Document:

chk90242010_43.htm

Exhibit 4.3

 

 

CHESAPEAKE ENERGY CORPORATION

 

as Issuer,

 

THE SUBSIDIARY GUARANTORS PARTY HERETO

 

as Subsidiary Guarantors,

 

and

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

 

As Trustee

 

 

 

SECOND SUPPLEMENTAL INDENTURE

 

 

Dated August 17, 2010

 

To

 

Indenture dated as of August 2, 2010

 

$1,400,000,000

 

 

6.625% Senior Notes due 2020

 

  

  

  

TABLE OF CONTENTS

Page

 

	
ARTICLE 1

	
THE SECURITIES 

	
1     

 

	
  

	
Section 1.1

	
The Securities 

	
1   

 

	
  

	
Section 1.2

	
Authentication 

	
2   

 

	
  

	
Section 1.3

	
Registrar and Paying Agent 

	
2   

 

	
  

	
Section 1.4

	
Transfer and Exchange 

	
2   

 

	
  

	
Section 1.5

	
Guarantee of the Notes 

	
2   

 

	
  

	
Section 1.6

	
Defeasance and Discharge 

	
2   

 

	
  

	
Section 1.7

	
Redemption 

	
3   

 

	
ARTICLE 2

	
MISCELLANEOUS PROVISIONS 

	
4   

 

	
  

	
Section 2.1

	
Counterpart Originals 

	
4   

 

	
  

	
Section 2.2

	
Governing Law 

	
4   

 

	  	
 

	  

  

  

 

  

THIS SECOND SUPPLEMENTAL INDENTURE dated as of August 17, 2010 (this "Supplemental Indenture"), is among Chesapeake Energy Corporation, an Oklahoma corporation (the "Company"), the Subsidiary Guarantors party hereto and The Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the "Trustee").  Each capitalized term used but not defined herein shall have the meaning assigned to such term in the Base Indenture (as defined below).

 

RECITALS:

 

WHEREAS, the Company, the Subsidiary Guarantors and the Trustee are parties to an Indenture, dated as of August 2, 2010 (the "Base Indenture" and as supplemented by this Supplemental Indenture, the "Indenture"), providing for the issuance by the Company from time to time of its debentures, notes, bonds and other evidences of indebtedness, issued and to be issued in one or more series unlimited as to principal amount (the "Securities"), and the guarantee by each Subsidiary Guarantor of the Securities (the "Guarantee");

 

WHEREAS, the Company has duly authorized and desires to cause to be issued pursuant to the Indenture a new series of Securities designated the 6.625% Senior Notes due 2020 (the "Notes"), all of such Notes to be guaranteed by the Subsidiary Guarantors as provided in Article Ten of the Base Indenture;

 

WHEREAS, the Company desires to cause the issuance of the Notes pursuant to Sections 2.01 and 2.03 of the Base Indenture, which sections permit the execution of indentures supplemental thereto to establish the form and terms of Securities of any series;

 

WHEREAS, pursuant to Section 9.01 of the Base Indenture, the Company and the Subsidiary Guarantors have requested that the Trustee join in the execution of this Supplemental Indenture to establish the form and terms of the Notes;

 

WHEREAS, all things necessary have been done to make the Notes, when executed by the Company and authenticated and delivered hereunder and under the Base Indenture and duly issued by the Company, and the Guarantee of the Subsidiary Guarantors, when the Notes are duly issued by the Company, the legal, valid and binding obligations of the Company and the Subsidiary Guarantors, respectively, and to make this Supplemental Indenture a legal, valid and binding agreement of the Company and the Subsidiary Guarantors enforceable in accordance with its terms.

 

NOW THEREFORE, the Company, the Subsidiary Guarantors and the Trustee hereby agree that the following provisions shall supplement the Base Indenture:

 

ARTICLE 1

THE NOTES

 

Section 1.1 Form.  The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A to this Supplemental Indenture (the "Form of Note").  The terms and provisions contained in the Form of Note shall constitute, and are hereby expressly made, a part of this Supplemental Indenture and to the extent applicable, the Company, the Subsidiary Guarantors and the Trustee, by their execution and delivery of this Supplemental Indenture, expressly agree to such terms and provisions and to be bound thereby.

 

Section 1.2 Title, Issuance.  The Notes shall be entitled the "6.625% Senior Notes due 2020".  The Notes shall be issued initially in the form of one or more Global Securities in definitive, fully registered form and shall be deposited on behalf of the purchasers of the Notes with the Trustee, at its principal corporate trust office, as custodian for The Depository Trust Company, which is hereby appointed Depositary for the Global Securities (the "Depositary").  The Notes shall be registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided.  The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided.

 

Except as provided in Section 2.13 of the Indenture, owners of beneficial interests in Global Securities shall not be entitled to receive physical delivery of certificated Notes.  The Notes shall be issued in denominations of $1,000 and integral multiples of $1,000 in excess thereof.

 

The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depositary, in accordance with Section 2.13 of the Base Indenture and the rules and procedures of the Depositary therefor.

 

Section 1.3 Amount, Authentication.

 

The Trustee shall authenticate and deliver (i) on the Issue Date, $1,400,000,000 in aggregate principal amount of the Notes and (ii) from time to time after the Issue Date, additional Notes ("Additional Notes") in such principal amounts as may be specified in a Company Order described in this Section 1.3, in each case upon a Company Order for the authentication and delivery thereof and satisfaction of the other provisions of Section 2.05 of the Base Indenture.  Such order shall specify the amount of the Notes to be authenticated, the date on which the Notes are to be authenticated, and the name or names of the initial Holder or Holders.  The aggregate principal amount of Notes that may be outstanding at any time may not exceed $1,400,000,000 plus such additional principal amounts as may be issued and authenticated pursuant to clause (ii) of this paragraph (except as provided in Section 2.10 of the Base Indenture).

 

Section 1.4 Registrar and Paying Agent.  The Company confirms the appointment of the Trustee as Registrar and Paying Agent with respect to the Notes pursuant to Section 2.06 of the Base Indenture.

 

Section 1.5 Guarantee of the Notes.

 

In accordance with Article Ten of the Base Indenture, the Notes will be fully, unconditionally and absolutely guaranteed on a senior basis, jointly and severally, by the Subsidiary Guarantors.

 

Section 1.6 Defeasance and Discharge.

 

The Notes shall be subject to satisfaction and discharge and to both legal defeasance and covenant defeasance as contemplated by Articles Eight and Twelve of the Base Indenture.

 

Section 1.7 Redemption.

 

(a)  The Company shall have no obligation to redeem, purchase or repay the Notes pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a Holder thereof.

 

(b)  At any time prior to the Maturity Date, the Company, at its option, may redeem the Notes in whole or from time to time in part for an amount equal to the Make-Whole Price plus accrued and unpaid interest to the date of redemption in accordance with the Form of Note.

 

ARTICLE 2

MISCELLANEOUS PROVISIONS

 

Section 2.1 Counterpart Originals.

 

The parties may sign any number of copies of this Supplemental Indenture.  Each signed copy shall be an original, but all of them together represent the same instrument.

 

Section 2.2 Governing Law.

 

THIS SUPPLEMENTAL INDENTURE AND THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY, EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE OF NEW YORK WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION REGARDING THE VALIDITY OF THE NOTES AND THE GUARANTEES.

 

  

  

 

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written.

 

	
COMPANY:

 

CHESAPEAKE ENERGY CORPORATION

 

	
By:

	/s/ JENNIFER M. GRIGSBY  
	  	
Name:   Jennifer M. Grigsby

	  	
Title:     Senior Vice President, Treasurer

              and Corporate Secretary

  

  

 

  

	
SUBSIDIARY GUARANTORS:

 

	
CARMEN ACQUISITION, L.L.C.

CHESAPEAKE AEZ EXPLORATION, L.L.C.

CHESAPEAKE APPALACHIA, L.L.C.

CHESAPEAKE-CLEMENTS ACQUISITION, L.L.C.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE ENERGY MARKETING, INC.

CHESAPEAKE EXPLORATION, L.L.C.

CHESAPEAKE LAND DEVELOPMENT COMPANY, L.L.C.

CHESAPEAKE OPERATING, INC.

CHESAPEAKE PLAZA, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

CHK HOLDINGS, L.L.C.

COMPASS MANUFACTURING, L.L.C.

DIAMOND Y ENTERPRISE, INCORPORATED

GENE D. YOST & SON, INC.

GOTHIC PRODUCTION, L.L.C.

GREAT PLAINS OILFIELD RENTAL, L.L.C.

HAWG HAULING & DISPOSAL, LLC

HODGES TRUCKING COMPANY, L.L.C.

MC LOUISIANA MINERALS, L.L.C.

MC MINERAL COMPANY, L.L.C.

MIDCON COMPRESSION, L.L.C.

NOMAC DRILLING, L.L.C.

VENTURA REFINING AND TRANSMISSION. LLC

	  
	
By:

	/s/ JENNIFER M. GRIGSBY  
	  	
Name:   Jennifer M. Grigsby

	  	
Title:     Senior Vice President, Treasurer

              and Corporate Secretary

  

  

 

  

	  
	  
	
CHESAPEAKE LOUISIANA, L.P.

	  
	
By:

 

	
Chesapeake Operating, Inc., as general partner

	  	  
	  	  
	
By:

	/s/ JENNIFER M. GRIGSBY  
	  	
Name:   Jennifer M. Grigsby

Title:     Senior Vice President, Treasurer

              and Corporate Secretary

	  
	  
	
EMPRESS LOUISIANA PROPERTIES, L.P.

	  
	
By:

 

	
EMLP, L.L.C., as general partner

	  	  
	  	  
	
By:

	/s/ JENNIFER M. GRIGSBY  
	  	
Name:   Jennifer M. Grigsby

Title:     Senior Vice President, Treasurer

              and Corporate Secretary

 

  

  

 

  

	
TRUSTEE:

THE BANK OF NEW YORK MELLON TRUST     COMPANY, N.A., AS TRUSTEE

	  
	
By:

	/s/ D. G. DONOVAN
	  	
Name: D. G. Donovan

	  	
Title:           Authorized Signatory

 

  

  

 

  

Exhibit A

FORM OF NOTE

 

[FACE OF NOTE]

 

 

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.]1

 

  
1 To be included in a Global Security

A-1

  

  

 

  

 

	Certificate No. 	 CUSIP NO. 165167 CF2
	$ 	 ISIN NO. US165167CF27

 

 

 

6.625% Senior Notes due 2020

 

Chesapeake Energy Corporation, an Oklahoma corporation, promises to pay to ________________, or registered assigns, the principal sum of  _____________________________________ Dollars on August 15, 2020.

 

Interest Payment Dates: February 15 and August 15 (commencing February 15, 20112)

 

Record Dates:  February 1 and August 1

 

Additional provisions of this Note are set forth on the other side of this Note.

 

Dated: ________________

 

	
CHESAPEAKE ENERGY CORPORATION

	  
	
By

	  
	  	
Name:

	  	
Title:

	
By

	  
	  	
Name:

	  	
Title:

TRUSTEE’S CERTIFICATE OF

AUTHENTICATION

 

	
This is one of the Securities of the Series designated therein referred to in the within-mentioned Indenture.

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

As Trustee

	  
	
Date:

	  	
By:

	  
	  	
Authorized Signatory

  
2 Or such later date as is appropriate in the case of Additional Notes.

A-2

  

  

 

  

[REVERSE SIDE OF NOTE]

 

6.625% Senior Note due 2020

 

1. Interest

 

Chesapeake Energy Corporation, an Oklahoma corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the “Company”), promises to pay interest on the principal amount of this Note at the rate per annum shown above.  The Company will pay interest semiannually on February 15 and August 15 of each year, commencing February 15, 20113.  Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from August 17, 20104.  Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months.

 

2. Method of Payment

 

The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered holders of Notes at the close of business on the February 1 or August 1 next preceding the interest payment date even if Notes are canceled after the record date and on or before the interest payment date.  Holders must surrender Notes to a Paying Agent to collect principal payments.  The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts.  Payments in respect of the Notes represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company.  The Company will make all payments in respect of a certificated Note (including principal, premium and interest) by mailing a check to the registered address of each Holder thereof; provided, however, that payments on a certificated Note will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).

 

3. Indenture

 

The Company issued the Notes under an Indenture dated as of August 2, 2010 among the Company, the Subsidiary Guarantors and the Trustee, as supplemented by that Second Supplemental Indenture dated as of August 17, 2010 among the Company, the Subsidiary Guarantors and the Trustee (as so supplemented, the “Indenture”).  The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the “Act”).  Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture.  The Notes are subject to all such terms, and Holders are referred to the Indenture and the Act for a statement of those terms.

 

  
3 Or such other date as is appropriate in the case of Additional Notes.

  
4 Or such later date as is appropriate in the case of Additional Notes.

 

A-3

  

  

 

  

The Company shall be entitled to issue Additional Notes pursuant to Section 2.03 of the Indenture.  The Notes issued on the Issue Date and any Additional Notes will be treated as a single series for all purposes under the Indenture.

 

4. Make-Whole Price Redemption

 

At any time prior to the Maturity Date, the Company, at its option, may redeem the Notes, in whole or from time to time in part, for an amount equal to the Make-Whole Price plus accrued and unpaid interest on the Notes so redeemed to the date of redemption.  Any redemption pursuant to this paragraph 4 shall be made, to the extent applicable, pursuant to the provisions of Sections 3.02 through 3.07 of the Indenture.

 

"Make-Whole Price" means the sum of the outstanding principal amount of the Notes to be redeemed plus the Make-Whole Amount of such Notes.

 

"Make-Whole Amount" with respect to a Note means an amount equal to the excess, if any, of (i) the present value of the remaining principal, premium, if any, and interest payments due on such Note (excluding any portion of such payments of interest accrued as of the redemption date) as if such Note were redeemed on the Maturity Date, computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (ii) the outstanding principal amount of such Note.

 

"Treasury Rate" means the yield to maturity (calculated on a semi-annual bond equivalent basis) at the time of the computation of United States Treasury securities with a constant maturity (as compiled by and published in the most recent Federal Reserve Statistical Release H.15 (519), which has become publicly available at least two Business Days prior to the date of the redemption notice or, if such Statistical Release is no longer published, any publicly available source of similar market data) most nearly equal to the then remaining maturity of the Notes assuming redemption of the Notes on the Maturity Date; provided, however, that if the Make-Whole Average Life of such Note is not equal to the constant maturity of the United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the Make-Whole Average Life of such Notes is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

 

"Make-Whole Average Life" means the number of years (calculated to the nearest one-twelfth) between the date of redemption and the Maturity Date.

 

5. Notice of Redemption

 

Notice of redemption will be mailed to the Holder’s registered address at least 30 days but not more than 60 days before the redemption date to each Holder of Notes to be redeemed. If less than all Notes are to be redeemed, the Trustee shall select pro rata, by lot or, if the Notes are listed on any securities exchange, by any other method that complies with the requirements of such exchange, the Notes to be redeemed in multiples of $1,000; provided, however, that no Notes with a principal amount of $1,000 or less will be redeemed in part.  Notes in denominations larger than $1,000 may be redeemed in part.  On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption (unless the Company shall default in the payment of the redemption price or accrued interest).

 

A-4

  

  

 

  

6. Net Proceeds Offer

 

In the event of certain Sale/Leaseback Transactions, the Company may be required to make a Net Proceeds Offer to purchase all or any portion of each Holder’s Notes, at 100% of the principal amount thereof, plus accrued and unpaid interest to the Net Proceeds Payment Date.

 

7. Restrictive Covenants

 

The Indenture imposes certain limitations on, among other things, the ability of the Company to merge or consolidate with any other Person or sell and lease back certain of its properties or assets and the ability of the Company or the Subsidiaries to incur encumbrances securing funded debt against certain property, all subject to certain limitations described in the Indenture.

 

8. Ranking and Guarantees

 

The Notes are general senior unsecured obligations of the Company.  The Company’s obligation to pay principal, premium, if any, and interest with respect to the Notes is unconditionally guaranteed on a senior basis, jointly and severally, by the Subsidiary Guarantors pursuant to Article Ten of the Indenture.  Certain limitations to the obligations of the Subsidiary Guarantors are set forth in further detail in the Indenture.

 

9. Denominations; Transfer; Exchange

 

The Notes are in registered form without coupons in denominations of $1,000 principal amount and whole multiples of $1,000.  A Holder may transfer or exchange Notes in accordance with the Indenture.  The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture.  The Registrar need not register the transfer of or exchange of any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Notes for a period of 15 Business Days before the mailing of a notice of an offer to repurchase or redeem Notes or 15 Business Days before an interest payment date.

 

10. Persons Deemed Owners

 

The registered Holder of this Note may be treated as the owner of it for all purposes.

 

11. Unclaimed Money

 

If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person.  After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

 

A-5

  

  

 

  

 

12. Discharge and Defeasance

 

Subject to certain conditions, the Company at any time shall be entitled to terminate some or all of its obligations under the Notes and the Indenture if the Company deposits with the Trustee money or U.S. Government Securities for the payment of principal and interest on the Notes to redemption or maturity, as the case may be.

 

13. Amendment, Supplement, Waiver

 

Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority of the outstanding principal amount of the Notes, and any past default or noncompliance with any provision may be waived with the consent of the Holders of a majority in principal amount of the Notes.  Without the consent of any Holder, the Company may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency or to make any change that does not adversely affect the rights of any Holder in any material respect.

 

14. Successor Obligor

 

When a successor obligor assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor obligor will be released from those obligations.

 

15. Defaults and Remedies

 

An Event of Default generally is: default by the Company or any Subsidiary Guarantor for 30 days in payment of interest on the Notes; default by the Company or any Subsidiary Guarantor in payment of principal of, or premium, if any, on the Notes; default by the Company or any Subsidiary Guarantor in the deposit of any optional redemption or repurchase payment when due and payable; defaults resulting in acceleration prior to maturity of certain other Indebtedness or resulting from payment defaults under certain other Indebtedness; failure by the Company or any Subsidiary Guarantor for 60 days after notice to comply with any of its other agreements in the Indenture; a failure of any Guarantee of a Subsidiary Guarantor to be in full force and effect or denial by any Subsidiary Guarantor of its obligations with respect thereto; and certain events of bankruptcy or insolvency.  Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy, insolvency or reorganization, all outstanding Notes shall become due and payable immediately without further action or notice.  Holders may not enforce the Indenture or the Notes except as provided in the Indenture.  The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes.  Subject to certain limitations, Holders of a majority in principal amount of the Notes may direct the Trustee in its exercise of any trust or power.  The Company must furnish an annual compliance certificate to the Trustee.

 

16. Trustee Dealings with Company and Subsidiary Guarantors

 

The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, the Subsidiary Guarantors or their respective Subsidiaries or Affiliates with the same rights it would have if it were not Trustee.

 

A-6

  

  

 

  

 

17. No Recourse Against Others

 

A director, officer, employee or stockholder, as such, of the Company, any Subsidiary Guarantor or the Trustee shall not have any liability for any obligations of the Company, any Subsidiary Guarantor or the Trustee under the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation.  Each Holder by accepting a Note waives and releases all such liability.  The waiver and release are part of the consideration for the issue of the Note.

 

18. Authentication

 

This Note shall not be valid until the Trustee or an authenticating agent signs the certificate of authentication on the other side of this Note.

 

19. Abbreviations

 

Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to Minors Act).

 

20. CUSIP Numbers

 

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Notes as a convenience to Holders of the Notes.  No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon.

 

21. Governing Law

 

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY, EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE OF NEW YORK WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION REGARDING THE VALIDITY OF THE NOTES.

 

A-7

  

  

 

  

 

The Company will furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture.  Requests may be made to:

 

Chesapeake Energy Corporation

6100 North Western Avenue

Oklahoma City, OK 73118

 

Attention:  Assistant Treasurer

 

A-8

  

  

 

  

 

NOTATION OF GUARANTEE

 

The Subsidiary Guarantors (which term includes any successor Persons under the Indenture), have fully, unconditionally and absolutely guaranteed on a senior basis, jointly and severally, to the extent set forth in the Indenture and subject to the provisions in the Indenture, the due and punctual payment of the principal of, and premium, if any, and interest on the Notes and all other amounts due and payable under the Indenture and the Notes by the Company.

 

The obligations of each Subsidiary Guarantor to the Holders of Notes and to the Trustee pursuant to its Guarantee and the Indenture are expressly set forth in Article Ten of the Base Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee.

 

	
SUBSIDIARY GUARANTORS:

 

	  
	
CHESAPEAKE LOUISIANA, L.P.

	  
	
By:

 

	
Chesapeake Operating, Inc., as general partner

	  	  
	  	  
	
By:

	  
	  	
Name:   Jennifer M. Grigsby

Title:     Senior Vice President, Treasurer

              and Corporate Secretary

	  
	  
	
EMPRESS LOUISIANA PROPERTIES, L.P.

	  
	
By:

 

	
EMLP, L.L.C., as general partner

	  	  
	  	  
	
By:

	  
	  	
Name:   Jennifer M. Grigsby

Title:     Senior Vice President, Treasurer

              and Corporate Secretary

 

A-9

  

  

 

  

 

	  
	
CARMEN ACQUISITION, L.L.C.

CHESAPEAKE AEZ EXPLORATION, L.L.C.

CHESAPEAKE APPALACHIA, L.L.C.

CHESAPEAKE-CLEMENTS ACQUISITION, L.L.C.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE ENERGY MARKETING, INC.

CHESAPEAKE EXPLORATION, L.L.C.

CHESAPEAKE LAND DEVELOPMENT COMPANY, L.L.C.

CHESAPEAKE OPERATING, INC.

CHESAPEAKE PLAZA, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

CHK HOLDINGS, L.L.C.

COMPASS MANUFACTURING, L.L.C.

DIAMOND Y ENTERPRISE, INCORPORATED

GENE D. YOST & SON, INC.

GOTHIC PRODUCTION, L.L.C.

GREAT PLAINS OILFIELD RENTAL, L.L.C.

HAWG HAULING & DISPOSAL, LLC

HODGES TRUSCING COMPANY, L.L.C.

MC LOUISIANA MINERALS, L.L.C.

MC MINERAL COMPANY, L.L.C.

MIDCON COMPRESSION, L.L.C.

NOMAC DRILLING, L.L.C.

VENTURA REFINING AND TRANSMISSION, LLC

	  
	
By:

 

	  
	  	
Name:   Jennifer M. Grigsby

	  	
Title:     Senior Vice President, Treasurer

              and Corporate Secretary

 

A-10

  

  

 

  

____________________________________________________________

 

ASSIGNMENT FORM

 

To assign this Note, fill in the form below:

 

I or we assign and transfer this Note to

 

(Print or type assignee’s name, address and zip code)

 

(Insert assignee’s social security or tax I.D. No.)

 

and irrevocably appoint                           agent to transfer this Note on the books of the Company.  The agent may substitute another to act for him.

 

 

	
Dated:

	  	
Your Signature:

	  

 

 

_______________________________________________________________________

Sign exactly as your name appears on the other side of this Note.

 

 

Signature Guarantee:

 

	
 

Signature must be guaranteed

 

	  

 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

A-11

  

  

 

  

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

 

The following increases or decreases in this Global Security have been made:

 

	

Date of

Exchange

	 	

Amount of decrease in Principal  amount of 

this Global Security

	 	

Amount of increase in 

Principal amount of 

this Global Security

	 	

Principal amount of 

this Global Security 

following such 

decrease or increase

	 	

Signature of 

authorized officer of 

Trustee

	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  

 

A-12

  

  

 

  

OPTION OF HOLDER TO ELECT PURCHASE

 

If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 of the Indenture, check the box:

 

 ̈

 

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.10 of the Indenture, state the amount in principal amount:  $__________________________

 

	
Dated:

	  	
Your Signature:

	  
	  	  	  	
(Sign exactly as your name appears on the other side of this Note.)

 

	
Signature Guarantee:

 

	  
	
(Signature must be guaranteed)

	  

 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

 

A-13Exhibit 10-N

CONFORMED
 COPY 

DONALDSON
 COMPANY, INC. 

$30,000,000

4.85% Senior Notes, Series 2004-A

Due December 17, 2011 

_________________ 

SECOND
 SUPPLEMENT AND

FIRST AMENDMENT TO

NOTE PURCHASE AGREEMENT 

_________________ 

Dated
 as of September 30, 2004 

PPN:
 257651 B*9 

SECOND
 SUPPLEMENT AND

FIRST AMENDMENT TO

NOTE PURCHASE AGREEMENT 

        THIS
 SECOND SUPPLEMENT AND
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT (this “Second
Supplement”) is entered into as of September 30, 2004
between Donaldson Company, Inc., a Delaware corporation (the “Company”),
 each Purchaser listed in the attached Schedule
A (individually a “Purchaser” and collectively, the “Purchasers”) and
the other holders of outstanding Notes
executing the signature pages hereto for the purpose of agreeing to
Section 1(c) hereof and the amendments to the Note Purchase
Agreement (the “other noteholders”) contained herein. 

R
 E C I T A L S 

        A.       
 The Company has previously
entered into a Note Purchase Agreement dated as of July 15, 1998 with
the institutions listed in Schedule A thereto and a First
Supplement to Note Purchase Agreement dated as of August 1, 1998 with
the institutions named in Schedule A thereto (as so
supplemented, the “Note Purchase Agreement”); 

        B.       
          The
Purchasers and other noteholders own all of the Notes outstanding as set
 forth in the attached Schedule B; 

        C.       
          The
Company has entered into an amended and restated credit agreement with
its banks that provides, among other things, for the
obligations of the Company thereunder to be guarantied by certain
Subsidiaries of the Company; and 

        D.       
          The
Company desires to issue and sell, and the Purchasers desire to
purchase, an additional series of Notes (as defined in the Note
Purchase Agreement) pursuant to the Note Purchase Agreement and in
accordance with the terms set forth below; 

        NOW,
 THEREFORE, the Company,
the Purchasers and the other noteholders agree as follows: 

	1. 	  	Authorization of the New Series of Notes; Subsidiary
Guaranty; Release. 

	 
 	        (a)   Description
of
 Series 2004-A Notes.   The Company has authorized
the issue and sale of $30,000,000 aggregate principal
amount of Notes to be designated as its 4.85% Senior Notes, Series
2004-A, due December 17, 2011 (the “Series 2004-A
Notes,” such term to include any such Notes issued in substitution
therefor pursuant to Section 13 of the Note Purchase
Agreement). The Series 2004-A Notes shall be substantially in the form
set out in Exhibit 1(a), with such changes therefrom, if
any, as may be approved by the Purchasers and the Company. 

	 
 	        (b)   Subsidiary
 Guaranties.   All
of the outstanding Notes and the Series 2004-A Notes, will be
guarantied by the Subsidiary Guarantors pursuant to a guaranty
substantially in the form set out in Exhibit 1(b) (the “Subsidiary
Guaranty”). 

	 
 	        (c)   Release
of
 Subsidiary Guaranty.   Each holder of a Note agrees
to release and discharge a Subsidiary Guarantor from the
Subsidiary Guaranty upon written request of the Company, provided that
(i) such Subsidiary has been, or concurrently with the
release by the holders of Notes, will be released and discharged as
guarantor under and in respect of the Credit Agreement and any
other Indebtedness of the Company; (ii) such release and discharge is
not part of a plan of financing that contemplates such
Subsidiary Guarantor guaranteeing any other Indebtedness of the Company
or becoming a borrower under the Credit Agreement; (iii)
no Default or Event of Default exists or will exist immediately
following such release and discharge; (iv) if any fee or other
consideration is paid or given to any holder of Indebtedness in
connection with such release, other than the repayment of all or a
portion of such Indebtedness, each holder of a Note receives equivalent
consideration on a pro rata basis; and (v) at the time of
such written request, the Company delivers to each holder of Notes a
certificate of a Responsible Officer certifying the matters
set forth in clauses (i) through (iv). 

        2.   Sale
and
 Purchase of Series 2004-A Notes.   Subject to the
terms and conditions of this Second Supplement and the
Note Purchase Agreement, the Company will issue and sell to the
Purchasers, and the Purchasers will purchase from the Company, at
the Closing provided for in Section 3, Series 2004-A Notes in the
principal amount specified opposite their names in the
attached Schedule A at the purchase price of 100% of the principal
amount thereof. The obligations of the Purchasers hereunder are
several and not joint obligations and no Purchaser shall have any
liability to any Person for the performance or non-performance
by any other Purchaser hereunder. 

        3.   Closing.   The
sale
 and purchase of the Series 2004-A Notes to be purchased by the
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 on December 17,
2004 (the “Closing”) or on such other Business Day thereafter, not later
 than December 31, 2004, as may be agreed upon
by the Company and the Purchasers. At the Closing the Company will
deliver to each Purchaser the Series 2004-A Notes to be
purchased by it in the form of a single Note (or such greater number of
Series 2004-A Notes in denominations of at least $500,000
as the Purchasers may request) dated the date of the Closing and
registered in its name (or in the name of its nominee), against
delivery by the Purchasers 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 1502-5005-4130 at US Bank –
Minneapolis, US Bank Place, 601 Second Avenue South, Minneapolis, MN
55402, ABA No. 0910-0002-2. If at the Closing the
Company shall fail to tender such Series 2004 Notes to a Purchaser as
provided above in this Section 3, or any of the conditions
specified in Section 4 of the Note Purchase Agreement, as modified or
expanded by Section 4 hereof, shall not have been fulfilled
to such Purchaser’s satisfaction, such Purchaser shall, at its election,
 be relieved of all further obligations under this
Agreement, without thereby waiving any rights it may have by reason of
such failure or such nonfulfillment. 

-2-
 

        4.   Conditions
to
 Closing.   Each Purchaser’s obligation to purchase
and pay for the Series 2004-A Notes to be sold to it
at the Closing is subject to the fulfillment to its satisfaction, prior
to or at the Closing, of the conditions set forth in
Section 4 of the Note Purchase Agreement, as hereafter modified, and to
the following additional conditions: 

	 
 	        (a)   References
in
 Section 4 of the Note Purchase Agreement to “Series 1998-A Notes” shall
 be deemed to be references to the Series
2004-A Notes and references to the “Closing” shall be deemed to refer to
 the Closing as such term is defined in this
Second Supplement; 

	 
 	        (b)   The
legal
 opinions, and forms thereof, called for by Section 4.4 of the Note
Purchase Agreement shall be appropriately modified to
reflect this Second Supplement and the transactions contemplated herein,
 including the authorization, execution and enforceability
of the Subsidiary Guaranty and other matters related thereto; 

	 
 	        (c)   At
least
 three Business Days prior to the date of the Closing, each Purchaser
shall have received a copy of written instructions
signed by a Responsible Officer on letterhead of the Company confirming
the information specified in Section 3 including (i) the
name and address of the transferee bank, (ii) such transferee bank’s ABA
 number and (iii) the account name and number into
which the purchase price for the Notes is to be deposited; 

	 
 	        (d)   Each
Subsidiary
 Guarantor shall have executed and delivered the Subsidiary Guaranty and
 each Purchaser and each other holder of Notes
shall have received an executed counterpart thereof; and 

	 
 	        (e)   The
Purchasers
 and their special counsel shall have been provided with a copy of the
executed Credit Agreement. 

        5.   Representations
and
 Warranties of the Company.   The Company represents
and warrants to the Purchasers that each of the
representations and warranties contained in Section 5 of the Note
Purchase Agreement is true and correct as of the date
hereof (a) except that all references to “Purchasers” and “you”
therein shall be deemed to refer to the
Purchasers and each Purchaser hereunder, all references to “this
Agreement” shall be deemed to refer to the Note
Purchase Agreement as supplemented and amended by this Second
Supplement, all references to “Notes” therein shall be
deemed to include the Series 2004-A Notes, and (b) except for
changes to such representations and warranties or the Schedules
referred to therein, which changes are set forth in the attached
Schedule 5. Section 5 of the Note Purchase Agreement also is
amended to modify or add the following representations and warranties: 

	 
 	        (a)   Section
 5.3 is amended to read in its entirety as follows:  

	 
 	        5.3   Disclosure.
 

	 
 	        Except
as
 disclosed in Schedule 5.3, and except for projections, as to which no
representation or warranty is made other than as stated
in the next 

-3-
 

	 
 	sentence,
 this Agreement, the documents, certificates or other
writings delivered to you by or on behalf of the Company in connection
with the transactions contemplated hereby, including 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. The projections included in the materials delivered to you by
 or on behalf of the Company are based on good faith
estimates and assumptions that the Company believes are reasonable.
Except 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 July 31, 2003, there has been no change in the financial
condition, operations, business, properties or prospects of the
Company or any Subsidiary, except changes that individually or in the
aggregate could not reasonably be expected to have a
Material Adverse Effect. There is no fact known to the Company that
could reasonably be expected to have a Material Adverse Effect
that has not been set forth herein or in the other documents,
certificates and other writings delivered to you by or on behalf of
the Company specifically for use in connection with the transactions
contemplated hereby. 

	 
 	        (b)   Section
5.14
 is amended to read in its entirety as follows (and all references
therein to the 1998-A Notes shall be deemed to refer to the
Series 2004-A Notes): 

	 
 	        5.14.   Use
 of Proceeds; Margin Regulations. 

	 
 	        The
 Company will
apply the proceeds of the sale of the Series 1998-A Notes to the
repayment of Indebtedness to banks. No part of the proceeds from
the sale of the Series 1998-A Notes hereunder will be used, directly or
indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System (12 CFR 221), other than
repurchases of stock of the Company that are in compliance with
Regulation U, 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 10% 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 25% or more 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. 

	 
 	        (c)    Section
5.16
 is amended to read in its entirety as follows: 

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

-4-
 

	 
 	        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, (c) the Anti-Terrorism Order or (d)
the United States Foreign Corrupt Practices Act of 1977, as amended.
Without limiting the foregoing, neither the Company nor any
Subsidiary (i) is a blocked person described in the Specially
Designated Nationals and Blocked Persons List of the Office of
Foreign Assets Control or in Section 1 of the Anti-Terrorism Order
or (ii) to the knowledge of the Company, engages in
any dealings or transactions, or is otherwise associated, with any such
person. The Company and its Subsidiaries are in
compliance, in all material respects, with all applicable provisions of
the USA Patriot Act. 

	 
 	        (d)    A
new
 Section 5.19 is added to read in its entirety as follows:  

	 
 	        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) the fair value
of the assets of each Subsidiary Guarantor (both at fair valuation and
at present fair saleable value) exceeds its liabilities,
(ii) each Subsidiary Guarantor is able to and expects to be able to pay
its debts as they mature, and (iii) each Subsidiary
Guarantor has capital sufficient to carry on its business as conducted
and as proposed to be conducted. 

        6.   Representations
of
 the Purchasers.   Each Purchaser confirms to the
Company that the representations set forth in
Section 6.1 of the Note Purchase Agreement are true and correct as
to it, except that all references therein to
“you” therein shall be deemed to refer to each Purchaser hereunder, and
all references to “Series 1998-A
Notes” therein shall be deemed to include the Series 2004-A Notes. Each
Purchaser also represents to the Company that it is
an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D under the Securities Act. Section 6.2 of
the Note Purchase Agreement is amended to read in its entirety, which is
 confirmed by each Purchaser: 

	 
 	        6.2.   Source
 of Funds. 

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

-5-
 

	 
 	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 its state of domicile; or 

	 
 	        (b)   the
Source
 is a separate account that is maintained solely in connection with its
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 August 12, 1991) and, except as it has 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”)) 

-6-
 

	 
 	managed
 by an “in-house asset manager” or
“INHAM” (within the meaning of Part IV of the INHAM exemption), the
conditions of Part I(a), (g) and (h) of the INHAM
Exemption are satisfied, neither the INHAM nor a person controlling or
controlled by the INHAM (applying the definition of
“control” in Section IV(h) of the INHAM Exemption) owns a 5% or more
interest in any Obligor 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 pursuant to
this paragraph (g); or 

	 
 	        (h)   the
Source
 does not include assets of any employee benefit plan, individual
retirement account or other arrangement subject to the
prohibited transaction rules under ERISA or the Code. 

	 
 	As
used in this Section 6, 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.   Scheduled
Prepayments
 of the Series 2004-A Notes.   No regularly scheduled
 prepayments are due on
the Series 2004-A Notes prior to their stated maturity.  

        8.   Section
10
 of Note Purchase Agreement.   Section 10 of the Note
 Purchase Agreement is amended
as follows:  

	 
 	        (a)   Schedule
 10.2.   Schedule
10.2 is replaced by Schedule 10.2 to this Second Supplement.  

	 
 	        (b)   New
Section
 10.9.   A new Section 10.9 is added to read in its
entirety as follows:  

	 
 	        10.9.   Additional
 Subsidiary Guarantors. 

	 
 	        The
 Company will
cause any Subsidiary that is organized under the laws of any state or
other jurisdiction of the United States and that (whether or
not required by the terms of the Credit Agreement) is to guarantee,
Indebtedness in respect of the Credit Agreement, to enter into
the Subsidiary Guaranty concurrently therewith and as a part thereof to
deliver to each of holder of the Notes: 

	 
 	        (a)       a
copy
 of an executed Joinder to the Subsidiary Guaranty;  

-7-
 

	 
 	        (b)       a
certificate
 signed by a Responsible Officer of the Company or of such Subsidiary
confirming the accuracy of the representations
and warranties in paragraphs (a) through (g) of the Joinder to the
Subsidiary Guaranty, with respect to such Subsidiary and the
Subsidiary Guaranty as it relates to such Subsidiary, as applicable; and
 

	 
 	        (c)       an
opinion
 of counsel (who may be counsel for the Company) reasonably satisfactory
 to the Required Holders addressed to each holder
of the Notes to the effect that the Subsidiary Guaranty of such
Subsidiary has been duly authorized, executed and delivered and
that the Subsidiary Guaranty constitutes the legal, valid and binding
contract and agreement of such Subsidiary enforceable
against such Subsidiary in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting the
enforcement of creditors’ rights generally and by general
equitable principles. 

        9.    Section
11
 of the Note Purchase Agreement. Section 11 of the Note Purchase
Agreement is
amended as follows:  

	 
 	        (a)    Section
 11(c).   Section
11(c) is amended to read in its entirety as follows:  

	 
 	        (c)    the
Company
 defaults in the performance of or compliance with any term contained in
 Section 7.1(e) or Sections 10.1 through 10.9; or

	 
 	        (b)    Section
11(e).   Section 11(e) is amended to read in its
entirety as follows:  

	 
 	        (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 any Subsidiary Guarantor in this Agreement or in the
Subsidiary Guaranty or in any writing furnished in connection with
the transactions contemplated hereby proves to have been false or
incorrect in any material respect on the date as of which made;
or 

	 
 	        (c)    New
Section
 11(k).   A new Section 11(k) is added to read in its
 entirety as follows:  

	 
 	        (k)       any
Subsidiary
 Guarantor defaults in the performance of or compliance with any term
contained in the Subsidiary Guaranty or the
Subsidiary Guaranty ceases to be in full force and effect, except as
provided in Section 1(c) of the Second Supplement, 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 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. 

-8-
 

        10.   Section
15.1
 of the Note Purchase Agreement.   Section 15.1 of
the Note Purchase Agreement is amended to read in its entirety as
follows: 

	 
 	        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 for you and the Other Purchasers
collectively 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 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 and the Subsidiary Guaranty. 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). 

        11.   Definitions;
Schedule
 B.   The following definitions in Schedule B are
amended in their entirety or the following new
definitions are added to Schedule B, in the appropriate alphabetical
order: 

	 
 	        “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)). 

	 
 	        “Credit
Agreement” means the Amended and Restated Credit Agreement dated as
of September 2, 2004 among the Company, various
subsidiaries of the Company, The Bank of Tokyo-Mitsubishi, Ltd., Chicago
 Branch, Lloyds TSB Bank plc, and U.S. Bank National
Association, as Co-Syndication Agents, Bank of America, N.A., as
Administrative Agent and L/C Issuer and the other Lenders party
thereto and Banc of America Securities LLC, as Sole Lead Arranger and
Sole Book Manager, 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. 

	 
 	        “INHAM
Exemption” is defined in Section 6.2(e) of the Second Supplement.  

-9-
 

	 
 	        “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 Guarantor to perform its obligations
under the Subsidiary Guaranty, or (d) the validity or enforceability of
this Agreement, the Notes or the Subsidiary Guaranty.

	 
 	        “NAIC
Annual
 Statement” is defined in Section 6.2(a) of the Second Supplement.  

	 
 	        “Priority
Debt” means, as of any date, the sum (without duplication) of (a)
unsecured Indebtedness of Domestic Restricted
Subsidiaries on such date (other than (i) Indebtedness owed to the
Company or another Restricted Subsidiary (ii) Indebtedness of a
Person outstanding at the time such Person is merged or consolidated
with, or becomes, a Restricted Subsidiary) and
(iii) Guaranties by a Subsidiary Guarantor of the Notes and of
Indebtedness in respect of the Credit Agreement and (b)
Indebtedness of the Company and its Domestic Restricted Subsidiaries
secured by Liens permitted by Section 10.2(j) on such date.

	 
 	        “QPAM
Exemption” is defined in Section 6.2(d) of the Second Supplement.  

	 
 	        “Second
Supplement” means the Second Supplement and First Amendment to Note
Purchase
Agreement dated as of September 30, 2004 between the Company and the
Purchasers and other
holders of Notes named in Schedules A and B thereto.  

	 
 	        “Significant
Subsidiary” means, as of the date of determination, (a) any
Subsidiary Guarantor and (b) any other Restricted Subsidiary
the assets or revenues of which account for more than 10% of the
Consolidated Total Assets of the Company and its Restricted
Subsidiaries at the end of the most recently ended fiscal period or more
 than 10% of the consolidated revenues of the Company and
its Restricted Subsidiaries for the most recently completed four fiscal
quarters. 

	 
 	        “Subsidiary
Guarantor” means Donaldson Capital, Inc., a Minnesota corporation
and a Subsidiary, and any other Subsidiary that is
organized under the laws of any state or other jurisdiction of the
United States and that hereafter becomes a party to the
Subsidiary Guaranty. 

	 
 	        “Subsidiary
Guaranty” is defined in Section 1(a) of the Second Supplement.  

-10-
 

	 
 	        “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. 

In addition, the
reference to “the date of this Agreement” in
clause (d) of the definition of “Restricted Investments” is amended to
refer to “the date of the Second
Supplement” and Schedule B-1 is amended by substituting therefor
Schedule B-1 to this Second Supplement. 

        12.   Applicability
of
 Note Purchase Agreement.   Except as otherwise
expressly provided herein (and expressly permitted by the
Note Purchase Agreement), all of the provisions of the Note Purchase
Agreement are incorporated by reference herein and shall
apply to the Series 2004-A Notes as if expressly set forth in this
Supplement and, except as so provided or where the context
otherwise requires, references in the Note Purchase Agreement to “Series
 1998-A Notes” and to the “Notes”
shall be deemed to refer to the Series 2004-A Notes and to include the
Series 2004-A Notes. 

-11-
 

        IN
 WITNESS WHEREOF, the
Company, the Purchasers and the other noteholders have caused this
Second Supplement to be executed and delivered as of the date
set forth above. 

	 	 	 	 	 	 
	 	 	DONALDSON COMPANY, INC.
	 
	 		By:  		/s/   William M. Cook 	 
	 	

	 		Name:  		William M. Cook 	 
	 		Title:  		President & CEO 	 

 
 

	 	 	 	 	 	 
	 	 	METROPOLITAN LIFE INSURANCE COMPANY 
	 
	 		By:  		/s/   Timothy Powell 	 
	 	

	 		Name:  		Timothy Powell 	 
	 		Title:  		Director 	 

S-2
 

	 	 	 	 	 	 
	 	 	STATE FARM LIFE INSURANCE COMPANY 
	 
	 		By:  		/s/   Jeff Attwood 	 
	 	

	 		Name:  		Jeff Attwood 	 
	 		Title:  		Investment Officer 	 
	 
	 
	 		By:  		/s/   Larry Rottunda 	 
	 	

	 		Name:  		Larry Rottunda 	 
	 		Title:  		Assistant Secretary 	 

S-3
 

        The
 undersigned holders of
Series 1998-A Notes have caused this Second Supplement to be executed
solely for the purpose of agreeing to the provisions of
Section 1(c) and consenting to the amendments to the Note Purchase
Agreement provided for in this Second Supplement. 

	 	 	 	 	 	 
	 	 	PRINCIPAL LIFE INSURANCE COMPANY, 
ON BEHALF OF ONE
OR MORE SEPARATE ACCOUNTS 
	 
	 		By:  		Principal Global Investors, LLC,
a Delaware limited
liability company,
its authorized signatory 	 
	 
	 		By:  		/s/   Douglas A. Drees 	 
	 	

	 		Its:  		Douglas A. Drees, Counsel 	 
	 
	 		By:  		/s/   Joellen J. Watts 	 
	 	

	 		Its:  		Joellen J. Watts, Counsel 	 

S-4
 

	 	 	 	 	 	 
	 	 	MIDLAND NATIONAL LIFE INSURANCE COMPANY 
	 
	 		By:  		Midland Advisors Company, as agent 	 
	 
	 		By:  		/s/   Tyson Rehfeld 	 
	 	

	 		Name:  		Tyson Rehfeld 	 
	 		Title:  		Vice President 	 

S-5
 

	 	 	 	 	 	 
	 
	 	 	AMERITAS LIFE INSURANCE CORP. 
	 
	 		By:  		Ameritas Investment Advisors, Inc., as agent 	 
	 
	 		By:  		/s/   Andrew S. White 	 
	 	

	 		Name:  		Andrew S. White 	 
	 		Title:  		Vice President 	 
	 
	 	 	AMERITAS VARIABLE LIFE INSURANCE COMPANY 
	 
	 		By:  		Ameritas Investment Advisors, Inc., as agent 	 
	 
	 		By:  		/s/   Andrew S. White 	 
	 	

	 		Name:  		Andrew S. White 	 
	 		Title:  		Vice President 	 

S-6
 

Schedule
 A to

Second Supplement  

INFORMATION
 RELATING TO PURCHASERS 

	Name
 of Purchaser 
		Principal
 Amount of Series
2004-A Notes to be Purchased 

	Metropolitan Life Insurance Company	 	$15,000,000	 

METROPOLITAN
 LIFE INSURANCE COMPANY

1 MetLife Plaza

27-01 Queens Plaza North

Long Island City, New York 11101 

(Securities to be
 registered in the name of Metropolitan Life Insurance Company) 

	(1) 	  	All
scheduled payments of principal and interest by wire transfer
of immediately available funds to: 

	 	Bank Name:	 	JPMorgan Chase Bank	 
	 	ABA Routing #:	 	021-000-021	 
	 	Account No.:	 	002-2-410591	 
	 	Account Name:	 	Metropolitan Life Insurance Company	 
	 	Ref:	 	Donaldson Company 4.85% Senior Notes, Series 2004-A due 
December
 17, 2011	 

	 
 	with
 sufficient information to identify the source and application
of such funds, including issuer, PPN#, interest rate, maturity and
whether payment is of principal, interest, make whole amount or
otherwise. 

	 
 	For
all payments other than scheduled payments of principal and
interest, the Company shall seek instructions from the holder, and in
the absence of instructions to the contrary, will make such
payments to the account and in the manner set forth above. 

	(2) 	  	All
notices and communications: 

	 
 	Metropolitan
 Life Insurance Company

Investments, Private Placements

10 Park Avenue

Morristown, New Jersey 07962-1902

Attention: Director

Facsimile (973) 355-4250 

Schedule
 A 

	 
 	        With
 a copy OTHER than with respect to deliveries of financial
statements to: 

	 
 	Metropolitan
 Life Insurance Company

10 Park Avenue

Morristown, New Jersey 07962-1902

Attention: Chief Counsel-Securities Investments (PRIV)

Facsimile (973) 355-4338 

	(3) 	  	Original
 notes delivered to: 

	 
 	Metropolitan
 Life Insurance Company

Securities Investments, Law Department

10 Park Avenue

Morristown, New Jersey 07962-1902

Attention: Sandip Khosla, Esq. 

	(4) 	  	Taxpayer
 I.D. Number: 13-5581829 

-2-

Schedule
 A 

Schedule
 A to

Second Supplement  

INFORMATION
 RELATING TO PURCHASERS 

STATE
 FARM LIFE INSURANCE COMPANY

TAX ID #37-0533090 

Participation/Series:      $15,000,000/2004-A
  

Wire
 Transfer Instructions: 

	 	JPMorganChase	 	 	 
	 	ABA#	 	021000021	 
	 	Attn:	 	SSG Private Income Processing	 
	 	A/C#	 	900 9 000200	 
	 	For further credit to:	 	State Farm Life Insurance Company 
Custody Account # G06893	 
	 	RE:	 	PPN #: 257651 B* 9 Rate: 4.85% Maturity Date: 12/17/11	 

Send notices,
financial statements, officer’s certificates and other
correspondence to: 

	 
 	State
 Farm Life Insurance Company

Investment Dept. E-8

One State Farm Plaza

Bloomington, IL 61710 

Send
 confirms to:  

	 
 	State
 Farm Life Insurance Company

Investment Accounting Dept. D-3

One State Farm Plaza

Bloomington, IL 61710 

Send
 the original security (via registered mail) to: 

	 
 	JPMorganChase

Attn: Barbara Walsh

(North America Insurance)

3 Chase Metrotech Center-5th Floor

Brooklyn, New York 11245 

Send an
additional copy of the
original security plus an original set of closing documents and two
conformed copies of
the Note Purchase Agreement to: 

	 
 	State
 Farm Insurance Companies

One State Farm Plaza

Bloomington, Illinois 61710

Attn:   Investment Legal E-3

            Larry
 Rottunda, Investment Counsel  

-3-

Schedule
 A 

Schedule
 B to

Second Supplement  

	Holder
			Principal
 Amount

		6.20%
 Senior Notes,
Series-1998-A,
Tranche 1 
		6.31%
 Senior Notes,
Series-1998-A, 
Tranche 2 
		6.39%
 Senior Notes,
Series 1998-B 

	Metropolitan Life Insurance Company	 	 	 	  	 	$	  22,000,000	 	$	  25,000,000	 
	 
	Principal Life Insurance Company	 	 	$	  10,000,000	 
	 
	Midland National Life Insurance Company*	 	 	 	5,000,000	 
	 
	State Farm Life Insurance Company	 	 	 	5,000,000	 	 	5,000,000	 
	 
	Ameritas Life Insurance Company	 	 	 	2,000,000	 
	 
	Ameritas Variable Life Insurance Company	 	 	 	1,000,000	 
		
		
		
	
	 
	        Total	 	 	$	  23,000,000	 	$	  27,000,000	 	$	  25,000,000	 
		
		
		
	

_________________ 

* Beneficial
owner. Registered in the name of Hare & Co. 

Schedule
 B 

Schedule
 B-1 to

Second Supplement  

EXISTING
 INVESTMENTS 

	Investment in Advanced Filtration Systems Inc.	 	 	$	 9,594,000	 
	 
	Investment in PT Panata Jaya Mandiri	 	 	$	 4,186,000	 
	 
	Investment in Rashed al-Rashed & Sons-Donaldson Ltd.	 	 	$	   761,000	 
	 
	Investment in Onboard Technologies	 	 	$	   200,000	 
	 
	Loan to Jay Ward in the amount of	 	 	$	    10,000	 
	 
	Loan to Mys-Tec Sales, Inc. in the amount of	 	 	$	   292,000	 

Schedule
 B-1 

Schedule
 5 to

Second Supplement  

EXCEPTIONS
 TO REPRESENTATIONS

AND WARRANTIES 

        Section
5.4.   Schedule 5.4 is replaced by Schedule 5.4 to
this Second Supplement.  

        Section
5.5.   Schedule 5.5 is replaced by Schedule 5.5 to
this Second Supplement.  

        Section
5.8.   Schedule 5.8 is replaced by Schedule 5.8 to
this Second Supplement.  

        Section
5.9.   Reference to December 31, 1990 shall be deemed
 to refer to July 31, 2000.  

        Section
5.11.   Schedule 5.11 is replaced by Schedule 5.11 to
 this Second Supplement.  

        Section
5.13.   Reference to the number 42 shall be deemed to
 refer to 4.  

        Section
5.15.   Reference to April 20, 1998 shall be deemed
to refer to July 31, 2004 and Schedule 5.15 is replaced
with Schedule 5.15 to this Second Supplement. 

Schedule
 5 

Schedule
 5.3 to

Second Supplement  

DISCLOSURE
 MATERIALS 

Offering
Memorandum dated July 2004 with respect to the Amended and Restated
Credit Agreement dated September 2, 2004. 

Schedule
 5.3 

Schedule
 5.4 to

Second Supplement  

SUBSIDIARIES
 AND OWNERSHIP OF SUBSIDIARY STOCK 

	(i)
  	  
 	Subsidiaries
  

*Unless otherwise
 noted, all listed subsidiaries are owned 100% by Donaldson
Company, Inc. or a Subsidiary of the Donaldson Company, Inc. 

Donaldson
Capital, Inc. (Minnesota, U.S.A.)

Nippon Donaldson, Ltd. (Japan)

Donaldson Korea Company, Ltd. (Republic of South Korea)

Donaldson Filtration (Asia Pacific) Pte. Ltd. (Singapore)

Donaldson Australasia Pty, Ltd. (Australia)

Donaldson India Filter Systems Private Limited (India)

P.T. Donaldson Systems Indonesia (Indonesia) (96.5% net ownership by
the Donaldson Company, Inc.) 

ASHC, Inc
(U.S.A.)

           Prestadora
 de Servicios Aquas S. de R.L. de C.V. (Mexico)

Donaldson Filtration Industrial S. de R.L. de C.V. (Mexico)

Donaldson S.A. de C.V. (Mexico)

           DIEMO
 S.A. de C.V. (Mexico)

Donaldson Sales, Inc. (Barbados)

Donaldson do Brazil M&E Limitida (Brazil)

Donaldson Filtration Systems Pty, Ltd. (South Africa)

Donaldson Canada, Inc. (Canada)

ultrafilter Pty, Ltd (Australia)

ultrafilter Co Ltd. (Thailand)

Donaldson Filtration Inc. (Phillipines)

Donaldson Filtration sdn hdn (Malaysia)

PT ultrafilter (Indonesia)

ultrafilter Pte Ltd.

-Donaldson Luxembourg S.a.r.l. (Luxembourg)

           Donaldson
 Coordination Center, B.V.B.A. (Belgium)

           Donaldson
 Torit, B.V. (Netherlands)

                      Donaldson
 Nederland B.V. (Netherlands)

                      ultrafilter
 B.V. (Netherlands)

                      Donaldson
 Schweiz GmbH (Switzerland)

                      ultrafilter
 AG (Switzerland)
                      

                      Donaldson
 Filtre Sistemleri Ticaret Ltd Sirketi (Turkey)

                      ultrafilter
 s.r.o. (Slovakia)

                      ultrafilter
 sp. zoo (Poland) 

Schedule
 5.4 

                      Donaldson
 Polska sp. zoo (Poland)

                      ultrafilter
 AS (Norway)

                      Donaldson
 Italia Srl (Italy)

                      Donaldson
 Filtration Österreich GmbH (Austria)

                      ultrafilter
 s.l. (Spain)

                      ultrafilter
 s.r.o (Czech Republic)

                      Donaldson
 Czech Republic (Czech Republic)

                      Donaldson
 France, S.A.S. (France)

                                 Tecnov
 Donaldson, S.A.S. (France)

                                 ultrafilter
 S.A.S. (France)

                                 Donaldson
 Filtros Iberica S.L. (Spain)

                      Donaldson
 Scandinavia APS (Denmark)

                                 ultrafilter
 APS (Denmark)

                      Donaldson
 Far East Limited (Hong Kong)

                                 Donaldson
 (Wuxi) Filters Co., Ltd. (China)

                                            Shanghai
 Donaldson Filtration Co., Ltd. (China)

                                 Donaldson
 Ltd. (Thailand)

                      Donaldson
 Europe, B.V.B.A. (Belgium)

                                 Donaldson
 Belgie B.V.B.A. (Belgium)

                      Donaldson
 UK Holding Ltd. (UK)

                                 ultrafilter
 Ltd. (UK)

                                            DCE
 Donaldson Ltd. (UK)

                                 DFCH
 Ltd. (UK)

                                            Donaldson
 Filter Components Ltd. (UK)

                                                       Tetratec
 Europe Ltd. (UK)

                                                       DCE
 Ltd. (UK)

                                                       DCE
 Group Ltd. (UK)

                                                           Donaldson
 Ibérica, Soluciones en Filtracion, S.L. (Spain)

                                                           DCE
 Donaldson (Pty) Ltd. (South Africa)

                      Donaldson
 Deutschland Holding GmbH (Germany)

                                 Donaldson
 GmbH (Germany)

                                 Torit
 DCE GmbH (Germany)

                                 ultrafilter
 kft (Hungary)

                      Donaldson
 Filtration Deutschland GmbH (Germany)

                                 ultratroc
 GmbH (Germany)

                                 ultra
 air GmbH (Germany)

                                 Quality
 Air GmbH (Germany)

                                 ultrafilter
 s.r.l. (Romania)

                                 ultrafilter
 International AG (Switzerland) 

Schedule
 5.4 

	(ii)
  	  
 	Other
 Affiliates  

	 
 	Advanced
 Filtration Systems Inc. (Illinois, USA) 50%

PT Panata Jaya Mandiri (Jakarta, Indonesia) 30%

Rashed al-Rashed & Sons-Donaldson Ltd. (Dammam, Saudi Arabia)
49%  

	(iii)
  	  
 	Directors
 and Officers  

	 
 	
Directors:

F. Guillaume Bastiaens, Vice Chairman, Cargill, Inc.

William M. Cook, President and Chief Executive Officer, Donaldson
Company, Inc.

Janet M. Dolan, President and Chief Executive Officer, Tennant
Company

Jack W. Eugster, Non-Executive Chairman, ShopKo Stores, Inc.

John F. Grundhofer, Chairman Emeritus, U.S. Bancorp

Kendrick B. Melrose, Chairman and Chief Executive Officer, The Toro
Company

Paul David Miller, Chairman, Alliant Techsystems Inc.

Jeffrey Noddle, Chairman, President and Chief Executive Officer,
SUPERVALU INC.

William G. Van Dyke, Chairman, Donaldson Company, Inc.

John P. Wiehoff, Chief Executive Officer and President, C.H.
Robinson Worldwide, Inc. 

	 
 	Officers:

William G. Van Dyke, Chairman, Donaldson Company, Inc.

William M. Cook, President and Chief Executive Officer, Donaldson
Company, Inc.

James R. Giertz, Senior Vice President, Commercial and Industrial

Nickolas Priadka, Senior Vice President, International

Lowell F. Schwab, Senior Vice President, Engine Systems and Parts

Dale M. Couch, Vice President and General Manager, Asia Pacific

Norman C. Linnell, Vice President, General Counsel and Secretary

Charles J. McMurray, Vice President, Human Resources

Geert Henk Touw, Vice President and General Manager, Europe/Middle
East/Africa

William I. Vann, Vice President, Operations

Thomas R. VerHage, Vice President and Chief Financial Officer 
 

Schedule
 5.4 

Schedule
 5.5 to

Second Supplement  

FINANCIAL
 STATEMENTS 

The only
financial statements provided by Donaldson Company, Inc. (other than
financial statements delivered to the Purchasers in their capacity as
holders of Notes pursuant to Section 7.1(a) and (b)) are the
following financial summaries included in the Offering Memorandum
described in Schedule 5.3: 

Summary
 of Historical Financial Information (Fiscal 2001-2003) 

Summary
 of Projected Financial Information (Fiscal 2004-2009) 

Schedule
 5.5 

Schedule
 5.8 to

Second Supplement  

LITIGATION
 

The Company is
appealing a judgment entered against it in the Engineering
Products Company v. Donaldson patent infringement case, which case is
discussed in the Company’s press release dated August
13, 2004, the text of which appears below: 

	Press Release	 	 	 	Source: Donaldson Company,
 Inc.	 

Donaldson
 Company to Appeal Judgment 
Friday August 13,
6:00 am ET  

MINNEAPOLIS, Aug.
 13 /PRNewswire-FirstCall/ — Donaldson Company, Inc.
(NYSE: DCI – News) announced today the outcome of post
trial motions in the jury trial between Donaldson and
Engineered Products Company, Inc. (“EPC”). In 1998, EPC filed a patent
infringement lawsuit against Donaldson in the
U.S. Federal District Court for the Northern District of Iowa. On May
11, 2004, the jury found in favor of EPC on its willful
infringement claims against Donaldson. On August 12, 2004, the Court
ruled that damages should be approximately $16.0 million.
Donaldson intends to vigorously challenge the judgment and will appeal
the decision to the Federal Circuit Court of Appeals. This
appeal could take up to two years or longer. EPC’s patent expired on May
 1, 2001 and will not impact Donaldson’s ongoing
business operations. Donaldson confirms previous guidance of delivering
its 15th consecutive year of double-digit earnings growth
when it issues its fourth quarter earnings release on August 31. 

About
 Donaldson Company, Inc. 

Donaldson
Company, Inc., headquartered in Minneapolis, is a leading worldwide
provider of filtration systems and replacement parts. Founded in 1915,
Donaldson is a technology-driven company committed to
satisfying customer needs for filtration solutions through innovative
research and development. Donaldson serves customers in the
industrial and engine markets including dust collection, power
generation, specialty filtration, compressed air purification,
off-road equipment, industrial compressors, and trucks. Our 10,000
employees contribute to the company’s success at over 30
manufacturing locations around the world. In fiscal year 2003, Donaldson
 reported sales of more than $1.2 billion and achieved its
14th consecutive year of double-digit earnings growth. Donaldson is a
member of the S&P MidCap 400 Index and Donaldson shares
are traded on the New York Stock Exchange under the symbol DCI.
Additional company information is available at
http://www.donaldson.com 

Schedule
 5.8 

Schedule
 5.11 to

Second Supplement  

LICENSES,
 PERMITS, ETC. 

The Company is
appealing a judgment entered against it in the Engineering
Products Company v. Donaldson patent infringement case, which case is
discussed in the Company’s press release dated August
13, 2004 (see Schedule 5.8). 

The Company also
has various ongoing legal assessments and actions relating
to violation of certain intellectual property rights of the Company,
none of which, however, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect. 

Schedule
 5.11 

Schedule
 5.15 to

Second Supplement  

INDEBTEDNESS
 

	Amounts in $ Millions:	 	 	 		 	 		 
	 
	Short-term debt:	 	 
	        Multi-currency
revolving facility	 	 	$	  0.0	 
	        Uncommitted
credit facilities	 	 	 	12.4	 
	        Credit
facilities of international subsidiaries	 	 	 	7.3	 	$	 19.7	 
		
		
	
	Current maturities of long-term debt	 	 
	        6.20% Unsecured
 senior notes due July 15, 2005	 	 	$	 23.0	 
	        1.9475%
Guaranteed senior notes due Jan 29, 2005	 	 	 	10.7	 
	        Aggregated
current capital leases	 	 	 	0.6	 	$	 34.3	 
		
		
	
	Long-term debt:	 	 
	6.31% Unsecured senior notes due July 15, 2008	 	 	$	 28.6	 
	6.39% Unsecured senior notes due August 15, 2010	 	 	 	24.5	 
	1.51% Guaranteed note due March 28, 2006	 	 	 	7.1	 
	9.4% Secured installment note due January 31, 2007	 	 	 	0.1	 
	Aggregated Long-term Capital Leases	 	 	 	2.6	 
	Variable rate industrial development revenue bonds	 	 
	        due September
1, 2024	 	 	 	8.0	 	$	 70.9	 
		
		
	

NOTE:   Since
 the close of F’04
(7-31-04), the Donaldson Company, Inc. engaged in the following material
 transactions. 

	 
 	•  	  	The
Donaldson Company, Inc. has amended and restated its existing
$150 million three year credit agreement that was to mature on September
 27, 2005. The amendment extends the maturity date of the
facility to September 2, 2009. 

	 
 	•  	  	The
Donaldson Company, Inc. has drawn $75 Million under its
amended and restated credit agreement. 

	 
 	•  	  	The
Company has repurchased three million shares, or approximately
3.5 percent, of its outstanding common stock after the market closed on
September 3, 2004. The shares were purchased from Banc of
America Securities LLC under an overnight share repurchase program at a
total cost of approximately $86.5 million. 

Schedule
 5.15 

Schedule
 10.2 to

Second Supplement  

LIENS
 

Donaldson
 Filtration Systems (Pty) Ltd Secured Note of 726,000
Rand 

Capitalized
leases in the aggregate amount of Euro 2,657,000 

Schedule
 10.2 

Exhibit
 1(a) to

Second Supplement  

[FORM
 OF SERIES 2004-A NOTE] 

DONALDSON
 COMPANY, INC. 

4.85%
 Senior Note, Series 2004-A

due December 17, 2011 

	No. [_____]	 	 	 	[Date]	 
	$[_______]	 	 	 	PPN: 257651 B*9	 

        FOR
 VALUE RECEIVED, the
undersigned, DONALDSON COMPANY, INC. (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
 December 17, 2011, 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 4.85% per annum from the date
hereof, payable semiannually, on June 17 and December 17 in each year,
commencing with the June 17 or December 17 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) 6.85%
or (ii) 2% over the rate of interest publicly announced by Bank of
America, NA 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, NA 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 Notes (herein called the “Notes”) issued pursuant to a Note Purchase
Agreement dated as of July 15, 2004, as
supplemented and amended by a First Supplement dated as of August 1,
1998 and a Second Supplement and First Amendment dated as of
September 30, 2004 (as so supplemented and amended and as hereafter from
 time to time amended and supplemented, the “Note
Purchase Agreement”), 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 set forth in Sections 6.1 (to the extent
such representation is required for such transfer) and 6.2
of the Note Purchase Agreement. The Notes have not been registered under
 the Securities Act of 1933, as amended. 

Schedule
 5 

        This
 Note is a registered
Note and, as provided in Section 13 of the Note Purchase Agreement, upon
 surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly
executed, by the registered holder hereof or such holder’s
attorney duly authorized in writing, a new Note for a like principal
amount will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be
affected by any notice to the contrary. 

        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 Subsidiary Guaranty dated as of
December 17, 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. 

	 	 	 	 	 	 
	 	 	DONALDSON COMPANY, INC. 
	 
	 
	   		By:  	 	   	 
	 	

		  	 
	   		Name:  	 	   	 
	 	

		  	 
	   		Title:  	 	   	 
	 	

		  	 

_________________ 

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

-2-

Exhibit
 1(a) 

Exhibit
 1(b) to

Second Supplement  

FORM
 OF SUBSIDIARY GUARANTY 

        THIS
 GUARANTY (this
“Guaranty”) dated as of December 17, 2004 is made by the undersigned
(each, a “Guarantor”), in favor of the
holders from time to time of the Notes 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,
 Donaldson Company,
Inc. (the “Company”) entered into a Note Purchase Agreement dated as of
July 15, 1998, a First Supplement to Note
Purchase Agreement dated as of August 1, 1998 and a Second Supplement
and First Amendment dated as of September 30, 2004 (the Note
Purchase Agreement as so supplemented and amended and as it may
hereafter be amended, supplemented, restated or otherwise modified
from time to time in accordance with its terms, the “Note Purchase
Agreement”); 

        WHEREAS,
 the Note Purchase
Agreement provides for the issuance by the Company of up to $150,000,000
 aggregate principal amount of Notes (as defined in the
Note Purchase Agreement), of which the Company has heretofore issued
$50,000,000 aggregate principal amount of Series 1998-A Notes
and $25,000,000 aggregate principal amount of Series 1998-B Notes and,
concurrently with the delivery by the Guarantors of this
Guaranty, is issuing $30,000,000 aggregate principal amount of Series
2004-A Notes; 

        WHEREAS,
 the Parent 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: 

Schedule
 5 

        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 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 (including reasonable attorneys’ fees and
expenses), 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: 

-2-

Exhibit
 1(b) 

	 
 	        (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 or the Parent 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;

	 
 	        (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 the Parent, 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, the Parent, 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 the Parent or any Guarantor into or
with any other corporation, or any sale, lease or
transfer of any of the assets of the Company or the Parent or any
Guarantor to any other person; 

-3-

Exhibit
 1(b) 

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

	 
 	        (j)       any
release
 or discharge, by operation of law, of any other 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. 

        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 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 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 

-4-

Exhibit
 1(b) 

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 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 the earlier to occur of (i) 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 and (ii) such Guarantor is released by the Holders
pursuant to Section 1(c) of the Second Supplement.

        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
power and authority to own or hold under lease the properties it
purports to own or hold under lease and to transact the business
it transacts and proposes to transact; 

-5-

Exhibit
 1(b) 

	 
 	        (b)       such
Guarantor
 has the power and authority to execute and deliver this Guaranty and to
 perform the provisions hereof, and this Guaranty
has been duly authorized by all necessary action on the part of such
Guarantor; 

	 
 	        (c)       this
Guaranty
 constitutes the legal, valid and binding obligation of such Guarantor
enforceable against such Guarantor in accordance
with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, fraudulent conveyance,
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); 

	 
 	        (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 agreement, or
corporate charter or by-laws to which such Guarantor is bound or by
which such 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 applicable to such Guarantor; 

	 
 	        (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)       there
are
 no actions, suits or proceedings pending or, to the knowledge of such
Guarantor, threatened against or affecting such
Guarantor, or any property of such Guarantor, 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; 

	 
 	        (g)       after
giving
 effect to the transactions contemplated in the Note Purchase Agreement
and after giving due consideration to any rights of
contribution (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 and communications provided for hereunder shall be in writing
and sent by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or by registered or certified mail
with return receipt requested (postage prepaid), or by a recognized
overnight delivery service (with charges prepaid) (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 

-6-

Exhibit
 1(b) 

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 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, 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. 

-7-

Exhibit
 1(b) 

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

	 	 	 	 	 	 
	 	 	[Name of Guarantor] 
	 
	 
	   		By:  	 	   	 
	 	

		  	 
	   		Name:  	 	   	 
	 	

		  	 
	   		Title:  	 	   	 
	 	

		  	 
	 
	 
	 	 	[Name of Guarantor] 
	 
	 
	   		By:  	 	   	 
	 	

		  	 
	   		Name:  	 	   	 
	 	

		  	 
	   		Title:  	 	   	 
	 	

		  	 
	 
	 
	 	 	[Name of Guarantor] 
	 
	 
	   		By:  	 	   	 
	 	

		  	 
	   		Name:  	 	   	 
	 	

		  	 
	   		Title:  	 	   	 
	 	

		  	 

-8-

Exhibit
 1(b) 

FORM
 OF JOINDER TO SUBSIDIARY GUARANTY 

        The
 undersigned (the
“Guarantor”), joins in the Subsidiary Guaranty dated as of December 17,
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)       such
Guarantor
 is duly organized, validly existing and in good standing under the laws
 of its jurisdiction of organization and has the
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; 

	 
 	        (b)       such
Guarantor
 has the power and authority to execute and deliver this Guaranty and to
 perform the provisions hereof, and this Guaranty
has been duly authorized by all necessary action on the part of such
Guarantor; 

	 
 	        (c)       this
Guaranty
 constitutes the legal, valid and binding obligation of such Guarantor
enforceable against such Guarantor in accordance
with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, fraudulent conveyance,
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); 

	 
 	        (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 agreement, or
corporate charter or by-laws to which such Guarantor is bound or by
which such 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 applicable to such Guarantor; 

	 
 	        (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)       there
are
 no actions, suits or proceedings pending or, to the knowledge of such
Guarantor, threatened against or affecting such
Guarantor, or any property of such Guarantor, 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; 

-9-

Exhibit
 1(b) 

	 
 	        (g)       after
giving
 effect to the transactions contemplated by the giving of this Joinder
and giving due consideration to any rights of
contribution (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:  	 	   	 
	 	

		  	 

-10-

Exhibit
 1(b)

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