Document:

<PAGE>   1

                                                               EXHIBIT 10.30 (c)

                            ASSET EXCHANGE AGREEMENT

                           DATED AS OF JANUARY 2, 2001

                                      AMONG

                             CC VIII OPERATING, LLC,
                                 ON THE ONE HAND

                                       AND

                  CHARTER COMMUNICATIONS ENTERTAINMENT I, LLC,
                          CHARTER CABLE PARTNERS, LLC,
               FALCON TELECABLE, A CALIFORNIA LIMITED PARTNERSHIP,
                         CHARTER COMMUNICATIONS VI, LLC,
                                ON THE OTHER HAND

<PAGE>   2

                            ASSET EXCHANGE AGREEMENT

         THIS ASSET EXCHANGE AGREEMENT (the "Agreement") is made as of January
2, 2001, by and between CC VIII Operating, LLC ("PARTY A") and each of Charter
Communications Entertainment I, LLC, Charter Cable Partners, LLC, Falcon
Telecable, a California Limited Partnership, and Charter Communications VI, LLC,
(collectively, "PARTY B"), with reference to the following facts and
circumstances:

                                    RECITALS

         A. PARTY A owns and operates all or part of cable television systems
that are franchised and/or hold other authority to operate in and around the
municipalities listed on SCHEDULE 4.8-A.

         B. PARTY B owns and operates all or part of cable television systems
that are franchised and/or hold other authority to operate in and around the
municipalities listed on SCHEDULE 4.8-B. PARTY B is comprised of four entities
all of which are single-member limited liability companies, and such entities
will be treated for federal income tax purposes as disregarded entities with
respect to Charter Communications Holding Company, LLC under Treasury Regulation
ss. 301.7701-3(b)(1)(ii).

         C. The parties desire to exchange the aforesaid systems in such a
manner as to effect, to the extent reasonably possible, a like-kind exchange of
such assets under Section 1031 of the United States Internal Revenue Code, as
amended (the "Code").

                                   AGREEMENTS

         Accordingly, the parties hereby agree as follows:

1. DEFINITIONS. In addition to the terms defined elsewhere in this Agreement,
the following capitalized terms or terms otherwise defined in this Article 1
shall have the meanings set forth below:

         1.1 Agreement. The term "Agreement" shall mean and refer to this Asset
Exchange Agreement.

         1.2 Assets. The term "Assets" shall mean and refer to all of the
assets, privileges, contracts, licenses, permits, franchises, authorizations,
rights, interests, claims and other properties, real and personal, tangible and
intangible, of every type and description which are owned, leased, held for use
or used in such Party's Cable Business. Assets shall include Tangible Personal
Property, Owned Property, Leased Property, Other Real Property Interests,
Systems Franchises, Systems Licenses, Systems Contracts, Books and Records and
Other Intangibles. Reference to PARTY A Assets shall be deemed to refer to the
Assets of PARTY A, and reference to PARTY B Assets shall be deemed to refer to
the Assets of PARTY B.

         1.3 Books and Records. The term "Books and Records" shall mean and
refer to all engineering records, files, data, drawings, blueprints, schematics,
reports, lists, plans and procedures and all other files of correspondence,
lists, records and reports concerning such

                                     - 1 -

<PAGE>   3

Party's Cable Business, including subscribers and prospective subscribers of
such Party's Systems, signal and program carriage and dealings with Governmental
Authorities with respect to such Party's Systems, including all reports filed
with respect to such Party's Systems by or on behalf of such Party with the FCC
and statements of account filed with respect to such Party's Systems by or on
behalf of such Party with the U.S. Copyright Office, but excluding all
documents, reports and records relating to any employee of such Party's Systems
who has not given consent to disclosure of such documents, reports and records.
Reference to PARTY A Books and Records shall be deemed to refer to the Books and
Records of PARTY A, and reference to PARTY B Books and Records shall be deemed
to refer to the Books and Records of PARTY B, in each case, as included among
such Party's Assets.

         1.4 Business Day. The term "Business Day" shall mean and refer to any
day other than a Saturday, Sunday or a day on which the banking institutions in
St. Louis, Missouri, are required or authorized to be closed.

         1.5 Cable Business. The term "Cable Business" shall mean and refer to
the cable television business and other revenue-generating businesses and
related operations conducted by such Party through such Party's Systems.
Reference to PARTY A Cable Business shall be deemed to refer to the Cable
Business of PARTY A, and reference to PARTY B Cable Business shall be deemed to
refer to the Cable Business of PARTY B.

         1.6 Closing. The term "Closing" shall mean and refer to the closing of
the exchange transactions contemplated by this Agreement.

         1.7 Closing Time. The term "Closing Time" shall mean and refer to 11:59
p.m., Central Time, on the Closing Date.

         1.8 Communications Act. The term "Communications Act" shall mean and
refer to the Communications Act of 1934, as amended, and the FCC rules and
regulations promulgated thereunder.

         1.9 Contract. The term "Contract" shall mean and refer to any contract,
mortgage, deed of trust, bond, indenture, lease, license, note, franchise,
certificate, option, warrant, right or other instrument, document, obligation or
agreement, whether written or oral.

         1.10 FCC. The term "FCC" shall mean and refer to the Federal
Communications Commission.

         1.11 Governmental Authority. The term "Governmental Authority" shall
mean and refer to the United States of America, any state, commonwealth,
territory or possession of the United States of America and any political
subdivision or quasi-governmental authority of any of the same, including any
court, tribunal, department, commission, board, bureau, agency, body, county,
municipality, province, parish or other instrumentality of any of the foregoing.

         1.12 Intellectual Property. The term "Intellectual Property" shall mean
and refer to, with respect to any Cable Business, any (a) trademarks, trade
dress, trade names, service

                                      - 2 -

<PAGE>   4

marks, logos and other similar proprietary rights, (b) domain names, (c)
copyrights and (d) patents and patentable know-how, inventions and processes, in
each case used in such Cable Business.

         1.13 Judgment. The term "Judgment" shall mean and refer to any
judgment, writ, order, injunction, award or decree of any court, judge, justice
or magistrate, including any bankruptcy court or judge or the arbitrator in any
binding arbitration, and any order of or by any Governmental Authority.

         1.14 Leased Property. The term "Leased Property" shall mean and refer
to the leaseholds of real property included among such Party's Assets and
described as such Party's Leased Property on SCHEDULE 1.14. Reference to PARTY A
Leased Property shall be deemed to refer to the Leased Property of PARTY A, and
reference to PARTY B Leased Property shall be deemed to refer to the Leased
Property of PARTY B, in each case, as included among such Party's Assets.

         1.15 Legal Requirement. The term "Legal Requirement" shall mean and
refer to any applicable common law and any statute, ordinance, code or other
law, rule, regulation, order, technical or other written standard, requirement
or procedure enacted, adopted, promulgated, applied or followed by any
Governmental Authority, including any Judgment.

         1.16 Lien. The term "Lien" shall mean and refer to any security
interest, security agreement, financing statement filed with any Governmental
Authority, conditional sale or other title retention agreement, any lease,
consignment or bailment given for purposes of security, any mortgage, lien
(including any lien for Taxes), indenture, pledge, option, encumbrance, adverse
interest, constructive trust or other trust, claim, attachment, exception to,
defect in, or other condition adversely affecting title or other ownership
interest (including reservations, rights of entry, possibilities of reverter,
encroachments, protrusions, easements, rights-of-way, rights of first refusal,
restrictive covenants, leases and licenses) of any kind, which constitutes an
interest in or claim against property, whether arising pursuant to any Legal
Requirement, Systems License, Systems Franchise, Systems Contract or otherwise.

         1.17 Losses. The term "Losses" shall mean and refer to any claims,
losses, liabilities, damages, penalties, costs and expenses, including interest
that may be imposed in connection therewith, expenses of investigation,
reasonable fees and disbursements of counsel and other experts, and, as
applicable, the cost to any Person making a claim or seeking indemnification
under this Agreement with respect to funds expended by such Person by reason of
the occurrence of any event or the existence or assertion of any Liens (other
than Permitted Liens) with respect to which indemnification is sought.

         1.18 Other Intangibles. The term "Other Intangibles" shall mean and
refer to all intangible assets, other than such Party's Systems Franchises,
Systems Licenses and Systems Contracts, including subscriber lists, claims, and
Intellectual Property, if any, included among such Party's Assets. Reference to
PARTY A Other Intangibles shall be deemed to refer to the Other Intangibles of
PARTY A, and reference to PARTY B Other Intangibles shall be deemed to refer to
the Other Intangibles of PARTY B, in each case, as included among such Party's
Assets.

                                      - 3 -

<PAGE>   5

         1.19 Other Real Property Interests. The term "Other Real Property
Interests" shall mean and refer to the easements and rights of access (other
than those relating to multiple dwelling units) and other interests in real
property held by such Party in connection with such Party's Cable Business, but
not including such Party's Leased Property or such Party's Owned Property.
Reference to PARTY A Other Real Property Interests shall be deemed to refer to
the Other Real Property Interests of PARTY A, and reference to PARTY B Other
Real Property Interests shall be deemed to refer to the Other Real Property
Interests of PARTY B, in each case, as included among such Party's Assets.

         1.20 Owned Property. The term "Owned Property" shall mean and refer to
the fee interests in the real property included among such Party's Assets and
described as such Party's Owned Property on SCHEDULE 1.20 and all improvements
and towers thereon and appurtenances thereto. Reference to PARTY A Owned
Property shall be deemed to refer to the Owned Property of PARTY A, and
reference to PARTY B Owned Property shall be deemed to refer to the Owned
Property of PARTY B, in each case, as included among such Party's Assets.

         1.21 Party. The term "Party" shall mean and refer to either PARTY A, or
PARTY B, or each of the entities constituting PARTY A or PARTY B, in each
instance as the context requires.

         1.22 Permitted Liens. The term "Permitted Liens" shall mean and refer
to (a) Liens for Taxes, assessments and governmental charges, in each case not
yet due and payable, (b) zoning laws or ordinances or any similar Legal
Requirements, (c) rights reserved to any Governmental Authority to regulate the
affected property, (d) as to Leased Property or Tangible Personal Property that
is leased, the interests of the lessors thereof, and (e) as to Owned Property,
Leased Property and Other Real Property Interests, any easements, rights-of-way,
servitudes, conditions, covenants, restrictions and minor imperfections or
irregularities in title, in each case, which are reflected in the public records
and which do not individually or in the aggregate interfere with the right or
ability of the applicable Party to own, use, enjoy or operate the Owned
Property, Leased Property or Other Real Property Interests in the manner
currently used or to convey good, marketable and indefeasible fee simple title
to the same; provided that "Permitted Liens" will not include any Lien which
could prevent or inhibit in any way (other than as permitted under clause (e))
the conduct of the business of the affected System, and provided further that
classification of any Lien as a "Permitted Lien" will not affect any liability
which a Party may have for any such Lien, including pursuant to any indemnity
obligation under this Agreement.

         1.23 Person. The term "Person" shall mean and refer to any natural
person, Governmental Authority, corporation, general or limited partnership,
limited liability company, joint venture, trust, association or unincorporated
entity of any kind.

         1.24 Required Consents. The term "Required Consents" shall mean and
refer to any and all consents, authorizations and approvals under or in
connection with such Party's Systems Franchises and Systems Licenses required
for (a) such Party to transfer its Assets to the other Party pursuant to this
Agreement, (b) the other Party to operate such Party's Systems and to own,
lease, use and operate such Party's Assets and Systems at the places

                                      - 4 -

<PAGE>   6

and in the manner in which such Party's Assets are used and such Party's Systems
are operated as of the date of this Agreement and as of the Closing, or (c) the
other Party to assume and perform such Party's Systems Franchises and Systems
Licenses. Reference to PARTY A Required Consents shall be deemed to refer to the
Required Consents for PARTY A, and reference to PARTY B Required Consents shall
be deemed to refer to the Required Consents for PARTY B.

         1.25 System. The term "System" shall mean and refer to all or part of
any cable television distribution system owned or leased by a Party, or in which
a Party has other rights of use, that are used by such Party to serve its
customers within the municipalities set forth on SCHEDULE 4.8-A (for PARTY A)
and SCHEDULE 4.8-B (for PARTY B). Reference to PARTY A Systems shall be deemed
to refer to the Systems of PARTY A, and reference to PARTY B Systems shall be
deemed to refer to the Systems of PARTY B.

         1.26 Systems Contracts. The term "Systems Contracts" shall mean and
refer to all Contracts (other than such Party's Systems Franchises and Systems
Licenses) that are included among such Party's Assets, including the lease
agreements for such Party's Tangible Personal Property, pole attachment
agreements, underground conduit agreements, crossing agreements, retransmission
consent agreements, multiple dwelling, bulk billing or commercial service
agreements and the Contracts documenting such Party's Leased Property described
on SCHEDULE 1.14. Reference to PARTY A Systems Contracts shall be deemed to
refer to the Systems Contracts of PARTY A, and reference to PARTY B Systems
Contracts shall be deemed to refer to the Systems Contracts of PARTY B, in each
case, as included among such Party's Assets.

         1.27 Systems Franchises. The term "Systems Franchises" shall mean and
refer to the franchises, permits and similar authorizations included among such
Party's Assets (other than such Party's Systems Licenses) described on SCHEDULE
1.27, and all rights and benefits of such Party, including the rights and
benefits arising under Section 626 of the Communications Act (47 U.S.C. 546) to
the extent applicable to such Party's Systems Franchises. Reference to PARTY A
Systems Franchises shall be deemed to refer to the Systems Franchises of PARTY
A, and reference to PARTY B Systems Franchises shall be deemed to refer to the
Systems Franchises of PARTY B, in each case, as included among such Party's
Assets.

         1.28 Systems Licenses. The term "Systems Licenses" shall mean and refer
to the intangible cable television channel distribution rights, cable television
relay service (CARS), business radio and other licenses, earth station
registrations, authorizations, consents or permits issued by the FCC or any
other Governmental Authority included among such Party's Assets and described on
SCHEDULE 1.28 (other than such Party's Systems Franchises and Systems Contracts)
and all rights and benefits of such Party pertaining thereto. Reference to PARTY
A Systems Licenses shall be deemed to refer to the Systems Licenses of PARTY A,
and reference to PARTY B Systems Licenses shall be deemed to refer to the
Systems Licenses of PARTY B, in each case, as included among such Party's
Assets.

         1.29 Tangible Personal Property. The term "Tangible Personal Property"
shall mean and refer to all tangible personal property included among such
Party's Assets, including towers (other than towers on such Party's Owned
Property which are fixtures

                                      - 5 -

<PAGE>   7

thereon and a part thereof), tower equipment, aboveground and underground cable,
distribution systems, headend amplifiers, line amplifiers, microwave equipment,
converters, testing equipment, motor vehicles, office equipment, computers and
billing equipment, furniture, fixtures, supplies, inventory and other physical
assets relating to the Systems. Reference to PARTY A Tangible Personal Property
shall be deemed to refer to the Tangible Personal Property of PARTY A, and
reference to PARTY B Tangible Personal Property shall be deemed to refer to the
Tangible Personal Property of PARTY B, in each case, as included among such
Party's Assets.

         1.30 Taxes. The term "Taxes" shall mean and refer to levies and
assessments of any kind or nature imposed by any Governmental Authority,
including all income, sales, use, ad valorem, value added, franchise, severance,
net or gross proceeds, withholding, payroll, employment, excise or property
taxes and levies or assessments related to unclaimed property, together with any
interest thereon and any penalties, additions to tax or additional amounts
applicable thereto. For purposes of determining any Tax cost or Tax benefit to
any Person, such amount will be the actual cost or benefit recognized by such
Person at the time of actual payment of the additional Tax or actual receipt of
the Tax benefit. In the event that any Loss, payment or other amount is required
to be determined on an after-Tax basis, such payment or other amount will be
determined without regard to any Tax cost or Tax benefit not actually recognized
at the time of the determination, and appropriate adjustments will be made when
and to the extent that such Tax cost or Tax benefit is actually recognized.

         1.31 Other Definitions. The following terms have the meanings set forth
in the sections indicated in the table below:

<TABLE>
<CAPTION>
         Term                                              Section
         ----                                              -------
         <S>                                               <C>
         Closing Date                                      8.1
         Code                                              Recital C
         commercially reasonable efforts                   10.9
         Exchange                                          2.1
         Exchange Groups                                   2.2
         Matching Franchise                                5.1.1
         PARTY A                                           First Paragraph
         PARTY A Matching Franchise                        5.1.2
         PARTY A Retained Franchise                        5.1.1
         PARTY A System Value                              3.1
         PARTY B                                           First Paragraph
         PARTY B Matching Franchise                        5.1.1
         PARTY B Retained Franchise                        5.1.2
         PARTY B System Value                              3.1
         Primary Transfer                                  5.1.3
         Retained Franchise                                5.1.1
         Subsequent Transfer                               5.1.4
         Taking                                            10.8
         Transfer Tax Returns                              5.2
</TABLE>

                                     - 6 -

<PAGE>   8

<TABLE>
<CAPTION>
         Term                                              Section
         ----                                              -------
         <S>                                               <C>
         Transfer Taxes                                    5.2
</TABLE>

         1.32 Usage. The definitions in Article 1 shall apply equally to both
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed to be references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. All Exhibits and Schedules attached hereto shall be deemed incorporated
herein as if set forth in full herein and, unless otherwise defined therein, all
terms used in any Exhibit or Schedule shall have the meaning ascribed to such
term in this Agreement. The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation." The words "hereof,"
"herein," and "hereunder," and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise expressly provided herein, any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein. All
accounting terms not otherwise defined in this Agreement will have the meanings
ascribed to them under generally acceptable accounting principles as in effect
from time to time in the United States, consistently applied.

2.       EXCHANGE.

         2.1 Exchange of Assets. Upon the terms and subject to the conditions
set forth in this Agreement, at the Closing, PARTY A and PARTY B agree to
exchange simultaneously the PARTY A Assets for the PARTY B Assets, free and
clear of all Liens (except Permitted Liens) (the "Exchange"). PARTY A and PARTY
B agree to use all reasonable efforts to structure the Exchange in such a way
that, to the extent reasonably possible, it will be a tax free exchange of
like-kind assets under Section 1031 of the Code.

         2.2 Method of Exchange. The Exchange is to occur as follows: (A) PARTY
A Tangible Personal Property and PARTY B Tangible Personal Property are being
exchanged each for the other; (B) PARTY A Owned Property, PARTY A Leased
Property, and PARTY A Other Real Property Interests and PARTY B Owned Property,
PARTY B Leased Property, and PARTY B Other Real Property Interests are being
exchanged each for the other; and (C) PARTY A Systems Contracts, PARTY A Systems
Franchises, PARTY A Systems Licenses, and PARTY A Other Intangibles and PARTY B
Systems Contracts, PARTY B Systems Franchises, PARTY B Systems Licenses, and
PARTY B Other Intangibles are being exchanged each for the other. In each case,
the assets described in this Section 2.2 shall be exchanged each for the other
in "Exchange Groups" as defined under Treasury Regulations Sections 1.1031(a)-2
and 1.1031(j)-1, and in each case to the maximum extent permitted by Section
1031 of the Code and the regulations promulgated thereunder. Liabilities assumed
or taken subject to by each Party are being exchanged each for the other to the
maximum extent permitted under Section 1031 of the Code and regulations
thereunder.

                                      - 7 -

<PAGE>   9

3.       CONSIDERATION.

         3.1 For the purposes of this Agreement, the aggregate gross value and
the value of each Exchange Group of the PARTY A Assets comprising all of the
PARTY A Systems shall be as set forth on SCHEDULE 3.1-A ("PARTY A System
Value"), and the aggregate gross value and the value of each Exchange Group of
the PARTY B Assets comprising all of the PARTY B Systems shall be as set forth
on SCHEDULE 3.1-B ("PARTY B System Value").

4.       REPRESENTATIONS AND WARRANTIES. Each Party represents and warrants to
the other Party, as follows:

         4.1 Organization and Qualification. Such Party is duly formed, validly
existing and in good standing under the laws of its jurisdiction of
formation/incorporation. As of the Closing Date, such Party has all requisite
power and authority to own, lease and use such Party's Assets owned, leased or
used by it and to conduct its Cable Business as it is currently being conducted
by it. As of the date of this Agreement, such Party is duly qualified to do
business and is in good standing under the laws of each jurisdiction in which
the ownership, leasing or use of such Party's Assets owned, leased or used by it
or the nature of its activities undertaken in connection with such Party's
Systems makes such qualification necessary.

         4.2 Authority and Validity. Such Party has all requisite entity power
and authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by this Agreement. The execution and
delivery by such Party of, its performance under, and its consummation of the
transactions contemplated by this Agreement have been duly and validly
authorized by all necessary entity action by or on behalf of such Party. This
Agreement has been duly and validly executed and delivered by such Party and
constitutes valid and legally binding agreement of such Party, enforceable
against it in accordance with the terms hereof, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to the enforcement of
creditors' rights generally or by principles governing the availability of
equitable remedies.

         4.3 No Violation. Assuming all Required Consents have been obtained,
the execution and delivery by each Party of, its performance under, and its
consummation of the transactions contemplated by this Agreement do not and will
not: (a) violate any provision of the organizational documents of such Party;
(b) violate any provision of any Legal Requirement applicable to such Party; (c)
require any consent, approval or authorization of, or filing of any certificate,
notice, application, report or other document with, any Governmental Authority
or other Person; or (d) (i) violate, result in a breach of or constitute a
default under, (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of such Party under, or (iv) result in the
creation or imposition of any Lien under, any Systems Contract, Systems
Franchise, Systems License, or other instrument evidencing any of the Assets of
such Party or by which such Party or any of its assets is bound or affected,
provided, however, that no breach of any of the foregoing representations will
be deemed to

                                      - 8 -

<PAGE>   10

have occurred if such occurrence does not have a material adverse effect on the
Assets being transferred pursuant hereto, or preclude the transfer thereof.

         4.4 Systems Contracts. Such Party has delivered to the other Party true
and complete copies of all such Party's Systems Contracts (including each
Contract relating to such Party's Leased Property and Other Real Property
Interests), including any amendments thereto (or, in the case of oral Contracts,
true and complete written summaries thereof), and each document evidencing such
Party's ownership of its Owned Property.

         4.5 Compliance with Legal Requirements. Such Party has used
commercially reasonable efforts to comply in all material respects with all the
applicable Legal Requirements.

         4.6 Absence of Certain Changes or Events. Since the date of the
execution of this Agreement, there has been no material adverse change in, nor
has any event or events (other than any affecting the cable television industry
generally) occurred that, individually or in the aggregate, could reasonably be
expected to result in a material adverse change in such Party's Assets, Cable
Business, operations, condition (financial or otherwise) or results of
operations of its Systems, taken as a whole.

         4.7 Tax Returns; Other Reports. Such Party has duly and timely filed in
correct form all federal, state, local and foreign Tax returns and other Tax
reports required to be filed by it, and has timely paid all Taxes which have
become due and payable, whether or not so shown on any such return or report,
the failure of which to be filed or paid could affect or result in the
imposition of a Lien upon its Assets or create any transferee or other liability
upon the other Party, except such amounts as are being contested diligently and
in good faith and are not in the aggregate material. Except as set forth on
SCHEDULE 4.7, such Party has not received any notice of, nor does such Party
have any knowledge of, any deficiency, assessment or audit, or proposed
deficiency, assessment or audit from any taxing Governmental Authority which
could affect, or result in the imposition of a Lien upon, any of its Assets or
transferee or other liability upon the other Party.

         4.8 Systems Information. SCHEDULES 4.8-A and 4.8-B set forth a
materially true and accurate description, on a System-by-System basis, of the
following information relating to each Party's Systems as of the date of this
Agreement:

               (a) the approximate number of aerial and underground miles of
plant included in such Party's Assets and served by each headend;

               (b) the approximate number of single family homes and residential
multiple dwelling units passed by each such System;

               (c) the MHZ capacity and channel capacity of each headend; and

               (d) the number of subscribers served by each such System.

                                      - 9 -

<PAGE>   11

5.       ADDITIONAL COVENANTS.

         5.1 Required Consents. If less than all of the Required Consents for
the transfer of Systems Franchises are obtained as of the Closing Date, then the
following will occur:

               5.1.1 With respect to each PARTY A Systems Franchise for which a
Required Consent necessary for the transfer thereof has not been obtained as of
the Closing Date (such Systems Franchise and the PARTY A Assets pertaining
thereto, hereinafter, a "PARTY A Retained Franchise"), the parties will
negotiate in good faith to reach agreement on a PARTY B Systems Franchise (such
Systems Franchise and the PARTY B Assets pertaining thereto, hereinafter, a
"PARTY B Matching Franchise") that is to the greatest extent possible, like kind
to PARTY A Retained Franchise for purposes of Section 1031 of the Code and the
applicable exchange. A PARTY B Matching Franchise may also be a PARTY B Retained
Franchise. For purposes of this Section 5.1, a "Retained Franchise" means either
a PARTY A Retained Franchise or a PARTY B Retained Franchise or both, as the
context requires, and a "Matching Franchise" means either a PARTY A Matching
Franchise or a PARTY B Matching Franchise or both, as the context requires.

               5.1.2 Similarly, with respect to each PARTY B Systems Franchise
for which a PARTY B Required Consent necessary for the transfer thereof has not
been obtained as of the Closing Date (such Systems Franchise and the PARTY B
Assets pertaining thereto, hereinafter, a "PARTY B Retained Franchise"), the
parties will negotiate in good faith to reach agreement on a PARTY A Systems
Franchise (such Systems Franchise and the PARTY A Assets pertaining thereto,
hereinafter, a "PARTY A Matching Franchise") that is to the greatest extent
possible, like kind to PARTY B Retained Franchise for purposes of Section 1031
of the Code and the applicable exchange. A PARTY A Matching Franchise may also
be a PARTY A Retained Franchise.

               5.1.3 At the Closing, PARTY A and PARTY B shall transfer, convey
and assign (the "Primary Transfer") all of the PARTY A Assets other than any
PARTY A Retained Franchises and PARTY A Matching Franchises and all of the PARTY
B Assets other than any PARTY B Retained Franchises and PARTY B Matching
Franchises.

               5.1.4 Following the Closing of the Primary Transfer, the parties
will continue to use commercially reasonable efforts to obtain on an expedited
basis the Required Consents for all PARTY A Retained Franchises and PARTY B
Retained Franchises. Pending such Required Consents being obtained, each of
PARTY A Retained Franchises and PARTY B Retained Franchises shall continue to be
subject to the arrangement set forth in Article 7 hereof, and shall be
transferred, conveyed, or assigned as contemplated herein as soon as practicable
following the obtaining of such Required Consents (such transfer hereinafter
referred to as a "Subsequent Transfer").

               5.1.5 All references in this Agreement to the Closing and the
Closing Date will mean the Closing and Closing Date of the Primary Transfer
except as specifically provided otherwise in this Section 5.1.5. Without
limiting the foregoing, all representations and warranties (except as to those
Required Consents that have not been obtained) made in connection with the
Retained Franchises and the Matching Franchises will be made as of the Closing
Date rather than the date of the Subsequent Transfer, the other covenants in
Article

                                     - 10 -

<PAGE>   12

5 will not apply to the Retained Franchises or the Matching Franchises following
the Closing Date.

         5.2 Sales and Transfer Taxes. All sales, use or excise Taxes arising
from or payable by reason of the transfer of each Party's Assets ("Transfer
Taxes") and all transfer and similar taxes or assessments, including transfer
fees and similar assessments for or under Systems Franchises, Systems Licenses
and Systems Contracts, arising from or payable by reason of the conveyance of
each Party's Assets will be borne equally by each Party. Tax Returns required to
be filed with respect to Transfer Taxes ("Transfer Tax Returns") shall be
prepared and filed by the Party that has the primary responsibility under
applicable law for filing such Transfer Tax Returns.

         5.3 Further Assurances. At or after the Closing, each Party at the
request of the other Party, will promptly execute and deliver, or cause to be
executed and delivered, to the other Party all such documents and instruments,
in addition to those otherwise required by this Agreement, in form and substance
reasonably satisfactory to the other Party as the other Party may reasonably
request in order to carry out or evidence the terms of this Agreement or to
collect any accounts receivable or other claims included in the Assets
transferred to the other Party. Without limiting the generality of the
foregoing, PARTY A and PARTY B will take, or cause to be taken, all actions
consistent with the terms of this Agreement, including execution and delivery of
any documents or instruments, as the other may reasonably request to effect the
qualification of the transactions contemplated hereby as a like-kind exchange
under Section 1031 of the Code.

         5.4 Satisfaction of Conditions. Each Party will use its commercially
reasonable efforts to satisfy, or to cause to be satisfied, the conditions to
the obligations of the other Party to consummate the transactions contemplated
by this Agreement, as set forth in Article 6.

6.       CONDITIONS PRECEDENT.

         6.1 Conditions to Each Party's Obligations. The obligations of each
Party to consummate the transactions contemplated by this Agreement will be
subject to the satisfaction, at or before the Closing, of the following
conditions, one or more of which may be waived by such Party:

               6.1.1 Accuracy of Representations and Warranties. The
representations and warranties of each Party in this Agreement, without giving
effect to any materiality qualifications contained therein, are true, complete
and accurate on and as of the Closing with the same effect as if made at and as
of the Closing, except to the extent that all misstatements, omissions and
inaccuracies, in the aggregate, do not have a material adverse effect on the
other Party's Assets, Cable Business, the operations, condition (financial or
otherwise) or results of operations of the Systems taken as a whole, or on the
ability of the other Party to perform its obligations under this Agreement.

               6.1.2 Deliveries. Each Party shall have delivered the items and
documents required to be delivered by and pursuant to this Agreement, including
those required to be delivered by each Party to the other Party under Section
8.2.

                                     - 11 -

<PAGE>   13

               6.1.3 Legal Proceedings. No Legal Requirement of any Governmental
Authority (including any temporary Legal Requirement) shall be in effect which
would prevent or make illegal the consummation of any of the transactions
contemplated by this Agreement.

               6.1.4 Consents.

                    (a) Except as provided in Section 5.1, Required Consents
relating to each Party's Systems Franchises shall have been obtained in form and
substance reasonably satisfactory to the other Party, or the consent of the
appropriate Governmental Authority shall be deemed to have been received in
accordance with Section 617 of the Communications Act (47 U.S.C. ss.537).

                    (b) Each Party shall have received evidence, in form and
substance reasonably satisfactory to it, that the other Party's Required
Consents relating to the other Party's Systems Licenses and Systems Contracts
have been obtained.

               6.1.5 No Material Adverse Damage. There shall not have occurred
any damage to such Party's Assets that has materially and adversely affected, or
could reasonably be expected to materially and adversely affect, the cash flow
therefrom.

7.       PRE-CLOSING MANAGEMENT ARRANGEMENT.

         Pending the Closing, each Party hereby agrees that the other shall be
entitled to receive and retain any and all revenues from the operation of the
Cable Business of the other Party to be transferred pursuant hereto including,
without limitation, subscriber payments and advertising revenue, and shall be
responsible for all expenses and expenditures respecting or pertaining to such
Cable Business. Thus, each PARTY A entity shall be entitled to receive and
retain all revenues from the operation of the PARTY B Cable Business being
transferred to it, and shall be responsible for all expenses and expenditures
respecting or pertaining to such Cable Business; provided, however, that
management fees shall be limited, and shall be paid and expensed only as
allowed, by the credit agreement to which such PARTY B entity is party to or
otherwise bound, and each PARTY B entity shall be entitled to receive and retain
all revenues from the operation of the PARTY A Cable Business being transferred
to it, and shall be responsible for all expenses and expenditures respecting or
pertaining to such Cable Business; provided, however, that management fees shall
be limited, and shall be paid and expensed only as allowed, by the credit
agreement to which such PARTY A entity is party to or otherwise bound.

8.       THE CLOSING.

         8.1 The Closing; Time and Place. Subject to the terms and conditions of
this Agreement, the Closing shall be held at a place, date and time as mutually
agreed upon by the Parties; provided that such day shall be a Business Day (the
"Closing Date"). The transactions to be consummated at Closing shall be deemed
to have been consummated as of the Closing Time.

         8.2 Delivery Obligations. At the Closing, each Party will deliver or
cause to be delivered to the other Party the following:

                                     - 12 -

<PAGE>   14

               8.2.1 Bill of Sale and Assumption Agreement. The Bill of Sale and
Assumption Agreement in the form mutually acceptable, transferring such Party's
Assets as contemplated hereunder.

               8.2.2 Deeds. Quitclaim deeds in recordable form conveying each
parcel of such Party's Owned Property, and assignments of leases and easements
in recordable form, with respect to such Party's Leased Property and Other Real
Property Interests, each as contemplated hereunder.

               8.2.3 Other. Such other documents and instruments as may be
necessary to effect the intent of this Agreement and to consummate the
transactions contemplated hereby.

9.       TERMINATION AND DEFAULT.

         9.1 Termination Events. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:

               9.1.1 At any time, by the mutual agreement of PARTY A and PARTY
B;

               9.1.2 By either PARTY A or PARTY B at any time, if the other is
in material breach or default of any of the other's covenants, agreements or
other obligations herein;

               9.1.3 By either PARTY A or PARTY B upon written notice to the
other, with respect to any transfers that have not been completed on or before
six (6) months after the date of this Agreement; or

               9.1.4 By either PARTY A or PARTY B if an injunction, restraining
order or decree of any nature of any Governmental Authority of competent
jurisdiction is issued that prohibits the consummation of any of the
transactions contemplated hereby and such injunction, restraining order or
decree is final and nonappealable; provided, however, that the party seeking to
terminate this Agreement pursuant to this clause has used commercially
reasonable efforts to have such injunction, order or decree vacated or denied.

         9.2 Effect of Termination. Except as set forth in Section 9.1.3, if
this Agreement is terminated pursuant to Section 9.1, all obligations of the
Parties under this Agreement will terminate, except for the obligations set
forth in Section 10.7.

10.      MISCELLANEOUS PROVISIONS.

         10.1 Parties Obligated and Benefited. Subject to the limitations set
forth below, this Agreement will be binding upon each of the Parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the Parties and their respective assigns and successors in interest,
and no other Person will be entitled to any of the benefits conferred by this
Agreement.

         10.2 Waiver. This Agreement or any of its provisions may not be waived
except in writing. The failure of any Party to enforce any right arising under
this Agreement on one

                                     - 13 -

<PAGE>   15

or more occasions will not operate as a waiver of that or any other right on
that or any other occasion.

         10.3 Captions. The section and other captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.

         10.4 Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original.

         10.5 Entire Agreement. This Agreement (including the Schedules and
Exhibits referred to in this Agreement, which are incorporated in and constitute
a part of this Agreement) contains the entire agreement of the Parties with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings with respect to such subject matter. This
Agreement may not be amended or modified except by a writing signed by all of
the parties hereto.

         10.6 Severability. Any term or provision of this Agreement that is
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefited by such provision or any other provisions
of this Agreement.

         10.7 Expenses. Except as otherwise expressly provided in this
Agreement, each Party will pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations and the consummation of the transactions
contemplated by this Agreement.

         10.8 Risk of Loss. At all times prior to the Closing Time, the risk of
any loss or damage to each Party's Assets resulting from fire, theft or other
casualty (except reasonable wear and tear) or the risk that all or any part of
or interest in each Party's Assets is taken or condemned as a result of a
Governmental Authority's exercise of its powers of eminent domain, or if a
Governmental Authority having such power informs a Party that it intends to
condemn all or any part of such Party's Assets (such event being called, in
either case, a "Taking"), shall remain with the current owner of such Assets,
and such owner shall be entitled to receive and retain all insurance or
condemnation proceeds paid or payable as a result of any loss, damage or
condemnation of its Assets. With respect to any Party's Assets that are damaged
or taken and therefore are not to be transferred pursuant hereto, the Parties
agree to adjust the values of the Assets to be exchanged pursuant hereto so as
to comply with the requirements of Section 1031 of the Code and the applicable
exchange; such adjustment shall occur according to the mechanism set forth in
Section 5.1 with the necessary changes thereto.

         10.9 Commercially Reasonable Efforts. For purposes of this Agreement,
"commercially reasonable efforts" will not be deemed to require a Party to
undertake extraordinary or unreasonable measures, including the payment of
amounts in excess of normal and usual filing fees and processing fees, if any,
or other payments with respect to any Contract that are significant in the
context of such Contract (or significant on the aggregate basis as to all
Contracts).

              [The remainder of this page intentionally left blank]

                                     - 14 -

<PAGE>   16

         The parties have executed this Agreement as of the day and year first
above written.

                                     CC VIII OPERATING, LLC,
                                     Federal Tax ID #: 38-2558446

                                     By:___________________________________

                                     Title:________________________________

                                     CHARTER COMMUNICATIONS
                                     ENTERTAINMENT I, LLC
                                     Federal Tax ID #: 43-1720016

                                     By:___________________________________

                                     Title:________________________________

                                     CHARTER CABLE PARTNERS, LLC,
                                     Federal Tax ID #: 75-2775562

                                     By:___________________________________

                                     Title:________________________________

                                     FALCON TELECABLE, A CALIFORNIA
                                     LIMITED PARTNERSHIP,
                                     Federal Tax ID #: 95-4455179

                                     By:___________________________________

                                     Title:________________________________

                                     CHARTER COMMUNICATIONS VI, LLC
                                     Federal Tax ID #: 43-1854208

                                     By:___________________________________

                                     Title:________________________________

                                     - 15 -

<PAGE>   17

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                        Page
                                                                                                        ----
<S>      <C>                                                                                            <C>
1.       DEFINITIONS......................................................................................1

         1.1      Agreement...............................................................................1

         1.2      Assets..................................................................................1

         1.3      Books and Records.......................................................................1

         1.4      Business Day............................................................................2

         1.5      Cable Business..........................................................................2

         1.6      Closing.................................................................................2

         1.7      Closing Time............................................................................2

         1.8      Communications Act......................................................................2

         1.9      Contract................................................................................2

         1.10     FCC.....................................................................................2

         1.11     Governmental Authority..................................................................2

         1.12     Intellectual Property...................................................................2

         1.13     Judgment................................................................................3

         1.14     Leased Property.........................................................................3

         1.15     Legal Requirement.......................................................................3

         1.16     Lien....................................................................................3

         1.17     Losses..................................................................................3

         1.18     Other Intangibles.......................................................................3

         1.19     Other Real Property Interests...........................................................4

         1.20     Owned Property..........................................................................4

         1.21     Party...................................................................................4

         1.22     Permitted Liens.........................................................................4

         1.23     Person..................................................................................4
</TABLE>

                                      - i -

<PAGE>   18

<TABLE>
<CAPTION>

                                                                                                        Page
                                                                                                        ----
<S>      <C>                                                                                            <C>
         1.24     Required Consents.......................................................................4

         1.25     System..................................................................................5

         1.26     Systems Contracts.......................................................................5

         1.27     Systems Franchises......................................................................5

         1.28     Systems Licenses........................................................................5

         1.29     Tangible Personal Property..............................................................5

         1.30     Taxes...................................................................................6

         1.31     Other Definitions.......................................................................6

         1.32     Usage...................................................................................7

2.       EXCHANGE.........................................................................................7

         2.1      Exchange of Assets......................................................................7

         2.2      Method of Exchange......................................................................7

3.       CONSIDERATION....................................................................................8

4.       REPRESENTATIONS AND WARRANTIES...................................................................8

         4.1      Organization and Qualification..........................................................8

         4.2      Authority and Validity..................................................................8

         4.3      No Violation............................................................................8

         4.4      Systems Contracts.......................................................................9

         4.5      Compliance with Legal Requirements......................................................9

         4.6      Absence of Certain Changes or Events....................................................9

         4.7      Tax Returns; Other Reports..............................................................9

         4.8      Systems Information.....................................................................9

5.       ADDITIONAL COVENANTS............................................................................10

         5.1      Required Consents......................................................................10

         5.2      Sales and Transfer Taxes...............................................................11
</TABLE>

                                     - ii -

<PAGE>   19

<TABLE>
<CAPTION>

                                                                                                        Page
                                                                                                        ----
<S>      <C>                                                                                            <C>
         5.3      Further Assurances.....................................................................11

         5.4      Satisfaction of Conditions.............................................................11

6.       CONDITIONS PRECEDENT............................................................................11

         6.1      Conditions to Each Party's Obligations.................................................11

                  6.1.1    Accuracy of Representations and Warranties....................................11

                  6.1.2    Deliveries....................................................................11

                  6.1.3    Legal Proceedings.............................................................12

                  6.1.4    Consents......................................................................12

                  6.1.5    No Material Adverse Damage....................................................12

7.       PRE-CLOSING MANAGEMENT ARRANGEMENT..............................................................12

8.       THE CLOSING.....................................................................................12

         8.1      The Closing; Time and Place............................................................12

         8.2      Delivery Obligations...................................................................12

                  8.2.1    Bill of Sale and Assumption Agreement.........................................13

                  8.2.2    Deeds.........................................................................13

                  8.2.3    Other.........................................................................13

9.       TERMINATION AND DEFAULT.........................................................................13

         9.1      Termination Events.....................................................................13

         9.2      Effect of Termination..................................................................13

10.      MISCELLANEOUS PROVISIONS........................................................................13

         10.1     Parties Obligated and Benefited........................................................13

         10.2     Waiver.................................................................................13

         10.3     Captions...............................................................................14

         10.4     Counterparts...........................................................................14

         10.5     Entire Agreement.......................................................................14
</TABLE>

                                    - iii -

<PAGE>   20

<TABLE>
<CAPTION>

                                                                                                        Page
                                                                                                        ----
<S>      <C>                                                                                            <C>
         10.6     Severability...........................................................................14

         10.7     Expenses...............................................................................14

         10.8     Risk of Loss...........................................................................14

         10.9     Commercially Reasonable Efforts........................................................14
</TABLE>

                                     - iv -

<PAGE>   21

                                List of Schedules

Schedule 1.14            Leased Property

Schedule 1.20            Owned Property

Schedule 1.27            Systems Franchises

Schedule 1.28            Systems Licenses

Schedule 3.1-A           PARTY A System Value

Schedule 3.1-B           PARTY B System Value

Schedule 4.7             Tax Returns Deficiency/Audit Notice

Schedule 4.8-A           PARTY A Systems

Schedule 4.8-B           PARTY B Systems

                                     - v -

<PAGE>   22

                                 SCHEDULE 4.8-A

                       CC VIII Operating, LLC ("PARTY A")

CC VIII OPERATING, LLC

<TABLE>
<CAPTION>
      HEADEND                              SYSTEM                   FRANCHISE AUTHORITY                STATE
      -------                              ------                   -------------------                -----
<S>                                       <C>                       <C>                                <C>
Winchester/ Winsted                       Northwest                    Barkhamsted                       CT
Winchester/ Winsted                       Northwest                    Colebrook                         CT
Winchester/ Winsted                       Northwest                    Harwinton                         CT
Winchester/ Winsted                       Northwest                    New Hartford                      CT
Winchester/ Winsted                       Northwest                    West Hartland                     CT
Winchester/Winsted                        Northwest                    Winchester                        CT
Winchester/ Winsted                       Northwest                    Winsted                           CT
McCook                                    Beatrice, NE                 Beattie                           KS
McCook                                    Beatrice, NE                 Greenleaf                         KS
McCook                                    Beatrice, NE                 Hanover                           KS
Linn                                      Beatrice, NE                 Linn                              KS
Linn                                      Beatrice, NE                 Marshall County                   KS
Linn                                      Beatrice, NE                 Marysville                        KS
Belchertown                               Belchertown                  Belcherton                        MA
Charlton                                  Charlton                     Brookfield                        MA
Charlton, Oxford (after upgrade)          Charlton                     Charlton                          MA
Charlton                                  Charlton                     E. Brookfield                     MA
Belchertown                               Hadley                       Hadley                            MA
Hinsdale                                  Berkshire                    Hinsdale                          MA
Lanesborough                              Berkshire                    Lanesborough                      MA
Charlton                                  Charlton                     N. Brookfield                     MA
West Stockbridge                          Berkshire                    West Stockbridge                  MA
Oscoda                                    Beatrice                     Adams                             NE
Oscoda                                    Grand Island                 Alda                              NE
Oscoda                                    Alliance                     Alliance                          NE
Oscoda                                    Scottsbluff                  Bayard                            NE
Oscoda                                    Beatrice                     Beatrice                          NE
Oscoda                                    Scottsbluff                  Bridgeport                        NE
Oscoda                                    North Platte                 Broken Bow                        NE
Oscoda                                    Beatrice                     Cortland                          NE
Oscoda                                    Beatrice                     Firth                             NE
Oscoda                                    Grand Island                 Grand Island                      NE
Oscoda                                    Hastings                     Hastings                          NE
Ogallala                                  Ogallala                     Keith                             NE
Ogallala                                  Scottsbluff                  Kimball City                      NE
Ogallala                                  Scottsbluff                  Kimball County                    NE
Ogallala                                  North Platte                 Lexington                         NE
McCook                                    North Platte                 McCook                            NE
</TABLE>

<PAGE>   23

<TABLE>
<CAPTION>
      HEADEND                              SYSTEM                   FRANCHISE AUTHORITY                STATE
      -------                              ------                   -------------------                -----
<S>                                       <C>                       <C>                                <C>
McCook                                    Scottsbluff                  Minatare                          NE
McCook                                    Scottsbluff                  Mitchell                          NE
McCook                                    Scottsbluff                  Morrill                           NE
McCook                                    North Platte                 North Platte                      NE
Ogallala                                  Ogallala                     Ogallala                          NE
McCook                                    North Platte                 Red Willow                        NE
McCook                                    Scottsbluff                  Scotts Bluff City                 NE
McCook                                    Scottsbluff                  Scotts Bluff County               NE
McCook                                    Grand Island                 Shelton                           NE
McCook                                    Sidney                       Sidney                            NE
McCook                                    Grand Island                 St. Paul                          NE
McCook                                    Beatrice                     Talmage                           NE
Chatham                                   Taconic                      Ancram                            NY
Chatham                                   Taconic                      Austerlitz                        NY
Chatham                                   Taconic                      Canaan                            NY
Chatham                                   Taconic                      Chatham, Town of                  NY
Chatham                                   Taconic                      Chatham, Village of               NY
Chatham                                   Taconic                      Copake                            NY
Chatham                                   Taconic                      Ghent                             NY
Chatham                                   Taconic                      Hillsdale                         NY
Chatham                                   Taconic                      New Lebanon                       NY
Baraboo                                   Baraboo WI                   Baraboo                           WI
Belleville                                Belleville WI                Belleville                        WI
Madison                                   Madison WI                   Blooming Grove                    WI
Madison                                   Madison WI                   Bristol                           WI
Brooklyn                                  Belleville WI                Brooklyn (Dane Co.)               WI
Brooklyn                                  Belleville WI                Brooklyn (Green Co.)              WI
Madison                                   Madison WI                   Burke                             WI
Madison                                   Madison WI                   Cambridge                         WI
Madison                                   Madison WI                   Christiana                        WI
Portage                                   Madison WI                   Columbia                          WI
Columbus                                  Madison WI                   Columbus                          WI
Columbus                                  Belleville WI                Cottage Grove Town                WI
Columbus                                  Belleville WI                Cottage Grove Village             WI
Middleton                                 Belleville WI                Cross Plains Town                 WI
Madison                                   Madison WI                   Cross Plains Village              WI
Madison                                   Madison WI                   Deerfield Town                    WI
Madison                                   Madison WI                   Deerfield Village                 WI
Madison                                   Madison WI                   DeForest                          WI
Harvard                                   Walworth/Fontana             Delavan                           WI
Madison                                   Madison WI                   Dunkirk                           WI
Madison                                   Madison WI                   Dunn                              WI
Columbus                                  Madison WI                   Elba                              WI
Harvard                                   Walworth/Fontana             Fontana-on-Geneva Lake            WI
</TABLE>

                                     - 7 -

<PAGE>   24

<TABLE>
<CAPTION>
      HEADEND                              SYSTEM                   FRANCHISE AUTHORITY                STATE
      -------                              ------                   -------------------                -----
<S>                                       <C>                       <C>                                <C>
Harvard                                   Walworth/Fontana             Geneva                            WI
Harvard                                   Walworth/Fontana WI          Genoa City                        WI
Harvard                                   Walworth/Fontana             Linn                              WI
Madison                                   Madison WI                   Madison                           WI
Madison                                   Madison WI                   Maple Bluff                       WI
Madison                                   Madison WI                   Marshall                          WI
Madison                                   Madison WI                   McFarland                         WI
Madison                                   Madison WI                   Medina                            WI
Madison                                   Madison WI                   Middleton, City of                WI
Middleton                                 Madison WI                   Middleton Township                WI
Madison                                   Madison WI                   Monona                            WI
Madison                                   Madison WI                   Oakland                           WI
Madison                                   Madison WI                   Oregon                            WI
Madison                                   Madison WI                   Pleasant Springs                  WI
Portage                                   Madison WI                   Portage                           WI
Portage                                   Baraboo WI                   Reedsburg, City of                WI
Portage                                   Baraboo WI                   Reedsburg, Town of                WI
Richland Center                           Richland Center              Richland Center City              WI
Richland Center                           Richland Center              Richland Center Town              WI
Sauk City                                 Madison                      Sauk City                         WI
Sharon                                    Walworth/ Fontana            Sharon                            WI
Madison                                   Madison WI                   Shorewood Hills                   WI
Middleton                                 Belleville WI                Springfield                       WI
Madison                                   Madison WI                   Stoughton                         WI
Madison                                   Madison WI                   Sun Prairie, City of              WI
Madison                                   Madison WI                   Sun Prairie, Town of              WI
Harvard                                   Walworth/ Fontana            Walworth, Town of                 WI
Harvard                                   Walworth/Fontana             Walworth, Village of              WI
Madison                                   Madison WI                   Westport                          WI
Harvard                                   Walworth/Fontana             Williams Bay                      WI
Madison                                   Madison WI                   Windsor                           WI
Madison                                   Baraboo WI                   Wisconsin Dells                   WI
</TABLE>

                                     - 8 -

<PAGE>   25

                                 SCHEDULE 4.8-B

Charter Communications Entertainment I, LLC, Charter Cable Partners, LLC, Falcon
Telecable, a California Limited Partnership, and Charter Communications VI, LLC,
                           (collectively, "PARTY B"),

CHARTER COMMUNICATIONS ENTERTAINMENT I, LLC (RECEIVING ASSETS ONLY)

CHARTER CABLE PARTNERS, LLC

<TABLE>
<CAPTION>
      HEADEND               SYSTEM              FRANCHISE AUTHORITY               STATE
      -------               ------              -------------------               -----
<S>                     <C>                <C>                                    <C>
Eau Claire              Eau Claire WI      Altoona                                  WI
Onalaska/Tomah          Eau Claire WI      Angelo                                   WI
Ashland                 Eau Claire WI      Ashland                                  WI
Onalaska/Tomah          Eau Claire WI      Bangor                                   WI
Onalaska/Tomah          Eau Claire WI      Bangor                                   WI
Ashland                 Eau Claire WI      Barksdale                                WI
Onalaska/Tomah          Eau Claire WI      Barre                                    WI
Onalaska/Tomah          Eau Claire WI      Barron, City of                          WI
Onalaska/Tomah          Eau Claire WI      Barron, Town of                          WI
Black River Falls       Eau Claire WI      Black River Falls                        WI
Eau Claire              Eau Claire WI      Bloomer                                  WI
Eau Claire              Eau Claire WI      Boyd                                     WI
Black River Falls       Eau Claire WI      Brockway                                 WI
Eau Claire              Eau Claire WI      Brunswick                                WI
Eau Claire              Eau Claire WI      Cameron                                  WI
Onalaska/Tomah          Eau Claire WI      Campbell                                 WI
Onalaska/Tomah          Eau Claire WI      Chetek City                              WI
Onalaska/Tomah          Eau Claire WI      Chetek Town                              WI
Eau Claire              Eau Claire WI      Chippewa Falls                           WI
Eau Claire              Eau Claire WI      Colfax Town                              WI
Eau Claire              Eau Claire WI      Colfax Village                           WI
Eau Claire              Eau Claire WI      Cornell                                  WI
Eau Claire              Eau Claire WI      Cumberland                               WI
Eau Claire              Eau Claire WI      Eagle Point                              WI
Eau Claire              Eau Claire WI      Eau Claire                               WI
Ashland                 Eau Claire WI      Eileen                                   WI
Eau Claire              Eau Claire WI      Elk Mound                                WI
Onalaska/Tomah          Eau Claire WI      Greenfield                               WI
Onalaska/Tomah          Eau Claire WI      Greenfield (ST. JOSEPH RIDGE)            WI
Eau Claire              Eau Claire WI      Hallie                                   WI
Onalaska/Tomah          Eau Claire WI      Hamilton                                 WI
Onalaska/Tomah          Eau Claire WI      Holland                                  WI
Onalaska/Tomah          Eau Claire WI      Holmen                                   WI
Onalaska/Tomah          Eau Claire WI      La Crosse                                WI
Onalaska/Tomah          Eau Claire WI      La Grange                                WI
</TABLE>

<PAGE>   26

<TABLE>
<CAPTION>
      HEADEND               SYSTEM              FRANCHISE AUTHORITY               STATE
      -------               ------              -------------------               -----
<S>                     <C>                <C>                                    <C>
Eau Claire              Eau Claire WI      Lafayette                                WI
Onalaska/Tomah          Eau Claire WI      Leon                                     WI
Onalaska/Tomah          Eau Claire WI      Medary                                   WI
Onalaska/Tomah          Eau Claire WI      Melrose                                  WI
Eau Claire              Eau Claire WI      Menomonie City                           WI
Eau Claire              Eau Claire WI      Menomonie Town                           WI
Mindoro                 Eau Claire WI      Mindoro                                  WI
Onalaska/Tomah          Eau Claire WI      Oakdale                                  WI
Onalaska/Tomah          Eau Claire WI      Onalaska City                            WI
Onalaska/Tomah          Eau Claire WI      Onalaska Town                            WI
Eau Claire              Eau Claire WI      Pleasant Valley                          WI
Eau Claire              Eau Claire WI      Red Cedar                                WI
Eau Claire              Eau Claire WI      Rice Lake City                           WI
Eau Claire              Eau Claire WI      Rice Lake Town                           WI
Eau Claire              Eau Claire WI      Seymour                                  WI
Spooner                 Eau Claire WI      Shell Lake                               WI
Onalaska/Tomah          Eau Claire WI      Sparta City                              WI
Onalaska/Tomah          Eau Claire WI      Sparta Town                              WI
Eau Claire              Eau Claire WI      Stanley City                             WI
Eau Claire              Eau Claire WI      Stanley Town                             WI
Eau Claire              Eau Claire WI      Tainter                                  WI
Eau Claire              Eau Claire WI      Tilden                                   WI
Onalaska/Tomah          Eau Claire WI      Tomah, City of                           WI
Onalaska/Tomah          Eau Claire WI      Tomah, Town of                           WI
Eau Claire              Eau Claire WI      Union                                    WI
Onalaska/Tomah          Eau Claire WI      Warrens                                  WI
Onalaska/Tomah          Eau Claire WI      West Salem                               WI
Stockton                Eau Claire         Altura                                   MN
Stockton                Eau Claire         Stockton                                 MN
Stockton                Eau Claire         Rollingstone                             MN
Stockton                Eau Claire         Hidden Valley Village                    MN
Stockton                Eau Claire         Lewiston                                 MN
Eau Claire              Eau Claire         Wheaton                                  WI
</TABLE>

FALCON TELECABLE, A CALIFORNIA LIMITED PARTNERSHIP

<TABLE>
<CAPTION>
  HEADEND        SYSTEM        FRANCHISE AUTHORITY      STATE
  -------        ------        -------------------      -----
<S>             <C>         <C>                          <C>
Au Gres         Au Gres     Akron                         MI
Au Gres         Au Gres     Au Gres, City of              MI
Au Gres         Au Gres     Au Gres Township              MI
Au Gres         Au Gres     Sims                          MI
Unionville      Au Gres     Unionville                    MI
</TABLE>

                                     - x -

<PAGE>   27

<TABLE>
<CAPTION>
  HEADEND        SYSTEM        FRANCHISE AUTHORITY      STATE
  -------        ------        -------------------      -----
<S>             <C>         <C>                          <C>
Au Gres         Au Gres     Whitney                       MI
</TABLE>

CHARTER COMMUNICATIONS VI, LLC

<TABLE>
<CAPTION>
  HEADEND                  SYSTEM                 FRANCHISE AUTHORITY           STATE
  -------                  ------                 -------------------           -----
<S>                   <C>                        <C>                            <C>
Rose City             Rose City                  Cummings                         MI
Rose City             Rose City                  Goodar                           MI
Rose City             Rose City                  Hill                             MI
Rose City             Rose City                  Plainfield                       MI
Rose City             Rose City                  Rose                             MI
Rose City             Rose City                  Rose City                        MI
Oxford                Oxford                     Addison                          MI
Oxford                Almont                     Almont Township                  MI
Oxford                Almont                     Almont Village                   MI
Oxford                Attica                     Arcadia                          MI
Fenton                Fenton                     Argentine                        MI
Davison               Davison                    Atlas                            MI
Oxford                Attica                     Attica                           MI
Mio                   Mio/Mentor Twp             Big Creek                        MI
Oxford                Oxford                     Brandon                          MI
Mio                   Mio/Mentor Twp             Commins                          MI
Davison               Davison                    Davison                          MI
Davison               Davison                    Davison Township                 MI
Fenton                Fenton                     Deerfield Township               MI
Oxford                North Branch               Deerfield Township               MI
Whitmore Lake         Livingston                 Dexter                           MI
Oxford                Almont                     Drydon Township                  MI
Oxford                Almont                     Drydon Village                   MI
Mio                   Mio/Mentor Twp             Elmer                            MI
Fenton                Fenton                     Fenton                           MI
Fenton                Fenton                     Fenton Township                  MI
Davison               Davison                    Forest                           MI
Oxford                Mayville/Otter Lake        Freemont                         MI
Davison               Davison                    Goodrich                         MI
Whitmore Lake         Livingston                 Green Oak                        MI
Oxford                Oxford                     Hadley                           MI
Whitmore Lake         Livingston                 Hamburg                          MI
Highland Park         Highland Park              Highland Park                    MI
Oxford                Imlay City                 Imlay                            MI
Oxford                Imlay City                 Imlay City                       MI
Oxford                Oxford                     Leonard                          MI
Fenton                Fenton                     Linden                           MI
</TABLE>

                                     - xi -

<PAGE>   28

<TABLE>
<CAPTION>
  HEADEND                  SYSTEM                 FRANCHISE AUTHORITY           STATE
  -------                  ------                 -------------------           -----
<S>                   <C>                        <C>                            <C>
Oxford                Mayville/Otter Lake        Marathon                         MI
Whitmore Lake         Livingston                 Marion                           MI
Oxford                Mayville/Otter Lake        Mayville                         MI
Mio                   Mio/Mentor Twp             Mentor                           MI
Oxford                Oxford                     Metamora                         MI
Oxford                Oxford                     Metamora                         MI
Oxford                North Branch               North Branch                     MI
Oxford                North Branch               North Branch Township            MI
Whitmore Lake         Livingston                 Northfield                       MI
Davison               Davison                    Oregon                           MI
Oxford                Oxford                     Ortonville                       MI
Davison               Davison                    Otisville                        MI
Oxford                Mayville/Otter Lake        Otter Lake                       MI
Oxford                Oxford                     Oxford Township                  MI
Oxford                Oxford                     Oxford Village                   MI
Whitmore Lake         Livingston                 Pinckney                         MI
Whitmore Lake         Livingston                 Putnam                           MI
Davison               Davison                    Richfield                        MI
Whitmore Lake         Livingston                 Salem                            MI
Fenton                Fenton                     Tyrone                           MI
Whitmore Lake         Livingston                 Unadilla                         MI
Oxford                Mayville/ Otter Lake       Watertown                        MI
Whitmore Lake         Livingston                 Webster                          MI
</TABLE>

                                    - xii -<PAGE>   1

                                                                     EXHIBIT 4.1

                  SUBORDINATED SECURED NOTES PURCHASE AGREEMENT

        This Subordinated Secured Notes Purchase Agreement (this "Agreement"),
dated as of May 23, 2001, among Sheldahl, Inc., a Minnesota corporation (the
"Company"), the wholly-owned subsidiaries of the Company listed on Schedule I
attached hereto, as guarantors (the "Guarantors" and, together with the Company,
the "Obligors"), the purchasers listed on Schedule II attached hereto (sometimes
referred to herein as a "Purchaser" and collectively as the "Purchasers") and
Ampersand IV Limited Partnership, as agent for the Purchasers (the "Agent").

                              PRELIMINARY STATEMENT

        Subject to the terms and conditions set forth in this Agreement, the
Company desires to issue and sell to the Purchasers and the Purchasers severally
desire to purchase from the Company 22% Senior Subordinated Secured Notes in an
aggregate principal amount of $5,000,000 (the "Notes") subject to the terms and
conditions of this Agreement.

        Accordingly, the Obligors and the Purchasers agree as follows:

                                   ARTICLE I

                     ISSUANCE OF THE NOTES AND THE WARRANTS

        1.1 Authorization of Issuance.

        The Company has authorized the issuance of Notes in the aggregate
principal amount of $5,000,000, such Notes to be substantially in the form of
Exhibit A attached hereto. The Notes are sometimes referred to herein as the
"Securities."

        1.2 Purchase Commitments.

        (a) Morgenthaler Venture Partners V, L.P. ("Morgenthaler") agrees to
purchase in accordance with and subject to the terms and conditions hereof Notes
in the aggregate principal amount of $3,000,000.

        (b) Ampersand IV Limited Partnership ("Ampersand LP") agrees to purchase
in accordance with and subject to the terms and conditions hereof Notes in the
aggregate principal amount of $1,000,000.

        (c) Molex Incorporated ("Molex") agrees to purchase in accordance with
and subject to the terms and conditions hereof Notes in the aggregate principal
amount of $1,000,000.

<PAGE>   2

        1.3 The Closing.

        (a) The closing of the purchase and sale of the Notes (the "Closing")
shall take place at the offices of Lindquist & Vennum P.L.L.P., 4200 IDS Center,
80 South 8th Street, Minneapolis, Minnesota. The date of the Closing is
hereinafter referred to as the "Closing Date."

        (b) At the Closing:

                (1) the Company shall deliver or caused to be delivered to each
        Purchaser (A) Notes in the principal amount set forth below the name of
        such Purchaser on Schedule II attached hereto, dated the Closing Date
        and duly executed by the Company; and (B) all other documents,
        instruments and writings required to have been delivered at or prior to
        the Closing by the Obligors to the Purchasers pursuant to this
        Agreement, and

                (2) each Purchaser shall deliver to the Company the purchase
        price set forth below the name of such Purchaser on Schedule II attached
        hereto by wire transfer of same day funds to an account designated by
        the Company in writing two (2) business days before the Closing.

                                   ARTICLE II

                             PROVISIONS OF THE NOTES

        2.1 Interest Payments.

        (a) The Company shall pay interest on the outstanding principal balance
of the Notes at a rate equal to 22% per annum, compounded quarterly on each of
March 31, June 20, September 30 and December 31, of each year, and payable on
the date that the Notes are repaid in full.

        (b) In the event the interest on the Notes is payable at a rate that
exceeds the maximum rate of interest permissible under any applicable law (the
"Maximum Legal Rate") at any time, the interest on the Notes shall be payable at
a rate equal to the Maximum Legal Rate at such time.

        2.2 Default Interest. If the Company defaults in the payment of the
principal of, premium, if any, or accrued interest on, the Notes, or on any
other amount due hereunder, the Company shall, on or upon demand from time to
time, pay interest on such overdue amount from the date when due up to and
including the date of actual payment (before as well as after judgment) at a
rate equal to the lower of 24% per annum or the Maximum Legal Rate.

        2.3 Payments. Subject to the provisions for optional payments in Section
2.4 hereof and Article VIII hereof, the aggregate principal amount of the Notes,
together with all interest accrued thereon, shall be due and payable
simultaneously with the repayment in full of all of the

                                      -2-
<PAGE>   3

Company's obligations under the Credit and Security Agreement, dated as of June
19, 1998, as amended, restated and replaced and refinanced from time to time,
provided that any restatement or refinancing occurs prior to the sale of the
Materials Business (as defined in Section 2.5(b)) or otherwise with the consent
of the Agent (the "Credit Agreement") by and among the Company, the lenders
party thereto, and Wells Fargo Bank, National Association f/k/a Norwest Bank
Minnesota, National Association (such date being referred to herein as the
"Maturity Date") or earlier in accordance with the terms hereof if permitted
pursuant to the terms of the Credit Agreement and the Subordination Agreement as
defined herein. The Company shall make payment of principal of and premium, if
any, or accrued interest on the Notes, or any other amount due to the Purchasers
under this Agreement, as provided herein or in the Notes. All payments hereunder
shall be in United States dollars by wire transfer of same day funds. If any
payment hereunder shall be due on a day that is not a business day, the date for
payment shall be extended to the next succeeding business day, and in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. If at any time any payment made by the Company
hereunder is rescinded or must otherwise be restored or returned upon the
insolvency, bankruptcy or reorganization of any Obligor or otherwise, such
payment obligations of the Company hereunder shall be reinstated as though such
payment had been due but not made when due.

        2.4 Optional Redemption of the Notes. Upon notice given as provided in
Section 2.6 below, the Company, at its option, but subject to the terms of the
Credit Agreement and the Subordination Agreement, may redeem the Notes as a
whole, or from time to time in part (in a minimum amount of $100,000 and
otherwise in multiples of $100,000), in each case at the principal amount so to
be prepaid, together with interest accrued thereon to the date fixed for such
prepayment and the Commitment Fee (as defined in Section 2.11 hereof).

        2.5 Mandatory Redemption.

        (a) Except as otherwise provided in Section 2.7 hereof, concurrently
with the receipt by the Company or any of its subsidiaries of the cash proceeds
from (i) the issuance of any shares, interests, participations or other
equivalents of corporate stock or membership interests ("Capital Stock") of any
of the Company's subsidiaries or options or warrants to acquire Capital Stock of
any of the Company's subsidiaries or (ii) any sale or other disposition of
assets by the Company or any of its subsidiaries (excluding granting any
Permitted Liens as defined in Section 7.2 hereof), the Company shall apply such
cash proceeds (net of expenses payable by the Company or any of its subsidiaries
to any person other than an affiliate of the Company in connection with the
issuance thereof and net of accrued interest as a result of such redemption) to
the redemption of Notes, together with interest accrued thereon to the date of
such prepayment, and the Commitment Fee; provided, however, that the Company may
first apply such cash proceeds to repay the Company's obligations under the
Credit Agreement and any excess proceeds remaining thereafter shall be applied
to redeem the Notes as provided in this Section 2.5(a) and provided, further,
that the Company shall have no obligation to apply to such redemption the first
$1,000,000 of net cash proceeds received by the Company or any subsidiary from
all such issuances of Capital Stock subsequent to the Closing Date.

        (b) Notwithstanding the foregoing, if the Company or any of its
subsidiaries sells or disposes of equipment in the ordinary course of business,
the Company shall not be obligated to use such cash proceeds to redeem the Notes
pursuant to this Section 2.5.

                                      -3-
<PAGE>   4

        (c) If the Company enters into any agreement with any party other than
any of the Purchasers that contains (i) provisions granting an exclusive option
to purchase the Company's Materials Business or (ii) any financial obligations
on the part of the Company to any potential acquirer of the Company's Materials
Business (other than any of the Purchasers) in the event that the Company's
Materials Business is not acquired by such potential acquirer, then either such
potential acquirer must purchase from the Purchasers all of the Notes for a
purchase price equal the aggregate unpaid principal balance thereof plus accrued
interest thereon plus the Commitment Fee or the Company must redeem all of the
Notes in accordance with the terms of Section 2.4 hereof, in each case within
three (3) business days of the execution of such agreement. For purposes of this
Agreement, "Materials Business" shall mean the Company's adhesive-based tapes,
laminates and composite materials business, excluding the Company's Accentia,
Comclad and lithium batteries products and assets associated exclusively with
these products. The Materials Business shall also exclude the Company's flexible
interconnect division, including Novaclad, Novaflex and Flexbase products and
assets associated exclusively with that division.

        2.6 Notice of Redemption. The Company shall give the holder of each Note
irrevocable written notice of any redemption pursuant to Section 2.4 hereof not
less than five (5) days nor more than twenty (20) days prior to the date
specified for such redemption, specifying such date and the principal amount of
the Notes held by such holder to be redeemed on such date and stating that such
redemption is to be made pursuant to Section 2.4 hereof. Notice of redemption
having been given as aforesaid, the principal amount of the Notes specified in
such notice, together with accrued and unpaid interest thereon through the
redemption date with respect thereto and the Commitment Fee, shall become due
and payable on such redemption date.

        2.7 Change in Control.

        (a) In the event of any Change in Control (as hereinafter defined), each
holder of Note or Notes shall have the right, at its option, subject to the
terms of the Credit Agreement and the Subordination Agreement to require the
Company to purchase all or any portion of such holder's Note(s) on the date (the
"Change in Control Payment Date") which is twenty (20) business days after the
date the Change in Control Notice (as hereinafter defined) is required to be
mailed, together with payment of the Commitment Fee.

        (b) For purposes of this Agreement, the term "Change in Control" means
the occurrence of any of the following: (i) the sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all of the
assets of the Company and its subsidiaries, taken as a whole, to any "person" or
"group" (as such terms are used in Section 13(d)(3) and Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than
Morgenthaler and its affiliates, Ampersand LP and its affiliates, Ampersand CFLP
and its affiliates or Molex and its affiliates (collectively, the "Permitted
Holders"); (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company; (iii) any person or group (as defined above), other
than the Permitted Holders, becomes the "beneficial owner" (as such term is used
in Section 13(d)(3) of the Exchange Act) of 35% or more of the voting power of
the voting stock of the Company; or (iv) during any consecutive two-year period,
individuals, who at the beginning of such period constituted the Board of
Directors (together with any new directors whose election

                                      -4-
<PAGE>   5

by the Board of Directors or whose nomination for election by the stockholders
of the Company was approved by a vote of a majority of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors then in office. For so
long as the Permitted Holders hold a majority of the outstanding shares of the
Company's Series G Convertible Preferred Stock (the "Series G Stock"), those
directors elected by the holders of the Series G Stock shall not be considered
in applying clause (iv) above. In addition, any change in the identity of a
person occupying a board seat resulting from the loss by the holders of the
Series G Stock of the right to elect one or more directors shall not be
considered in applying clause (iv) above.

        (c) The Company shall send all holders of the Notes, within five (5)
business days after the occurrence of any Change in Control, a notice of the
occurrence of such Change in Control (the "Change in Control Notice") and each
holder of Notes who wishes to have its Notes repurchased pursuant to this
Section 2.7 shall so indicate by written notice delivered to the Company within
ten (10) business days of receipt of the Change in Control Notice. Each Change
in Control Notice shall state:

                (1) the Change in Control Payment Date;

                (2) the date by which the right to have Notes purchased must be
        exercised;

                (3) that such right is conditioned on receipt of notice from the
        holders;

                (4) the purchase price, if the right to have Notes purchased is
        exercised;

                (5) a description of the procedure which the holders of Notes
        must follow to exercise the right to have Notes purchased;

                (6) that the purchase is being made pursuant to this Section
        2.7;

                (7) that any Note not tendered will continue to accrue interest
        if interest is then accruing; and

                (8) that, unless the Company defaults in making payment
        therefor, any Note purchased shall cease to accrue interest after the
        Change in Control Payment Date.

        (d) No failure of the Company to give the Change in Control Notice shall
limit any holder's right to exercise a right to have Notes purchased.

        (e) If any indebtedness is outstanding under the Credit Agreement, or
any amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change in Control, prior to the mailing of the Change in Control
Notice to holders of the Notes, but in any event within ten (10) business days
after the date the Change in Control Notice is required to be mailed, the
Company shall (i) repay in full all obligations and terminate all commitments
under or in respect of such indebtedness under the Credit Agreement or (ii)
obtain the requisite consents under the Credit Agreement to permit the
repurchase of the Notes as described above. The Company must first comply with
the covenant described in the preceding sentence before it

                                      -5-
<PAGE>   6

shall be required to purchase Notes pursuant to this Section 2.7 in the event of
a Change in Control; provided, however, that the Company's failure to timely
comply with the covenant described in the preceding sentence shall constitute an
Event of Default as described in Section 8.1(c) hereof.

        (f) The Company shall not be required to purchase all or any portion of
the Notes under subparagraph (a) of this Section 2.7 if a third party offers to
purchase the Notes in the manner, at the time and otherwise in compliance with
the requirements set forth in this Section 2.7, and timely purchases all Notes
or portions thereof validly tendered and not withdrawn under this Section 2.7.

        2.8 Partial Redemptions Pro Rata. Upon any partial redemption of the
Notes pursuant to Section 2.4 or 2.5 hereof, the principal amount so redeemed
shall be allocated to all Notes at the time outstanding in proportion to the
respective outstanding principal amounts thereof.

        2.9 Retirement of the Notes. The Company shall not redeem or otherwise
retire in whole or in part prior to the Maturity Date (other than by redemption
pursuant to Section 2.4, 2.5 or 2.7 hereof or upon acceleration of such Maturity
Date pursuant to Section 8.1 hereof), or purchase or otherwise acquire, directly
or indirectly, Notes held by any holder unless the Company shall have offered to
redeem or otherwise retire, purchase or acquire, as the case may be, the same
proportion of the aggregate principal amount of Notes held by each holder of
Notes at the time outstanding upon the same terms and conditions. Any Notes so
redeemed or otherwise retired, purchased or acquired by the Company shall not be
deemed to be outstanding for any purpose under this Agreement.

        2.10 Subordination. The Purchasers agree to subordinate their interest
in and to the unpaid principal amount of and interest on the Notes to the
interest of lenders under the Credit Agreement (collectively, the "Senior
Lenders") in the obligations of the Company under the Credit Agreement pursuant
to the terms of a Subordination Agreement among the Purchasers, the Senior
Lenders and the Company substantially in the form of Exhibit B attached hereto;
provided however, that the holders of the Notes will not be obligated to
subordinate their interests to more than an aggregate of $45,000,000 of
Indebtedness owed to such Senior Lenders under the Credit Agreement, provided
further that this restriction on the obligation of such holders to subordinate
their interests shall not apply to Indebtedness under the Credit Agreement
agented by Wells Fargo Bank Minnesota, National Association ("Senior Debt"). To
the extent that any provisions in this Agreement or the Notes conflict with the
provisions of such Subordination Agreement, the provisions of such Subordination
Agreement shall govern.

        2.11 Commitment Fee. The Company shall pay to the Agent for the ratable
benefit of the Purchasers in accordance with their respective commitments as set
forth on Schedule II hereto a commitment fee in the amount of $500,000 (the
"Commitment Fee"). The Commitment Fee shall become fully payable upon the
earlier of the Maturity Date or the date on which the Notes are repaid in full
(the "Commitment Fee Payment Date").

                                      -6-
<PAGE>   7

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

        3.1 Representations and Warranties of the Obligors. The Obligors hereby
represent and warrant to the Purchasers as follows:

        (a) Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota. Each
Guarantor is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the subsidiaries of the
Obligors is a corporation or limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. Each of the Obligors and its subsidiaries has the
requisite corporate power and authority to own, operate or lease its properties
and to carry on its business as it is now being conducted, and is duly qualified
or licensed to do business, and is in good standing, in each jurisdiction in
which the nature of its business or the properties owned, operated or leased by
it makes such qualification, licensing or good standing necessary, except where
the failure to have such power or authority, or the failure to be so qualified,
licensed or in good standing, would not have a Material Adverse Effect (as
defined in Section 5.1(c) hereof) on the Obligors. The term "subsidiary" or
"subsidiaries" means, with respect to any Obligor, any person, corporation,
partnership, joint venture or other legal entity of which such Obligor (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, stock or other equity interests the holders of which are generally
entitled to more than 50% of the vote for the election of the Board of Directors
or other governing body of such corporation or other legal entity.

        (b) Authorization. The execution, delivery and performance by each of
the Obligors of each Loan Document (as hereinafter defined) to which it is a
party have been duly authorized by all requisite corporate action by such
Obligor, and each of the Loan Documents constitutes a valid and binding
obligation of each Obligor which is a party thereto, enforceable in accordance
with its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting creditors' rights generally and to general
principles of equity. As used herein, the term "Loan Documents" means,
collectively, this Agreement, each of the Notes and each of the other
instruments, documents or certificates delivered in connection herewith.

        (c) Conflicts. The execution and delivery of each of the Loan Documents
by each Obligor which is a party thereto, the consummation of the transactions
contemplated thereby and the compliance with the provisions thereof by the
Obligors and the issuance, sale and delivery of the Notes by the Company, will
not:

                (1) violate any provision of law, statute, rule or regulation,
        or any ruling, writ, injunction, order, judgment or decree of any court,
        administrative agency or other governmental body applicable to any
        Obligor; or

                (2) conflict with or result in any breach of any of the terms,
        conditions or provisions of, or constitute (with due notice or lapse of
        time, or both) a default (or give rise to any right of termination,
        cancellation or acceleration) under, the

                                      -7-
<PAGE>   8

        certificate of incorporation or by-laws of any Obligor, or under any
        note, indenture, mortgage, lease, purchase or sales order or other
        material contract, agreement or instrument to which any Obligor is a
        party or by which it or any of its property is bound or affected; or

                (3) result in the creation of any lien, security interest,
        charge or encumbrance upon any of the properties or assets of any
        Obligor other than in favor of the Agent and the Purchasers.

        (d) Securities Laws Compliance. The Company has not offered the
Securities or any other security the offering of which would be integrated (as
that term is used in Rule 502 of Regulation D promulgated under the Securities
Act of 1933, as amended (the "Securities Act")) with the offer or sale of the
Securities for sale to, or solicited any offers to buy any of the foregoing
from, or otherwise approached or negotiated in respect thereof, with any Person
other than a limited number of institutional or other sophisticated investors
deemed to be "accredited investors" as such term is defined in rule 501(a) of
Regulation D adopted under the Securities Act.

        (e) No Consent or Approval Required. Except for the filing of any notice
subsequent to the date hereof that may be required under applicable federal or
state securities laws (which, if required, shall be filed on a timely basis as
may be so required) and the filing of financing statements under the Uniform
Commercial Code in order to perfect the security interests granted to the Agent
for the benefit of the Purchasers pursuant to Section 9 hereof, no permit,
consent, approval or authorization of, or declaration to, or filing with, any
person (governmental or private) is required for the valid authorization,
execution, delivery and performance by the Obligors of this Agreement or for the
valid authorization, issuance, sale and delivery by the Company of the Notes, or
the carrying out by the Obligors of the transactions contemplated hereby which
has not been obtained.

        (f) No Default or Violation. Neither any Obligor nor any subsidiary (i)
is in default under or in violation of any indenture, loan or credit agreement
or any other agreement or instrument to which it is a party or by which it or
any of its properties is bound, other than the Credit Agreement; or (ii) is in
violation of any order of any court, arbitrator or governmental body, except for
purposes of clauses (i) or (ii) as could not reasonably be expected to, in any
such case (individually or in the aggregate) have or result in a Material
Adverse Effect.

        (g) Compliance with Laws. The Obligors and their respective subsidiaries
are in compliance, in all material respects, with any applicable law, rule or
regulation of any United States federal, state, local, or foreign government or
agency thereof which affects the business, properties or assets of the Obligors
and their respective subsidiaries, the non-compliance with which would have a
Material Adverse Effect on any Obligor and no notice, charge, claim, action or
assertion has been received by any Obligor or any of its subsidiaries or has
been filed, commenced or, to the Obligors' knowledge, threatened against any
Obligor or any of its subsidiaries alleging any such violation.

        (h) Use of Proceeds; Margin Stock. None of the proceeds of the sale of
the Securities will be used for the purpose of purchasing or carrying any
"margin stock" as defined in Regulations U, T, or X of the Board of Governors of
the Federal Reserve System, or for the

                                      -8-
<PAGE>   9

purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry "margin stock," or for any other purpose which might
constitute transactions contemplated by this Agreement a "purpose credit" within
the meaning of Regulations U, T or X. The Obligors are not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stocks. The Obligors have not taken and will not take any action which might
cause any violation of Regulations U, T or X or any other regulations of the
Board of Governors of the Federal Reserve System or any violation of Section 7
of the Exchange Act, or any rule or regulation promulgated thereunder, in each
case as now in effect or as the same may hereinafter be in effect.

        (i) The Security Documents. The provisions of this Agreement are
effective to create in favor of the Agent for the ratable benefit of the
Purchasers a legal, valid and enforceable security interest in all right, title
and interest of the Collateral (as hereinafter defined) to the extent that a
security interest can be created therein under the UCC, and, on the Closing
Date, the Agent for the ratable benefit of the Purchasers will have a fully
perfected lien on, and security interest in the Collateral (to the extent such
security interest can be perfected by filing a UCC-1 financing statement or by
taking possession of the Collateral), subject to no other liens other than
Permitted Liens.

        (j) Assets. Each Obligor has good and marketable title to all of its
properties and assets (including real property and tangible and intangible
personal property), in each case free and clear of all liens other than
Permitted Liens.

        (k) Insurance. All material fire and casualty, general liability,
business interruption, product liability and sprinkler and water damage
insurance policies maintained by the Obligors or any of their subsidiaries are
with nationally recognized insurance carriers, provide coverage for all normal
risks incident to the business of the Obligors and their subsidiaries and their
respective properties and assets and are in character and amount appropriate for
the business conducted by the Obligors, except as would not, individually or in
the aggregate, have a Material Adverse Effect on any Obligor.

        (l) Disclosure. The representations, warranties and other statements of
the Obligors contained in this Agreement and the other certificates furnished to
the Purchasers by the Obligors pursuant hereto, taken as a whole, do not contain
any untrue statement of a material fact or, to the best of the knowledge of the
Obligors, omit to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances made, not
materially misleading as of the date hereof.

        (m) Knowledge. Whenever a representation or warranty made by any Obligor
refers to the best of the knowledge of such Obligor or its subsidiaries, such
knowledge shall be deemed to consist only of the actual knowledge of the
executive officers of such Obligor or its subsidiaries.

        3.2 Representations, Warranties and Agreements of the Purchasers. Each
Purchaser severally and not jointly, hereby represents and warrants to the
Company as follows:

        (a) Authorization. The execution, delivery and performance by Purchaser
of this Agreement has been duly authorized by all requisite entity action by
Purchaser, and this

                                      -9-
<PAGE>   10

Agreement constitutes a valid and binding obligation of Purchaser, enforceable
in accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors, rights generally
and to general principles of equity.

        (b) Conflicts. The consummation of the transactions contemplated hereby
and compliance with the provisions hereof by Purchaser, will not:

                (1) violate any provision of law, statute, rule or regulation,
        or any ruling, writ, injunction, order, judgment or decree of any court,
        administrative agency or other governmental body applicable to
        Purchaser; or

                (2) conflict with or result in any breach of any of the terms or
        provisions of, or constitute a default (or give rise to any right of
        termination, cancellation or acceleration) under, the organizational
        documents of Purchaser or under any note, indenture, agreement or
        instrument to which Purchaser is a party or by which it or any of its
        properties is bound or affected.

        (c) Purchase for Investment. Purchaser is acquiring the Notes for its
own account, for investment and not with a view to the distribution thereof
within the meaning of the Securities Act.

        (d) No Registration. Purchaser understands that the Securities have not
been, nor will it or they be, registered under the Securities Act, by reason of
its or their issuance by the Company in a transaction exempt from the
registration requirements of the Securities Act; and that the Notes must be held
by Purchaser indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from registration.

        (e) Restrictions on Resale. Purchaser understands that the exemption
from registration afforded by Rule 144 (the provisions of which are known to
Purchaser) promulgated under the Securities Act depends on the satisfaction of
various conditions, and that, if and when applicable, Rule 144 may only afford
the basis for sales in limited amounts.

        (f) Accredited Investor.

                (1) Purchaser is an "accredited investor" as defined in Rule
        501(a) of Regulation D promulgated under the Securities Act and, by
        reason of its business and financial experience and the business and
        financial experience of those persons retained by it to advise it with
        respect to its investment in the Notes, has such knowledge,
        sophistication and experience in business and financial matters so as to
        be capable of evaluating the merits and risks of the prospective
        investment, is able to bear the economic risk of such investment and, at
        the present time, is able to afford a complete loss of such investment;
        and

                (2) Purchaser is familiar with the business of the Company and
        has had the opportunity to ask questions of the officers and directors
        of the Company and to obtain such information about the financial
        condition of the Company as it has requested.

                                      -10-
<PAGE>   11

        (g) Reliance. Each Purchaser understands and acknowledges that (i) the
Securities are being offered and sold to the Purchaser without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder; and (ii) the availability
of such exemption depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and such Purchaser
hereby consents to such reliance.

        (h) No Affiliation. No Purchaser is an "interested shareholder" of the
Company or an "affiliate" or "associate" thereof, as such terms are defined in
Section 302A.011 of the MBCA resulting from any share purchase, contract,
arrangement or understanding, other than this Agreement and the other Loan
Documents, the Subordinated Notes and Warrant Purchase Agreement, the Merger
Agreement (as defined in the Subordinated Notes and Warrant Purchase Agreement)
or any acquisition of shares approved by a committee of the Board of Directors
of the Company as required in Section 302A.673, subdivision 1(d) of the MBCA.

                                   ARTICLE IV

                         OTHER AGREEMENTS OF THE PARTIES

        4.1 Transfer Restrictions.

        (a) If any Purchaser should decide to dispose of any of the Securities
held by it, such Purchaser understands and agrees that it may do so only
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from the registration requirements
of the Securities Act. In connection with any transfer of any Securities other
than pursuant to an effective registration statement or to the Company or to an
affiliate of such Purchaser or pursuant to Rule 144 under the Securities Act
("Rule 144"), the Company may require the transferor thereof to provide to the
Company a written opinion of counsel experienced in the area of United States
securities laws selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act.

        (b) Each Purchaser agrees to the imprinting, so long as is required, of
the following legends on the Notes:

        THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
        COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
        EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
        (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
        EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
        SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
        TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
        SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

                                      -11-
<PAGE>   12

        THIS NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT IN FAVOR
        OF WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, AS AGENT FOR
        CERTAIN SENIOR LENDERS, DATED AS OF MAY __, 2001.

        4.2 Use of Proceeds. The Company shall use the net proceeds from the
issuance of the Securities for working capital and other general corporate
purposes.

        4.3 Commercially Reasonable Efforts. Subject to the terms and conditions
herein provided and to applicable legal requirements, each of the parties hereto
agrees to use its commercially reasonable efforts to take, or cause to be taken,
all action, and to do, or cause to be done, and assist and cooperate with the
other parties hereto in doing, as promptly as practicable, all things necessary,
proper or advisable under applicable laws and regulations to ensure that the
conditions set forth in Article V hereof are satisfied.

        4.4 Consents. Each of the parties will use its commercially reasonable
efforts to obtain as promptly as practicable all consents and approvals of any
governmental authority or other person necessary in connection with the
execution, delivery and performance of this Agreement and the Notes.

                                   ARTICLE V

                                   CONDITIONS

        5.1 Conditions Precedent to the Obligation of the Purchasers to Purchase
the Securities on the Closing Date. The obligation of each Purchaser hereunder
to acquire and pay for the Securities is subject to the satisfaction or waiver
by such Purchaser, at or before the Closing, of each of the following
conditions:

        (a) Accuracy of the Obligors' Representations and Warranties. The
representations and warranties of the Obligors contained herein shall be true
and correct, in all material respects, as of the date hereof.

        (b) Performance by the Obligors. The Obligors shall have performed,
satisfied and complied with in all material respects all covenants and
agreements required by this Agreement to be performed, satisfied or complied
with by the Obligors at or prior to the Closing Date.

        (c) No Material Adverse Effect. There shall not have occurred any
change, circumstance or event that has had or may reasonably be expected to have
(i) a material adverse effect on the business, financial condition, assets,
results of operations or prospects of the Obligors and their subsidiaries, taken
as a whole, or (ii) prevent or materially delay the ability of the Obligors to
consummate the transactions contemplated by this Agreement and the other Loan
Documents (a "Material Adverse Effect").

        (d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

                                      -12-
<PAGE>   13

        (e) Legal Opinion. The Obligors shall have delivered to the Purchasers a
legal opinion of Lindquist & Vennum, P.L.L.P., dated the Closing Date,
substantially in the form of Exhibit C attached hereto.

        (f) Required Approvals. The Obligors shall have obtained the consent or
approval of the Senior Lenders under the Credit Agreement and any other
governmental authority or person which may be necessary in connection with the
execution, delivery and performance of this Agreement and the Notes.

        (g) Delivery of Notes. The Company shall have delivered to such
Purchaser or such Purchaser's designee duly executed Notes at the Closing to be
received by each Purchaser, in the name of such Purchaser or such Purchaser's
designee, each in form satisfactory to such Purchaser or such Purchaser's
designee.

        (h) Secretary's Certificate and Other Documents. The Purchasers shall
have received from each Obligor on the Closing Date (i) except to the extent
waived by the Agent, a copy of such Obligor's certificate of incorporation,
including all amendments thereto, certified by the Secretary of State of its
jurisdiction of incorporation and a certificate as to the good standing of the
Obligor in such jurisdiction as of the Closing Date, (ii) a certificate of an
officer of such Obligor dated as of the Closing Date certifying to the
Purchasers that the Purchasers have received (A) a correct and complete copy of
such Obligor's certificate of incorporation and bylaws as in effect on the
Closing Date and at all times subsequent to the date of the resolutions
described in the following clause (B), (B) a correct and complete copy of
resolutions duly adopted by the Board of Directors of such Obligor authorizing
the execution, delivery and performance of the Loan Documents, the sale of the
Notes hereunder, and the other transactions contemplated hereby and thereby, as
applicable, and (C) as to the incumbency and specimen signature of each officer
of such Obligor who shall execute any Loan Document or any other document
delivered in connection therewith; and (iii) such other documents as the
Purchasers and their counsel may reasonably request.

        (i) Officer's Certificate. The Company shall have delivered to the
Purchasers on the Closing Date a certificate signed on its behalf by its
President, Chief Executive Officer or Chief Financial Officer certifying that
the conditions specified in Sections 5.1(a) and (b) hereof have been fulfilled.

        (j) Subordination Agreement. The Purchasers and the Senior Lenders shall
have executed a Subordination Agreement on terms consistent with those contained
herein, in the form of Exhibit B attached hereto.

        (k) Perfection Certificate and UCC Financing Statements. On the Closing
Date, each Obligor shall have duly authorized, executed and delivered a
Perfection Certificate in the form of Exhibit D hereto and all the UCC Financing
Statements and such other instruments and documents as may be required by the
Purchasers to perfect the security interests created by this Agreement.

        (l) Expenses. All fees and expenses (including reasonable attorneys'
fees) incurred by the Agent and the Purchasers in connection with the
negotiation, preparation, filing

                                      -13-
<PAGE>   14

and recording of this Agreement, any documents necessary under this Agreement
and the other Loan Documents shall be paid in full on the date of the Closing.

        (m) Ninth Amendment to Credit Agreement. The Company shall have executed
the Ninth Amendment to the Credit Agreement in substantially the same form as
previously provided to the Purchasers by the Company.

        (n) Letter Agreement. The Company and the Purchasers shall have executed
the Letter Agreement relating to the proposed purchase of the assets of the
Company relating to its Materials Business.

        (o) Total Bank Debt. The Total Bank Debt (as hereinafter defined) of the
Obligors and their subsidiaries as of the Closing Date shall not have exceeded
[$30,000,000]. For purposes of this Section 5.1(n), "Total Bank Debt" shall mean
all outstanding bank debt included in current liabilities and long term
liabilities including but not limited to all outstanding mortgages.

        5.2 Conditions Precedent to the Company's Obligations on the Closing
Date. The obligations of the Company to consummate the Closing hereunder are
subject to the following conditions:

        (a) Accuracy of the Representations and Warranties of the Purchasers.
The representations and warranties of the Purchasers contained herein shall be
true and correct in all material respects as of the Closing Date.

        (b) Performance by the Purchasers. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing Date.

        (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

        (d) Payment of Purchase Price. Each Purchaser shall have paid the
purchase price set forth below the Purchaser's name on Schedule II attached
hereto for the Securities being purchased by such Purchaser at the Closing.

                                   ARTICLE VI

                              AFFIRMATIVE COVENANTS

        Each of the Obligors hereby covenants and agrees with the Purchasers
that, immediately after the Closing Date and for so long as any Note or any
monetary obligation under this Agreement remains outstanding, the Obligors shall
comply with the covenants set forth in this Article VI:

                                      -14-
<PAGE>   15

        6.1 Payment of Principal, Premium, Interest, Fees and Expenses. Subject
to the terms of the Subordination Agreement referred to in Section 2.10, the
Company shall duly and punctually pay the principal of (and premium, if any) and
interest on the Notes in accordance with the terms of the Notes, this Agreement
and the other Loan Documents and all fees and expenses due under this Agreement
when payable.

        6.2 Corporate Existence. Each Obligor shall do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
corporate existence and any necessary state or other qualifications (other than
any qualifications the absence of which, in the aggregate, would not have a
Material Adverse Effect).

        6.3 Obligations and Taxes. Each Obligor shall pay or discharge, or cause
to be paid or discharged, before the same shall become delinquent (a) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its business or property unless such taxes,
assessments or governmental charges are being paid in accordance with the terms
of an agreement with the applicable taxing authority, (b) all lawful claims for
labor, materials and supplies, (c) all required payments under any Indebtedness
and (d) all other obligations; provided however, that, in each case, it shall
not be required to pay or discharge or to cause to be paid or discharged any
such amount so long as the validity or amount thereof shall be contested in good
faith in an appropriate manner and appropriate reserves and accruals have been
made with respect thereto.

        6.4 Performance under Agreements. Each Obligor shall perform its
obligations under this Agreement, each other Loan Document, and each other
contract to which it is a party; provided however, that the Obligors shall not
be required to so perform its obligations under any contract (other than this
Agreement, any other Loan Document and the Subordinated Note and Warrant
Purchase Agreement) to the extent it is reasonably contesting such obligations
in good faith and in an appropriate manner and, if required by GAAP, it has made
appropriate reserves and accruals with respect thereto.

        6.5 Access to Properties and Inspections. The Obligors shall maintain
financial records in accordance with accounting practices and controls
sufficient to allow the Obligors to prepare the financial statements,
certificates and reports required by Section 6.10 hereof; and, upon written
notice, at all reasonable times and as often as the Purchasers may reasonably
request, permit any authorized representative or agent of any Purchaser to visit
and inspect their physical properties and reports and permit any authorized
representative or agent of any Purchaser to discuss their affairs, finances and
condition with such officers, key employees and independent chartered
accountants acting as auditors as the Purchasers shall deem appropriate.
Delivery of a copy of this Agreement to the respective independent accountants
acting as auditors shall constitute instructions to such accountants to discuss
the financial condition of the Obligors with the Purchasers and their
representatives, and to permit the Purchasers and their representatives to
inspect, copy and make extracts from all financial statements, analyses, work
papers and other documents and information (including electronically stored
documents and information) prepared by such accountants with respect to the
Obligors.

        6.6 Defense of Claims. Each Obligor shall diligently defend itself and
its properties from and against any lawsuits or claims.

                                      -15-
<PAGE>   16

        6.7 Notice of Litigation, Claims, Etc. The Obligors shall promptly upon
obtaining notice of the occurrence thereof (but in no event more than ten (10)
days after obtaining notice of the occurrence thereof), provide the Purchasers
with written notice of any of the following events:

        (a) the issuance by any governmental authority of any injunction, order
or decision involving any Obligor or any of its properties;

        (b) the filing or commencement of any action, suit or proceeding against
or affecting any Obligor or the properties of any Obligor, whether at law or in
equity or by or before any court if such event might reasonably be interpreted
to have a Material Adverse Effect;

        (c) the imposition of any lien which is not a Permitted Lien (as defined
in Section 7.2 hereof);

        (d) any claim, demand or action impairing title to any of the properties
or assets of any Obligor;

        (e) any other adverse action by or notice from a governmental authority
with respect to any Obligor or any of its respective properties;

        (f) any default by any Obligor under any contract of indebtedness in
excess of $250,000 other than a lease or conditional sales contract for
immaterial amounts; and

        (g) any development in the business or affairs of any Obligor which is
likely, in the reasonable judgment of such Obligor, to have a Material Adverse
Effect.

        Each notice shall specify, as applicable, (i) the nature and extent of
the subject matter being disclosed, (ii) any rights of any other parties thereto
with respect to termination, acceleration or similar provisions and (iii) any
corrective action taken or proposed to be taken with respect thereto.

        6.8 Proceeds. The Company shall use the net proceeds from the issuance
of the Securities for general corporate purposes, including the retirement of
existing indebtedness.

6.9 Compliance. Each Obligor shall comply in all material respects with all
applicable laws and maintain all required clearances, consents, permits and
approvals of governmental authorities.

        6.10 Financial Statements and Reports. The Obligors shall furnish to the
Purchasers:

        (a) as soon as available but in any event within ninety (90) days after
the end of each fiscal year, consolidated balance sheets, income statements and
cash flow statements of the Obligors and their subsidiaries, showing their
financial condition as at the end of such fiscal year and the results of their
operations for such fiscal year, all the foregoing financial statements (other
than any consolidating schedules) to be audited by independent chartered
accountants of nationally-recognized standing reasonably acceptable to the
Purchasers and prepared in accordance with GAAP.

                                      -16-
<PAGE>   17

        (b) as soon as available but in any event within forty-five (45) days
after the end of each fiscal quarter, commencing with the fiscal quarter
including the Closing Date, the unaudited consolidated balance sheets, income
statements and cash flow statements (along with comparisons to budget), showing
the financial condition as at the end of such fiscal quarter, and the results of
operations for such fiscal quarter and for the then elapsed portion of the
fiscal year, for the Obligors in each case prepared in accordance with GAAP,
subject to normal year-end adjustments (none of which alone or in the aggregate
would result in a Material Adverse Effect) and the absence of notes thereto;

        (c) as soon as received, copies of any notice of potential liability or
charge or complaint received by any Obligor from any governmental authority
which could reasonably cause the Obligors or any of their subsidiaries to incur
liabilities in excess of $250,000;

        (d) concurrently with the statements provided pursuant to clauses (a)
and (c) a certificate of the Chief Financial Officer of the Company containing a
narrative management discussion and analysis of the financial condition and
results of operations of the Company for the periods covered by such statements;

        (e) promptly upon their becoming available, copies of any statements,
reports and other communications, if any, which the Company shall have generally
provided to its stockholders, or to the Senior Lenders, or material statements,
reports and other communications to particular stockholders or to the Company's
directors;

        (f) promptly upon receipt thereof, copies of all financial and
management reports submitted to the Obligors by their independent auditors in
connection with each annual audit of the books of the Obligors;

        (g) promptly, from time to time, such other information (in writing if
so requested) regarding the assets and properties (including the collateral) and
operations, business affairs and financial condition of the Obligors as the
Purchasers may reasonably request; and

        (h) all filings with the Securities and Exchange Commission.

        Each certificate of the Chief Financial Officer of the Company (and, in
the case of year-end financial statements and reports, the independent auditors
of the Company) delivered under this Section 6.10 shall certify that the
statement or report to which such certificate relates fairly presents in all
material respects the financial position and results of operations of the
Obligors at the dates thereof and for the periods then ended and has been
prepared in accordance with GAAP, in the case of unaudited financial statements,
subject to normal year-end audit adjustments (none of which alone or in the
aggregate would result in a Material Adverse Effect) and the absence of notes
thereto, no Event of Default has occurred and is continuing and to the best of
the Chief Financial Officer's knowledge no event or condition has occurred which
would have a Material Adverse Effect on the Obligors. The audit report with
respect to the financial statements referred to in clause (a) shall not contain
a "going concern" or like qualification or exception or any qualification
arising out of the scope of the audit.

        6.11 Insurance. Each Obligor shall maintain insurance on its business
and properties to such extent and against such risks, including fire and other
risks insured against by extended coverage, and workers' compensation insurance
and public liability insurance against claims for

                                      -17-
<PAGE>   18

personal injury or death or property damage occurring upon, in, about or in
connection with, the use of any properties owned, occupied or controlled by such
Obligor, in each case as is customary with companies similarly situated and in
the same or similar businesses, and shall provide evidence to the Purchasers of
such insurance upon their request.

        6.12 Notification of Event of Default. The Obligors shall immediately
notify the Purchasers in writing of (a) the occurrence of any default or any
Event of Default hereunder or under the Credit Agreement of which they become
aware and (b) any event or condition which has or could reasonably be expected
to have a Material Adverse Effect and specify what steps, if any, are being
taken to cure the same.

        6.13 Fiscal Year. The Obligors shall maintain their current fiscal year
for financial reporting purposes; provided, however, that the Obligors may
without the consent of the Purchasers change their fiscal year as may be
approved by its Board of Directors so long as the Obligors deliver written
notice to the Purchasers of such change within thirty (30) days of Board
approval of such change.

        6.14 Further Assurances. Each Obligor shall duly execute and deliver, or
cause to be duly executed and delivered, at its own cost and expense, such
further instruments and documents and take or cause to be taken all such action,
in each case as may be necessary or proper in the reasonable judgment of the
Purchasers, to carry out the provisions and purposes of this Agreement and the
other Loan Documents and to better assure and confirm unto the Purchasers, its
rights and remedies under this Agreement and the other Loan Documents.

        6.15 Maintenance of Properties. Each Obligor shall keep and maintain all
property material to the conduct of its business as in good working order and
condition, ordinary wear and tear excepted, as such property is in as of the
date hereof.

                                  ARTICLE VII

                               NEGATIVE COVENANTS

        The Obligors hereby covenant and agree with the Purchasers that,
immediately after the Closing Date and for so long as any Note or any monetary
obligation under this Agreement remains outstanding, the Obligors shall, except
to the extent waived by the holders of at least seventy-five percent (75%) of
the outstanding principal amount of the Notes, comply with the covenants set
forth in this Article VII:

        7.1 Indebtedness. The Obligors shall not, and shall not permit any of
their respective subsidiaries to, incur, create, assume or suffer or permit to
exist any indebtedness, except (a) indebtedness under and pursuant to the terms
of this Agreement and the other Loan Documents (including the issuance of the
Additional Notes), (b) indebtedness under that certain Amended Restated
Subordinated Note and Warrant Purchase Agreement, dated as of December 29, 2000,
as amended from time to time, by and among the Company and the Purchasers party
thereto (the "Subordinated Note and Warrant Purchase Agreement"), (c)
indebtedness under capital or operating leases entered into within the ordinary
course of the Obligors' business consistent with past practice, and (d)
indebtedness to the Senior Lenders under the Credit Agreement.

                                      -18-
<PAGE>   19

        7.2 Liens. No Obligor or subsidiary shall incur, create, assume or
suffer or permit to exist any lien on any of their property or assets or on any
income or rights in respect of any thereof, except (the "Permitted Liens"):

        (a) liens incurred and arising out of surety bonds, appeal bonds,
statutory obligations, bids, performance and return of money and similar
obligations and pledges or deposits made in the ordinary course of business in
connection with worker compensation, unemployment insurance, old age pensions
and other social security benefits;

        (b) liens imposed by law, including carriers', warehousemen's,
mechanics', materialmen's and vendors' liens incurred in the ordinary course of
business and securing obligations which are not yet due or which are being
contested in good faith by appropriate proceedings, and in any such case as to
which it shall have set aside adequate cash reserves in accordance with GAAP;

        (c) liens securing the payment of taxes, assessments and governmental
charges or levies, either not yet due and payable or being contested in good
faith by appropriate legal or administrative proceedings, and in any such case
as to which it shall have set aside adequate cash reserves in accordance with
GAAP;

        (d) zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, restrictions on the use of property or minor
irregularities of title which do not in the aggregate impair the use of any
parcel of property material to the operation of the business of the any Obligor
or the value of such property for the purpose of the business of any Obligor;

        (e) liens securing purchase money indebtedness; provided, however, that
each such lien does not secure any other indebtedness and does not encumber any
property other than that property acquired with the proceeds of such
indebtedness;

        (f) extensions and renewals of liens permitted hereunder; provided,
however, that the indebtedness secured thereby is not increased and the lien
does not encumber any property not encumbered by the lien so extended or
renewed;

        (g) liens securing capital or operating leases within the ordinary
course of business consistent with past practice;

        (h) liens securing indebtedness under the Credit Agreement;

        (i) liens existing on the date of the Subordinated Notes and Warrant
Purchase Agreement and listed on Part 3.1(m) of the Disclosure Letter (as
defined in the Subordinated Notes and Warrant Purchase Agreement); and

        (j) Liens securing the Notes.

        7.3 Restricted Payments. No Obligor shall declare or make, or permit any
of its subsidiaries to declare or make (a) any dividend or other distribution on
any shares of the capital stock of such Obligor or its subsidiaries (other than
(i) in the case of the Company, stock splits, stock dividends or the
distribution of shares of capital stock of the Company pursuant to the

                                      -19-
<PAGE>   20

exercise of warrants and dividends payable in the form of the Company's common
stock to holders of the Company's Series D, E, F and G Convertible Preferred
Stock and (ii) in the case of the Guarantors or any other subsidiaries of the
Company, distributions to the Obligors), or (b) any payment on account of the
purchase, redemption, retirement or acquisition of (i) any shares of capital
stock of such Obligor or its subsidiaries or (ii) any option, warrant or other
right to acquire shares of the capital stock of such Obligor or its
subsidiaries.

        7.4 Nature of Business; Place of Business. No Obligor shall conduct, or
permit any of its subsidiaries to conduct, any business or operations other than
the business or operations conducted on the date hereof; provided, however, that
the Obligors and their subsidiaries may engage in business or operations which
are complementary to the business and operations of the Obligors and their
subsidiaries. No Obligor shall change, or permit any of its subsidiaries to
change, its corporate structure or its principal place of business. No Obligor
shall change its state of incorporation without providing thirty (30) days prior
written notice to the Purchasers and executing and delivering, or causing to be
executed and delivered, to the Agent such financing statements and other
documents as the Agent may require to protect, perfect or preserve any lien
granted to the Agent pursuant to the Loan Documents.

        7.5 Charter, Bylaw and Loan Document Amendment. No Obligor shall amend,
modify or supplement its charter or bylaws in any manner that the Purchasers
deem will adversely affect the rights of the Purchasers under this Agreement or
any other Loan Document or their ability to enforce the same or amend, modify or
supplement the Loan Documents without the consent of the Purchasers.

        7.6 Transactions with Affiliates. No Obligor will enter into, or permit
any of its subsidiaries to enter into, any transaction, including, without
limitation, the purchase, sale, lease or exchange of property, real or personal,
the purchase or sale of any security, the borrowing or lending of any money, or
the rendering of any service, with any person or entity affiliated with such
Obligor or any of its subsidiaries (including officers, directors and
shareholders owning 3% (three percent) or more of the Company's outstanding
capital stock (other than the holders of the Series G Stock)), except in the
ordinary course of and pursuant to the reasonable requirements of its business
and upon fair and reasonable terms not less favorable than would be obtained in
a comparable arms-length transaction with any other person or entity not
affiliated with such Obligor.

        7.7 Mergers. No Obligor or subsidiary shall, in a single transaction or
through a series of related transactions, merge or consolidate with another
corporation or other business entity, except that any Guarantor may merge with
another Guarantor or with the Company (so long as the Company is the surviving
corporation).

        7.8 Asset Sales. No Obligor or subsidiary shall, directly or indirectly,
in a single transaction or a series of related transactions, sell, lease,
transfer or otherwise dispose of or suffer to be sold, leased, transferred,
abandoned or otherwise disposed of, all or any part of its assets except: (i)
assets related to the Obligors' Material Business, (ii) inventory sold in the
ordinary course of business, (iii) equipment sold or disposed of in the ordinary
course of business and (iv) assets in transactions not otherwise permitted by
subsections (i), (ii) and (iii) so long as (A) such Obligor or applicable
subsidiary receives consideration at the time of such transaction equal to at
least the fair market value of the assets sold; (B) not less than 80% of the
consideration received

                                      -20-
<PAGE>   21

by such Obligor or such subsidiary was in the form of cash or cash equivalents;
and (C) the sale of such assets would not have a Material Adverse Effect.

        7.9 Use of Proceeds. The Company shall not use the net proceeds from the
issuance of the Securities to purchase or carry "margin securities."

        7.10 Contracts. The Obligors shall prohibit their subsidiaries from
entering into any contract, commitment, understanding, or arrangement by which
the subsidiaries are restricted from making distributions or other payments to
the Obligors. No Obligor will, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement (other than this Agreement,
the Credit Agreement and the Subordinated Notes and Warrant Purchase Agreement)
that prohibits, restricts or imposes any condition upon the ability of any
Obligor to create, incur or permit to exist any lien upon any of its property or
assets (other than Permitted Liens); provided that the foregoing shall not apply
to customary provisions in capital or operating leases but solely with respect
to the property being leased, and restrictions and conditions imposed by law or
by this Agreement, the Credit Agreement or the Subordinated Notes and Warrant
Purchase Agreement.

                                  ARTICLE VIII

                                EVENTS OF DEFAULT

        8.1 Events. In case of the happening of any of the following events
(each, an "Event of Default"):

        (a) the Company shall fail to make any payment on principal of the Notes
when and as the same shall become due and payable, whether at the due date
thereof, by acceleration or otherwise; or

        (b) the Company shall fail to pay any premium, interest, fee or other
obligation due hereunder when and as the same shall become due and payable,
whether at the due date thereof, by acceleration or otherwise; or

        (c) the Company shall fail timely to perform its obligations under
Section 2.7(e) hereof; or

        (d) default shall be made in the due observance or performance by any
Obligor of any covenant or agreement contained in Section 6.1 or 6.2 or Article
VII of this Agreement, and such default shall continue unremedied for thirty
(30) days after written notice thereof to the Company by the Purchasers; or

        (e) default shall be made in the due observance or performance by any
Obligor of any other covenant or agreement to be observed or performed under
this Agreement or any other Transaction Document, and such default shall
continue unremedied for thirty (30) days (or such lesser period as may be
required as a result of such default) after written notice thereof to the
Company by the Purchasers; or

        (f) any representation or warranty made by any Obligor contained in this
Agreement or in any other Loan Document or in any certificate, financial
statement or other

                                      -21-
<PAGE>   22

instrument furnished by or on behalf of any Obligor pursuant to this Agreement
or such other Loan Document shall prove to have been false or misleading in any
material respect when made or furnished; or

        (g) any Obligor or any of its subsidiaries shall (i) voluntarily
commence any proceeding or file any petition or proposal or any notice of its
intent to commence or file any such proceeding, petition or proposal seeking
relief under the U.S. Bankruptcy Code or any other federal, state bankruptcy,
insolvency or similar law, (ii) consent to the institution of, or fail to
controvert in a timely and appropriate manner, any such proceeding or the filing
of any such petition or proposal, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator or similar official for any such
person or for any substantial part of its property or assets, (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors,
(vi) fail generally to pay its debts as they become due or (vii) take any
corporate or stockholder action in furtherance of any of the foregoing; or

        (h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of any Obligor or any of its subsidiaries or of any substantial part
of the property or assets thereof, under Title 11 of the United States Code or
any other federal, state bankruptcy, insolvency or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator or similar official
for any Obligor or any of its subsidiaries or for any substantial part of their
property or (iii) the winding-up or liquidation of any Obligor or any of its
subsidiaries, and such proceeding, petition or order shall continue unstayed and
in effect for a period of sixty (60) consecutive days; or

        (i) a final judgment for the payment of money in an amount in excess of
$500,000 shall be rendered by a court or other tribunal against any Obligor or
any of its subsidiaries and shall remain undischarged for a period of sixty (60)
consecutive days during which such judgment and any levy or execution thereof
shall not have been effectively stayed or vacated; or

        (j) any event shall occur or condition shall exist or fail to occur or
exist if the effect of such occurrence, existence or failure is to accelerate
the maturity of any indebtedness of any Obligor or any of its subsidiaries in a
principal amount in excess of $500,000 or any such indebtedness shall not be
paid when due, whether at maturity, by acceleration or otherwise, or the holder
of any lien upon property of any Obligor shall commence foreclosure of such
lien; or

        (k) any Loan Document shall cease to be in full force and effect and
enforceable against any Obligor which is a party thereto in accordance with its
terms; or

        (l) there shall have occurred with respect to the Company a Change in
Control; or

        (m) the security interest in the Collateral granted hereunder shall
cease to be, in any material respect, in full force and effect, or shall cease,
in any material respect, to give the Agent for the ratable benefit of the
Purchasers, rights, powers and privileges purported to be created thereby or any
Obligor shall default in the due performance or observance of any material term,
covenant or agreement on its part to be performed or observed pursuant to
Article IX

                                      -22-
<PAGE>   23

hereof and such default shall continue for thirty (30) or more days after
written notice to the Company; or

        (n) any Obligor or an ERISA Affiliate (as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) shall fail to pay
when due an amount or amounts aggregating in excess of $500,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent to
terminate an "employee pension benefit plan" (a "Benefit Plan") shall be filed
under Title IV of ERISA by any ERISA Affiliate, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate, to impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer any Benefit Plan; or a condition shall exist by reason
of which the PBGC would be entitled to obtain a decree adjudicating that any
Benefit Plan must be terminated; or there shall occur a complete or partial
withdrawal from or a default, within the meaning of Section 4219 (c) (5) of
ERISA, with respect to, one or more multi-employer plans which could cause one
or more ERISA Affiliates to incur a payment obligation in excess of $500,000; or

        (o) there shall have occurred any event which would constitute a
Material Adverse Effect; or

        (p) any Guarantor shall assert that its obligations hereunder or under
any other Loan Document shall be invalid or unenforceable or that it has no
further obligations or liabilities hereunder;

then, and in any such event, and at any time thereafter during the continuance
of such event, subject to the terms of the Subordination Agreement, the Agent or
the holders of at least seventy-five (75%) percent in aggregate principal amount
of the Notes then outstanding may, by notice to the Company, take any of the
following actions at the same or different times: (i) terminate forthwith the
commitment hereunder to purchase the Notes and (ii) declare the Notes (if
outstanding) to be forthwith due and payable, whereupon the entire unpaid
principal of the Notes, together with accrued interest thereon, the then
applicable redemption premium, if any, and all other obligations, shall become
forthwith due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by the Company,
anything contained herein or in the Notes or the other Loan Documents to the
contrary notwithstanding (except for the Subordination Agreement), and (iii)
exercise any and all other remedies provided under any Loan Document upon the
occurrence and continuance of an Event of Default.

Notwithstanding the foregoing, in the case of an Event of Default arising under
subsections (g) or (h) of Section 8.1 hereof with respect to any Obligor or any
subsidiary of any Obligor, all outstanding Notes will ipso facto become due and
payable without further action or notice.

All rights and remedies of the Agent and the Purchasers under this Agreement and
all covenants and obligations of the Company hereunder, are subject to the terms
and conditions of the Subordination Agreement. In the event of any conflict
between the terms of this Agreement and the terms of the Subordination
Agreement, the terms of the Subordination Agreement shall control.

                                      -23-
<PAGE>   24

                                   ARTICLE IX

                                    SECURITY

        9.1 Security Interest. As security for the due and punctual payment and
performance of the Secured Obligations (as hereinafter defined), each Obligor
hereby grants to the Agent for the ratable benefit of the Purchasers a
continuing security interest in and lien on all tangible and intangible personal
property and Manufacturing Fixtures (as defined below) of such Obligor, whether
now owned or existing or hereafter acquired or arising, together with any and
all additions thereto and replacements therefor and proceeds and products
thereof (collectively referred to for purposes of this Agreement as
"Collateral"), including without limitation the property described below:

        (a) all tangible personal property, including without limitation all
present and future goods, inventory (including, without limitation, all
merchandise, raw materials, work in process, finished goods and supplies),
machinery, equipment, motor vehicles, rolling stock, tools, furniture,
Manufacturing Fixtures, office supplies, computers, computer software and
associated equipment, whether now owned or hereafter acquired, including,
without limitation, all tangible personal property used in the operation of the
business of such Obligor;

        (b) all rights under all present and future authorizations, permits,
licenses and franchises issued, granted or licensed to such Obligor for the
operation of its business;

        (c) all patents issued or assigned to and all patent applications made
by such Obligor and all exclusive and nonexclusive licenses to such Obligor from
third parties or rights to use patents owned by such third parties, including,
without limitation, the patents, patent applications and licenses listed on
Schedule III hereto, along with any and all (a) inventions and improvements
described and claimed therein, (b) reissues, divisions, continuations,
extensions and continuations-in-part thereof, (c) income, royalties, damages,
claims and payments now and hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for past or future
infringements thereof, (d) rights to sue for past, present and future
infringements thereof, and (e) any other rights corresponding thereto throughout
the world (collectively, "Patents");

        (d) all trademarks (including service marks), federal and state
trademark registrations and applications made by such Obligor (other than
Federal Intent to Use Applications prior to the filing of a verified Statement
of Use under 15 U.S.C. ss.1051(d)), common law trademarks and trade names owned
by or assigned to such Obligor, all registrations and applications for the
foregoing and all exclusive and nonexclusive licenses from third parties of the
right to use trademarks of such third parties, including, without limitation,
the registrations, applications, unregistered trademarks, service marks and
licenses listed on Schedule IV hereto, along with any and all (1) renewals
thereof, (2) income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto, including, without limitation, damages,
claims and payments for past or future infringements thereof, (3) rights to sue
for past, present and future infringements thereof, and (4) foreign trademarks,
trademark registrations, and trade name applications for any thereof and any
other rights corresponding thereto throughout the world (collectively,
"Trademarks");

                                      -24-
<PAGE>   25

        (e) all copyrights, whether statutory or common law, owned by or
assigned to such Obligor, and all exclusive and nonexclusive licenses (other
than nonexclusive licenses to use off-the-shelf software products) to such
Obligor from third parties or rights to use copyrights owned by such third
parties, including, without limitation, the registrations, applications and
licenses listed on Schedule V hereto, along with any and all (1) renewals and
extensions thereof, (2) income, royalties, damages, claims and payments now and
hereafter due and/or payable with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (3) rights to sue for past, present and future infringements thereof,
and (4) foreign copyrights and any other rights corresponding thereto throughout
the world (collectively, "Copyrights");

        (f) the entire goodwill of such Obligor's business and other general
intangibles (including know-how, trade secrets, customer lists, proprietary
information, inventions, domain names, methods, procedures and formulae)
connected with the use of and symbolized by any Patents, Trademarks or
Copyrights of such Obligor;

        (g) any other intellectual property of such Obligor;

        (h) all rights under all present and future vendor or customer contracts
and all franchise, distribution, design, consulting, construction, engineering,
management and advertising and related agreements;

        (i) all rights under all present and future leases of real and personal
property; and

        (j) all other personal property, including, without limitation, all
present and future accounts, accounts receivable, cash, cash equivalents,
deposits, deposit accounts, loss carry back, tax refunds, insurance proceeds,
premiums, rebates and refunds, choses in action, investment property,
securities, contracts, contract rights, general intangibles (including without
limitation, all customer and advertiser mailing lists, intellectual property,
patents, copyrights, trademarks, trade secrets, trade names, domain names,
goodwill, customer lists, advertiser lists, catalogs and other printed
materials, publications, indexes, lists, data and other documents and papers
relating thereto, blueprints, designs, charts, and research and development,
whether on paper, recorded electronically or otherwise), all websites (including
without limitation, all content, HTML documents, audiovisual material, software,
data, hardware, access lines, connections, copyrights, trademarks, patents and
trade secrets relating to such websites) and domain names, any information
stored on any medium, including electronic medium, related to any of the
personal property of such Obligor, all financial books and records and other
books and records relating, in any manner, to the business of such Obligor, all
proposals and cost estimates and rights to performance, all instruments and
promissory notes, documents and chattel paper, and all debts, obligations and
liabilities in whatever form owing to such Obligor from any person, firm or
corporation or any other legal entity, whether now existing or hereafter
arising, now or hereafter received by or belonging or owing to such Obligor; and
all guaranties and security therefor, and all letter of credit and other
supporting obligations in respect of such debts, obligations and liabilities.

        Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and no Obligor shall not be deemed to have granted a
security interest in any of such Obligor's rights or interests in any lease,
license, contract, permit or agreement (including, without

                                      -25-
<PAGE>   26

limitation, any such agreement which shall grant a security interest in the
assets of any Obligor) to which any Obligor is a party or any of its rights or
interests thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such lease, license, contract, permit or agreement or
otherwise, result in a breach of the terms of, or constitute a default under, or
cause a termination of, such lease, license, contract, permit or agreement to
which such Obligor is a party (other than to the extent that the other party to
such lease, license, contract, permit or agreement has consented to such grant
or to the extent that any such term would be rendered ineffective pursuant to
the Uniform Commercial Code, as amended and in effect from time to time (the
"UCC"), or any other applicable law (including the U.S. Bankruptcy Code) or
principles of equity), provided, that (x) the foregoing grant of security
interest shall extend to, and the Collateral shall include, any and all proceeds
of any such lease, license, contract, permit or agreement to the extent that the
assignment or encumbering of such proceeds is not so restricted and is permitted
by applicable law and (y) immediately upon the ineffectiveness, lapse, waiver or
termination of any such provision or restriction, the Collateral shall include,
and the Obligors shall be deemed to have granted a security interest in, all
such rights and interests as if such provision or restriction had never been in
effect.

        As used herein, the term "Secured Obligations" shall mean (a) principal
of and premium, if any, and interest on the Notes, (b) any and all other
obligations of any of the Obligors to the Agent and the Purchasers or any of
them, whether now existing or hereafter arising, under the this Agreement and
the Notes, all as amended from time to time, and (c) any and all other
Guaranteed Obligations (as hereinafter defined) and Indebtedness of any of the
Obligors to the Agent and the Purchasers or any of them, whether direct or
indirect, absolute or contingent, due or to become due or now existing or
hereafter arising, including, without limitation, any and all other fees,
premiums, penalties or other Guaranteed Obligations or Indebtedness of the
Obligors to the Agent and the Purchasers or any of them, in each case in
connection with this Agreement and the Notes, all as amended from time to time.

        As used herein, "Manufacturing Fixtures" shall refer to any equipment
used in the manufacturing operations of the Obligors which is deemed to be a
fixture under applicable law.

        9.2 Revised UCC Article 9. The parties to this Agreement acknowledge and
agree to the following provisions of this Agreement in anticipation of the
possible application, in one or more jurisdictions to the transactions
contemplated hereby, of Revised Article 9. For purposes of this Agreement,
"Revised Article 9" shall mean the Revised Article 9 of the UCC in the form or
substantially in the form included in the 1999 official text of the UCC as
approved by the American Law Institute and the National Conference of
Commissioners on Uniform State Law.

        (a) In applying the law of any jurisdiction in which Revised Article 9
is in effect, the Collateral is all assets of each Obligor whether or not within
the scope of Revised Article 9. The Collateral shall include the following
categories of assets as defined in Revised Article 9: goods (including
inventory, equipment and any accessions thereto), instruments (including
promissory notes), documents, accounts (including health-care-insurance
receivables), chattel paper (whether tangible or electronic), deposit accounts,
letter-of-credit rights (whether or not the letter of credit is evidenced by a
writing), commercial tort claims, securities and all other investment property,
general intangibles (including payment intangibles and software), supporting
obligations and any and all proceeds of any thereof, wherever located, whether
now owned and hereafter acquired. If any Obligor shall at any time, whether or
not Revised Article 9

                                      -26-
<PAGE>   27

is in effect in any particular jurisdiction, acquire a commercial tort claim, as
defined in Revised Article 9, such Obligor shall immediately notify the Agent in
a writing signed by such Obligor of the brief details thereof and grant to the
Agent for the benefit of the Purchasers in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance reasonably satisfactory to the Agent.

        (b) The Agent may, at any time and from time to time, pursuant to the
provisions of this Section 9, file financing statements, continuation statements
and amendments thereto that describe the Collateral as all tangible and
intangible personal property and Manufacturing Fixtures of each Obligor or words
of similar effect and which contain any other information required by Revised
Article 9 (including Part 5 thereof) for the sufficiency or filing office
acceptance of any financing statement, continuation statement or amendment,
including whether each Obligor is an organization, the type of organization and
any organization identification number issued to such Obligor. Each Obligor
agrees to furnish any such information to the Agent promptly upon request. Any
such financing statements, continuation statements or amendments may be signed
by the Agent on behalf of each Obligor and may be filed at any time in any
jurisdiction whether or not Revised Article 9 is then in effect in that
jurisdiction.

        (c) Each Obligor shall, at any time and from time to time, whether or
not Revised Article 9 is in effect in any particular jurisdiction, take such
steps as the Agent may reasonably request for the Agent (i) to obtain an
acknowledgment, in form and substance reasonably satisfactory to the Agent, of
any bailee having possession of any of the Collateral that such bailee holds
such Collateral for the Agent for the benefit of the Purchasers, (ii) to obtain
"control" of any investment property, deposit accounts, letter-of-credit rights
or electronic chattel paper (as such terms are defined in Revised Article 9 with
corresponding provisions in revised Sections 9-104, 9-105, 9-106 and 9-107 (or
such other corresponding section) relating to what constitutes "control" for
such items of Collateral), with any agreements establishing control to be in
form and substance reasonably satisfactory to the Agent, and (iii) otherwise to
insure the continued perfection and priority of the Purchasers' security
interest in any of the Collateral and of the preservation of its rights therein,
whether in anticipation of or following the effectiveness of Revised Article 9
in any jurisdiction.

        (d) Nothing contained in this Section 9.2 shall be construed to narrow
the scope of the Purchasers' security interest in any of the Collateral or the
perfection or priority thereof or to impair or otherwise limit any of the
rights, powers, privileges or remedies of the Purchasers hereunder except (and
then only to the extent) mandated by Revised Article 9 to the extent then
applicable.

        9.3 Special Warrants and Covenants. Each Obligor hereby warrants and
covenants to the Agent and the Purchasers that:

        (a) Each Obligor has delivered to the Agent a Perfection Certificate in
substantially the form of Exhibit D hereto. All information set forth in such
Perfection Certificate is true and correct in all material respects and the
facts contained in such Perfection Certificate are accurate in all material
respects as of the date of this Agreement. Each Obligor agrees to supplement its
Perfection Certificate promptly after obtaining information which would require
a correction or addition to such Perfection Certificate.

                                      -27-
<PAGE>   28

        (b) No Obligor will change its jurisdiction of organization, principal
or any other place of business, or the location of any Collateral from the
locations set forth in the Perfection Certificate delivered by such Obligor, or
make any change in its name or conduct its business operations under any
fictitious business name or trade name, without, in any such case, providing at
least thirty (30) days' prior written notice to the Agent and executing and
delivering, or causing to be executed and delivered, such financing statements
and other documents as the Agent shall require in connection therewith; provided
that any Obligor's inventory may be in the possession of manufacturers or
processors in any jurisdiction in which all necessary UCC financing statements
have been filed by the Agent, provided that no UCC financing statement shall be
required to be filed in any jurisdiction outside the United States to cover
inventory transferred to such jurisdiction in the ordinary course of the
Obligor's business, as currently conducted.

        (c) Except for the liens created in favor of the Agent under the Loan
Documents and except for Permitted Liens, each Obligor is the owner of its
Collateral free from any lien and such Obligor will defend its Collateral
against all claims and demands of all persons at any time claiming the same or
any interest therein, except as expressly permitted hereunder.

        (d) Except for Collateral that is obsolete or no longer used in such
Obligor's businesses, each Obligor will keep the Collateral in good order and
repair (normal wear excepted) and adequately insured at all times. Each Obligor
will pay promptly when due all taxes and assessments on the Collateral or for
its use or operation. Following the occurrence and during the continuance of an
Event of Default, the Agent may at its option discharge any taxes or liens to
which any Collateral is at any time subject (other than Permitted Liens), and
may, upon the failure of any Obligor to do so in accordance with this Agreement,
purchase insurance on any Collateral and pay for the repair, maintenance or
preservation thereof, and each Obligor agrees to reimburse the Agent on demand
for any payments or expenses incurred by the Agent or the Purchasers pursuant to
the foregoing authorization.

        (e) Each Obligor will promptly execute and deliver to the Agent such
financing statements, certificates and other documents or instruments as may be
necessary to enable the Agent to perfect or from time to time renew the liens
granted in favor of the Agent hereunder, including, without limitation, such
financing statements, certificates and other documents as may be necessary to
perfect a security interest in any additional Collateral hereafter acquired by
such Obligor or in any replacements or proceeds thereof. Each Obligor authorizes
and appoints the Agent, in case of need, to execute such financing statements,
certificates and other documents pertaining to the Agent's liens on the
Collateral in its stead if such Obligor fails to so execute such documents, with
full power of substitution, as such Obligor's attorney in fact. The Agent may
from time to time request and each Obligor shall deliver copies of all customer
lists and vendor lists. Each Obligor further agrees that a carbon, photographic
or other reproduction of a security agreement or financing statement is
sufficient as a financing statement under this Agreement and the other Loan
Documents.

        (f) Each Obligor agrees that it will join with the Agent in executing
and, at its own expense, will file and refile, or permit the Agent to file and
refile such financing statements, continuation statements and other documents
(including, without limitation, this Agreement and licenses to use software and
other property protected by copyright), in such offices (including, without
limitation, the United States Patent and Trademark Office, the United States
Copyright

                                      -28-
<PAGE>   29

Office, and appropriate state patent, trademark and copyright offices), as the
Agent may reasonably deem necessary or appropriate, wherever required or
permitted by law in order to perfect and preserve the rights and interests
granted to the Agent in Patents, Trademarks and Copyrights hereunder. Each
Obligor will give the Agent notice of each office at which records of such
Obligor pertaining to all intangible items of Collateral are kept. Except as may
be provided in such notice, the records concerning all intangible Collateral are
and will be kept at the address shown in the respective Perfection Certificate
for the applicable Obligor as the principal place of business of such Obligor.

        (g) While the Notes are outstanding, each Obligor shall, annually by the
end of the first calendar quarter following the previous calendar year, provide
written notice to the Agent of all applications for registration of Patents,
Trademarks or Copyrights, to the extent such applications exist, made during the
preceding calendar year. Each Obligor shall file and prosecute diligently all
applications for registration of Patents, Trademarks or Copyrights now or
hereafter pending that would be necessary to the businesses of such Obligor to
which any such applications pertain, and to do all acts, in any such instance,
necessary to preserve and maintain all rights in such registered Patents,
Trademarks or Copyrights unless such Patents, Trademarks or Copyrights are not
material to such Obligor's businesses, as reasonably determined by such Obligor
consistent with prudent and commercially reasonable business practices. Any and
all costs and expenses incurred in connection with any such actions shall be
borne by the Obligors. Except in accordance with prudent and commercially
reasonable business practices, no Obligor shall abandon any right to file a
Patent, Trademark or Copyright application or any pending Patent, Trademark or
Copyright application or any registered Patent, Trademark or Copyright, in each
case material to its business, without the consent of the Agent.

        9.4 Fixtures. It is the intention of the parties hereto that none of the
Collateral shall become fixtures and the Obligors will take all such reasonable
action or actions as may be necessary to prevent any of the Collateral from
becoming fixtures.

        9.5 Right of Agent to Dispose of Collateral. Upon the occurrence of any
Event of Default, such Event of Default not having previously been waived,
remedied or cured, but subject to the terms of the Subordination Agreement and
the provisions of the UCC or other applicable law, in addition to all other
rights under applicable law and under the Loan Documents, the Agent shall have
the right to take possession of the Collateral and, in addition thereto, the
right to enter upon any premises on which the Collateral or any part thereof may
be situated and remove the same therefrom. The Agent may require the Obligors to
make the Collateral (to the extent the same is moveable) available to the Agent
at a place to be designated by the Agent which is reasonably convenient to both
parties or transfer any information related to the Collateral to the Agent by
electronic medium. Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, the
Agent will give the Obligors at least seven (7) days' prior written notice of
the time and place of any public sale thereof or of the time after which any
private sale or any other intended disposition thereof is to be made. Any such
notice shall be deemed to meet any requirement hereunder or under any applicable
law (including the UCC) that reasonable notification be given of the time and
place of such sale or other disposition.

        9.6 Right of Agent to Use and Operate Collateral. Upon the occurrence
and during the continuance of any Event of Default, subject to the provisions of
the Subordination Agreement

                                      -29-
<PAGE>   30

and the UCC or other applicable law, the Agent shall have the right and power
(a) to take possession of all or any part of the Collateral, and to exclude the
Obligors and all persons claiming under the Obligors wholly or partly therefrom,
and thereafter to hold, store, and/or use, operate, manage and control the same,
and (b) to grant a license to use, or cause to be granted a license to use, any
or all of the Patents, Trademarks and Copyrights (in the case of Trademarks,
along with the goodwill associated therewith), but subject to the terms of any
licenses. Upon any such taking of possession, the Agent may, from time to time,
at the expense of the Obligors, make all such repairs, replacements,
alterations, additions and improvements to and of the Collateral as the Agent
may deem proper. In any such case the Agent shall have the right to manage and
control the Collateral and to carry on the business and to exercise all rights
and powers of the Obligors in respect thereto as the Agent shall deem best,
including the right to enter into any and all such agreements with respect to
the operation of the Collateral or any part thereof as the Agent may see fit;
and the Agent shall be entitled to collect and receive all rents, issues,
profits, fees, revenues and other income of the same and every part thereof.
Such rents, issues, profits, fees, revenues and other income shall be applied to
pay the expenses of holding and operating the Collateral and of conducting the
business thereof, and of all maintenance, repairs, replacements, alterations,
additions and improvements, and to make all payments which the Agent may be
required or may elect to make, if any, for taxes, assessments, insurance and
other charges upon the Collateral or any part thereof, and all other payments
which the Agent may be required or authorized to make under any provision of
this Agreement (including legal costs and reasonable attorneys' fees). The Agent
shall apply the remainder of such rents, issues, profits, fees, revenues and
other income as provided in Section 9.7 hereof.

        9.7 Proceeds of Collateral. After deducting all reasonable costs and
expenses of collection, storage, custody, sale or other disposition and delivery
(including reasonable legal costs and attorneys' fees) and all other charges
against the Collateral, the Agent shall remit the residue of the proceeds of any
such sale or disposition of the Collateral for the benefit of the Agent and the
Purchasers to the Purchasers to be applied to the Secured Obligations in
accordance with the terms hereof and any surplus shall be returned to the
Obligors or to any person or party lawfully entitled thereto. In the event the
proceeds of any sale, lease or other disposition of the Collateral are
insufficient to pay all of the Secured Obligations in full, the Obligors will be
liable for the deficiency, together with interest thereon at the rate set forth
in Section 2.2 hereof, and the cost and expenses of collection of such
deficiency, including (to the extent permitted by law), without limitation,
reasonable attorneys' fees, expenses and disbursements.

        9.8 Waivers. Each Obligor hereby waives presentment, demand, notice,
protest and, except as is otherwise provided herein or in the other Loan
Documents, all other demands and notices in connection with this Agreement or
the enforcement of the Agent's rights hereunder or in connection with any of the
Notes or any Collateral; consents to and waives notice of the granting of
renewals, extensions of time for payment or other indulgences to any Obligor or
to any account debtor in respect of any account receivable or to any other third
party, or substitution, release or surrender of any Collateral, the addition or
release of persons primarily or secondarily liable on any Note or on any account
receivable or other Collateral, the acceptance of partial payments on any Note
or on any account receivable or other Collateral and/or the settlement or
compromise thereof. No delay or omission on the part of the Agent or any
Purchaser in exercising any right hereunder shall operate as a waiver of such
right or of any other right hereunder. Any waiver of any such right on any one
occasion shall not be construed as a

                                      -30-
<PAGE>   31

bar to or waiver of any such right on any future occasion. Each Obligor's
waivers under this section have been made voluntarily, intelligently and
knowingly and after such Obligor has been apprised and counseled by their
attorneys as to the nature thereof and its possible alternative rights.

        9.9 Termination of Security Interest; Reinstatement. When all the
Secured Obligations have been paid in full and have been terminated, the
security interest in the Collateral created by this Agreement shall terminate.
In such event, the Agent agrees to execute appropriate releases of liens on the
Collateral upon the request of the Obligors and at the Obligors' expense.
Notwithstanding the forgoing, the security interest in the Collateral created by
this Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any amount received by the Agent or any Purchaser in respect
of the Secured Obligations is rescinded or must otherwise be restored or
returned by the Agent or such Purchaser upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Obligor or upon the
appointment of any intervener or conservator of, or trustee or similar official
for any Obligor or any substantial part of any of its properties, or otherwise,
all as though such payments had not been made.

                                   ARTICLE X

                                   THE AGENT

        10.1 Appointment and Authorization. Each of the Purchasers hereby
irrevocably appoints the Agent as its agent and authorizes the Agent to take
such actions on its behalf and to exercise such powers as are delegated to the
Agent by the terms of this Agreement and the other Loan Documents, together with
such actions and powers as are reasonably incidental thereto.

        10.2 Agent's Right as a Purchaser. The Purchaser serving as the Agent
hereunder shall have the same rights and powers in its capacity as a Purchaser
hereunder as any other Purchaser and may exercise the same as though it were not
the Agent, and the Agent and its affiliates may generally engage in any kind of
business with the Company or any subsidiary or other affiliate thereof as if it
were not the Agent hereunder.

        10.3 Agent's Duties. The Agent shall not have any duties or obligations
except those expressly set forth in this Agreement and the other Loan Documents.
Without limiting the generality of the foregoing, (a) the Agent shall not be
subject to any fiduciary or other implied duties, regardless of whether an Event
of Default has occurred and is continuing, (b) the Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by this Agreement and the
other Loan Documents, and (c) except as expressly set forth herein and in the
other Loan Documents, the Agent shall not have any duty to disclose, nor shall
be liable for the failure to disclose, any information relating to the Company
or any of its subsidiaries that is communicated to or obtained by the Agent or
any of its affiliates in any capacity. The Agent shall be not liable for any
action taken or not taken by it with the consent or at the request of the
Purchasers, or in the absence of its own gross negligence or willful misconduct.
The Agent shall not be deemed to have knowledge of any Event of Default unless
and until written notice thereof is given to the Agent by the Company or a
Purchaser, and the Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in,
or in

                                      -31-
<PAGE>   32

connection with, this Agreement or the other Loan Documents, (ii) the contents
of any certificate, report or other document delivered hereunder or under any of
the other Loan Documents or in connection herewith of therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, the other Loan
Documents or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article 5 or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Agent. The Agent shall not, except to the extent the Agent expressly instructed
by the Purchasers with respect to the Collateral hereunder, be required to
initiate or conduct any litigation or collection proceedings hereunder or under
any other Loan Document; provided, however, that the Agent shall not be required
to take any action which exposes the Agent to personal liability or which is
contrary to the Loan Documents or applicable law.

        10.4 Reliance by Agent. The Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper person. The
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper person, and shall not incur any
liability for relying thereon. The Agent may consult with legal counsel (who may
be counsel for the Company), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Purchasers as it deems appropriate or it shall
first be indemnified to its satisfaction by the Purchasers against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action (it being understood that this provision
shall not release the Agent from performing any action with respect to the
Company expressly required to be performed by it pursuant to the terms hereof)
under this Agreement. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and the other Loan Documents
in accordance with a request of the Purchasers, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the
Purchasers and all future holders of the Notes.

        10.5 Purchasers' Independent Decisions. Each Purchaser acknowledges that
it has, independently and without reliance upon the Agent or any other Purchaser
and based on such documents and information as it has deemed appropriate, made
its own decision to enter into this Agreement. Each Purchaser also acknowledges
that it will, independently and without reliance upon the Agent or any other
Purchaser and based on such documents and information as it shall from time to
time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement and the other Loan Documents,
any related agreement or any document furnished hereunder or thereunder. Except
as explicitly provided herein, the Agent has no duty or responsibility, either
initially or on a continuing basis, to provide any Purchaser with any
information with respect to such operations, business, property, condition or
creditworthiness, whether such information comes into its possession on or
before the first Event of Default or at any time thereafter. The Agent shall not
be deemed a trustee or other fiduciary on behalf of any party.

                                      -32-
<PAGE>   33

        10.6 Indemnification. Each Purchaser agrees to indemnify and hold
harmless the Agent (to the extent not reimbursed under Section 12.9, but without
limiting the obligations of the Obligors under Section 12.9) ratably in
accordance with the aggregate principal amount of the respective Notes held by
the Purchasers for any and all liabilities (including pursuant to any
environmental law), obligations, losses, damages, penalties, actions, judgments,
deficiencies, suits, costs, expenses (including reasonable attorney's fees) or
disbursements of any kind and nature whatsoever that may be imposed on, incurred
by or asserted against the Agent (including by any Purchaser) arising out of or
by reason of any investigation in or in any way relating to or arising out of
any Loan Document or any other documents contemplated by or referred to therein
for any action taken or omitted to be taken by the Agent under or in respect of
any of the Loan Documents or other such documents or the transactions
contemplated thereby (including the costs and expenses that the Obligors are
obligated to pay under Section 12.9, but excluding, unless an Event of Default
has occurred and is continuing, normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or of any such other documents; provided,
however, that no Purchaser shall be liable for any of the foregoing to the
extent they are determined by a court of competent jurisdiction in a final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of the party to be indemnified. The agreements set forth in this
Section 10.6 shall survive the payment of all Notes and other obligations
hereunder and shall be in addition to and not in lieu of any other
indemnification agreements contained in any other Loan Document.

                                   ARTICLE XI

                             AMENDMENTS AND WAIVERS

        The Company and the holders of the Notes may amend, supplement or waive
any provision of this Agreement and the Notes with the written consent of the
holders of Notes of at least seventy-five (75%) percent in aggregate principal
amount of the Notes then outstanding. Notwithstanding the foregoing, without the
consent of each holder of the Notes affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder of Notes):

        (a) reduce the aggregate principal amount of the Notes held by any
holder;

        (b) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes;

        (c) reduce the rate of or change the time for payment of interest on any
Note or reduce the amount or change the payment terms of the Commitment Fee;

        (d) waive an Event of Default in the payment of principal of or premium,
if any, or interest on the Notes (except a rescission of acceleration of the
Notes by the holders of at least seventy-five percent (75%) in aggregate
principal amount of the then outstanding Notes and a waiver of the payment
default that resulted from such acceleration);

        (e) make any Note payable in money other than that stated herein or in
the Notes;

                                      -33-
<PAGE>   34

        (f) make any change in the provisions of this Agreement relating to
waivers of past Events of Default or the rights of holders of Notes to receive
payments of principal of or interest on the Notes;

        (g) waive a payment of a premium or mandatory redemption with respect to
any Note; or

        (h) make any change in the foregoing amendment and waiver provisions.

                                  ARTICLE XII

                                   GUARANTEE

        12.1 The Guarantee. Subject to the terms of the Subordination Agreement
referred to in Section 2.10, each Guarantor hereby jointly and severally
guarantees to each Purchaser and the Agent and their respective successors and
assigns the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the principal of and interest on the Notes and all
other amounts from time to time owing to the Purchasers or the Agent by the
Company hereunder or under any other Loan Document, in each case strictly in
accordance with the terms thereof (such obligations being herein collectively
called the "Guaranteed Obligations"). Each Guarantor hereby further agrees that
if the Company shall fail to pay in full when due (whether at stated maturity,
by acceleration or otherwise) any of the Guaranteed Obligations, each Guarantor
will promptly pay the same, without any demand or notice whatsoever, and that in
the case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.

        12.2 Obligations Unconditional. Subject to the terms of the
Subordination Agreement referred to in Section 2.10, the obligations of each
Guarantor under Section 12.1 are absolute and unconditional irrespective of the
value, genuineness, validity, regularity or enforceability of this Agreement,
the other Loan Documents or any other agreement or instrument referred to herein
or therein, or any substitution, release or exchange of any other guarantee of
or security for any of the Guaranteed Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 12.2 that the
obligations of the Guarantors hereunder shall be absolute and unconditional
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Guarantors hereunder which shall
remain absolute and unconditional as described above:

        (a) at any time or from time to time, without notice to such Guarantors,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;

        (b) any of the acts mentioned in any of the provisions hereof or of the
other Loan Documents or any other agreement or instrument referred to herein or
therein shall be done or omitted;

                                      -34-
<PAGE>   35

        (c) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right hereunder or under the
other Loan Documents or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in whole or
in part or otherwise dealt with; or

        (d) any lien or security interest granted to, or in favor of, the Agent
or any Purchaser or Purchasers as security for any of the Guaranteed Obligations
shall fail to be perfected.

        The Guarantors hereby expressly waive diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that the Agent
or any Purchaser exhaust any right, power or remedy or proceed against the
Company hereunder or under the other Loan Documents or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.

        12.3 Reinstatement. The obligations of each Guarantor under this Article
12 shall be automatically reinstated if and to the extent that for any reason
any payment by or on behalf of the Company in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, and each of the Guarantors agrees that it will
indemnify the Agent and each Purchaser on demand for all reasonable costs and
expenses (including fees and expenses of counsel) incurred by the Agent or any
Purchaser in connection with such rescission or restoration, including any such
costs and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.

        12.4 Subrogation. Until such time as the Guaranteed Obligations shall
have been indefensibly paid in full, each Guarantor hereby waives all rights of
subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Federal
Bankruptcy Code of 1978, as amended) or otherwise by reason of any payment by it
pursuant to the provisions of this Article 12 and further agrees with the
Company for the benefit of each of its creditors (including, without limitation,
each Purchaser and the Agent) that any such payment by it shall constitute a
contribution of capital by such Guarantor to the Company.

        12.5 Remedies. Each Guarantor agrees that, as between such Guarantor and
the Purchasers, the obligations of the Company hereunder may be declared to be
forthwith due and payable as provided in Section 8, Section 2.5 or Section 2.7,
as applicable (and shall be deemed to have become automatically due and payable
in the circumstances provided in Section 8.1, Section 2.5 or Section 2.7, as
applicable) for purposes of Section 12.1 notwithstanding any stay, injunction or
other prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Company and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by the
Company) shall forthwith become due and payable by such Guarantor for purposes
of Section 12.1.

                                      -35-
<PAGE>   36

        12.6 Instrument for the Payment of Money. Each Guarantor hereby
acknowledges that the guarantee in this Article 12 constitutes an instrument for
the payment of money, and consents and agrees that any Purchaser or the Agent,
at its sole option, in the event of a dispute by the Guarantors in the payment
of any moneys due hereunder, shall have the right to summary judgment or such
other expedited procedure as may be available for a suit on a note or other
instrument for the payment of money.

        12.7 Continuing Guarantee. The guarantee in this Article 12 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.

        12.8 Rights of Contribution. The Guarantors hereby agree, as between
themselves, that if any Guarantor shall become an Excess Funding Guarantor (as
defined below) by reason of the payment by such Guarantor of any Guaranteed
Obligations, each other Guarantor shall, on demand of such Excess Funding
Guarantor (but subject to the next sentence), pay to such Excess Funding
Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below
and determined, for this purpose, without reference to the properties, debts and
liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined
below) in respect of such Guaranteed Obligations. The payment obligation of a
Guarantor to any Excess Funding Guarantor under this Section 12.8 shall be
subordinate and subject in right of payment to the prior payment in full of the
obligations of such Guarantor under the other provisions of this Article 12 and
such Excess Funding Guarantor shall not exercise any right or remedy with
respect to such excess until payment and satisfaction in full of all of such
obligations.

        For purposes of this Section 12.8, (i) "Excess Funding Guarantor" means,
in respect of any Guaranteed Obligations, a Guarantor that has paid an amount in
excess of its Pro Rata Share of such Guaranteed Obligations, (ii) "Excess
Payment" means, in respect of any Guaranteed Obligations, the amount paid by an
Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed
Obligations and (iii) "Pro Rata Share" means, for any Guarantor, the ratio
(expressed as a percentage) of (x) the amount by which the aggregate present
fair saleable value of all properties of such Guarantor (excluding any shares of
stock of, or ownership interest in, any other Guarantor) exceeds the amount of
all the debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder and any obligations of any other
Guarantor that have been Guaranteed by such Guarantor) to (y) the amount by
which the aggregate fair saleable value of all properties of all of the Obligors
exceeds the amount of all the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of the Company and the Guarantors hereunder and under the other Loan
Documents) of all of the Obligors, determined as of the closing date.

        12.9 General Limitation on Guarantee Obligations. In any action or
proceeding involving any state or non-U.S. corporate law, or any state or
Federal or non-U.S. bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if the obligations of any Guarantor
under Section 12.1 would otherwise, taking into account the provisions of
Section 12.8, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under Section 12.1, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by such Guarantor, any Purchaser, the Agent or other Person, be
automatically limited and reduced to the highest amount that is valid and

                                      -36-
<PAGE>   37

enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.

                                  ARTICLE XIII

                                  MISCELLANEOUS

        13.1 Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered on a business day after
during normal business hours where such notice is to be received); or (b) on the
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:

        If to any Obligor:   Sheldahl, Inc.
                             1150 Sheldahl Road
                             Northfield, MN 55057-9444
                             Attn:  Donald R. Friedman
                             Fax:   (507) 663-8326 or
                                    (507) 663-8435

        With copies to:      Lindquist & Vennum P.L.L.P.
                             4200 IDS Center
                             80 South Eighth Street
                             Minneapolis MN 55402
                             Attn:  Charles P. Moorse, Esq.
                             Fax:   (612) 371-3207

        If to a Purchaser:   To the address set forth on Schedule II attached
                             hereto.

or such other address as may be designated in writing hereafter, in the same
manner, by such person.

        13.2 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

        13.3 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Neither any Obligor nor any Purchaser may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding anything to the contrary contained herein, each Purchaser may
assign its rights hereunder in connection with any sale or transfer of such
Purchaser's Securities to any "Affiliate" or "Associate" (as such terms are
defined in Rule 12b-2 under the Exchange Act) of such Purchaser as long as the
transferee Affiliate or Associate agrees in writing to be bound by the
applicable provisions of this Agreement, in which case the term

                                      -37-
<PAGE>   38

"Purchaser" shall be deemed to refer to such transferee as though such
transferee were an original signatory hereto.

        13.4 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

        13.5 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of The Commonwealth of
Massachusetts without regard to the principles of conflicts of law thereof.

        13.6 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become binding with respect to each Purchaser on the
date the acceptance form hereto is executed by such Purchaser and with respect
to each Obligor on the date executed by such Obligor, it being understood that
both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.

        13.7 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.

        13.8 Survival of Representations and Warranties. The representations and
warranties made in this Agreement, or in any instrument delivered pursuant to
this Agreement shall survive indefinitely. All covenants and agreements shall
survive in accordance with their respective terms.

        13.9 Indemnity; Expenses.

        (a) The Obligors jointly and severally agree to pay, or reimburse the
Agent or the Purchasers, as applicable, for paying, (i) all reasonable
out-of-pocket expenses incurred by the Agent and the Purchasers and their
respective affiliates, including the reasonable fees, charges and disbursements
of its legal counsel, in connection with the preparation of this Agreement and
the other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all out-of-pocket expenses
incurred by the Agent, or any Purchaser, including the fees, charges and
disbursements of any counsel for the Agent or any Purchaser, in connection with
the enforcement or protection of its rights in connection with this Agreement
and the other Loan Documents, including its rights under this Section 13.9, or
in connection with the Notes, including in connection with any workout,
restructuring or negotiations in respect thereof, and (iii) all taxes levied by
any governmental authority in respect of this Agreement or any of the other Loan
Documents or any other document referred to herein or therein and all costs,
expenses, taxes, assessments and other charges incurred in connection with any
filing,

                                      -38-
<PAGE>   39

registration, recording or perfection of any security interest contemplated by
any Loan Document or any other document referred to therein.

        (b) The Obligors jointly and severally agree to indemnify the Agent and
each Purchaser and each of their respective affiliates (each such Person being
called an "Indemnitee") against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including the
fees, charges and disbursements of any counsel for any Indemnitee and settlement
costs, incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement, the other Loan Documents or any agreement or instrument contemplated
hereby, the performance by the parties hereto and thereto of their respective
obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or any other transactions contemplated hereby or thereby,
(ii) any Note or the use of the proceeds therefrom, (iii) any actual or alleged
presence or release of hazardous materials on or from any property owned, leased
or operated by any Obligor or any of its subsidiaries, or any environmental
liability related in any way to any Obligor or any of its Subsidiaries, or (iv)
any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee. In connection with any such claim, litigation, investigation or
proceeding involving claims brought by any party other than the Obligors, the
Agent and each Purchaser shall give any Obligor subject to such claim the
opportunity to participate in the defense against such claim and shall not
settle any such claim, litigation, investigation or proceeding without the
written consent of such Obligor.

        (c) To the extent that the Obligors fail to pay any amount required to
be paid by them to the Agent under paragraph (a) or (b) of this Section 13.9,
each Purchaser severally agrees to pay to the Agent such unpaid amount in
accordance with such Purchaser's respective commitment as set forth on Schedule
II hereto; provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Agent in its capacity as such.

        (d) To the extent permitted by applicable law, each Obligor shall not
assert, and each Obligor hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, the other Loan Documents or any agreement or
instrument contemplated hereby or thereby, the transactions contemplated hereby,
any Note or the use of the proceeds thereof.

        (e) All amounts due under this Section 13.9 shall be payable promptly
after written demand therefor, provided that all fees and expenses (including
reasonable attorneys' fees) referred to in Section 13.9(a)(i) incurred in
connection with the negotiation and preparation of this Agreement and the other
Loan Documents shall be paid on the Closing Date.

                                      -39-
<PAGE>   40

        IN WITNESS WHEREOF, each Obligor and the Agent have caused this
Agreement to be duly executed by its authorized representative and each
Purchaser has caused this Agreement to be executed by signing in counterpart the
acceptance form attached to this Agreement.

                                       OBLIGORS:

                                       COMPANY:

                                       SHELDAHL, INC.

                                       By: /s/ Donald R. Friedman
                                          --------------------------------------
                                           Name:  Donald R. Friedman
                                           Title: President and Chief Executive
                                                  Officer

                                       GUARANTORS:

                                       INTERNATIONAL FLEX HOLDINGS, INC.

                                       By: /s/ John D. Lutsi
                                          --------------------------------------
                                           Name:  John D. Lutsi
                                           Title: President

                                      INTERNATIONAL FLEX TECHNOLOGIES, INC.

                                       By: /s/ Donald R. Friedman
                                          --------------------------------------
                                           Name:  Donald R. Friedman
                                           Title: Chief Executive Officer

                                      AGENT:

                                      AMPERSAND IV LIMITED PARTNERSHIP,
                                      as Agent for the Purchasers

                                      By: AMP-IV MANAGEMENT COMPANY
                                          LIMITED LIABILITY COMPANY,
                                          Its general partner

                                      By: /s/ Stuart A. Auerbach
                                         ---------------------------------------
                                          Name:   Stuart A. Auerbach
                                          Title:  Managing Member

                                      -40-
<PAGE>   41

                                   ACCEPTANCE

        The undersigned hereby accepts the terms and conditions set forth in the
Subordinated Secured Notes Purchase Agreement, dated May 23, 2001, among
Sheldahl, Inc., a Minnesota corporation (the "Company"), the wholly-owned
subsidiaries of the Company listed on Schedule I attached thereto, as guarantors
(the "Guarantors" and, together with the Company, the "Obligors"), certain
Purchasers listed in Schedule II attached thereto, and Ampersand IV Limited
Partnership, as agent for the Purchasers (the "Agent"), as the terms and
conditions applicable to the purchase of Note of the Company by the undersigned.
By execution of this Acceptance, the undersigned hereby makes each of the
representations contained in Section 3.2 of the Subordinated Secured Notes
Purchase Agreement.

                                       PURCHASER:

                                       MORGENTHALER VENTURE PARTNERS V, L.P.

                                       By: /s/ John D. Lutsi
                                          --------------------------------------
                                           Name:  John D. Lutsi
                                           Title: General Partner

<PAGE>   42

                                   ACCEPTANCE

        The undersigned hereby accepts the terms and conditions set forth in the
Subordinated Secured Notes Purchase Agreement, dated May 23, 2001, among
Sheldahl, Inc., a Minnesota corporation (the "Company"), the wholly-owned
subsidiaries of the Company listed on Schedule I attached thereto, as guarantors
(the "Guarantors" and, together with the Company, the "Obligors"), certain
Purchasers listed in Schedule II attached thereto, and Ampersand IV Limited
Partnership, as agent for the Purchasers (the "Agent"), as the terms and
conditions applicable to the purchase of Note of the Company by the undersigned.
By execution of this Acceptance, the undersigned hereby makes each of the
representations contained in Section 3.2 of the Subordinated Secured Notes
Purchase Agreement.

                                       PURCHASER:

                                       AMPERSAND IV LIMITED PARTNERSHIP

                                       By: AMP-IV MANAGEMENT COMPANY
                                           LIMITED LIABILITY COMPANY,
                                           Its general partner

                                       By: /s/ Stuart A. Auerbach
                                          --------------------------------------
                                           Name:  Stuart A. Auerbach
                                           Title: Managing Member

<PAGE>   43

                                   ACCEPTANCE

     The undersigned hereby accepts the terms and conditions set forth in the
Subordinated Secured Notes Purchase Agreement, dated May 23, 2001, among
Sheldahl, Inc., a Minnesota corporation (the "Company"), the wholly-owned
subsidiaries of the Company listed on Schedule I attached thereto, as guarantors
(the "Guarantors" and, together with the Company, the "Obligors"), certain
Purchasers listed in Schedule II attached thereto, and Ampersand IV Limited
Partnership, as agent for the Purchasers (the "Agent"), as the terms and
conditions applicable to the purchase of Note of the Company by the undersigned.
By execution of this Acceptance, the undersigned hereby makes each of the
representations contained in Section 3.2 of the Subordinated Secured Notes
Purchase Agreement.

                                        PURCHASER:

                                        MOLEX INCORPORATED

                                        By: /s/ Robert Mahoney
                                           -------------------------------------
                                            Name:  Robert Mahoney
                                            Title: Vice President,
                                                   Chief Financial Officer

<PAGE>   44

                                                                      SCHEDULE I

                                   GUARANTORS

<TABLE>
<CAPTION>
------------------------------------------------- -----------------------------------------------
               NAME OF GUARANTOR                           JURISDICTION OF ORGANIZATION
<S>                                               <C>
------------------------------------------------- -----------------------------------------------
International Flex Holdings, Inc.                                    Delaware
------------------------------------------------- -----------------------------------------------
International Flex Technologies, Inc.                                Delaware
------------------------------------------------- -----------------------------------------------
</TABLE>

<PAGE>   45

                                                                     SCHEDULE II

                             SCHEDULE OF PURCHASERS

<TABLE>
<CAPTION>
                               Morgenthaler            Ampersand IV              Molex Incorporated
                                 Venture                 Limited                 222 Wellington Court
                                 Partners V,             Partnership             Lisle, IL  60532
                                 L.P.                  55 William Street
                               Terminal Tower          Suite 240
                               50 Public Square        Wellesley, MA
                               Suite 2700              02481
                               Cleveland, OH
                               44113
<S>                            <C>                     <C>                       <C>
PRINCIPAL AMOUNT
OF NOTES PURCHASED
AT CLOSING                     $3,000,000              $1,000,000                 $1,000,000

CLOSING PURCHASE
PRICE                          $3,000,000              $1,000,000                 $1,000,000

STATE OF RESIDENCE             OH                      MA                         IL
</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}]]