Execution Copy




                              BANDAG, INCORPORATED


                                   $40,000,000


                    6.50% Senior Notes due December 15, 2007


                                 _______________

                             NOTE PURCHASE AGREEMENT
                                 _______________



                             Dated December 15, 1997

   <PAGE>

                                TABLE OF CONTENTS

   Section                                                               Page

   1.   AUTHORIZATION OF NOTES . . . . . . . . . . . . . . . . . . . . . .  1

   2.   SALE AND PURCHASE OF NOTES . . . . . . . . . . . . . . . . . . . .  1

   3.   CLOSING  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2

   4.   CONDITIONS TO CLOSING  . . . . . . . . . . . . . . . . . . . . . .  2
        4.1.  Representations and Warranties . . . . . . . . . . . . . . .  2
        4.2.  Performance; No Default  . . . . . . . . . . . . . . . . . .  2
        4.3.  Compliance Certificates  . . . . . . . . . . . . . . . . . .  3
        4.4.  Opinions of Counsel  . . . . . . . . . . . . . . . . . . . .  3
        4.5.  Purchase Permitted By Applicable Law, etc. . . . . . . . . .  3
        4.6.  Sale of Other Notes  . . . . . . . . . . . . . . . . . . . .  3
        4.7.  Payment of Special Counsel Fees  . . . . . . . . . . . . . .  4
        4.8.  Private Placement Number . . . . . . . . . . . . . . . . . .  4
        4.9.  Changes in Corporate Structure . . . . . . . . . . . . . . .  4
        4.10. Proceedings and Documents  . . . . . . . . . . . . . . . . .  4

   5.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY  . . . . . . . . . .  4
        5.1.  Organization; Power and Authority  . . . . . . . . . . . . .  4
        5.2.  Authorization, etc.  . . . . . . . . . . . . . . . . . . . .  5
        5.3.  Disclosure . . . . . . . . . . . . . . . . . . . . . . . . .  5
        5.4.  Organization and Ownership of Shares of Subsidiaries . . . .  5
        5.5.  Financial Statements . . . . . . . . . . . . . . . . . . . .  6
        5.6.  Compliance with Laws, Other Instruments, etc.  . . . . . . .  6
        5.7.  Governmental Authorizations, etc.  . . . . . . . . . . . . .  7
        5.8.  Litigation; Observance of Statutes and Orders  . . . . . . .  7
        5.9.  Taxes  . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
        5.10. Title to Property; Leases  . . . . . . . . . . . . . . . . .  7
        5.11. Licenses, Permits, etc.  . . . . . . . . . . . . . . . . . .  8
        5.12. Compliance with ERISA  . . . . . . . . . . . . . . . . . . .  8
        5.13. Private Offering by the Company  . . . . . . . . . . . . . .  9
        5.14. Use of Proceeds; Margin Regulations  . . . . . . . . . . . .  9
        5.15. Existing Indebtedness  . . . . . . . . . . . . . . . . . . .  9
        5.16. Foreign Assets Control Regulations, etc. . . . . . . . . . . 10
        5.17. Status under Certain Statutes  . . . . . . . . . . . . . . . 10

   6.   REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . . . . . . 10
        6.1.  Purchase for Investment  . . . . . . . . . . . . . . . . . . 10
        6.2.  Source of Funds  . . . . . . . . . . . . . . . . . . . . . . 10

   7.   INFORMATION AS TO COMPANY  . . . . . . . . . . . . . . . . . . . . 12
        7.1.  Financial and Business Information . . . . . . . . . . . . . 12
        7.2.  Officer's Certificate  . . . . . . . . . . . . . . . . . . . 14
        7.3.  Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 15

   8.   PREPAYMENT OF THE NOTES  . . . . . . . . . . . . . . . . . . . . . 15
        8.1.  Required Prepayments . . . . . . . . . . . . . . . . . . . . 15
        8.2.  Optional Prepayments with Make-Whole Amount  . . . . . . . . 15
        8.3.  Allocation of Partial Prepayments  . . . . . . . . . . . . . 16
        8.4.  Maturity; Surrender, etc.  . . . . . . . . . . . . . . . . . 16
        8.5.  Purchase of Notes  . . . . . . . . . . . . . . . . . . . . . 16
        8.6.  Make-Whole Amount  . . . . . . . . . . . . . . . . . . . . . 17

   9.   AFFIRMATIVE COVENANTS  . . . . . . . . . . . . . . . . . . . . . . 18
        9.1.  Compliance with Law  . . . . . . . . . . . . . . . . . . . . 18
        9.2.  Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . 19
        9.3.  Maintenance of Properties  . . . . . . . . . . . . . . . . . 19
        9.4.  Payment of Taxes and Other Claims  . . . . . . . . . . . . . 19
        9.5.  Corporate Existence, etc.  . . . . . . . . . . . . . . . . . 20

   10.  NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 20
        10.1. Transactions with Affiliates . . . . . . . . . . . . . . . . 20
        10.2. Merger, Consolidation and Disposition of Assets  . . . . . . 20
        10.3. Limitations on Indebtedness.22
        10.4. Limitation on Liens. . . . . . . . . . . . . . . . . . . . . 23
        10.5. Priority Debt. . . . . . . . . . . . . . . . . . . . . . . . 25
        10.6. Sale and Leaseback.  . . . . . . . . . . . . . . . . . . . . 25
        10.7. Limitation on Investments. . . . . . . . . . . . . . . . . . 25
        10.8. Restricted Payments. . . . . . . . . . . . . . . . . . . . . 25
        10.9. Line of Business.  . . . . . . . . . . . . . . . . . . . . . 25
        10.10.Subsidiary Dividend Restrictions.  . . . . . . . . . . . . . 25

   11.  EVENTS OF DEFAULT  . . . . . . . . . . . . . . . . . . . . . . . . 26

   12.  REMEDIES ON DEFAULT, ETC.  . . . . . . . . . . . . . . . . . . . . 28
        12.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . 28
        12.2. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . 29
        12.3. Rescission . . . . . . . . . . . . . . . . . . . . . . . . . 29
        12.4. No Waivers or Election of Remedies, Expenses, etc. . . . . . 29

   13.  REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES  . . . . . . . . . . 30
        13.1. Registration of Notes  . . . . . . . . . . . . . . . . . . . 30
        13.2. Transfer and Exchange of Notes . . . . . . . . . . . . . . . 30
        13.3. Replacement of Notes . . . . . . . . . . . . . . . . . . . . 31

   14.  PAYMENTS ON NOTES  . . . . . . . . . . . . . . . . . . . . . . . . 31
        14.1. Place of Payment . . . . . . . . . . . . . . . . . . . . . . 31
        14.2. Home Office Payment  . . . . . . . . . . . . . . . . . . . . 31

   15.  EXPENSES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
        15.1. Transaction Expenses . . . . . . . . . . . . . . . . . . . . 32
        15.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 32

   16.  SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
        ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 32

   17.  AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . 33
        17.1. Requirements . . . . . . . . . . . . . . . . . . . . . . . . 33
        17.2. Solicitation of Holders of Notes . . . . . . . . . . . . . . 33
        17.3. Binding Effect, etc. . . . . . . . . . . . . . . . . . . . . 34
        17.4. Notes held by Company, etc.  . . . . . . . . . . . . . . . . 34

   18.  NOTICES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

   19.  REPRODUCTION OF DOCUMENTS  . . . . . . . . . . . . . . . . . . . . 35

   20.  CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 35

   21.  SUBSTITUTION OF PURCHASER  . . . . . . . . . . . . . . . . . . . . 36

   22.  MISCELLANEOUS  . . . . . . . . . . . . . . . . . . . . . . . . . . 37
        22.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . 37
        22.2. Payments Due on Non-Business Days  . . . . . . . . . . . . . 37
        22.3. Severability . . . . . . . . . . . . . . . . . . . . . . . . 37
        22.4. Construction . . . . . . . . . . . . . . . . . . . . . . . . 37
        22.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 37
        22.6. Governing Law  . . . . . . . . . . . . . . . . . . . . . . . 38

      SCHEDULE A     -- Information Relating to Purchasers
      SCHEDULE B     -- Defined Terms
      SCHEDULE 4.9   -- Changes in Corporate Structure
      SCHEDULE 5.3   -- Disclosure Materials
      SCHEDULE 5.4   -- Subsidiaries of the Company and Ownership of
                        Subsidiary Stock
      SCHEDULE 5.5   -- Financial Statements
      SCHEDULE 5.11  -- Patents, etc.
      SCHEDULE 5.14  -- Use of Proceeds
      SCHEDULE 5.15  -- Existing Indebtedness
      SCHEDULE 10.4  -- Existing Liens
      SCHEDULE 10.7  -- Existing Investments
      EXHIBIT 1      -- Form of 6.50% Senior Note due December 15, 2007
      EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company
      EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers

   <PAGE>


                              BANDAG, INCORPORATED
                              2905 North Highway 61
                               Muscatine, IA 52671

                    6.50% Senior Notes due December 15, 2007



                                                            December 15, 1997


   TO EACH OF THE PURCHASERS LISTED IN
        THE ATTACHED SCHEDULE A:

   Ladies and Gentlemen:

             Bandag, Incorporated, an Iowa corporation (the "Company"),
   agrees with each of the purchasers listed in the attached Schedule A
   (individually, a "Purchaser" and collectively, the "Purchasers") as
   follows:

   1.   AUTHORIZATION OF NOTES.

             The Company will authorize the issue and sale of $40,000,000
   aggregate principal amount of its 6.50% Senior Notes due December 15, 2007
   (the "Notes", such term to include any such notes issued in substitution
   therefor pursuant to Section 13 of this Agreement).  The Notes shall be
   substantially in the form set out in Exhibit 1, with such changes
   therefrom, if any, as may be approved by the Purchasers and the Company.
   Certain capitalized terms used in this Agreement are defined in Schedule
   B; references to a "Schedule" or an "Exhibit" are, unless otherwise
   specified, to a Schedule or an Exhibit attached to this Agreement.

   2.   SALE AND PURCHASE OF NOTES.

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

   3.   CLOSING.

             The sale and purchase of the Notes to be purchased by the
   Purchasers shall occur at the offices of Schiff Hardin & Waite, 7200 Sears
   Tower, 233 S. Wacker Drive, Chicago, Illinois 60606 at 10:00 a.m., Central
   Standard time, at a closing (the "Closing") on December 15, 1997.  At the
   Closing the Company will deliver to each Purchaser the Notes to be pur-
   chased by such Purchaser in the form of a single Note (or such greater
   number of Notes in denominations of at least $500,000 as such Purchaser
   may request or as may be specified on Schedule A) dated the date of the
   Closing and registered in such Purchaser's name (or in the name of its
   nominee), against delivery by such Purchaser to the Company or its order
   of immediately available funds in the amount of the purchase price there-
   for by wire transfer of immediately available funds for the account of the
   Company to account number 98655, at The Northern Trust Company, 50 South
   LaSalle Street, Chicago, IL 60675; ABA number 071000152.  If at the
   Closing the Company shall fail to tender such Notes to a Purchaser as
   provided above in this Section 3, or any of the conditions specified in
   Section 4 shall not have been fulfilled to the satisfaction of a
   Purchaser, such Purchaser shall, at its election, be relieved of all
   further obligations under this Agreement, without thereby waiving any
   rights it may have by reason of such failure or such nonfulfillment.

   4.   CONDITIONS TO CLOSING.

             Each Purchaser's obligation to purchase and pay for the Notes to
   be sold to it at the Closing is subject to the fulfillment to such
   Purchaser's satisfaction, prior to or at the Closing, of the following
   conditions:

   4.1. Representations and Warranties.

             The representations and warranties of the Company in this Agree-
   ment shall be correct when made and at the time of the Closing in all
   Material respects.

   4.2. Performance; No Default.

             The Company shall have performed and complied with all
   agreements and conditions contained in this Agreement required to be
   performed or complied with by it prior to or at the Closing and after
   giving effect to the issue and sale of the Notes (and the application of
   the proceeds thereof as contemplated by Schedule 5.14) no Default or Event
   of Default shall have occurred and be continuing.

   4.3. Compliance Certificates.

             (a)  Officer's Certificate.  The Company shall have delivered to
   each Purchaser an Officer's Certificate, dated the date of the Closing,
   certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have
   been fulfilled.

             (b)  Secretary's Certificate.  The Company shall have delivered
   to each Purchaser a certificate certifying as to the resolutions attached
   thereto and other corporate proceedings relating to the authorization,
   execution and delivery of the Notes and the Agreements.

   4.4. Opinions of Counsel.

             Each Purchaser shall have received opinions in form and
   substance satisfactory to it, dated the date of the Closing (a) from Foley
   & Lardner, counsel for the Company, covering the matters set forth in
   Exhibit 4.4(a) and covering such other matters incident to the
   transactions contemplated hereby as the Purchasers or their respective
   counsel may reasonably request (and the Company hereby instructs its
   counsel to deliver such opinion to the Purchasers) and (b) from the
   Purchasers' special counsel in connection with such transactions, sub-
   stantially in the form set forth in Exhibit 4.4(b) and covering such other
   matters incident to such transactions as the Purchasers may reasonably
   request.

   4.5. Purchase Permitted By Applicable Law, etc.

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

   4.6. Sale of Other Notes.

             (a)  Contemporaneously with the Closing with respect to each
   Purchaser, the Company shall sell to each other Purchaser and each other
   Purchaser shall purchase the Notes to be purchased by it at the Closing as
   specified in Schedule A.

             (b)  Contemporaneously with the Closing the Company shall sell
   to the purchasers of the Series 2002 Notes and the purchasers of the
   Series 2002 Notes shall purchase the Series 2002 Notes to be purchased by
   them as specified in Schedule A of the Series 2002 Note Purchase
   Agreement.

   4.7. Payment of Special Counsel Fees.

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

   4.8. Private Placement Number.

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

   4.9. Changes in Corporate Structure.

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

   4.10.     Proceedings and Documents.

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

   5.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

             The Company represents and warrants to each Purchaser that:

   5.1. Organization; Power and Authority.

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

   5.2. Authorization, etc.

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

   5.3. Disclosure.

             The Company, through its agent, William Blair & Company, L.L.C.,
   has delivered to each Purchaser a copy of a Confidential Placement
   Memorandum, dated November 1997 (the "Memorandum"), relating to the
   transactions contemplated hereby.  Except as disclosed in Schedule 5.3,
   this Agreement, the Memorandum, the documents, certificates or other
   writings identified in Schedule 5.3 and the financial statements listed in
   Schedule 5.5, taken as a whole, do not contain any untrue statement of a
   material fact or omit to state any material fact necessary to make the
   statements therein not misleading in light of the circumstances under
   which they were made.  Except as disclosed in the Memorandum or as
   expressly described in Schedule 5.3, or in one of the documents,
   certificates or other writings identified therein, or in the financial
   statements listed in Schedule 5.5, since December 31, 1996, there has been
   no change in the financial condition, operations, business or properties
   of the Company or any of its Subsidiaries except changes that individually
   or in the aggregate would not reasonably be expected to have a Material
   Adverse Effect.

   5.4. Organization and Ownership of Shares of Subsidiaries.

             (a) Schedule 5.4 is (except as noted therein) a complete and
   correct list of the Company's Subsidiaries, showing, as to each
   Subsidiary, the correct name thereof, the jurisdiction of its
   organization, and the percentage of shares of each class of its capital
   stock or similar equity interests outstanding owned by the Company and
   each other Subsidiary.  As of the date of Closing, all Subsidiaries of the
   Company will be Restricted Subsidiaries.

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

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

   5.5. Financial Statements.

             The Company has delivered to each Purchaser copies of the
   financial statements of the Company and its Subsidiaries listed on
   Schedule 5.5.  All of said financial statements (including in each case
   the related schedules and notes) fairly present in all material respects
   the consolidated financial position of the Company and its Subsidiaries as
   of the respective dates specified in such Schedule and the consolidated
   results of their operations and cash flows for the respective periods so
   specified and have been prepared in accordance with GAAP consistently
   applied throughout the periods involved except as set forth in the notes
   thereto (subject, in the case of any interim financial statements, to
   normal year-end adjustments).

   5.6. Compliance with Laws, Other Instruments, etc.

             The execution, delivery and performance by the Company of this
   Agreement and the Notes will not (i) contravene, result in any breach of,
   or constitute a default under, or result in the creation of any Lien in
   respect of any property of the Company or any Subsidiary under, any
   indenture, mortgage, deed of trust, loan, purchase or credit agreement,
   lease, corporate charter or by-laws, or any other Material agreement or
   instrument to which the Company or any Subsidiary is bound or by which the
   Company or any Subsidiary or any of their respective properties may be
   bound or affected, (ii) conflict with or result in a breach of any of the
   terms, conditions or provisions of any order, judgment, decree, or ruling
   of any court, arbitrator or Governmental Authority applicable to the
   Company or any Subsidiary or (iii) violate any provision of any statute or
   other rule or regulation of any Governmental Authority applicable to the
   Company or any Subsidiary relying, in part, as to compliance with federal
   and state securities laws, on the representation of the Purchasers
   contained in Section 6.1.

   5.7. Governmental Authorizations, etc.

             No consent, approval or authorization of, or registration,
   filing or declaration with, any Governmental Authority is required in
   connection with the execution, delivery or performance by the Company of
   this Agreement or the Notes.

   5.8. Litigation; Observance of Statutes and Orders.

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

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

   5.9. Taxes.

             The Company and its Subsidiaries have filed all income tax
   returns that are required to have been filed in any jurisdiction, and have
   paid all taxes shown to be due and payable on such returns and all other
   taxes and assessments payable by them, to the extent such taxes and
   assessments have become due and payable and before they have become
   delinquent, except for any taxes and assessments (i) the amount of which
   is not individually or in the aggregate Material or (ii) the amount,
   applicability or validity of which is currently being contested in good
   faith by appropriate proceedings and with respect to which the Company or
   a Subsidiary, as the case may be, has established adequate reserves in
   accordance with GAAP.  The Federal income tax liabilities of the Company
   and its Subsidiaries have been determined by the Internal Revenue Service
   and paid for all fiscal years up to and including the fiscal year ended
   December 31, 1993.

   5.10.     Title to Property; Leases.

             The Company and its Subsidiaries have good and sufficient title
   to their respective Material properties, including all such properties
   reflected in the most recent audited balance sheet referred to in Section
   5.5 or purported to have been acquired by the Company or any Subsidiary
   after said date (except as sold or otherwise disposed of in the ordinary
   course of business), in each case free and clear of Liens prohibited by
   this Agreement, except for those defects in title and Liens that,
   individually or in the aggregate, would not have a Material Adverse
   Effect.  All Material leases are valid and subsisting and are in full
   force and effect in all material respects.

   5.11.     Licenses, Permits, etc.

             Except as disclosed in Schedule 5.11, the Company and its
   Subsidiaries own or possess all licenses, permits, franchises,
   authorizations, patents, copyrights, service marks, trademarks and trade
   names, or rights thereto, that are Material, without known conflict with
   the rights of others, except for those conflicts that, individually or in
   the aggregate, would not have a Material Adverse Effect.

   5.12.     Compliance with ERISA.

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

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

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

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

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

   5.13.     Private Offering by the Company.

             Neither the Company nor anyone acting on its behalf has offered
   the Notes or any similar securities for sale to, or solicited any offer to
   buy any of the same from, or otherwise approached or negotiated in respect
   thereof with, any person other than the Purchasers, the purchasers of
   Series 2002 Notes and not more than 60 other Institutional Investors, each
   of which has been offered the Notes or the Series 2002 Notes at a private
   sale for investment.  Neither the Company nor anyone acting on its behalf
   has taken, or will take, any action that would subject the issuance or
   sale of the Notes to the registration requirements of Section 5 of the
   Securities Act.

   5.14.     Use of Proceeds; Margin Regulations.

             The Company will apply the proceeds of the sale of the Notes as
   set forth in Schedule 5.14.  No part of the proceeds from the sale of the
   Notes hereunder will be used, directly or indirectly, for the purpose of
   buying or carrying any margin stock within the meaning of Regulation G of
   the Board of Governors of the Federal Reserve System (12 CFR 207), or for
   the purpose of buying or carrying or trading in any securities under such
   circumstances as to involve the Company in a violation of Regulation X of
   said Board (12 CFR 224) or to involve any broker or dealer in a violation
   of Regulation T of said Board (12 CFR 220).  Margin stock does not consti-
   tute more than 25% of the value of the consolidated assets of the Company
   and its Subsidiaries and the Company does not have any present intention
   that margin stock will constitute more than 25% of the value of such
   assets.  As used in this Section, the terms "margin stock" and "purpose of
   buying or carrying" shall have the meanings assigned to them in said
   Regulation G.

   5.15.     Existing Indebtedness.

             Except as described therein, Schedule 5.15 sets forth a complete
   and correct list of all outstanding Indebtedness of the Company and its
   Subsidiaries as of November 30, 1997, since which date there has been no
   Material change in the amounts, interest rates, sinking funds, installment
   payments or maturities of the Indebtedness of the Company or its
   Subsidiaries.  Neither the Company nor any Subsidiary is in default and no
   waiver of default is currently in effect, in the payment of any principal
   or interest on any Indebtedness of the Company or such Subsidiary and no
   event or condition exists with respect to any Indebtedness of the Company
   or any Subsidiary that would permit (or that with notice or the lapse of
   time, or both, would permit) one or more Persons to cause such
   Indebtedness to become due and payable before its stated maturity or
   before its regularly scheduled dates of payment.

   5.16.     Foreign Assets Control Regulations, etc.

             Neither the sale of the Notes by the Company hereunder nor its
   use of the proceeds thereof will violate the Trading with the Enemy Act,
   as amended, or any of the foreign assets control regulations of the United
   States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or
   any enabling legislation or executive order relating thereto.

   5.17.     Status under Certain Statutes.

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

   6.   REPRESENTATIONS OF THE PURCHASERS.

   6.1. Purchase for Investment.

             Each Purchaser represents that it is purchasing the Notes for
   its own account or for one or more separate accounts maintained by it or
   for the account of one or more pension or trust funds and not with a view
   to the distribution thereof, provided that the disposition of its or their
   property shall at all times be within its or their control.  Each
   Purchaser understands that the Notes have not been registered under the
   Securities Act and may be resold only if registered pursuant to the provi-
   sions of the Securities Act or if an exemption from registration is
   available, except under circumstances where neither such registration nor
   such an exemption is required by law, and that the Company is not required
   to register the Notes.

   6.2. Source of Funds.

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

             (a)  The Source of funds being used by such Purchaser to pay the
        purchase price of the Notes being purchased by such Purchaser
        hereunder constitutes assets: (i) allocated to the "insurance company
        general account" of such Purchaser (as such term is defined under
        Section V of the United States Department of Labor's Prohibited
        Transaction Class Exemption "TCE" 95-60), and as of the date of the
        purchase of the Notes such Purchaser satisfies all of the applicable
        requirements for relief under Section I and IV of PTCE 95-60, (ii)
        allocated to a separate account maintained by such Purchaser in which
        no employee benefit plan, other than employee benefit plans
        identified on a list which has been furnished by such Purchaser to
        the Company, participates to the extent of 10% or more, or (iii) of
        an investment fund, the assets of which do not include assets of any
        employee benefit plan within the meaning of ERISA.

             (b)  The Source is either (i) an insurance company pooled
        separate account, within the meaning of Prohibited Transaction
        Exemption ("PTE") 90-1 (issued January 29, 1990), or (ii) a bank
        collective investment fund, within the meaning of the PTE 91-38
        (issued July 12, 1991) and, except as such Purchaser has disclosed to
        the Company in writing pursuant to this paragraph (b), no employee
        benefit plan or group of plans maintained by the same employer or
        employee organization beneficially owns more than 10% of all assets
        allocated to such pooled separate account or collective investment
        fund; or

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

             (d)  The Source is a governmental plan; or

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

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

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

   7.   INFORMATION AS TO COMPANY.

   7.1. Financial and Business Information.

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

             (a)  Quarterly Statements -- within 60 days after the end of
        each quarterly fiscal period in each fiscal year of the Company
        (other than the last quarterly fiscal period of each such fiscal
        year), duplicate copies of,

                  (i)  a consolidated balance sheet of the Company and its
             Restricted Subsidiaries as at the end of such quarter, and

                  (ii) consolidated statements of income, changes in
             shareholders' equity and cash flows of the Company and its
             Restricted Subsidiaries, for such quarter and (in the case of
             the second and third quarters) for the portion of the fiscal
             year ending with such quarter,

        setting forth in each case in comparative form the figures for the
        corresponding periods in the previous fiscal year, all in reasonable
        detail, prepared in accordance with GAAP applicable to quarterly
        financial statements generally, and certified by a Senior Financial
        Officer as fairly presenting, in all material respects, the financial
        position of the companies being reported on and their results of
        operations and cash flows, subject to changes resulting from year-end
        adjustments;

             (b)  Annual Statements -- within 105 days after the end of each
        fiscal year of the Company, duplicate copies of,

                  (i)  a consolidated balance sheet of the Company and its
             Restricted Subsidiaries, as at the end of such year, and

                  (ii) consolidated statements of income, changes in
             shareholders' equity and cash flows of the Company and its
             Restricted Subsidiaries, for such year,

        setting forth in each case in comparative form the figures for the
        previous fiscal year, all in reasonable detail, prepared in
        accordance with GAAP, and accompanied by an opinion thereon of
        independent certified public accountants of recognized national
        standing, which opinion shall state that such financial statements
        present fairly, in all material respects, the financial position of
        the companies being reported upon and their results of operations and
        cash flows and have been prepared in conformity with GAAP, and that
        the examination of such accountants in connection with such financial
        statements has been made in accordance with generally accepted
        auditing standards, and that such audit provides a reasonable basis
        for such opinion in the circumstances;

             (c)  SEC and Other Reports -- promptly upon their becoming
        available, one copy of (i) each financial statement, report, notice
        or proxy statement sent by the Company or any Restricted Subsidiary
        to public security holders generally, and (ii) each regular or
        periodic report, each registration statement that shall have become
        effective (without exhibits except as expressly requested by such
        holder), and each final prospectus and all amendments thereto filed
        by the Company or any Restricted Subsidiary with the Securities and
        Exchange Commission or with any national securities exchange;

             (d)  Notice of Default or Event of Default -- promptly, and in
        any event within five days, after a Responsible Officer becoming
        aware of the existence of any Default or Event of Default, a written
        notice specifying the nature and period of existence thereof and what
        action the Company is taking or proposes to take with respect
        thereto;

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

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

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

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

             (f)  Information Required by Rule 144A -- upon the request of
        the holder of any Note, provide such holder, and any qualified
        institutional buyer designated by such holder, such financial and
        other information as such holder may reasonably determine to be
        necessary in order to permit compliance with the information
        requirements of Rule 144A under the Securities Act in connection with
        the resale of Notes, except at such times as the Company is subject
        to the reporting requirements of section 13 or 15(d) of the Exchange
        Act.  For the purposes of this paragraph 7.1(f), the term "qualified
        institutional buyer" shall have the meaning specified in Rule 144A
        under the Securities Act.

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

   7.2. Officer's Certificate.

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

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

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

   7.3. Inspection.

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

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

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

   8.   PREPAYMENT OF THE NOTES.

   8.1. Required Prepayments.

             Beginning on December 15, 2001 and on each December 15th
   thereafter to and including December 15, 2006, the Company will prepay
   $5,714,285.71 aggregate principal amount (or such lesser principal amount
   as shall then be outstanding) of the Notes at par and without payment of
   the Make-Whole Amount or any premium, provided that upon any partial
   purchase of the Notes permitted by Section 8.5, the principal amount of
   each required prepayment of the Notes becoming due under this Section 8.1
   on and after the date of such prepayment or purchase shall be reduced in
   the same proportion as the aggregate unpaid principal amount of the Notes
   is reduced as a result of such prepayment or purchase.  The entire
   outstanding principal amount of the Notes shall be paid on the maturity
   date of the Notes.

   8.2. Optional Prepayments with Make-Whole Amount.

             The Company may, at its option, upon notice as provided below,
   prepay at any time after the first anniversary of the Closing all, or from
   time to time any part of, the Notes, in an amount not less than 5% of the
   aggregate principal amount of the Notes then outstanding in the case of a
   partial prepayment, at 100% of the principal amount so prepaid, plus the
   Make-Whole Amount determined for the prepayment date with respect to such
   principal amount.  The Company will give each holder of Notes written no-
   tice of each optional prepayment under this Section 8.2 not less than 30
   days and not more than 60 days prior to the date fixed for such
   prepayment.  Each such notice shall specify such date, the aggregate
   principal amount of the Notes to be prepaid on such date, the principal
   amount of each Note held by such holder to be prepaid (determined in
   accordance with Section 8.3), and the interest to be paid on the
   prepayment date with respect to such principal amount being prepaid, and
   shall be accompanied by a certificate of a Senior Financial Officer as to
   the estimated Make-Whole Amount due in connection with such prepayment
   (calculated as if the date of such notice were the date of the
   prepayment), setting forth the details of such computation.  Two Business
   Days prior to such prepayment, the Company shall deliver to each holder of
   Notes a certificate of a Senior Financial Officer specifying the
   calculation of such Make-Whole Amount as of the specified prepayment date.

   8.3. Allocation of Partial Prepayments.

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

   8.4. Maturity; Surrender, etc.

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

   8.5. Purchase of Notes.

             The Company will not and will not permit any Affiliate to
   purchase, redeem, prepay or otherwise acquire, directly or indirectly, any
   of the outstanding Notes except (a) upon the payment or prepayment of the
   Notes in accordance with the terms of this Agreement and the Notes or
   (b) pursuant to an offer to purchase made by the Company or an Affiliate
   pro rata to the holders of all Notes at the time outstanding upon the same
   terms and conditions.  Any such offer shall provide each holder with suf-
   ficient information to enable it to make an informed decision with respect
   to such offer, and shall remain open for at least 30 Business Days.  If
   the holders of more than 5% of the principal amount of the Notes then
   outstanding accept such offer, the Company shall promptly notify the
   remaining holders of such fact and the expiration date for the acceptance
   by holders of Notes of such offer shall be extended by the number of days
   necessary to give each such remaining holder at least 15 Business Days
   from its receipt of such notice to accept such offer.  The Company will
   promptly cancel all Notes acquired by it or any Affiliate pursuant to any
   payment, prepayment or purchase of Notes pursuant to any provision of this
   Agreement and no Notes may be issued in substitution or exchange for any
   such Notes.

   8.6. Make-Whole Amount.

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

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

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

             "Reinvestment Yield" means, with respect to the Called Principal
        of any Note, 0.5% over the yield to maturity implied by (a) the
        yields reported, as of 10:00 A.M. (New York City time) on the second
        Business Day preceding the Settlement Date with respect to such
        Called Principal, on the display designated as "Page 678" on the Dow
        Jones Markets, Inc. services (Telerate) (or such other display as may
        replace Page 678 on the Dow Jones Markets, Inc. services (Telerate))
        for actively traded U.S. Treasury securities having a maturity equal
        to the Remaining Average Life of such Called Principal as of such
        Settlement Date, or (b) if such yields are not reported as of such
        time or the yields reported as of such time are not ascertainable,
        the Treasury Constant Maturity Series Yields reported, for the latest
        day for which such yields have been so reported as of the second
        Business Day preceding the Settlement Date with respect to such
        Called Principal, in Federal Reserve Statistical Release H.15 (519)
        (or any comparable successor publication) for actively traded U.S.
        Treasury securities having a constant maturity equal to the Remaining
        Average Life of such Called Principal as of such Settlement Date.
        Such implied yield will be determined, if necessary, by (1) convert-
        ing U.S. Treasury bill quotations to bond-equivalent yields in
        accordance with accepted financial practice and (2) interpolating
        linearly between (A) the actively traded U.S. Treasury security with
        the duration closest to and greater than the Remaining Average Life
        and (B) the actively traded U.S. Treasury security with the duration
        closest to and less than the Remaining Average Life.

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

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

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

   9.   AFFIRMATIVE COVENANTS.

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

   9.1. Compliance with Law.

             The Company will, and will cause each of its Restricted Sub-
   sidiaries to, comply with all laws, ordinances or governmental rules or
   regulations to which each of them is subject, including, without
   limitation, Environmental Laws, and will obtain and maintain in effect all
   licenses, certificates, permits, franchises and other governmental
   authorizations necessary to the ownership of their respective properties
   or to the conduct of their respective businesses, in each case to the
   extent necessary to ensure that non-compliance with such laws, ordinances
   or governmental rules or regulations or failures to obtain or maintain in
   effect such licenses, certificates, permits, franchises and other
   governmental authorizations would not reasonably be expected, individually
   or in the aggregate, to have a materially adverse effect on the business,
   operations, affairs, financial condition, properties or assets of the
   Company and its Restricted Subsidiaries taken as a whole.

   9.2. Insurance.

             The Company will, and will cause each of its Restricted Sub-
   sidiaries to, maintain, with financially sound and reputable insurers,
   insurance with respect to their respective properties and businesses
   against such casualties and contingencies, of such types, on such terms
   and in such amounts (including deductibles and co-insurance, if adequate
   reserves are maintained with respect thereto) as is customary in the case
   of entities of established reputations engaged in the same or a similar
   business and owning and operating similar properties, provided that such
   insurance is commercially available; and further provided that the Company
   and its Restricted Subsidiaries may maintain a system or systems of self-
   insurance in accordance with good business practice if adequate reserves
   are maintained with respect thereto.

   9.3. Maintenance of Properties.

             The Company will, and will cause each of its Restricted Sub-
   sidiaries to, maintain, preserve and keep, or cause to be maintained,
   preserved  and kept, their respective properties in good repair, working
   order and condition (ordinary wear and tear excepted), and will, and will
   cause each of its Restricted Subsidiaries to, make all repairs,
   replacements, additions and betterments, as needed, so that the efficiency
   thereof shall be maintained, provided that this Section shall not prevent
   the Company or any Restricted Subsidiary from discontinuing the operation
   and the maintenance of any of its properties if such discontinuance is
   desirable in the conduct of its business and the Company has concluded
   that such discontinuance would not, individually or in the aggregate, have
   a materially adverse effect on the business, operations, affairs,
   financial condition, properties or assets of the Company and its
   Restricted Subsidiaries taken as a whole.

   9.4. Payment of Taxes and Other Claims.

             The Company will, and will cause each of its Restricted Sub-
   sidiaries to, file all income tax or similar tax returns required to be
   filed in any jurisdiction and to pay and discharge all taxes shown to be
   due and payable on such returns and all other taxes, assessments,
   governmental charges, or levies and all claims for labor, materials and
   supplies payable by any of them, to the extent such taxes, assessments,
   charges, levies and claims have become due and payable and before they
   have become delinquent, provided that neither the Company nor any
   Restricted Subsidiary need pay any such tax, assessment, charge, levy or
   claim  if (i) the amount, applicability or validity thereof is contested
   by the Company or such Restricted Subsidiary on a timely basis in good
   faith and in appropriate proceedings that will prevent the forfeiture or
   sale of any property, and the Company or Restricted Subsidiary has estab-
   lished adequate reserves therefor in accordance with GAAP on the books of
   the Company or such Restricted Subsidiary or (ii) the nonpayment of all
   such taxes, assessments, charges, levies and claims in the aggregate would
   not reasonably be expected to have a materially adverse effect on the
   business, operations, affairs, financial condition, properties or assets
   of the Company and its Restricted Subsidiaries taken as a whole.

   9.5. Corporate Existence, etc.

             Subject to Section 10.2, the Company will, and will cause each
   of its Restricted Subsidiaries to, at all times preserve and keep in full
   force and effect its corporate existence (except in the case of a merger
   of a Restricted Subsidiary into the Company or into a Wholly-Owned
   Restricted Subsidiary) and all of its rights and franchises unless, in the
   good faith judgment of the Company, the termination of or failure to
   preserve and keep in full force and effect such right or franchise would
   not, individually or in the aggregate, have a materially adverse effect on
   the business, operations, affairs, financial condition, properties or
   assets of the Company and its Restricted Subsidiaries taken as a whole.

   10.  NEGATIVE COVENANTS.

             The Company covenants that so long as any of the Notes are out-
   standing:

   10.1.     Transactions with Affiliates.

             The Company will not, and will not permit any Restricted Sub-
   sidiary to, enter into directly or indirectly any transaction (including,
   without limitation, the purchase, lease, sale or exchange of properties of
   any kind or the rendering of any service) with any Affiliate, except
   pursuant to the reasonable requirements of the Company's or such
   Restricted Subsidiary's business and upon fair and reasonable terms no
   less favorable to the Company or such Restricted Subsidiary than would be
   obtainable in a comparable arm's-length transaction with a Person not an
   Affiliate; provided that the Company or a Restricted Subsidiary may enter
   into any transaction with an Affiliate so long as such transaction,
   together with any other related transactions, would not reasonably be
   expected to have a materially adverse effect on the business, operations,
   affairs, financial condition, properties or assets of the Company and its
   Restricted Subsidiaries taken as a whole.

   10.2.     Merger, Consolidation and Disposition of Assets

             The Company will not, and will not permit any Restricted
   Subsidiary to, merge or consolidate with any Person, or sell, transfer,
   lease or otherwise dispose of any substantial portion of its properties to
   any Person, except that:

             (i)  any corporation may be merged into any Restricted
        Subsidiary and any Restricted Subsidiary may consolidate with or
        merge into, or sell, lease or otherwise dispose of its properties as
        an entirety or substantially as an entirety to, the Company, another
        Restricted Subsidiary or any corporation, so long as immediately
        after the consummation thereof (a) the Company shall be entitled to
        incur an additional $1.00 of Senior Funded Debt under clauses (a) and
        (b) of Section 10.3(ii), (b) the Company is in compliance with the
        provisions of Section 10.4 and (c) no Default or Event of Default
        shall exist;

             (ii) any corporation may be merged into the Company and the
        Company may consolidate with or merge into, or sell or otherwise
        dispose of its properties as an entirety or substantially as an
        entirety to, any solvent corporation organized and existing under the
        laws of the United States or any State thereof (including the
        District of Columbia) which expressly assumes in writing (in form and
        substance reasonably satisfactory to the Required Holders and
        executed and delivered to each holder of any Note) the due and
        punctual payment of the principal of, and interest and Make-Whole
        Amount on, the Notes and the due and punctual performance of the
        obligations of the Company under this Agreement and under the Notes,
        so long as immediately after the consummation thereof (a) the
        surviving entity or such corporation to which such properties are
        sold or otherwise disposed of, as the case may be, shall be entitled
        to incur an additional $1.00 of Senior Funded Debt under clauses (a)
        and (b) of Section 10.3(ii), (b) the surviving entity or such
        corporation, as the case may be, is in compliance with the provisions
        of Section 10.4 and (c) no Default or Event of Default shall exist;

             (iii)     the Company or any Restricted Subsidiary may sell,
        lease or otherwise dispose of any of its assets in the ordinary
        course of its business;

             (iv) the Company or any Restricted Subsidiary may, on one
        occasion in one transaction or group of related transactions, sell,
        transfer, lease or otherwise dispose of properties at fair market
        value, so long as (a) the aggregate net proceeds received by the
        Company and its Restricted Subsidiaries from all properties sold,
        transferred, leased or otherwise disposed of in such transaction or
        group of transactions does not exceed 20% of the Company's
        Consolidated Total Assets as of the end of the fiscal year of the
        Company most recently ended prior to the date of such transaction,
        (b) prior to or promptly after the consummation of such transaction
        the Company shall have notified each holder of any Note that the
        Company has effected a transaction pursuant to this clause (iv),
        together with a description of such transaction, and (c) immediately
        after the consummation of such transaction (1) the Company shall be
        entitled to incur an additional $1.00 of Senior Funded Debt under
        clauses (a) and (b) of Section 10.3(ii), (2) the Company is in
        compliance with the provisions of Section 10.4, and (3) no Default or
        Event of Default shall exist; and

             (v)  in addition to transactions permitted by clauses (i), (ii),
        (iii) or (iv) of this Section 10.2, the Company or any Restricted
        Subsidiary may sell or otherwise dispose of any of its properties at
        fair market value so long as (a) the net proceeds received by the
        Company and its Restricted Subsidiaries from such sale or other
        disposition, together with (x) the aggregate net proceeds received by
        the Company and its Restricted Subsidiaries from all sales, leases
        and other dispositions of properties (excluding sales of inventory
        and other properties sold in the ordinary course of its business)
        during the 12 consecutive calendar months immediately preceding such
        sale or other disposition and (y) the aggregate fair market value of
        all the properties of any Restricted Subsidiary which the Company had
        designated as an Unrestricted Subsidiary during such 12 consecutive
        calendar months, shall not exceed 10% of Consolidated Total Assets as
        of the end of the fiscal year of the Company most recently ended
        prior to the date of such transaction, and (b) immediately after the
        consummation of such transaction (1) the Company shall be entitled to
        incur an additional $1.00 of Senior Funded Debt under clauses (a) and
        (b) of Section 10.3(ii), (2) the Company is in compliance with the
        provisions of Section 10.4, and (3) no Default or Event of Default
        shall exist.

             For purposes of this Section 10.2, a "substantial portion" of
   the properties of the Company or any Restricted Subsidiary shall mean
   properties which, together with all properties sold, transferred or
   otherwise disposed of in any related transactions, have a book value, in
   the aggregate, greater than or equal to 10% of the Consolidated Total
   Assets as of the end of the fiscal year most recently ended.  No sale,
   transfer, lease or other disposition permitted under this Section 10.2
   shall have the effect of releasing the Company or any successor
   corporation that shall theretofore have become such in the manner
   prescribed in this Section 10.2 from its liability under this Agreement or
   the Notes.

   10.3.     Limitations on Indebtedness.

             The Company will not, and will not permit any Restricted
   Subsidiary to, directly or indirectly, create, incur, assume, Guaranty or
   otherwise become directly or indirectly liable with respect to any Current
   Debt or Funded Debt, other than:

             (i)  the Notes, the Series 2002 Notes and all Funded Debt
        outstanding as of the date of this Agreement and identified on
        Schedule 5.15 hereto;

             (ii) Funded Debt of the Company or any Restricted Subsidiary
        (including any Funded Debt secured by Liens permitted under Section
        10.4) if immediately after giving effect thereto (a) the ratio of
        Consolidated Senior Funded Debt to Total Capitalization would not
        exceed 60% and (b) the ratio of Consolidated Funded Debt to Total
        Capitalization would not exceed 65%;

             (iii)     Current Debt of the Company or any Restricted
        Subsidiary (including any Current Debt secured by Liens permitted
        under Section 10.4), provided that during the 12 month period
        immediately preceding each day such Current Debt is outstanding,
        there shall have been a period of 30 consecutive days during which,
        on each day during such 30 day period, the aggregate amount of all
        outstanding Current Debt of the Company and its Restricted
        Subsidiaries did not exceed the amount of additional Senior Funded
        Debt that the Company could have (but did not) incur under clauses
        (a) and (b) of Section 10.3(ii); and

             (iv) Funded Debt and Current Debt of  a Restricted Subsidiary
        owed to the Company or to a Wholly-Owned Restricted Subsidiary.

   provided, however, that, in each case, after giving effect to such Funded
   Debt or Current Debt, the Company shall be in compliance with the
   provisions of Section 10.5 hereof.

             For the purposes of this Section 10.3, any Person becoming a
   Restricted Subsidiary after the date hereof shall be deemed, at the time
   it becomes a Restricted Subsidiary, to have incurred all of its then
   existing Funded Debt and Current Debt, and any Person extending, renewing
   or refunding any Funded Debt or Current Debt shall be deemed to have
   incurred such Funded Debt or Current Debt at the time of such extension,
   renewal or refunding.


   10.4.     Limitation on Liens.

             The Company will not, and will not permit any Restricted
   Subsidiary to, directly or indirectly create, incur, assume or permit to
   exist (upon the happening of a contingency or otherwise) any Lien on or
   with respect to any property (including, without limitation, any document
   or instrument in respect of goods or accounts receivable) of the Company
   or any Restricted Subsidiary, whether now owned or held or hereafter
   acquired, or any income or profits therefrom, (whether or not provision is
   made for the equal and ratable securing of the Notes in accordance with
   the last paragraph of this Section 10.4), or assign or otherwise convey
   any right to receive income or profits, except:

             (i)  Liens on property of the Company or a Restricted Subsidiary
        existing as of the date of this Agreement and which are either (a)
        identified on Schedule 10.4 hereto or (b) Liens which do not secure
        Indebtedness and which, in the aggregate, are not Material;

             (ii) Liens, pledges or deposits in connection with worker's
        compensation, social security, unemployment insurance, to secure the
        performance of letters of credit, bids, tenders, sales contracts,
        leases, subleases granted to others, statutory obligations, surety,
        appeal and performance bonds and other similar obligations not
        incurred in connection with borrowing money, the obtaining of
        advances or the payment of the deferred purchase price of property;

             (iii)     Liens for taxes, assessments or governmental charges
        or levies or construction or materialmen's or warehousemen's liens
        securing obligations not overdue, or if overdue, being contested in
        good faith by appropriate proceedings that will prevent the
        forfeiture or sale of any property, provided  that adequate  reserves
        are  established in accordance with GAAP on the books of the Company
        or a Restricted Subsidiary;

             (iv) attachment, judgment and other similar Liens arising in
        connection with court proceedings, provided the execution or other
        enforcement of such Lien(s) is effectively stayed and the claims
        secured thereby are being contested in good faith in such manner that
        the property subject to such Lien(s) is not subject to forfeiture or
        sale, and further provided that adequate reserves are established in
        accordance with GAAP on the books of the Company or a Restricted
        Subsidiary;

             (v)  encumbrances in  the  nature  of zoning  restrictions,
        easements, rights and restrictions of record on the use of real
        property, landlord's and lessor's liens in the ordinary course of
        business, which do not materially impair the Company's or a
        Restricted Subsidiary's use thereof;

             (vi) Liens, including Capital Leases, securing Indebtedness for
        the acquisition or construction of real property, leasehold
        improvements, equipment or other tangible assets provided that (a)
        such Liens are limited to the property acquired or constructed with
        the proceeds of the Indebtedness secured thereby and the amount of
        such Indebtedness is limited to the cost or value of such property,
        and (b) after giving effect thereto, the Company could incur an
        additional $1.00 of Senior Funded Debt under clauses (a) and (b) of
        Section 10.3(ii) and no Default or Event of Default shall exist;

             (vii)     Liens existing on property at the time of the
        acquisition by the Company or its Restricted Subsidiaries of such
        property (or of the entity owning such property) provided that the
        Lien does not extend to any other property of the Company or its
        Restricted Subsidiaries; and

             (viii)    other Liens securing Funded Debt or Current Debt
        permitted to be incurred under the provisions of Section 10.3 hereof,
        provided that, after giving effect to such Funded Debt or Current
        Debt, the Company shall be in compliance with the provisions of
        Section 10.5 hereof.

             If, notwithstanding the prohibition contained herein, the
   Company shall, or shall permit any of its Restricted Subsidiaries to,
   directly or indirectly create, incur, assume or permit to exist any Lien,
   other than those Liens permitted by the provisions of clauses (i) through
   (viii) of this Section 10.4, it will make or cause to be made effective
   provision whereby the Notes will be secured equally and ratably with any
   and all other obligations thereby secured, such security to be pursuant to
   agreements reasonably satisfactory to the Required Holders and, in any
   such case, the Notes shall have the benefit, to the fullest extent that,
   and with such priority as, the holders of the Notes may be entitled under
   applicable law, of an equitable Lien on such property.  Such violation of
   this Section 10.4 will constitute a Default, whether or not provision is
   made for an equal and ratable Lien pursuant to this paragraph.

   10.5.     Priority Debt.

             The Company will not at any time permit Priority Debt to exceed
   15% of Consolidated Total Assets.

   10.6.     Sale and Leaseback.

             The Company will not, and will not permit any Restricted
   Subsidiary to, sell or transfer any property (other than real property) to
   any Person (other than to the Company or a Wholly-Owned Restricted
   Subsidiary) and thereupon lease, as lessee, the same property unless such
   lease constitutes a Capital Lease and the incurrence of the Indebtedness
   evidenced thereby shall be permitted under Section 10.3.

   10.7.     Limitation on Investments.

             The Company will not, and will not permit any Restricted
   Subsidiary to, make or suffer to exist any Investment other than Permitted
   Investments.

   10.8.     Restricted Payments.

             The Company will not, and will not permit any Restricted
   Subsidiary to, declare or make any Restricted Payment unless, immediately
   after giving effect thereto, (a) no Default or Event of Default would
   exist and (b) the Company could incur an additional $1.00 of Senior Funded
   Debt under clauses (a) and (b) of Section 10.3(ii).

   10.9.     Line of Business.

             The Company will not, and will not permit any Restricted
   Subsidiary to, engage to any substantial extent in any business other than
   the business in which the Company and its Subsidiaries in the aggregate
   are engaged on the date of this Agreement as described in the Memorandum.

   10.10.    Subsidiary Dividend Restrictions.

             The Company will not, and will not permit any Restricted
   Subsidiary to, enter into, or be otherwise subject to, any contract or
   agreement (including its certificate of incorporation or other
   organization document) which limits the amount of, or otherwise imposes
   restriction on the payment of, dividends by such Restricted Subsidiary.

   11.  EVENTS OF DEFAULT.

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

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

             (b)  the Company defaults in the payment of any interest on any
        Note for more than ten Business Days after the same becomes due and
        payable; or

             (c)  the Company defaults in the performance of or compliance
        with any term contained in Sections 10.1 through 10.10 and such
        default is not remedied within 30 days after the earlier of (i) a
        Responsible Officer obtaining actual knowledge of such default and
        (ii) the Company receiving written notice of such default from any
        holder of a Note (any such written notice to be identified as a
        "notice of default" and to refer specifically to this paragraph (c)
        of Section 11); or

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

             (e)  any representation or warranty made in writing by or on
        behalf of the Company or by any officer of the Company in this
        Agreement or in any writing furnished in connection with the
        transactions contemplated hereby proves to have been false or incor-
        rect in any material respect on the date as of which made; or

             (f)  (i) the Company or any Restricted Subsidiary is in default
        (as principal or as guarantor or other surety) in the payment of any
        principal of or premium or make-whole amount or interest on any
        Indebtedness that is outstanding in an aggregate principal amount of
        at least $10,000,000 beyond any period of grace provided with respect
        thereto, or (ii) the Company or any Restricted Subsidiary is in
        default in the performance of or compliance with any term of any
        evidence of any Indebtedness in an aggregate outstanding principal
        amount of at least $10,000,000 or of any mortgage, indenture or other
        agreement relating thereto or any other condition exists, and as a
        consequence of such default or condition such Indebtedness has
        become, or has been declared due and payable (or to be repurchased by
        the Company or any Restricted Subsidiary) before its stated maturity
        or before its regularly scheduled dates of payment; provided however,
        that this clause (f) shall not apply to any Indebtedness which is
        payable solely out of the property or assets of a partnership, joint
        venture or similar entity (which is not a Restricted Subsidiary) in
        which the Company or any Restricted Subsidiary is a participant, or
        is secured by a mortgage on the property or assets owned or held by
        such partnership, joint venture or other entity, if there is no
        recourse to or liability of the Company or any Restricted Subsidiary
        for the payment of such Indebtedness; or

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

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

             (i)  a final judgment or judgments for the payment of money
        aggregating in excess of $10,000,000 are rendered against one or more
        of the Company and its Restricted  Subsidiaries and which judgments
        are not, within 60 days after entry thereof, bonded, discharged or
        stayed pending appeal, or are not discharged within 60 days after the
        expiration of such stay; or

             (j)  (i) any Plan shall fail to satisfy the minimum funding
        standards of ERISA or the Code for any plan year or part thereof or a
        waiver of such standards or extension of any amortization period is
        sought or granted under section 412 of the Code, (ii) a notice of
        intent to terminate any Plan shall have been or is reasonably
        expected to be filed with the PBGC or the PBGC shall have instituted
        proceedings under ERISA section 4042 to terminate or appoint a
        trustee to administer any Plan or the PBGC shall have notified the
        Company or any ERISA Affiliate that a Plan may become a subject of
        any such proceedings, (iii) the aggregate "amount of unfunded benefit
        liabilities" (within the meaning of section 4001(a)(18) of ERISA)
        under all Plans, determined in accordance with Title IV of ERISA,
        shall exceed $10,000,000, (iv) the Company or any ERISA Affiliate
        shall have incurred or is reasonably expected to incur any liability
        pursuant to Title I or IV of ERISA or the penalty or excise tax
        provisions to Title I or IV of ERISA or the penalty or excise tax
        provisions of the Code relating to employee benefit plans, (v) the
        Company or any ERISA Affiliate withdraws from any Multiemployer Plan,
        or (vi) the Company or any Restricted Subsidiary establishes or
        amends any employee welfare benefit plan that provides post-
        employment welfare benefits in a manner that would increase the
        liability of the Company or any Restricted Subsidiary thereunder; and
        any such event or events described in clauses (i) through (vi) above,
        either individually or together with any other such event or events,
        would reasonably be expected to have a Materially Adverse Effect.

   12.  REMEDIES ON DEFAULT, ETC.

   12.1.     Acceleration.

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

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

             (c)  If any Event of Default described in paragraph (a) or (b)
   of Section 11 has occurred and is continuing, any holder or holders of
   Notes at the time outstanding affected by such Event of Default may at any
   time, at its or their option, by notice or notices to the Company, declare
   all the Notes held by it or them to be immediately due and payable.

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

   12.2.     Other Remedies.

             If any Default or Event of Default has occurred and is
   continuing, and irrespective of whether any Notes have become or have been
   declared immediately due and payable under Section 12.1, the holder of any
   Note at the time outstanding may proceed to protect and enforce the rights
   of such holder by an action at law, suit in equity or other appropriate
   proceeding, whether for the specific performance of any agreement
   contained herein or in any Note, or for an injunction against a violation
   of any of the terms hereof or thereof, or in aid of the exercise of any
   power granted hereby or thereby or by law or otherwise.

   12.3.     Rescission.

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

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

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

   13.  REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

   13.1.     Registration of Notes.

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

   13.2.     Transfer and Exchange of Notes.

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

   13.3.     Replacement of Notes.

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

             (a)  in the case of loss, theft or destruction, of indemnity
        reasonably satisfactory to it (provided that if the holder of such
        Note is, or is a nominee for, an original Purchaser or another holder
        of a Note with a minimum net worth of at least $25,000,000, such
        original Purchaser's or other Note holder's own unsecured agreement
        of indemnity shall be deemed to be satisfactory), or

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

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

   14.  PAYMENTS ON NOTES.

   14.1.     Place of Payment.

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

   14.2.     Home Office Payment.

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

   15.  EXPENSES, ETC.

   15.1.     Transaction Expenses.

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

   15.2.     Survival.

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


   16.  SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

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

   17.  AMENDMENT AND WAIVER.

   17.1.     Requirements.

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

   17.2.     Solicitation of Holders of Notes.

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

             (b)  Payment.  The Company will not directly or indirectly pay
   or cause to be paid any remuneration, whether by way of supplemental or
   additional interest, fee or otherwise, or grant any security, to any
   holder of Notes as consideration for or as an inducement to the entering
   into by any holder of Notes or any waiver or amendment of any of the terms
   and provisions hereof unless such remuneration is concurrently paid, or
   security is concurrently granted, on the same terms, ratably to each
   holder of Notes then outstanding even if such holder did not consent to
   such waiver or amendment.

   17.3.     Binding Effect, etc.

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

   17.4.     Notes held by Company, etc.

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

   18.  NOTICES.

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

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

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

             (iii)     if to the Company, to the Company at its address set
        forth at the beginning hereof to the attention of Garold L. Oliver,
        Assistant Treasurer, or at such other address as the Company shall
        have specified to the holder of each Note in writing.

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

   19.  REPRODUCTION OF DOCUMENTS.

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

   20.  CONFIDENTIAL INFORMATION.

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

   21.  SUBSTITUTION OF PURCHASER.

             Each Purchaser shall have the right to substitute any one of its
   affiliates as the purchaser of the Notes that it has agreed to purchase
   hereunder, by written notice to the Company, which notice shall be signed
   by both such Purchaser and such affiliate, shall contain such affiliate's
   agreement to be bound by this Agreement and shall contain a confirmation
   by such affiliate of the accuracy with respect to it of the repre-
   sentations set forth in Section 6.  Upon receipt of such notice, wherever
   the word "Purchaser" or "Purchasers" is used in this Agreement with
   respect to such Purchaser (other than in this Section 21), such word shall
   be deemed to refer to such affiliate in lieu of such Purchaser.  In the
   event that such affiliate is so substituted as a purchaser hereunder and
   such affiliate thereafter transfers to such Purchaser all of the Notes
   then held by such affiliate, upon receipt by the Company of notice of such
   transfer, wherever the word "Purchaser" or "Purchasers" is used in this
   Agreement with respect to such Purchaser (other than in this Section 21),
   such words shall no longer be deemed to refer to such affiliate, but shall
   refer to such Purchaser, and such Purchaser shall have all the rights of
   an original holder of the Notes under this Agreement.

   22.  MISCELLANEOUS.

   22.1.     Successors and Assigns.

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

   22.2.     Payments Due on Non-Business Days.

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

   22.3.     Severability.

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

   22.4.     Construction.

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

   22.5.     Counterparts.

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

   22.6.     Governing Law.

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

                              *    *    *    *    *

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

                                 Very truly yours,

                                 BANDAG, INCORPORATED


                                 By___________________________

                                      Name:_________________________
                                      Title:________________________

                                 and


                                 By___________________________

                                      Name:_________________________
                                      Title:________________________


   The foregoing is hereby
   agreed to as of the
   date thereof.

   NATIONWIDE LIFE INSURANCE COMPANY


   By______________________________

        Name:____________________________
        Title:___________________________


   STATE FARM LIFE INSURANCE COMPANY


   By________________________________

        Name:__________________________
        Title:_________________________

   and


   By__________________________________

        Name:__________________________
        Title:_________________________


   WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY


   By__________________________________

        Name:__________________________
        Title:_________________________

   and


   By__________________________________

        Name:__________________________
        Title:_________________________


   AMERICAN FAMILY LIFE INSURANCE COMPANY

   By__________________________________

        Name:__________________________
        Title:_________________________


   BERKSHIRE LIFE INSURANCE COMPANY

   By__________________________________

        Name:__________________________
        Title:_________________________


   THE SECURITY MUTUAL LIFE INSURANCE
   COMPANY OF LINCOLN, NEBRASKA


   By__________________________________

        Name:__________________________
        Title:_________________________

   <PAGE>

                       INFORMATION RELATING TO PURCHASERS

                                          Aggregate
                                        Principal Amount
                                              of
                                          Notes to be            Note
                                          Purchased          Denomination(s)

    NATIONWIDE LIFE INSURANCE COMPANY     $10,000,000        $10,000,000

    (1)  All payments on account of
         Notes held by such Purchaser
         shall be made by wire transfer
         of immediately available funds
         for credit to:

         The Bank of New York
         (ABA No.: 021-000-018)
         BNF: IOC566
         F/A/O Nationwide Life Insurance
         Company
         Attn: P&I Department

         Each such wire transfer shall
         set forth the name of the
         Company, a reference to "6.50%
         Senior Notes due December 15,
         2007, PPN 059815 A@ 9, and the
         due date and application (as
         among principal, interest and
         Make-Whole Amount) of the
         payment being made.


    (2)  Address for all notices
         relating to payments:

         Nationwide Life Insurance Company
         c/o The Bank of New York
         P.O. Box 19266
         Attn: P&I Department
         Newark, New Jersey 07195

         With a copy to:

         Nationwide Life Insurance Company
         Attn: Investment Accounting
         One Nationwide Plaza (1-32-05)
         Columbus, Ohio 43215-2220


    (3)  Address for all other
         communications and notices:

         Nationwide Life Insurance Company
         One Nationwide Plaza (1-33-07)
         Columbus, Ohio 43215-2220

         Attention: Corporate Fixed-
         Income Securities

    (4)  Tax Identification No.: 31-4156830


                                               Aggregate
                                               Principal
                                               Amount of
                                               Notes to be       Note
                                               Purchased     Denomination(s)

    WOODMEN OF THE WORLD                       $10,000,000   $10,000,000
    LIFE INSURANCE SOCIETY

    (1)  All payments on account of Notes
         held by such Purchaser shall be made
         by wire transfer of immediately
         available funds for credit to:

         Account No. 1-487-477-7-0730
         First Bank, N.A., 1700 Farnam Street
         Omaha, Nebraska 68102, For the
         Account of WOW
         (ABA No.: 104000029)

         Each such wire transfer shall set
         forth the name of the Company, a
         reference to "6.50% Senior Notes due
         December 15, 2007, PPN 059815 A@ 9,
         and the due date and application (as
         among principal, interest and Make-
         Whole Amount) of the payment being
         made.

    (2)  Address for all notices relating to
         payments:

         Woodmen of the World
         Life Insurance Society
         1700 Farnam Street
         Omaha, Nebraska 68102


         Attention:  Securities Department
         Telephone: (402) 271-7873
         Telecopier: (402) 342-5136

    (3)  Address for all other communications
         and notices:

         Woodmen of the World
         Life Insurance Society
         1700 Farnam Street
         Omaha, Nebraska 68102

         Attention: Securities Department
         Telephone: (402) 271-7873
         Telecopier: (402) 342-5136

    (4)  Telephonic notices of prepayment to
         be given on or before the date
         written notice of prepayment is
         given to:

         Securities Department
         Telephone: (402) 271-7873
         Telecopier: (402) 342-5136



    (5)  Tax Identification No.: 47-0339250

                                            Aggregate
                                            Principal
                                            Amount of
                                            Notes to be          Note
                                            Purchased        Denomination(s)

    STATE FARM LIFE INSURANCE COMPANY       $8,000,000       $8,000,000


    (1)  All payments on account of Notes
         held by such Purchaser shall be
         made by wire transfer of
         immediately available funds for
         credit to:

         The Chase Manhattan Bank
         ABA No.: 021000021
         SSG Private Income Processing
         A/C #900-9-000200
         For Credit To Account Number G06893
         Ref. PPN 059815 A@ 9, 6.50%
         Bandag, Incorporated     Series B
         Senior Notes
         Rate: 6.50%
         Maturity Date: December 15, 2007

    (2)  Address for all payment notices
         and communications:

         State Farm Life Insurance Company
         Investment Accounting Dept. D-3
         One State Farm Plaza
         Bloomington, Illinois 61710

    (3)  Address for all other
         communications and notices:

         State Farm Life Insurance Company
         Investment Dept. E-10
         One State Farm Plaza
         Bloomington, Illinois 61710

    (4)  Tax Identification No.: 37-0533090

                                            Aggregate
                                            Principal
                                            Amount of
                                            Notes to be          Note
                                            Purchased        Denomination(s)

    AMERICAN FAMILY LIFE INSURANCE COMPANY  $7,000,000       $7,000,000

    (1)  All payments on account of Notes
         held by such Purchaser shall be
         made by wire transfer of
         immediately available funds for
         credit to:

         Firstar Bank Milwaukee, N.A.
         Account of Firstar Trust Company
         ABA #075000022
         For Credit To Account #112-950-027
         Trust Account 000018012500 for
         AFLIC-Traditional Portfolio
         Attn: Accounting Department

         Each such wire transfer shall set
         forth the name of the Company, a
         reference to "6.50% Senior Notes
         due December 15, 2007, PPN 059815
         A@ 9, and the due date and
         application (as among principal,
         interest and Make-Whole Amount)
         of the payment being made.

    (2)  Address for all notices and
         communications, including payment
         notices:

         AMERICAN FAMILY LIFE INSURANCE COMPANY
         6000 American Parkway
         Madison, Wisconsin 53783-0001
         Attn: Investment Division -
         Private Placements

    (3)  Note to be registered in nominee
         name:
         BAND & Co.

    (4)  Tax Identification No. 39-6040365


                                              Aggregate
                                              Principal
                                              Amount of
                                              Notes to be        Note
                                              Purchased      Denomination(s)

    BERKSHIRE LIFE INSURANCE COMPANY          $3,000,000     $3,000,000

    (1)  All payments on account of Notes
         held by such Purchaser shall be
         made by wire transfer of
         immediately available funds for
         credit to:

         Berkshire Life Insurance Company
         Account Number 002-4-020877
         The Chase Manhattan Bank, N.A.
         Funds Transfer Services
         4 New York Plaza, 15th Floor
         New York, New York 10004
         Attn: Operations Manager
    `    ABA #021000021

         Each such wire transfer shall set
         forth the name of the Company, a
         reference to "6.50% Senior Notes
         due December 15, 2007, PPN 059815
         A@ 9, and the due date and
         application (as among principal,
         interest and Make-Whole Amount) of
         the payment being made.


    (2)  Address for all notices and
         communications, including payment
         notices:

         Berkshire Life Insurance Company
         Attention: Securities Department
         700 South Street
         Pittsfield, Massachusetts 01201

    (3)  Tax Identification No.: 04-1083480


                                             Aggregate
                                             Principal
                                             Amount of
                                             Notes to be         Note
                                             Purchased       Denomination(s)

    THE SECURITY MUTUAL LIFE INSURANCE       $2,000,000      $2,000,000
    COMPANY OF LINCOLN, NEBRASKA

    (1)  All payments on account of Notes
         held by such Purchaser shall be
         made by wire transfer of
         immediately available funds at the
         opening of business on the due
         date for credit to:

         National Bank of Commerce
         13th and O Street
         Lincoln, Nebraska
         ABA No. 1040-00045
         Account of: Security Mutual Life
         Account of: 40-797-624

         Each such wire transfer shall set
         forth the name of the Company, a
         reference to "6.50% Senior Notes
         due December 15, 2007, PPN 059815
         A@ 9, and the due date and
         application (as among principal,
         interest and Make-Whole Amount) of
         the payment being made.


    (2)  Address for all payment notices
         and communications:

         The Security Mutual Life
           Insurance Company of
           Lincoln, Nebraska
         200 Centennial Mall North
         Lincoln, Nebraska 68508
         Attention: Investment Division
         Fax: (402-434-9599)
         Phone: (402-434-9500)

    (3)  Address for all other notices and
         communications:

          The Security Mutual Life
            Insurance Company of
            Lincoln, Nebraska
         200 Centennial Mall North
         Lincoln, Nebraska 68508

    (4)  Tax Identification No.: 47-0293990

   <PAGE>

                                  DEFINED TERMS

             As used herein, the following terms have the respective meanings
   set forth below or set forth in the Section of the Agreement following
   such term:

             "Affiliate" means any Person  (other than the Company or a
   Restricted Subsidiary) which, directly or indirectly, controls, is
   controlled by or is under direct or indirect common control with the
   Company or a Restricted Subsidiary or which beneficially owns or holds or
   has the power to direct the voting power of 20% or more of the voting
   stock of the Company or a Restricted Subsidiary, and any director or
   executive officer of the Company or a Restricted Subsidiary.   As used in
   this definition, "Control" means the possession, directly or indirectly,
   of the power to direct or cause the direction of the management and
   policies of a Person, whether through the ownership of voting securities,
   by contract or otherwise.

             "Agreement" as defined in Section 17.3.

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

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

             "Closing" is defined in Section 3 of the Agreement.

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

             "Company" means Bandag, Incorporated, an Iowa corporation.

             "Confidential Information" is defined in Section 20 of the
   Agreement.

             "Consolidated Funded Debt" means, on any date, the sum of all
   Consolidated Senior Funded Debt on such date and all Consolidated
   Subordinated Funded Debt on such date.

             "Consolidated Net Worth" means, on any date,  the total
   shareholders' equity of the Company and its Restricted Subsidiaries
   (including any preferred shareholders' equity) on such date, determined on
   a consolidated basis in accordance with GAAP .

             "Consolidated Senior Funded Debt" means, on any date, all Senior
   Funded Debt of the Company and its Restricted Subsidiaries on such date
   after eliminating inter-company items in accordance with GAAP.

             "Consolidated Subordinated Funded Debt" means, on any date, all
   Subordinated Funded Debt of the Company and its Restricted Subsidiaries on
   such date after eliminating inter-company items in accordance with GAAP.

             "Consolidated Total Assets"  means, on any date,  the total
   assets of the Company and its Restricted Subsidiaries on such date
   determined on a consolidated basis in accordance with GAAP.

             "Current Debt"  means, with respect to any Person, Indebtedness
   of such Person which, by its terms or by the terms of any instrument or
   agreement relating thereto, matures on demand or within one year or less
   from the date of creation thereof and is not directly or indirectly
   renewable or extendible at the option of the obligor in respect thereof to
   a date one year or more from such date, provided that Indebtedness
   outstanding under a revolving credit or similar agreement which obligates
   the lender or lenders to extend credit over a period of one year or more
   shall constitute Funded Debt and not Current Debt, even though such
   Indebtedness by its terms matures on demand or within one year from such
   date.

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

             "Default Rate" means that rate of interest that is the greater
   of (i) 2% per annum above the rate of interest stated in clause (a) of the
   first paragraph of the Notes or (ii) 2% over the rate of interest publicly
   announced by Morgan Guaranty Trust Company of New York from time to time
   in New York City as its Prime Rate.

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

             "ERISA" means the Employee Retirement Income  Security Act of
   1974, as amended from time to time, and the rules and regulations promul-
   gated thereunder from time to time in effect.

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

             "Event of Default" is defined in Section 11.

             "Exchange Act" means the Securities Exchange Act of 1934, as
   amended.

             "Funded Debt" means, with respect to any Person, all
   Indebtedness of such Person which by its terms or by the terms of any
   instrument or agreement relating thereto matures, or which is otherwise
   payable or unpaid, one year or more from, or is directly or indirectly
   renewable or extendible at the option of the obligor in respect thereof to
   a date one year or more (including, without limitation, an option of such
   obligor under a revolving credit or similar agreement obligating the
   lender or lenders to extend credit over a period of one year or more)
   from, the date of the creation thereof.

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

             "Governmental Authority"  means

             (a)  the government of

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

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

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

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

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

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

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

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

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

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

             "Indebtedness"with respect to any Person means, at any time,
   without duplication,

             (a)  its liabilities for borrowed money;

             (b)  its liabilities for the deferred purchase price of property
        acquired by such Person (excluding accounts payable arising in the
        ordinary course of business but including all liabilities created or
        arising under any conditional sale or other title retention agreement
        with respect to any such property);

             (c)  all liabilities appearing on its balance sheet in
        accordance with GAAP in respect of Capital Leases;

             (d)  all its liabilities in respect of promissory notes or
        instruments serving a similar function; and


             (e)  any Guaranty of such Person with respect to liabilities of
        a type described in any of clauses (a) through (d) hereof.

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

             "Investment" means any loan, advance, extension of credit or
   contribution of capital or any other investment in or to, or purchase or
   other acquisition of stock, notes, debentures or other securities of, any
   Person.

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

             "Make-Whole Amount" is defined in Section 8.6.

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

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

             "Memorandum" is defined in Section 5.3 of the Agreement.

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

             "Notes" is defined in Section 1 of the Agreement.

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

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


             "Permitted Investment" means (a) Investments (including leverage
   lease and affordable housing tax credit transactions) of the Company and
   its Restricted Subsidiaries existing as of the date of this Agreement and
   set forth on Schedule 10.7 to the Agreement, and (b) other Investments
   consisting of: (i) direct obligations of the United States of America or
   any agency of the United States of America or obligations guaranteed by
   the United States of America, so long as such obligations or guaranty
   shall have the benefit of the full faith and credit of the United States
   of America, in each case maturing in eighteen months or less from the date
   of acquisition; (ii) state, municipal or corporate debt obligations
   maturing in eighteen months or less from the date of acquisition and rated
   "A" or better (or the equivalent) by Standard & Poor's Rating Group or
   Moody's Investors Service, Inc.; (iii) investments in bankers acceptances,
   Eurodollar deposits or certificates of deposits maturing within eighteen
   months from the date of issuance thereof and issued by, or any demand
   deposits in, any United States commercial bank with capital and surplus of
   not less than $250,000,000 or any foreign bank with a capital and surplus
   of not less than $1.0 billion with a branch in the United States; (iv)
   preferred stock rated "BBB" or better by Standard & Poor's Rating Group or
   Moody's Investors Service, Inc.; (v) loans or advances in the ordinary
   course of business to suppliers, franchisees, officers, directors and
   employees incidental to carrying on the business of the Company or any
   Restricted Subsidiary (including employee relocation loans); (vi)
   receivables arising from the sale of goods and services in the ordinary
   course of business of the Company and its Restricted Subsidiaries; (vii)
   loans to and advances from Restricted Subsidiaries in the usual course of
   business; (viii) Investments in any Restricted Subsidiary or any Person
   which, after giving effect to such Investment, would be a Restricted
   Subsidiary; (ix) Investments in money market funds; and (x) other
   Investments not listed above which do not exceed, in the aggregate, 10% of
   Consolidated Net Worth at any time.

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

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

             "Priority Debt"  means (i) Indebtedness of the Company secured
   by Liens  permitted  under clause (viii) of Section 10.4 of the Agreement,
   and (ii) Indebtedness of Restricted Subsidiaries, except Indebtedness owed
   to the Company.

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

             "Purchaser" and "Purchasers" are defined in the first sentence
   of the Agreement.

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

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

             "Responsible Officer" means any Senior Financial Officer and any
   other officer of the Company with responsibility for the administration of
   the relevant portion of the Agreement.

             "Restricted Payment" means any dividend or other distribution or
   payment on the capital stock or other equity interests of the Company or
   any Restricted Subsidiary, whether in cash or in property (except
   distributions solely in shares of such capital stock or equity interests),
   and any redemption, purchase, retirement or other acquisition of the
   capital stock or other equity interests of the Company or any Restricted
   Subsidiary or of warrants, rights or other options to acquire such capital
   stock or other equity interests, excluding any dividends, distributions or
   payments to, or redemptions, purchases, retirements or other acquisitions
   from, the Company or a Wholly-Owned Restricted Subsidiary.

             "Restricted Subsidiary" means any Subsidiary of the Company
   other than an Unrestricted Subsidiary.

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

             "Senior Financial Officer" means the chief financial officer,
   principal accounting officer, treasurer or assistant treasurer of the
   Company.

             "Senior Funded Debt" means Funded Debt of the Company and its
   Restricted Subsidiaries other than Subordinated Funded Debt.

             "Series 2002 Notes" means the Company's 6.41% Senior Notes due
   December 15, 2002, in the original aggregate principal amount of
   $60,000,000, issued pursuant to the Series 2002 Note Purchase Agreement.

             "Series 2002 Note Purchase Agreement" means the Note Purchase
   Agreement, dated as of the date of the Agreement, among the Company and
   the purchasers listed on Schedule A attached thereto, providing for the
   purchase and sale of the Series 2002 Notes.

             "Significant Subsidiary" means at any time any Subsidiary that
   would at such time constitute a "significant subsidiary" (as such term is
   defined in Regulation S-X of the Securities and Exchange Commission as in
   effect on the date of the Closing) of the Company.

             "Subordinated Funded Debt" means any Funded Debt of the Company
   and its Restricted Subsidiaries which is subordinated in right of payment
   to the Notes pursuant to a subordination agreement, in form and substance
   approved in writing by the Required Holders, and which has a maturity
   extending beyond final maturity of the Notes.

             "Subsidiary" means any corporation, association or other
   business entity in which the Company or one or more of its Subsidiaries or
   the Company and one or more of its Subsidiaries owns sufficient equity or
   voting interests to enable it or them (as a group) ordinarily, in the
   absence of contingencies, to elect a majority of the directors (or Persons
   performing similar functions) of such entity, and any partnership or joint
   venture if more than a 50% interest in the profits or capital thereof is
   owned by the Company or one or more of its Subsidiaries or the Company and
   one or more of its Subsidiaries (unless such partnership can and does
   ordinarily take major business actions without the prior approval of the
   Company or one or more of its Subsidiaries).

             "Total Capitalization" means, on any date, the sum of (i)
   Consolidated Funded Debt on such date, (ii) the deferred income tax
   liability of the Company and each Restricted Subsidiary on such date,
   determined on a consolidated basis in accordance with GAAP, and (iii)
   Consolidated Net Worth on such date.

             "Unrestricted Subsidiary"  means any Subsidiary designated as an
   "Unrestricted Subsidiary" at any time by the Company in a writing
   delivered to the holders of the Notes and not thereafter designated as a
   "Restricted Subsidiary" by the Company in a writing delivered to the
   holders of the Notes; provided that the Company may so designate a
   Subsidiary as an Unrestricted Subsidiary or designate an Unrestricted
   Subsidiary as a Restricted Subsidiary only if (i) at the time of any such
   designation of a Subsidiary as an Unrestricted Subsidiary, the Subsidiary
   so designated neither owns, directly or indirectly, any Funded Debt or
   capital stock of any other Restricted Subsidiary, and (ii) after giving
   effect to such designation of a Subsidiary as an Unrestricted Subsidiary
   or of an Unrestricted Subsidiary as a Restricted Subsidiary (x) the
   Company could incur an additional $1.00 of Senior Funded Debt pursuant to
   clauses (a) and (b) of Section 10.3(ii) of the Agreement, and (y) no
   Default or Event of Default would exist.  Once a Subsidiary is designated
   an Unrestricted Subsidiary, it may thereafter be designated as a
   Restricted Subsidiary but after being so designated as a Restricted
   Subsidiary such Subsidiary may not again be designated as an Unrestricted
   Subsidiary.  As of the time of Closing, no Subsidiary is an Unrestricted
   Subsidiary.

             "Wholly-Owned Restricted Subsidiary" means, at any time, any
   Restricted Subsidiary one hundred percent (100%) of all of the equity
   interests (except directors' qualifying shares) and voting interests of
   which are owned by any one or more of the Company and the Company's other
   Wholly-Owned Restricted Subsidiaries at such time.

   <PAGE>

                                 [FORM OF NOTE]


                              BANDAG, INCORPORATED

                     6.50% SENIOR NOTE DUE DECEMBER 15, 2007

   No. R-2007-__                                     [DATE]
   $[_______]                                                 PPN 059815 A@ 9

             FOR VALUE RECEIVED, the undersigned, Bandag, Incorporated
   (herein called the "Company"), a corporation organized and existing under
   the laws of the State of Iowa hereby promises to pay to
   [___________________________], or registered assigns, the principal sum of
   [___________________________] DOLLARS on December 15, 2007, with interest
   (computed on the basis of a 360-day year of twelve 30-day months) (a) on
   the unpaid balance thereof at the rate of 6.50% per annum from the date
   hereof, payable semiannually, on the 15th day of June and December in each
   year, commencing with the June or December next succeeding the date
   hereof, until the principal hereof shall have become due and payable, and
   (b) to the extent permitted by law on any overdue payment (including any
   overdue prepayment) of principal, any overdue payment of interest and any
   overdue payment of any Make-Whole Amount (as defined in the Note Purchase
   Agreement referred to below), payable semiannually as aforesaid (or, at
   the option of the registered holder hereof, on demand), at a rate per
   annum from time to time equal to the greater of (i) 8.50% or (ii) 2% over
   the rate of interest publicly announced by Morgan Guaranty Trust Company
   of New York from time to time in New York City, New York as its Prime
   Rate.

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

             This Note is one of a series of Senior Notes (herein called the
   "Notes") issued pursuant to the Note Purchase Agreement, dated as of
   December 15, 1997 (as from time to time amended, the "Note Purchase
   Agreement"), among the Company and the respective Purchasers named therein
   and is entitled to the benefits thereof.  Each holder of this Note will be
   deemed, by its acceptance hereof, (i) to have agreed to the confiden-
   tiality provisions set forth in Section 20 of the Note Purchase Agreement
   and (ii) to have made the representation set forth in Section 6.2 of the
   Note Purchase Agreement.

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

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

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

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

                                 BANDAG, INCORPORATED


                                 By_________________________
                                    Title:

                                 and

                                 By_________________________
                                    Title:

   <PAGE>

                       FORM OF OPINION OF SPECIAL COUNSEL
                                 TO THE COMPANY

                            Matters To Be Covered In
                    Opinion of Special Counsel To the Company


             1.   Each of the Company and its Significant Subsidiaries being
   duly incorporated, validly existing and in good standing and having
   requisite corporate power and authority to issue and sell the Notes and to
   execute and deliver the documents.

             2.   Each of the Company and its Significant Subsidiaries being
   duly qualified and in good standing as a foreign corporation in such
   jurisdictions as may be requested by the Purchasers.

             3.   Due authorization and execution of the documents and such
   documents being legal, valid, binding and enforceable.

             4.   No conflicts with charter documents, laws or other
   agreements.

             5.   All consents required to issue and sell the Notes and to
   execute and deliver the documents having been obtained.

             6.   No litigation questioning validity of documents.

             7.   The Notes not requiring registration under the Securities
   Act of 1933, as amended; no need to qualify an indenture under the Trust
   Indenture Act of 1939, as amended.

             8.   No violation of Regulations G, T or X of the Federal
   Reserve Board.

             9.   Company not an "investment company", or a company
   "controlled" by an "investment company", under the Investment Company Act
   of 1940, as amended.

   <PAGE>

                       FORM OF OPINION OF SPECIAL COUNSEL
                                TO THE PURCHASERS



                                [TO BE PROVIDED]