date of receipt or refusal to accept receipt as indicated by postal  records;  a
notice sent by rapid  transmission  shall be deemed to be given when  receipt of
such transmission is acknowledged.

         10.5  Amendments  and Waivers.  Any provision of this  Agreement to the
contrary  notwithstanding,  changes in or  additions to this  Agreement  and the
Notes may be made, or compli ance with any term, covenant, agreement,  condition
or provision  set forth  herein,  in the Notes may be omitted or waived  (either
generally or in a particular instance and either retroactively or prospectively)
with,  but only with,  the  consent in writing of the  holders of a majority  in
principal  amount of the Notes at the time  outstanding and the Company,  except
that no such  change,  addition,  omission,  waiver or consent  may be made with
respect to the Notes,  without  the  consent of all of the holders of the Notes,
except as  otherwise  provided  in  Section  8.3,  if it  involves  any  change,
addition,  omission,  waiver or consent with respect to the provisions regarding
the  amount,  timing or form of payment of  premium,  if any,  or interest on or
principal of the Notes, the maturity date thereof or which changes or amends the
provisions of this Section with respect to the requirement of unanimous  consent
of the  Noteholders;  and each such change,  addition or waiver shall be binding
upon each  future  holder  of the Notes  and,  in the case of the  Company,  its
successors  and  permitted  assigns.   Any  consent  may  be  given  subject  to
satisfaction of conditions stated therein. The failure to insist upon the strict
provisions of any covenant, term, condition or other provision of this Agreement
or the Notes or to exercise any right or remedy  hereunder or  thereunder  shall
not constitute a waiver of any such covenant, term, condition or other provision
thereof or Potential  Default or Event of Default in connection  therewith.  The
waiver of any covenant,  term, condition or other provision hereof or thereof or
Potential  Default or Event of Default  hereunder shall not affect or alter this
Agreement or the Notes in any other respect, and each and every covenant,  term,
condition or other  provision  of this  Agreement  and the Notes shall,  in such
event,  continue  in full force and  effect,  except as so waived,  and shall be
operative  with  respect  to any other then  existing  or  subsequent  Potential
Default or Event of Default in connection therewith.

         10.6 Governing Law; Venue.  This Agreement is and shall be deemed to be
a contract  made  under,  and the  validity,  interpretation,  construction  and
performance of this Agreement  shall be governed by, the applicable  laws of the
United States of America and the domestic  substantive  laws of the State of New
York without giving effect to any choice or conflict of laws provision or rule

                                      -41-

<PAGE>



that would  cause the  application  of  domestic  substantive  laws of any other
jurisdiction.  In the event of any Legal Action between the parties  arising out
of this  Agreement,  the parties  agree to submit the matter to the  appropriate
municipal, state or federal court sitting in San Francisco,  California, and the
parties agree to submit to the jurisdiction of such courts.

         10.7 Entire  Agreement.  This Agreement (which term, unless the context
otherwise  specifically  requires,  includes all Exhibits and Schedules  hereto)
constitutes the entire  agreement  between American and the Company with respect
to the subject matter hereof and supersedes all prior agreements,  arrangements,
covenants, promises, conditions,  understandings,  inducements,  representations
and negotiations, expressed or implied, oral or written, between them as to such
subject matter.

         10.8 Saturdays,  Sundays,  Holidays,  etc. If the last or appointed day
for taking of any action  required or  permitted  hereby or by the Notes  (other
than the payment of principal  of or interest or premium,  if any, on the Notes)
shall be a  Saturday,  Sunday or legal  holiday  in Boca  Raton,  Florida or San
Francisco,  California,  or a day on which banking  institutions  in Boca Raton,
Florida or San Francisco,  California,  are authorized by law or executive order
to close, then such action may be taken on the next succeeding  business day for
banking institutions in such cities.

         10.9  Brokers,  etc. No broker,  finder or other  person  performing  a
similar  function has been retained by the Company in connection  with the issue
and  sale of the  Notes or the  Acquisition.  The  Company  will  pay,  and will
indemnify and hold harmless American and its officers, directors,  stockholders,
employees,  trustees and agents from, the fees,  commissions and expenses of any
Person purporting to have acted on the Company's behalf in such connection or in
connection  with the issue and sale of the Notes and the  Acquisition.  American
will pay, and will  indemnify  and hold  harmless the Company and its  officers,
directors,  employees,  trustees  and agents  from,  the fees,  commissions  and
expenses of any Person  purporting  to have acted on  American's  behalf in such
connection  or in  connection  with  the  issue  and sale of the  Notes  and the
Acquisition.

         10.10 Headings;  Counterparts. The headings contained in this Agreement
are for  reference  purposes  only and shall not limit or  otherwise  affect the
meaning of any provision of this  Agreement.  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,  binding  upon all of the  parties
hereto. In pleading or proving any provision of this Agreement,  it shall not be
necessary to produce more than one of such counterparts.

         10.11 Severability. If any provision of this Agreement shall be held or
deemed  to  be,  or  shall  in  fact  be,  invalid,   inoperative,   illegal  or
unenforceable  as  applied  to  any  particular  case  in  any  jurisdiction  or
jurisdictions,  or in all jurisdictions or in all cases, because of the conflict
of any provision  with any  constitution  or statute or rule of public policy or
for any other reason,  such circumstance  shall not have the effect of rendering
the  provision  or  provisions  in  question  invalid,  inoperative,  illegal or
unenforceable in any other  jurisdiction or in any other case or circumstance or
of  rendering  any other  provision  or  provisions  herein  contained  invalid,
inoperative,  illegal or  unenforceable to the extent that such other provisions
are not themselves actually in conflict with such constitution,  statute or rule
of public policy, but this Agreement shall be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative, illegal or unenforceable

                                      -42-

<PAGE>


provision had never been contained herein and such provision reformed so that it
would be valid,  operative and  enforceable to the maximum  extent  permitted in
such jurisdiction or in such case.

         10.12 Further  Assurances  Each of the parties hereto agrees to execute
and deliver those writings and documents reasonably required to more fully carry
out the acts contemplated  hereby,  and each party hereby agrees, at the written
request  of any  other  party,  to  advise  any  Person  of the  status  of this
Agreement,  the Notes or any of the other Related  Agreements  and to the effect
that any of the same is or is not in default.

         10.13 Specific  Performance;  Other Rights.  The parties recognize that
various  of the  rights of the  parties  under this  Agreement  are unique  and,
accordingly,  the parties  shall,  in addition to such other  remedies as may be
available  to it at law or in  equity,  have the  right to  enforce  its  rights
hereunder  by actions for  injunctive  relief and  specific  performance  to the
extent  permitted  by Law.  Nothing  herein  contained  shall  be  construed  as
prohibiting  either party from pursuing any other  remedies  available to it for
such breach or threatened  breach,  including without limitation the recovery of
damages.

         10.14   Non-Recourse   Obligation.   The  obligations  of  the  Company
represented  by the Notes are  nonrecourse to the  stockholders  of the Company,
and,  notwithstanding any provision to the contrary in this Agreement,  the Note
or any of the other  Related  Agreements,  American  agrees for itself,  and its
successors  and assigns that (a) neither any  stockholder of the Company nor his
successors and assigns shall be personally  liable on the Notes,  and (b) in the
event that one or more Events of  Defaults  has  occurred  or any other  default
whatsoever has occurred under this Agreement or the Notes,  American,  or any of
its  successors  and assigns,  shall look solely to the Company and its property
and  assets,  including  without  limitation  the  Diablo  Assets and the Diablo
Business,  of the  Company for payment of the  indebtedness  represented  by the
Notes and will not make any claim or institute any action or proceeding  against
any  stockholder  of the Company,  or any of his  successors  and  assigns,  for
payment of such indebtedness (or for any deficiency).

         IN WITNESS WHEREOF the parties hereto have executed this Agreement, all
pursuant to authority  heretofore  granted,  to the extent applicable,  by their
respective Boards of Directors, as of the date and year first above written.

                                       Diablo Communications, Inc.

                                       By:________________________________
                                             Name:
                                             Title:

                                       American Tower Systems Corporation

                                       By:________________________________
                                             Name:
                                             Title:



                                      -43-