Document:

exv4w20

 

EXHIBIT 4.20

EXECUTION COPY

ELKCORP

$50,000,000

6.28% Senior Notes

due November 15, 2014

NOTE PURCHASE AGREEMENT

Dated as of June 15, 2004

PPN: 287456 A@ 6

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	Section
	 	Page

	1. AUTHORIZATION OF NOTES
	 	 	1	 
	2. SALE AND PURCHASE OF NOTES
	 	 	1	 
	3. CLOSING
	 	 	2	 
	4. CONDITIONS TO CLOSING
	 	 	2	 
	4.1. Representations and Warranties
	 	 	2	 
	4.2. Performance; No Default
	 	 	2	 
	4.3. Compliance Certificates
	 	 	3	 
	4.4. Opinions of Counsel
	 	 	3	 
	4.5. Purchase Permitted By Applicable Law, etc.
	 	 	3	 
	4.6. Sale of Other Notes
	 	 	3	 
	4.7. Payment of Special Counsel Fees
	 	 	4	 
	4.8. Private Placement Number
	 	 	4	 
	4.9. Changes in Corporate Structure
	 	 	4	 
	4.10. Subsidiary Guaranty
	 	 	4	 
	4.11. Proceedings and Documents
	 	 	4	 
	5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 	 	4	 
	5.1. Organization; Power and Authority
	 	 	4	 
	5.2. Authorization, etc.
	 	 	5	 
	5.3. Disclosure
	 	 	5	 
	5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates
	 	 	6	 
	5.5. Financial Statements
	 	 	6	 
	5.6. Compliance with Laws, Other Instruments, etc.
	 	 	7	 
	5.7. Governmental Authorizations, etc.
	 	 	7	 
	5.8. Litigation; Observance of Agreements, Statutes and Orders
	 	 	7	 
	5.9. Taxes
	 	 	8	 
	5.10. Title to Property; Leases
	 	 	8	 
	5.11. Licenses, Permits, etc.
	 	 	8	 
	5.12. Compliance with ERISA
	 	 	9	 
	5.13. Private Offering by the Company
	 	 	10	 
	5.14. Use of Proceeds; Margin Regulations
	 	 	10	 
	5.15. Existing Debt; Future Liens
	 	 	10	 
	5.16. Foreign Assets Control Regulations, Anti-Terrorism Order, etc.
	 	 	11	 
	5.17. Status under Certain Statutes
	 	 	11	 
	5.18. Environmental Matters
	 	 	11	 
	5.19. Solvency of Subsidiary Guarantors
	 	 	12	 
	6. REPRESENTATIONS OF THE PURCHASERS
	 	 	12	 
	6.1. Purchase for Investment
	 	 	12	 

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	Section
	 	Page

	6.2. Source of Funds
	 	 	12	 
	7. INFORMATION AS TO COMPANY
	 	 	14	 
	7.1. Financial and Business Information
	 	 	14	 
	7.2. Officer’s Certificate
	 	 	16	 
	7.3. Inspection
	 	 	17	 
	8. PREPAYMENT OF THE NOTES
	 	 	18	 
	8.1. No Scheduled Prepayments
	 	 	18	 
	8.2. Optional Prepayments with Make-Whole Amount
	 	 	18	 
	8.3. Allocation of Partial Prepayments
	 	 	18	 
	8.4. Maturity; Surrender, etc.
	 	 	18	 
	8.5. Purchase of Notes
	 	 	19	 
	8.6. Make-Whole Amount
	 	 	19	 
	9. AFFIRMATIVE COVENANTS
	 	 	20	 
	9.1. Compliance with Law
	 	 	20	 
	9.2. Insurance
	 	 	20	 
	9.3. Maintenance of Properties
	 	 	21	 
	9.4. Payment of Taxes and Claims
	 	 	21	 
	9.5. Corporate Existence, etc.
	 	 	21	 
	10. NEGATIVE COVENANTS
	 	 	21	 
	10.1. Consolidated Net Debt
	 	 	22	 
	10.2. Interest Coverage
	 	 	22	 
	10.3. Adjusted Consolidated Net Worth
	 	 	22	 
	10.4. Debt of Restricted Subsidiaries
	 	 	22	 
	10.5. Liens
	 	 	23	 
	10.6. Sale of Assets
	 	 	24	 
	10.7. Mergers, Consolidations, etc.
	 	 	25	 
	10.8. Disposition of Stock of Restricted Subsidiaries
	 	 	26	 
	10.9. Designation of Restricted and Unrestricted Subsidiaries
	 	 	27	 
	10.10. Subsidiary Guaranty
	 	 	27	 
	10.11. Nature of Business
	 	 	27	 
	10.12. Transactions with Affiliates
	 	 	28	 
	11. EVENTS OF DEFAULT
	 	 	28	 
	12. REMEDIES ON DEFAULT, ETC.
	 	 	30	 
	12.1. Acceleration
	 	 	30	 
	12.2. Other Remedies
	 	 	31	 
	12.3. Rescission
	 	 	31	 
	12.4. No Waivers or Election of Remedies, Expenses, etc.
	 	 	31	 
	13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
	 	 	32	 
	13.1. Registration of Notes
	 	 	32	 
	13.2. Transfer and Exchange of Notes
	 	 	32	 

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	Section
	 	Page

	13.3. Replacement of Notes
	 	 	32	 
	14. PAYMENTS ON NOTES
	 	 	33	 
	14.1. Place of Payment
	 	 	33	 
	14.2. Home Office Payment
	 	 	33	 
	15. EXPENSES, ETC.
	 	 	33	 
	15.1. Transaction Expenses
	 	 	33	 
	15.2. Survival
	 	 	34	 
	16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
	 	 	34	 
	17. AMENDMENT AND WAIVER
	 	 	34	 
	17.1. Requirements
	 	 	34	 
	17.2. Solicitation of Holders of Notes
	 	 	35	 
	17.3. Binding Effect, etc.
	 	 	35	 
	17.4. Notes held by Company, etc.
	 	 	35	 
	18. NOTICES
	 	 	36	 
	19. REPRODUCTION OF DOCUMENTS
	 	 	36	 
	20. CONFIDENTIAL INFORMATION
	 	 	36	 
	21. SUBSTITUTION OF PURCHASER
	 	 	37	 
	22. RELEASE OF SUBSIDIARY GUARANTOR
	 	 	38	 
	23. MISCELLANEOUS
	 	 	38	 
	23.1. Successors and Assigns
	 	 	38	 
	23.2. Payments Due on Non-Business Days
	 	 	38	 
	23.3. Severability
	 	 	38	 
	23.4. Construction
	 	 	38	 
	23.5. Counterparts
	 	 	39	 
	23.6. Governing Law
	 	 	39	 

iii

 

	 	 	 	 	 
	SCHEDULE A

	 	—
	 	Information Relating to Purchasers
	SCHEDULE B

	 	—
	 	Defined Terms
	SCHEDULE B-1

	 	—
	 	Existing Priority Debt
	SCHEDULE B-2

	 	—
	 	Existing Investments
	 
	 	 	 	 
	SCHEDULE 4.9

	 	—
	 	Changes in Corporate Structure
	SCHEDULE 5.3

	 	—
	 	Disclosure Materials
	SCHEDULE 5.4

	 	—
	 	Subsidiaries; Affiliates
	SCHEDULE 5.5

	 	—
	 	Financial Statements
	SCHEDULE 5.8

	 	—
	 	Litigation
	SCHEDULE 5.11

	 	—
	 	Licenses, Permits, etc.
	SCHEDULE 5.15

	 	—
	 	Existing Debt
	SCHEDULE 5.18

	 	—
	 	Environmental Matters
	SCHEDULE 10.5

	 	—
	 	Liens
	 
	 	 	 	 
	EXHIBIT 1(a)

	 	—
	 	Form of Senior Note
	EXHIBIT 1(b)

	 	—
	 	Form of Subsidiary Guaranty
	EXHIBIT 4.4(a)

	 	—
	 	Form of Opinion of Counsel for the Company
	EXHIBIT 4.4(b)

	 	—
	 	Form of Opinion of Special Counsel for the Purchasers

iv

 

ELKCORP

14911 Quorum Drive, Suite 600

Dallas, Texas 75254-1491

(972) 851-0500

Fax: (972) 851-0550

$50,000,000 6.28% Senior Notes due November 15, 2014

Dated as of June 15, 2004

TO EACH OF THE PURCHASERS LISTED IN

THE ATTACHED SCHEDULE A:

Ladies and Gentlemen:

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

1. AUTHORIZATION OF NOTES.

     The Company has authorized the issue and sale of $50,000,000 aggregate
principal amount of its 6.28% Senior Notes due November 15, 2014 (the “Notes”,
such term to include any such Notes issued in substitution therefor pursuant to
Section 13 of this Agreement). The Notes shall be substantially in the form
set out in Exhibit 1(a) with such changes therefrom, if any, as may be approved
by you, the Other Purchasers and the Company. Certain capitalized terms used
in this Agreement are defined in Schedule B; references to a “Schedule” or an
“Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached
to this Agreement. Subject to Section 22, the Notes will be guaranteed by each
Restricted Subsidiary that as of the Closing is or in the future becomes a
signatory to the Bank Guaranty or a borrower under the Credit Agreement
(individually, a “Subsidiary Guarantor” and collectively, the “Subsidiary
Guarantors”) pursuant to a guaranty in substantially the form of Exhibit 1(b)
(the “Subsidiary Guaranty”). The Notes shall be unsecured and shall rank pari
passu with the Company’s Debt to Banks under the Credit Agreement and with all
other senior unsecured Debt of the Company.

2. SALE AND PURCHASE OF NOTES.

     Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and each of the other purchasers named in Schedule A (the
“Other Purchasers”), and you and the Other Purchasers will purchase from the
Company, at the Closing provided for

 

 

in Section 3, Notes in the principal
amount specified opposite your names in Schedule A at the
purchase price of 100% of the principal amount thereof. Your obligation
hereunder and the obligations of the Other Purchasers are several and not joint
obligations and you shall have no liability to any Person for the performance
or non-performance by any Other Purchaser hereunder.

3. CLOSING.

     The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Gardner Carton & Douglas LLP, Suite
3700, 191 North Wacker Drive, Chicago, Illinois 60606 at 9:00 a.m., Chicago
time, at a closing (the “Closing”) on November 15, 2004 or on such other
Business Day thereafter on or prior to November 30, 2004 as may be agreed upon
by the Company and you and the Other Purchasers. At the Closing the Company
will deliver to you the Notes to be purchased by you in the form of a single
Note (or such greater number of Notes in denominations of at least $100,000 as
you may request) dated the date of the Closing and registered in your name (or
in the name of your nominee), against delivery by you to the Company or its
order of immediately available funds in the amount of the purchase price
therefor by wire transfer of immediately available funds for the account of the
Company to account number 1252603284 at Bank of America, 910 Main Street,
Dallas, Texas 75202, ABA #111000012. If at the Closing the Company fails to
tender such Notes to you as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.

4. CONDITIONS TO CLOSING.

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

4.1. Representations and Warranties.

     The representations and warranties of the Company in this Agreement shall
be correct when made and at the time of the Closing, except for changes between
the date hereof and the date of Closing that (i) are contemplated herein or
occur in the ordinary course of business, or (ii) would have been permitted by
Sections 9 and 10 hereof had such Sections applied since such date and, in any
or all of such instances (y) are disclosed in the Officer’s Certificate
delivered pursuant to Section 4.3 and (z) have not, individually or in the
aggregate, resulted in and could not reasonably be expected to result in a
Material Adverse Effect.

4.2. Performance; No Default.

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

2

 

occurred and be
continuing. Neither the Company nor any Restricted Subsidiary shall have
entered into any transaction since the date of the Memorandum that would have
been prohibited by Sections 10.1 through 10.12 hereof had such Sections applied
since such date.

4.3. Compliance Certificates.

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

     (b) Secretary’s Certificate. Each of the Company and each
Subsidiary Guarantor shall have delivered to you a certificate certifying
as to the resolutions attached thereto and other corporate proceedings
relating to the authorization, execution and delivery of the Notes and
the Agreement or the Subsidiary Guaranty, as the case may be.

4.4. Opinions of Counsel.

     You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing (a) from Baker & McKenzie, counsel to the
Company, covering the matters set forth in Exhibit 4.4(a) and covering such
other matters incident to the transactions contemplated hereby as you or your
counsel may reasonably request (and the Company instructs its counsel to
deliver such opinion to you) and (b) from Gardner Carton & Douglas LLP, your
special counsel in connection with such transactions, substantially in the form
set forth in Exhibit 4.4(b) and covering such other matters incident to such
transactions as you may reasonably request.

4.5. Purchase Permitted By Applicable Law, etc.

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

4.6. Sale of Other Notes.

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

3

 

4.7. Payment of Special Counsel Fees.

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

4.8. Private Placement Number.

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

4.9. Changes in Corporate Structure.

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

4.10. Subsidiary Guaranty.

     Each Subsidiary Guarantor shall have executed and delivered the Subsidiary
Guaranty in favor of you and the Other Purchasers.

4.11. Proceedings and Documents.

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

5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and warrants to you that:

5.1. Organization; Power and Authority.

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

4

 

proposes to transact, to execute and deliver this Agreement and the Notes and
to perform the provisions hereof and thereof.

5.2. Authorization, etc.

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

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

5.3. Disclosure.

     The Company, through its agent, Banc of America Securities LLC, has
delivered to you and each Other Purchaser a copy of a Private Placement
Memorandum dated May 2004 relating to the transactions contemplated hereby and
the Company has delivered to you the SEC Reports (together with the
aforementioned Private Placement Memorandum, the “Memorandum”). The Memorandum
fairly describes, in all material respects, the general nature of the business
and principal properties of the Company and its Subsidiaries. Except as
disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents,
certificates or other writings delivered to you by or on behalf of the Company
in connection with the transactions contemplated hereby and the financial
statements listed in Schedule 5.5, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. Except as disclosed in the Memorandum or as expressly
described in Schedule 5.3, or in one of the documents, certificates or other
writings identified therein, or in the financial statements listed in Schedule
5.5, since June 30, 2003, there has been no change in the financial condition,
operations, business or properties of the Company or any Subsidiary except
changes that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect. There is no fact known to the Company that
could reasonably be expected to have a Material Adverse Effect that has not
been set forth herein or in the Memorandum or in the other documents,
certificates and other writings delivered to you by or on behalf of the Company
specifically for use in connection with the transactions contemplated hereby.

5

 

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

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

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

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

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

5.5. Financial Statements.

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

6

 

5.6. Compliance with Laws, Other Instruments, etc.

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

     The execution, delivery and performance by each Subsidiary Guarantor of
the Subsidiary Guaranty will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of such Subsidiary Guarantor under any indenture, mortgage, deed
of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which such Subsidiary
Guarantor is bound or by which such Subsidiary Guarantor or any of its
properties may be bound or affected, (ii) conflict with or result in a breach
of any of the terms, conditions or provisions of any order, judgment, decree,
or ruling of any court, arbitrator or Governmental Authority applicable to such
Subsidiary Guarantor or (iii) violate any provision of any statute or other
rule or regulation of any Governmental Authority, including the USA Patriot
Act, applicable to such Subsidiary Guarantor.

5.7. Governmental Authorizations, etc.

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

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

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

     (b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it
is bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority or is in violation of any applicable
law, ordinance, rule or regulation (including Environmental Laws and the
USA Patriot Act) of any Governmental Authority, which default or

7

 

     violation, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

5.9. Taxes.

     The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (i) the amount of
which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of Federal, state or other taxes for all fiscal periods are adequate.
The Federal income tax liabilities of the Company and its Subsidiaries have
been determined by the Internal Revenue Service and paid for all fiscal years
up to and including the fiscal year ended June 30, 1995.

5.10. Title to Property; Leases.

     The Company and its Subsidiaries have good and sufficient title to their
respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance
sheet referred to in Section 5.5 or purported to have been acquired by the
Company or any Subsidiary after said date (except as sold or otherwise disposed
of in the ordinary course of business or in transactions contemplated by the
Memorandum that would be permitted by Section 10 if such Section applied at the
time of any such sale or other disposition), in each case free and clear of
Liens prohibited by this Agreement. All leases that individually or in the
aggregate are Material are valid and subsisting and are in full force and
effect in all material respects.

5.11. Licenses, Permits, etc.

     Except as disclosed in Schedule 5.11,

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

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

8

 

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

5.12. Compliance with ERISA.

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

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

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

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

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

9

 

5.13. Private Offering by the Company.

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

5.14. Use of Proceeds; Margin Regulations.

     The Company will apply the proceeds of the sale of the Notes for general
corporate purposes and to fund growth opportunities. No part of the proceeds
from the sale of the Notes will be used, directly or indirectly, for the
purpose of buying or carrying any margin stock within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for
the purpose of buying or carrying or trading in any securities under such
circumstances as to involve the Company in a violation of Regulation X of said
Board (12 CFR 224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220). Margin stock does not constitute more
than 1% of the value of the consolidated assets of the Company and its
Subsidiaries and the Company does not have any present intention that margin
stock will constitute more than 1% of the value of such assets. As used in
this Section, the terms “margin stock” and “purpose of buying or carrying”
shall have the meanings assigned to them in said Regulation U.

5.15. Existing Debt; Future Liens.

     (a) Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Debt of the Company and its
Subsidiaries as of March 31, 2004, since which date there has been no
Material change in the amounts, interest rates, sinking funds,
installment payments or maturities of the Debt of the Company or its
Subsidiaries. Neither the Company nor any Subsidiary is in default and
no waiver of default is currently in effect, in the payment of any
principal or interest on any Debt of the Company or such Subsidiary and
no event or condition exists with respect to any Debt of the Company or
any Subsidiary that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such Debt to
become due and payable before its stated maturity or before its regularly
scheduled dates of payment.

     (b) Except as disclosed in Schedule 5.15, neither the Company nor
any Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien not
permitted by Section 10.5.

10

 

5.16. Foreign Assets Control Regulations, Anti-Terrorism Order, etc.

     Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate (a) the Trading with the Enemy Act, as amended,
(b) any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto or (c) to the knowledge of the
Company, the Anti-Terrorism Order. Without limiting the foregoing, neither the
Company nor any Subsidiary (i) is a blocked person described in Section 1 of
the Anti-Terrorism Order or (ii) engages in any dealings or transactions, or is
otherwise associated, with any such person.

5.17. Status under Certain Statutes.

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

5.18. Environmental Matters.

     Except as disclosed in Schedule 5.18, neither the Company nor any
Subsidiary has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted raising any claim against the Company or
any of its Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets, alleging any
damage to the environment or violation of any Environmental Laws, except, in
each case, such as could not reasonably be expected to result in a Material
Adverse Effect. Except as disclosed in Schedule 5.18,

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

     (b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them and has not disposed of any Hazardous Materials
in a manner contrary to any Environmental Laws in each case in any manner
that could reasonably be expected to result in a Material Adverse Effect;
and

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

11

 

5.19. Solvency of Subsidiary Guarantors.

     After giving effect to the transactions contemplated herein and after
giving due consideration to any rights of contribution (i) each Subsidiary
Guarantor has received fair consideration and reasonably equivalent value for
the incurrence of its obligations under the Subsidiary Guaranty, (ii) the fair
value of the assets of each Subsidiary Guarantor (both at fair valuation and at
present fair saleable value) exceeds its liabilities, (iii) each Subsidiary
Guarantor is able to and expects to be able to pay its debts as they mature,
and (iv) each Subsidiary Guarantor has capital sufficient to carry on its
business as conducted and as proposed to be conducted.

6. REPRESENTATIONS OF THE PURCHASERS.

6.1. Purchase for Investment.

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

6.2. Source of Funds.

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

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

12

 

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

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

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

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

     (f) the Source is a governmental plan; or

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

13

 

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

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

7. INFORMATION AS TO COMPANY.

7.1. Financial and Business Information.

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

     (a) Quarterly Statements — within 50 days (or such other shorter
period within which Quarterly Reports on Form 10-Q are required to be
timely filed with the Securities and Exchange Commission, including any
extension permitted by Rule 12b-25 of the Exchange Act) after the end of
each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year),
duplicate copies of,

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

          (ii) consolidated statements of income of the Company and its
Subsidiaries for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter, and

          (iii) consolidated statements of cash flows of the Company and
its Subsidiaries for such quarter or (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter,

setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified
above of copies of the Company’s Quarterly Report on Form 10-Q prepared
in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a);

     (b) Annual Statements — within 105 days (or such other shorter
period within which Annual Reports on Form 10-K are required to be timely
filed with the Securities and Exchange Commission, including any
extension permitted by Rule 12b-25 of the Exchange Act) after the end of
each fiscal year of the Company, duplicate copies of,

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

14

 

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

setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by an opinion of independent certified public
accountants of recognized national standing, which opinion shall state
that such financial statements present fairly, in all material respects,
the financial position of the companies being reported upon and their
results of operations and cash flows and have been prepared in conformity
with GAAP, and that the examination of such accountants in connection
with such financial statements has been made in accordance with generally
accepted auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances, provided that the delivery
within the time period specified above of the Company’s Annual Report on
Form 10-K for such fiscal year (together with the Company’s annual report
to shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) prepared in accordance with the requirements therefor and
filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this Section 7.1(b);

     (c) Unrestricted Subsidiaries — if, at the time of delivery of any
financial statements pursuant to Section 7.1(a) or (b), Unrestricted
Subsidiaries account for more than 10% of (i) the consolidated total
assets of the Company and its Subsidiaries reflected in the balance sheet
included in such financial statements or (ii) the consolidated revenues
of the Company and its Subsidiaries reflected in the consolidated
statement of income included in such financial statements, an unaudited
balance sheet for all Unrestricted Subsidiaries taken as whole as at the
end of the fiscal period included in such financial statements and the
related unaudited statements of income, stockholders’ equity and cash
flows for such Unrestricted Subsidiaries for such period, together with
consolidating statements reflecting all eliminations or adjustments
necessary to reconcile such group financial statements to the
consolidated financial statements of the Company and its Subsidiaries
shall be delivered together with the financial statements required
pursuant to Sections 7.1(a) and (b);

     (d) SEC and Other Reports — promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy
statement sent by the Company or any Restricted Subsidiary to public
securities holders generally, and (ii) each regular or periodic report,
each registration statement other than registration statements on Form
S-8 (without exhibits except as expressly requested by such holder), and
each prospectus and all amendments thereto filed by the Company or any
Restricted Subsidiary with the Securities and Exchange Commission and of
all press releases and other statements made available generally by the
Company or any Restricted Subsidiary to the public concerning
developments that are Material;

     (e) Notice of Default or Event of Default — promptly, and in any
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default
hereunder or that any Person has given notice or taken any action with
respect to a claimed default of the type referred to in Section 11(f), a
written notice

15

 

specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;

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

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

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

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

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

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

7.2. Officer’s Certificate.

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

16

 

     (a) Covenant Compliance — the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.12, inclusive,
during the quarterly or annual period covered by the statements then
being furnished (including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such
Sections, and the calculation of the amount, ratio or percentage then in
existence); and

     (b) Event of Default — a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his
or her supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the quarterly or
annual period covered by the statements then being furnished to the date
of the certificate and that such review shall not have disclosed the
existence during such period of any condition or event that constitutes a
Default or an Event of Default or, if any such condition or event existed
or exists (including any such event or condition resulting from the
failure of the Company or any Subsidiary to comply with any Environmental
Law), specifying the nature and period of existence thereof and what
action the Company shall have taken or proposes to take with respect
thereto.

7.3. Inspection.

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

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

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

Each holder agrees to treat any information obtained in connection with any
inspection pursuant to this Section 7 as Confidential Information subject to
Section 20 so as to avoid any disclosure obligation on the Company under
Regulation FD under the Exchange Act.

17

 

8. PREPAYMENT OF THE NOTES.

8.1. No Scheduled Prepayments.

     No regularly scheduled prepayments are due on the Notes prior to their
stated maturity.

8.2. Optional Prepayments with Make-Whole Amount.

     The Company may, at its option, upon notice as provided below, prepay at
any time all, or from time to time any part of, the Notes in an amount not less
than $1,000,000 in the aggregate in the case of a partial prepayment, at 100%
of the principal amount so prepaid, plus the Make-Whole Amount determined for
the prepayment date with respect to such principal amount. The Company will
give each holder of Notes written notice of each optional prepayment under this
Section 8.2 not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such date, the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.3), and the interest to be paid on the prepayment
date with respect to such principal amount being prepaid, and shall be
accompanied by a certificate of a Senior Financial Officer as to the estimated
Make-Whole Amount due in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment), setting forth the details
of such computation. Two Business Days prior to such prepayment, the Company
shall deliver to each holder of Notes a certificate of a Senior Financial
Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.

8.3. Allocation of Partial Prepayments.

     In the case of each partial prepayment of the Notes pursuant to this
Section 8, the principal amount of the Notes to be prepaid shall be allocated
among all of the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof not theretofore
called for prepayment.

8.4. Maturity; Surrender, etc.

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

18

 

8.5. Purchase of Notes.

     The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.

8.6. Make-Whole Amount.

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

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

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

     “Reinvestment Yield” means, with respect to the Called Principal of
any Note, .50% over the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business
Day preceding the Settlement Date with respect to such Called Principal,
on the display designated as the “PX1 Screen” on the Bloomberg Financial
Market Service (or such other display as may replace the PX1 Screen on
Bloomberg Financial Market Service) for actively traded U.S. Treasury
securities having a maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date, or (ii) if such yields are
not reported as of such time or the yields reported as of such time are
not ascertainable, the Treasury Constant Maturity Series Yields reported,
for the latest day for which such yields have been so reported as of the
second Business Day preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519) (or
any comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the maturity closest to and
greater than the Remaining

19

 

Average Life and (2) the actively traded U.S. Treasury security with the
maturity closest to and less than the Remaining Average Life.

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

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

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

9. AFFIRMATIVE COVENANTS.

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

9.1. Compliance with Law.

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

9.2. Insurance.

     The Company will, and will cause each Restricted Subsidiary to, maintain,
with financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are

20

 

maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.

9.3. Maintenance of Properties.

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

9.4. Payment of Taxes and Claims.

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

9.5. Corporate Existence, etc.

     The Company will at all times preserve and keep in full force and effect
its corporate existence. Subject to Sections 10.6, 10.7 and 10.8, the Company
will at all times preserve and keep in full force and effect the corporate
existence of each of its Restricted Subsidiaries (unless merged into the
Company or a Restricted Subsidiary) and all rights and franchises of the
Company and its Restricted Subsidiaries unless, in the good faith judgment of
the Company, the termination of or failure to preserve and keep in full force
and effect such corporate existence, right or franchise could not, individually
or in the aggregate, have a Material Adverse Effect.

10. NEGATIVE COVENANTS.

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

21

 

10.1. Consolidated Net Debt.

     The Company will not incur, and will not permit any Restricted Subsidiary
to incur, any Debt if, after giving effect thereto and to the application of
the proceeds therefrom, Consolidated Net Debt would exceed 55% of Consolidated
Total Capitalization.

10.2. Interest Coverage.

     The Company will not permit the ratio of Consolidated EBITDA to
Consolidated Interest Expense (in each case for the Company’s then most
recently completed four fiscal quarters) to be less than 2.0 to 1.0 at any
time.

10.3. Adjusted Consolidated Net Worth.

     The Company will not permit at any time its Adjusted Consolidated Net
Worth as of the end of any fiscal year to be less than $130,000,000 plus the
cumulative sum of 50% of Consolidated Net Income (but only if a positive
number) for each fiscal year ending after June 30, 2001.

10.4. Debt of Restricted Subsidiaries.

     The Company will not permit any Restricted Subsidiary that is not a
Subsidiary Guarantor to create, assume, incur or otherwise become liable for,
directly or indirectly, any Debt, other than:

     (a) Debt owed to the Company or another Restricted Subsidiary;

     (b) Debt of a Restricted Subsidiary secured by Liens permitted under
Sections 10.5(g) or (h);

     (c) Debt of a Subsidiary outstanding at the time of its acquisition
by the Company and initial designation as a Restricted Subsidiary,
provided that (i) such Debt was not incurred in contemplation of such
Subsidiary becoming a Restricted Subsidiary and (ii) immediately after
giving effect to the designation of such Subsidiary as a Restricted
Subsidiary, no Default or Event of Default would exist; provided,
however, that such Debt may not be extended, renewed or refunded unless
such Debt could be incurred under clause (d) below; and

     (d) Additional Debt, provided that after giving effect to the
incurrence thereof and the application of the proceeds thereof, Priority
Debt does not exceed 15% of Adjusted Consolidated Net Worth, and any
renewals or extension of such Debt, provided that (i) there is no
increase in the principal amount or decrease in maturity of such Debt at
the time of such extension or renewal and (ii) immediately after such
extension or renewal no Default or Event of Default would exist.

22

 

10.5. Liens.

     The Company will not, and will not permit any Restricted Subsidiary to,
permit to exist, create, assume or incur, directly or indirectly, any Lien on
its properties or assets, whether now owned or hereafter acquired, except:

     (a) Liens for taxes, assessments or governmental charges not then
due and delinquent or the nonpayment of which is permitted by Section
9.4;

     (b) Liens incidental to the conduct of business or the ownership of
properties and assets (including landlords’, lessors’, carriers’,
warehousemen’s, mechanics’, materialmen’s and other similar Liens) and
Liens to secure the performance of bids, tenders, leases or trade
contracts, or to secure statutory obligations (including obligations
under workers compensation, unemployment insurance and other social
security legislation), surety or appeal bonds or other Liens of like
general nature incurred in the ordinary course of business and not in
connection with the borrowing of money;

     (c) any attachment or judgment Lien, unless the judgment it secures
has not, within 60 days after the entry thereof, been discharged or
execution thereof stayed pending appeal, or has not been discharged
within 60 days after the expiration of any such stay;

     (d) Liens securing Debt of a Restricted Subsidiary owed to the
Company or to another Restricted Subsidiary;

     (e) Liens securing Debt existing on property or assets of the
Company or any Restricted Subsidiary as of the date of this Agreement
that are described in Schedule 10.5;

     (f) encumbrances in the nature of leases, subleases, zoning
restrictions, easements, rights of way, minor survey exceptions and other
rights and restrictions of record on the use of real property and defects
in title arising or incurred in the ordinary course of business, which,
individually and in the aggregate, do not materially impair the use of
the property or assets subject thereto by the Company or such Restricted
Subsidiary in their business or which relate only to assets that in the
aggregate are not Material;

     (g) Liens (i) existing on property at the time of its acquisition by
the Company or a Restricted Subsidiary and not created in contemplation
thereof, whether or not the Debt secured by such Lien is assumed by the
Company or a Restricted Subsidiary; or (ii) on property created
contemporaneously with its acquisition or within 180 days of the
acquisition or completion of construction or improvements thereof to
secure or provide for all or a portion of the purchase price or cost of
construction or improvements of such property after the date of Closing;
or (iii) existing on property of a Person at the time such Person is
merged or consolidated with, or becomes a Restricted Subsidiary of, or
substantially all of its assets are acquired by, the Company or a
Restricted Subsidiary and not created in contemplation thereof; provided
that in the case of clauses (i), (ii) and (iii)

23

 

such Liens do not extend to additional property of the Company or
any Restricted Subsidiary (other than property that is an improvement to
or is acquired for specific use in connection with the subject property)
and, in the case of clause (ii) only, that the aggregate principal amount
of Debt secured by each such Lien does not exceed the lesser of cost of
acquisition or construction or the fair market value (determined in good
faith by one or more officers of the Company to whom authority to enter
into the transaction has been delegated by the board of directors of the
Company) of the property subject thereto;

     (h) Liens resulting from extensions, renewals or replacements of
Liens permitted by paragraphs (e) and (g), provided that (i) there is no
increase in the principal amount or decrease in maturity of the Debt
secured thereby at the time of such extension, renewal or replacement,
(ii) any new Lien attaches only to the same property theretofore subject
to such earlier Lien and (iii) immediately after such extension, renewal
or replacement no Default or Event of Default would exist; and

     (i) Liens securing Debt not otherwise permitted by paragraphs (a)
through (h) above, provided that, after giving effect to the incurrence
of the Debt so secured, Priority Debt does not exceed 15% of Adjusted
Consolidated Net Worth, and any renewals or extensions of Liens securing
such Debt, provided that (i) there is no increase in the principal amount
or decrease in maturity of the Debt secured thereby at the time of such
renewal or extension, (ii) any new Lien attaches only to the same
property theretofore subject to such earlier Lien and (iii) immediately
after such renewal or extension no Default or Event of Default would
exist.

10.6. Sale of Assets.

     Except as permitted by Section 10.7, the Company will not, and will not
permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose
of, including by way of merger (collectively a “Disposition”), any assets,
including capital stock of Restricted Subsidiaries, in one or a series of
transactions, to any Person, other than:

     (a) Dispositions in the ordinary course of business;

     (b) Dispositions by the Company to a Restricted Subsidiary, by a
Subsidiary Guarantor to the Company or to another Subsidiary Guarantor or
by a Restricted Subsidiary that is not a Subsidiary Guarantor to the
Company or a Restricted Subsidiary; or

     (c) Dispositions not otherwise permitted by Section 10.6(a) or (b),
provided that:

          (i) each such Disposition is made in an arms length
transaction for a consideration at least equal to the fair market
value of the property subject thereto;

          (ii) the aggregate net book value of all assets disposed of in
any period of 365 consecutive days pursuant to this Section 10.6(c)
does not exceed 10% of

24

 

Consolidated Total Assets as of the end of the
immediately preceding fiscal quarter; and

     (iii) at the time of such Disposition and after giving effect
thereto no Default or Event of Default shall have occurred and be
continuing.

Notwithstanding the foregoing, the Company may, or may permit any Restricted
Subsidiary to, make a Disposition and the assets subject to such Disposition
shall not be subject to or included in the foregoing limitation and computation
contained in Section 10.6(c)(ii) of the preceding sentence to the extent that
(i) each such Disposition is for a consideration at least equal to the fair
market value of the property subject thereto, and

     (A) such assets are leased back by the Company or any Restricted
Subsidiary, as lessee, within 365 days of the original acquisition or
construction thereof by the Company or such Restricted Subsidiary; or

     (B) the net after tax proceeds from such disposition are within 365
days of such Disposition:

     (i) reinvested in productive assets used or useful in carrying
on the business of the Company and its Restricted Subsidiaries; or

     (ii) applied to the payment or prepayment of any outstanding
Debt of the Company or any Restricted Subsidiary that is pari passu
with or senior to the Notes, including the Notes.

If any prepayment of the Notes is to be made pursuant to foregoing clause (ii),
the Company may offer to prepay (on a date not less than 30 or more than 60
days following such offer) at a price of 100% of the principal amount of the
Notes to be prepaid (without any Make-Whole Amount), together with interest
accrued to the date of prepayment; provided that if any holder of the Notes
declines such offer, the proceeds that would have been paid to such holder
shall be offered pro rata to the other holders of the Notes that have accepted
the offer. A failure by a holder of Notes to respond at least 10 days prior to
the proposed prepayment date shall be deemed to constitute a rejection of such
offer by such holder. If at the time of making such offer to prepay and
following such prepayment there is no Debt of the Company or any Restricted
Subsidiary outstanding other than the Notes, any net proceeds remaining
unapplied shall not be subject to or included in the limitation and computation
contained in Section 10.6(c)(ii).

10.7. Mergers, Consolidations, etc.

          The Company will not, and will not permit any Restricted Subsidiary to,
consolidate with or merge with any other Person or convey, transfer, sell or
lease all or substantially all of its assets in a single transaction or series of
transactions to any Person except that:

     (a) the Company may consolidate or merge with any other Person or
convey, transfer, sell or lease all or substantially all of its assets in
a single transaction or series of transactions to any Person, provided
that:

25

 

     (i) the successor formed by such consolidation or the survivor
of such merger or the Person that acquires by conveyance, transfer,
sale or lease all or substantially all of the assets of the Company
as an entirety, as the case may be, is a solvent corporation
organized and existing under the laws of the United States or any
state thereof (including the District of Columbia), and, if the
Company is not such corporation, such corporation (y) shall have
executed and delivered to each holder of any Notes its assumption
of the due and punctual performance and observance of each covenant
and condition of this Agreement and the Notes and (z) shall have
caused to be delivered to each holder of any Notes an opinion of
independent counsel reasonably satisfactory to the Required
Holders, to the effect that all agreements or instruments effecting
such assumption are enforceable in accordance with their terms and
comply with the terms hereof; and

     (ii) immediately after giving effect to such transaction, the
successor formed by such consolidation or the survivor of such
merger or the Person that acquires by conveyance, transfer, sale or
lease all or substantially all of the assets of the Company as an
entirety, as the case may be, can incur $1.00 of additional Debt;
and

     (iii) immediately before and after giving effect to such
transaction, no Default or Event of Default shall have occurred and
be continuing; and

     (b) Any Restricted Subsidiary may (x) merge into the Company
(provided that the Company is the surviving corporation) or a Restricted
Subsidiary or (y) sell, transfer or lease all or any part of its assets
to the Company or a Restricted Subsidiary, or (z) merge or consolidate
with, or sell, transfer or lease all or substantially all of its assets
to, any Person in a transaction that is permitted by Section 10.6 or, as
a result of which, such Person becomes a Restricted Subsidiary; provided
in each instance set forth in clauses (x) through (z) that, (1)
immediately before and after giving effect thereto, there shall exist no
Default or Event of Default and (2) a Subsidiary Guarantor may engage in
any of the foregoing transactions only with the Company or another
Subsidiary Guarantor.

No such conveyance, transfer, sale or lease of all or substantially all of the
assets of the Company shall have the effect of releasing the Company or any
successor corporation that shall theretofore have become such in the manner
prescribed in this Section 10.7 from its liability under this Agreement or the
Notes.

10.8. Disposition of Stock of Restricted Subsidiaries.

     (a) The Company will not permit any Restricted Subsidiary to issue
its capital stock, or any warrants, rights or options to purchase, or
securities convertible into or exchangeable for, such capital stock, to
any Person other than the Company or a Restricted Subsidiary, except in
the case of Foreign Restricted Subsidiaries (i) for directors’ qualifying
shares or (ii) to satisfy local ownership requirements.

26

 

     (b) The Company will not, and will not permit any Restricted
Subsidiary to, sell, transfer or otherwise dispose of any shares of
capital stock of a Restricted Subsidiary if such sale would be prohibited
by Section 10.6, except in the case of Foreign Restricted Subsidiaries
(i) for directors’ qualifying shares or (ii) to satisfy local ownership
requirements.

     (c) If a Restricted Subsidiary at any time ceases to be such as a
result of a sale or issuance of its capital stock, any Liens on property
of the Company or any other Restricted Subsidiary securing Debt owed to
such Restricted Subsidiary, which is not contemporaneously repaid,
together with such Debt, shall be deemed to have been incurred by the
Company or such other Restricted Subsidiary, as the case may be, at the
time such Restricted Subsidiary ceases to be a Restricted Subsidiary.

10.9. Designation of Restricted and Unrestricted Subsidiaries.

          The Company may designate any Restricted Subsidiary as an Unrestricted
Subsidiary and any Unrestricted Subsidiary as a Restricted Subsidiary; provided
that,

     (a) if such Subsidiary initially is designated a Restricted
Subsidiary, then such Restricted Subsidiary may be subsequently
designated as an Unrestricted Subsidiary and such Unrestricted Subsidiary
may be subsequently designated as a Restricted Subsidiary, but no further
changes in designation may be made;

     (b) if such Subsidiary initially is designated an Unrestricted
Subsidiary, then such Unrestricted Subsidiary may be subsequently
designated as a Restricted Subsidiary and such Restricted Subsidiary may
be subsequently designated as an Unrestricted Subsidiary, but no further
changes in designation may be made;

     (c) the Company may not designate a Restricted Subsidiary as an
Unrestricted Subsidiary unless: (i) such Restricted Subsidiary does not
own, directly or indirectly, any Debt or capital stock of the Company or
any other Restricted Subsidiary, (ii) such designation, considered as a
sale of assets, is permitted pursuant to Sections 10.6, 10.7 and 10.8,
(iii) immediately before and after such designation there exists no
Default or Event of Default; and

     (d) a Subsidiary Guarantor may not be designated an Unrestricted
Subsidiary.

10.10. Subsidiary Guaranty.

          The Company will not permit any Restricted Subsidiary to become a borrower
or a guarantor of Debt owed to banks under the Credit Agreement unless such
Restricted Subsidiary is, or concurrently therewith becomes, a party to the
Subsidiary Guaranty.

10.11. Nature of Business.

          The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business if, as a result, the general nature of the business in
which the Company and its Restricted Subsidiaries, taken as a whole, would then
be engaged would be substantially changed

27

 

from the general nature of the
business in which the Company and its Restricted Subsidiaries, taken as a
whole, are engaged on the date of this Agreement as described in the
Memorandum.

10.12. Transactions with Affiliates.

          The Company will not and will not permit any Restricted Subsidiary to
enter into directly or indirectly any Material transaction or Material group of
related transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate (other than the Company or another Restricted Subsidiary), except in
the ordinary course of the Company’s or such Restricted Subsidiary’s business
and upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than would be obtainable in a comparable arm’s-length
transaction with a Person not an Affiliate.

11. EVENTS OF DEFAULT.

          An “Event of Default” shall exist if any of the following conditions or
events shall occur and be continuing on or at any time after the date of
Closing:

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

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

     (c) the Company defaults in the performance of or compliance with
any term contained in Sections 10.1 through 10.12; or

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

     (e) any representation or warranty made in writing by or on behalf
of the Company or any Subsidiary Guarantor or by any officer of the
Company or a Subsidiary
Guarantor in this Agreement, the Subsidiary Guaranty or in any
writing furnished in connection with the transactions contemplated hereby
or thereby proves to have been false or incorrect in any material respect
on the date as of which made; or

     (f) (i) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any
principal of or premium or make-whole amount or interest on any Debt that
is outstanding in an aggregate principal amount of at least $5,000,000
beyond any period of grace provided with respect thereto, or (ii) the
Company or any Restricted Subsidiary is in default in the performance of
or compliance with any term of any evidence of any Debt that is
outstanding in an aggregate

28

 

principal amount of at least $5,000,000 or of
any mortgage, indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or condition such
Debt has become, or has been declared, due and payable before its stated
maturity or before its regularly scheduled dates of payment; or

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

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

     (i) a final judgment or judgments for the payment of money
aggregating at least $5,000,000 are rendered against one or more of the
Company and its Restricted Subsidiaries, which judgments are not, within
60 days after entry thereof, bonded, discharged or stayed pending appeal,
or are not discharged within 60 days after the expiration of such stay;
or

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

29

 

manner that would increase the liability of the Company or any Subsidiary
thereunder; and any such event or events described in clauses (i) through
(vi) above, either individually or together with any other such event or
events, could reasonably be expected to have a Material Adverse Effect;
or

     (k) any Subsidiary Guarantor defaults in the performance of or
compliance with any term contained in the Subsidiary Guaranty, and such
default continues beyond any period of grace in respect thereof, or the
Subsidiary Guaranty ceases to be in full force and effect, except as
provided in Section 22, or is declared to be null and void in whole or in
material part by a court or other governmental or regulatory authority
having jurisdiction or the validity or enforceability thereof shall be
contested by any of the Company or any Subsidiary Guarantor or any of
them renounces any of the same or denies that it has any or further
liability thereunder.

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

12. REMEDIES ON DEFAULT, ETC.

12.1. Acceleration.

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

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

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

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

30

 

the event that the Notes are
prepaid or are accelerated as a result of an Event of Default, is intended to
provide compensation for the deprivation of such right under such
circumstances.

12.2. Other Remedies.

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

12.3. Rescission.

          At any time after any Notes have been declared due and payable pursuant to
clause (b) or (c) of Section 12.1, the holders of a majority in principal
amount of the Notes then outstanding, by written notice to the Company, may
rescind and annul any such declaration and its consequences if (a) the Company
has paid all overdue interest on the Notes, all principal of and Make-Whole
Amount, if any, on any Notes that are due and payable and are unpaid other than
by reason of such declaration, and all interest on such overdue principal and
Make-Whole Amount, if any, and (to the extent permitted by applicable law) any
overdue interest in respect of the Notes, at the Default Rate, (b) all Events
of Default and Defaults, other than non-payment of amounts that have become due
solely by reason of such declaration, have been cured or have been waived
pursuant to Section 17, and (c) no judgment or decree has been entered for the
payment of any monies due pursuant hereto or to the Notes. No rescission and
annulment under this Section 12.3 will extend to or affect any subsequent Event
of Default or Default or impair any right consequent thereon.

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

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

31

 

13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

13.1. Registration of Notes.

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

13.2. Transfer and Exchange of Notes.

          Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company’s expense (except as provided below), one
or more new Notes (as requested by the holder thereof) in exchange therefor,
in an aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1(a).
Each such new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $500,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $500,000. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed to have made the representations and agreement
set forth in Section 6.

13.3. Replacement of Notes.

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

     (a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original Purchaser or another Institutional
Investor holder of a Note with a minimum net worth of at least
$50,000,000, such Person’s own unsecured agreement of indemnity shall be
deemed to be satisfactory), or

32

 

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

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

14. PAYMENTS ON NOTES.

14.1. Place of Payment.

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

14.2. Home Office Payment.

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

15. EXPENSES, ETC.

15.1. Transaction Expenses.

          Whether or not the transactions contemplated hereby are consummated, the
Company will pay all costs and expenses (including reasonable attorneys’ fees
of one special counsel and, if reasonably required, local or other counsel)
incurred by you and each Other Purchaser or holder of a Note in connection with
such transactions and in connection with any amendments, waivers or consents
under or in respect of this Agreement, the Notes or the

33

 

Subsidiary Guaranty
(whether or not such amendment, waiver or consent becomes effective),
including: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this
Agreement, the Notes or the Subsidiary Guaranty or in responding to any
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement, the Notes or the Subsidiary Guaranty, or by
reason of being a holder of any Note, and (b) the costs and expenses, including
financial advisors’ fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with any work-out
or restructuring of the transactions contemplated hereby and by the Notes. The
Company will pay, and will save you and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by you).

15.2. Survival.

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

16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

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

17. AMENDMENT AND WAIVER.

17.1. Requirements.

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

34

 

percentage of the principal amount of the Notes the holders of which are
required to consent to any such amendment or waiver, or (iii) amend any of
Sections 8, 11(a), 11(b), 12, 17 or 20.

17.2. Solicitation of Holders of Notes.

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

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

17.3. Binding Effect, etc.

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

17.4. Notes held by Company, etc.

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

35

 

18. NOTICES.

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

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

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

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

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

19. REPRODUCTION OF DOCUMENTS.

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

20. CONFIDENTIAL INFORMATION.

          For the purposes of this Section 20, “Confidential Information” means
information delivered to you by or on behalf of the Company or any Subsidiary
in connection with the transactions contemplated by or otherwise pursuant to
this Agreement that is proprietary or confidential in nature and that was
clearly marked or labeled or otherwise adequately identified when received by
you as being confidential information of the Company or such Subsidiary,
provided that such term does not include information that (a) was publicly
known or otherwise known to you prior to the time of such disclosure, (b)
subsequently becomes publicly

36

 

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

21. SUBSTITUTION OF PURCHASER.

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

37

 

22. RELEASE OF SUBSIDIARY GUARANTOR.

          You and each subsequent holder of a Note agree to release any Subsidiary
Guarantor from the Subsidiary Guaranty (i) if such Subsidiary Guarantor ceases
to be such as a result of a disposition permitted by Sections 10.6, 10.7 or
10.8 or (ii) at such time as the banks party to the Credit Agreement release
such Subsidiary from the Bank Guaranty and any other holders of Debt guaranteed
by such Subsidiary release such Subsidiary from such Guaranties; provided,
however, that you and each subsequent holder will not be required to release a
Subsidiary Guarantor from the Subsidiary Guaranty under the circumstances
contemplated by clause (ii), if (A) a Default or Event of Default has occurred
and is continuing, (B) such Subsidiary Guarantor is to become a borrower under
the Credit Agreement or (C) such release is part of a plan of financing that
contemplates such Subsidiary Guarantor guaranteeing any other Debt of the
Company. Your obligation to release a Subsidiary Guarantor from the Subsidiary
Guaranty is conditioned upon your prior receipt of a certificate from a Senior
Financial Officer of the Company stating that none of the circumstances
described in clauses (A), (B) and (C) above are true.

23. MISCELLANEOUS.

23.1. Successors and Assigns.

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

23.2. Payments Due on Non-Business Days.

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

23.3. Severability.

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

23.4. Construction.

          Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance

38

 

with any one covenant shall not (absent such an express contrary provision) be
deemed to excuse compliance with any other covenant. Where any provision
herein refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.

23.5. Counterparts.

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

23.6. Governing Law.

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

39

 

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

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	ELKCORP
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:
	 	Gregory J. Fisher
	

	 	Title:
	 	Senior Vice President, Chief Financial Officer
	

	 	 	 	and Controller

S-1

 

The foregoing is agreed

to as of the date thereof.

MONY LIFE INSURANCE COMPANY OF AMERICA

	 	 	 
	By:

	 	MONY Capital Management, Inc.,
	

	 	Authorized Agent
	 
	 	 
	By:
	 	 
	

	 	

	

	 	Leonard Mazlish
	

	 	Senior Managing Director

S-2

 

C.M. LIFE INSURANCE COMPANY

	 	 	 
	By:
	 	 
	

	 	

	Name:
	 	 
	

	 	

	Title:
	 	 
	

	 	

HAKONE FUND LLC

	 	 	 
	By:
	 	 
	

	 	

	Name:
	 	 
	

	 	

	Title:
	 	 
	

	 	

MASSACHUSETTS MUTUAL LIFE INSURANCE

COMPANY

	 	 	 
	By:
	 	 
	

	 	

	Name:
	 	 
	

	 	

	Title:
	 	 
	

	 	

MASSMUTUAL ASIA LIMITED

	 	 	 
	By:
	 	 
	

	 	

	Name:
	 	 
	

	 	

	Title:
	 	 
	

	 	

MML BAY STATE LIFE INSURANCE COMPANY

	 	 	 
	By:
	 	 
	

	 	

	Name:
	 	 
	

	 	

	Title:
	 	 
	

	 	

S-3

 

ALLSTATE LIFE INSURANCE COMPANY

	 	 	 
	By:
	 	 
	

	 	

	Name:
	 	 

	 	 	 
	By:
	 	 
	

	 	

	Name:
	 	 

          Authorized Signatories

S-4

 

	 	 	 
	TEACHERS INSURANCE AND ANNUITY

	 	 
	 ASSOCIATION OF AMERICA
	 	 

	 	 	 
	By:
	 	 
	

	 	

	

	 	Name:
	

	 	Title:

S-5

 

AMERICAN FAMILY LIFE INSURANCE COMPANY

	 	 	 
	By:
	 	 
	

	 	

	Name:

	 	Phillip Hannifan
	Title:

	 	Investment Director

S-6

 

SCHEDULE A

INFORMATION RELATING TO PURCHASERS

This information is confidential.

Schedule A

1

 

SCHEDULE B

DEFINED TERMS

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

          “Affiliate” means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or
indirectly, 10% or more of any class of voting or equity interests. As used in
this definition, “Control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. Unless the context otherwise clearly requires, any reference to an
“Affiliate” is a reference to an Affiliate of the Company. Notwithstanding
anything in the foregoing to the contrary, a Person that (i) would be an
Affiliate of the Company solely by virtue of its ownership of voting or equity
interests of the Company and (ii) is eligible pursuant to Rule 13d-1(b) under
the Exchange Act to file a statement with the Securities and Exchange
Commission on Schedule 13G, shall not be deemed to be an Affiliate.

          “Adjusted Consolidated Net Worth” means, as of any date, consolidated
stockholders’ equity of the Company and its Restricted Subsidiaries on such
date (including, without duplication, minority interests in Restricted
Subsidiaries), less the amount by which outstanding Restricted Investments on
such date exceed 20% of consolidated stockholders’ equity of the Company and
its Restricted Subsidiaries on such date; provided, however, that the effects
on shareholders’ equity of any changes recorded by the Company and its
Restricted Subsidiaries related to the impairment of goodwill and other
intangibles as may be required under Statement of Financial Accounting
Standards No. 142 shall not be taken into account in determining Adjusted
Consolidated Net Worth.

          “Anti-Terrorism Order” means Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)).

          “Bank Guaranty” means each of the Subsidiary Guaranties dated as of
November 30, 2000, August 15, 2002 and September 30, 2002 of the Subsidiary
Guarantors of Debt outstanding under the Credit Agreement, as such Guaranties
may be amended, restated or otherwise modified, and any successor thereto.

          “Banks” means the banks party to the Credit Agreement, including Bank of
America, N.A., as administrative agent for such banks.

Schedule B

1

 

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

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

          “Closing” is defined in Section 3.

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

          “Company” means ELKCORP, a Delaware corporation.

          “Confidential Information” is defined in Section 20.

          “Consolidated EBIT” means, for any period, the sum of Consolidated Net
Income for such period, plus, to the extent deducted in determining such
Consolidated Net Income, (i) federal, state, local and foreign income, value
added and similar taxes and (ii) Consolidated Interest Expense.

          “Consolidated EBITDA” means, for any period, the sum of Consolidated EBIT
for such period, (i) plus, to the extent deducted in determining Consolidated
Net Income, any (a) depreciation and amortization expense, (b) extraordinary
expenses or losses, (c) charges recorded by the Company and its Restricted
Subsidiaries related to the impairment of goodwill and other intangibles as may
be required under Statement of Financial Accounting Standards No. 142, (d)
other non-cash charges, (ii) minus, to the extent included in Consolidated Net
Income, any (x) extraordinary income or gains and (y) other non-cash income.
If, during the period for which Consolidated EBITDA is being calculated, the
Company or a Restricted Subsidiary has (i) acquired one or more Persons (or the
assets thereof) or (ii) disposed of one or more Restricted Subsidiaries (or
substantially all of the assets thereof), Consolidated EBITDA shall be
calculated on a pro forma basis as if all of such acquisitions (other than
acquisitions by or resulting in Unrestricted Subsidiaries) and all such
dispositions had occurred on the first day of such period.

          “Consolidated Interest Expense” means, for any period, the consolidated
interest expense of the Company and its Restricted Subsidiaries for such period
determined in accordance with GAAP. If, during the period for which
Consolidated Interest Expense is being calculated, the Company or a Restricted
Subsidiary has (i) acquired one or more Persons (or the assets thereof) or (ii)
disposed of one or more Restricted Subsidiaries (or substantially all of the
assets thereof), Consolidated Interest Expense shall be calculated on a pro
forma basis as if (i) all of such acquisitions (other than acquisitions by or
resulting in Unrestricted Subsidiaries) and all such dispositions had occurred
on the first day of such period and (ii) any Debt incurred, assumed,

Schedule B

2

 

repaid, replaced or refinanced in connection therewith had been so incurred,
assumed, repaid, replaced or refinanced on the first day of such period.

          “Consolidated Net Debt” means, as of any date, outstanding Debt of the
Company and its Restricted Subsidiaries as determined on a consolidated basis
in accordance with GAAP (excluding valuation effects of FAS 133) less cash in
excess of $2,000,000.

          “Consolidated Net Income” means, for any period, the net income or loss of
the Company and its Restricted Subsidiaries for such period (including, without
duplication, income attributed to minority interests) determined on a
consolidated basis in accordance with GAAP.

          “Consolidated Total Assets” means, as of any date, the assets and
properties of the Company and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP.

          “Consolidated Total Capitalization” means, as of any date, the sum of
Consolidated Net Debt and Adjusted Consolidated Net Worth as of such date.

          “Credit Agreement” means the Credit Agreement dated as of November 30,
2000, as amended by the First Amendment dated as of March 31, 2001, the Second
Amendment dated as of June 5, 2002, the Third Amendment dated as of February
20, 2003, the Fourth Amendment dated as of March 7, 2003 and the Fifth
Amendment dated as of December 3, 2003, among the Company and Bank of America,
N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Bank One,
Texas, N.A., as Documentation Agent, First Union National Bank, as Syndication
Agent, and the other lenders party thereto, as such agreement may be hereafter
amended, modified, restated, supplemented, refinanced, increased or reduced
from time to time, and any successor credit agreement or similar facilities.

          “Debt” with respect to any Person means, at any time, without duplication,

     (a) its liabilities for borrowed money;

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

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

     (d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities); and

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

Schedule B

3

 

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

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

          “Disposition” is defined in Section 10.6.

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

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

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

          “Event of Default” is defined in Section 11.

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

          “Foreign Restricted Subsidiary” means any Restricted Subsidiary organized
under the laws of a jurisdiction other than the United States or any state
thereof (including the District of Columbia).

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

          “Governmental Authority” means

     (a) the government of

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

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

Schedule B

4

 

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

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

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

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

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

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

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

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

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

          “INHAM Exemption” is defined in Section 6.2(e).

          “Institutional Investor” means (a) any original purchaser of a Note, (b)
any holder of more than $2,000,000 in aggregate principal amount of the Notes
at the time outstanding, and (c) any bank, trust company, savings and loan
association or other financial

Schedule B

5

 

institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.

          “Investments” means all investments made, in cash or by delivery of
property, directly or indirectly, by any Person, in any other Person, whether
by acquisition of shares of capital stock, indebtedness or other obligations or
securities or by loan, Guaranty, advance, capital contribution or otherwise.

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

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

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

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

          “Memorandum” is defined in Section 5.3.

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

          “Notes” is defined in Section 1.

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

          “Other Purchasers” is defined in Section 2.

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

Schedule B

6

 

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

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

          “Priority Debt” means, as of any date, the sum (without duplication) of
(a) outstanding unsecured Debt of Restricted Subsidiaries that are not
Subsidiary Guarantors other than (i) Debt owed to the Company or another
Restricted Subsidiary, (ii) Debt of a Person that is not an Unrestricted
Subsidiary outstanding at the time it becomes a Restricted Subsidiary and (iii)
Debt of Restricted Subsidiaries outstanding on the date of this Agreement that
is described in Schedule B-1 and (b) Debt of the Company and its Restricted
Subsidiaries secured by Liens not otherwise permitted by Sections 10.5(a)
through (h).

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

          “Purchaser” means each purchaser listed in Schedule A.

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

          “Required Holders” means, at any time, the holders of at least a majority
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).

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

          “Restricted Investments” means all Investments of the Company and its
Restricted Subsidiaries, other than:

     (a) property or assets to be used or consumed in the ordinary course
of business;

     (b) current assets arising from the sale of goods or services in the
ordinary course of business;

     (c) Investments in Restricted Subsidiaries or in any Person that, as
a result thereof, becomes a Restricted Subsidiary;

Schedule B

7

 

     (d) Investments in common stock of the Company;

     (e) Investments existing as of the date of this Agreement that are
listed in the attached Schedule B-2; and

     (f) Investments in:

     (i) obligations, maturing within one year from the date of
acquisition, of or fully guaranteed by the United States of
America, or an agency thereof, or Canada, or any province thereof;

     (ii) state, or municipal securities having an effective
maturity within one year from the date of acquisition that are
rated in one of the top two rating classifications by at least one
nationally recognized rating agency;

     (iii) certificates of deposit or banker’s acceptances maturing
within one year from the date of acquisition of or issued by
commercial banks whose long-term unsecured debt obligations (or the
long-term unsecured debt obligations of the bank holding company
owning all of the capital stock of such bank) are rated in one of
the top two rating classifications by at least one nationally
recognized rating agency;

     (iv) commercial paper maturing within 270 days from the date
of issuance that, at the time of acquisition, is rated in one of
the top two rating classifications by at least one credit rating
agency of recognized national standing;

     (v) repurchase agreements; and

     (vi) money market instrument programs that are properly
classified as current assets in accordance with GAAP.

          “Restricted Subsidiary” means any Subsidiary (a) of which at least a
majority of the voting securities are owned by the Company and/or one or more
Restricted Subsidiaries and (b) that the Company has not designated an
Unrestricted Subsidiary by notice in writing given to the holders of the Notes
pursuant to Section 10.9 hereof.

          “SEC Reports” means the Company’s Annual Report on Form 10-K for the year
ended June 30, 2003 and its Quarterly Reports on Form 10-Q for the periods
ending September 30 and December 31, 2003 and March 31, 2004, in each case, as
filed with the Securities and Exchange Commission.

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

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

Schedule B

8

 

          “Source” is defined in Section 6.2.

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

          “Subsidiary Guarantor” is defined in Section 1.

          “Subsidiary Guaranty” is defined in Section 1.

          “this Agreement” or “the Agreement” is defined in Section 17.3.

          “Unrestricted Subsidiary” means any Subsidiary of the Company that has
been so designated by notice in writing given to the holders of the Notes.

          “USA Patriot Act” means Public Law 107-56 of the United States of America,
United and Strengthening America by Providing Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT) Act of 2001.

Schedule B

9

 

SCHEDULE B-1

EXISTING PRIORITY DEBT

None.

Schedule B-1

 

SCHEDULE B-2

EXISTING INVESTMENTS

The Company maintains a Deferred Compensation Plan for certain of its officers
and directors, pursuant to which such persons may defer a portion of their
compensation and direct that such deferred compensation be invested in various
mutual funds and other investment vehicles. To fund the amounts payable to the
participants pursuant to the Deferred Compensation Plan, the Company makes
investments in the applicable mutual funds and other investment vehicles. At
May 31, 2004, the Company had investments of approximately $2,000,000 pursuant
to the Deferred Compensation Plan.

Schedule B-2

 

SCHEDULE 4.9

CHANGES IN CORPORATE STRUCTURE

None.

Schedule 4.9

 

SCHEDULE 5.3

DISCLOSURE MATERIALS

See Schedule 5.8.

As contemplated in the Memorandum, the Company may sell its conductive coatings
business, including, without limitation, Cybershield, Inc., Cybershield
International, Inc., Cybershield of Texas, Inc. and Cybershield of Georgia,
Inc., or substantially all of the assets held by such entities. If the Company
disposes of the assets of any of these entities, the Company may dissolve such
entities following the disposition(s).

Schedule 5.3

 

SCHEDULE 5.4

SUBSIDIARIES AND AFFILIATES

(a) Subsidiaries and Affiliates

     (i) Subsidiaries

The Company has the Subsidiaries shown on the attached organizational chart
(domicile of organization is shown parenthetically for each Subsidiary).
Except as otherwise indicated on such organizational chart, line relationships
indicate ownership of 100% of the common stock or other voting securities of
the underlying Subsidiary. See Schedule 5.3.

     (ii) Affiliates

Except as shown above in part (a)(i) of this Schedule 5.4 and in Schedule B-2,
the Company has no equity investments in any other corporation or entity.

     (iii) Directors and Senior Officers of Company

	 	 	 	 	 
	Directors:

	 	James E. Hall*
	 	Richard A. Nowak
	

	 	Thomas D. Karol
	 	David W. Quinn***
	

	 	Dale V. Kesler**
	 	Harold K. Work
	

	 	Michael L. McMahan	 	 
	 
	 	 	 	 
	 	 	* Chair of Corporate Governance Committee
	 	 	** Chair of Compensation Committee
	 	 	*** Chair of Audit Committee
	 
	 	 	 	 
	Senior Officers:

	 	Thomas D. Karol
	 	Chairman of the Board and Chief Executive Officer
	

	 	Richard A. Nowak
	 	President and Chief Operating Officer
	

	 	Gregory J. Fisher
	 	Senior Vice President, Chief Financial Officer and Controller
	

	 	Matti Kiik
	 	Senior Vice President- Research and Development
	

	 	David G. Sisler
	 	Senior Vice President, General Counsel and Secretary
	

	 	James J. Waibel
	 	Senior Vice President- Administration
	

	 	Leonard R. Harral
	 	Vice President, Chief Accounting Officer and Treasurer
	

	 	Thomas W. Cave
	 	Vice President and Assistant Secretary

Schedule 5.4

 

 

SCHEDULE 5.5

FINANCIAL STATEMENTS

	1.	 	The financial statements and the notes thereto included in the SEC Form
10-K for each of the fiscal years ended June 30, 1999, 2000, 2001, 2002
and 2003.
	 
	2.	 	The financial statements and the notes thereto included in the SEC Forms
10-Q for the fiscal quarters ended September 30, 2003, December 31, 2003
and March 31, 2004.

Schedule 5.5

 

 

SCHEDULE 5.8

CONFIDENTIAL

LITIGATION

This information is confidential.

Schedule 5.8

 

 

SCHEDULE 5.11

LICENSES, PERMITS, ETC.

None.

Schedule 5.11

 

 

SCHEDULE 5.15

EXISTING DEBT

Debt of the Company and its Subsidiaries as of March 31, 2004:

	 	 	 	 	 	 	 
	ElkCorp

	 	6.99% Senior Notes, Series A, due June 15, 2009
	 	$	60,000,000	 
	ElkCorp

	 	7.49% Senior Notes, Series B, due June 15, 2012
	 	$	60,000,000	 
	ElkCorp

	 	4.69% Senior Notes due July 15, 2007
	 	$	25,000,000	 

The Company also maintains the Credit Agreement. At March 31, 2004,
$18,200,000 was outstanding under the Credit Agreement and at May 31, 2004,
$37,400,000 was outstanding under the Credit Agreement.

At March 31, 2004, the Company had $3,079,000 of letters of credit outstanding
under the Credit Agreement. In connection with the disposition of its
conductive coatings business, the Company may issue a letter of credit in an
amount up to $500,000.

Effective June 17, 2002, the Company entered into a pay floating (6 month Libor
plus 1.91%), receive fixed (7.49%), interest rate swap with Bank of America,
N.A. through June 15, 2012, covering a notional amount of $60,000,000. In
addition, the Company may enter into an interest rate swap on its $25,000,000
of 4.69% Senior Notes due July 15, 2007, converting the Indebtedness evidenced
by such Notes from fixed rate to floating rate. These interest rate swaps do
not constitute Debt.

The Subsidiaries guarantee the obligations set forth above and any future
obligations that may become outstanding under the Credit Agreement.

Schedule 5.15

 

 

SCHEDULE 5.18

ENVIRONMENTAL MATTERS

Chromium has engaged in limited remediation activities at its former plating
operation, which is located on the site of Cybershield’s Lufkin, Texas
manufacturing facility. Soil sampling results from a pre-closing environmental
evaluation of the site indicated the necessity of localized cleanup. Chromium
has entered the property into the Texas Voluntary Cleanup Program (VCP). Under
this program, the Texas Commission on Environmental Quality (TCEQ) reviews the
voluntary cleanup plan the applicant submits, and, when the work is complete,
issues a certificate of completion, evidencing cleanup to levels protective of
human health and the environment and releasing prospective purchasers and
lenders from liability to the state. Properties entered into the VCP are
protected from TCEQ enforcement actions.

Under the VCP, Chromium submitted a testing program, which the TCEQ has
approved, for a supplemental groundwater and soil assessment at the facility.
This program was designed to, among other things, further define the cleanup
requirements at the site. Once the investigation is complete, Chromium intends
to clean up the site under the VCP to a site specific risk-based cleanup
standard as prescribed by the Texas Risk Reduction Program. Preliminary
results from recent groundwater and soil assessments indicate that there has
been no environmental impairment beyond Company property boundaries or to any
aquifer. However, until Chromium has the final results from its supplemental
assessment and completes its cleanup plan, the estimate of costs to remediate
the site are not determinable, nor can the Company determine at this point in
time if it is reasonably possible that it will incur material additional costs
at the site. If a remediation plan similar to a plan successfully used at
another Chromium plant is approved by TCEQ, remediation costs will be
immaterial to the Company’s consolidated results of operations, financial
position and liquidity. However, other potential scenarios, none of which are
reasonably expected at this time, could potentially result in material costs to
the Company. It is not possible to estimate potential environmental exposure
until this testing is complete and a remediation plan is developed for
submission to the TCEQ. The Company believes that sufficient information for
establishing a reserve for this environmental exposure in accordance with SFAS
No. 5, “Accounting for Contingencies,” may be available by the end of the first
half of fiscal 2005, and further anticipates that it may be in a position at
that time to determine if it is reasonably possible that the Company will incur
material additional costs with regard to this site.

The Company’s operations are subject to extensive federal, state and local laws
and regulations relating to environmental matters. Such laws and regulations
are frequently changed and could result in significantly increased cost of
compliance. Further, certain of the Company’s manufacturing operations utilize
hazardous materials in their production processes. As a result, the Company
incurs costs for recycling or disposal of such materials and may incur costs
for remediation activities at its facilities and off-site from time to time.
The Company establishes and maintains reserves for such known or probable
remediation activities in accordance with SFAS No. 5.

Schedule 5.18

 

 

SCHEDULE 10.5

EXISTING LIENS

	 	 	 
	Cybershield of Georgia, Inc.

	 	The real property comprising Cybershield of Georgia, Inc.’s
	

	 	Canton, Georgia facility was conveyed to Cherokee County,
	

	 	Georgia and leased-back for nominal consideration in
	

	 	exchange for tax abatements granted by Cherokee County.
	

	 	At the conclusion of the tax abatement, Cybershield of
	

	 	Georgia, Inc. may obtain title to the property for nominal or
	

	 	no consideration.

Schedule 10.5

 

 

EXHIBIT 1(a)

[FORM OF SENIOR NOTE]

ELKCORP

6.28% SENIOR NOTE

DUE NOVEMBER 15, 2014

	 	 	 
	No. R-[                   ]

	 	[Date]
	$[                   ]

	 	PPN: 287456 A@ 6

         FOR VALUE RECEIVED, the undersigned, ELKCORP (herein called the
“Company”), a corporation organized and existing under the laws of the State of
Delaware, promises to pay to [    ], or registered assigns, the principal
sum of $[      ] on November 15, 2014, with interest (computed on the
basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 6.28% per annum from the date hereof, payable
semiannually, on May 15 and November 15 in each year, commencing with the May
or November next succeeding the date hereof, until the principal hereof shall
have become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as
defined in the Note Purchase Agreement referred to below), payable semiannually
as aforesaid (or, at the option of the registered holder hereof, on demand), at
a rate per annum from time to time equal to the greater of (i) 8.28% or (ii) 2%
over the rate of interest publicly announced by Bank of America, or its
successor, from time to time in Chicago, Illinois as its “base” or “prime”
rate.

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

         This Note is one of a series of Senior Notes (herein called the “Notes”)
issued pursuant to a Note Purchase Agreement dated as of June 15, 2004 (as from
time to time amended, the “Note Purchase Agreement”), between the Company and
the respective Purchasers named therein and is entitled to the benefits
thereof. Each holder of this Note will be deemed, by its acceptance hereof,
(i) to have agreed to the confidentiality provisions set forth in Section 20 of
the Note Purchase Agreement and (ii) to have made the representations and
agreement set forth in Section 6 of the Note Purchase Agreement.

         This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a

Exhibit 1(a)

 

 

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

         This Note is subject to optional prepayment, in whole or from time to time
in part, at the times and on the terms specified in the Note Purchase Agreement
but not otherwise.

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

         Payment of the principal of, and interest and Make-Whole Amount, if any,
on this Note, and all other amounts due under the Note Purchase Agreement, is
guaranteed pursuant to the terms of a Guaranty dated as of November 15, 2004 of
certain subsidiaries of the Company.*

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

	 	 	 	 	 
	

	 	ELKCORP	 	 
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	Name:
	 	

	

	 	Title:
	 	

	*	 	This paragraph must be removed at such time as there are no Subsidiary
Guarantors.

Exhibit 1(a)

2

 

EXHIBIT 1(b)

[FORM OF SUBSIDIARY GUARANTY]

     THIS GUARANTY (this “Guaranty”) dated as of November 15, 2004 is made by
the undersigned (each, a “Guarantor”), in favor of the holders from time to
time of the Notes hereinafter referred to, including each purchaser named in
the Note Purchase Agreement hereinafter referred to, and their respective
successors and assigns (collectively, the “Holders” and each individually, a
“Holder”).

W I T N E S S E T H:

     WHEREAS, ELKCORP, a Delaware corporation (the “Company”), and the initial
Holders have entered into a Note Purchase Agreement dated as of June 15, 2004
(the Note Purchase Agreement as amended, supplemented, restated or otherwise
modified from time to time in accordance with its terms and in effect, the
“Note Purchase Agreement”);

     WHEREAS, the Note Purchase Agreement provides for the issuance by the
Company of $50,000,000 aggregate principal amount of Notes (as defined in the
Note Purchase Agreement);

     WHEREAS, the Company owns, directly or indirectly, all of the issued and
outstanding capital stock or partnership interests of each Guarantor and, by
virtue of such ownership and otherwise, each Guarantor will derive substantial
benefits from the purchase by the Holders of the Company’s Notes;

     WHEREAS, it is a condition precedent to the obligation of the Holders to
purchase the Notes that each Guarantor shall have executed and delivered this
Guaranty to the Holders; and

     WHEREAS, each Guarantor desires to execute and deliver this Guaranty to
satisfy the conditions described in the preceding paragraph;

     NOW, THEREFORE, in consideration of the premises and other benefits to
each Guarantor, and of the purchase of the Company’s Notes by the Holders, and
for other good and valuable consideration, the receipt and sufficiency of which
are acknowledged, each Guarantor makes this Guaranty as follows:

     SECTION 1. Definitions. Any capitalized terms not otherwise herein
defined shall have the meanings attributed to them in the Note Purchase
Agreement.

     SECTION 2. Guaranty. Each Guarantor, jointly and severally with each
other Guarantor, unconditionally and irrevocably guarantees to the Holders the
due, prompt and complete payment by the Company of the principal of, Make-Whole
Amount, if any, and interest on, and each other amount due under, the Notes or
the Note Purchase Agreement, when and as the same shall become due and payable
(whether at stated maturity or by required or optional prepayment or by
declaration or otherwise) in accordance with the terms of the Notes and the
Note Purchase Agreement (the Notes and the Note Purchase Agreement being
sometimes

Exhibit 1(b)

 

 

hereinafter collectively referred to as the “Note Documents” and the amounts
payable by the Company under the Note Documents, and all other monetary
obligations of the Company thereunder, being sometimes collectively hereinafter
referred to as the “Obligations”). This Guaranty is a guaranty of payment and
not just of collectibility and is in no way conditioned or contingent upon any
attempt to collect from the Company or upon any other event, contingency or
circumstance whatsoever. If for any reason whatsoever the Company shall fail
or be unable duly, punctually and fully to pay such amounts as and when the
same shall become due and payable, each Guarantor, without demand, presentment,
protest or notice of any kind, will forthwith pay or cause to be paid such
amounts to the Holders under the terms of such Note Documents, in lawful money
of the United States, at the place specified in the Note Purchase Agreement, or
perform or comply with the same or cause the same to be performed or complied
with, together with interest (to the extent provided for under such Note
Documents) on any amount due and owing from the Company. Each Guarantor,
promptly after demand, will pay to the Holders the reasonable costs and
expenses of collecting such amounts or otherwise enforcing this Guaranty,
including, without limitation, the reasonable fees and expenses of counsel.
Notwithstanding the foregoing, the right of recovery against each Guarantor
under this Guaranty is limited to the extent it is judicially determined with
respect to any Guarantor that entering into this Guaranty would violate Section
548 of the United States Bankruptcy Code or any comparable provisions of any
state law, in which case such Guarantor shall be liable under this Guaranty
only for amounts aggregating up to the largest amount that would not render
such Guarantor’s obligations hereunder subject to avoidance under Section 548
of the United States Bankruptcy Code or any comparable provisions of any state
law.

     SECTION 3. Guarantor’s Obligations Unconditional. The obligations of
each Guarantor under this Guaranty shall be primary, absolute and unconditional
obligations of each Guarantor, shall not be subject to any counterclaim,
set-off, deduction, diminution, abatement, recoupment, suspension, deferment,
reduction or defense based upon any claim each Guarantor or any other person
may have against the Company or any other person, and to the full extent
permitted by applicable law shall remain in full force and effect without
regard to, and shall not be released, discharged or in any way affected by, any
circumstance or condition whatsoever (whether or not each Guarantor or the
Company shall have any knowledge or notice thereof), including:

     (a) any termination, amendment or modification of or deletion from
or addition or supplement to or other change in any of the Note Documents
or any other instrument or agreement applicable to any of the parties to
any of the Note Documents;

     (b) any furnishing or acceptance of any security, or any release of
any security, for the Obligations, or the failure of any security or the
failure of any person to perfect any interest in any collateral;

     (c) any failure, omission or delay on the part of the Company to
conform or comply with any term of any of the Note Documents or any other
instrument or agreement referred to in paragraph (a) above, including,
without limitation, failure to give notice to any Guarantor of the
occurrence of a “Default” or an “Event of Default” under any Note
Document;

Exhibit 1(b)

2

 

     (d) any waiver of the payment, performance or observance of any of
the obligations, conditions, covenants or agreements contained in any
Note Document, or any other waiver, consent, extension, indulgence,
compromise, settlement, release or other action or inaction under or in
respect of any of the Note Documents or any other instrument or agreement
referred to in paragraph (a) above or any obligation or liability of the
Company, or any exercise or non-exercise of any right, remedy, power or
privilege under or in respect of any such instrument or agreement or any
such obligation or liability;

     (e) any failure, omission or delay on the part of any of the Holders
to enforce, assert or exercise any right, power or remedy conferred on
such Holder in this Guaranty, or any such failure, omission or delay on
the part of such Holder in connection with any Note Document, or any
other action on the part of such Holder;

     (f) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, conservatorship, custodianship,
liquidation, marshaling of assets and liabilities or similar proceedings
with respect to the Company, any Guarantor or to any other person or any
of their respective properties or creditors, or any action taken by any
trustee or receiver or by any court in any such proceeding;

     (g) any discharge, termination, cancellation, frustration,
irregularity, invalidity or unenforceability, in whole or in part, of any
of the Note Documents or any other agreement or instrument referred to in
paragraph (a) above or any term hereof;

     (h) any merger or consolidation of the Company or any Guarantor into
or with any other corporation, or any sale, lease or transfer of any of
the assets of the Company or any Guarantor to any other person;

     (i) any change in the ownership of any shares of capital stock of
the Company or any change in the corporate relationship between the
Company and any Guarantor, or any termination of such relationship;

     (j) any release or discharge, by operation of law, of any Guarantor
from the performance or observance of any obligation, covenant or
agreement contained in this Guaranty; or

     (k) any other occurrence, circumstance, happening or event
whatsoever, whether similar or dissimilar to the foregoing, whether
foreseen or unforeseen, and any other circumstance which might otherwise
constitute a legal or equitable defense or discharge of the liabilities
of a guarantor or surety or which might otherwise limit recourse against
any Guarantor.

Exhibit 1(b)

3

 

     SECTION 4. Full Recourse Obligations. The obligations of each Guarantor
set forth herein constitute the full recourse obligations of such Guarantor
enforceable against it to the full extent of all its assets and properties.

     SECTION 5. Waiver. Each Guarantor unconditionally waives, to the extent
permitted by applicable law, (a) notice of any of the matters referred to in
Section 3, (b) notice to such Guarantor of the incurrence of any of the
Obligations, notice to such Guarantor or the Company of any breach or default
by such Company with respect to any of the Obligations or any other notice that
may be required, by statute, rule of law or otherwise, to preserve any rights
of the Holders against such Guarantor, (c) presentment to or demand of payment
from the Company or the Guarantor with respect to any amount due under any Note
Document or protest for nonpayment or dishonor, (d) any right to the
enforcement, assertion or exercise by any of the Holders of any right, power,
privilege or remedy conferred in the Note Purchase Agreement or any other Note
Document or otherwise, (e) any requirement of diligence on the part of any of
the Holders, (f) any requirement to exhaust any remedies or to mitigate the
damages resulting from any default under any Note Document, (g) any notice of
any sale, transfer or other disposition by any of the Holders of any right,
title to or interest in the Note Purchase Agreement or in any other Note
Document and (h) any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge, release or defense of a guarantor or
surety or which might otherwise limit recourse against such Guarantor.

     SECTION 6. Subrogation, Contribution, Reimbursement or Indemnity. Until
one year and one day after all Obligations have been indefeasibly paid in full,
each Guarantor agrees not to take any action pursuant to any rights which may
have arisen in connection with this Guaranty to be subrogated to any of the
rights (whether contractual, under the United States Bankruptcy Code, as
amended, including Section 509 thereof, under common law or otherwise) of any
of the Holders against the Company or against any collateral security or
guaranty or right of offset held by the Holders for the payment of the
Obligations. Until one year and one day after all Obligations have been
indefeasibly paid in full, each Guarantor agrees not to take any action
pursuant to any contractual, common law, statutory or other rights of
reimbursement, contribution, exoneration or indemnity (or any similar right)
from or against the Company which may have arisen in connection with this
Guaranty. So long as the Obligations remain, if any amount shall be paid by or
on behalf of the Company to any Guarantor on account of any of the rights
waived in this paragraph, such amount shall be held by such Guarantor in trust,
segregated from other funds of such Guarantor, and shall, forthwith upon
receipt by such Guarantor, be turned over to the Holders (duly endorsed by such
Guarantor to the Holders, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Holders may determine. The
provisions of this paragraph shall survive the term of this Guaranty and the
payment in full of the Obligations.

     SECTION 7. Effect of Bankruptcy Proceedings, etc. This Guaranty shall
continue to be effective or be automatically reinstated, as the case may be, if
at any time payment, in whole or in part, of any of the sums due to any of the
Holders pursuant to the terms of the Note Purchase Agreement or any other Note
Document is rescinded or must otherwise be restored or returned by such Holder
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the

Exhibit 1(b)

4

 

Company or any other person, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to the Company or other person or any substantial part of its property, or
otherwise, all as though such payment had not been made. If an event
permitting the acceleration of the maturity of the principal amount of the
Notes shall at any time have occurred and be continuing, and such acceleration
shall at such time be prevented by reason of the pendency against the Company
or any other person of a case or proceeding under a bankruptcy or insolvency
law, each Guarantor agrees that, for purposes of this Guaranty and its
obligations hereunder, the maturity of the principal amount of the Notes and
all other Obligations shall be deemed to have been accelerated with the same
effect as if any Holder had accelerated the same in accordance with the terms
of the Note Purchase Agreement or other applicable Note Document, and such
Guarantor shall forthwith pay such principal amount, Make-Whole Amount, if any,
and interest thereon and any other amounts guaranteed hereunder without further
notice or demand.

     SECTION 8. Term of Agreement. This Guaranty and all guaranties,
covenants and agreements of each Guarantor contained herein shall continue in
full force and effect and shall not be discharged until such time as all of the
Obligations shall be paid and performed in full and all of the agreements of
such Guarantor hereunder shall be duly paid and performed in full.

     SECTION 9. Representations and Warranties. Each Guarantor represents and
warrants to each Holder that:

     (a) such Guarantor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has the
requisite power and authority to own and operate its property, to lease
the property it operates as lessee and to conduct the business in which
it is currently engaged;

     (b) such Guarantor has the requisite power and authority and the
legal right to execute and deliver, and to perform its obligations under,
this Guaranty, and has taken all necessary action to authorize its
execution, delivery and performance of this Guaranty;

     (c) this Guaranty constitutes a legal, valid and binding obligation
of such Guarantor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’ rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law);

     (d) the execution, delivery and performance of this Guaranty will
not (i) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property
of such Guarantor under any indenture, mortgage, deed of trust, loan,
credit agreement, corporate charter or by-laws, or any other agreement
evidencing Debt, (ii) contravene, result in any breach of, or constitute
a default under, or result in the creation of any Lien in respect of any
property of such Guarantor under, any other agreement or instrument to
which such Guarantor is bound or by which

Exhibit 1(b)

5

 

such Guarantor or any of its properties may be bound or affected, except
as could not reasonably be expected to have a Material Adverse Effect,
(iii) conflict with or result in a breach of any of the terms, conditions
or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to such Guarantor, except
as could not reasonably be expected to have a Material Adverse Effect, or
(iv) violate any provision of any statute or other rule or regulation of
any Governmental Authority applicable to such Guarantor, except as could
not reasonably be expected to have a Material Adverse Effect;

     (e) no consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is required in
connection with the execution, delivery or performance by such Guarantor
of this Guaranty;

     (f) except as disclosed in Section 5.8 of the Note Purchase
Agreement, no litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of
such Guarantor, threatened by or against such Guarantor or any of its
properties or revenues (i) with respect to this Guaranty or any of the
transactions contemplated hereby or (ii) which could reasonably be
expected to have a Material Adverse Effect;

     (g) such Guarantor (after giving due consideration to any rights of
contribution) has received fair consideration and reasonably equivalent
value for the incurrence of its obligations hereunder or as contemplated
hereby and after giving effect to the transactions contemplated herein,
(i) the fair value of the assets of such Guarantor (both at fair
valuation and at present fair saleable value) exceeds its liabilities,
(ii) such Guarantor is able to and expects to be able to pay its debts as
they mature, and (iii) such Guarantor has capital sufficient to carry on
its business as conducted and as proposed to be conducted.

     SECTION 10. Notices. All notices under the terms and provisions hereof
shall be in writing, and shall be delivered or sent by facsimile if the sender
on the same day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), mailed by registered or certified
mail with return receipt requested (postage prepaid), or sent by a recognized
overnight delivery service, charges prepaid, addressed (a) if to the Company or
any Holder at the address set forth in, the Note Purchase Agreement or (b) if
to a Guarantor, in care of the Company at the Company’s address set forth in
the Note Purchase Agreement, or in each case at such other address as the
Company, any Holder or such Guarantor shall from time to time designate in
writing to the other parties. Any notice so addressed shall be deemed to be
given when actually received.

     SECTION 11. Survival. All warranties, representations and covenants made
by each Guarantor herein or in any certificate or other instrument delivered by
it or on its behalf hereunder shall be considered to have been relied upon by
the Holders and shall survive the execution and delivery of this Guaranty,
regardless of any investigation made by any of the

Exhibit 1(b)

6

 

Holders. All statements in any such certificate or other instrument shall
constitute warranties and representations by such Guarantor hereunder.

     SECTION 12. Submission to Jurisdiction. Each Guarantor irrevocably
submits to the jurisdiction of the courts of the State of Illinois and of the
courts of the United States of America having jurisdiction in the State of
Illinois for the purpose of any legal action or proceeding in any such court
with respect to, or arising out of, this Guaranty, the Note Purchase Agreement
or the Notes. Each Guarantor consents to process being served in any suit,
action or proceeding by mailing a copy thereof by registered or certified mail,
postage prepaid, return receipt requested. Each Guarantor agrees that such
service upon receipt (i) shall be deemed in every respect effective service of
process upon it in any such suit, action or proceeding and (ii) shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon and personal delivery to such Guarantor.

     SECTION 13. Miscellaneous. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, each Guarantor hereby waives any provision of law
that renders any provisions hereof prohibited or unenforceable in any respect.
The terms of this Guaranty shall be binding upon, and inure to the benefit of,
each Guarantor and the Holders and their respective successors and assigns. No
term or provision of this Guaranty may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by each
Guarantor and the Required Holders. The section and paragraph headings in this
Guaranty are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof, and all references
herein to numbered sections, unless otherwise indicated, are to sections in
this Guaranty. This Guaranty shall in all respects be governed by, and
construed in accordance with, the laws of the State of Illinois, including all
matters of construction, validity and performance.

Exhibit 1(b)

7

 

            IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed as of the day and year first above written.

	 	 	 
	

	 	Chromium Corporation
	

	 	Cybershield, Inc.
	

	 	Cybershield of Georgia, Inc.
	

	 	Cybershield International, Inc.
	

	 	Cybershield of Texas, Inc.
	

	 	Elk Composite Building Products, Inc.
	

	 	Elk Corporation of Alabama
	

	 	Elk Corporation of America
	

	 	Elk Corporation of Arkansas
	

	 	Elk Corporation of Texas
	

	 	Elk Group, Inc.
	

	 	Elk Performance Nonwoven Fabrics, Inc.
	

	 	Elk Premium Building Products, Inc.
	

	 	Elk Technologies, Inc.
	

	 	Elk Technology Group, Inc.
	

	 	OEL, Ltd.
	 
	 	 
	

	 	
Gregory J. Fisher
	

	 	Vice President
	 
	 	 
	

	 	Elk Group, L.P.
	 
	 	 
	

	 	By: Elk Group, Inc.
	

	 	Its General Partner
	 
	 	 
	

	 	Gregory J.
Fisher

	

	 	Vice President

Exhibit 1(b)

8

 

	 	 	 
	

	 	NELPA, Inc.
	 
	 	 
	

	 	

	

	 	Monte L. Miller
	

	 	President, Secretary and Treasurer

Exhibit 1(b)

9

 

FORM OF JOINDER TO SUBSIDIARY GUARANTY

     The undersigned (the “Guarantor”), joins in the Subsidiary Guaranty dated
as of November 15, 2004 from the Guarantors named therein in favor of the
Holders, as defined therein, and agrees to be bound by all of the terms thereof
and represents and warrants to the Holders that:

     (a) the Guarantor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has the
requisite power and authority to own and operate its property, to lease
the property it operates as lessee and to conduct the business in which
it is currently engaged;

     (b) the Guarantor has the requisite power and authority and the
legal right to execute and deliver this Joinder to Subsidiary Guaranty
(“Joinder”) and to perform its obligations hereunder and under the
Subsidiary Guaranty and has taken all necessary action to authorize its
execution and delivery of this Joinder and its performance of the
Subsidiary Guaranty;

     (c) the Subsidiary Guaranty constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding
in equity or at law);

     (d) the execution, delivery and performance of this Joinder will not
(i) contravene, result in any breach of, or constitute a default under,
or result in the creation of any Lien in respect of any property of such
Guarantor under any indenture, mortgage, deed of trust, loan, credit
agreement, corporate charter or by-laws, or any other agreement
evidencing Debt, (ii) contravene, result in any breach of, or constitute
a default under, or result in the creation of any Lien in respect of any
property of such Guarantor under, any other agreement or instrument to
which such Guarantor is bound or by which such Guarantor or any of its
properties may be bound or affected, except as could not reasonably be
expected to have a Material Adverse Effect, (iii) conflict with or result
in a breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to such Guarantor, except as could not reasonably be
expected to have a Material Adverse Effect, or (iv) violate any provision
of any statute or other rule or regulation of any Governmental Authority
applicable to such Guarantor, except as could not reasonably be expected
to have a Material Adverse Effect;

     (e) no consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is required in
connection with the execution, delivery or performance by such Guarantor
of this Joinder;

Exhibit 1(b)

10

 

     (f) except as disclosed in writing to the Holders, no litigation,
investigation or proceeding of or before any arbitrator or governmental
authority is pending or, to the knowledge of the Guarantor, threatened by
or against the Guarantor or any of its properties or revenues (i) with
respect to this Joinder, the Subsidiary Guaranty or any of the
transactions contemplated hereby or (ii) that could reasonably be
expected to have a Material Adverse Effect;

     (g) such Guarantor (after giving due consideration to any rights of
contribution) has received fair consideration and reasonably equivalent
value for the incurrence of its obligations hereunder or as contemplated
hereby and after giving effect to the transactions contemplated herein,
(i) the fair value of the assets of such Guarantor (both at fair
valuation and at present fair saleable value) exceeds its liabilities,
(ii) such Guarantor is able to and expects to be able to pay its debts as
they mature, and (iii) such Guarantor has capital sufficient to carry on
its business as conducted and as proposed to be conducted.

Capitalized Terms used but not defined herein have the meanings ascribed in the
Subsidiary Guaranty.

            IN WITNESS WHEREOF, the undersigned has caused this Joinder to Subsidiary
Guaranty to be duly executed as of                ,      .

	 	 	 
	

	 	[Name of Guarantor]
	 
	 	 
	

	 	By:

	

	 	Name:

	

	 	Title:

Exhibit 1(b)

11

 

EXHIBIT 4.4(a)

FORM OF OPINION OF COUNSEL

TO THE COMPANY

     The opinion of Baker & McKenzie, counsel to the Company, shall be to the
effect that:

     1. Each of the Company and each Subsidiary Guarantor is a corporation or
limited partnership validly existing and in good standing under the laws of its
jurisdiction of organization, and each has all requisite corporate or
partnership power and authority to own and operate its properties, to carry on
its business as now conducted, and, in the case of the Company, to enter into
and perform the Agreement and to issue and sell the Notes and, in the case of
each Subsidiary Guarantor, to enter into and perform the Subsidiary Guaranty.

     2. The Agreement and the Notes have been duly authorized by proper
corporate action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Company and constitute the legal,
valid and binding agreements of the Company, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
of general application relating to or affecting the enforcement of the rights
of creditors or by equitable principles, regardless of whether enforcement is
sought in a proceeding in equity or at law.

     3. The Subsidiary Guaranty has been duly authorized by proper corporate or
partnership action on the part of each Subsidiary Guarantor, has been duly
executed and delivered by an authorized officer of each such Subsidiary
Guarantor (or the General Partner thereof) and constitutes the legal, valid and
binding obligation of each Subsidiary Guarantor, enforceable in accordance with
its terms, except to the extent the enforcement thereof may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws of general application relating to or affecting the
enforcement of the rights of creditors or by equitable principles, regardless
of whether enforcement is sought in a proceeding in equity or at law.

     4. A Texas court, or a Federal court sitting in Texas, would honor the
choice of Illinois law to govern the Agreement, the Notes and the Subsidiary
Guaranty.

     5. Based on the representations set forth in the Agreement, the offer,
sale and delivery of the Notes and delivery of the Subsidiary Guaranty do not
require the registration of the Notes or the Subsidiary Guaranty under the
Securities Act of 1933, as amended, or the qualification of an indenture under
the Trust Indenture Act of 1939, as amended.

     6. No authorization, approval or consent of, and no designation, filing,
declaration, registration and/or qualification with, any Governmental Authority
is necessary or required in connection with the execution, delivery and
performance by the Company of the Note Purchase

Exhibit 4.4(a)

 

 

Agreement or the offer, issuance and sale by the Company of the Notes, and no
authorization, approval or consent of, and no designation, filing, declaration,
registration and/or qualification with, any Governmental Authority is necessary
or required in connection with the execution, delivery and performance by any
Subsidiary Guarantor of the Subsidiary Guaranty.

     7. The issuance and sale of the Notes by the Company, and the execution,
delivery and performance by the Company of the terms and conditions of the
Notes and the Agreement do not result in any breach or violation of any of the
provisions of, or constitute a default under, or result in the creation or
imposition of any Lien on, the property of the Company or any Subsidiary
pursuant to the provisions of (i) the certificate or articles of incorporation
or bylaws of the Company or any Subsidiary, (ii) any loan agreement to which
the Company or any Subsidiary is a party or by which any of them or their
property is bound that is filed (or incorporated by reference) as an exhibit to
the Company’s Annual Report on Form 10-K for its fiscal year ended June 30,
2003 or any other report or registration statement subsequently filed by the
Company with the Securities and Exchange Commission, (iii) any other Material
agreement or instrument to which the Company or any Subsidiary is a party or by
which any of them or their property is bound that is filed (or incorporated by
reference) as an exhibit to the Company’s Annual Report on Form 10-K for its
fiscal year ended June 30, 2003 or any other report or registration statement
subsequently filed by the Company with the Securities and Exchange Commission,
(iv) any law (including usury laws) or regulation applicable to the Company, or
(v) to the knowledge of such counsel, any order, writ, injunction or decree of
any court or Governmental Authority applicable to the Company.

     8. The execution, delivery and performance of the Subsidiary Guaranty do
not result in any breach or violation of any of the provisions of, or
constitute a default under, or result in the creation or imposition of any Lien
on, the property of any Subsidiary Guarantor pursuant to the provisions of (i)
its certificate or articles of incorporation or by-laws, (ii) any loan
agreement to which any Subsidiary Guarantor is a party or by which it or its
property is bound that is filed (or incorporated by reference) as an exhibit to
the Company’s Annual Report on Form 10-K for its fiscal year ended June 30,
2003 or any other report or registration statement subsequently filed by the
Company with the Securities and Exchange Commission, (iii) any other Material
agreement or instrument to which any Subsidiary Guarantor is a party or by
which it or its property is bound that is filed (or incorporated by reference)
as an exhibit to the Company’s Annual Report on Form 10-K for its fiscal year
ended June 30, 2003 or any other report or registration statement subsequently
filed by the Company with the Securities and Exchange Commission, (iv) any law
or regulation applicable to any Subsidiary Guarantor, or (v) to the knowledge
of such counsel, any order, writ, injunction or decree of any court or
Governmental Authority applicable to any Subsidiary Guarantor.

     9. Except as disclosed in Schedule 5.8 to the Note Purchase Agreement, to
such counsel’s knowledge there are no actions, suits or proceedings pending, or
threatened against the Company or any Subsidiary, at law or in equity or before
or by any Governmental Authority, that are likely to result, individually or in
the aggregate, in a Material Adverse Effect.

Exhibit 4.4(a)

2

 

     9. Neither the Company nor any Subsidiary is (i) a “public utility
company” or a “holding company,” or a “subsidiary company” of a “holding
company,” as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended, (ii) a “public utility” as defined in the Federal Power
Act, as amended, or (iii) an “investment company” or a company “controlled” by
an “investment company,” as such terms are defined in the Investment Company
Act of 1940, as amended.

     10. The issuance of the Notes and the intended use of the proceeds of the
sale of the Notes do not violate or conflict with Regulation U, T or X of the
Board of Governors of the Federal Reserve System.

The opinion of Baker & McKenzie shall cover such other matters relating to the
sale of the Notes as the Purchasers may reasonably request. With respect to
matters of fact on which such opinion is based, such counsel shall be entitled
to rely on appropriate certificates of public officials and officers of the
Company. With respect to matters governed by the laws of any jurisdiction
other than the United States of America and the States of Delaware and Texas,
such counsel may rely upon the opinions of counsel deemed (and stated in their
opinion to be deemed) by them to be competent and reliable; provided that, with
respect to the opinions in numbered paragraphs 2 and 3, such counsel may assume
that the laws of the State of Illinois are the same as the laws of the State of
Texas. Such opinion shall state that subsequent transferees and assignees of
the Notes may rely thereon.

Exhibit 4.4(a)

3

 

EXHIBIT 4.4(b)

FORM OF OPINION OF SPECIAL COUNSEL

TO THE PURCHASERS

     The opinion of Gardner Carton & Douglas LLP, special counsel to the
Purchasers, shall be to the effect that:

     1. The Company is a corporation organized and validly existing in good
standing under the laws of the State of Delaware, with requisite corporate
power and authority to enter into the Agreement and to issue and sell the
Notes.

     2. The Agreement and the Notes have been duly authorized, executed and
delivered by and constitute the legal, valid and binding agreements of the
Company, enforceable in accordance with their terms, except to the extent that
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application relating to
or affecting the enforcement of the rights of creditors or by equitable
principles, regardless of whether enforcement is sought in a proceeding in
equity or at law.

     3. The Subsidiary Guaranty constitutes the legal, valid and binding
obligation of each Subsidiary Guarantor, enforceable in accordance with their
terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws of general application relating to or affecting the
enforcement of the rights of creditors or by equitable principles, regardless
of whether enforcement is sought in a proceeding in equity or at law.

     4. Based upon the representations set forth in the Agreement, the offer,
sale and delivery of the Notes and delivery of the Subsidiary Guaranty do not
require the registration of the Notes or the Subsidiary Guaranty under the
Securities Act of 1933, as amended, nor the qualification of an indenture under
the Trust Indenture Act of 1939, as amended.

     5. The issuance and sale of the Notes and compliance with the terms and
provisions of the Notes and the Agreement do not conflict with or result in any
breach of any of the provisions of the Certificate of Incorporation or By-Laws
of the Company.

     6. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal or
state, is necessary in connection with the execution and delivery of the Note
Purchase Agreement or the Notes.

The opinion of Gardner Carton & Douglas LLP shall state that the opinion of
Baker & McKenzie delivered to you pursuant to the Agreement, is satisfactory in
form and scope to Gardner Carton & Douglas LLP, and, in its opinion, the
Purchasers are justified in relying thereon. The opinion shall state that
subsequent transferees and assignees of the Notes may rely thereon. The
opinion also shall cover such other matters relating to the sale of the Notes
as the Purchasers may reasonably request.

Exhibit 4.4(b)<PAGE>
                                                                   Exhibit 10.29

[AIR COMMERCIAL REAL ESTATE ASSOCIATION LOGO]

                      STANDARD OFFER, AGREEMENT AND ESCROW
                    INSTRUCTIONS FOR PURCHASE OF REAL ESTATE
                               (Non-Residential)
                     AIR Commercial Real Estate Association

                                                            April 15, 2004
                                                   (Date for Reference Purposes)

1.   BUYER.

     1.1  Oplink Communications, Inc. or Assignee, ("BUYER") hereby offers to
purchase the real property, hereinafter described, from the owner thereof
("SELLER") (collectively, the "PARTIES" or individually, a "PARTY"), through an
escrow ("ESCROW") to close on May 16, 2004 (see Addendum Paragraph C)
("EXPECTED CLOSING DATE") to be held by First American Title Company (Teresa
Woost) ("ESCROW HOLDER") whose address is 20545 Valley Green Drive, Cupertino,
CA 95014, Phone No. 408-873-2900, Facsimile No. 408-873-2920 upon the terms
and conditions set forth in this agreement ("AGREEMENT"). Buyer shall have the
right to assign Buyer's rights hereunder, but any such assignment shall not
relieve Buyer of Buyer's obligations herein unless Seller expressly releases
Buyer.

     1.2  The term "DATE OF AGREEMENT" as used herein shall be the date when
by execution and delivery (as defined in paragraph 20.2) of this document or a
subsequent counteroffer thereto, Buyer and Seller have reached agreement in
writing whereby Seller agrees to sell, and Buyer agrees to purchase, the
Property upon terms accepted by both Parties.

2.   PROPERTY.

     2.1  The real property ("PROPERTY") that is the subject of this offer
consists of (insert a brief physical description) an approximately 51,840
square foot building is located in the City of Fremont, County of Alameda,
State of California, is commonly known by the street address of 46305-46355
Landing Parkway and is legally described as: see the Preliminary Title Report
(APN: 519-0850-090-05).

     2.2  If the legal description of the Property is not complete or is
inaccurate, this Agreement shall not be invalid and the legal description shall
be completed or corrected to meet the requirements of First American Title
Company ("TITLE COMPANY"), which shall issue the title policy hereinafter
described.

     2.3  The Property includes, at no additional cost to Buyer, the permanent
improvements thereon, including those items which pursuant to applicable law
are a part of the property, as well as the following items, if any, owned by
Seller and at present located on the Property: electrical distribution systems
(power panel, bus ducting, conduits, disconnects, lighting fixtures); telephone
distribution systems (lines, jacks and connections only); space heaters;
heating, ventilating, air conditioning equipment ("HVAC"); air lines; fire
sprinkler systems; security and fire detection systems; carpets; window
coverings; wall coverings; and N/A (collectively, the "IMPROVEMENTS").

     2.4  The fire sprinkler monitor: / / is owned by Seller and included in the
Purchase Price, or /X/ is leased by Seller, and Buyer will need to negotiate a
new lease with the fire monitoring company.

     2.5  Except as provided in Paragraph 2.3, the Purchase Price does not
include Seller's personal property, furniture and furnishings, and N/A all of
which shall be removed by Seller prior to Closing.

3.   PURCHASE PRICE.

     3.1  The purchase price ("PURCHASE PRICE") to be paid by Buyer to Seller
for the Property shall be $4,758,000.00, payable as follows:

          (a) Cash down payment, including the Deposit as defined in paragraph
4.3 (or if an all cash transaction, the Purchase Price):    $4,758,000.00
                                                            -------------
              Total Purchase Price:                         $4,758,000.00
                                                            -------------

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4.   DEPOSITS.

     4.1  / /  Buyer has delivered to Broker a check in the sum of
$----------------, payable to Escrow Holder, to be held by Broker until both
Parties have executed this Agreement and the executed Agreement has been
delivered to Escrow Holder, or /x/ Buyer shall deliver to Escrow Holder a check
in the sum of $100,000.00 when both Parties have executed this Agreement and the
executed Agreement has been delivered to Escrow Holder. When cashed, the check
shall be deposited into the Escrow's trust account to be applied toward the
Purchase Price of the Property at the Closing. Should Buyer and Seller not enter
into an agreement for purchase and sale, Buyer's check or funds shall, upon
request by Buyer, be promptly returned to Buyer.

          (b)  Within 5 business days after the contingencies discussed in
paragraph 9.1 (a) through (k) are approved or waived, Buyer shall deposit with
Escrow Holder the additional sum of $100,000.00 to be applied to the Purchase
Price at the Closing and shall be non refundable to Buyer, and shall be applied
to Liquidated Damages set forth in Provision 21 of this Agreement.

     4.3  Escrow Holder shall deposit the funds deposited with it by Buyer
pursuant to paragraphs 4.1 and 4.2 (collectively the "DEPOSIT"), in a State or
Federally chartered bank in an interest bearing account whose term is
appropriate and consistent with the timing requirements of this transaction. The
interest therefrom shall accrue to the benefit of Buyer, who hereby acknowledges
that there may be penalties or interest forfeitures if the applicable instrument
is redeemed prior to its specified maturity. Buyer's Federal Tax Identification
Number is to be provided by Buyer. NOTE: Such interest bearing account cannot be
opened until Buyer's Federal Tax Identification Number is provided.

7.   REAL ESTATE BROKERS.

     7.1  The following real estate broker(s) ("BROKERS") and brokerage
relationships exist in this transaction and are consented to by the Parties
(check the applicable boxes):

/x/  Grubb & Ellis Company (John Serex)     represents Seller exclusively
                                            ("SELLER'S BROKER");

/x/  Colliers International (Dave Mein)     represents Buyer exclusively
                                            ("BUYER'S BROKER"); or

/ /  ----------------------------------     represents both Seller and Buyer
                                            ("DUAL AGENCY").

The Parties acknowledge that Brokers are the procuring cause of this Agreement.
See paragraph 24 for disclosures regarding the nature of a real estate agency
relationship. Buyer shall use the services of Buyer's Broker exclusively in
connection with any and all negotiations and offers with respect to the
Property for a period of 1 year from the Date of Agreement.

     7.2  Buyer and Seller each represent and warrant to the other that he/she/
it has had no dealings with any person, firm, broker or finder in connection
with the negotiation of this Agreement and/or the consummation of the purchase
and sale contemplated herein, other than the Brokers named in paragraph 7.1, and
no broker or other person, firm or entity, other than said Brokers is/are
entitled to any commission or finder's fee in connection with this transaction
as the result of any dealings or acts of such Party. Buyer and Seller do each
hereby agree to indemnify, defend, protect and hold the other harmless from and
against any costs, expenses or liability for compensation, commission or charges
which may be claimed by any broker, finder or other similar party, other than
said named Brokers by reason of any dealings or act of the indemnifying Party.

8.   ESCROW AND CLOSING.

     8.1  Upon acceptance hereof by Seller, this Agreement, including any
counter-offers incorporated herein by the Parties, shall constitute not only
the agreement of purchase and sale between Buyer and Seller, but also
instructions to Escrow Holder for the consummation of the Agreement through the
Escrow. Escrow Holder shall not prepare any further escrow instructions
restating or amending the Agreement unless specifically so instructed by the
Parties or a Broker herein. Subject to the reasonable approval of the Parties,
Escrow Holder may, however, include its standard general escrow provisions.

     8.2  As soon as practical after the receipt of this Agreement and any
relevant counteroffers, Escrow Holder shall ascertain the Date of Agreement as
defined in paragraphs 1.2 and 20.2 and advise the Parties and Brokers, in
writing, of the date ascertained.

     8.3  Escrow Holder is hereby authorized and instructed to conduct the
Escrow in accordance with this Agreement, applicable law and custom and
practice of the community in which Escrow Holder is located, including any
reporting requirements of the Internal Revenue Code. In the event of a
conflict between the law of the state where the Property is located and the law
of the state where the Escrow Holder is located, the law of the state where
the

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Property is located shall prevail.
     8.4  Subject to satisfaction of the contingencies herein described,
Escrow Holder shall close this escrow (the "Closing") by recording a general
warranty deed (a grant deed in California) and the other documents required to
be recorded, and by disbursing the funds and documents in accordance with this
Agreement.
     8.5  Buyer and Seller shall pay title fees and escrow fees per Alameda
County Standards.
     8.6  Escrow Holder shall verify that all of Buyer's contingencies have
been satisfied or waived prior to Closing. The matters contained in paragraphs
9.1 subparagraphs (b), (c), (d), (e), (g), (i), (n) and (o), 9.4, 9.5, 12, 13,
14, 16, 18, 20, 21, 22, and 24 are, however, matters of agreement between the
Parties only and are not instructions to Escrow Holder.
     8.7  If this transaction is terminated for non-satisfaction and non-waiver
of a Buyer's Contingency, as defined in paragraph 9.2, then neither of the
Parties shall thereafter have any liability to the other under this Agreement,
except to the extent of a breach of any affirmative covenant or warranty in
this Agreement. In the event of such termination, Buyer shall be promptly
refunded all funds deposited by Buyer with Escrow Holder, less only Title
Company and Escrow Holder cancellation fees and costs, all of which shall be
Buyer's obligation.
     8.8  The Closing shall occur on the Expected Closing Date, or as soon
thereafter as the Escrow is in condition for Closing; provided, however, that
if the Closing does not occur by the Expected Closing Date and said Date is not
extended by mutual instructions of the Parties, a Party not then in default
under this Agreement may notify the other Party, Escrow Holder, and Brokers, in
writing that, unless the Closing occurs within 5 business days following said
notice, the Escrow shall be deemed terminated without further notice or
instructions.
     8.9  Except as otherwise provided herein, the termination of Escrow shall
not relieve or release either Party from any obligation to pay Escrow Holder's
fees and costs or constitute a waiver, release or discharge of any breach or
default that has occurred in the performance of the obligations, agreements,
covenants or warranties contained therein.
     8.10 If this Escrow is terminated for any reason other than Seller's
breach or default, then at Seller's request, and as a condition to the return
of Buyer's deposit, Buyer shall within 5 days after written request deliver to
Seller, at no charge, copies of all surveys, engineering studies, soil reports,
maps, master plans, feasibility studies and other similar items prepared by or
for Buyer that pertain to the Property. Provided, however, that Buyer shall not
be required to deliver any such report if the written contract which Buyer
entered into with the consultant who prepared such report specifically forbids
the dissemination of the report to others.
9.   Contingencies to Closing.
     9.1  The Closing of this transaction is contingent upon the satisfaction or
waiver of the following contingencies. Buyer's conditional approval shall
constitute disapproval, unless provision is made by the Seller within the time
specified therefore by the Buyer in such conditional approval or by this
Agreement, whichever is later, for the satisfaction of the condition imposed by
the Buyer. Escrow Holder shall promptly provide all Parties with copies of any
written disapproval or conditional approval which it receives. With regard to
subparagraphs (a) through (l) the pre-printed time periods shall control unless
a different number of days is inserted in the spaces provided. With exception to
items 9.1(c) and (d), all other contingencies shall be waived no later than
twenty-one (21) days following the date of agreement.
     (a) Disclosure. Seller shall make to Buyer, through escrow, all of the
applicable disclosures required by law (See AIR Commercial Real Estate
Association ("AIR") standard form entitled "Seller's Mandatory Disclosure
Statement") and provide Buyer with a completed Property Information Sheet
("Property Information Sheet") concerning the Property, duly executed by or on
behalf of Seller in the current form or equivalent to that published by the
AIR within 5 days following the Date of Agreement. Buyer has 21 days from the
receipt of said disclosures to approve or disapprove the matters disclosed.
     (b) Physical Inspection. Buyer has 21 days from the receipt of the
Property Information Sheet or the Date of Agreement, whichever is later, to
satisfy itself with regard to the physical aspects and size of the Property.
     (c) Hazardous Substance Conditions Report. Buyer has 21 days from the
receipt of the Property Information Sheet or the Date of Agreement, whichever
is later, to satisfy itself with regard to the environmental aspects of the
Property. Seller recommends that Buyer obtain a Hazardous Substance Conditions
Report concerning the Property and relevant adjoining properties. Any such
report shall be paid for by Buyer. A "Hazardous Substance" for purposes of this
Agreement is defined as any substance whose nature and/or quantity of
existence, use, manufacture, disposal or effect, render it subject to Federal,
state or local regulation, investigation, remediation or removal as potentially
injurious to public health or welfare. A "Hazardous Substance Condition" for
purposes of this Agreement is defined as the existence on, under or relevantly
adjacent to the Property of a Hazardous Substance that would require
remediation and/or removal under applicable Federal, state or local law. In the
event that ERAS Environmental, or other appointed registered environmental
assessor(s), should recommend additional investigations be performed in their
Phase 1 environmental site assessment report findings for the subject property,
then the Buyer shall be granted an additional twenty-one (21) day period from
the Seller to complete said recommended investigations. However, said extension
shall only apply to sections 9.1(c) and 9.1(d).
     (d) Soil Inspection. Buyer has 21 days from the receipt of the Property
Information Sheet or the Date of Agreement, whichever is later, to satisfy
itself with regard to the condition of the soils on the Property. Seller
recommends that Buyer obtain a soil test report. Any such report shall be paid
for by Buyer. Seller shall provide Buyer copies of any soils report that
Seller may have within 10 days of the Date of Agreement. In the event that ERAS
Environmental, or other appointed registered environmental assessor(s), should
recommend additional investigations be performed in their Phase 1 environmental
site assessment report findings for the subject property, then the Buyer shall
be granted an additional twenty-one (21) day period from the Seller to complete
said recommended investigations. However, said extension shall only apply to
sections 9.1(c) and 9.1(d).
     (e) Governmental Approvals. Buyer has 21 days from the Date of Agreement
to satisfy itself with regard to approvals and permits from governmental
agencies or departments which have or may have jurisdiction over the Property
and which Buyer deems necessary or desirable in connection with its intended
use of the Property, including, but not limited to, permits and approvals
required with respect to zoning, planning, building and safety, fire, police,
handicapped and Americans with Disabilities Act requirements, transportation
and environmental matters.
     (f) Conditions of Title. Escrow Holder shall cause a current commitment for
title insurance ("Title Commitment") concerning the Property issued by the Title
Company, as well as legible copies of all documents referred to in the Title
Commitment ("Underlying Documents") to be delivered to Buyer within 10 or ----
days following the Date of Agreement. Buyer has 10 days from the receipt of the
Title Commitment and Underlying Documents to satisfy itself with regard to the
condition of title. The disapproval of Buyer of any monetary encumbrance, which
by the terms of this Agreement is not to remain against the Property after the
Closing, shall not be considered a failure of this contingency, as Seller shall
have the obligation, at Seller's expense, to satisfy and remove such disapproved
monetary encumbrance at or before the Closing.
     (g) Survey. Buyer has 10 days from the receipt of the Title Commitment and
Underlying Documents to satisfy itself with regard to any ALTA title supplement
based upon a survey prepared to American Land Title Association ("ALTA")
standards for an owner's policy by a licensed surveyor, showing the legal
description and boundary lines of the Property, any easements of record, and
any improvements, poles, structures and things located within 10 feet of
either side of the Property boundary lines. Any such survey shall be prepared
at Buyer's direction and expense. If Buyer has obtained a survey and approved
the ALTA title supplement, Buyer may elect within the period allowed for
Buyer's approval of a survey to have an ALTA extended coverage owner's form of
title policy, in which event Buyer shall pay any additional premium
attributable thereto.
     (h) Existing Leases and Tenancy Statements. Seller shall within 10 or ----
days of the Date of Agreement provide both Buyer and Escrow Holder with legible
copies of all leases, subleases or rental arrangements (collectively, "Existing
Leases") affecting the Property, and with a tenancy statement ("Estoppel
Certificate") in the latest form or equivalent to that published by the AIR,
executed by Seller and/or each tenant and subtenant of the Property. Seller
shall use its best efforts to have each tenant complete and execute an Estoppel
Certificate. If any tenant fails or refuses to provide an Estoppel Certificate
then Seller shall complete and execute an Estoppel Certificate for that tenancy.
Buyer has 10 days from the receipt of said Existing Leases and Estoppel
Certificates to satisfy itself with regard to the Existing Leases and any other
tenancy issues.
     (i) Other Agreements. Seller shall within 5 days of the Date of Agreement
provide Buyer with legible copies of all other agreements ("Other Agreements")
known to Seller that will affect the Property after Closing. Buyer has 10 days
from the receipt of said Other Agreements to satisfy itself with regard to such
Agreements.

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          (m) Destruction, Damage or Loss. There shall not have occurred prior
to the Closing, a destruction of, or damage or loss to, the Property or any
portion thereof, from any cause whatsoever, which would cost more than
$10,000.00 to repair or cure. If the cost of repair or cure is $10,000.00 or
less, Seller shall repair or cure the loss prior to the Closing. Buyer shall
have the option, within 10 days after receipt of written notice of a loss
costing more than $10,000.00 to repair or cure, to either terminate this
transaction or to purchase the Property notwithstanding such loss, but without
deduction or offset against the Purchase Price. If the cost to repair or cure is
more than $10,000.00, and Buyer does not elect to terminate this transaction,
Buyer shall be entitled to any insurance proceeds applicable to such loss.
Unless otherwise notified in writing, Escrow Holder shall assume no such
destruction, damage or loss has occurred prior to Closing.

          (n) Material Change. Buyer shall have 10 days following receipt of
written notice of a Material Change within which to satisfy itself with regard
to such change. "MATERIAL CHANGE" shall mean a change in the status of the use,
occupancy, tenants, or condition of the Property that occurs after the date of
this offer and prior to the Closing. Unless otherwise notified in writing,
Escrow Holder shall assume that no Material Change has occurred prior to the
Closing.

          (o) Seller Performance. The delivery of all documents and the due
performance by Seller of each and every undertaking and agreement to be
performed by Seller under this Agreement.

          (p) Warranties. That each representation and warranty of Seller herein
be true and correct as of the Closing. Escrow Holder shall assume that this
condition has been satisfied unless notified to the contrary in writing by any
Party prior to the Closing.

          (q) Brokerage Fee. Payment of the Closing of such brokerage fee as is
specified in this Agreement or later written instructions to Escrow Holder
executed by Seller and Brokers ("BROKERAGE FEE"). It is agreed by the Parties
and Escrow Holder that Brokers are a third party beneficiary of this Agreement
insofar as the Brokerage Fee is concerned, and that no change shall be made with
respect to the payment of the Brokerage Fee specified in this Agreement, without
the written consent of Brokers.

     9.2 All of the contingencies specified in subparagraphs (a) through (p) of
paragraph 9.1 are for the benefit of, and may be waived by, Buyer, and may be
elsewhere herein referred to as "BUYER CONTINGENCIES."

     9.3 If any Buyer's Contingency or any other matter subject to Buyer's
approval is disapproved as provided for herein in a timely manner ("DISAPPROVED
ITEM"), Seller shall have the right within 15 days following the receipt of
notice of Buyer's disapproval to elect to cure such Disapproved Item prior to
the Expected Closing Date ("SELLER'S ELECTION"). Seller's failure to give to
Buyer within such period, written notice of Seller's commitment to cure such
Disapproved Item on or before the Expected Closing Date shall be conclusively
presumed to be Seller's Election not to cure such Disapproved Item. If Seller
elects, either by written notice or failure to give written notice, not to cure
a Disapproved Item, Buyer shall have the election, within 10 days after Seller's
Election to either accept title to the Property subject to such Disapproved
Item, or to terminate this transaction. Buyer's failure to notify Seller in
writing of Buyer's election to accept title to the Property subject to the
Disapproved Item without deduction or offset shall constitute Buyer's election
to terminate this transaction. Unless expressly provided otherwise herein,
Seller's right to cure shall not apply to the remediation of Hazardous Substance
Conditions or to the Financing Contingency. Unless the Parties mutually instruct
otherwise, if the time periods for the satisfaction of contingencies or for
Seller's and Buyer's said Elections would expire on a date after the Expected
Closing Date, the Expected Closing Date shall be deemed extended for 3 business
days following the expiration of: (a) the applicable contingency period(s), (b)
the period within which the Seller may elect to cure the Disapproved Item, or
(c) if Seller elects not to cure, the period within which Buyer may elect to
proceed with this transaction, whichever is later.

     9.4 Buyer understands and agrees that until such time as all Buyer's
Contingencies have been satisfied or waived, Seller and/or its agents may
solicit, entertain and/or accept back-up offers to purchase the subject
Property.

     9.5 The Parties acknowledge that extensive local, state and Federal
legislation establish broad liability upon owners and/or users of real property
for the investigation and remediation of Hazardous Substances. The
determination of the existence of a Hazardous Substance Condition and the
evaluation of the impact of such a condition are highly technical and beyond
the expertise of Brokers. The Parties acknowledge that they have been advised
by Brokers to consult their own technical and legal experts with respect to the
possible presence of Hazardous Substances on this Property or adjoining
properties, and Buyer and Seller are not relying upon any investigation by or
statement of Brokers with respect thereto. The Parties hereby assume all
responsibility for the impact of such Hazardous Substances upon their
respective interests herein.

     10. DOCUMENTS REQUIRED AT OR BEFORE CLOSING:

     10.1 Five days prior to the Closing date Escrow Holder shall obtain an
updated Title Commitment concerning the Property from the Title Company and
provide copies thereof to each of the Parties.

     10.2 Seller shall deliver to Escrow Holder in time for delivery to Buyer
at the Closing:

          (a) Grant or general warranty deed, duly executed and in recordable
form, conveying fee title to the Property to Buyer.

          (b) If applicable, the Beneficiary Statements concerning Existing
Note(s).

          (c) If applicable, the Existing Leases and Other Agreements together
with duly executed assignments thereof by Seller and Buyer. The assignment of
Existing Leases shall be on the most recent Assignment and Assumption of
Lessor's interest in Lease form published by the AIR or its equivalent.

          (d) If applicable, Estoppel Certificates executed by Seller and/or
the tenant(s) of the Property.

          (e) An affidavit executed by Seller to the effect that Seller is not a
"foreign person" within the meaning of Internal Revenue Code Section 1445 or
successor statutes. If Seller does not provide such affidavit in form reasonably
satisfactory to Buyer at least 3 business days prior to the Closing, Escrow
Holder shall at the Closing deduct from Seller's proceeds and remit to Internal
Revenue Service such sum as is required by applicable Federal law with respect
to purchases from foreign sellers.

          (f) If the Property is located in California, an affidavit executed by
Seller to the effect that Seller is not a "nonresident" within the meaning of
California Revenue and Tax Code Section 18662 or successor statutes. If Seller
does not provide such affidavit in form reasonably satisfactory to Buyer at
least 3 business days prior to the Closing, Escrow Holder shall at the Closing
deduct from Seller's proceeds and remit to the Franchise Tax Board such sum as
is required by such statute.

          (g) If applicable, a bill of sale, duly executed, conveying title to
any included personal property to Buyer.

          (h) If the Seller is a corporation, a duly executed corporate
resolution authorizing the execution of this Agreement and the sale of the
Property.

     10.3 Buyer shall deliver to Seller through Escrow:

          (a) The cash portion of the Purchase Price and such additional sums as
are required of Buyer under this Agreement shall be deposited by Buyer with
Escrow Holder, by federal funds wire transfer, or any other method acceptable to
Escrow Holder as immediately collectable funds, no later than 2:00 P.M. on the
business day prior to the Expected Closing Date.

          (b) If a Purchase Money Note and Purchase Money Deed of Trust are
called for by this Agreement, the duly executed originals of those documents,
the Purchase Money Deed of Trust being in recordable form, together with
evidence of fire insurance on the improvements in the amount of the full
replacement cost naming Seller as a mortgage loss payee, and a real estate tax
service contract (at Buyer's expense), assuring Seller of notice of the status
of payment of real property taxes during the life of the Purchase Money Note.

          (c) The Assignment and Assumption of Lessor's Interest in Lease form
specified in paragraph 10.2(c) above, duly executed by Buyer.

          (d) Assumptions duly executed by Buyer of the obligations of Seller
that accrue after Closing under any Other Agreements.

          (e) If applicable, a written assumption duly executed by Buyer of the
loan documents with respect to Existing Notes.

          (f) If the Buyer is a corporation, a duly executed corporate
resolution authorizing the execution of this Agreement and the purchase of the
Property.

     10.4 At Closing, Escrow Holder shall cause to be issued to Buyer a
standard coverage (or ALTA extended, if elected pursuant to 9.1(g)) owner's
form policy of title insurance effective as of the Closing, issued by the Title
Company in the full amount of the Purchase Price, insuring title to the
Property vested in Buyer, subject only to the exceptions approved by Buyer. In
the event there is a Purchase Money Deed of Trust in this transaction, the
policy of title insurance shall be a joint protection policy insuring both
Buyer and Seller.

IMPORTANT: IN A PURCHASE OR EXCHANGE OF REAL PROPERTY, IT MAY BE ADVISABLE TO
OBTAIN TITLE INSURANCE IN CONNECTION WITH THE CLOSE OF ESCROW SINCE THERE MAY
BE PRIOR RECORDED LIENS AND ENCUMBRANCES WHICH AFFECT YOUR INTEREST IN THE
PROPERTY BEING ACQUIRED. A NEW POLICY OF TITLE INSURANCE SHOULD BE OBTAINED IN
ORDER TO ENSURE YOUR INTEREST IN THE PROPERTY THAT YOU ARE ACQUIRING.

11. PRORATIONS AND ADJUSTMENTS.

     11.1 Taxes. Applicable real property taxes and special assessment bonds
shall be prorated through Escrow as of the date of the Closing, based upon the
latest tax bill available. The Parties agree to prorate as of the Closing any
taxes assessed against the Property by supplemental bill levied by reason of
events occurring prior to the Closing. Payment of the prorated amount shall be
made promptly in cash upon receipt of a copy of any

    /s/ JL                                                  /s/ DSG
_______________________                                 _______________________

_______________________                                 _______________________
     Initials                                                  Initials

                                     Page 4
                                    REVISED

2000-AIR Commercial Real Estate Association                     Form OFA-4-8/00E

<PAGE>
supplemental bill.

     11.2 Insurance. WARNING: Any insurance which Seller maintained will
terminate on the Closing. Buyer is advised to obtain appropriate insurance to
cover the Property.

     11.3 Rentals, Interest and Expenses. Scheduled rentals, interest on
Existing Notes, utilities, and operating expenses shall be prorated as of the
date of Closing. The Parties agree to promptly adjust between themselves
outside of Escrow any rents received after the Closing.

     11.4 Security Deposit. Security Deposits held by Seller shall be given to
Buyer as a credit to the cash required of Buyer at the Closing.

     11.5 Post Closing Matters. Any item to be prorated that is not determined
or determinable at the Closing shall be promptly adjusted by the Parties by
appropriate cash payment outside of the Escrow when the amount due is
determined.

     11.6 Variations in Existing Note Balances. In the event that Buyer is
purchasing the Property subject to an Existing Deed of Trust(s), and in the
event that a Beneficiary Statement as to the applicable Existing Note(s)
discloses that the unpaid principal balance of such Existing Note(s) at the
Closing will be more or less than the amount set forth in paragraph 3.1(c)
hereof ("Existing Note Variation"), then the Purchase Money Note(s) shall be
reduced or increased by an amount equal to such Existing Note Variation. If
there is to be no Purchase Money Note, the cash required at the Closing per
paragraph 3.1(a) shall be reduced or increased by the amount of such Existing
Note Variation.

     11.7 Variations in New Loan Balance. In the event Buyer is obtaining a New
Loan and the amount ultimately obtained exceeds the amount set forth in
paragraph 5.1, then the amount of the Purchase Money Note, if any, shall be
reduced by the amount of such excess.

12.  REPRESENTATION AND WARRANTIES OF SELLER AND DISCLAIMERS.

     12.1 Seller's warranties and representations shall survive the Closing and
delivery of the deed for a period of 3 years, and, are true, material and
relied upon by Buyer and Brokers in all respects. Seller hereby makes the
following warranties and representations to Buyer and Brokers:

          (a) Authority of Seller. Seller is the owner of the Property and/or
has the full right, power and authority to sell, convey and transfer the
Property to Buyer as provided herein, and to perform Seller's obligations
hereunder.

          (b) Maintenance During Escrow and Equipment Condition At Closing.
Except as otherwise provided in paragraph 9.1(m) hereof, Seller shall maintain
the Property until the Closing in its present condition, ordinary wear and tear
excepted. The HVAC, plumbing, elevators, loading doors and electrical systems
shall be in good operating order and condition at the time of Closing.

          (c) Hazardous Substances/Storage Tanks. Seller has no knowledge,
except as otherwise disclosed to Buyer in writing, of the existence or prior
existence on the Property of any Hazardous Substance, nor of the existence or
prior existence of any above or below ground storage tank.

          (d) Compliance. Seller has no knowledge of any aspect or condition of
the Property which violates applicable laws, rules, regulations, codes or
covenants, conditions or restrictions, or of improvement or alterations made to
the Property without a permit where one was required, or of any unfulfilled
order or directive of any applicable governmental agency or casualty insurance
company requiring any investigation, remediation, repair, maintenance or
improvement be performed on the Property.

          (e) Changes in Agreements. Prior to the Closing, Seller will not
violate or modify any Existing Lease or Other Agreement, or create any new
leases or other agreements affecting the Property, without Buyer's written
approval, which approval will not be unreasonably withheld.

          (f) Possessory Rights. Seller has no knowledge that anyone will, at
the Closing, have any right to possession of the Property, except as disclosed
by this Agreement or otherwise in writing to Buyer.

          (g) Mechanics' Liens. There are no unsatisfied mechanics' or
materialmens' lien rights concerning the Property.

          (h) Actions, Suits or Proceedings. Seller has no knowledge of any
actions, suits or proceedings pending or threatened before any commission,
board, bureau, agency, arbitrator, court or tribunal that would affect the
Property or the right to occupy or utilize same.

          (i) Notice of Changes. Seller will promptly notify Buyer and Brokers
in writing of any Material Change (see paragraph 9.1(n)) affecting the Property
that becomes known to Seller prior to the Closing.

          (j) No Tenant Bankruptcy Proceedings. Seller has no notice or
knowledge that any tenant of the Property is the subject of a bankruptcy or
insolvency proceeding.

          (k) No Seller Bankruptcy Proceedings. Seller is not the subject of a
bankruptcy, insolvency or probate proceeding.

          (l) Personal Property. Seller has no knowledge that anyone will, at
the Closing, have any right to possession of any personal property included in
the Purchase Price nor knowledge of any liens or encumbrances affecting such
personal property, except as disclosed by this Agreement or otherwise in
writing to Buyer.

     12.2 Buyer hereby acknowledges that, except as otherwise stated in this
Agreement, Buyer is purchasing the Property in its existing condition and will,
by the time called for herein, make or have waived all inspections of the
Property Buyer believes are necessary to protect its own interest in, and its
contemplated use of, the Property. The Parties acknowledge that, except as
otherwise stated in this Agreement, no representations, inducements, promises,
agreements, assurances, oral or written, concerning the Property, or any aspect
of the occupational safety and health laws, Hazardous Substance laws, or any
other act, ordinance or law, have been made by either Party or Brokers, or
relied upon by either Party hereto.

     12.3 In the event that Buyer learns that a Seller representation or
warranty might be untrue prior to the Closing, and Buyer elects to purchase the
Property anyway then, and in that event, Buyer waives any right that it may
have to bring an action or proceeding against Seller or Brokers regarding said
representation or warranty.

     12.4 Any environmental reports, soils reports, surveys, and other similar
documents which were prepared by third party consultants and provided to Buyer
by Seller or Seller's representatives, have been delivered as an accommodation
to Buyer and without any representation or warranty as to the sufficiency,
accuracy, completeness, and/or validity of said documents, all of which Buyer
relies on at its own risk. Seller believes said documents to be accurate, but
Buyer is advised to retain appropriate consultants to review said documents and
investigate the Property.

13.  POSSESSION.
Possession of the Property shall be given to Buyer at the Closing.

14.  BUYER'S ENTRY.
At any time during the Escrow period, Buyer, and its agents and representatives,
shall have the right at reasonable times and subject to rights of tenants, to
enter upon the Property for the purpose of making inspections and tests
specified in this Agreement. No destructive testing shall be conducted, however,
without Seller's prior approval which shall not be unreasonably withheld.
Following any such entry or work, unless otherwise directed in writing by
Seller, Buyer shall return the Property to the condition it was in prior to such
entry or work, including the recompaction or removal of any disrupted soil or
material as Seller may reasonably direct. All such inspections and tests and any
other work conducted or materials furnished with respect to the Property by or
for Buyer shall be paid for by Buyer as and when due and Buyer shall indemnify,
defend, protect and hold harmless Seller and the Property of and from any and
all claims, liabilities, losses, expenses (including reasonable attorneys'
fees), damages, including those for injury to person or property, arising out of
or relating to any such work or materials or the acts or omissions of Buyer, its
agents or employees in connection therewith.

15. FURTHER DOCUMENTS AND ASSURANCES.
The Paries shall each, diligently and in good faith, undertake all actions and
procedures reasonably required to place the Escrow in condition for Closing as
and when required by this Agreement. The Parties agree to provide all further
information, and to execute and deliver all further documents, reasonably
required by Escrow Holder or the Title Company.

17.  PRIOR AGREEMENTS/AMENDMENTS.

     17.1 This Agreement supersedes any and all prior agreements between Seller
and Buyer regarding the Property.

     17.2 Amendments to this Agreement are effective only if made in writing
and executed by Buyer and Seller.

18.  BROKER'S RIGHTS.

     18.2 Upon the Closing, Brokers are not authorized to publicize the facts
of this transaction.

19.  NOTICES.

     19.1 Whenever any Party, Escrow Holder or Brokers herein shall desire to
give or serve any notice, demand, request, approval, disapproval or other
communication, each such communication shall be in writing and shall be
delivered personally, by messenger or by mail, postage prepaid, to the address
set forth in this Agreement or by facsimile transmission.

     19.2 Service of any such communication shall be deemed made on the date of
actual receipt if personally delivered. Any such communication sent by regular
mail shall be deemed given 48 hours after the same is mailed. Communications
sent by United States Express Mail or overnight courier that guarantee next day
delivery shall be deemed delivered 24 hours after delivery of the same to the
Postal Service or courier. Communications transmitted by facsimile transmission
shall be deemed delivered upon telephonic confirmation of receipt (confirmation
report from fax machine is sufficient), provided a copy is also delivered via
delivery or mail. If such communication is received on a Saturday, Sunday or
legal holiday, it shall be deemed received on the next business day.

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2000-AIR COMMERCIAL REAL ESTATE ASSOCIATION

<PAGE>
     19.3 Any Party or Broker hereto may from time to time, by notice in
writing, designate a different address to which, or a different person or
additional persons to whom, all communications are thereafter to be made.

20.  DURATION OF OFFER.

     20.1 If this offer is not accepted by Seller on or before 5:00 P.M.
according to the time standard applicable to the city of Fremont on the date of
April 16, 2004, it shall be deemed automatically revoked.

     20.2 The acceptance of this offer, or of any subsequent counteroffer
hereto, that creates an agreement between the Parties as described in paragraph
1.2, shall be deemed made upon delivery to the other Party or either Broker
herein of a duly executed writing unconditionally accepting the last outstanding
offer or counteroffer.

21.  LIQUIDATED DAMAGES. (This Liquidated Damages paragraph is applicable only
if initialed by both Parties).

THE PARTIES AGREE THAT IT WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX,
PRIOR TO SIGNING THIS AGREEMENT, THE ACTUAL DAMAGES WHICH WOULD BE SUFFERED BY
SELLER IF BUYER FAILS TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT.
THEREFORE, IF, AFTER THE SATISFACTION OR WAIVER OF ALL CONTINGENCIES PROVIDED
FOR THE BUYER'S BENEFIT, BUYER BREACHES THIS AGREEMENT, SELLER SHALL BE ENTITLED
TO LIQUIDATED DAMAGES IN THE AMOUNT OF $200,000.00. UPON PAYMENT OF SAID SUM TO
SELLER, BUYER SHALL BE RELEASED FROM ANY FURTHER LIABILITY TO SELLER, AND ANY
ESCROW CANCELLATION FEES AND TITLE COMPANY CHARGES SHALL BE PAID BY SELLER. THE
LIQUIDATED DAMAGES ARE THE SELLER'S, BUYER'S BROKER'S, AND SELLER'S BROKER'S
SOLE REMEDY AGAINST BUYER IF BUYER DEFAULTS OR BREACHES THIS AGREEMENT.

                   /s/ JL                          /s/ DSG
               --------------------          --------------------
                  BUYER INITIALS                SELLER INITIALS

22.  ARBITRATION OF DISPUTES. (This Arbitration of Disputes paragraph is
applicable only if initialed by both Parties.)

     22.1 ANY CONTROVERSY AS TO WHETHER SELLER IS ENTITLED TO THE LIQUIDATED
DAMAGES AND/OR BUYER IS ENTITLED TO THE RETURN OF DEPOSIT MONEY, SHALL BE
DETERMINED BY BINDING ARBITRATION BY, AND UNDER THE COMMERCIAL RULES OF THE
AMERICAN ARBITRATION ASSOCIATION ("COMMERCIAL RULES"). ARBITRATION HEARINGS
SHALL BE HELD IN THE COUNTY WHERE THE PROPERTY IS LOCATED. ANY SUCH CONTROVERSY
SHALL BE ARBITRATED BY 3 ARBITRATORS WHO SHALL BE IMPARTIAL REAL ESTATE BROKERS
WITH AT LEAST 5 YEARS OF FULL TIME EXPERIENCE IN BOTH THE AREA WHERE THE
PROPERTY IS LOCATED AND THE TYPE OF REAL ESTATE THAT IS THE SUBJECT OF THIS
AGREEMENT. THEY SHALL BE APPOINTED UNDER THE COMMERCIAL RULES. THE ARBITRATORS
SHALL HEAR AND DETERMINE SAID CONTROVERSY IN ACCORDANCE WITH APPLICABLE LAW, THE
INTENTION OF THE PARTIES AS EXPRESSED IN THIS AGREEMENT AND ANY AMENDMENTS
THERETO, AND UPON THE EVIDENCE PRODUCED AT AN ARBITRATION HEARING.
PRE-ARBITRATION DISCOVERY SHALL BE PERMITTED IN ACCORDANCE WITH THE COMMERCIAL
RULES OR STATE LAW APPLICABLE TO ARBITRATION PROCEEDINGS. THE AWARD SHALL BE
EXECUTED BY AT LEAST 2 OF THE 3 ARBITRATORS, BE RENDERED WITHIN 30 DAYS AFTER
THE CONCLUSION OF THE HEARING, AND MAY INCLUDE ATTORNEYS' FEES AND COSTS TO THE
PREVAILING PARTY PER PARAGRAPH 16 HEREOF. JUDGMENT MAY BE ENTERED ON THE AWARD
IN ANY COURT OF COMPETENT JURISDICTION NOTWITHSTANDING THE FAILURE OF A PARTY
DULY NOTIFIED OF THE ARBITRATION HEARING TO APPEAR THEREAT.

     22.2 BUYER'S RESORT TO OR PARTICIPATION IN SUCH ARBITRATION PROCEEDINGS
SHALL NOT BAR SUIT IN A COURT OF COMPETENT JURISDICTION BY THE BUYER FOR DAMAGES
AND/OR SPECIFIC PERFORMANCE UNLESS AND UNTIL THE ARBITRATION RESULTS IN AN AWARD
TO THE SELLER OF LIQUIDATED DAMAGES, IN WHICH EVENT SUCH AWARD SHALL ACT AS A
BAR AGAINST ANY ACTION BY BUYER FOR DAMAGES AND/OR SPECIFIC PERFORMANCE.

     22.3 NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU
ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A
COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY
INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO
THIS ARBITRATION PROVISION IS VOLUNTARY.

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO
NEUTRAL ARBITRATION.

                   /s/ JL                          /s/ DSG
               --------------------          --------------------
                  BUYER INITIALS                SELLER INITIALS

23.  MISCELLANEOUS

     23.1  BINDING EFFECT.  This Agreement shall be binding on the Parties
without regard to whether or not paragraphs 21 and 22 are initialed by both of
the Parties. Paragraphs 21 and 22 are each incorporated into this Agreement only
if initialed by both Parties at the time that the Agreement is executed.

     23.2  APPLICABLE LAW.  This Agreement shall be governed by, and paragraph
22.3 is amended to refer to, the laws of the state in which the Property is
located.

     23.3  TIME OF ESSENCE. Time is of the essence of this Agreement.

     23.4  COUNTERPARTS. This Agreement may be executed by Buyer and Seller in
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. Escrow Holder, after
verifying that the counterparts are identical except for the signatures, is
authorized and instructed to combine the signed signature pages on one of the
counterparts, which shall then constitute the Agreement.

     23.5  WAIVER OF JURY TRIAL. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR
ARISING OUT OF THIS AGREEMENT.

     23.6  CONFLICT.  Any conflict between the printed provisions of this
Agreement and the typewritten or handwritten provisions shall be controlled by
the typewritten or handwritten provisions.

24.  DISCLOSURES REGARDING THE NATURE OF A REAL ESTATE AGENCY RELATIONSHIP.

     24.1 The Parties and Brokers agree that their relationship(s) shall be
governed by the principles set forth in the applicable sections of the
California Civil Code, as summarized in paragraph 24.2.

     24.2 When entering into a discussion with a real estate agent regarding a
real estate transaction, a Buyer or Seller should from the outset understand
what type of agency relationship or representation it has with the agent or
agents in the transaction. Buyer and Seller acknowledge being advised by the
Brokers in this transaction, as follows:

          (a) Seller's Agent. A Seller's agent under a listing agreement with
the Seller acts as the agent for the Seller only. A Seller's agent or subagent
has the following affirmative obligations: (1) To the Seller: A fiduciary duty
of utmost care, integrity, honesty, and loyalty in dealings with the Seller. (2)
To the Buyer and the Seller: a. Diligent exercise of reasonable skills and care
in performance of the agent's duties. b. A duty of honest and fair dealing and
good faith. c. A duty to disclose all facts known to the agent materially
affecting the value or desirability of the property that are not known to, or
within the

   /s/ JL                                                         /s/ DSG
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                                     Page 6
                                    REVISED
<PAGE>
diligent attention and observation of, the Parties. An agent is not obligated
to reveal to either Party any confidential information obtained from the other
Party which does not involve the affirmative duties set forth above.

          (b) Buyer's Agent.  A selling agent can, with a Buyer's consent, agree
to act as agent for the Buyer only. In these situations, the agent is not the
Seller's agent, even if by agreement the agent may receive compensation for
services rendered, either in full or in part from the Seller. An agent acting
only for a Buyer has the following affirmative obligations: (1) To the Buyer: A
fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with
the Buyer. (2) To the Buyer and the Seller: a. Diligent exercise of reasonable
skills and care in performance of the agent's duties. b. A duty of honest and
fair dealing and good faith. c. A duty to disclose all facts known to the agent
materially affecting the value or desirability of the property that are not
known to, or within the diligent attention and observation of, the Parties. An
agent is not obligated to reveal to either Party any confidential information
obtained from the other Party which does not involve the affirmative duties set
forth above.

          (c) Agent Representing Both Seller and Buyer: A real estate agent,
either acting directly or through one or more associate licenses, can legally be
the agent of both the Seller and the Buyer in a transaction, but only with the
knowledge and consent of both the Seller and the Buyer. (1) In a dual agency
situation, the agent has the following affirmative obligations to both the
Seller and the Buyer: a. A fiduciary duty of utmost care, integrity, honesty and
loyalty in the dealings with either Seller or the Buyer. b. Other duties to the
Seller and the Buyer as stated above in their respective sections (a) or (b) of
this paragraph 24.2. (2) In representing both Seller and Buyer, the agent may
not without the express permission of the respective Party, disclose to the
other Party that the Seller will accept a price less than the listing price or
that the Buyer will pay a price greater than the price offered. (3) The above
duties of the agent in a real estate transaction do not relieve a Seller or
Buyer from the responsibility to protect their own interests. Buyer and Seller
should carefully read all agreements to assure that they adequately express
their understanding of the transaction. A real estate agent is a person
qualified to advise about real estate. If legal or tax advice is desired,
consult a competent professional.

          (d) Further Disclosures. Throughout this transaction Buyer and Seller
may receive more than one disclosure, depending upon the number of agents
assisting in the transaction. Buyer and Seller should each read its contents
each time it is presented, considering the relationship between them and the
real estate agent in this transaction and that disclosure. Brokers have no
responsibility with respect to any default or breach hereof by either Party. The
liability (including court costs and attorneys' fees), of any Broker with
respect to any breach of duty, error or omission relating to this Agreement
shall not exceed the fee received by such Broker pursuant to this Agreement;
provided, however, that the foregoing limitation on each Broker's liability
shall not be applicable to any gross negligence or willful misconduct of such
Broker.

     24.3 Confidential Information: Buyer and Seller agree to identify to
Brokers as "Confidential" any communication or information given Brokers that
is considered by such Party to be confidential.

25.  CONSTRUCTION OF AGREEMENT. In construing this Agreement, all headings and
titles are for the convenience of the parties only and shall not be considered
a part of this Agreement. Whenever required by the context, the singular shall
include the plural and vice versa. Unless otherwise specifically indicated to
the contrary, the word "days" as used in this Agreement shall mean and refer to
calendar days. This Agreement shall not be construed as if prepared by one of
the parties, but rather according to its fair meaning as a whole, as if both
parties had prepared it.

26.  ADDITIONAL PROVISIONS:
Additional provisions of this offer, if any, are as follows or are attached
hereto by an addendum consisting of paragraphs A through C. (If there are no
additional provisions write "NONE".)

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ATTACHMENTS:   California Sale/Lease Americans with Disabilities Act, Hazardous
               Materials, and Tax Disclosure
               Receipt for Earthquake Safety & Fault-Rupture Hazard Zones
               booklets
               The Commercial Property Owner's Guide to Earthquake Safety
               booklet
               Fault-Rupture Hazard Zones in California booklet

--------------------------------------------------------------------------------
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL
REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS AGREEMENT OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:

1.   SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
AGREEMENT.
2.   RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PROPERTY. SAID INVESTIGATION SHOULD
INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES,
THE ZONING OF THE PROPERTY, THE INTEGRITY AND CONDITION OF ANY STRUCTURES AND
OPERATING SYSTEMS, AND THE SUITABILITY OF THE PROPERTY FOR BUYER'S INTENDED USE.

WARNING: IF THE PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THIS AGREEMENT MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF
THE STATE IN WHICH THE PROPERTY IS LOCATED.
--------------------------------------------------------------------------------

NOTE:
     1.   THIS FORM IS NOT FOR USE IN CONNECTION WITH THE SALE OF RESIDENTIAL
PROPERTY.
     2.   IF THE BUYER IS A CORPORATION, IT IS RECOMMENDED THAT THIS AGREEMENT
BE SIGNED BY TWO CORPORATE OFFICERS.
THE UNDERSIGNED BUYER OFFERS AND AGREES TO BUY THE PROPERTY ON THE TERMS AND
CONDITIONS STATED AND ACKNOWLEDGES RECEIPT OF A COPY HEREOF.

BROKER:                                 BUYER:

Mr. David Mein                          Oplink Communications, Inc. or Assignee
----------------------------------      ---------------------------------------
Colliers International                  /s/ Joe Liu
----------------------------------      ---------------------------------------
Attn:                                   By:
     -----------------------------         ------------------------------------
Title: Vice President                   Date:
       ---------------------------           ----------------------------------
Address:                                Name Printed: Joe Liu
        --------------------------                   --------------------------
                                        Title: CEO
----------------------------------            ---------------------------------
Telephone:                              Telephone/Facsimile:
          ------------------------                          -------------------
Facsimile:
          ------------------------
Federal ID No.:                         By:
               -------------------         ------------------------------------
                                        Date: 4-15-04
                                             ----------------------------------
                                        Name Printed:
                                                     --------------------------
                                        Title:
                                              ---------------------------------
                                        Address:
                                                -------------------------------

    JL                                                                DSG
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                                    REVISED

2000-AIR COMMERCIAL REAL ESTATE ASSOCIATION                     FORM OFA-4-8/00E
<PAGE>

                                       Telephone/Facsimile: ____________________
                                       Federal ID No. __________________________

27. Acceptance.

      27.1 Seller accepts the foregoing offer to purchase the Property and
hereby agrees to sell the Property to Buyer on the terms and conditions therein
specified.

      27.2 Seller acknowledges that Brokers have been retained to locate a Buyer
and are the procuring cause of the purchase and sale of the Property set forth
in this Agreement. In consideration of real estate brokerage service rendered by
Brokers, Seller agrees to pay Brokers a real estate Brokerage Fee in a sum equal
to per separate agreement% of the Purchase Price divided in such shares as said
Brokers shall direct in writing. This Agreement shall serve as an irrevocable
instruction to Escrow Holder to pay such Brokerage Fee to Brokers out of the
proceeds accruing to the account of Seller at the Closing. Seller is solely
liable for the brokerage fees for the brokers of Seller and Buyer.

      27.3 Seller acknowledges receipt of a copy hereof and authorizes Brokers
to deliver a signed copy to Buyer.

NOTE: A PROPERTY INFORMATION SHEET IS REQUIRED TO BE DELIVERED TO BUYER BY
SELLER UNDER THIS AGREEMENT.

BROKER:                                 SELLER:
John Serex                              Dianne S. Gagos & Mitchell S. Gagos,
----------------------------------      Trustees, The Dianne S. Gagos Survivors
Attn: /s/ John Serex                    Trust, U/I/D April 8, 1992
----------------------------------      ----------------------------------------
                                        By: /s/ Dianne S. Gagos
                                        ----------------------------------------
Title: Vice President                   Date: 4-15-04
----------------------------------      ----------------------------------------
Address: 1732 N. First Street,          Name Printed: Dianne S. Gagos
Suite 100                               ----------------------------------------
San Jose, CA 95112                      Title: Co-Trustee
----------------------------------      ----------------------------------------
Telephone:                              Telephone/Facsimile:
----------------------------------      ----------------------------------------
Facsimile:                              By:
----------------------------------      ----------------------------------------
                                        Date:
Federal ID No.                          ----------------------------------------
----------------------------------

                                        Dianne S. Gagos & Mitchell S. Gagos,
                                        Trustees, The George S. Gagos
                                        Marital Trust, U/I/D April 8 1992
                                        By: /s/ Dianne S. Gagos
                                        ----------------------------------------
                                        Date: 4-15-04
                                        ----------------------------------------
                                        By:
                                        ----------------------------------------
                                        Date:
                                        ----------------------------------------
                                        Name Printed:
                                        ----------------------------------------
                                        Title:
                                        ----------------------------------------
                                        Address:
                                        ----------------------------------------
                                        Telephone/Facsimile:
                                        ----------------------------------------
                                        Federal ID No.
                                        ----------------------------------------

These forms are often modified to meet changing requirements of law and needs of
the industry. Always write or call to make sure you are utilizing the most
current form: AIR Commercial Real Estate Association, 700 South Flower Street,
Suite 600, Los Angeles, CA 90017, (213) 687-8777.

          (c)Copyright 2000-By AIR Commercial Real Estate Association.
                              All Rights Reserved.

          No part of these works may be reproduced in any form without
                             permission in writing.

       JL                                                            DSG
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2000-AIR Commercial Real Estate Association       REVISED       Form OFA-4-8/00E
<PAGE>
ADDENDUM TO THAT CERTAIN STANDARD OFFER, AGREEMENT AND ESCROW INSTRUCTIONS FOR
PURCHASE OF REAL ESTATE DATED APRIL 15, 2004 (FOR REFERENCE PURPOSES ONLY)
WHEREIN DIANNE S. GAGOS & MITCHELL S. GAGOS, TRUSTEES, THE DIANNE S. GAGOS
SURVIVORS TRUST, U/I/D APRIL 8, 1992 AND DIANNE S. GAGOS & MITCHELL S. GAGOS,
TRUSTEES, THE GEORGE S. GAGOS MARITAL TRUST, U/I/D APRIL 8, 1992 IS THE SELLER,
AND OPLINK COMMUNICATIONS, INC. OR ASSIGNEE IS THE BUYER, AND 46305-46335
LANDING PARKWAY, FREMONT, CALIFORNIA IS THE SUBJECT PREMISES.

A. SELLER'S 1031 EXCHANGE

   Should the Seller desire to utilize the Property as replacement property in a
   tax deferred exchange under Section 1031 of the Internal Revenue Code (the
   "Exchange"), then the Buyer agrees to use reasonable efforts to cooperate
   with the Seller with respect to any Exchange, including the execution at the
   time of performance of all documents necessary to effect such Exchange.
   Notwithstanding any term in this Agreement, the Buyer agrees:

     (1) that any Exchange shall be at no expense to the Buyer, and the Buyer
         shall incur no unreimbursed cost or expense in connection with the
         Exchange, including, without limitation, deed excise taxes, transfer
         fees, recording fees, property taxes, facilitation fees, or costs not
         otherwise provided for in this Purchase Agreement;

     (2) the Buyer shall have no personal liability with respect to the Exchange
         and shall not be required to purchase or take title to any property;
         and

     (3) the Closing Date shall not be postponed due to such Exchange.

B. NO REPRESENTATIONS BY BROKER

   Seller and Buyer understand that Brokers have not made any determination or
   representation other than what is specifically expressed in this Agreement
   regarding the usability of the Property; the past, present, or future zoning,
   the structural, mechanical, electrical, or other status of building, any
   leases or other agreements affecting the Property, the condition of the soil
   on the Property, including, but not limited to, the presence in or under the
   soil of any underground improvements, tanks, or hazardous or toxic wastes;
   the presence or absence, past or present, of toxic or hazardous materials or
   wastes on the Property or in groundwater thereunder; the compliance with or
   violation of any Federal, State, County, or Municipal ordinances, statutes,
   building code or permit compliance or regulations by Seller, or any tenant of
   Seller, the existence of physical defects in the Property, and/or the state
   of title to the Property. Seller fully indemnifies brokers from any and all
   liability associated with this transaction and will survive beyond the close
   of escrow.

   Buyer is advised that any representation of square footage with respect to
   the Property and any improvements thereon are approximations only, which may
   be inaccurate. Buyer acknowledges that the Purchase Price is not based on the
   square footage of any improvements or lot size.

C. SELLER'S OPTION TO EXTEND THE CLOSE OF ESCROW

   The Sellers shall have two (2) options to extend the close of escrow for
   thirty (30) days for each option period. Seller shall provide the Buyer with
   seven (7) days written notice prior to their scheduled close of escrow date
   to exercise said options.

READ AND AGREED:

BUYER: Oplink Communications, Inc.  SELLER: Dianne S. Gagos & Mitchell S. Gagos,
       or Assignee                          Trustees, The Dianne S. Gagos
                                            Survivors Trust, U/I/D April 8, 1992

By: /s/ Joe Liu                     By: /s/ Dianne S. Gagos
   ------------------------------      --------------------------------

Date:    4-15-04                    Date: 4-15-04
     ----------------------------        ------------------------------

                                    By:
                                       --------------------------------

                                    Date:
                                         ------------------------------

                                            Dianne S. Gagos & Mitchell S. Gagos,
                                            Trustees, the George S. Gagos
                                            Marital Trust, U/I/D April 8, 1992

                                    By: /s/ Dianne S. Gagos
                                       --------------------------------

                                    Date: 4-15-04
                                         ------------------------------

                                    By:
                                       --------------------------------

                                    Date:
                                         ------------------------------

                                     Page 9

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