Document:

Exhibit 10.87
                                                                  EXECUTION COPY
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                            HEADWATERS INCORPORATED,

                                       To

                                WELLS FARGO BANK,

                              NATIONAL ASSOCIATION

                                   as Trustee

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                                    INDENTURE

                            Dated as of June 1, 2004

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              2-7/8% Convertible Senior Subordinated Notes due 2016

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                                TABLE OF CONTENTS

                                                                          Page

                                    ARTICLE 1
                                   DEFINITIONS

Section 1.01. Definitions......................................................1

                                   ARTICLE 2
        ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

Section 2.01. Designation Amount and Issue of Notes............................9
Section 2.02. Form of Notes...................................................10
Section 2.03. Date and Denomination of Notes; Payments of Interest............11
Section 2.04. Execution of Notes..............................................12
Section 2.05. Exchange and Registration of Transfer of Notes; Restrictions
                on Transfer...................................................13
Section 2.06. Mutilated, Destroyed, Lost or Stolen Notes......................18
Section 2.07. Temporary Notes.................................................19
Section 2.08. Cancellation of Notes...........................................20
Section 2.09. CUSIP Numbers...................................................20

                                    ARTICLE 3
                       REDEMPTION AND REPURCHASE OF NOTES

Section 3.01. Redemption of Notes.............................................20
Section 3.02. Notice of Redemption; Selection of Notes........................23
Section 3.03. Payment of Notes Called for Redemption by the Company...........24
Section 3.04. Conversion Arrangement on Call for Redemption...................25
Section 3.05. Repurchase at Option of Holders upon a Designated Event.........25
Section 3.06. Repurchase of Notes by the Company at Option of the Holder......29
Section 3.07. Company Repurchase Notice.......................................30
Section 3.08. Effect of Repurchase Notice.....................................31
Section 3.09. Deposit of Repurchase Price.....................................32
Section 3.10. Notes Repurchased in Part.......................................32
Section 3.11. Repayment to the Company........................................32

                                    ARTICLE 4
                               CONTINGENT INTEREST

Section 4.01. Contingent Interest.............................................32
Section 4.02. Payment of Contingent Interest..................................33

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Section 4.03. Contingent Interest Notification................................33

                                    ARTICLE 5
                       PARTICULAR COVENANTS OF THE COMPANY

Section 5.01. Payment of Principal and Interest...............................33
Section 5.02. Maintenance of Office or Agency.................................33
Section 5.03. Appointments to Fill Vacancies in Trustee's Office..............34
Section 5.04. Provisions as to Paying Agent...................................34
Section 5.05. Existence.......................................................35
Section 5.06. Maintenance of Properties.......................................35
Section 5.07. Payment of Taxes and Other Claims...............................36
Section 5.08. Rule 144A Information Requirement...............................36
Section 5.09. Stay, Extension and Usury Laws..................................36
Section 5.10. Compliance Certificate..........................................37
Section 5.11. Additional Interest Notice......................................37
Section 5.12. Contingent Debt Tax Treatment...................................37
Section 5.13. Calculation of Original Issue Discount..........................37

                                    ARTICLE 6
          NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

Section 6.01. Noteholders' Lists..............................................38
Section 6.02. Preservation and Disclosure of Lists............................38
Section 6.03. Reports by Trustee..............................................39
Section 6.04. Reports by Company..............................................39

                                    ARTICLE 7
         REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT

Section 7.01. Events of Default...............................................39
Section 7.02. Payments of Notes on Default; Suit Therefor.....................41
Section 7.03. Application of Monies Collected by Trustee......................43
Section 7.04. Proceedings by Noteholder.......................................43
Section 7.05. Proceedings by Trustee..........................................44
Section 7.06. Remedies Cumulative and Continuing..............................44
Section 7.07. Direction of Proceedings and Waiver of Defaults by
                Majority of Noteholders.......................................45
Section 7.08. Notice of Default...............................................45
Section 7.09. Undertaking to Pay Costs........................................45

                                    ARTICLE 8
                                   THE TRUSTEE

Section 8.01. Duties and Responsibilities of Trustee..........................46

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Section 8.02. Reliance on Documents, Opinions, Etc............................47
Section 8.03. No Responsibility for Recitals, Etc.............................49
Section 8.04. Trustee, Paying Agents, Conversion Agents or Registrar
                May Own Notes.................................................49
Section 8.05. Monies to Be Held in Trust......................................49
Section 8.06. Compensation and Expenses of Trustee............................49
Section 8.07. Officer's Certificate as Evidence...............................50
Section 8.08. Conflicting Interests of Trustee................................50
Section 8.09. Eligibility of Trustee..........................................50
Section 8.10. Resignation or Removal of Trustee...............................50
Section 8.11. Acceptance by Successor Trustee.................................52
Section 8.12. Succession by Merger............................................52
Section 8.13. Preferential Collection of Claims...............................53
Section 8.14. Trustee's Application for Instructions from the Company.........53

                                    ARTICLE 9
                                 THE NOTEHOLDERS

Section 9.01. Action by Noteholders...........................................53
Section 9.02. Proof of Execution by Noteholders...............................54
Section 9.03. Who Are Deemed Absolute Owners..................................54
Section 9.04. Company-owned Notes Disregarded.................................54
Section 9.05. Revocation of Consents; Future Holders Bound....................55

                                   ARTICLE 10
                             MEETINGS OF NOTEHOLDERS

Section 10.01. Purpose of Meetings............................................55
Section 10.02. Call of Meetings by Trustee....................................55
Section 10.03. Call of Meetings by Company or Noteholders.....................56
Section 10.04. Qualifications for Voting......................................56
Section 10.05. Regulations....................................................56
Section 10.06. Voting.........................................................57
Section 10.07. No Delay of Rights by Meeting..................................57

                                   ARTICLE 11
                             SUPPLEMENTAL INDENTURES

Section 11.01. Supplemental Indentures Without Consent of Noteholders.........58
Section 11.02. Supplemental Indenture with Consent of Noteholders.............59
Section 11.03. Effect of Supplemental Indenture...............................60
Section 11.04. Notation on Notes..............................................60
Section 11.05. Evidence of Compliance of Supplemental Indenture to Be
                 Furnished to Trustee.........................................61

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                                   ARTICLE 12
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

Section 12.01. Company May Consolidate on Certain Terms.......................61
Section 12.02. Successor to Be Substituted....................................61
Section 12.03. Opinion of Counsel to Be Given to Trustee......................62

                                   ARTICLE 13
                     SATISFACTION AND DISCHARGE OF INDENTURE

Section 13.01. Discharge of Indenture.........................................62
Section 13.02. Deposited Monies to Be Held in Trust by Trustee................63
Section 13.03. Paying Agent to Repay Monies Held..............................63
Section 13.04. Return of Unclaimed Monies.....................................63
Section 13.05. Reinstatement..................................................64

                                   ARTICLE 14
         IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS

Section 14.01. Indenture and Notes Solely Corporate Obligations...............64

                                   ARTICLE 15
                               CONVERSION OF NOTES

Section 15.01. Right to Convert...............................................64
Section 15.02. Exercise of Conversion Privilege; Issuance of Common
                 Stock on Conversion; No Adjustment for Interest
                 or Dividends.................................................67
Section 15.03. Cash Payments in Lieu of Fractional Shares.....................69
Section 15.04. Conversion Rate................................................69
Section 15.05. Adjustment of Conversion Rate..................................69
Section 15.06. Effect of Reclassification, Consolidation, Merger or Sale......78
Section 15.07. Taxes on Shares Issued.........................................79
Section 15.08. Reservation of Shares; Shares to Be Fully Paid; Compliance
                 with Governmental Requirements; Listing of Common Stock......79
Section 15.09. Responsibility of Trustee......................................80
Section 15.10. Notice to Holders Prior to Certain Actions.....................80
Section 15.11. Shareholder Rights Plans.......................................81

                                   ARTICLE 16
                                  SUBORDINATION

Section 16.01. Agreement to Subordinate.......................................81
Section 16.02. Liquidation, Dissolution, Bankruptcy...........................82

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Section 16.03. Default on Senior Indebtedness.................................82
Section 16.04. Acceleration of Payment of Notes...............................83
Section 16.05. When Distribution Must Be Paid Over............................83
Section 16.06. Subrogation....................................................83
Section 16.07. Relative Rights................................................84
Section 16.08. Subordination May Not Be Impaired by Company...................84
Section 16.09. Rights of Trustee and Paying Agent.............................84
Section 16.10. Distribution or Notice to Representative.......................85
Section 16.11. Article 16 Not to Prevent Events of Default or Limit
                 Right to Accelerate..........................................85
Section 16.12. Trust Monies Not Subordinated..................................85
Section 16.13. Trustee Entitled to Rely.......................................85
Section 16.14. Trustee to Effectuate Subordination............................85
Section 16.15. Trustee Not Fiduciary for Holders of Senior Indebtedness.......85
Section 16.16. Reliance by Noteholders of Senior Indebtedness on
                 Subordination Provisions.....................................86

                                   ARTICLE 17
                            MISCELLANEOUS PROVISIONS

Section 17.01. Provisions Binding on Company's Successors.....................86
Section 17.02. Official Acts by Successor Corporation.........................86
Section 17.03. Addresses for Notices, Etc.....................................86
Section 17.04. Governing Law..................................................87
Section 17.05. Evidence of Compliance with Conditions Precedent;
                 Certificates to Trustee......................................87
Section 17.06. Legal Holidays.................................................87
Section 17.07. Trust Indenture Act............................................87
Section 17.08. No Security Interest Created...................................88
Section 17.09. Benefits of Indenture..........................................88
Section 17.10. Table of Contents, Headings, Etc...............................88
Section 17.11. Authenticating Agent...........................................88
Section 17.12. Execution in Counterparts......................................88
Section 17.13. Severability...................................................89

Exhibit A   -   FORM OF NOTE

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                                    INDENTURE

         INDENTURE dated as of June 1, 2004, between HEADWATERS INCORPORATED, a
Delaware corporation (hereinafter called the "Company"), having its principal
office at 10653 South Riverfront Parkway, Suite 300, South Jordan, UT 84095, and
Wells Fargo Bank, National Association, a national banking association, as
trustee hereunder (hereinafter called the "Trustee").

                                   WITNESSETH:

         WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 2-7/8% Convertible Senior Subordinated Notes due
2016 (hereinafter called the "Notes"), in an aggregate principal amount not to
exceed $172,500,000 and, to provide the terms and conditions upon which the
Notes are to be authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture; and

         WHEREAS, the Notes, the certificate of authentication to be borne by
the Notes, a form of assignment, a form of Designated Event Repurchase Notice, a
form of Repurchase Notice and a form of Conversion Notice to be borne by the
Notes are to be substantially in the forms hereinafter provided for; and

         WHEREAS, all acts and things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute this Indenture a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized,

         NOW, THEREFORE, THIS INDENTURE WITNESSETH:

         That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:

                                    ARTICLE 1
                                   DEFINITIONS

Section 1.01. Definitions.

         The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section 1.01. All other terms used in this
Indenture that are defined in the Trust Indenture Act or which are by reference
therein defined in the Securities Act (except as herein otherwise expressly
provided or unless the context otherwise requires) shall have the meanings
assigned to such terms in the Trust Indenture Act and in the Securities Act as

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in force at the date of the execution of this Indenture. The words "herein",
"hereof", "hereunder" and words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other subdivision. The terms
defined in this Article include the plural as well as the singular.

         "Additional Interest" has the meaning specified for "Additional
Interest Amount" in Section 2(e) of the Registration Rights Agreement.

         "Additional Interest Notice" has the meaning specified in Section 5.12.

         "Adjustment Event" has the meaning specified in Section 15.05(k).

         "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.

         "Agent Members" has the meaning specified in Section 2.05(b).

         "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.

         "Board of Directors" means the Board of Directors of the Company or a
committee of such Board duly authorized to act for it hereunder.

         "Business Day" means any day except a Saturday, Sunday or legal holiday
on which banking institutions in The City of New York are authorized or
obligated by law, regulation or executive order to close.

         "Calendar Quarter" means, with respect to the Company, the first,
second, third and fourth quarter of any fiscal year ending on March 31, June 30,
September 30 and December 31, respectively.

         "Closing Sale Price" of the shares of Common Stock on any date means
the closing sale price per share (or, if no closing sale price is reported, the
average of the closing bid and ask prices or, if more than one in either case,
the average of the average closing bid and the average closing ask prices) on
such date as reported in composite transactions for the principal United States
securities exchange on which shares of Common Stock are traded or, if the shares
of Common Stock are not listed on a United States national or regional
securities exchange, as reported by the Nasdaq Stock Market or by the National
Quotation Bureau Incorporated. In the absence of such quotations, the Company
shall be entitled to determine the Closing Sale Price on the basis it considers
appropriate. The Closing Sale Price shall be determined without reference to
extended or after-hours trading.

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         "Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this Indenture such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.

         "Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the provisions
of Section 15.06, however, shares issuable on conversion of Notes shall include
only shares of the class designated as common stock of the Company at the date
of this Indenture (namely, the Common Stock, par value $0.01) or shares of any
class or classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which are not subject to redemption by the
Company; provided that, if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable on conversion
shall be substantially in the proportion which the total number of shares of
such class resulting from all such reclassifications bears to the total number
of shares of all such classes resulting from all such reclassifications.

         "Company" means the corporation named as the "Company" in the first
paragraph of this Indenture, and, subject to the provisions of Article 12 and
Section 15.06, shall include its successors and assigns.

         "Company Repurchase Notice" has the meaning specified in Section
3.07(b).

         "Company Repurchase Notice Date" has the meaning specified in Section
3.07(b).

         "Contingent Interest" has the meaning specified in Section 4.01.

         "Conversion Date" has the meaning specified in Section 15.02.

         "Conversion Notice" has the meaning specified in Section 15.02.

         "Conversion Price" as of any day will equal $1,000 divided by the
Conversion Rate as of such date.

         "Conversion Rate" has the meaning specified in Section 15.04.

         "Corporate Trust Office" or other similar term means the designated
office of the Trustee at which at any particular time its corporate trust
business as it relates to this Indenture shall be administered, which office is,
at the date as of which this Indenture is dated, located at Sixth & Marquette;
N9303-120 Minneapolis, MN 55479.

         "Credit Agreement" means the credit agreement dated March 31, 2004
among the Company, the Lenders, the Issuer (both, as defined therein) and Bank
One, N.A. acting as administrative agent, as amended, restated, supplemental,
waived, replaced, whether or not upon termination, and whether with the original

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Lenders or otherwise, refinanced, restructured or refinancing thereof (including
amendments that increase the principal amount thereof).

         "Current Market Price" has the meaning specified in Section 15.05(g).

         "Custodian" means Wells Fargo Bank, National Association, as custodian
with respect to the Notes in global form, or any successor entity thereto.

         "Default" means any event that is, or after notice or passage of time,
or both, would be, an Event of Default.

         "Defaulted Interest" has the meaning specified in Section 2.03.

         "Depositary" means the clearing agency registered under the Exchange
Act that is designated to act as the Depositary for the Global Notes. The
Depository Trust Company shall be the initial Depositary, until a successor
shall have been appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter, "Depositary" shall mean or include such
successor.

         "Designated Event" shall mean any Fundamental Change or a Termination
of Trading.

         "Designated Event Expiration Time" has the meaning specified in Section
3.05(b).

         "Designated Event Notice" has the meaning specified in Section 3.05(b).

         "Designated Event Repurchase Date" has the meaning specified in Section
3.05(a).

         "Designated Event Repurchase Notice" has the meaning specified in
Section 3.05(a).

         "Designated Senior Indebtedness" of the Company means (a) the Credit
Agreement and (b) any other Senior Indebtedness of the Company that, at the date
of determination, has an aggregate principal amount outstanding of, or under
which, at the date of determination, the holders thereof are committed to lend
up to, at least $25,000,000 and is specifically designated by the Company in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of this Indenture.

         "Determination Date" has the meaning specified in Section 15.05(k).

         "Event of Default" means any event specified in Section 7.01 as an
Event of Default.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, as in effect from time to
time.

         "Ex-Dividend Time" has the meaning specified in Section 15.01(b).

         "Expiration Time" has the meaning specified in Section 15.05(f).

         "Fair Market Value" has the meaning specified in Section 15.05(g)(ii).

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         "Fundamental Change" means the occurrence of any transaction or event
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise) in connection with which all or substantially all of the Common Stock
shall be exchanged for, converted into, acquired for or constitutes solely the
right to receive, consideration which is not all or substantially all common
stock, depositary receipts, ordinary shares or other certificates representing
common equity interests that are (or, upon consummation of or immediately
following such transaction or event, will be) listed on a United States national
securities exchange or approved (or, upon consummation of or immediately
following such transaction or event, will be approved) for quotation on the
Nasdaq National Market or any similar United States system of automated
dissemination of quotations of securities prices.

         "Global Note" has the meaning specified in Section 2.02.

         "Indebtedness" means, with respect to any Person on any date of
determination, without duplication, the principal or face amount of (i) all
obligations for borrowed money, (ii) all obligations evidenced by notes, bonds
or other similar instruments, (iii) all obligations in respect of letters of
credit or bankers' acceptances or similar instruments (or reimbursement
obligations with respect thereto), (iv) all obligations to pay the deferred
purchase price of property or services, except any such balance that constitutes
an accrued expense or trade payable, (v) all obligations as lessee which are
capitalized in accordance with generally accepted accounting principles, (vi)
representing any amounts owing in respect to foreign exchange and interest rate,
commodity or other hedging agreements, and (vii) all Indebtedness of others
guaranteed by such Person or any of its Subsidiaries or for which such Person or
any of its Subsidiaries is legally responsible or liable (whether by agreement
to purchase indebtedness of, or to supply funds or to invest in, others).

         "Indenture" means this instrument as originally executed or, if amended
or supplemented as herein provided, as so amended or supplemented.

         "Initial Purchasers" means each of Morgan Stanley & Co. Incorporated,
J.P. Morgan Securities Inc., Adams, Harkness & Hill, Inc., RBC Capital Markets
Corporation and Stephens Inc. (each an "Initial Purchaser").

         "Interest" means, when used with reference to the Notes, any interest
payable under the terms of the Notes, including Contingent Interest, if any, and
Additional Interest, if any, payable under the terms of the Registration Rights
Agreement.

         "Make Whole Payment" means, with respect to each $1,000 principal
amount of Notes, a payment in cash, Common Stock or a combination thereof equal
to the present value of all remaining scheduled payments of Interest on the
Notes to be redeemed through June 1, 2011. Present value will be computed using
a discount rate equal to the Treasury Yield.

         "Measurement Period" has the meaning specified in Section 15.01(a).

         "Non-electing share" has the meaning specified in Section 15.06.

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         "Note" or "Notes" means any Note or Notes, as the case may be,
authenticated and delivered under this Indenture, including any Global Note.

         "Noteholder" or "holder" as applied to any Note, or other similar terms
(but excluding the term "Beneficial Holder"), means any Person in whose name at
the time a particular Note is registered on the Note Registrar's books.

         "Note Register" has the meaning specified in Section 2.05.

         "Note Registrar" has the meaning specified in Section 2.05.

         "Notice Date" means the date of mailing of the notice of redemption
pursuant to Section 3.02.

         "Officer" means, with respect to the Company, its Chairman of the
Board, the Chief Executive Officer, the President or any Vice President (whether
or not designated by a number or numbers or word or words added before or after
the title "Vice President") and the Treasurer or any Assistant Treasurer, or the
Secretary or Assistant Secretary of the Company.

         "Officer's Certificate", when used with respect to the Company, means a
certificate signed by an Officer thereof.

         "Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company.

         "Outstanding", when used with reference to Notes and subject to the
provisions of Section 9.04, means, as of any particular time, all Notes
authenticated and delivered by the Trustee under this Indenture, except:

                  (a) Notes theretofore canceled by the Trustee or delivered to
         the Trustee for cancellation;

                  (b) Notes, or portions thereof, (i) for the redemption of
         which monies in the necessary amount shall have been deposited in trust
         with the Trustee or with any paying agent (other than the Company) or
         (ii) which shall have been otherwise discharged in accordance with
         Article 13;

                  (c) Notes in lieu of which, or in substitution for which,
         other Notes shall have been authenticated and delivered pursuant to the
         terms of Section 2.06; and

                  (d) Notes converted into Common Stock pursuant to Article 15
         and Notes deemed not outstanding pursuant to Article 3.

         "Permitted Junior Securities" means (i) equity interests in the Company
or (ii) debt securities that are subordinated to all Senior Indebtedness and any
debt securities issued in exchange for Senior Indebtedness to the same extent
as, or to a greater extent than, the Notes are subordinated to Senior
Indebtedness under this Indenture.

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<PAGE>

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

         "Portal Market" means The Portal Market operated by the National
Association of Securities Dealers, Inc. or any successor thereto.

         "Predecessor Note" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note, and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.06 in exchange for a mutilated Note
or in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the
same debt as the mutilated lost, destroyed or stolen Note that it replaces.

         "Purchased Shares" has the meaning specified in Section 15.05(f)(i).

         "Record Date" has the meaning specified in Section 15.05(g)(iii).

         "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of June 1, 2004, between the Company and the Initial
Purchasers, as amended from time to time in accordance with its terms.

         "Repurchase Date" has the meaning specified in Section 3.06.

         "Repurchase Notice" has the meaning specified in Section 3.06.

         "Responsible Officer" shall mean, when used with respect to the
Trustee, any officer within the corporate trust department of the Trustee with
direct responsibility for the administration of this Indenture, and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of such person's knowledge or any familiarity
with the particular subject.

         "Restricted Securities" has the meaning specified in Section 2.05(c).

         "Rule 144A" means Rule 144A as promulgated under the Securities Act.

         "Securities" has the meaning specified in Section 15.05(d).

         "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time.

         "Senior Indebtedness" means (i) all Indebtedness of the Company
outstanding under the Credit Agreement and all Hedging Obligations with respect
to secured obligations thereunder, including interest, fees, expenses, amounts
payable under reimbursement obligations in connection with letters of credit and
interest accruing after, or which would accrue but for the filing of a petition
initiating any proceeding pursuant to Bankruptcy Law at the rate specified in
the Credit Agreement, whether or not a claim for such interest would be
allowed), (ii) any other Indebtedness of the Company, whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed, guaranteed or in
effect guaranteed by the Company (including all deferrals, renewals, extensions

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<PAGE>

or refundings of, or amendments, modifications or supplements to the foregoing)
and (iii) all Obligations with respect to the items listed in the preceding
clauses (i) and (ii); provided, however, that Senior Indebtedness does not
include: (a) Indebtedness evidenced by the Notes; (b) Indebtedness of the
Company to any Subsidiary of the Company, except to the extent such Indebtedness
is pledged by such Subsidiary as security for any Senior Indebtedness of such
Subsidiary; (c) any liability for federal, state, foreign, local or other taxes
owed or owing by the Company; (d) accounts payable or other liabilities of the
Company to trade creditors arising in the ordinary course of business, and (e)
any Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof expressly provides that such Indebtedness is
pari passu with, or is subordinated to, the Notes.

         "Senior Subordinated Indebtedness" of the Company means the Notes and
any other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Notes in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness.

         "Significant Subsidiary" means, as of any date of determination, a
Subsidiary of the Company that would constitute a "significant subsidiary" as
such term is defined under Rule 1-02(w) of Regulation S-X of the Commission as
in effect on the date of this Indenture.

         "Subordinated Indebtedness" means any Indebtedness of the Company
(whether outstanding on the date of this Indenture or thereafter Incurred) that
is subordinate or junior in right of payment to the Notes pursuant to a written
agreement.

         "Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or managing general partner of which is such Person or a
subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more subsidiaries of such Person (or any combination
thereof).

         "Tax Original Issue Discount" means the amount of ordinary interest
income on a Note that must be accrued as original issue discount for United
States federal income tax purposes pursuant to United States Treasury Regulation
section 1.1275-4 or any successor provision.

         "Termination of Trading" will be deemed to have occurred if the Common
Stock (or other common stock, depositary receipts, ordinary shares or other
certificates representing common equity interests into which the Notes are then
convertible) is neither listed for trading on a United States national
securities exchange nor approved for trading on the Nasdaq National Market.

         "Trading Day" has the meaning specified in Section 15.05(g).

         "Trading Price" means, on any date, the average of the secondary market
bid quotations per $1,000 principal amount of Notes obtained by the Trustee for

                                       8
<PAGE>

$10,000,000 principal amount of Notes at approximately 3:30 p.m., New York City
time, on such date from three independent nationally recognized securities
dealers selected by the Company; provided that if at least three such bids
cannot reasonably be obtained by the Trustee, but two bids are obtained, then
the average of the two such bids shall be used, and if only one such bid can
reasonably be obtained by the Trustee, that one bid shall be used ; provided
further that if the Trustee cannot reasonably obtain at least one bid for
$10,000,000 principal amount of Notes from a nationally recognized securities
dealer, then the Trading Price per $1,000 principal amount of Notes on such date
shall be deemed to be less than 98% of the product of (a) the number of shares
of Common Stock issuable upon conversion of $1,000 principal amount of Notes and
(b) the Closing Sale Price on such date.

         "Treasury Yield" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519) that
has become publicly available at least two business days prior to the redemption
date (or, if such Statistical Release is no longer published, any publicly
available source for similar market data)) most nearly equal to the then
remaining term to June 1, 2011; provided, however, that if the then remaining
term to June 1, 2011 is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the Treasury Yield
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 then remaining term to June
1, 2011 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.

         "Trigger Event" has the meaning specified in Section 15.05(d).

         "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as it was in force at the date of this Indenture, except as provided in
Sections 11.03 and 15.06; provided that if the Trust Indenture Act of 1939 is
amended after the date hereof, the term "Trust Indenture Act" shall mean, to the
extent required by such amendment, the Trust Indenture Act of 1939 as so
amended.

         "Trustee" means Well Fargo Bank, National Association and its
successors and any corporation resulting from or surviving any consolidation or
merger to which it or its successors may be a party and any successor trustee at
the time serving as successor trustee hereunder.

                                   ARTICLE 2
        ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

Section 2.01. Designation Amount and Issue of Notes.

         The Notes shall be designated as "2-7/8% Convertible Senior
Subordinated Notes due 2016". Notes not to exceed the aggregate principal amount
of $172,500,000 (except pursuant to Sections 2.05, 2.06, 3.03, 3.05, 3.06, 3.10
and 16.02 hereof) upon the execution of this Indenture, or from time to time
thereafter, may be executed by the Company and delivered to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver said
Notes to or upon the written order of the Company, signed by its Chairman of the

                                       9
<PAGE>

Board, Chief Executive Officer, President or any Vice President (whether or not
designated by a number or numbers or word or words added before or after the
title "Vice President"), the Treasurer or any Assistant Treasurer or the
Secretary or Assistant Secretary, without any further action by the Company
hereunder.

Section 2.02. Form of Notes.

         The Notes and the Trustee's certificate of authentication to be borne
by such Notes shall be substantially in the form set forth in Exhibit A. The
terms and provisions contained in the form of Note attached as Exhibit A hereto
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.

         Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends, endorsements or changes as the
officers executing the same may approve (execution thereof to be conclusive
evidence of such approval) and as are not inconsistent with the provisions of
this Indenture, or as may be required by the Custodian, the Depositary or by the
National Association of Securities Dealers, Inc. in order for the Notes to be
tradable on The Portal Market or as may be required for the Notes to be tradable
on any other market developed for trading of securities pursuant to Rule 144A or
as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed, or to conform to usage, or to indicate any special limitations or
restrictions to which any particular Notes are subject.

         So long as the Notes are eligible for book-entry settlement with the
Depositary, or unless otherwise required by law, or otherwise contemplated by
Section 2.05(a), all of the Notes will be represented by one or more Notes in
global form registered in the name of the Depositary or the nominee of the
Depositary (a "Global Note"). The transfer and exchange of beneficial interests
in any such Global Note shall be effected through the Depositary in accordance
with this Indenture and the applicable procedures of the Depositary. Except as
provided in Section 2.05(a), beneficial owners of a Global Note shall not be
entitled to have certificates registered in their names, will not receive or be
entitled to receive physical delivery of certificates in definitive form and
will not be considered holders of such Global Note.

         Any Global Note shall represent such of the outstanding Notes as shall
be specified therein and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be increased or reduced to reflect redemptions, repurchases, conversions,
transfers or exchanges permitted hereby. Any endorsement of a Global Note to
reflect the amount of any increase or decrease in the amount of outstanding
Notes represented thereby shall be made by the Trustee or the Custodian, at the
direction of the Trustee, in such manner and upon instructions given by the
holder of such Notes in accordance with this Indenture. Payment of principal of
and Interest on any Global Note shall be made to the holder of such Note.

                                       10
<PAGE>

Section 2.03. Date and Denomination of Notes; Payments of Interest.

         The Notes shall be issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. Each
Note shall be dated the date of its authentication and shall bear Interest from
the date specified on the face of the form of Note attached as Exhibit A hereto.
Interest on the Notes shall be computed on the basis of a 360-day year comprised
of twelve 30-day months.

         The Person in whose name any Note (or its Predecessor Note) is
registered on the Note Register at the close of business on any record date with
respect to any interest payment date shall be entitled to receive the Interest
payable on such interest payment date, except that the Interest payable upon
redemption or repurchase will be payable to the Person to whom principal is
payable pursuant to such redemption or repurchase (unless the redemption date or
the repurchase date, as the case may be, falls after a record date and on or
prior to the corresponding interest payment date, in which case accrued and
unpaid Interest to, but excluding, such redemption date or repurchase date shall
be payable on such interest payment date to the holders of such Notes registered
as such on the applicable record date).

         Notwithstanding the foregoing, if any Note (or portion thereof) is
converted into Common Stock during the period after a record date for the
payment of Interest to, but excluding, the next succeeding interest payment date
and such Note (or portion thereof) has been called or tendered for redemption on
a redemption date which occurs during such period, the Company shall not be
required to pay interest on such interest payment date in respect of any such
Note (or portion thereof). Interest shall be payable at the office of the
Company maintained by the Company for such purposes in the Borough of Manhattan,
City of New York, which shall initially be an office or agency of the Trustee.
The Company shall pay Interest (i) on any Notes in certificated form by (x)
check mailed to the address of the Person entitled thereto as it appears in the
Note Register (or upon written notice, by wire transfer in immediately available
funds, if such Person is entitled to Interest on aggregate principal in excess
of $2 million) or (y) by transfer to an account maintained by such person in the
United States or (ii) on any Global Note by wire transfer of immediately
available funds to the account of the Depositary or its nominee. The term
"record date" with respect to any interest payment date shall mean the May 15 or
November 15 preceding the applicable June 1 or December 1 interest payment date,
respectively.

         Any Interest on any Note which is payable, but is not punctually paid
or duly provided for, on any June 1 or December 1 (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Noteholder on the relevant
record date by virtue of his having been such Noteholder, and such Defaulted
Interest shall be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:

                  (a) The Company may elect to make payment of any Defaulted
         Interest to the Persons in whose names the Notes (or their respective
         Predecessor Notes) are registered at the close of business on a special
         record date for the payment of such Defaulted Interest, which shall be
         fixed in the following manner. The Company shall notify the Trustee in
         writing of the amount of Defaulted Interest proposed to be paid on each
         Note and the date of the proposed payment (which shall be not less than
         twenty-five (25) days after the receipt by the Trustee of such notice,
         unless the Trustee shall consent to an earlier date), and at the same

                                       11
<PAGE>

         time the Company shall deposit with the Trustee an amount of money
         equal to the aggregate amount to be paid in respect of such Defaulted
         Interest or shall make arrangements satisfactory to the Trustee for
         such deposit on or prior to the date of the proposed payment, such
         money when deposited to be held in trust for the benefit of the Persons
         entitled to such Defaulted Interest as in this clause provided.
         Thereupon the Trustee shall fix a special record date for the payment
         of such Defaulted Interest which shall be not more than fifteen (15)
         days and not less than ten (10) days prior to the date of the proposed
         payment, and not less than ten (10) days after the receipt by the
         Trustee of the notice of the proposed payment. The Trustee shall
         promptly notify the Company of such special record date and, in the
         name and at the expense of the Company, shall cause notice of the
         proposed payment of such Defaulted Interest and the special record date
         therefor to be mailed, first-class postage prepaid, to each holder at
         such holder's address as it appears in the Note Register, not less than
         ten (10) days prior to such special record date. Notice of the proposed
         payment of such Defaulted Interest and the special record date therefor
         having been so mailed, such Defaulted Interest shall be paid to the
         Persons in whose names the Notes (or their respective Predecessor
         Notes) are registered at the close of business on such special record
         date and shall no longer be payable pursuant to the following clause
         (2) of this Section 2.03.

                  (a) The Company may make payment of any Defaulted Interest in
         any other lawful manner not inconsistent with the requirements of any
         securities exchange or automated quotation system on which the Notes
         may be listed or designated for issuance, and upon such notice as may
         be required by such exchange or automated quotation system, if, after
         notice given by the Company to the Trustee of the proposed payment
         pursuant to this clause, such manner of payment shall be deemed
         practicable by the Trustee.

Section 2.04. Execution of Notes.

         The Notes shall be signed in the name and on behalf of the Company by
the manual or facsimile signature of its Chairman of the Board, Chief Executive
Officer, President or any Vice President (whether or not designated by a number
or numbers or word or words added before or after the title "Vice President")
and attested by the manual or facsimile signature of its Secretary or any of its
Assistant Secretaries or its Treasurer or any of its Assistant Treasurers (which
may be printed, engraved or otherwise reproduced thereon, by facsimile or
otherwise). Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on the form of Note attached
as Exhibit A hereto, manually executed by the Trustee (or an authenticating
agent appointed by the Trustee as provided by Section 17.12), shall be entitled
to the benefits of this Indenture or be valid or obligatory for any purpose.
Such certificate by the Trustee (or such an authenticating agent) upon any Note
executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.

         In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the

                                       12
<PAGE>

Company, and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.

Section 2.05. Exchange and Registration of Transfer of Notes; Restrictions on
Transfer.

         (a) The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency of the Company designated pursuant to Section 5.02 being herein sometimes
collectively referred to as the "Note Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Notes and of transfers of Notes. The Note Register shall be in
written form or in any form capable of being converted into written form within
a reasonably prompt period of time. The Trustee is hereby appointed "Note
Registrar" for the purpose of registering Notes and transfers of Notes as herein
provided. The Company may appoint one or more co-registrars in accordance with
Section 5.02.

         Upon surrender for registration of transfer of any Note to the Note
Registrar or any co-registrar, and satisfaction of the requirements for such
transfer set forth in this Section 2.05, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount and bearing such restrictive legends as may be
required by this Indenture.

         Notes may be exchanged for other Notes of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency maintained by the Company pursuant to
Section 5.02. Whenever any Notes are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Notes which
the Noteholder making the exchange is entitled to receive bearing registration
numbers not contemporaneously outstanding.

         All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.

         All Notes presented or surrendered for registration of transfer or for
exchange, redemption, repurchase or conversion shall (if so required by the
Company or the Note Registrar) be duly endorsed, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company, and
the Notes shall be duly executed by the Noteholder thereof or his attorney duly
authorized in writing.

         No service charge shall be made to any holder for any registration of,
transfer or exchange of Notes, but the Company may require payment by the holder
of a sum sufficient to cover any tax, assessment or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Notes.

         Neither the Company nor the Trustee nor any Note Registrar shall be
required to exchange or register a transfer of (a) any Notes for a period of
fifteen (15) days next preceding any selection of Notes to be redeemed, (b) any
Notes or portions thereof called for redemption pursuant to Section 3.02, (c)
any Notes or portions thereof surrendered for conversion pursuant to Article 15,

                                       13
<PAGE>

(d) any Notes or portions thereof tendered for repurchase (and not withdrawn)
pursuant to Section 3.05 or (e) any Notes or portions thereof tendered for
repurchase (and not withdrawn) pursuant to Section 3.06.

         (b) The following provisions shall apply only to Global Notes:

                  (i) Each Global Note authenticated under this Indenture shall
         be registered in the name of the Depositary or a nominee thereof and
         delivered to such Depositary or a nominee thereof or Custodian
         therefor, and each such Global Note shall constitute a single Note for
         all purposes of this Indenture.

                  (ii) Notwithstanding any other provision in this Indenture, no
         Global Note may be exchanged in whole or in part for Notes registered,
         and no transfer of a Global Note in whole or in part may be registered,
         in the name of any Person other than the Depositary or a nominee
         thereof, unless (A) the Depositary (i) has notified the Company that it
         is unwilling or unable to continue as Depositary for such Global Note
         and a successor depositary has not been appointed by the Company within
         ninety days or (ii) has ceased to be a clearing agency registered under
         the Exchange Act and a successor depositary has not been appointed by
         the Company within ninety days, (B) an Event of Default has occurred
         and the maturity of the Notes shall have been accelerated in accordance
         with Section 7.01 and any Noteholder shall have given written notice to
         the Company requesting the issuance of definitive Notes or (C) the
         Company, in its sole discretion, notifies the Trustee in writing that
         it no longer wishes to have all the Notes represented by Global Notes.
         Any Global Note exchanged pursuant to clause (A) or (B) above shall be
         so exchanged in whole and not in part and any Global Note exchanged
         pursuant to clause (C) above may be exchanged in whole or from time to
         time in part as directed by the Company. Any Note issued in exchange
         for a Global Note or any portion thereof shall be a Global Note;
         provided that any such Note so issued that is registered in the name of
         a Person other than the Depositary or a nominee thereof shall not be a
         Global Note.

                  (iii) Securities issued in exchange for a Global Note or any
         portion thereof pursuant to clause (ii) above shall be issued in
         definitive, fully registered form, without interest coupons, shall have
         an aggregate principal amount equal to that of such Global Note or
         portion thereof to be so exchanged, shall be registered in such names
         and be in such authorized denominations as the Depositary shall
         designate and shall bear any legends required hereunder. Any Global
         Note to be exchanged in whole shall be surrendered by the Depositary to
         the Trustee, as Note Registrar. With regard to any Global Note to be
         exchanged in part, either such Global Note shall be so surrendered for
         exchange or, if the Trustee is acting as Custodian for the Depositary
         or its nominee with respect to such Global Note, the principal amount
         thereof shall be reduced, by an amount equal to the portion thereof to
         be so exchanged, by means of an appropriate adjustment made on the
         records of the Trustee. Upon any such surrender or adjustment, the
         Trustee shall authenticate and make available for delivery the Note
         issuable on such exchange to or upon the written order of the
         Depositary or an authorized representative thereof.

                                       14
<PAGE>

                  (iv) In the event of the occurrence of any of the events
         specified in clause (ii) above, the Company will promptly make
         available to the Trustee a reasonable supply of certificated Notes in
         definitive, fully registered form, without interest coupons.

                  (v) Neither any members of, or participants in, the Depositary
         ("Agent Members") nor any other Persons on whose behalf Agent Members
         may act shall have any rights under this Indenture with respect to any
         Global Note registered in the name of the Depositary or any nominee
         thereof, and the Depositary or such nominee, as the case may be, may be
         treated by the Company, the Trustee and any agent of the Company or the
         Trustee as the absolute owner and holder of such Global Note for all
         purposes whatsoever. Notwithstanding the foregoing, nothing herein
         shall prevent the Company, the Trustee or any agent of the Company or
         the Trustee from giving effect to any written certification, proxy or
         other authorization furnished by the Depositary or such nominee, as the
         case may be, or impair, as among the Depositary, its Agent Members and
         any other Person on whose behalf an Agent Member may act, the operation
         of customary practices of such Persons governing the exercise of the
         rights of a holder of any Note.

                  (vi) At such time as all interests in a Global Note have been
         redeemed, repurchased, converted, canceled or exchanged for Notes in
         certificated form, such Global Note shall, upon receipt thereof, be
         canceled by the Trustee in accordance with standing procedures and
         instructions existing between the Depositary and the Custodian. At any
         time prior to such cancellation, if any interest in a Global Note is
         redeemed, repurchased, converted, canceled or exchanged for Notes in
         certificated form, the principal amount of such Global Note shall, in
         accordance with the standing procedures and instructions existing
         between the Depositary and the Custodian, be appropriately reduced, and
         an endorsement shall be made on such Global Note, by the Trustee or the
         Custodian, at the direction of the Trustee, to reflect such reduction.

         (c) Every Note that bears or is required under this Section 2.05(c) to
bear the legend set forth in this Section 2.05(c) (together with any Common
Stock issued upon conversion of the Notes and required to bear the legend set
forth in Section 2.05(d), collectively, the "Restricted Securities") shall be
subject to the restrictions on transfer set forth in this Section 2.05(c)
(including those set forth in the legend below) unless such restrictions on
transfer shall be waived by written consent of the Company, and the holder of
each such Restricted Security, by such Noteholder's acceptance thereof, agrees
to be bound by all such restrictions on transfer. As used in this Section
2.05(c), the term "transfer" encompasses any sale, pledge, loan, transfer or
other disposition whatsoever of any Restricted Security or any interest therein.

         Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
certificate evidencing such Note (and all securities issued in exchange therefor
or substitution thereof, other than Common Stock, if any, issued upon conversion
thereof, which shall bear the legend set forth in Section 2.05(d), if
applicable) shall bear a legend in substantially the following form, unless such
Note has been sold pursuant to a registration statement that has been declared
effective under the Securities Act (and which continues to be effective at the
time of such transfer) or pursuant to Rule 144 under the Securities Act or any
similar provision then in force, or unless otherwise agreed by the Company in
writing, with written notice thereof to the Trustee:

                                       15
<PAGE>

         THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
         STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
         ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
         EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
         HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL
         BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (OR ANY
         SUCCESSOR PROVISIONS); (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION
         OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY
         UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
         PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE OR THE COMMON STOCK
         ISSUABLE UPON CONVERSION OF THIS NOTE EXCEPT (A) TO HEADWATERS
         INCORPORATED OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
         INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
         ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
         144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (D) PURSUANT TO A
         REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
         SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
         TRANSFER); (3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT
         TO CLAUSE 2(D) ABOVE), IT WILL FURNISH TO WELLS FARGO BANK, NATIONAL
         ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
         CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY
         REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
         TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
         REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (4) AGREES THAT IT
         WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
         SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED
         UPON THE EARLIER OF THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE 2(D)
         ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER RULE 144(k) UNDER THE
         SECURITIES ACT (OR ANY SUCCESSOR PROVISION). THE INDENTURE CONTAINS A
         PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
         THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTION.

         Any Note (or security issued in exchange or substitution therefor) as
to which such restrictions on transfer shall have expired in accordance with
their terms or as to conditions for removal of the foregoing legend set forth
therein have been satisfied may, upon surrender of such Note for exchange to the
Note Registrar in accordance with the provisions of this Section 2.05, be
exchanged for a new Note or Notes, of like tenor and aggregate principal amount,
which shall not bear the restrictive legend required by this Section 2.05(c). If
the Restricted Security surrendered for exchange is represented by a Global Note
bearing the legend set forth in this Section 2.05(c), the principal amount of
the legended Global Note shall be reduced by the appropriate principal amount
and the principal amount of a Global Note without the legend set forth in this
Section 2.05(c) shall be increased by an equal principal amount. If a Global

                                       16
<PAGE>

Note without the legend set forth in this Section 2.05(c) is not then
outstanding, the Company shall execute and the Trustee shall authenticate and
deliver an unlegended Global Note to the Depositary.

         (d) Until the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
any stock certificate representing Common Stock issued upon conversion of any
Note shall bear a legend in substantially the following form, unless such Common
Stock has been sold pursuant to a registration statement that has been declared
effective under the Securities Act (and which continues to be effective at the
time of such transfer) or pursuant to Rule 144 under the Securities Act or any
similar provision then in force, or such Common Stock has been issued upon
conversion of Notes that have been transferred pursuant to a registration
statement that has been declared effective under the Securities Act or pursuant
to Rule 144 under the Securities Act or any similar provision then in force, or
unless otherwise agreed by the Company in writing with written notice thereof to
the transfer agent:

         THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
         UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
         ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
         OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE
         HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF THE HOLDING PERIOD
         APPLICABLE TO SALES OF THE COMMON STOCK EVIDENCED HEREBY UNDER RULE
         144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION); (1) IT
         WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY
         EXCEPT (A) TO HEADWATERS INCORPORATED OR TO ANY SUBSIDIARY THEREOF, (B)
         TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
         SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C) PURSUANT TO THE
         EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
         ACT (IF AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH
         HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH
         CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO
         SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(D) ABOVE), IT
         WILL FURNISH TO Equiserve Trust Company, N.A., AS TRANSFER AGENT (OR A
         SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
         OPINIONS OR OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY
         REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
         EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
         REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT WILL DELIVER TO EACH
         PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED (OTHER
         THAN A TRANSFER PURSUANT TO CLAUSE 1(D) ABOVE) A NOTICE SUBSTANTIALLY
         TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE
         EARLIER OF THE TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY PURSUANT

                                       17
<PAGE>

         TO CLAUSE 1(D) ABOVE OR UPON ANY TRANSFER OF THE COMMON STOCK EVIDENCED
         HEREBY AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES
         OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE SECURITIES
         ACT (OR ANY SUCCESSOR PROVISION).

         Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms or as to which the conditions for
removal of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.05(d).

         (e) Any Note or Common Stock issued upon the conversion of a Note that,
prior to the expiration of the holding period applicable to sales thereof under
Rule 144(k) under the Securities Act (or any successor provision), is purchased
or owned by the Company or any Affiliate thereof may not be resold by the
Company or such Affiliate unless registered under the Securities Act or resold
pursuant to an exemption from the registration requirements of the Securities
Act in a transaction which results in such Notes or Common Stock, as the case
may be, no longer being "Restricted Securities" (as defined under Rule 144).

         (f) The Company and the Trustee shall have no responsibility or
obligation to any Agent Members or any other Person with respect to the accuracy
of the books or records, or the acts or omissions, of the Depositary or its
nominee or of any participant or member thereof, with respect to any ownership
interest in the Notes or with respect to the delivery to any Agent Member or
other Person (other than the Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such Notes.
All notices and communications to be given to the Noteholder and all payments to
be made to Noteholders under the Notes shall be given or made only to or upon
the order of the registered Noteholders (which shall be the Depositary or its
nominee in the case of a Global Note). The rights of beneficial owners in any
Global Note shall be exercised only through the Depositary subject to the
customary procedures of the Depositary. The Trustee may rely and shall be fully
protected in relying upon information furnished by the Depositary with respect
to its Agent Members.

         The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Note (including any transfers between or among Agent Members in any
Global Note) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and when
expressly required by, the terms of this Indenture, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.

Section 2.06. Mutilated, Destroyed, Lost or Stolen Notes.

         In case any Note shall become mutilated or be destroyed, lost or
stolen, the Company in its discretion may execute, and upon its written request
the Trustee or an authenticating agent appointed by the Trustee shall
authenticate and make available for delivery, a new Note, bearing a number not
contemporaneously outstanding, in exchange and substitution for the mutilated
Note, or in lieu of and in substitution for the Note so destroyed, lost or
stolen. In every case, the applicant for a substituted Note shall furnish to the

                                       18
<PAGE>

Company, to the Trustee and, if applicable, to such authenticating agent such
security or indemnity as may be required by them to save each of them harmless
for any loss, liability, cost or expense caused by or connected with such
substitution, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent evidence to their satisfaction of the destruction, loss or
theft of such Note and of the ownership thereof.

         Following receipt by the Trustee or such authenticating agent, as the
case may be, of satisfactory security or indemnity and evidence, as described in
the preceding paragraph, the Trustee or such authenticating agent may
authenticate any such substituted Note and make available for delivery such
Note. Upon the issuance of any substituted Note, the Company may require the
payment by the holder of a sum sufficient to cover any tax, assessment or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Note which has matured or is about to
mature or has been called for redemption or has been tendered for repurchase
upon a Designated Event (and not withdrawn) or has been surrendered for
repurchase on a Repurchase Date (and not withdrawn) or is to be converted into
Common Stock shall become mutilated or be destroyed, lost or stolen, the Company
may, instead of issuing a substitute Note, pay or authorize the payment of or
convert or authorize the conversion of the same (without surrender thereof
except in the case of a mutilated Note), as the case may be, if the applicant
for such payment or conversion shall furnish to the Company, to the Trustee and,
if applicable, to such authenticating agent such security or indemnity as may be
required by them to save each of them harmless for any loss, liability, cost or
expense caused by or in connection with such substitution, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Company, the
Trustee and, if applicable, any paying agent or conversion agent evidence to
their satisfaction of the destruction, loss or theft of such Note and of the
ownership thereof.

         Every substitute Note issued pursuant to the provisions of this Section
2.06 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion or redemption
or repurchase of mutilated, destroyed, lost or stolen Notes and shall preclude
any and all other rights or remedies notwithstanding any law or statute existing
or hereafter enacted to the contrary with respect to the replacement or payment
or conversion or redemption or repurchase of negotiable instruments or other
securities without their surrender.

Section 2.07. Temporary Notes.

         Pending the preparation of Notes in certificated form, the Company may
execute and the Trustee or an authenticating agent appointed by the Trustee
shall, upon the written request of the Company, authenticate and deliver
temporary Notes (printed or lithographed). Temporary Notes shall be issuable in
any authorized denomination, and substantially in the form of the Notes in
certificated form, but with such omissions, insertions and variations as may be
appropriate for temporary Notes, all as may be determined by the Company. Every
such temporary Note shall be executed by the Company and authenticated by the
Trustee or such authenticating agent upon the same conditions and in
substantially the same manner, and with the same effect, as the Notes in

                                       19
<PAGE>

certificated form. Without unreasonable delay, the Company will execute and
deliver to the Trustee or such authenticating agent Notes in certificated form
and thereupon any or all temporary Notes may be surrendered in exchange
therefor, at each office or agency maintained by the Company pursuant to Section
5.02 and the Trustee or such authenticating agent shall authenticate and make
available for delivery in exchange for such temporary Notes an equal aggregate
principal amount of Notes in certificated form. Such exchange shall be made by
the Company at its own expense and without any charge therefor. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits and subject to the same limitations under this Indenture as Notes in
certificated form authenticated and delivered hereunder.

Section 2.08. Cancellation of Notes.

         All Notes surrendered for the purpose of payment, redemption,
repurchase, conversion, exchange or registration of transfer shall, if
surrendered to the Company or any paying agent or any Note Registrar or any
conversion agent, be surrendered to the Trustee and promptly canceled by it, or,
if surrendered to the Trustee, shall be promptly canceled by it, and no Notes
shall be issued in lieu thereof except as expressly permitted by any of the
provisions of this Indenture. The Trustee shall dispose of such canceled Notes
in accordance with its customary procedures. If the Company shall acquire any of
the Notes, such acquisition shall not operate as a redemption, repurchase or
satisfaction of the indebtedness represented by such Notes unless and until the
same are delivered to the Trustee for cancellation.

Section 2.09. CUSIP Numbers.

         The Company in issuing the Notes may use CUSIP numbers (if then
generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of
redemption or repurchases as a convenience to Noteholders; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Notes or as contained in any notice of a
redemption or a repurchase and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption or
repurchase shall not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in the CUSIP numbers.

                                   ARTICLE 3
                       REDEMPTION AND REPURCHASE OF NOTES

Section 3.01. Redemption of Notes.

         (a) The Company may not redeem any Notes prior to June 1, 2007. On or
after June 1, 2007 and prior to June 4, 2011 the Notes may be redeemed at the
option of the Company, in whole or in part at any time and from time to time,
subject to the conditions specified in paragraphs 7 and 8 of the Notes and upon
notice as set forth in Section 3.02, at a cash redemption price equal to 100% of
the principal amount of the Notes being redeemed, together with accrued and
unpaid Interest, if any, to, but excluding, the date fixed for redemption plus

                                       20
<PAGE>

the Make Whole Payment; provided that if the redemption date falls after a
record date and on or prior to the corresponding interest payment date, then
accrued and unpaid Interest, if any, to, but excluding, the date fixed for
redemption shall be paid on such interest payment date to the holders of record
of such Notes on the applicable record date instead of the holders surrendering
such Notes for redemption on such date.

         (b) The Make Whole Payment, if any, shall be paid on all Notes being
redeemed by the Company on a Redemption Date on or after June 1, 2007 and prior
to June 4, 2011, including any Notes that may have been converted after the date
of the notice of redemption and prior to such Redemption Date.

         (c) The Company may elect to pay the Make Whole Payment or any portion
thereof (A) in cash or, (B) subject to the fulfillment by the Company of the
conditions set forth in Section 3.01 (e), by delivering the number of shares of
Common Stock equal to (i) the Make Whole Payment (or any portion thereof that
the Company elects to pay in shares of Common Stock) divided by (ii) 97.5% of
the average of the Trading Price per share of Common Stock for the five
consecutive Trading Days immediately preceding and including the third Trading
Day prior to the Redemption Date.

         (d) Any issuance of shares of Common Stock in respect of the Make Whole
Payment shall be deemed to have been effected immediately prior to the close of
business on the Redemption Date and the Person or Persons in whose name or names
any stock certificate or stock certificates representing shares of Common Stock
shall be issuable upon such redemption shall be deemed to have become on the
Redemption Date the holder or holders of record of the shares represented
thereby; provided, however, that any surrender for redemption on a date when the
stock transfer books of the Company shall be closed shall constitute the Person
or Persons in whose name or names the stock certificate or stock certificates
representing such shares are to be issued as the holder or holders of record of
the shares represented thereby for all purposes at the opening of business on
the next succeeding day on which such stock transfer books are open. No payment
or adjustment shall be made for dividends or distributions on any Common Stock
declared prior to the Redemption Date.

         (e) No fractions of shares of Common Stock shall be issued upon payment
of the Make Whole Payment. Instead of any fractional share of Common Stock that
would otherwise be issued, the Company shall pay a cash adjustment in respect of
such fraction (calculated to the nearest one-100th of a share) in an amount
equal to the same fraction of the Trading Price of the Common Stock as of the
Trading Day preceding the Redemption Date.

         (f) Any issuance and delivery of stock certificates representing shares
of Common Stock on payment of the Make Whole Payment shall be made without
charge to the Holder of Notes being redeemed or for any tax or duty in respect
of the issuance or delivery of such stock certificates or the Notes represented
thereby; provided, however, that the Company shall not be required to pay any
tax or duty which may be payable in respect of (i) income of the Holder or (ii)
any transfer involved in the issuance or delivery of stock certificates
representing shares of Common Stock in a name other than that of the Holder of
the Notes being redeemed, and no such issuance or delivery shall be made unless

                                       21
<PAGE>

the Persons requesting such issuance or delivery has paid to the Company the
amount of any such tax or duty or has established, to the satisfaction of the
Company, that such tax or duty has been paid.

         (g) Conditions to the Company's Election to Pay the Make Whole Payment
in Common Stock.

         The Company may, at its option, pay the Make Whole Payment payable to
Holders pursuant to Section 3.01(b) upon redemption of the Notes, in shares of
Common Stock, if the following conditions are satisfied:

         (A) The shares of Common Stock to be so issued:

         (1) shall not require registration under any federal securities law
before such shares may be freely transferable without being subject to any
transfer restrictions under the Securities Act upon redemption or if such
registration is required, such registration shall be completed and shall become
effective prior to the Redemption Date; and

         (2) shall not require registration with, or approval of, any
governmental authority under any state law or any other federal law before
shares may be validly issued or delivered upon redemption or if such
registration is required or such approval must be obtained, such registration
shall be completed or such approval shall be obtained prior to the Redemption
Date.

         (B) The shares of Common Stock to be listed upon redemption of Notes
hereunder are, or shall have been, approved for listing on the Nasdaq National
Market or the New York Stock Exchange or listed on another national securities
exchange, in any case, prior to the Redemption Date.

         (C) All shares of Common Stock which may be issued upon redemption of
Notes will be issued out of the Company's authorized but unissued Common Stock
and will, upon issue, be duly and validly issued and fully paid and
nonassessable and free of any preemptive or similar rights.

         (D) If any of the conditions set forth in clauses (a) through (c) of
this Section 3.01(g) are not satisfied in accordance with the terms thereof, the
Make Whole Payment shall be paid by the Company only in cash.

         (h) At any time on or after June 4, 2011 and prior to maturity, the
Notes may be redeemed at the option of the Company, in whole or in part at any
time and from time to time, upon notice as set forth in Section 3.02, at a cash
redemption price equal to 100% of the principal amount of the Notes being
redeemed, together with accrued and unpaid Interest, if any, to, but excluding,
the date fixed for redemption; provided that if the redemption date falls after
a record date and on or prior to the corresponding interest payment date, then
accrued and unpaid Interest, if any, to, but excluding, the date fixed for
redemption shall be paid on such interest payment date to the holders of record
of such Notes on the applicable record date instead of the holders surrendering
such Notes for redemption on such date.

                                       22
<PAGE>

Section 3.02. Notice of Redemption; Selection of Notes.

         In case the Company shall desire to exercise the right to redeem all
or, as the case may be, any part of the Notes pursuant to Section 3.01, it shall
fix a date for redemption and it or, at its written request received by the
Trustee not fewer than forty-five (45) days prior (or such shorter period of
time as may be acceptable to the Trustee) to the date fixed for redemption, the
Trustee in the name of and at the expense of the Company, shall mail or cause to
be mailed a notice of such redemption not fewer than twenty (20) nor more than
sixty (60) days prior to the redemption date to each holder of Notes so to be
redeemed as a whole or in part at its last address as the same appears on the
Note Register; provided that if the Company shall give such notice, it shall
also give written notice of the redemption date to the Trustee. Such mailing
shall be by first class mail. The notice, if mailed in the manner herein
provided, shall be conclusively presumed to have been duly given, whether or not
the holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Note designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Note. Concurrently with the mailing
of any such notice of redemption, the Company shall issue a press release
announcing such redemption, the form and content of which press release shall be
determined by the Company in its sole discretion. The failure to issue any such
press release or any defect therein shall not affect the validity of the
redemption notice or any of the proceedings for the redemption of any Note
called for redemption.

         Each such notice of redemption shall specify the aggregate principal
amount of Notes to be redeemed, the CUSIP number or numbers of the Notes being
redeemed, the date fixed for redemption (which shall be a Business Day), the
redemption price at which Notes are to be redeemed, the place or places of
payment, that payment will be made upon presentation and surrender of such
Notes, that Interest accrued to the date fixed for redemption will be paid as
specified in said notice, and that on and after said date Interest thereon or on
the portion thereof to be redeemed will cease to accrue. Such notice shall also
state the current Conversion Rate and the date on which the right to convert
such Notes or portions thereof into Common Stock will expire. If fewer than all
the Notes are to be redeemed, the notice of redemption shall identify the Notes
to be redeemed (including CUSIP numbers, if any). In case any Note is to be
redeemed in part only, the notice of redemption shall state the portion of the
principal amount thereof to be redeemed and shall state that, on and after the
redemption date, upon surrender of such Note, a new Note or Notes in principal
amount equal to the unredeemed portion thereof will be issued.

         On or prior to the redemption date specified in the notice of
redemption given as provided in this Section 3.02, the Company will deposit with
the Trustee or with one or more paying agents (or, if the Company is acting as
its own paying agent, set aside, segregate and hold in trust as provided in
Section 5.04) an amount of money in immediately available funds sufficient to
redeem on the redemption date all the Notes (or portions thereof) so called for
redemption (other than those theretofore surrendered for conversion into Common
Stock) at the appropriate redemption price, together with accrued Interest to,
but excluding, the redemption date; provided that if such payment is made on the
redemption date it must be received by the Trustee or paying agent, as the case
may be, by 10:00 a.m. New York City time on such date. The Company shall be
entitled to retain any interest, yield or gain on amounts deposited with the
Trustee or any paying agent pursuant to this Section 3.02 in excess of amounts

                                       23
<PAGE>

required hereunder to pay the redemption price and accrued Interest to, but
excluding, the redemption date. If any Note called for redemption is converted
pursuant hereto prior to such redemption date, any money deposited with the
Trustee or any paying agent or so segregated and held in trust for the
redemption of such Note shall be paid to the Company upon its written request,
or, if then held by the Company, shall be discharged from such trust. Whenever
any Notes are to be redeemed, the Company will give the Trustee written notice
in the form of an Officer's Certificate not fewer than forty-five (45) days (or
such shorter period of time as may be acceptable to the Trustee) prior to the
redemption date as to the aggregate principal amount of Notes to be redeemed.

         If less than all of the outstanding Notes are to be redeemed, the
Trustee shall select the Notes or portions thereof of the Global Note or the
Notes in certificated form to be redeemed (in principal amounts of $1,000 or
multiples thereof) by lot, on a pro rata basis or by another method the Trustee
deems fair and appropriate. If any Note selected for partial redemption is
submitted for conversion in part after such selection, the portion of such Note
submitted for conversion shall be deemed (so far as may be possible) to be the
portion to be selected for redemption. The Notes (or portions thereof) so
selected shall be deemed duly selected for redemption for all purposes hereof,
notwithstanding that any such Note is submitted for conversion in part before
the mailing of the notice of redemption.

         Upon any redemption of less than all of the outstanding Notes, the
Company and the Trustee may (but need not), solely for purposes of determining
the pro rata allocation among such Notes as are unconverted and outstanding at
the time of redemption, treat as outstanding any Notes surrendered for
conversion during the period of fifteen (15) days next preceding the mailing of
a notice of redemption and may (but need not) treat as outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.

Section 3.03. Payment of Notes Called for Redemption by the Company.

         If notice of redemption has been given as provided in Section 3.02, the
Notes or portion of Notes with respect to which such notice has been given
shall, unless converted into Common Stock pursuant to the terms hereof, become
due and payable on the date fixed for redemption and at the place or places
stated in such notice at the applicable redemption price, together with Interest
accrued to (but excluding) the redemption date, and on and after said date
(unless the Company shall default in the payment of such Notes at the redemption
price, together with Interest accrued to said date) Interest on the Notes or
portion of Notes so called for redemption shall cease to accrue and, after the
close of business on the Business Day immediately preceding the redemption date
(unless the Company shall default in the payment of such Notes at the redemption
price, together with Interest accrued to said date) such Notes shall cease to be
convertible into Common Stock and, except as provided in Section 8.05 and
Section 13.04, to be entitled to any benefit or security under this Indenture,
and the holders thereof shall have no right in respect of such Notes except the
right to receive the redemption price thereof and unpaid Interest to (but
excluding) the redemption date. On presentation and surrender of such Notes at a
place of payment in said notice specified, the said Notes or the specified
portions thereof shall be paid and redeemed by the Company at the applicable

                                       24
<PAGE>

redemption price, together with Interest accrued thereon to, but excluding, the
redemption date; provided that if the redemption date falls after a record date
and on or prior the corresponding interest payment date, then accrued and unpaid
Interest, if any, to, but excluding, the date fixed for redemption shall be paid
on such interest payment date to the holders of record of such Notes on the
applicable record date instead of the holders surrendering such Notes for
redemption on such date.

         Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the holder thereof, at the expense of the Company, a new Note or Notes, of
authorized denominations, in principal amount equal to the unredeemed portion of
the Notes so presented.

         Notwithstanding the foregoing, the Trustee shall not redeem any Notes
or mail any notice of redemption during the continuance of a default in payment
of Interest on the Notes. If any Note called for redemption shall not be so paid
upon surrender thereof for redemption, the principal shall, until paid or duly
provided for, bear interest from the redemption date at a rate equal to 1% per
annum plus the rate borne by the Note and such Note shall remain convertible
into Common Stock until the principal and Interest shall have been paid or duly
provided for.

Section 3.04. Conversion Arrangement on Call for Redemption.

         In connection with any redemption of Notes, the Company may arrange for
the purchase and conversion of any Notes by an agreement with one or more
investment banks or other purchasers to purchase such Notes by paying to the
Trustee in trust for the Noteholders, on or before the date fixed for
redemption, an amount not less than the applicable redemption price, together
with Interest accrued to, but excluding, the date fixed for redemption, of such
Notes. Notwithstanding anything to the contrary contained in this Article 3, the
obligation of the Company to pay the redemption price of such Notes, together
with Interest accrued to, but excluding, the date fixed for redemption, shall be
deemed to be satisfied and discharged to the extent such amount is so paid by
such purchasers. If such an agreement is entered into, a copy of which will be
filed with the Trustee prior to the date fixed for redemption, any Notes not
duly surrendered for conversion by the holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and (notwithstanding anything to the contrary
contained in Article 15) surrendered by such purchasers for conversion, all as
of immediately prior to the close of business on the date fixed for redemption
(and the right to convert any such Notes shall be extended through such time),
subject to payment of the above amount as aforesaid. At the direction of the
Company, the Trustee shall hold and dispose of any such amount paid to it in the
same manner as it would monies deposited with it by the Company for the
redemption of Notes. Without the Trustee's prior written consent, no arrangement
between the Company and such purchasers for the purchase and conversion of any
Notes shall increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Trustee as set forth in this Indenture.

Section 3.05. Repurchase at Option of Holders upon a Designated Event.

         (a) If there shall occur a Designated Event at any time prior to
maturity of the Notes, then each Noteholder shall have the right, at such
holder's option, to require the Company to repurchase all of such holder's
Notes, or any portion thereof that is an integral multiple of $1,000 principal
amount, on the date (the "Designated Event Repurchase Date") specified by the

                                       25
<PAGE>

Company that is thirty (30) days after the date of the Designated Event Notice
(as defined in Section 3.05(b)) of such Designated Event at a cash repurchase
price equal to 100% of the principal amount thereof, together with accrued
Interest, if any, to, but excluding, the Designated Event Repurchase Date;
provided that if such Designated Event Repurchase Date falls after a record date
and on or prior the corresponding interest payment date, then accrued and unpaid
Interest, if any, to, but excluding the Designated Event Repurchase Date shall
be paid on such interest payment date to the holders of record of the Notes on
the applicable record date instead of the holders surrendering the Notes for
repurchase on such date. Repurchases of Notes under this Section 3.05 shall be
made, at the option of the holder thereof, upon:

                  (i) delivery to the Trustee (or other paying agent appointed
         by the Company) by a holder of a duly completed notice (the "Designated
         Event Repurchase Notice") in the form set forth on the reverse of the
         Note prior to the close of business on the Designated Event Expiration
         Time; and

                  (ii) delivery or book-entry transfer of the Notes to the
         Trustee (or other paying agent appointed by the Company) at any time
         after delivery of the Designated Event Repurchase Notice (together with
         all necessary endorsements) at the Corporate Trust Office of the
         Trustee (or other paying agent appointed by the Company) in the Borough
         of Manhattan as provided in Section 5.02, such delivery being a
         condition to receipt by the holder of the repurchase price therefor;
         provided that such repurchase price shall be so paid pursuant to this
         Section 3.05 only if the Note so delivered to the Trustee (or other
         paying agent appointed by the Company) shall conform in all respects to
         the description thereof in the related Designated Event Repurchase
         Notice.

         The Company shall purchase from the holder thereof, pursuant to this
Section 3.05, a portion of a Note, only if the principal amount of such portion
is $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply
to the purchase of all of a Note also apply to the purchase of such portion of
such Note.

         Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.05 shall be consummated by the delivery of the consideration to
be received by the holder promptly following the later of the Designated Event
Repurchase Date and the time of the book-entry transfer or delivery of the Note.

         Notwithstanding anything herein to the contrary, any holder delivering
to the Trustee (or other paying agent appointed by the Company) the Designated
Event Repurchase Notice contemplated by this Section 3.05 shall have the right
to withdraw such Designated Event Repurchase Notice at any time prior to the
close of business on the Designated Event Expiration Time by delivery of a
written notice of withdrawal to the Trustee (or other paying agent appointed by
the Company) in accordance with Section 3.05(c) below.

         The Trustee (or other paying agent appointed by the Company) shall
promptly notify the Company of the receipt by it of any Designated Event
Repurchase Notice or written notice of withdrawal thereof.

                                       26
<PAGE>

         (b) On or before the fifteenth day after the occurrence of a Designated
Event, the Company or at its written request (which must be received by the
Trustee at least five (5) Business Days prior to the date the Trustee is
requested to give notice as described below, unless the Trustee shall agree in
writing to a shorter period), the Trustee, in the name of and at the expense of
the Company, shall mail or cause to be mailed to all holders of record on the
date of the Designated Event a notice (the "Designated Event Notice") of the
occurrence of such Designated Event and of the repurchase right at the option of
the holders arising as a result thereof. Such notice shall be mailed in the
manner and with the effect set forth in the first paragraph of Section 3.02
(without regard for the time limits set forth therein). If the Company shall
give such notice, the Company shall also deliver a copy of the Designated Event
Notice to the Trustee at such time as it is mailed to Noteholders. Concurrently
with the mailing of any Designated Event Notice, the Company shall issue a press
release announcing such Designated Event referred to in the Designated Event
Notice, the form and content of which press release shall be determined by the
Company in its sole discretion. The failure to issue any such press release or
any defect therein shall not affect the validity of the Designated Event Notice
or any proceedings for the repurchase of any Note which any Noteholder may elect
to have the Company repurchase as provided in this Section 3.05.

         Each Designated Event Notice shall specify the circumstances
constituting the Designated Event, the Designated Event Repurchase Date, the
price at which the Company shall be obligated to repurchase Notes, that the
holder must exercise the repurchase right on or prior to the close of business
on the Business Day immediately preceding the Designated Event Repurchase Date
(the "Designated Event Expiration Time"), that the holder shall have the right
to withdraw any Notes surrendered prior to the Designated Event Expiration Time,
a description of the procedure which a Noteholder must follow to exercise such
repurchase right and to withdraw any surrendered Notes, the place or places
where the holder is to surrender such holder's Notes, the amount of Interest
accrued on each Note to the Designated Event Repurchase Date and the CUSIP
number or numbers of the Notes (if then generally in use) and include a form of
Designated Event Repurchase Notice.

         No failure of the Company to give the foregoing notices and no defect
therein shall limit the Noteholders' repurchase rights or affect the validity of
the proceedings for the repurchase of the Notes pursuant to this Section 3.05.

         (c) A Designated Event Repurchase Notice may be withdrawn by means of a
written notice of withdrawal delivered to the office of the Trustee (or other
paying agent appointed by the Company) in accordance with the Designated Event
Repurchase Notice at any time prior to the Designated Event Expiration Time,
specifying:

                  (i) the certificate number, if any, of the Note in respect of
         which such notice of withdrawal is being submitted, or the appropriate
         Depositary information if the Note in respect of which such notice of
         withdrawal is being submitted is represented by a Global Note,

                  (ii) the principal amount of the Note with respect to which
         such notice of withdrawal is being submitted, and

                                       27
<PAGE>

                  (iii) the principal amount, if any, of such Note which remains
         subject to the original Designated Event Repurchase Notice and which
         has been or will be delivered for purchase by the Company.

         (d) On or prior to the Designated Event Repurchase Date, the Company
will deposit with the Trustee (or other paying agent appointed by the Company or
if the Company is acting as its own paying agent, set aside, segregate and hold
in trust as provided in Section 5.04) an amount of money sufficient to
repurchase on the Designated Event Repurchase Date all the Notes to be
repurchased on such date at the appropriate repurchase price, together with
accrued Interest to, but excluding, the Designated Event Repurchase Date;
provided that if such payment is made on the Designated Event Repurchase Date,
it must be received by the Trustee or paying agent, as the case may be, by 10:00
a.m. New York City time, on such date. Subject to receipt of funds and/or Notes
by the Trustee (or other paying agent appointed by the Company), payment for
Notes surrendered for repurchase (and not withdrawn) prior to the Designated
Event Expiration Time will be made promptly (but in no event more than five (5)
Business Days) following the later of (x) the Designated Event Repurchase Date
with respect to such Note (provided the holder has satisfied the conditions in
Section 3.05) and (y) the time of delivery of such Note to the Trustee (or other
paying agent appointed by the Company) by the holder thereof in the manner
required by Section 3.05) by mailing checks for the amount payable to the
holders of such Notes entitled thereto as they shall appear in the Note
Register.

         If the Trustee (or other paying agent appointed by the Company) holds
money sufficient to repurchase on the Designated Event Repurchase Date all the
Notes or portions thereof that are to be purchased as of the Designated Event
Repurchase Date, then on or after the Designated Event Repurchase Date (i) the
Notes will cease to be outstanding, (ii) Interest on the Notes will cease to
accrue, and (iii) all other rights of the holders of such Notes will terminate,
whether or not book-entry transfer of the Notes has been made or the Notes have
been delivered to the Trustee or paying agent, other than the right to receive
the repurchase price upon delivery of the Notes.

         (e) In the case of a reclassification, change, consolidation, merger,
combination, sale or conveyance to which Section 15.06 applies, in which the
Common Stock of the Company is changed or exchanged as a result into the right
to receive stock, securities or other property or assets (including cash), which
includes shares of Common Stock of the Company or shares of common stock of
another Person that are, or upon issuance will be, traded on a United States
national securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate Fair Market Value of such stock, securities or other property or
assets (including cash) (as determined by the Company, which determination shall
be conclusive and binding), then the Person formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture (accompanied
by an Opinion of Counsel that such supplemental indenture complies with the
Trust Indenture Act as in force at the date of execution of such supplemental
indenture) modifying the provisions of this Indenture relating to the right of
holders of the Notes to cause the Company to repurchase the Notes following a
Designated Event, including without limitation the applicable provisions of this

                                       28
<PAGE>

Section 3.05 and the definitions of Common Stock and Designated Event, as
appropriate, as determined in good faith by the Company (which determination
shall be conclusive and binding), to make such provisions apply to such other
Person if different from the Company and the common stock issued by such Person
(in lieu of the Company and the Common Stock of the Company).

         (f) The Company will comply with the provisions of Rule 13e-4 and any
other tender offer rules under the Exchange Act (including, without limitation,
filing a Schedule TO or other schedule) to the extent then applicable in
connection with the repurchase rights of the holders of Notes in the event of a
Designated Event.

Section 3.06. Repurchase of Notes by the Company at Option of the Holder.

         Unless the Company has elected to redeem all of the Notes in accordance
with Section 3.01, Notes shall be purchased by the Company pursuant to the terms
of the Notes at the option of the holder thereof on June 1, 2011 (the
"Repurchase Date"), for cash, at a repurchase price of 100% of the principal
amount, plus any accrued and unpaid Interest to, but excluding, the Repurchase
Date, subject to the provisions of Section 3.07(a); provided that no Notes may
be repurchased by the Company pursuant to this Section 3.06 if the principal
amount of the Notes has been accelerated and such acceleration has not been
rescinded on or prior to the Repurchase Date. Repurchases of Notes under this
Section 3.06 shall be made, at the option of the holder thereof, upon:

                  (a) delivery to the Trustee (or other paying agent appointed
         by the Company) by a holder of a duly completed notice (the "Repurchase
         Notice") in the form set forth on the reverse of the Note during the
         period beginning at any time from the opening of business on the date
         that is 20 Business Days prior to the Repurchase Date until the close
         of business on the date that is two Business Days prior to the
         Repurchase Date; and

                  (b) delivery or book-entry transfer of the Notes to the
         Trustee (or other paying agent appointed by the Company) at any time
         after delivery of the Repurchase Notice (together with all necessary
         endorsements) at the Corporate Trust Office or any other office of the
         Trustee (or other paying agent appointed by the Company) in the Borough
         of Manhattan as provided in Section 5.02, such delivery being a
         condition to receipt by the holder of the repurchase price therefor;
         provided that such repurchase price shall be so paid pursuant to this
         Section 3.06 only if the Note so delivered to the Trustee (or other
         paying agent appointed by the Company) shall conform in all respects to
         the description thereof in the related Repurchase Notice.

         The Company shall purchase from the holder thereof, pursuant to this
Section 3.06, a portion of a Note, only if the principal amount of such portion
is $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply
to the purchase of all of a Note also apply to the purchase of such portion of
such Note.

         Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.06 shall be consummated by the delivery of the consideration to
be received by the holder promptly following the later of the Repurchase Date
and the time of the book-entry transfer or delivery of the Note.

                                       29
<PAGE>

         Notwithstanding anything herein to the contrary, any holder delivering
to the Trustee (or other paying agent appointed by the Company) a Repurchase
Notice contemplated by this Section 3.06 shall have the right to withdraw such
Repurchase Notice at any time prior to the close of business on the Business Day
immediately preceding the Repurchase Date by delivery of a written notice of
withdrawal to the Trustee (or other paying agent appointed by the Company) in
accordance with Section 3.08. The Company is not obligated under this Section
3.06 to repurchase notes listed in such written notice of withdrawal.

         The Trustee (or other paying agent appointed by the Company) shall
promptly notify the Company of the receipt by it of any Repurchase Notice or
written notice of withdrawal thereof.

Section 3.07. Company Repurchase Notice.

         (a) The Notes to be repurchased on any Repurchase Date pursuant to
Section 3.06 will be paid for in cash.

         Unless the Company has elected to redeem all of the Notes in accordance
with Section 3.01, at least three Business Days before the Company Repurchase
Notice Date, the Company shall deliver an Officer's Certificate to the Trustee
specifying:

                  (i) the information required by Section 3.07(b) in the Company
         Repurchase Notice, and

                  (ii) whether the Company desires the Trustee to give the
         Company Repurchase Notice required by Section 3.07(b).

         (b) Unless the Company has elected to redeem all of the Notes in
accordance with Section 3.01, in connection with any repurchase of Notes, the
Company shall, no less than 20 Business Days prior to the Repurchase Date (the
"Company Repurchase Notice Date"), give notice to holders at their addresses
shown in the Note Register setting forth information specified in this Section
3.07(b) (the "Company Repurchase Notice"). The Company will also give notice to
beneficial owners as required by applicable law.

         The Company Repurchase Notice shall:

         (a) state the repurchase price and the Repurchase Date to which the
Company Repurchase Notice relates;

         (a) include a form of Repurchase Notice;

         (a) state the name and address of the Trustee (or other paying agent
appointed by the Company);

         (a) state that Notes must be surrendered to the Trustee (or other
paying agent appointed by the Company) to collect the repurchase price;

                                       30
<PAGE>

         (a) if the Notes are then convertible, state that Notes as to which a
Repurchase Notice has been given may be converted only if the Repurchase Notice
is withdrawn in accordance with the terms of this Indenture; and

         (a) state the CUSIP number of the Notes.

         The Company Repurchase Notice may be given by the Company or, at the
Company's request, the Trustee shall give such Company Repurchase Notice in the
Company's name and at the Company's expense.

         (c) The Company will comply with the provisions of Rule 13e-4 and any
other tender offer rules under the Exchange Act (including, without limitation,
filing a Schedule TO or other schedule) to the extent then applicable in
connection with the repurchase rights of the holders of Notes.

Section 3.08. Effect of Repurchase Notice.

         Upon receipt by the Trustee (or other paying agent appointed by the
Company) of the Repurchase Notice specified in Section 3.06, the holder of the
Note in respect of which such Repurchase Notice was given shall (unless such
Repurchase Notice is validly withdrawn) thereafter be entitled to receive solely
the repurchase price with respect to such Note. Such repurchase price shall be
paid to such holder, subject to receipt of funds and/or Notes by the Trustee (or
other paying agent appointed by the Company), promptly following the later of
(x) the Repurchase Date with respect to such Note (provided the holder has
satisfied the conditions in Section 3.06) and (y) the time of delivery of such
Note to the Trustee (or other paying agent appointed by the Company) by the
holder thereof in the manner required by Section 3.06. Notes in respect of which
a Repurchase Notice has been given by the holder thereof may not be converted
pursuant to Article 15 hereof on or after the date of the delivery of such
Repurchase Notice unless such Repurchase Notice has first been validly
withdrawn.

         A Repurchase Notice may be withdrawn by means of a written notice of
withdrawal delivered to the office of the Trustee (or other paying agent
appointed by the Company) in accordance with the Repurchase Notice at any time
prior to the close of business on the Business Day immediately preceding the
Repurchase Date, specifying:

         (a) the certificate number, if any, of the Note in respect of which
such notice of withdrawal is being submitted, or the appropriate Depositary
information if the Note in respect of which such notice of withdrawal is being
submitted is represented by a Global Note,

         (b) the principal amount of the Note with respect to which such notice
of withdrawal is being submitted, and

         (c) the principal amount, if any, of such Note which remains subject to
the original Repurchase Notice and which has been or will be delivered for
repurchase by the Company.

                                       31
<PAGE>

Section 3.09. Deposit of Repurchase Price.

         (a) Prior to 10:00 a.m. (New York City Time) on the Repurchase Date,
the Company shall deposit with the Trustee (or other paying agent appointed by
the Company; or, if the Company or a Subsidiary or an Affiliate of either of
them is acting as the paying agent, shall segregate and hold in trust as
provided in Section 5.04) an amount of cash (in immediately available funds if
deposited on such Business Day), sufficient to pay the aggregate repurchase
price of all the Notes or portions thereof that are to be purchased as of the
Repurchase Date.

         (b) If the Trustee or other paying agent appointed by the Company, or
the Company or a Subsidiary or Affiliate of either of them, if such entity is
acting as the paying agent, holds cash sufficient to pay the aggregate
repurchase price of all the Notes, or portions thereof that are to be
repurchased as of the Repurchase Date, on or after the Repurchase Date (i) the
Notes will cease to be outstanding, (ii) Interest on the Notes will cease to
accrue, and (iii) all other rights of the holders of such Notes will terminate,
whether or not book-entry transfer of the Notes has been made or the Notes have
been delivered to the Trustee or paying agent, other than the right to receive
the repurchase price upon delivery of the Notes.

Section 3.10. Notes Repurchased in Part.

         Upon presentation of any Note repurchased pursuant to Section 3.05 or
3.06, as the case may be, only in part, the Company shall execute and the
Trustee shall authenticate and make available for delivery to the holder
thereof, at the expense of the Company, a new Note or Notes, of any authorized
denomination, in aggregate principal amount equal to the unrepurchased portion
of the Notes presented.

Section 3.11. Repayment to the Company.

         The Trustee (or other paying agent appointed by the Company) shall
return to the Company any cash or money that remains unclaimed as provided in
Section 13.04, together with interest, if any, thereon, held by them for the
payment of the repurchase price pursuant to Section 3.05 or 3.06, as the case
may be; provided that to the extent that the aggregate amount of cash or money
deposited by the Company pursuant to Section 3.05(d) or Section 3.09, as the
case may be, exceeds the aggregate repurchase price of the Notes or portions
thereof which the Company is obligated to purchase as of the Designated Event
Repurchase Date or the Repurchase Date, as the case may be, then, unless
otherwise agreed in writing with the Company, promptly after the Business Day
following the Designated Event Repurchase Date or the Repurchase Date, as the
case may be, the Trustee shall return any such excess to the Company together
with interest, if any, thereon.

                                   ARTICLE 4
                               CONTINGENT INTEREST

Section 4.01. Contingent Interest.

         Beginning with the six-month interest period commencing June 1, 2011,
the Company will pay contingent interest ("Contingent Interest") to the

                                       32
<PAGE>

Noteholders for any six-month interest period if the Trading Price for each of
the five Trading Days immediately preceding the first day of the applicable
six-month interest period equals or exceeds 120% of the principal amount of the
Notes. For any six-month interest period when Contingent Interest is payable,
the Contingent Interest payable on each $1,000 principal amount of Note shall
equal 0.40% of the average Trading Price for $1,000 principal amount of Notes
during the five Trading Day measuring period immediately preceding the first day
of applicable six-month interest period used to determine whether Contingent
Interest must be paid.

         The Trustee's sole responsibility pursuant to this Section 4.01 hereof
shall be to obtain the Trading Price of the Notes for each of the five Trading
Days immediately preceding the first day of the applicable six-month interest
period and to provide such information to the Company. The Company shall
determine whether holders are entitled to receive Contingent Interest, and if
so, provide notice pursuant to Section 4.03. Notwithstanding any term contained
in this Indenture or any other document to the contrary, the Trustee shall have
no responsibilities, duties or obligations for or with respect to (i)
determining whether the Company must pay Contingent Interest or (ii) determining
the amount of Contingent Interest, if any, payable by the Company.

Section 4.02. Payment of Contingent Interest.

         Contingent Interest for any six-month interest period shall be paid on
the applicable interest payment date to the Person in whose name any Note (or
its Predecessor Note) is registered on the Note Register at the corresponding
record date. Contingent Interest due under this Article 4 shall be treated for
all purposes of this Indenture like any other interest accruing on the Notes.

Section 4.03. Contingent Interest Notification.

         By the first Business Day of a six-month interest period for which
Contingent Interest will be paid, the Company will disseminate a press release
through Business Wire stating that Contingent Interest will be paid on the Notes
and identifying such six-month interest period as the six-month interest period
for which such Contingent Interest will be paid.

                                   ARTICLE 5
                       PARTICULAR COVENANTS OF THE COMPANY

Section 5.01. Payment of Principal and Interest.

         The Company covenants and agrees that it will duly and punctually pay
or cause to be paid the principal of (including the redemption price upon
redemption or the repurchase price upon repurchase, in each case pursuant to
Article 3) and Interest, on each of the Notes at the places, at the respective
times and in the manner provided herein and in the Notes.

Section 5.02. Maintenance of Office or Agency.

         The Company will maintain an office or agency in the Borough of
Manhattan, The City of New York, where the Notes may be surrendered for
registration of transfer or exchange or for presentation for payment or for
conversion, redemption or repurchase and where notices and demands to or upon

                                       33
<PAGE>

the Company in respect of the Notes and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency not designated or appointed by
the Trustee. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office or the corporate trust office of the Trustee in The
Borough of Manhattan which office is located at Wells Fargo Corporate Trust, c/o
The Depository Trust Company, 1st Floor, TADS Dept., 55 Water Street, New York,
New York 10041.

         The Company may also from time to time designate co-registrars and one
or more offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company will give prompt written notice of any such designation or
rescission and of any change in the location of any such other office or agency.

         The Company hereby initially designates the Trustee as paying agent,
Note Registrar, Custodian and conversion agent and each of the Corporate Trust
Office and the office of agency of the Trustee in The Borough of Manhattan,
shall be considered as one such office or agency of the Company for each of the
aforesaid purposes.

         So long as the Trustee is the Note Registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 8.10(a) and the
third paragraph of Section 8.11. If co-registrars have been appointed in
accordance with this Section, the Trustee shall mail such notices only to the
Company and the holders of Notes it can identify from its records.

Section 5.03. Appointments to Fill Vacancies in Trustee's Office.

         The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 8.10, a
Trustee, so that there shall at all times be a Trustee hereunder.

Section 5.04. Provisions as to Paying Agent.

         (a) If the Company shall appoint a paying agent other than the Trustee,
or if the Trustee shall appoint such a paying agent, the Company will cause such
paying agent to execute and deliver to the Trustee an instrument in which such
agent shall agree with the Trustee, subject to the provisions of this Section
5.04:

                  (a) that it will hold all sums held by it as such agent for
         the payment of the principal of or Interest on the Notes (whether such
         sums have been paid to it by the Company or by any other obligor on the
         Notes) in trust for the benefit of the holders of the Notes;

                  (a) that it will give the Trustee notice of any failure by the
         Company (or by any other obligor on the Notes) to make any payment of
         the principal of or Interest on the Notes when the same shall be due
         and payable; and

                                       34
<PAGE>

                  (a) that at any time during the continuance of an Event of
         Default, upon request of the Trustee, it will forthwith pay to the
         Trustee all sums so held in trust.

         The Company shall, on or before each due date of the principal or
Interest on the Notes, deposit with the paying agent a sum (in funds which are
immediately available on the due date for such payment) sufficient to pay such
principal or Interest, and (unless such paying agent is the Trustee) the Company
will promptly notify the Trustee of any failure to take such action; provided
that if such deposit is made on the due date, such deposit shall be received by
the paying agent by 10:00 a.m. New York City time, on such date.

         (b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of or Interest on the Notes, set aside,
segregate and hold in trust for the benefit of the holders of the Notes a sum
sufficient to pay such principal or Interest so becoming due and will promptly
notify the Trustee of any failure to take such action and of any failure by the
Company (or any other obligor under the Notes) to make any payment of the
principal of or Interest on the Notes when the same shall become due and
payable.

         (c) Anything in this Section 5.04 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any paying agent hereunder
as required by this Section 5.04, such sums to be held by the Trustee upon the
trusts herein contained and upon such payment by the Company or any paying agent
to the Trustee, the Company or such paying agent shall be released from all
further liability with respect to such sums.

         (d) Anything in this Section 5.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.04 is subject to
Sections 13.03 and 13.04.

         The Trustee shall not be responsible for the actions of any other
paying agents (including the Company if acting as its own paying agent) and
shall have no control of any funds held by such other paying agents.

Section 5.05. Existence.

         Subject to Article 12, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence and
rights (charter and statutory); provided that the Company shall not be required
to preserve any such right if the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
that the loss thereof is not disadvantageous in any material respect to the
Noteholders.

Section 5.06. Maintenance of Properties.

         The Company will cause all properties used or useful in the conduct of
its business or the business of any Significant Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided
that nothing in this Section shall prevent the Company from discontinuing the

                                       35
<PAGE>

operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any subsidiary and not disadvantageous in any material respect to
the Noteholders.

Section 5.07. Payment of Taxes and Other Claims.

         The Company will pay or discharge, or cause to be paid or discharged,
before the same may become delinquent, (i) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Significant
Subsidiary or upon the income, profits or property of the Company or any
Significant Subsidiary, (ii) all claims for labor, materials and supplies which,
if unpaid, might by law become a lien or charge upon the property of the Company
or any Significant Subsidiary and (iii) all stamp taxes and other duties, if
any, which may be imposed by the United States or any political subdivision
thereof or therein in connection with the issuance, transfer, exchange,
conversion, redemption or repurchase of any Notes or with respect to this
Indenture; provided that, in the case of clauses (i) and (ii), the Company shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim (A) if the failure to do so will not, in the
aggregate, have a material adverse impact on the Company, or (B) if the amount,
applicability or validity is being contested in good faith by appropriate
proceedings.

Section 5.08. Rule 144A Information Requirement.

         Within the period prior to the expiration of the holding period
applicable to sales thereof under Rule 144(k) under the Securities Act (or any
successor provision), the Company covenants and agrees that it shall, during any
period in which it is not subject to Section 13 or 15(d) under the Exchange Act,
make available to any holder or beneficial holder of Notes or any Common Stock
issued upon conversion thereof which continue to be Restricted Securities in
connection with any sale thereof and any prospective purchaser of Notes or such
Common Stock designated by such holder or beneficial holder, the information
required pursuant to Rule 144A(d)(4) under the Securities Act upon the request
of any holder or beneficial holder of the Notes or such Common Stock and it will
take such further action as any holder or beneficial holder of such Notes or
such Common Stock may reasonably request, all to the extent required from time
to time to enable such holder or beneficial holder to sell its Notes or Common
Stock without registration under the Securities Act within the limitation of the
exemption provided by Rule 144A, as such Rule may be amended from time to time.
Upon the request of any holder or any beneficial holder of the Notes or such
Common Stock, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.

Section 5.09. Stay, Extension and Usury Laws.

         The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of or Interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the

                                       36
<PAGE>

covenants or the performance of this Indenture and the Company (to the extent it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.

Section 5.10. Compliance Certificate.

         The Company shall deliver to the Trustee, within one hundred twenty
(120) days after the end of each fiscal year of the Company, a certificate
signed by either the principal executive officer, principal financial officer or
principal accounting officer of the Company, stating whether or not to the best
knowledge of the signer thereof the Company is in default in the performance and
observance of any of the terms, provisions and conditions of this Indenture
(without regard to any period of grace or requirement of notice provided
hereunder) and, if the Company shall be in default, specifying all such defaults
and the nature and the status thereof of which the signer may have knowledge.

         The Company will deliver to the Trustee, forthwith upon becoming aware
of (i) any default in the performance or observance of any covenant, agreement
or condition contained in this Indenture, or (ii) any Event of Default, an
Officer's Certificate specifying with particularity such Default or Event of
Default and further stating what action the Company has taken, is taking or
proposes to take with respect thereto.

         Any notice required to be given under this Section 5.10 shall be
delivered to a Responsible Officer of the Trustee at its Corporate Trust Office.

Section 5.11. Limitation on Senior Subordinated Indebtedness.

         The Company will not incur any Indebtedness that is subordinate in
right of payment to any Senior Indebtedness of the Company unless such
Indebtedness is pari passu with, or subordinated in right of payment to, the
Notes.

Section 5.12. Additional Interest Notice.

         In the event that the Company is required to pay Additional Interest to
holders of Notes pursuant to the Registration Rights Agreement, the Company will
provide written notice ("Additional Interest Notice") to the Trustee of the
Company's obligation to pay Additional Interest no later than fifteen (15) days
prior to the proposed payment date for the Additional Interest, and the
Additional Interest Notice shall set forth the amount of Additional Interest to
be paid by the Company on such payment date. The Trustee shall not at any time
be under any duty or responsibility to any holder of Notes to determine the
Additional Interest, or with respect to the nature, extent or calculation of the
amount of Additional Interest when made, or with respect to the method employed
in such calculation of the Additional Interest.

Section 5.13. Contingent Debt Tax Treatment.

         The Company agrees, and by acceptance of a beneficial interest in a
Note each holder and any beneficial owner of a Note shall be deemed to have
agreed to treat the Note as indebtedness of the Company for United States
federal income tax purposes that is subject to Treasury Regulation Section

                                       37
<PAGE>

1.1275-4 or any successor provision (the "contingent payment regulations") and
to be bound (in the absence of an administrative determination or judicial
ruling to the contrary) by the Company's determination of the comparable yield
and the projected payment schedule within the meaning of the contingent payment
regulations. A holder of Notes may obtain the issue price, amount of Tax
Original Issue Discount, issue date, yield to maturity, comparable yield and
projected payment schedule for the Notes, determined by the Company pursuant to
the contingent payment regulations, by submitting a written request for it to
the Company at the following address: Headwaters Incorporated, 10653 South
Riverfront Parkway, Suite 300, South Jordan, UT 84095, Attention: Harlan M.
Hatfield, General Counsel.

Section 5.14. Calculation of Original Issue Discount.

         The Company shall file with the Trustee promptly at the end of each
calendar year (i) a written notice specifying the amount of Tax Original Issue
Discount (including daily rates and accrual periods) accrued on outstanding
Notes as of the end of such year and (ii) such other specific information
relating to such Tax Original Issue Discount as may then be required under the
Internal Revenue Code of 1986, as amended from time to time, or the Treasury
regulations promulgated thereunder.

                                   ARTICLE 6
          NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

Section 6.01. Noteholders' Lists.

         The Company covenants and agrees that it will furnish or cause to be
furnished to the Trustee, semiannually, not more than fifteen (15) days after
each January 1 and July 1 in each year beginning with July 1, 2004, and at such
other times as the Trustee may request in writing, within thirty (30) days after
receipt by the Company of any such request (or such lesser time as the Trustee
may reasonably request in order to enable it to timely provide any notice to be
provided by it hereunder), a list in such form as the Trustee may reasonably
require of the names and addresses of the holders of Notes as of a date not more
than fifteen (15) days (or such other date as the Trustee may reasonably request
in order to so provide any such notices) prior to the time such information is
furnished, except that no such list need be furnished by the Company to the
Trustee so long as the Trustee is acting as the sole Note Registrar.

Section 6.02. Preservation and Disclosure of Lists.

         (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Notes contained in the most recent list furnished to it as provided in Section
6.01 or maintained by the Trustee in its capacity as Note Registrar or
co-registrar in respect of the Notes, if so acting. The Trustee may destroy any
list furnished to it as provided in Section 6.01 upon receipt of a new list so
furnished.

         (b) The rights of Noteholders to communicate with other holders of
Notes with respect to their rights under this Indenture or under the Notes, and
the corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.

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<PAGE>

         (c) Every Noteholder, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
agent of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of holders of Notes made pursuant to the
Trust Indenture Act.

Section 6.03. Reports by Trustee.

         (a) Within sixty (60) days after August 1 of each year commencing with
the year 2004, the Trustee shall transmit to holders of Notes such reports dated
as of August 1 of the year in which such reports are made concerning the Trustee
and its actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto. In the
event that no events have occurred under the applicable sections of the Trust
Indenture Act the Trustee shall be under no duty or obligation to provide such
reports.

         (b) A copy of such report shall, at the time of such transmission to
holders of Notes, be filed by the Trustee with each stock exchange and automated
quotation system upon which the Notes are listed (if applicable) and with the
Company. The Company will promptly notify the Trustee in writing when the Notes
are listed on any stock exchange or automated quotation system or delisted
therefrom.

Section 6.04. Reports by Company.

         The Company shall file with the Trustee (and the Commission if at any
time after the Indenture becomes qualified under the Trust Indenture Act), and
transmit to holders of Notes, such information, documents and other reports and
such summaries thereof, as may be required pursuant to the Trust Indenture Act
at the times and in the manner provided pursuant to such Act, whether or not the
Notes are governed by such Act; provided that any such information, documents or
reports required to be filed with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act shall be filed with the Trustee within fifteen (15) days
after the same is so required to be filed with the Commission. Delivery of such
reports, information and documents to the Trustee is for informational purposes
only and the Trustee's receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on an Officer's
Certificates).

                                   ARTICLE 7
         REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT

Section 7.01. Events of Default.

         In case one or more of the following Events of Default (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:

                  (a) default in the payment of any installment of Interest upon
         any of the Notes as and when the same shall become due and payable,

                                       39
<PAGE>

         whether or not such payment shall be prohibited by Article 16, and
         continuance of such default for a period of thirty (30) days; or

                  (b) default in the payment of the principal of any of the
         Notes as and when the same shall become due and payable either at
         maturity or in connection with any redemption, repurchase or otherwise,
         in each case pursuant to Article 3, by acceleration or otherwise,
         whether or not such payment shall be prohibited by Article 16; or

                  (c) default in the Company's obligation to provide a
         Designated Event Notice upon a Designated Event as provided in Section
         3.05; or

                  (d) failure on the part of the Company duly to observe or
         perform any other of the covenants or agreements on the part of the
         Company in the Notes or in this Indenture (other than a covenant or
         agreement a default in whose performance or whose breach is elsewhere
         in this Section 7.01 specifically dealt with) continued for a period of
         sixty (60) days after the date on which written notice of such failure,
         requiring the Company to remedy the same, shall have been given to the
         Company by the Trustee, or the Company and a Responsible Officer of the
         Trustee by the holders of at least twenty-five percent (25%) in
         aggregate principal amount of the Notes at the time outstanding
         determined in accordance with Section 9.04; or

                  (e) the Company shall commence a voluntary case or other
         proceeding seeking liquidation, reorganization or other relief with
         respect to the Company or its debts under any bankruptcy, insolvency or
         other similar law now or hereafter in effect or seeking the appointment
         of a trustee, receiver, liquidator, custodian or other similar official
         of the Company or any substantial part of the property of the Company,
         or shall consent to any such relief or to the appointment of or taking
         possession by any such official in an involuntary case or other
         proceeding commenced against the Company, or shall make a general
         assignment for the benefit of creditors, or shall fail generally to pay
         its debts as they become due; or

                  (f) an involuntary case or other proceeding shall be commenced
         against the Company seeking liquidation, reorganization or other relief
         with respect to the Company or its debts under any bankruptcy,
         insolvency or other similar law now or hereafter in effect or seeking
         the appointment of a trustee, receiver, liquidator, custodian or other
         similar official of the Company or any substantial part of the property
         of the Company, and such involuntary case or other proceeding shall
         remain undismissed and unstayed for a period of sixty (60) consecutive
         days;

then, and in each and every such case (other than an Event of Default specified
in Section 7.01(e) or 7.01(f)), unless the principal of all of the Notes shall
have already become due and payable, either the Trustee or the holders of not
less than twenty-five percent (25%) in aggregate principal amount of the Notes
then outstanding hereunder determined in accordance with Section 9.04, by notice
in writing to the Company (and to the Trustee if given by Noteholders), may
declare the principal of all the Notes, the Interest accrued thereon to be due
and payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in

                                       40
<PAGE>

Section 7.01(e) or 7.01(f) occurs, the principal of all the Notes and the
Interest accrued thereon shall be immediately and automatically due and payable
without necessity of further action. This provision, however, is subject to the
conditions that if, at any time after the principal of the Notes shall have been
so declared due and payable, and before any judgment or decree for the payment
of the monies due shall have been obtained or entered as hereinafter provided,
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
all matured installments of Interest upon all Notes and the principal of any and
all Notes which shall have become due otherwise than by acceleration (with
interest on overdue installments of Interest (to the extent that payment of such
interest is enforceable under applicable law) and on such principal at the rate
borne by the Notes, to the date of such payment or deposit) and amounts due to
the Trustee pursuant to Section 8.06, and if any and all defaults under this
Indenture, other than the nonpayment of principal of and accrued Interest on
Notes which shall have become due by acceleration, shall have been cured or
waived pursuant to Section 7.07, then and in every such case the holders of a
majority in aggregate principal amount of the Notes then outstanding, by written
notice to the Company and to the Trustee, may waive all Defaults or Events of
Default and rescind and annul such declaration and its consequences; but no such
waiver or rescission and annulment shall extend to or shall affect any
subsequent Default or Event of Default, or shall impair any right consequent
thereon. The Company shall notify in writing a Responsible Officer of the
Trustee, promptly upon becoming aware thereof, of any Event of Default.

         In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been taken.

Section 7.02. Payments of Notes on Default; Suit Therefor.

         The Company covenants that (a) in case default shall be made in the
payment of any installment of Interest upon any of the Notes as and when the
same shall become due and payable, and such default shall have continued for a
period of thirty (30) days, or (b) in case default shall be made in the payment
of the principal of any of the Notes as and when the same shall have become due
and payable, whether at maturity of the Notes or in connection with any
redemption, by or under this Indenture declaration or otherwise, then, upon
demand of the Trustee, the Company will pay to the Trustee, for the benefit of
the holders of the Notes, the whole amount that then shall have become due and
payable on all such Notes for principal or Interest, as the case may be, with
interest upon the overdue principal and (to the extent that payment of such
interest is enforceable under applicable law) upon the overdue installments of
Interest at the rate borne by the Notes, plus 1% and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including reasonable compensation to the Trustee, its agents,
attorneys and counsel, and all other amounts due the Trustee under Section 8.06.
Until such demand by the Trustee, the Company may pay the principal of and
Interest on the Notes to the registered holders, whether or not the Notes are
overdue.

                                       41
<PAGE>

         In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.

         In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.02,
shall be entitled and empowered, by intervention in such proceedings or
otherwise, to file and prove a claim or claims for the whole amount of principal
and Interest owing and unpaid in respect of the Notes, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
of the Noteholders allowed in such judicial proceedings relative to the Company
or any other obligor on the Notes, its or their creditors, or its or their
property, and to collect and receive any monies or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of any amounts due the Trustee under Section 8.06, and to take any other action
with respect to such claims, including participating as a member of any official
committee of creditors, as it reasonably deems necessary or advisable, and,
unless prohibited by law or applicable regulations, and any receiver, assignee
or trustee in bankruptcy or reorganization, liquidator, custodian or similar
official is hereby authorized by each of the Noteholders to make such payments
to the Trustee, and, in the event that the Trustee shall consent to the making
of such payments directly to the Noteholders, to pay to the Trustee any amount
due it for reasonable compensation, expenses, advances and disbursements,
including counsel fees and expenses incurred by it up to the date of such
distribution. To the extent that such payment of reasonable compensation,
expenses, advances and disbursements out of the estate in any such proceedings
shall be denied for any reason, payment of the same shall be secured by a lien
on, and shall be paid out of, any and all distributions, dividends, monies,
securities and other property which the holders of the Notes may be entitled to
receive in such proceedings, whether in liquidation or under any plan of
reorganization or arrangement or otherwise.

         All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.

                                       42
<PAGE>

         In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.

Section 7.03. Application of Monies Collected by Trustee.

         Any monies or property collected by the Trustee pursuant to this
Article 7 shall be applied in the order following, at the date or dates fixed by
the Trustee for the distribution of such monies or property, upon presentation
of the several Notes and either (i) stamping thereon the payment, if only
partially paid, or (ii) upon surrender thereof, if fully paid.

                  FIRST: To the payment of all amounts due the Trustee under
         Section 8.06;

                  SECOND: To holders of Senior Indebtedness of the Company to
         the extent required by Article 16;

                  THIRD: In case the principal of the outstanding Notes shall
         not have become due and be unpaid, to the payment of Interest on the
         Notes in default in the order of the maturity of the installments of
         such Interest, with interest (to the extent that such interest has been
         collected by the Trustee) upon the overdue installments of Interest at
         the rate borne by the Notes, such payments to be made ratably to the
         Persons entitled thereto;

                  FOURTH: In case the principal of the outstanding Notes shall
         have become due, by declaration or otherwise, and be unpaid to the
         payment of the whole amount then owing and unpaid upon the Notes for
         principal and Interest, with Interest on the overdue principal and (to
         the extent that such Interest has been collected by the Trustee) upon
         overdue installments of Interest at the rate borne by the Notes, and in
         case such monies shall be insufficient to pay in full the whole amounts
         so due and unpaid upon the Notes, then to the payment of such principal
         and Interest without preference or priority of principal over Interest,
         or of Interest over principal, or of any installment of Interest over
         any other installment of Interest, or of any Note over any other Note,
         ratably to the aggregate of such principal and accrued and unpaid
         Interest; and

                  FIFTH: To the payment of the remainder, if any, to the
         Company.

Section 7.04. Proceedings by Noteholder.

         No holder of any Note shall have any right by virtue of or by reference
to any provision of this Indenture to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Indenture, or for the
appointment of a receiver, trustee, liquidator, custodian or other similar
official, or for any other remedy hereunder, unless such holder previously shall
have given to the Trustee written notice of an Event of Default and of the
continuance thereof, as hereinbefore provided, and unless also the holders of
not less than twenty-five percent (25%) in aggregate principal amount of the
Notes then outstanding shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such reasonable security or indemnity as
it may require against the costs, expenses and liabilities to be incurred
therein or thereby, and the Trustee for sixty (60) days after its receipt of

                                       43
<PAGE>

such notice, request and offer of indemnity shall have neglected or refused to
institute any such action, suit or proceeding and no direction inconsistent with
such written request shall have been given to the Trustee pursuant to Section
7.07; it being understood and intended, and being expressly covenanted by the
taker and holder of every Note with every other taker and holder and the
Trustee, that no one or more holders of Notes shall have any right in any manner
whatever by virtue of or by reference to any provision of this Indenture to
affect, disturb or prejudice the rights of any other holder of Notes, or to
obtain or seek to obtain priority over or preference to any other such holder,
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal, ratable and common benefit of all holders of Notes
(except as otherwise provided herein). For the protection and enforcement of
this Section 7.04 each and every Noteholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.

         Notwithstanding any other provision of this Indenture and any provision
of any Note, the right of any holder of any Note to receive payment of the
principal of (including the redemption price upon redemption pursuant to Article
7) and accrued Interest on such Note, on or after the respective due dates
expressed in such Note or in the event of redemption, or to institute suit for
the enforcement of any such payment on or after such respective dates against
the Company shall not be impaired or affected without the consent of such
holder.

         Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, in its own behalf and for its own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, its rights of conversion as provided herein.

Section 7.05. Proceedings by Trustee.

         In case of an Event of Default, the Trustee may, in its discretion,
proceed to protect and enforce the rights vested in it by this Indenture by such
appropriate judicial proceedings as are necessary to protect and enforce any of
such rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.

Section 7.06. Remedies Cumulative and Continuing.

         Except as provided in Section 2.06, all powers and remedies given by
this Article 7 to the Trustee or to the Noteholders shall, to the extent
permitted by law, be deemed cumulative and not exclusive of any thereof or of
any other powers and remedies available to the Trustee or the holders of the
Notes, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture, and no
delay or omission of the Trustee or of any holder of any of the Notes to
exercise any right or power accruing upon any Default or Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or any acquiescence
therein, and, subject to the provisions of Section 7.04, every power and remedy

                                       44
<PAGE>

given by this Article 7 or by law to the Trustee or to the Noteholders may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Noteholders.

Section 7.07. Direction of Proceedings and Waiver of Defaults by Majority of
Noteholders.

         The holders of a majority in aggregate principal amount of the Notes at
the time outstanding determined in accordance with Section 9.04 shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee; provided that (a) such direction shall not be in conflict with any
rule of law or with this Indenture, (b) the Trustee may take any other action
which is not inconsistent with such direction, (c) the Trustee may decline to
take any action that would benefit some Noteholder to the detriment of other
Noteholders and (d) the Trustee may decline to take any action that would
involve the Trustee in personal liability. The holders of a majority in
aggregate principal amount of the Notes at the time outstanding determined in
accordance with Section 9.04 may, on behalf of the holders of all of the Notes,
waive any past Default or Event of Default hereunder and its consequences except
(i) a default in the payment of Interest on, or the principal of, the Notes,
(ii) a failure by the Company to convert any Notes into Common Stock, (iii) a
default in the payment of the redemption price pursuant to Article 3, (iv) a
default in the payment of the repurchase price pursuant to Article 3 or (v) a
default in respect of a covenant or provisions hereof which under Article 11
cannot be modified or amended without the consent of the holders of each or all
of the Notes then outstanding or affected thereby. Upon any such waiver, the
Company, the Trustee and the holders of the Notes shall be restored to their
former positions and rights hereunder; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon. Whenever any Default or Event of Default hereunder shall have been
waived as permitted by this Section 7.07, said Default or Event of Default shall
for all purposes of the Notes and this Indenture be deemed to have been cured
and to be not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.

Section 7.08. Notice of Default.

         The Trustee shall, within ninety (90) days after a Responsible Officer
of the Trustee has actual knowledge of the occurrence of a default, mail to all
Noteholders, as the names and addresses of such holders appear upon the Note
Register, notice of all defaults known to a Responsible Officer, unless such
defaults shall have been cured or waived before the giving of such notice;
provided that except in the case of default in the payment of the principal of
or Interest on any of the Notes, the Trustee shall be protected in withholding
such notice if and so long as a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interests of the Noteholders.

Section 7.09. Undertaking to Pay Costs.

         All parties to this Indenture agree, and each holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may, in its
discretion, require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an

                                       45
<PAGE>

undertaking to pay the costs of such suit and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant;
provided that the provisions of this Section 7.09 (to the extent permitted by
law) shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Noteholder, or group of Noteholders, holding in the aggregate
more than ten percent in principal amount of the Notes at the time outstanding
determined in accordance with Section 9.04, or to any suit instituted by any
Noteholder for the enforcement of the payment of the principal of or Interest on
any Note on or after the due date expressed in such Note or to any suit for the
enforcement of the right to convert any Note in accordance with the provisions
of Article 15.

                                    ARTICLE 8
                                   THE TRUSTEE

Section 8.01. Duties and Responsibilities of Trustee.

         The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Indenture. In case an Event of Default has occurred (which has not been cured or
waived), the Trustee shall exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their exercise,
as a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.

         No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:

                  (a) prior to the occurrence of an Event of Default and after
         the curing or waiving of all Events of Default which may have occurred:

                           (i) the duties and obligations of the Trustee shall
                  be determined solely by the express provisions of this
                  Indenture and the Trust Indenture Act, and the Trustee shall
                  not be liable except for the performance of such duties and
                  obligations as are specifically set forth in this Indenture
                  and no implied covenants, duties or obligations shall be read
                  into this Indenture and the Trust Indenture Act against the
                  Trustee; and

                           (ii) in the absence of bad faith and willful
                  misconduct on the part of the Trustee, the Trustee may
                  conclusively rely as to the truth of the statements and the
                  correctness of the opinions expressed therein, upon any
                  certificates or opinions furnished to the Trustee and
                  conforming to the requirements of this Indenture; but, in the
                  case of any such certificates or opinions which by any
                  provisions hereof are specifically required to be furnished to

                                       46
<PAGE>

                  the Trustee, the Trustee shall be under a duty to examine the
                  same to determine whether or not they conform to the
                  requirements of this Indenture but need not confirm or
                  investigate the accuracy of mathematical calculations or other
                  facts stated therein;

                  (b) the Trustee shall not be liable for any error of judgment
         made in good faith by a Responsible Officer or Officers of the Trustee,
         unless the Trustee was negligent in ascertaining the pertinent facts;

                  (c) the Trustee shall not be liable with respect to any action
         taken or omitted to be taken by it in good faith in accordance with the
         written direction of the holders of not less than a majority in
         principal amount of the Notes at the time outstanding determined as
         provided in Section 9.04 relating to the time, method and place of
         conducting any proceeding for any remedy available to the Trustee, or
         exercising any trust or power conferred upon the Trustee, under this
         Indenture;

                  (d) whether or not therein provided, every provision of this
         Indenture relating to the conduct or affecting the liability of, or
         affording protection to, the Trustee shall be subject to the provisions
         of this Section;

                  (e) the Trustee shall not be liable in respect of any payment
         (as to the correctness of amount, entitlement to receive or any other
         matters relating to payment) or notice effected by the Company or any
         paying agent or any records maintained by any co-registrar with respect
         to the Notes;

                  (f) if any party fails to deliver a notice relating to an
         event the fact of which, pursuant to this Indenture, requires notice to
         be sent to the Trustee, the Trustee may conclusively rely on its
         failure to receive such notice as reason to act as if no such event
         occurred; and

                  (g) the Trustee shall not be deemed to have knowledge of any
         Event of Default hereunder unless it shall have been notified in
         writing of such Event of Default by the Company or the holders of at
         least 10% in aggregate principal amount of the Notes.

         None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.

Section 8.02. Reliance on Documents, Opinions, Etc.

         Except as otherwise provided in Section 8.01:

                  (a) the Trustee may conclusively rely and shall be protected
         in acting upon any resolution, certificate, statement, instrument,
         opinion, report, notice, request, consent, order, bond, debenture,
         note, coupon or other paper or document (whether in its original or
         facsimile form) believed by it in good faith to be genuine and to have
         been signed or presented by the proper party or parties;

                                       47
<PAGE>

                  (b) any request, direction, order or demand of the Company
         mentioned herein shall be sufficiently evidenced by an Officer's
         Certificate (unless other evidence in respect thereof be herein
         specifically prescribed); and any resolution of the Board of Directors
         may be evidenced to the Trustee by a copy thereof certified by the
         Secretary or an Assistant Secretary of the Company;

                  (c) the Trustee may consult with counsel of its own selection
         and any advice or Opinion of Counsel shall be full and complete
         authorization and protection in respect of any action taken or omitted
         by it hereunder in good faith and in accordance with such advice or
         Opinion of Counsel;

                  (d) the Trustee shall be under no obligation to exercise any
         of the rights or powers vested in it by this Indenture at the request,
         order or direction of any of the Noteholders pursuant to the provisions
         of this Indenture, unless such Noteholders shall have offered to the
         Trustee reasonable security or indemnity satisfactory to it against the
         costs, expenses and liabilities which may be incurred therein or
         thereby;

                  (e) the Trustee shall not be bound to make any investigation
         into the facts or matters stated in any resolution, certificate,
         statement, instrument, opinion, report, notice, request, direction,
         consent, order, bond, debenture or other paper or document, but the
         Trustee may make such further inquiry or investigation into such facts
         or matters as it may see fit, and, if the Trustee shall determine to
         make such further inquiry or investigation, it shall be entitled to
         examine the books, records and premises of the Company, personally or
         by agent or attorney at the expense of the Company, and shall incur no
         liability of any kind by reason of such inquiry or investigation;

                  (f) the Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents or attorneys and the Trustee shall not be responsible
         for any misconduct or negligence on the part of any agent or attorney
         appointed by it with due care hereunder;

                  (g) the Trustee shall not be liable for any action taken,
         suffered or omitted to be taken by it in good faith and reasonably
         believed by it to be authorized or within the discretion or rights or
         powers conferred upon it by this Indenture;

                  (h) the rights, privileges, protections, immunities and
         benefits given to the Trustee, including, without limitation, its right
         to be indemnified, are extended to, and shall be enforceable by, the
         Trustee in each of its capacities hereunder, and each agent, custodian
         and other Person employed to act hereunder;

                  (i) the Trustee may request that the Company deliver an
         Officer's Certificate setting forth the names of individuals and/or
         titles of officers authorized at such time to take specified actions
         pursuant to this Indenture, which Officer's Certificate may be signed
         by any person authorized to sign an Officer's Certificate, including
         any person specified as so authorized in any such certificate
         previously delivered and not superseded; and

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<PAGE>

                  (j) any permissive right or authority granted to the Trustee
         shall not be construed as a mandatory duty.

Section 8.03. No Responsibility for Recitals, Etc.

         The recitals contained herein and in the Notes (except in the Trustee's
certificate of authentication) shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes. The Trustee shall not be accountable for the use or
application by the Company of any Notes or the proceeds of any Notes
authenticated and delivered by the Trustee in conformity with the provisions of
this Indenture.

Section 8.04. Trustee, Paying Agents, Conversion Agents or Registrar May Own
Notes.

         The Trustee, any paying agent, any conversion agent or Note Registrar,
in its individual or any other capacity, may become the owner or pledgee of
Notes with the same rights it would have if it were not Trustee, paying agent,
conversion agent or Note Registrar.

Section 8.05. Monies to Be Held in Trust.

         Subject to the provisions of Section 13.04, all monies received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as may be agreed in writing from time to time by
the Company and the Trustee.

Section 8.06. Compensation and Expenses of Trustee.

         The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, such compensation for all services
rendered by it hereunder in any capacity (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
as mutually agreed to from time to time in writing between the Company and the
Trustee, and the Company will pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances reasonably incurred or made
by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all Persons not regularly in its employ), except any such
expense, disbursement or advance as shall be determined to have been caused by
its own negligence or willful misconduct. The Company also covenants to
indemnify the Trustee and any predecessor Trustee (or any officer, director or
employee of the Trustee) in any capacity under this Indenture and its agents and
any authenticating agent for, and to hold them harmless against, any and all
loss, liability, damage, claim or expense, including taxes (other than taxes
based on the income of the Trustee) incurred without negligence, bad faith or
willful misconduct on the part of the Trustee or such officers, directors,
employees and agent or authenticating agent, as the case may be, and arising out
of or in connection with the acceptance or administration of this trust or in
any other capacity hereunder, including the costs and expenses of defending
themselves against any claim (whether asserted by the Company, any holder or any
other Person) of liability in the premises. The obligations of the Company under

                                       49
<PAGE>

this Section 8.06 to compensate or indemnify the Trustee and to pay or reimburse
the Trustee for expenses, disbursements and advances shall be secured by a lien
prior to that of the Notes upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the benefit of the holders of
particular Notes. The obligation of the Company under this Section shall survive
the satisfaction and discharge of this Indenture.

         When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
7.01(e) or (f) with respect to the Company occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency or similar laws.

Section 8.07. Officer's Certificate as Evidence.

         Except as otherwise provided in Section 8.01, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of bad faith or
willful misconduct on the part of the Trustee, be deemed to be conclusively
proved and established by an Officer's Certificate delivered to the Trustee.

Section 8.08. Conflicting Interests of Trustee.

         If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall (i) eliminate such
interest within 90 days, (ii) apply to the Commission for permission to continue
as trustee or (iii) resign, in each case to the extent and in the manner
provided by, and subject to the provisions of, the Trust Indenture Act and this
Indenture.

Section 8.09. Eligibility of Trustee.

         There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000 (or, if such Person is a
member of a bank holding company system, its bank holding company shall have a
combined capital and surplus of at least $50,000,000). If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of any supervising or examining authority, then for the purposes of this Section
the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 8.09, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.

Section 8.10. Resignation or Removal of Trustee.

         (a) The Trustee may at any time resign by giving written notice of such
resignation to the Company and to the holders of Notes. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor trustee by
written instrument, in duplicate, executed by order of the Board of Directors,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so

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<PAGE>

appointed and have accepted appointment sixty (60) days after the mailing of
such notice of resignation to the Noteholders, the resigning Trustee may, upon
ten (10) Business Days' notice to the Company and the Noteholders, petition, at
the expense of the Company, any court of competent jurisdiction for the
appointment of a successor trustee, or, any Noteholder who has been a bona fide
holder of a Note or Notes for at least six (6) months may, subject to the
provisions of Section 7.09, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.

         (b) In case at any time any of the following shall occur:

                  (i) the Trustee shall fail to comply with Section 8.08 after
         written request therefor by the Company or by any Noteholder who has
         been a bona fide holder of a Note or Notes for at least six (6) months;
         or

                  (ii) the Trustee shall cease to be eligible in accordance with
         the provisions of Section 8.09 and shall fail to resign after written
         request therefor by the Company or by any such Noteholder; or

                  (iii) the Trustee shall become incapable of acting, or shall
         be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
         its property shall be appointed, or any public officer shall take
         charge or control of the Trustee or of its property or affairs for the
         purpose of rehabilitation, conservation or liquidation;

then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.09, any Noteholder who has been a bona fide holder of a
Note or Notes for at least six (6) months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee; provided that
if no successor Trustee shall have been appointed and have accepted appointment
sixty (60) days after either the Company or such Noteholder has removed the
Trustee, or the Trustee resigns, the Trustee so removed may petition, at the
expense of the Company, any court of competent jurisdiction for an appointment
of a successor trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.

         (c) The holders of a majority in aggregate principal amount of the
Notes at the time outstanding may at any time remove the Trustee and nominate a
successor trustee which shall be deemed appointed as successor trustee unless,
within ten (10) days after notice to the Company of such nomination, the Company
objects thereto, in which case the Trustee so removed or any Noteholder, or, if
such Trustee so removed or any Noteholder fails to act, the Company, upon the
terms and conditions and otherwise as in Section 8.10(a) provided, may petition
any court of competent jurisdiction for an appointment of a successor trustee.

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<PAGE>

         (d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.11.

         (e) Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 8.06 shall continue for the
benefit of the retiring Trustee.

Section 8.11. Acceptance by Successor Trustee.

         Any successor trustee appointed as provided in Section 8.10 shall
execute, acknowledge and deliver to the Company and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as trustee
herein; but, nevertheless, on the written request of the Company or of the
successor trustee, the trustee ceasing to act shall, upon payment of any amount
then due it pursuant to the provisions of Section 8.06, execute and deliver an
instrument transferring to such successor trustee all the rights and powers of
the trustee so ceasing to act. Upon request of any such successor trustee, the
Company shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers. Any trustee ceasing to act shall, nevertheless, retain a lien upon
all property and funds held or collected by such trustee as such, except for
funds held in trust for the benefit of holders of particular Notes, to secure
any amounts then due it pursuant to the provisions of Section 8.06.

         No successor trustee shall accept appointment as provided in this
Section 8.11 unless, at the time of such acceptance, such successor trustee
shall be qualified under the provisions of Section 8.08 and be eligible under
the provisions of Section 8.09.

         Upon acceptance of appointment by a successor trustee as provided in
this Section 8.11, the Company (or the former trustee, at the written direction
of the Company) shall mail or cause to be mailed notice of the succession of
such trustee hereunder to the holders of Notes at their addresses as they shall
appear on the Note Register. If the Company fails to mail such notice within ten
(10) days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.

Section 8.12. Succession by Merger.

         Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee (including any trust created by this Indenture), shall
be the successor to the Trustee hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
in the case of any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, such corporation shall be qualified
under the provisions of Section 8.08 and eligible under the provisions of
Section 8.09.

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<PAGE>

         In any case where at the time such successor to the Trustee shall
succeed to the trusts created by this Indenture, any of the Notes shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor trustee or
authenticating agent appointed by such predecessor trustee, and deliver such
Notes so authenticated; and in case at that time any of the Notes shall not have
been authenticated, any successor to the Trustee or any authenticating agent
appointed by such successor trustee may authenticate such Notes in the name of
the successor trustee; and in all such cases such certificates shall have the
full force that is provided in the Notes or in this Indenture; provided that the
right to adopt the certificate of authentication of any predecessor Trustee or
to authenticate Notes in the name of any predecessor Trustee shall apply only to
its successor or successors by merger, conversion or consolidation.

Section 8.13. Preferential Collection of Claims.

         If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Notes), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of the claims
against the Company (or any such other obligor).

Section 8.14. Trustee's Application for Instructions from the Company.

         Any application by the Trustee for written instructions from the
Company (other than with regard to any action proposed to be taken or omitted to
be taken by the Trustee that affects the rights of the holders of the Notes
under this Indenture) may, at the option of the Trustee, set forth in writing
any action proposed to be taken or omitted by the Trustee under this Indenture
and the date on and/or after which such action shall be taken or such omission
shall be effective. The Trustee shall not be liable for any action taken by, or
omission of, the Trustee in accordance with a proposal included in such
application on or after the date specified in such application (which date shall
not be less than three (3) Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking any such action
(or the effective date in the case of an omission), the Trustee shall have
received written instructions in response to such application specifying the
action to be taken or omitted.

                                   ARTICLE 9
                                 THE NOTEHOLDERS

Section 9.01. Action by Noteholders.

         Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Notes may take any
action (including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that, at the time
of taking any such action, the holders of such specified percentage have joined
therein may be evidenced (a) by any instrument or any number of instruments of
similar tenor executed by Noteholders in person or by agent or proxy appointed
in writing, or (b) by the record of the holders of Notes voting in favor thereof
at any meeting of Noteholders duly called and held in accordance with the
provisions of Article 10, or (c) by a combination of such instrument or

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<PAGE>

instruments and any such record of such a meeting of Noteholders. Whenever the
Company or the Trustee solicits the taking of any action by the Noteholders, the
Company or the Trustee may fix in advance of such solicitation a date as the
record date for determining holders entitled to take such action. The record
date shall be not more than fifteen (15) days prior to the date of commencement
of solicitation of such action.

Section 9.02. Proof of Execution by Noteholders.

         Subject to the provisions of Sections 8.01, 8.02 and 10.05, proof of
the execution of any instrument by a Noteholder or its agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee. The holding of Notes shall be proved by the registry of such Notes
or by a certificate of the Note Registrar.

         The record of any Noteholders' meeting shall be proved in the manner
provided in Section 10.06.

Section 9.03. Who Are Deemed Absolute Owners.

         The Company, the Trustee, any paying agent, any conversion agent and
any Note Registrar may deem the Person in whose name such Note shall be
registered upon the Note Register to be, and may treat it as, the absolute owner
of such Note (whether or not such Note shall be overdue and notwithstanding any
notation of ownership or other writing thereon made by any Person other than the
Company or any Note Registrar) for the purpose of receiving payment of or on
account of the principal of and Interest on such Note, for conversion of such
Note and for all other purposes; and neither the Company nor the Trustee nor any
paying agent nor any conversion agent nor any Note Registrar shall be affected
by any notice to the contrary. All such payments so made to any holder for the
time being, or upon such holder's order, shall be valid and, to the extent of
the sum or sums so paid, effectual to satisfy and discharge the liability for
monies payable upon any such Note.

Section 9.04. Company-owned Notes Disregarded.

         In determining whether the holders of the requisite aggregate principal
amount of Notes have concurred in any direction, consent, waiver or other action
under this Indenture, Notes which are owned by the Company or any other obligor
on the Notes or any Affiliate of the Company or any other obligor on the Notes
shall be disregarded and deemed not to be outstanding for the purpose of any
such determination; provided that, for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, consent, waiver or
other action, only Notes which a Responsible Officer knows are so owned shall be
so disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.04 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or any Affiliate of the Company or any such other obligor. In the case of
a dispute as to such right, any decision by the Trustee taken upon the advice of
counsel shall be full protection to the Trustee. Upon request of the Trustee,

                                       54
<PAGE>

the Company shall furnish to the Trustee promptly an Officer's Certificate
listing and identifying all Notes, if any, known by the Company to be owned or
held by or for the account of any of the above described Persons, and, subject
to Section 8.01, the Trustee shall be entitled to accept such Officer's
Certificate as conclusive evidence of the facts therein set forth and of the
fact that all Notes not listed therein are outstanding for the purpose of any
such determination.

Section 9.05. Revocation of Consents; Future Holders Bound.

         At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 9.01, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Notes specified in this
Indenture in connection with such action, any holder of a Note which is shown by
the evidence to be included in the Notes the holders of which have consented to
such action may, by filing written notice with the Trustee at its Corporate
Trust Office and upon proof of holding as provided in Section 9.02, revoke such
action so far as concerns such Note. Except as aforesaid, any such action taken
by the holder of any Note shall be conclusive and binding upon such holder and
upon all future holders and owners of such Note and of any Notes issued in
exchange or substitution therefor, irrespective of whether any notation in
regard thereto is made upon such Note or any Note issued in exchange or
substitution therefor.

                                   ARTICLE 10
                             MEETINGS OF NOTEHOLDERS

Section 10.01. Purpose of Meetings.

         A meeting of Noteholders may be called at any time and from time to
time pursuant to the provisions of this Article 10 for any of the following
purposes:

                  (a) to give any notice to the Company or to the Trustee or to
         give any directions to the Trustee permitted under this Indenture, or
         to consent to the waiving of any Default or Event of Default hereunder
         and its consequences, or to take any other action authorized to be
         taken by Noteholders pursuant to any of the provisions of Article 7;

                  (b) to remove the Trustee and nominate a successor trustee
         pursuant to the provisions of Article 8;

                  (c) to consent to the execution of an indenture or indentures
         supplemental hereto pursuant to the provisions of Section 11.02; or

                  (d) to take any other action authorized to be taken by or on
         behalf of the holders of any specified aggregate principal amount of
         the Notes under any other provision of this Indenture or under
         applicable law.

Section 10.02. Call of Meetings by Trustee.

         The Trustee may at any time call a meeting of Noteholders to take any
action specified in Section 10.01, to be held at such time and at such place as
the Trustee shall determine. Notice of every meeting of the Noteholders, setting
forth the time and place of such meeting and in general terms the action

                                       55
<PAGE>

proposed to be taken at such meeting and the establishment of any record date
pursuant to Section 9.01, shall be mailed to holders of Notes at their addresses
as they shall appear on the Note Register. Such notice shall also be mailed to
the Company. Such notices shall be mailed not less than twenty (20) nor more
than ninety (90) days prior to the date fixed for the meeting.

         Any meeting of Noteholders shall be valid without notice if the holders
of all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.

Section 10.03. Call of Meetings by Company or Noteholders.

         In case at any time the Company, pursuant to a resolution of its Board
of Directors, or the holders of at least ten percent (10%) in aggregate
principal amount of the Notes then outstanding, shall have requested the Trustee
to call a meeting of Noteholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within twenty (20) days after receipt of
such request, then the Company or such Noteholders may determine the time and
the place for such meeting and may call such meeting to take any action
authorized in Section 10.01 by mailing notice thereof as provided in Section
10.02.

Section 10.04. Qualifications for Voting.

         To be entitled to vote at any meeting of Noteholders, a person shall
(a) be a holder of one or more Notes on the record date pertaining to such
meeting or (b) be a person appointed by an instrument in writing as proxy by a
holder of one or more Notes on the record date pertaining to such meeting. The
only persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.

Section 10.05. Regulations.

         Notwithstanding any other provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Noteholders, in regard to proof of the holding of Notes and of the appointment
of proxies, and in regard to the appointment and duties of inspectors of votes,
the submission and examination of proxies, certificates and other evidence of
the right to vote, and such other matters concerning the conduct of the meeting
as it shall think fit.

         The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.03, in which case the
Company or the Noteholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the holders of a majority
in principal amount of the Notes represented at the meeting and entitled to vote
at the meeting.

                                       56
<PAGE>

         Subject to the provisions of Section 9.04, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Notes held or represented by him; provided that no vote
shall be cast or counted at any meeting in respect of any Note challenged as not
outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of
Notes held by him or instruments in writing as aforesaid duly designating him as
the proxy to vote on behalf of other Noteholders. Any meeting of Noteholders
duly called pursuant to the provisions of Section 10.02 or 10.03 may be
adjourned from time to time by the holders of a majority of the aggregate
principal amount of Notes represented at the meeting, whether or not
constituting a majority of the aggregate principal amount of Notes outstanding,
the latter of which shall constitute a quorum, and the meeting may be held as so
adjourned without further notice.

Section 10.06. Voting.

         The vote upon any resolution submitted to any meeting of Noteholders
shall be by written ballot on which shall be subscribed the signatures of the
holders of Notes or of their representatives by proxy and the outstanding
principal amount of the Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Noteholders shall be prepared by the secretary of
the meeting, and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided in
Section 10.02. The record shall show the principal amount of the Notes voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.

         Any record so signed and verified shall be conclusive evidence of the
matters therein stated.

Section 10.07. No Delay of Rights by Meeting.

         Nothing contained in this Article 10 shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Noteholders or any
rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Noteholders under any of the provisions of
this Indenture or of the Notes.

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<PAGE>

                                   ARTICLE 11
                             SUPPLEMENTAL INDENTURES

Section 11.01. Supplemental Indentures Without Consent of Noteholders.

         The Company, when authorized by the resolutions of the Board of
Directors, and the Trustee may, from time to time, and at any time enter into an
indenture or indentures supplemental hereto for one or more of the following
purposes:

                  (a) make provision with respect to the conversion rights of
         the holders of Notes pursuant to the requirements of Section 15.06 and
         the repurchase obligations of the Company pursuant to the requirements
         of Section 3.05(e);

                  (b) to convey, transfer, assign, mortgage or pledge to the
         Trustee as security for the Notes, any property or assets;

                  (c) to evidence the succession of another Person to the
         Company, or successive successions, and the assumption by the successor
         Person of the covenants, agreements and obligations of the Company
         pursuant to Article 12;

                  (d) to add to the covenants of the Company such further
         covenants, restrictions or conditions as the Board of Directors and the
         Trustee shall consider to be for the benefit of the holders of Notes,
         and to make the occurrence, or the occurrence and continuance, of a
         default in any such additional covenants, restrictions or conditions a
         default or an Event of Default permitting the enforcement of all or any
         of the several remedies provided in this Indenture as herein set forth;
         provided that, in respect of any such additional covenant, restriction
         or condition, such supplemental indenture may provide for a particular
         period of grace after default (which period may be shorter or longer
         than that allowed in the case of other defaults) or may provide for an
         immediate enforcement upon such default or may limit the remedies
         available to the Trustee upon such default;

                  (e) to provide for the issuance under this Indenture of Notes
         in coupon form (including Notes registrable as to principal only) and
         to provide for exchangeability of such Notes with the Notes issued
         hereunder in fully registered form and to make all appropriate changes
         for such purpose;

                  (f) to cure any ambiguity or to correct or supplement any
         provision contained herein or in any supplemental indenture that may be
         defective or inconsistent with any other provision contained herein or
         in any supplemental indenture, or to make such other provisions in
         regard to matters or questions arising under this Indenture that shall
         not materially adversely affect the interests of the holders of the
         Notes;

                  (g) to evidence and provide for the acceptance of appointment
         hereunder by a successor Trustee with respect to the Notes;

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                  (h) to modify, eliminate or add to the provisions of this
         Indenture to such extent as shall be necessary to effect the
         qualifications of this Indenture under the Trust Indenture Act, or
         under any similar federal statute hereafter enacted;

                  (i) to increase, from time to time, the per annum interest
         rate on the Notes for any period; or

                  (j) to make any changes to Article 16 that would limit or
         terminate the benefits available to any holder of Senior Indebtedness
         of the Company.

         Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture, the Trustee
is hereby authorized to join with the Company in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations that may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder; provided that the Trustee
shall not be obligated to, but may in its discretion, enter into any
supplemental indenture that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

         Any supplemental indenture authorized by the provisions of this Section
11.01 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.02.

         Notwithstanding any other provision of the Indenture or the Notes, the
Registration Rights Agreement and the obligation to pay Additional Interest
thereunder may be amended, modified or waived only in accordance with the
provisions of the Registration Rights Agreement.

Section 11.02. Supplemental Indenture with Consent of Noteholders.

         With the consent (evidenced as provided in Article 9) of the holders of
at least a majority in aggregate principal amount of the Notes at the time
outstanding, the Company, when authorized by the resolutions of the Board of
Directors, and the Trustee may, from time to time and at any time, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or any supplemental indenture or of modifying in any manner the
rights of the holders of the Notes; provided that no such supplemental indenture
shall (i) extend the fixed maturity of any Note, (ii) reduce the rate or extend
the time of payment of Interest thereon, (iii) reduce the principal amount
thereof or reduce any amount payable on redemption or repurchase thereof, (iv)
change the obligation of the Company to repurchase any Note at the option of a
Noteholder on a Repurchase Date in a manner adverse to the holders of Notes, (v)
change the obligation of the Company to repurchase any Note upon the happening
of a Designated Event in a manner adverse to the holders of Notes, (vi) impair
the right of any Noteholder to institute suit for the payment thereof, (vii)
make the principal thereof or Interest thereon payable in any coin or currency
other than that provided in the Notes, (viii) impair the right to convert the
Notes into Common Stock or reduce the number of shares of Common Stock or any
other property receivable by a Noteholder upon conversion subject to the terms
set forth herein, including Section 15.06, in each case, without the consent of

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the holder of each Note so affected, (ix) modify any of the provisions of this
Section 11.02 or Section 7.07, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of the holder of each Note so affected, (x) change
any obligation of the Company to maintain an office or agency in the places and
for the purposes set forth in Section 5.02, (xi) reduce the quorum or voting
requirements set forth in Article 10, (xii) make any change in Article 16 that
adversely affects the rights of any Noteholder under Article 16 or (xiii) reduce
the aforesaid percentage of Notes, the holders of which are required to consent
to any such supplemental indenture, without the consent of the holders of all
Notes then outstanding.

         Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.

         It shall not be necessary for the consent of the Noteholders under this
Section 11.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

Section 11.03. Effect of Supplemental Indenture.

         Any supplemental indenture executed pursuant to the provisions of this
Article 11 shall comply with the Trust Indenture Act, as then in effect,
provided that this Section 11.03 shall not require such supplemental indenture
or the Trustee to be qualified under the Trust Indenture Act prior to the time
such qualification is in fact required under the terms of the Trust Indenture
Act or the Indenture has been qualified under the Trust Indenture Act, nor shall
it constitute any admission or acknowledgment by any party to such supplemental
indenture that any such qualification is required prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act or
the Indenture has been qualified under the Trust Indenture Act. Upon the
execution of any supplemental indenture pursuant to the provisions of this
Article 11, this Indenture shall be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitation of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Notes shall thereafter be determined, exercised and
enforced hereunder, subject in all respects to such modifications and amendments
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.

Section 11.04. Notation on Notes.

         Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article 11 may bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company or the Trustee shall so determine, new
Notes so modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any modification of this Indenture contained in any such
supplemental indenture may, at the Company's expense, be prepared and executed

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by the Company, authenticated by the Trustee (or an authenticating agent duly
appointed by the Trustee pursuant to Section 17.11) and delivered in exchange
for the Notes then outstanding, upon surrender of such Notes then outstanding.

Section 11.05. Evidence of Compliance of Supplemental Indenture to Be Furnished
to Trustee.

         Prior to entering into any supplemental indenture, the Trustee shall be
provided with an Officer's Certificate and an Opinion of Counsel as conclusive
evidence that any supplemental indenture executed pursuant hereto complies with
the requirements of this Article 11 and is otherwise authorized or permitted by
this Indenture.

                                   ARTICLE 12
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

Section 12.01. Company May Consolidate on Certain Terms.

         Subject to the provisions of Section 12.02, the Company shall not
consolidate or merge with or into any other Person or Persons (whether or not
affiliated with the Company), nor shall the Company or its successor or
successors be a party or parties to successive consolidations or mergers, nor
shall the Company sell, convey, transfer or lease the property and assets of the
Company substantially as an entirety to any other Person (whether or not
affiliated with the Company), unless: (i) the Company is the surviving Person,
or the resulting, surviving or transferee Person is a corporation organized and
existing under the laws of the United States of America, any state thereof or
the District of Columbia; (ii) upon any such consolidation, merger, sale,
conveyance, transfer or lease, the due and punctual payment of the principal of
and Interest on all of the Notes according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed by the Company, shall be expressly assumed, by
supplemental indenture satisfactory in form and substance to the Trustee,
executed and delivered to the Trustee by the Person (if other than the Company
and other than a Person who is a successor to the Company's obligations
hereunder and under the Note by operation of law) formed by such consolidation,
or into which the Company shall have been merged, or by the Person that shall
have acquired or leased such property, and such supplemental indenture shall
provide for the applicable conversion rights set forth in Section 15.06; and
(iii) immediately after giving effect to the transaction described above, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing.

Section 12.02. Successor to Be Substituted.

         In case of any such consolidation, merger, sale, conveyance, transfer
or lease and upon the assumption by the successor Person, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form to the
Trustee, of the due and punctual payment of the principal of and Interest on all
of the Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
Person shall succeed to and be substituted for the Company, with the same effect

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as if it had been named herein as the party of this first part. Such successor
Person thereupon may cause to be signed, and may issue either in its own name or
in the name of Headwaters Incorporated any or all of the Notes, issuable
hereunder that theretofore shall not have been signed by the Company and
delivered to the Trustee, and, upon the order of such successor Person instead
of the Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver, or cause
to be authenticated and delivered, any Notes that previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication and any Notes that such successor Person thereafter shall cause
to be signed and delivered to the Trustee for that purpose. All the Notes so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Notes theretofore or thereafter issued in accordance with the
terms of this Indenture as though all of such Notes had been issued at the date
of the execution hereof. In the event of any such consolidation, merger, sale,
conveyance, transfer or lease, the Person named as the "Company" in the first
paragraph of this Indenture or any successor that shall thereafter have become
such in the manner prescribed in this Article 12 may be dissolved, wound up and
liquidated at any time thereafter and such Person shall be released from its
liabilities as obligor and maker of the Notes and from its obligations under
this Indenture.

         In case of any such consolidation, merger, sale, conveyance, transfer
or lease, such changes in phraseology and form (but not in substance) may be
made in the Notes thereafter to be issued as may be appropriate.

Section 12.03. Opinion of Counsel to Be Given to Trustee.

         The Trustee shall receive an Officer's Certificate and an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale,
conveyance, transfer or lease and any such assumption complies with the
provisions of this Article 12.

                                   ARTICLE 13
                     SATISFACTION AND DISCHARGE OF INDENTURE

Section 13.01. Discharge of Indenture.

         When (a) the Company shall deliver to the Trustee for cancellation all
Notes theretofore authenticated (other than any Notes that have been destroyed,
lost or stolen and in lieu of or in substitution for which other Notes shall
have been authenticated and delivered) and not theretofore canceled, or (b) all
the Notes not theretofore canceled or delivered to the Trustee for cancellation
shall have become due and payable, or are by their terms to become due and
payable within one year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption,
and the Company shall deposit with the Trustee, in trust, funds sufficient to
pay at maturity or upon redemption of all of the Notes (other than any Notes
that shall have been mutilated, destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
not theretofore canceled or delivered to the Trustee for cancellation, including
principal and Interest due or to become due to such date of maturity or
redemption date, as the case may be, accompanied by a verification report, as to
the sufficiency of the deposited amount, from an independent certified

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accountant or other financial professional satisfactory to the Trustee, and if
the Company shall also pay or cause to be paid all other sums payable hereunder
by the Company, then this Indenture shall cease to be of further effect (except
as to (i) remaining rights of registration of transfer, substitution and
exchange and conversion of Notes, (ii) rights hereunder of Noteholders to
receive payments of principal of and Interest on the Notes and the other rights,
duties and obligations of Noteholders, as beneficiaries hereof with respect to
the amounts, if any, so deposited with the Trustee and (iii) the rights,
obligations and immunities of the Trustee hereunder), and the Trustee, on
written demand of the Company accompanied by an Officer's Certificate and an
Opinion of Counsel as required by Section 17.05 and at the cost and expense of
the Company, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture; the Company, however, hereby agrees to reimburse the
Trustee for any costs or expenses thereafter reasonably and properly incurred by
the Trustee and to compensate the Trustee for any services thereafter reasonably
and properly rendered by the Trustee in connection with this Indenture or the
Notes. The Trustee shall hold in trust money or Common Stock deposited with it
pursuant to this Article 13. It shall apply the deposited money and Common Stock
through the Paying Agent and in accordance with this Indenture to the payment of
principal of and Interest on the Notes. Money and Common Stock so held in trust
are not subject to Article 16.

Section 13.02. Deposited Monies to Be Held in Trust by Trustee.

         Subject to Section 13.04, all monies deposited with the Trustee
pursuant to Section 13.01 shall be held in trust for the sole benefit of the
Noteholders, and such monies shall be applied by the Trustee to the payment,
either directly or through any paying agent (including the Company if acting as
its own paying agent), to the holders of the particular Notes for the payment or
redemption of which such monies have been deposited with the Trustee of all sums
due and to become due thereon for principal and Interest.

Section 13.03. Paying Agent to Repay Monies Held.

         Upon the satisfaction and discharge of this Indenture, all monies then
held by any paying agent of the Notes (other than the Trustee) shall, upon
written request of the Company, be repaid to it or paid to the Trustee, and
thereupon such paying agent shall be released from all further liability with
respect to such monies.

Section 13.04. Return of Unclaimed Monies.

         Subject to the requirements of applicable law, any monies deposited
with or paid to the Trustee for payment of the principal or Interest on Notes
and not applied but remaining unclaimed by the holders of Notes for two years
(or such shorter period of time under applicable escheat law) after the date
upon which the principal of or Interest on such Notes, as the case may be, shall
have become due and payable, shall be repaid to the Company by the Trustee on
demand and all liability of the Trustee shall thereupon cease with respect to
such monies; and the holder of any of the Notes shall thereafter look only to
the Company for any payment that such holder may be entitled to collect unless
an applicable abandoned property law designates another Person.

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<PAGE>

Section 13.05. Reinstatement.

         If the Trustee or the paying agent is unable to apply any money in
accordance with Section 13.02 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Section
13.01 until such time as the Trustee or the paying agent is permitted to apply
all such money in accordance with Section 13.02; provided that, if the Company
makes any payment of Interest on or principal of any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the holders of such Notes to receive such payment from the money held by the
Trustee or paying agent.

                                   ARTICLE 14
         IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS

Section 14.01. Indenture and Notes Solely Corporate Obligations.

         No recourse for the payment of the principal of or Interest on any
Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, shareholder, employee, agent, officer, director or subsidiary, as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the Notes.

                                   ARTICLE 15
                               CONVERSION OF NOTES

Section 15.01. Right to Convert.

         (a) Subject to and upon compliance with the provisions of this
Indenture, prior to the close of business on June 1, 2016, the holder of any
Note shall have the right, at such holder's option, to convert the principal
amount of the Note, or any portion of such principal amount which is a multiple
of $1,000, into fully paid and non-assessable shares of Common Stock (as such
shares shall then be constituted) at the Conversion Rate in effect at such time,
by surrender of the Note so to be converted in whole or in part, together with
any required funds, under the circumstances described in this Section 15.01 and
in the manner provided in Section 15.02. The Notes shall be convertible only
upon the occurrence of one of the following events:

                  (i) prior to June 1, 2011, during any Calendar Quarter
         commencing after June 30, 2004, if the Closing Sale Price of the Common
         Stock exceeds 130% of the then-effective Conversion Price for at least
         20 Trading Days in the 30 consecutive Trading Day period ending on the
         last Trading Day of the immediately preceding Calendar Quarter (it

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         being understood for purposes of this Section 15.01(a)(i) that the
         Conversion Price in effect at the close of business on each of the 30
         consecutive Trading Days should be used);

                  (ii) at any time on or after June 1, 2011, if the Closing Sale
         Price of the Common Stock exceeds 130% of the then-effective Conversion
         Price on any Trading Day;

                  (iii) during any period in which (1) the credit rating
         assigned to the Notes by either Standard & Poor's Rating Services
         ("S&P") or Moody's Investors Service, Inc. ("Moody's"), if either S&P
         or Moody's assigns a credit rating to the Notes, is three or more
         rating subcategories below the initial credit rating assigned by S&P or
         Moody's, as the case may be, or (2) if the Notes are previously
         assigned a credit rating by either S&P or Moody's, the Notes are no
         longer rated by at least one of, or ratings thereof are suspended by
         both, S&P and Moody's.

                  (iv) during the five Business Day period immediately following
         any five consecutive Trading Day period (the "Measurement Period") in
         which the Trading Price per $1,000 principal amount of the Notes for
         each day of such Measurement Period was less than 98% of the product of
         the Closing Sale Price and the number of shares of Common Stock
         issuable upon conversion of $1,000 principal amount of the Notes;
         provided that no conversion pursuant to this clause (iv) may be made if
         on any Trading Day during the Measurement Period, the Closing Sale
         Price is more than 100% but less than 120% of the Conversion Price on
         such Trading Day;

                  (v) if such Note has been called for redemption, at any time
         on or after the date the notice of redemption has been given until the
         close of business on the Business Day immediately preceding the
         redemption date; or

                  (vi) as provided in Section (b) of this Section 15.01.

         The Trustee (or other conversion agent appointed by the Company) shall,
on behalf of the Company, determine on a daily basis during the time period
specified in Sections 15.01(a)(i) and (ii) whether the Notes shall be
convertible as a result of the occurrence of an event specified in clause (i) or
(ii) above and, if the Notes shall be so convertible, the Trustee (or other
conversion agent appointed by the Company) shall promptly deliver to the Company
and the Trustee (if the Trustee is not the conversion agent) written notice
thereof. Whenever the Notes shall become convertible pursuant to this Section
15.01, the Company or, at the Company's request, the Trustee in the name and at
the expense of the Company, shall notify the holders of the event triggering
such convertibility in the manner provided in Section 17.03, and the Company
shall also publicly announce such information and publish it on the Company's
web site. Any notice so given shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice.

         The Trustee (or other conversion agent appointed by the Company) shall
have no obligation to determine the Trading Price under this Section 15.01
unless the Company has requested such a determination; and the Company shall
have no obligation to make such request unless a holder provides it with
reasonable evidence that the Trading Price per $1,000 principal amount of Notes

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<PAGE>

would be less than 98% of the product of the Closing Sale Price and the number
of shares of Common Stock issuable upon conversion of $1,000 principal amount of
Notes. If such evidence is provided, the Company shall instruct the Trustee (or
other conversion agent) to determine the Trading Price of the Notes beginning on
the next Trading Day and on each successive Trading Day until the Trading Price
per $1,000 principal amount of Notes is greater than or equal to 98% of the
product of the Closing Sale Price and the number of shares issuable upon
conversion of $1,000 principal amount of the Notes; provided that the Trustee
shall be under no duty or obligation to make the calculations described in
Section 15.01(a)(iv) hereof or to determine whether the Notes are convertible
pursuant to such section. For the avoidance of doubt, the Company shall make the
calculations described in Section 15.01(a)(iv) using the Trading Price provided
by the Trustee.

         The Trustee shall be entitled at its sole discretion to consult with
the Company and to request the assistance of the Company in connection with the
Trustee's duties and obligations pursuant to Section 15.01(a)(i), (ii) and (iv)
hereof (including without limitation the calculation or determination of the
Conversion Price, the Closing Sale Price and the Trading Price), and the Company
agrees, if requested by the Trustee, to cooperate with, and provide assistance
to, the Trustee in carrying out its duties under this Section 15.01; provided
that nothing herein shall be construed to relieve the Trustee of its duties
pursuant to Sections 15.01(a)(i), (ii) and Section 15.01(a)(iv) hereof.

         (b) In addition, if:

                  (i) (A) the Company distributes to all holders of its Common
         Stock rights or warrants entitling them (for a period expiring within
         45 days of the record date for the determination of the shareholders
         entitled to receive such distribution) to subscribe for or purchase
         shares of Common Stock, at a price per share less than the average of
         the Closing Sale Price for the ten Trading Days immediately preceding,
         but not including, the date such distribution is first publicly
         announced by the Company, or (B) the Company distributes to all holders
         of its Common Stock cash or other assets, debt securities or rights to
         purchase its securities, where the Fair Market Value of such
         distribution per share of Common Stock exceeds 5% of the Closing Sale
         Price on the Trading Day immediately preceding the date such
         distribution is first publicly announced by the Company, then, in
         either case, the Notes may be surrendered for conversion at any time on
         and after the date that the Company gives notice to the holders of such
         distribution, which shall be not less than 20 days prior to the
         Ex-Dividend Time for such distribution, until the earlier of the close
         of business on the Business Day immediately preceding, but not
         including, the Ex-Dividend Time or the date the Company publicly
         announces that such distribution will not take place; provided that
         neither any adjustment to the Conversion Price will be made if the
         holder will otherwise participate in such distribution without
         conversion nor will a holder of a Note have the ability to convert
         pursuant to this Section 15.01(b); or

                  (ii) the Company consolidates with or merges with or into
         another Person or is a party to a binding share exchange or conveys,
         transfers, sells, leases or otherwise disposes of all or substantially
         all of its properties and assets in each case pursuant to which the

                                       66
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         Company's Common Stock is converted into cash, securities or other
         property, then the Notes may be surrendered for conversion at any time
         from and after the date fifteen (15) days prior to the anticipated
         effective date of the transaction and ending on and including the date
         fifteen (15) days after the consummation of the transaction. If such
         transaction constitutes a Designated Event, the Notes may be
         surrendered for conversion until the corresponding Designated Event
         Expiration Time. In such an event, a holder of Notes may elect to
         exercise its option to require the Company to repurchase all or a
         portion of such holder's Notes. The Board of Directors shall determine
         the anticipated effective date of the transaction, and such
         determination shall be conclusive and binding on the holders and shall
         be publicly announced by the Company and posted on its web site not
         later than two Business Days prior to such 15th day. If Notes are not
         surrendered pursuant to this paragraph for conversion, on the effective
         date of the transaction, the right to convert the Notes into Common
         Stock will convert into a right to convert the Notes into the kind and
         amount of cash, securities and other property that a Noteholder would
         have received if such holder had converted such holder's Notes
         immediately prior to the transaction.

         "Ex-Dividend Time" means, with respect to any distribution on shares of
Common Stock, the first date on which the shares of Common Stock trade regular
way on the principal securities market on which the shares of Common Stock are
then traded without the right to receive such distribution.

         (c) A Note in respect of which a holder is electing to exercise its
option to require the Company to repurchase such holder's Notes upon a
Designated Event pursuant to Section 3.05, or at the option of the holder
pursuant to Section 3.06, may be converted only if such holder withdraws its
election in accordance with Section 3.05(c) or Section 3.08, respectively. A
holder of Notes is not entitled to any rights of a holder of Common Stock until
such holder has converted his Notes to Common Stock, and only to the extent such
Notes are deemed to have been converted to Common Stock under this Article 15.

Section 15.02. Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends.

         In order to exercise the conversion privilege with respect to any Note
in certificated form, the Company must receive at the office or agency of the
Company maintained for that purpose or, at the option of such holder, the
Corporate Trust Office, such Note with the original or facsimile of the form
entitled "Conversion Notice" on the reverse thereof, duly completed and manually
signed, together with such Notes duly endorsed for transfer, accompanied by the
funds, if any, required by the penultimate paragraph of this Section 15.02. Such
notice shall also state the name or names (with address or addresses) in which
the certificate or certificates for shares of Common Stock which shall be
issuable on such conversion shall be issued, and shall be accompanied by
transfer or similar taxes, if required pursuant to Section 15.07.

         In order to exercise the conversion privilege with respect to any
interest in a Global Note, the beneficial holder must complete, or cause to be
completed, the appropriate instruction form for conversion pursuant to the
Depositary's book-entry conversion program, deliver, or cause to be delivered,
by book-entry delivery an interest in such Global Note, furnish appropriate

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endorsements and transfer documents if required by the Company or the Trustee or
conversion agent, and pay the funds, if any, required by this Section 15.02 and
any transfer taxes if required pursuant to Section 15.07.

         As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such Noteholder at the office or agency maintained by the Company for such
purpose pursuant to Section 5.02 a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of such Note or portion
thereof as determined by the Company in accordance with the provisions of this
Article 15 and a check or cash in respect of any fractional interest in respect
of a share of Common Stock arising upon such conversion, calculated by the
Company as provided in Section 15.03. In case any Note of a denomination greater
than $1,000 shall be surrendered for partial conversion, and subject to Section
2.03, the Company shall execute and the Trustee shall authenticate and deliver
to the holder of the Note so surrendered, without charge to such holder, a new
Note or Notes in authorized denominations in an aggregate principal amount equal
to the unconverted portion of the surrendered Note.

         Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date (the "Conversion Date") on which the
requirements set forth above in this Section 15.02 have been satisfied as to
such Note (or portion thereof), and the Person in whose name any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become on said date the holder of record of the shares
represented thereby; provided that any such surrender on any date when the stock
transfer books of the Company shall be closed shall constitute the Person in
whose name the certificates are to be issued as the record holder thereof for
all purposes on the next succeeding day on which such stock transfer books are
open, but such conversion shall be at the Conversion Rate in effect on the date
upon which such Note shall be surrendered.

         Any Note or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date to the close of business on the Business Day preceding such interest
payment date shall be accompanied by payment, in immediately available funds or
other funds acceptable to the Company, of an amount equal to the Interest
otherwise payable on such interest payment date on the principal amount being
converted; provided that no such payment need be made (1) if the Company has
specified a redemption date that is after a record date and on or prior to the
next interest payment date, (2) if the Company has specified a Designed Event
Repurchase Date that is after a record date and on or prior to the next interest
payment date or (3) to the extent of any overdue Interest, if any overdue
Interest exists at the time of conversion with respect to such Note. Except as
provided above in this Section 15.02, no payment or other adjustment shall be
made for Interest accrued on any Note converted or for dividends on any shares
issued upon the conversion of such Note as provided in this Article 15.

         Upon the conversion of an interest in a Global Note, the Trustee (or
other conversion agent appointed by the Company), or the Custodian at the
direction of the Trustee (or other conversion agent appointed by the Company),
shall make a notation on such Global Note as to the reduction in the principal

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<PAGE>

amount represented thereby. The Company shall notify the Trustee in writing of
any conversions of Notes effected through any conversion agent other than the
Trustee.

         Upon the conversion of a Note, that portion of the accrued but unpaid
Interest, including accrued Contingent Interest, if any, and Additional
Interest, if any, to the Conversion Date, with respect to the converted Note
shall not be canceled, extinguished or forfeited, but rather shall be deemed to
be paid in full to the holder thereof through delivery of the Common Stock
(together with the cash payment, if any in lieu of fractional shares) in
exchange for the Note being converted pursuant to the provisions hereof, and the
Fair Market Value of such shares of Common Stock (together with any such cash
payment in lieu of fractional shares) shall be treated as issued, to the extent
thereof, first in exchange for and in satisfaction of the Company's obligation
to pay the principal amount of the converted Note, the accrued but unpaid
Interest, including Contingent Interest, if any, and Additional Interest, if
any, through the Conversion Date and the balance, if any, of such Fair Market
Value of such Common Stock (and any such cash payment) shall be treated as
issued in exchange for and in satisfaction of the right to convert the Note
being converted pursuant to the provisions hereof.

         The Company agrees, and by acceptance of a beneficial interest in a
Note each holder and any beneficial owner of a Note shall be deemed to have
agreed, to treat, for United States federal income tax purposes, the Fair Market
Value of the Common Stock received upon a conversion of the Note (together with
any cash payment in lieu of fractional shares) as a contingent payment on the
Note for purposes of Treasury Regulation Section 1.1275-4 or any successor
provision.

Section 15.03. Cash Payments in Lieu of Fractional Shares.

         No fractional shares of Common Stock or scrip certificates representing
fractional shares shall be issued upon conversion of Notes. If more than one
Note shall be surrendered for conversion at one time by the same holder, the
number of full shares that shall be issuable upon conversion shall be computed
on the basis of the aggregate principal amount of the Notes (or specified
portions thereof to the extent permitted hereby) so surrendered. If any
fractional share of stock would be issuable upon the conversion of any Note or
Notes, the Company shall make an adjustment and payment therefor in cash at the
Closing Sale Price on the last Trading Day immediately preceding the Conversion
Date thereof to the holder of Notes. .

Section 15.04. Conversion Rate.

         Each $1,000 principal amount of the Notes shall be convertible into the
number of shares of Common Stock specified in the form of Note (herein called
the "Conversion Rate") attached as Exhibit A hereto, subject to adjustment as
provided in this Article 15.

Section 15.05. Adjustment of Conversion Rate.

         The Conversion Rate shall be adjusted from time to time by the Company
as follows:

                  (a) In case the Company shall hereafter pay a dividend or make
         a distribution to all holders of the outstanding Common Stock in shares
         of Common Stock, the Conversion Rate shall be increased so that the

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<PAGE>

         same shall equal the rate determined by multiplying the Conversion Rate
         in effect at the opening of business on the date following the date
         fixed for the determination of shareholders entitled to receive such
         dividend or other distribution by a fraction,

                           (i) the numerator of which shall be the sum of the
                  number of shares of Common Stock outstanding at the close of
                  business on the date fixed for the determination of
                  shareholders entitled to receive such dividend or other
                  distribution plus the total number of shares of Common Stock
                  constituting such dividend or other distribution; and

                           (ii) the denominator of which shall be the number of
                  shares of Common Stock outstanding at the close of business on
                  the date fixed for such determination,

         such increase to become effective immediately after the opening of
         business on the day following the date fixed for such determination.
         For the purpose of this paragraph (a), the number of shares of Common
         Stock at any time outstanding shall not include shares held in the
         treasury of the Company. The Company will not pay any dividend or make
         any distribution on shares of Common Stock held in the treasury of the
         Company. If any dividend or distribution of the type described in this
         Section 15.05(a) is declared but not so paid or made, the Conversion
         Rate shall again be adjusted to the Conversion Rate that would then be
         in effect if such dividend or distribution had not been declared.

                  (b) In case the Company shall issue rights or warrants to all
         holders of its outstanding shares of Common Stock entitling them (for a
         period expiring within forty-five (45) days after the date fixed for
         determination of shareholders entitled to receive such rights or
         warrants) to subscribe for or purchase shares of Common Stock at a
         price per share less than the average of the Closing Sale Prices of the
         Common Stock for the 10 Trading Days immediately preceding the date
         such distribution is first publicly announced by the Company, the
         Conversion Rate shall be increased so that the same shall equal the
         rate determined by multiplying the Conversion Rate in effect
         immediately prior to the date fixed for determination of shareholders
         entitled to receive such rights or warrants by a fraction,

                           (i) the numerator of which shall be the number of
                  shares of Common Stock outstanding on the date fixed for
                  determination of shareholders entitled to receive such rights
                  or warrants plus the total number of additional shares of
                  Common Stock offered for subscription or purchase, and

                           (ii) the denominator of which shall be the sum of the
                  number of shares of Common Stock outstanding at the close of
                  business on the date fixed for determination of shareholders
                  entitled to receive such rights or warrants plus the number of
                  shares that the aggregate offering price of the total number
                  of shares so offered would purchase at a price equal to the
                  average of the Closing Sale Prices of the Common Stock for the
                  10 Trading Days immediately preceding the date such
                  distribution is first publicly announced by the Company,

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         such adjustment shall be successively made whenever any such rights or
         warrants are issued, and shall become effective immediately after the
         opening of business on the day following the date fixed for
         determination of shareholders entitled to receive such rights or
         warrants. To the extent that shares of Common Stock are not delivered
         after the expiration of such rights or warrants, the Conversion Rate
         shall be readjusted to the Conversion Rate that would then be in effect
         had the adjustments made upon the issuance of such rights or warrants
         been made on the basis of delivery of only the number of shares of
         Common Stock actually delivered. If such rights or warrants are not so
         issued, the Conversion Rate shall again be adjusted to be the
         Conversion Rate that would then be in effect if such date fixed for the
         determination of shareholders entitled to receive such rights or
         warrants had not been fixed. In determining whether any rights or
         warrants entitle the holders to subscribe for or purchase shares of
         Common Stock at a price less than the average of the Closing Sale
         Prices of the Common Stock for the 10 Trading Days immediately
         preceding the date such distribution is first publicly announced by the
         Company, and in determining the aggregate offering price of such shares
         of Common Stock, there shall be taken into account any consideration
         received by the Company for such rights or warrants and any amount
         payable on exercise or conversion thereof, the value of such
         consideration, if other than cash, to be determined by the Board of
         Directors.

         (c) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Conversion Rate in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Rate in effect at the opening of business
on the day following the day upon which such combination becomes effective shall
be proportionately reduced, such increase or reduction, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.

         (d) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Company or evidences of its indebtedness or assets (including securities, but
excluding any rights or warrants referred to in Section 15.05(b), and excluding
any dividend or distribution (x) paid exclusively in cash or (y) referred to in
Section 15.05(a) (any of the foregoing hereinafter in this Section 15.05(d)
called the "Securities")), then, in each such case (unless the Company elects to
reserve such Securities for distribution to the Noteholders upon the conversion
of the Notes so that any such holder converting Notes will receive upon such
conversion, in addition to the shares of Common Stock to which such holder is
entitled, the amount and kind of such Securities which such holder would have
received if such holder had converted its Notes into Common Stock immediately
prior to the Record Date for such distribution of the Securities) the Conversion
Rate shall be increased so that the same shall be equal to the rate determined
by multiplying the Conversion Rate in effect on the Record Date with respect to
such distribution by a fraction,

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<PAGE>

                  (i) the numerator of which shall be the Current Market Price
         on such Record Date; and

                  (ii) the denominator of which shall be the Current Market
         Price on such Record Date less the Fair Market Value (as determined by
         the Board of Directors, whose determination shall be conclusive, and
         described in a resolution of the Board of Directors) on the Record Date
         of the portion of the Securities so distributed applicable to one share
         of Common Stock,

such adjustment to become effective immediately prior to the opening of business
on the day following such Record Date; provided that, if the then Fair Market
Value (as so determined) of the portion of the Securities so distributed
applicable to one share of Common Stock is equal to or greater than the Current
Market Price on the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Noteholder shall have the right to receive
upon conversion the amount of Securities such holder would have received had
such holder converted each Note on the Record Date. If such dividend or
distribution is not so paid or made, the Conversion Rate shall again be adjusted
to be the Conversion Rate that would then be in effect if such dividend or
distribution had not been declared. If the Board of Directors determines the
Fair Market Value of any distribution for purposes of this Section 15.05(d) by
reference to the actual or when issued trading market for any securities, it
must in doing so consider the prices in such market over the same period used in
computing the Current Market Price on the applicable Record Date.
Notwithstanding the foregoing, if the Securities distributed by the Company to
all holders of its Common Stock consist of capital stock of, or similar equity
interests in, a Subsidiary or other business unit, the Conversion Rate shall be
increased so that the same shall be equal to the rate determined by multiplying
the Conversion Rate in effect on the Record Date with respect to such
distribution by a fraction,

                  (i) the numerator of which shall be the sum of (A) the average
         of the Closing Sale Prices of the Common Stock for the ten (10) Trading
         Days commencing on and including the fifth Trading Day after the
         Ex-Dividend Time plus (B) the Fair Market Value of the securities
         distributed in respect of each share of Common Stock for which this
         Section 15.05(d) applies and shall equal the number of securities
         distributed in respect of each share of Common Stock multiplied by the
         average of the closing sale prices of those securities distributed
         (where such closing sale prices are available) for the ten (10) Trading
         Days commencing on and including the fifth Trading Day after the
         Ex-Dividend Time; and

                  (ii) the denominator of which shall be the average of the
         Closing Sale Prices of the Common Stock for the ten (10) Trading Days
         commencing on and including the fifth Trading Day after the Ex-Dividend
         Time,

such adjustment to become effective immediately prior to the opening of business
on the day following such Record Date; provided that the Company may in lieu of
the foregoing adjustment make adequate provision so that each Noteholder shall

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<PAGE>

have the right to receive upon conversion the amount of Securities such holder
would have received had such holder converted each Note on the Record Date with
respect to such distribution.

         Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 15.05 (and no adjustment to the Conversion Rate under
this Section 15.05 will be required) until the occurrence of the earliest
Trigger Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to the Conversion
Rate shall be made under this Section 15.05(d). If any such right or warrant,
including any such existing rights or warrants distributed prior to the date of
this Indenture, are subject to events, upon the occurrence of which such rights
or warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and each
such event shall be deemed to be the date of distribution and record date with
respect to new rights or warrants with such rights (and a termination or
expiration of the existing rights or warrants without exercise by any of the
holders thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event (of the
type described in the preceding sentence) with respect thereto that was counted
for purposes of calculating a distribution amount for which an adjustment to the
Conversion Rate under this Section 15.05 was made, (1) in the case of any such
rights or warrants that shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Rate shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash distribution, equal
to the per share redemption or repurchase price received by a holder or holders
of Common Stock with respect to such rights or warrants (assuming such holder
had retained such rights or warrants), made to all holders of Common Stock as of
the date of such redemption or repurchase, and (2) in the case of such rights or
warrants that shall have expired or been terminated without exercise by any
holders thereof, the Conversion Rate shall be readjusted as if such rights and
warrants had not been issued.

         No adjustment of the Conversion Rate shall be made pursuant to this
Section 15.05(d) in respect of rights or warrants distributed or deemed
distributed on any Trigger Event to the extent that such rights or warrants are
actually distributed, or reserved by the Company for distribution to holders of
Notes upon conversion by such holders of Notes to Common Stock.

         For purposes of this Section 15.05(d) and Sections 15.05(a) and (b),
any dividend or distribution to which this Section 15.05(d) is applicable that
also includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any Conversion Rate adjustment required by this Section 15.05(d) with respect to
such dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further Conversion Rate adjustment required by Sections

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<PAGE>

15.05(a) and 15.05(b) with respect to such dividend or distribution shall then
be made), except (A) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution", "the date fixed for the
determination of shareholders entitled to receive such rights or warrants" and
"the date fixed for such determination" within the meaning of Sections 15.05(a)
and 15.05(b) and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of Section 15.05(a).

         (e) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary), then, in such case, the Conversion Rate shall
be increased so that the same shall equal the rate determined by multiplying the
Conversion Rate in effect immediately prior to the close of business on such
record date by a fraction,

                  (i) the numerator of which shall be the Current Market Price
         on such record date; and

                  (ii) the denominator of which shall be the Current Market
         Price on such record date less the amount of cash so distributed
         applicable to one share of Common Stock,

such adjustment to be effective immediately prior to the opening of business on
the day following the record date; provided that if the portion of the cash so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price on the record date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Noteholder shall have
the right to receive upon conversion the amount of cash such holder would have
received had such holder converted each Note on the record date. If such
dividend or distribution is not so paid or made, the Conversion Rate shall again
be adjusted to be the Conversion Rate that would then be in effect if such
dividend or distribution had not been declared.

         (f) In case a tender or exchange offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and such
tender or exchange offer (as amended upon the expiration thereof) shall require
the payment to shareholders of consideration per share of Common Stock having a
Fair Market Value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of Directors)
that as of the last time (the "Expiration Time") tenders or exchanges may be
made pursuant to such tender or exchange offer (as it may be amended) exceeds
the Closing Sale Price of a share of Common Stock on the Trading Day next

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<PAGE>

succeeding the Expiration Time, the Conversion Rate shall be increased so that
the same shall equal the rate determined by multiplying the Conversion Rate in
effect immediately prior to the Expiration Time by a fraction,

                  (i) the numerator of which shall be the sum of (x) the Fair
         Market Value (determined as aforesaid) of the aggregate consideration
         payable to shareholders based on the acceptance (up to any maximum
         specified in the terms of the tender or exchange offer) of all shares
         validly tendered or exchanged and not withdrawn as of the Expiration
         Time (the shares deemed so accepted up to any such maximum, being
         referred to as the "Purchased Shares") and (y) the product of the
         number of shares of Common Stock outstanding (less any Purchased
         Shares) at the Expiration Time and the Closing Sale Price of a share of
         Common Stock on the Trading Day next succeeding the Expiration Time,
         and

                  (ii) the denominator of which shall be the number of shares of
         Common Stock outstanding (including any tendered or exchanged shares)
         at the Expiration Time multiplied by the Closing Sale Price of a share
         of Common Stock on the Trading Day next succeeding the Expiration Time,

such adjustment to become effective immediately prior to the opening of business
on the day following the Expiration Time. If the Company is obligated to
purchase shares pursuant to any such tender or exchange offer, but the Company
is permanently prevented by applicable law from effecting any such purchases or
all such purchases are rescinded, the Conversion Rate shall again be adjusted to
be the Conversion Rate that would then be in effect if such tender or exchange
offer had not been made.

         (g) For purposes of this Section 15.05, the following terms shall have
the meaning indicated:

                  (i) "Current Market Price" shall mean the average of the daily
         Closing Sale Prices per share of Common Stock for the ten consecutive
         Trading Days ending on the earlier of such date of determination and
         the day before the "ex" date with respect to the issuance,
         distribution, subdivision or combination requiring such computation
         immediately prior to the date in question. For purpose of this
         paragraph, the term "ex" date, (1) when used with respect to any
         issuance or distribution, means the first date on which the Common
         Stock trades, regular way, on the relevant exchange or in the relevant
         market from which the Closing Sale Price was obtained without the right
         to receive such issuance or distribution, and (2) when used with
         respect to any subdivision or combination of shares of Common Stock,
         means the first date on which the Common Stock trades, regular way, on
         such exchange or in such market after the time at which such
         subdivision or combination becomes effective.

                  If another issuance, distribution, subdivision or combination
         to which Section 15.05 applies occurs during the period applicable for
         calculating "Current Market Price" pursuant to the definition in the
         preceding paragraph, "Current Market Price" shall be calculated for
         such period in a manner determined by the Board of Directors to reflect

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<PAGE>

         the impact of such issuance, distribution, subdivision or combination
         on the Closing Sale Price of the Common Stock during such period.

                  (ii) "Fair Market Value" shall mean the amount which a willing
         buyer would pay a willing seller in an arm's-length transaction.

                  (iii) "Record Date" shall mean, with respect to any dividend,
         distribution or other transaction or event in which the holders of
         Common Stock have the right to receive any cash, securities or other
         property or in which the Common Stock (or other applicable security) is
         exchanged for or converted into any combination of cash, securities or
         other property, the date fixed for determination of shareholders
         entitled to receive such cash, securities or other property (whether
         such date is fixed by the Board of Directors or by statute, contract or
         otherwise).

                  (iv) "Trading Day" shall mean (x) if the applicable security
         is quoted on the Nasdaq National Market, a day on which trades may be
         made thereon, (y) if the applicable security is listed or admitted for
         trading on the American Stock Exchange, New York Stock Exchange or
         another national securities exchange, a day on which the American Stock
         Exchange, New York Stock Exchange or another national securities
         exchange is open for business, or (z) if the applicable security is not
         so listed, admitted for trading or quoted, any day other than a
         Saturday or Sunday or a day on which banking institutions in the State
         of New York are authorized or obligated by law or executive order to
         close.

         (h) The Company may make such increases in the Conversion Rate, in
addition to those required by Section 15.05(a), (b), (c), (d), (e) or (f) as the
Board of Directors considers to be advisable to avoid or diminish any income tax
to holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes.

         To the extent permitted by applicable law and Nasdaq Marketplace rules,
the Company from time to time may increase the Conversion Rate by any amount for
any period of time if the period is at least twenty (20) days, the increase is
irrevocable during the period and the Board of Directors shall have made a
determination that such increase would be in the best interests of the Company,
which determination shall be conclusive. Whenever the Conversion Rate is
increased pursuant to the preceding sentence, the Company shall mail to holders
of record of the Notes a notice of the increase at least fifteen (15) days prior
to the date the increased Conversion Rate takes effect, and such notice shall
state the increased Conversion Rate and the period during which it will be in
effect.

         (i) No adjustment in the Conversion Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent (1%) in
such rate; provided that any adjustments that by reason of this Section 15.05(i)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Article 15 shall be made

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<PAGE>

by the Company and shall be made to the nearest cent or to the nearest one-ten
thousandth (1/10,000) of a share, as the case may be. No adjustment need be made
for rights to purchase Common Stock pursuant to a Company plan for reinvestment
of dividends or interest or for any issuance of Common Stock or convertible or
exchangeable securities or rights to purchase Common Stock or convertible or
exchangeable securities. To the extent the Notes become convertible into cash,
assets, property or securities (other than capital stock of the Company), no
adjustment need be made thereafter as to the cash, assets, property or such
securities. Interest will not accrue on any cash into which the Notes are
convertible.

         (j) Whenever the Conversion Rate is adjusted as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other than
the Trustee an Officer's Certificate setting forth the Conversion Rate after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. Unless and until a Responsible Officer of the Trustee shall have
received such Officer's Certificate, the Trustee shall not be deemed to have
knowledge of any adjustment of the Conversion Rate and may assume that the last
Conversion Rate of which it has knowledge is still in effect. Promptly after
delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and
the date on which each adjustment becomes effective and shall mail such notice
of such adjustment of the Conversion Rate to the holder of each Note at his last
address appearing on the Note Register provided for in Section 2.05 of this
Indenture, within twenty (20) days after execution thereof. Failure to deliver
such notice shall not affect the legality or validity of any such adjustment.

         (k) In any case in which this Section 15.05 provides that an adjustment
shall become effective immediately after (1) a record date or Record Date for an
event, (2) the date fixed for the determination of shareholders entitled to
receive a dividend or distribution pursuant to Section 15.05(a), (3) a date
fixed for the determination of shareholders entitled to receive rights or
warrants pursuant to Section 15.05(b), or (4) the Expiration Time for any tender
or exchange offer pursuant to Section 15.05(f), (each a "Determination Date"),
the Company may elect to defer until the occurrence of the applicable Adjustment
Event (as hereinafter defined) (x) issuing to the holder of any Note converted
after such Determination Date and before the occurrence of such Adjustment
Event, the additional shares of Common Stock or other securities issuable upon
such conversion by reason of the adjustment required by such Adjustment Event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (y) paying to such holder any amount in cash in
lieu of any fraction pursuant to Section 15.03. For purposes of this Section
15.05(l), the term "Adjustment Event" shall mean:

                  (i) in any case referred to in clause (1) hereof, the
         occurrence of such event,

                  (ii) in any case referred to in clause (2) hereof, the date
         any such dividend or distribution is paid or made,

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<PAGE>

                  (iii) in any case referred to in clause (3) hereof, the date
         of expiration of such rights or warrants, and

                  (iv) in any case referred to in clause (4) hereof, the date a
         sale or exchange of Common Stock pursuant to such tender or exchange
         offer is consummated and becomes irrevocable.

         (l) For purposes of this Section 15.05, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Company will not pay
any dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.

Section 15.06. Effect of Reclassification, Consolidation, Merger or Sale.

         If any of the following events occur, namely (i) any reclassification
or change of the outstanding shares of Common Stock (other than (x) a
subdivision or combination to which Section 15.05(c) applies) as a result of
which holders of Common Stock shall be entitled to receive stock, other
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock, (ii) any consolidation, merger or combination of
the Company with another Person as a result of which holders of Common Stock
shall be entitled to receive stock, other securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, or (iii)
any sale or conveyance of all or substantially all of the properties and assets
of the Company to any other Person as a result of which holders of Common Stock
shall be entitled to receive stock, other securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, then the
Company or the successor or purchasing Person, as the case may be, shall execute
with the Trustee a supplemental indenture (which shall comply with the Trust
Indenture Act as in force at the date of execution of such supplemental
indenture) providing that each Note shall be convertible into the kind and
amount of shares of stock, other securities or other property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance by a holder of a number of shares of
Common Stock issuable upon conversion of such Notes (assuming, for such
purposes, a sufficient number of authorized shares of Common Stock are available
to convert all such Notes) immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance assuming such holder of
Common Stock did not exercise such holder's rights of election, if any, as to
the kind or amount of stock, other securities or other property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance (provided that, if the kind or amount of
stock, other securities or other property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale or
conveyance is not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised ("Non-electing share"),
then for the purposes of this Section 15.06 the kind and amount of stock, other
securities or other property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
for each non-electing share shall be deemed to be the kind and amount so

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<PAGE>

receivable per share by a plurality of the non-electing shares). Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
15.

         The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at its address appearing on the
Note Register provided for in Section 2.05 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.

         The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.

         If this Section 15.06 applies to any event or occurrence, Section 15.05
shall not apply.

Section 15.07. Taxes on Shares Issued.

         The issue of stock certificates on conversions of Notes shall be made
without charge to the converting Noteholder for any documentary, stamp or
similar issue or transfer tax in respect of the issue thereof. The Company shall
not, however, be required to pay any such tax which may be payable in respect of
any transfer involved in the issue and delivery of stock in any name other than
that of the holder of any Note converted, and the Company shall not be required
to issue or deliver any such stock certificate unless and until the Person or
Persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.

Section 15.08. Reservation of Shares; Shares to Be Fully Paid; Compliance with
Governmental Requirements; Listing of Common Stock.

         The Company shall provide, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares of
Common Stock to provide for the conversion of the Notes from time to time as
such Notes are presented for conversion.

         Before taking any action which would cause an adjustment increasing the
Conversion Rate to an amount that would cause the Conversion Price to be reduced
below the then par value, if any, of the shares of Common Stock issuable upon
conversion of the Notes, the Company will take all corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue shares of such Common Stock at such adjusted
Conversion Rate.

         The Company covenants that all shares of Common Stock which may be
issued upon conversion of Notes will upon issue be fully paid and non-assessable
by the Company and free from all taxes, liens and charges with respect to the
issue thereof.

         The Company covenants that, if any shares of Common Stock to be
provided for the purpose of conversion of Notes hereunder require registration
with or approval of any governmental authority under any federal or state law
before such shares may be validly issued upon conversion, the Company will in
good faith and as expeditiously as possible, to the extent then permitted by the
rules and interpretations of the Commission (or any successor thereto), endeavor
to secure such registration or approval, as the case may be.

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         The Company further covenants that, if at any time the Common Stock
shall be listed on the Nasdaq National Market or any other national securities
exchange or automated quotation system, the Company will, if permitted by the
rules of such exchange or automated quotation system, list and keep listed, so
long as the Common Stock shall be so listed on such exchange or automated
quotation system, all Common Stock issuable upon conversion of the Notes;
provided that if the rules of such exchange or automated quotation system permit
the Company to defer the listing of such Common Stock until the first conversion
of the Notes into Common Stock in accordance with the provisions of this
Indenture, the Company covenants to list such Common Stock issuable upon
conversion of the Notes in accordance with the requirements of such exchange or
automated quotation system at such time.

Section 15.09. Responsibility of Trustee.

         The Trustee and any other conversion agent shall not at any time be
under any duty or responsibility to any Noteholder to determine the Conversion
Rate or whether any facts exist which may require any adjustment of the
Conversion Rate, or with respect to the nature or extent or calculation of any
such adjustment when made, or with respect to the method employed, or herein or
in any supplemental indenture provided to be employed, in making the same. The
Trustee and any other conversion agent shall not be accountable with respect to
the validity or value (or the kind or amount) of any shares of Common Stock, or
of any securities or property, which may at any time be issued or delivered upon
the conversion of any Note; and the Trustee and any other conversion agent make
no representations with respect thereto. Neither the Trustee nor any conversion
agent shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any Note for the purpose of conversion or
to comply with any of the duties, responsibilities or covenants of the Company
contained in this Article 15. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any responsibility
to determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.06 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Noteholders upon the conversion of their Notes after any event referred to in
such Section 15.06 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 8.01, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officer's Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.

Section 15.10. Notice to Holders Prior to Certain Actions.

         In case:

                  (a) the Company shall declare a dividend (or any other
         distribution) on its Common Stock that would require an adjustment in
         the Conversion Rate pursuant to Section 15.05; or

                  (b) the Company shall authorize the granting to the holders of
         all or substantially all of its Common Stock of rights or warrants to
         subscribe for or purchase any share of any class or any other rights or
         warrants; or

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                  (c) of any reclassification or reorganization of the Common
         Stock of the Company (other than a subdivision or combination of its
         outstanding Common Stock, or a change in par value, or from par value
         to no par value, or from no par value to par value), or of any
         consolidation or merger to which the Company is a party and for which
         approval of any shareholders of the Company is required, or of the sale
         or transfer of all or substantially all of the assets of the Company;
         or

                  (d) of the voluntary or involuntary dissolution, liquidation
         or winding-up of the Company;

the Company shall cause to be filed with the Trustee and to be mailed to each
Noteholder at such holder's address appearing on the Note Register provided for
in Section 2.05 of this Indenture, as promptly as possible but in any event at
least ten (10) days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.

Section 15.11. Shareholder Rights Plans.

         Each share of Common Stock issued upon conversion of Notes pursuant to
this Article 15 shall be entitled to receive the appropriate number of rights,
if any, and the certificates representing the Common Stock issued upon such
conversion shall bear such legends, if any, in each case as may be provided by
the terms of any shareholder rights plan adopted by the Company, as the same may
be amended from time to time. If at the time of conversion, however, the rights
have separated from the shares of Common Stock in accordance with the provisions
of the applicable shareholder rights agreement so that the holders of the Notes
would not be entitled to receive any rights in respect of Common Stock issuable
upon conversion of the Notes, the conversion rate will be adjusted in accordance
with Section 15.05(d) treating all rights previously issued as Securities for
purposes of such adjustment, subject to readjustment in the event of the
expiration, termination or redemption of the rights.

                                   ARTICLE 16
                                  SUBORDINATION

Section 16.01. Agreement to Subordinate. The Company agrees, and each Noteholder
by accepting a Note agrees, that the Indebtedness evidenced by the Notes is
subordinated in right of payment, to the extent and in the manner provided in
this Article 16, to the prior payment in full of all Senior Indebtedness of the
Company and that the subordination is for the benefit of and enforceable by the

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<PAGE>

holders of such Senior Indebtedness. The Notes shall in all respects rank pari
passu with all other Senior Subordinated Indebtedness of the Company, senior in
right of payment to all existing and future Subordinated Indebtedness, and only
Indebtedness of the Company that is Senior Indebtedness of the Company shall
rank senior to the Notes in accordance with the provisions set forth herein. For
purposes of this Article 16, the Indebtedness evidenced by the Notes shall be
deemed to include any Additional Interest. All provisions of this Article 16
shall be subject to Section 16.12.

Section 16.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or
distribution of the assets of the Company to creditors upon a total or partial
liquidation or a total or partial dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property:

                  (i) holders of Senior Indebtedness of the Company shall be
         entitled to receive payment in full of such Senior Indebtedness before
         Noteholders shall be entitled to receive any payment of principal of or
         interest (including Contingent Interest) on the Notes; and

                  (ii) until the Senior Indebtedness of the Company is paid in
         full, any payment or distribution to which Noteholders would be
         entitled but for this Article 16 shall be made to holders of such
         Senior Indebtedness as their interests may appear, except that
         Noteholders may receive any Permitted Junior Securities (in the case of
         clauses (i) or (ii).

Section 16.03. Default on Senior Indebtedness.

         (a) The Company may not make any payment or distribution to the Trustee
or any Noteholder in respect of the amounts owed in respect of the Notes and may
not acquire from the Trustee or any Noteholder any Notes for cash or property
(other than Permitted Junior Securities) until all principal and other amounts
owing in respect of Designated Senior Indebtedness have been paid in full if:

                  (i) a default in the payment of any principal or other amounts
         owed in respect of Designated Senior Indebtedness occurs; or

                  (ii) a default, other than a payment default, on Designated
         Senior Indebtedness occurs and is continuing that then permits holders
         of the Designated Senior Indebtedness to accelerate its maturity, or in
         the case of a lease, a default occurs and is continuing that permits
         the lessor to either terminate the lease or require the Company to make
         an irrevocable offer to terminate the lease following an event of
         default under the lease, and the Trustee receives a notice of the
         default (a "Payment Blockage Notice") from the holder or holders of the
         Designated Senior Indebtedness or the trustee, agent or Representative
         acting on behalf of such Designated Senior Indebtedness. If the Trustee
         receives any such Payment Blockage Notice, no subsequent Payment
         Blockage Notice shall be effective for purposes of this Section unless
         and until (A) at least 365 days shall have elapsed since the
         effectiveness of the immediately prior Payment Blockage Notice and (B)
         all scheduled payments of principal, any premium and Additional

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         Interest, and interest (including Contingent Interest) on the Notes
         that have come due have been paid in full in cash. No nonpayment
         default that existed or was continuing on the date of delivery of any
         Payment Blockage Notice to the Trustee shall be, or be made, the basis
         for a subsequent Payment Blockage Notice.

         (b) The Company may and shall resume payments on and distributions in
respect of the Notes:

                  (i) in the case of a default referred to in clause (i) of
         paragraph (a) above, the date upon which the default is cured or
         waived;

                  (ii) in the case of a default referred to in clause (ii) of
         paragraph (a) above, upon the earlier of the date on which such
         nonpayment default is cured or waived or 179 days after the date on
         which the applicable Payment Blockage Notice is received, unless the
         maturity of any Designated Senior Indebtedness has been accelerated, or
         in the case of a lease, 179 days after notice is received if the
         Company has not received notice that the lessor under such lease has
         exercised its right to terminate the lease or require the Company to
         make an irrevocable offer to terminate the lease following an event of
         default under the lease; and

                  (iii) in either case, upon the earlier of the payment in full
         of the obligations outstanding under and the satisfaction and discharge
         or defeasance of Designated Senior Indebtedness,

if this Article 15 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.

In the case of clause (b), upon the earlier of the date on which such nonpayment
default is cured or waived or 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any Designated
Senior Debt has been accelerated.

Section 16.04. Acceleration of Payment of Notes. If payment of the Notes is
accelerated because of an Event of Default, the Company or the Trustee
(provided, that the Trustee shall have received written notice from the Company,
on which notice the Trustee shall be entitled to conclusively rely) shall
promptly notify the holders of the Designated Senior Indebtedness of the Company
(or their Representative) of the acceleration. If any Designated Senior
Indebtedness of the Company is outstanding, the Company may not pay the Notes
(other than Permitted Junior Securities) until five Business Days after such
holders or the Representative of such Designated Senior Indebtedness receive
notice of such acceleration and, thereafter, may pay the Notes only if this
Article 16 otherwise permits payment at that time.

Section 16.05. When Distribution Must Be Paid Over. If a distribution is made to
the Trustee or to the Noteholders that because of this Article 16 should not
have been made to them, the Trustee or the Noteholders who receive the
distribution shall hold it in trust for holders of Senior Indebtedness of the
Company and pay it over to them as their interests may appear.

Section 16.06. Subrogation. After all Senior Indebtedness of the Company is paid
in full and until the Notes are paid in full, Noteholders shall be subrogated to

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<PAGE>

the rights of holders of such Senior Indebtedness to receive distributions
applicable to Senior Indebtedness. A distribution made under this Article 16 to
holders of such Senior Indebtedness which otherwise would have been made to
Noteholders is not, as between the Company and Noteholders, a payment by the
Company on such Senior Indebtedness.

Section 16.07. Relative Rights. This Article 16 defines the relative rights of
Noteholders and holders of Senior Indebtedness of the Company. Nothing in this
Indenture shall:

                  (i) impair, as between the Company and Noteholders, the
         obligation of the Company, which is absolute and unconditional, to pay
         principal of and Interest on the Notes in accordance with their terms;
         or

                  (ii) prevent the Trustee or any Noteholder from exercising its
         available remedies upon a Default, subject to the rights of holders of
         Senior Indebtedness of the Company to receive distributions otherwise
         payable to Noteholders.

Section 16.08. Subordination May Not Be Impaired by Company. No right of any
holder of Senior Indebtedness of the Company to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company, the Trustee or any Noteholders or by its or their failure to
comply with this Indenture.

Section 16.09. Rights of Trustee and Paying Agent. Notwithstanding Section
16.03, the Trustee or Paying Agent may continue to make payments on the Notes
and shall not be charged with knowledge of the existence of facts that would
prohibit the making of any such payments unless, not less than two Business Days
prior to the date of such payment, a Trust Officer of the Trustee receives
written notice that payments may not be made under this Article 16. The Company,
the Note Registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness of the Company may give the notice; provided, however, that, if an
issue of Senior Indebtedness of the Company has a Representative, only the
Representative may give the notice.

         The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Company with the same rights it would have if it were not
Trustee. The Note Registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 16 with respect to any Senior Indebtedness of the Company which may at
any time be held by it, to the same extent as any other holder of such Senior
Indebtedness; and nothing in Article 8 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 16 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 8.06 or any other Section
of this Indenture.

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<PAGE>

Section 16.10. Distribution or Notice to Representative. Whenever a distribution
is to be made or a notice given to holders of Senior Indebtedness of the
Company, the distribution may be made and the notice given to their
Representative (if any).

Section 16.11. Article 16 Not to Prevent Events of Default or Limit Right to
Accelerate. The failure to make a payment pursuant to the Notes by reason of any
provision in this Article 16 shall not be construed as preventing the occurrence
of a Default. Nothing in this Article 16 shall have any effect on the right of
the Noteholders or the Trustee to accelerate the maturity of the Notes.

Section 16.12. Trust Monies Not Subordinated. Notwithstanding anything contained
herein to the contrary, payments from money held in trust under Article 13 by
the Trustee for the payment of principal of and Interest on the Notes shall not
be subordinated to the prior payment of any Senior Indebtedness of the Company
or subject to the restrictions set forth in this Article 16, and none of the
Noteholders shall be obligated to pay over any such amount to the Company or any
holder of Senior Indebtedness of the Company or any other creditor of the
Company.

Section 16.13. Trustee Entitled to Rely. Upon any payment or distribution
pursuant to this Article 16, the Trustee and the Noteholders shall be entitled
to conclusively rely (a) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 16.02
are pending, (b) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the Noteholders
or (c) upon the Representatives for the holders of Senior Indebtedness of the
Company for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of such Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 16. In the event that the Trustee determines, in good faith,
that evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness of the Company to participate in any payment or distribution
pursuant to this Article 16, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article 16, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 8.01 and 8.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article 16.

Section 16.14. Trustee to Effectuate Subordination. Each Noteholder by accepting
a Note authorizes and directs the Trustee on his behalf to take such action as
may be necessary or appropriate to acknowledge or effectuate the subordination
between the Noteholders and the holders of Senior Indebtedness of the Company as
provided in this Article 16 and appoints the Trustee as attorney-in-fact for any
and all such purposes.

Section 16.15. Trustee Not Fiduciary for Holders of Senior Indebtedness. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness of the Company and shall not be liable to any such holders if it

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<PAGE>

shall mistakenly pay over or distribute to Noteholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness of the
Company shall be entitled by virtue of this Article 16 or otherwise.

Section 16.16. Reliance by Noteholders of Senior Indebtedness on Subordination
Provisions. Each Noteholder by accepting a Note acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Indebtedness of the Company,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the Notes, to acquire and continue to hold, or to continue to hold,
such Senior Indebtedness and such holder of such Senior Indebtedness shall be
deemed conclusively to have relied on such subordination provisions in acquiring
and continuing to hold, or in continuing to hold, such Senior Indebtedness.

                                   ARTICLE 17
                            MISCELLANEOUS PROVISIONS

Section 17.01. Provisions Binding on Company's Successors.

         All the covenants, stipulations, promises and agreements by the Company
contained in this Indenture shall bind its successors and assigns whether so
expressed or not.

Section 17.02. Official Acts by Successor Corporation.

         Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee or officer of any Person that shall at the time be the
lawful sole successor of the Company.

Section 17.03. Addresses for Notices, Etc.

         Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Notes on the Company shall be deemed to have been sufficiently given or made,
for all purposes, if given or served by being deposited postage prepaid by
registered or certified mail in a post office letter box or sent by telecopier
transmission addressed as follows: to Headwaters Incorporated, 10653 South
Riverfront Parkway, Suite 300, South Jordan, Utah 84095, Attention: Harlan M.
Hatfield, General Counsel, Telecopier No.: (801) 984-9430. Any notice,
direction, request or demand hereunder to or upon the Trustee shall be deemed to
have been sufficiently given or made, for all purposes, if given or served by
being deposited, postage prepaid, by registered or certified mail in a post
office letter box or sent by telecopier transmission addressed as follows: Wells
Fargo Bank, N.A. Sixth & Marquette; N9303-120 Minneapolis, MN 55479 Attn:
Corporate Trust Services Fax: (612) 667-9825.

         The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.

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<PAGE>

         Any notice or communication mailed to a Noteholder shall be mailed to
such holder by first-class mail, postage prepaid, at his address as it appears
on the Note Register and shall be sufficiently given to such holder if so mailed
within the time prescribed.

         Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.

Section 17.04. Governing Law.

         This Indenture and each Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of laws principles thereof.

Section 17.05. Evidence of Compliance with Conditions Precedent; Certificates to
Trustee.

         Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, and an Opinion of Counsel stating that, in the
opinion of such counsel, all such conditions precedent have been complied with.

         Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.

Section 17.06. Legal Holidays.

         In any case in which the date of maturity of Interest on or principal
of the Notes or the redemption date of any Note will not be a Business Day, then
payment of such Interest on or principal of the Notes need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date of maturity or the redemption date, and no
Interest shall accrue for the period from and after such date.

Section 17.07. Company Responsible for Making Calculations.

         Except as specified in Section 4.01 and in relation to Section
15.01(a)(iv), the Company will be responsible for making all calculations
required under the Notes. The company will make these calculations in good faith
and absent manifest error, these calculations will be final and binding on the
Noteholders. Promptly after the calculation thereof, the Company will provide to
each of the Trustee and the Conversion Agent and Officer's Certificate setting
forth a schedule of its calculations, and each of the Trustee and the Conversion

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Agent is entitled to conclusively rely upon the accuracy of such calculations
without independent verification. The Trustee will forward the Company's
calculations any Holder upon the written request of such Holder.

Section 17.08. Trust Indenture Act.

         This Indenture is hereby made subject to, and shall be governed by, the
provisions of the Trust Indenture Act required to be part of and to govern
indentures qualified under the Trust Indenture Act; provided that this Section
17.08 shall not require this Indenture or the Trustee to be qualified under the
Trust Indenture Act prior to the time such qualification is in fact required
under the terms of the Trust Indenture Act, nor shall it constitute any
admission or acknowledgment by any party to this Indenture that any such
qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof which is required
to be included in an indenture qualified under the Trust Indenture Act, such
required provision shall control.

Section 17.09. No Security Interest Created.

         Nothing in this Indenture or in the Notes, express or implied, shall be
construed to constitute a security interest under the Uniform Commercial Code or
similar legislation, as now or hereafter enacted and in effect, in any
jurisdiction in which property of the Company or its subsidiaries is located.

Section 17.10. Benefits of Indenture.

         Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto, any paying agent, any
authenticating agent, any Note Registrar and their successors hereunder and the
holders of Notes any benefit or any legal or equitable right, remedy or claim
under this Indenture.

Section 17.11. Table of Contents, Headings, Etc.

         The table of contents and the titles and headings of the Articles and
Sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.

Section 17.12. Authenticating Agent.

         The Trustee may appoint an authenticating agent that shall be
authorized to act on its behalf, and subject to its direction, in the
authentication and delivery of Notes in connection with the original issuance
thereof and transfers and exchanges of Notes hereunder, including under Sections
2.04, 2.05, 2.06, 2.07, 3.03, 3.05, 3.06, 3.10 and 15.02, as fully to all
intents and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate and deliver
Notes. For all purposes of this Indenture, the authentication and delivery of
Notes by the authenticating agent shall be deemed to be authentication and
delivery of such Notes "by the Trustee" and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent shall be deemed to

                                       88
<PAGE>

satisfy any requirement hereunder or in the Notes for the Trustee's certificate
of authentication. Such authenticating agent shall at all times be a Person
eligible to serve as trustee hereunder pursuant to Section 8.09.

         Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 17.12, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.

         Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall either promptly appoint a successor authenticating agent or itself
assume the duties and obligations of the former authenticating agent under this
Indenture and, upon such appointment of a successor authenticating agent, if
made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment of
a successor authenticating agent to all holders of Notes as the names and
addresses of such holders appear on the Note Register.

         The Company agrees to pay to the authenticating agent from time to time
such reasonable compensation for its services as shall be agreed upon in writing
between the Company and the authenticating agent.

         The provisions of Sections 8.02, 8.03, 8.04 and 9.03 and this Section
17.12 shall be applicable to any authenticating agent.

Section 17.13. Execution in Counterparts.

         This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.

Section 17.14. Severability.

         In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, then (to the extent permitted by law) the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

                                       89
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed.

                             HEADWATERS INCORPORATED

                             By:  /s/ Steven G. Stewart
                                ---------------------------------------
                             Name: Steven G. Stewart
                                   Title: CFO

                             WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee

                             By:  /s/ Timothy P. Mowdy
                                ---------------------------------------
                             Name:  Timothy P. Mowdy
                             Title:  Assistant Vice President

                                       90
<PAGE>

                                                                       EXHIBIT A

         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
"DEPOSITARY", WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE CERTIFICATES)
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 IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND
ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), 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.

         THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT); (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE
144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR
OTHERWISE TRANSFER THIS NOTE OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE EXCEPT (A) TO HEADWATERS INCORPORATED OR ANY SUBSIDIARY THEREOF, (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (D) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH
CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (3) PRIOR TO SUCH
TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(D) ABOVE), IT WILL FURNISH
TO WELLS FARGO BANK, NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE,
AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE
TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (4) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND, THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF
THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE 2(D) ABOVE OR UPON ANY TRANSFER OF
THIS NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION). THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE
TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTION.

<PAGE>

                             HEADWATERS INCORPORATED

              2-7/8% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2016

CUSIP:  42210PAA0

No. 1 $150,000,000

         Headwaters Incorporated, a corporation duly organized and validly
existing under the laws of the State of Delaware (herein called the "Company",
which term includes any successor corporation under the Indenture referred to on
the reverse hereof), for value received hereby promises to pay to CEDE & CO. or
its registered assigns, the principal sum as set forth on Schedule I hereto on
June 1, 2016, at the office or agency of the Company maintained for that purpose
in accordance with the terms of the Indenture, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts, and to pay interest, semi-annually on June
1 and December 1 of each year, commencing December 1, 2004, on said principal
sum at said office or agency, in like coin or currency, at the rate per annum of
2-7/8%, from and including June 1, 2004 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for to, but excluding the
following Interest Payment Date. Contingent Interest, if any, will accrue for
any six month interest period and be payable to holders of this Note on the
applicable Interest Payment Date to the person in whose name this Note is
registered on the corresponding record date. Except as otherwise provided in the
Indenture, the interest payable on the Note pursuant to the Indenture on any
June 1 or December 1 will be paid to the Person entitled thereto as it appears
in the Note Register at the close of business on the record date, which shall be
the May 15 or November 15 (whether or not a Business Day) next preceding such
June 1 or December 1, as provided in the Indenture; provided that any such
interest not punctually paid or duly provided for shall be payable as provided
in the Indenture. The Company shall pay interest (i) on any Notes in
certificated form by check mailed to the address of the Person entitled thereto
as it appears in the Note Register (provided that the holder of Notes with an
aggregate principal amount in excess of $2,000,000 shall, at the written
election of such holder, be paid by wire transfer of immediately available
funds) or (ii) on any Global Note by wire transfer of immediately available
funds to the account of the Depositary or its nominee.

         The Company promises to pay interest, including Contingent Interest, if
any, and Additional Interest, if any, on overdue principal and (to the extent
that payment of such interest is enforceable under applicable law) interest at
the rate borne by the Notes, plus 1% per annum.

         Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions giving the holder
of this Note the right to convert this Note into Common Stock of the Company on
the terms and subject to the limitations referred to on the reverse hereof and
as more fully specified in the Indenture. Such further provisions shall for all
purposes have the same effect as though fully set forth at this place.

         This Note shall be governed by and construed in accordance with the
laws of the State of New York, without regard to conflicts of laws principles
thereof.

                                      A-2
<PAGE>

         This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.

                                      A-3
<PAGE>

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.

HEADWATERS INCORPORATED

By:_______________________________
Name:
Title:

Attest:

By:_______________________________
Name:
Title:

TRUSTEE'S CERTIFICATE OF AUTHENTICATION

This is one of the Notes described in the within-named Indenture.

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee

By:_______________________________
Authorized Signatory

or

By:_______________________________
As Authenticating Agent
(if different from Trustee)

By:_______________________________
Authorized Signatory

                                      A-4Exhibit 10.88
================================================================================

                            ASSET PURCHASE AGREEMENT

                                  BY AND AMONG

                            HEADWATERS INCORPORATED,

                             ACM BLOCK & BRICK, LP,

                                       AND

                       SOUTHWEST CONCRETE PRODUCTS, L.P.,

                                  JUNE 17, 2004

================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----

ARTICLE 1             SALE OF ASSETS........................................1

         Section 1.1.      Assets to be Sold................................1
         Section 1.2.      Excluded Assets..................................2

ARTICLE 2             ASSUMPTION OF LIABILITIES.............................3

         Section 2.1.      Liabilities Assumed by Buyer.....................3
         Section 2.2.      Liabilities Not Assumed by Buyer.................3

ARTICLE 3             PURCHASE PRICE AND PAYMENT............................4

         Section 3.1.      Purchase Price...................................4
         Section 3.2.      Earn-Out Consideration...........................4
         Section 3.3.      Payment of Purchase Price........................4
         Section 3.4.      EBITDA Calculations..............................5
         Section 3.5.      Purchase Price Allocation........................6

ARTICLE 4             CLOSING...............................................6

         Section 4.1.      Closing..........................................6

ARTICLE 5             REPRESENTATIONS AND WARRANTIES OF SELLER..............6

         Section 5.1.      Organization and Qualification...................6
         Section 5.2.      Authorization and Noncontravention...............7
         Section 5.3.      Certificate of Limited Partnership and
                             Partnership Agreement..........................7
         Section 5.4       Financial Statements.............................7
         Section 5.5       Employees........................................8
         Section 5.6       Absence of Certain Changes.......................9
         Section 5.7       Contracts........................................9
         Section 5.8       Government Contracts............................10
         Section 5.9       Title and Related Matters.......................11
         Section 5.10      Litigation......................................11
         Section 5.11      Tax Matters.....................................11
         Section 5.12      Compliance with Law and Certifications..........12
         Section 5.13      ERISA and Related Matters.......................12
         Section 5.14      Intellectual Property...........................14
         Section 5.15      Customer Warranties.............................16
         Section 5.16      Products Liability..............................16
         Section 5.17      Environmental Matters...........................16
         Section 5.18      Capital Expenditures and Investments............18
         Section 5.19      Dealings with Affiliates........................18

                                      -i-
<PAGE>

         Section 5.20      Insurance.......................................18
         Section 5.21      Accounts Receivable; Inventories................18
         Section 5.22      Brokerage.......................................19
         Section 5.23      Customers and Suppliers.........................19
         Section 5.24      Permits.........................................19
         Section 5.25      Utilities.......................................19
         Section 5.26      Improper and Other Payments.....................19
         Section 5.27      Projections.....................................20
         Section 5.28      Entire Investment in the Business; No Other
                             Business......................................20
         Section 5.29      Operations of Sellers...........................20
         Section 5.30      Tangible Property...............................20
         Section 5.31      Real Property...................................21
         Section 5.32      Bank Accounts; Lockboxes........................22
         Section 5.33      Disclosure......................................22
         Section 5.34      Disclaimer......................................22

ARTICLE 6             REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT...22

         Section 6.1.      Corporate and Partnership Organization, Etc.....23
         Section 6.2       Authorization, Etc..............................23
         Section 6.3       No Violation....................................23

ARTICLE 7             OTHER AGREEMENTS.....................................23

         Section 7.1       Deliveries After Closing........................23
         Section 7.2       Confidentiality.................................23
         Section 7.3       Public Announcements............................24
         Section 7.4       Tax Cooperation.................................24
         Section 7.5       Liability for Taxes.............................25
         Section 7.6       Name Change.....................................25
         Section 7.7       Rights to Refunds...............................26
         Section 7.8       Mail Received After Closing.....................26
         Section 7.9       Prorations......................................26
         Section 7.10      Post-Closing Operation of Business..............26

ARTICLE 8             INDEMNIFICATION......................................26

         Section 8.1       Survival........................................26
         Section 8.2       Limitations.....................................27
         Section 8.3       Indemnification by Seller.......................27
         Section 8.4       Indemnification by Buyer and Parent.............28
         Section 8.5       Third-Party Claims..............................28
         Section 8.6       Recourse for Certain Seller Indemnification
                             Obligations; Purchase Price Adjustment........29

ARTICLE 9.            MISCELLANEOUS PROVISIONS.............................30

         Section 9.1       Amendment and Modification......................30

                                      -ii-
<PAGE>

         Section 9.2       Waiver of Compliance; Consents..................30
         Section 9.3       Certain Definitions.............................30
         Section 9.4       Notices.........................................37
         Section 9.5       Assignment......................................38
         Section 9.6       Governing Law...................................39
         Section 9.7       Counterparts....................................39
         Section 9.8       Headings........................................39
         Section 9.9       Entire Agreement................................39
         Section 9.10      Injunctive Relief...............................39
         Section 9.11      Delays or Omissions.............................39
         Section 9.12      Severability....................................39
         Section 9.13      Expenses........................................40
         Section 9.14      No Third Party Beneficiaries....................40
         Section 9.15      Schedules.......................................40
         Section 9.16      No Strict Construction..........................40
         Section 9.17      Interpretation..................................40
         Section 9.18      Waiver of Jury Trial............................40
         Section 9.19      CONSENT TO JURISDICTION; SERVICE OF PROCESS.....41
         Section 9.20      EXPRESS NEGLIGENCE..............................41

                                     -iii-
<PAGE>

                                    Schedules
Schedule                                                       Responsibility
--------                                                   ---------------------
                                                           ("Seller" or "Buyer")

1.1(d)            Contracts....................................     Seller
1.1(g)            Motor Vehicles...............................     Seller
1.1(i)            Owned Real Property..........................     Seller
1.1(j)            Bank Accounts; Lockboxes.....................     Seller
1.2(a)            Bosnia Assets................................     Seller
1.2(f)            Notes Receivable.............................     Seller
5.2(b)            Authorization and Noncontravention...........     Seller
5.4(a)            Financial Statements.........................     Seller
5.4(c)            Indebtedness.................................     Seller
5.4(d)            Guarantees...................................     Seller
5.5               Employees....................................     Seller
5.6               Absence of Certain Changes...................     Seller
5.7(a)            Other Contracts..............................     Seller
5.7(b)            Breaches.....................................     Seller
5.7(d)            Outstanding Bids or Proposals................     Seller
5.7(d)            Government Contracts.........................     Seller
5.9(a)            Title and Related Matters....................     Seller
5.9(c)            Contracts of Sale or Lease...................     Seller
5.10              Litigation...................................     Seller
5.11(a)           Tax Returns..................................     Seller
5.11(b)           Tax Claims...................................     Seller
5.12(a)           Compliance with Laws.........................     Seller
5.13(a)           ERISA Matters................................     Seller
5.13(f)           Employee Leasing Company Benefit Plans.......     Seller
5.14(a)           Intellectual Property........................     Seller
5.14(b)           Licenses.....................................     Seller
5.14(c)           Liens on Intellectual Property...............     Seller
5.14(d)           Claims.......................................     Seller
5.14(e)           Infringement Matters.........................     Seller
5.14(f)           Other Claims.................................     Seller
5.14(g)           Contested Proceedings........................     Seller
5.15              Warranties...................................     Seller
5.16              Products Liability...........................     Seller
5.17              Environmental Matters........................     Seller
5.18              Capital Expenditures.........................     Seller
5.19              Affiliated Transactions......................     Seller
5.20              Insurance and Claims.........................     Seller
5.21              Accounts Receivable and Inventory............     Seller
5.22              Brokerage Fees...............................     Seller
5.23              Customers and Suppliers......................     Seller
5.24              Permits......................................     Seller
5.25              Utilities....................................     Seller
5.26              Improper and Other Payments..................     Seller
5.29              Operations of Seller.........................     Seller
5.30              Other Tangible Property......................     Seller

                                      -iv-
<PAGE>

5.31(a)           Owned Real Property..........................     Seller
5.31(b)           Title to Owned Real Property.................     Seller
5.31(c)           Rights to Acquired Real Property.............     Seller
5.31(d)           Landlord Consents............................     Seller
5.31(g)           Restricted Use...............................     Seller

                                      -v-
<PAGE>

                                                                  EXECUTION COPY

         This ASSET PURCHASE AGREEMENT, dated as of June 17, 2004 (this
"Agreement"), is by and among HEADWATERS INCORPORATED, a Delaware corporation
("Parent"), ACM BLOCK & BRICK, LP, a Texas limited partnership and an indirect
wholly-owned subsidiary of Parent ("Buyer"), and SOUTHWEST CONCRETE PRODUCTS,
L.P., a Delaware limited partnership (the "Seller").

         The following recitals are true and constitute the basis for this
Agreement:

         A.       Seller is in the business of manufacturing and/or distributing
                  bagged concrete, mortar and concrete products in the State of
                  Texas (collectively, the "Business");

         B.       Buyer wishes to purchase from Seller, for the consideration
                  set forth herein, and Seller wishes to sell to Buyer for such
                  consideration, substantially all of the assets, properties and
                  rights of Seller used in the operation of the Business, upon
                  the terms and conditions of this Agreement; and

         C.       Unless otherwise defined in this Agreement, certain
                  capitalized terms used in this Agreement shall have the
                  meanings ascribed to such terms in Section 9.3 below.

         NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:

                                    ARTICLE 1
                                 SALE OF ASSETS

         Section 1.1 Assets to be Sold. Except as otherwise provided in Section
1.2 below, at the Closing provided for in Section 4.1 below, Seller shall sell,
assign, transfer and deliver to Buyer all of the assets, properties and rights
of Seller of every type and description owned, leased or otherwise licensed by
Seller and used in the Business, including real, personal and mixed, tangible
and intangible, wherever located and whether or not reflected on the books and
records of Seller (all of such assets, properties and rights owned, leased or
otherwise licensed by Seller and used in the Business being hereinafter
sometimes collectively called the "Purchased Assets"), including, without
limitation:

                  (a) those assets, properties and rights reflected on the
Unaudited Financial Statements, including, but not limited to all cash, accounts
receivable, inventory, sales accessories, parts, machinery, equipment, tools,
computer hardware, software and data, furniture, leasehold improvements,
fixtures, supplies, trademarks, tradenames and service marks, telephone and
facsimile numbers, customer files, websites and prepaids, but excluding any such
items disposed of by Seller in the ordinary course of the Business since the
Financial Statement Date;

                  (b) Seller's list of customers and suppliers;

                  (c) Seller's right to use the names "Southwest Concrete
Products" and "Southwest Brick" and all variants thereof;

                                      -1-
<PAGE>

                  (d) all of Seller's interest in and Claims and rights under
Contracts listed in Schedule 1.1(d), including, but not limited to those certain
License Agreements with Flexlock, Novabrick and Versa-Lok, and all Permits held
by Seller;

                  (e) the books and records of Seller relating to the Purchased
Assets and the Assumed Liabilities;

                  (f) Seller's rights in all Seller's Intellectual Property;

                  (g) the motor vehicles and transportation equipment of Seller
listed on Schedule 1.1(g);

                  (h) the goodwill of Seller;

                  (i) the real property described in Schedule 1.1(i) (the "Owned
Real Property") along with all estates, rights, titles and interests of Seller
in and to all plants, storage facilities, buildings, structures, equipment,
works, fixtures (including without limitation, all apparatus, buildings,
appliances, machinery, equipment and other articles of a permanent nature),
construction in progress, improvements, betterments, installations and additions
constructed, erected or located on or attached or affixed to the Owned Real
Property;

                  (j) the bank and lockbox accounts of Seller described in
Schedule 1.1(j) hereto;

                  (k) all Claims for Tax refunds arising from Taxes (other than
Income Taxes) paid by Seller for any period or portion thereof ending on or
before the Closing Date;

                  (l) all other assets, properties, rights, Claims, entitlements
and business of every kind and nature owned or held by Seller or in which Seller
has an interest and used in connection with its block plant and sales facilities
located in Colorado County, Texas, Pasadena, Texas, San Antonio, Texas, and
Houston, Texas, known or unknown, fixed or unfixed, inchoate, accrued, absolute,
contingent or otherwise, whether or not specifically referred to in this
Agreement.

In confirmation of the foregoing sale, assignment and transfer, Seller shall
execute and deliver to Buyer at the Closing a Bill of Sale, Assignment and
Assumption Agreement and Special Warranty Deeds.

         Section 1.2 Excluded Assets. Notwithstanding the foregoing, the
following assets shall not be included among the Purchased Assets and shall be
excluded from the sale and transfer provided in this Agreement:

                  (a) the assets, rights, Contracts and business of Seller's
Bosnia operations described in Schedule 1.2(a) (the "Bosnia Assets");

                  (b) Seller's records relating to its partnership functions
(including, but not limited to, certificate of limited partnership, taxpayer and
other identification numbers, Income Tax records, seals and minute books), other
than those related to the Purchased Assets or the Assumed Liabilities;

                  (c) all rights of Seller under this Agreement and the
instruments and documents executed in connection herewith;

                  (d) all rights and interests of Seller in Sand Express, L.P.;

                  (e) all powers of attorney, safety deposit boxes and Contracts
relating to the engagement by Seller of investment bankers, accountants and
legal counsel;

                                      -2-
<PAGE>

                  (f) those certain notes receivable listed in Schedule 1.2(f)
hereto;

                  (g) the Policies;

                  (h) all Claims for Income Tax refunds arising from any Income
Taxes paid by Seller or its partners for any period or portion thereof; and

                  (i) all rights and obligations of Seller under the Supply and
Noncompete Agreement, dated December 29, 2000, by and between Seller and
Pavestone Company.

The specific assets described in this Section 1.2 are hereinafter sometimes
collectively referred to as the "Excluded Assets."

                                    ARTICLE 2
                            ASSUMPTION OF LIABILITIES

         Section 2.1 Liabilities Assumed by Buyer. In partial payment of the
Purchase Price, Buyer shall, except as otherwise provided in Section 2.2 and
subject to the rights of the Buyer Indemnified Parties and obligations of Seller
under Article 8 of this Agreement, assume, as of the Closing Date, all of the
liabilities and obligations of Seller, known or unknown, fixed or contingent,
whenever and however asserted, but only to the extent arising in connection with
the conduct of the Business or the ownership, use or operation of the Purchased
Assets, including, without limitation:

                  (a) all liabilities of Seller that are or should be reflected
in the Unaudited Financial Statements, including Indebtedness to the holders of
those certain Industrial Revenue Bonds (the "Industrial Revenue Bonds");

                  (b) all liabilities and obligations under Contracts (including
Operating Leases, Real Property Leases and license agreements) to which Seller
is a party or by or to which Seller or its assets, properties or rights are
bound or subject including those that are reflected in Schedules 1.1(d), 1.1(j),
5.5, 5.7(a), 5.9(a), 5.9(c), 5.13(a), 5.14(b), 5.14(e), 5.15, 5.19, or 5.31(a);

                  (c) all liabilities and obligations under all Permits of
Seller, Seller's Intellectual Property and Seller's bank and lock box accounts;
and

                  (d) all Tax Liabilities of Seller other than Seller's or any
of its present or former partner's liabilities for Income Taxes.

The liabilities to be assumed by Buyer pursuant to this Agreement are
hereinafter sometimes collectively referred to as the "Assumed Liabilities."

         Section 2.2 Liabilities Not Assumed by Buyer. Anything in this
Agreement to the contrary notwithstanding, Buyer shall not assume, nor in any
way be liable or responsible for, any of the following liabilities or
obligations of Seller:

                                      -3-
<PAGE>

                  (a) any liability of Seller under any Contract for brokerage
commissions, investment banking or finder's fees or expenses or similar
compensation in connection with the transactions contemplated by this Agreement
payable by Seller to Brown Brothers Harriman & Co. or any other Person;

                  (b) Income Taxes payable by Seller or any of its present or
former partners and fines and penalties with respect thereto;

                  (c) other than as specifically described on Schedule 1.1(d),
any liability or obligation of Seller to its partners or to their respective
Affiliates;

                  (d) Seller's liabilities and obligations under Article 8 of
this Agreement;

                  (e) any liability or obligation of Seller relating to any
severance payment, change of control payment or other payment or obligation any
employee of Seller becomes entitled to as a result of the transaction
contemplated hereby; or

                  (f) any liability or obligation of Seller arising out of, in
connection with or relating to any Excluded Asset and specifically including,
but not limited to, any liability or obligation related to the Bosnia Assets.

The specific liabilities not being assumed by Buyer pursuant to this Agreement
are hereinafter sometimes collectively referred to as the "Retained
Liabilities."

                                    ARTICLE 3
                           PURCHASE PRICE AND PAYMENT

         Section 3.1 Purchase Price. The aggregate purchase price for the
Purchased Assets (the "Purchase Price") shall be an amount equal to the
difference between (a) $35,018,998 (as adjusted pursuant to Section 3.4 below)
and (b) $9,977,776, the aggregate amount of all Indebtedness of Seller to Brown
Brothers Harriman & Co. under the terms of that certain Credit Agreement, dated
as of May 1, 2000, as amended on December 31, 2001, November 30, 2002 and
November 1, 2003 (the "Closing Cash Amount"); and plus (c) the 2005 Earn-Out
Consideration if the conditions set forth in Section 3.2 below are satisfied.

         Section 3.2 Earn-Out Consideration. As soon as practicable after
December 31, 2005, but no later than April 15, 2006, Buyer or Parent shall cause
Buyer's accountants to prepare and deliver to the Seller unaudited financial
statements of Buyer for the 12 months ended December 31, 2005 and a calculation
of the 2005 EBITDA (the "2005 EBITDA Calculations"). Seller shall have the right
to dispute the 2005 EBITDA Calculations (and any items therein) and make any
proposed adjustments thereto as provided in Section 3.4. If the Final 2005
EBITDA (as defined in Section 3.4) equals or exceeds $5,500,000, Buyer shall pay
(and Parent shall cause Buyer to pay) to Seller a cash amount equal to the 2005
Earn-Out Consideration based on the Final 2005 EBITDA within 10 days after the
Final 2005 EBITDA is determined, and interest thereon if payable pursuant to
Section 3.4(b).

         Section 3.3 Payment of Purchase Price. Buyer shall pay (and Parent
shall cause Buyer to pay) the Purchase Price by (a) payment to Seller in the
amount of the Closing Payment (as defined below), (b) the assumption by Buyer of
the Assumed Liabilities and (c) the payment of the 2005 Earn-Out Consideration
as provided herein. The Closing Payment shall be paid by the Buyer as follows:

                                      -4-
<PAGE>

                  (a) at the Closing, Buyer shall pay (and Parent shall cause
Buyer to pay) to Seller by wire transfer in immediately available funds to an
account designated by Seller at least 2 Business Days prior to the due date of
such payment, an amount equal to the Closing Cash Amount minus $5,200,000 (the
"Escrow Amount"). As used herein, the term "Closing Payment" shall mean the
Closing Cash Amount minus the Escrow Amount;

                  (b) at the Closing, Buyer shall pay (and Parent shall cause
Buyer to pay) to JP Morgan Chase Bank, a New York State Bank (the "Escrow
Agent") by wire transfer in immediately available funds the Escrow Amount to an
escrow account to be maintained and administered by the Escrow Agent pursuant to
the terms and conditions of the escrow agreement being executed
contemporaneously herewith (the "Escrow Agreement") as security for any Claims
for indemnification by any Buyer Indemnified Party under Article 8 of this
Agreement;

                  (c) the 2005 Earn-Out Consideration shall be paid in
accordance with Section 3.2; and

                  (d) the Assumed Liabilities shall be assumed by Buyer at the
Closing pursuant to the Bill of Sale, Assignment and Assumption Agreement
referred to in Section 1.1.

         Section 3.4 EBITDA Calculations. (a) The 2005 EBITDA Calculations shall
become final and binding on Seller, Buyer and Parent unless Seller notifies
Buyer in writing within 15 days after delivery to Seller of the 2005 EBITDA
Calculations, and specifies therein the basis and reason for the dispute and the
amount which is in dispute (the "Disputed Matters"). During a period of 10 days
following the delivery of such notice, Buyer and Seller shall attempt to resolve
any Disputed Matters. If, at the end of such 10 day period, Buyer and Seller
shall have failed to reach agreement with respect to the Disputed Matters, the
unresolved Disputed Matters shall be referred to BDO Seidman LLP or if such firm
declines to act in such capacity, any such other firm of independent nationally
recognized accountants chosen and mutually accepted by Buyer and Seller (the
"Independent Accountants") for resolution. Buyer and Seller shall provide the
Independent Accountants with a written statement that includes their respective
calculations of the 2005 EBITDA, and the Independent Accountant's decision as to
the Final 2005 EBITDA shall be communicated to the parties in writing. The
Independent Accountants shall be instructed to use every reasonable effort to
make its determination with respect to the Disputed Matters (the "Independent
Accountant's Final 2005 EBITDA Calculations") within 30 days of the submission
to them of the Disputed Matters. Buyer and Parent shall give the Independent
Accountants, during normal business hours and upon reasonable request, access to
all work papers and procedures used to prepare Buyer's determination of the 2005
EBITDA and to Buyer's and Parent's financial employees and accountants. The
final determination of the 2005 EBITDA (the "Final 2005 EBITDA") shall be the
2005 EBITDA Calculations as adjusted by any Disputed Matters resolved by the
parties and by the Independent Accountant's Final 2005 EBITDA Calculations, if
any. Each of the parties shall bear their own respective costs and expenses
incurred in connection with such determination, and one-half of the fees of the
Independent Accountants shall be paid by Buyer and one-half by Seller. This
provision for the resolution of any Disputed Matters shall be the sole and
exclusive remedy of the parties for resolving any Disputed Matter and shall be
specifically enforceable by the parties and the decision of the Independent
Accountants in accordance with the provisions hereof shall be final and binding
and there shall be no right of appeal therefrom, absent fraud or clear error.

                  (b) In the event that Buyer or Parent does not pay to Seller
the entire amount of the 2005 Earn-Out Consideration when due hereunder, the
unpaid balance payable to Seller shall bear interest at an annual rate equal to
the lesser of (i) the "prime rate" of interest reported from time to time in the
Wall Street Journal, Southwest Edition, in the "Money Rates" section or
equivalent substitute section of such paper (the "Prime Rate") plus 6% or (ii)

                                      -5-
<PAGE>

the maximum non-usurious rate permitted by law, from the due date of such
payment to the date of payment in full.

         Section 3.5 Purchase Price Allocation. For federal income tax purposes,
the amount of the Purchase Price that shall be allocated to each item of
tangible personal property acquired by Buyer from Seller on the Closing Date
shall be the fair market value of each such item of tangible personal property.
Upon request of Seller, Seller shall be provided with a copy of all appraisals
of the fair market value of each item of tangible personal property. This
allocation shall be binding upon Buyer, Parent, and Seller and Buyer and Seller
and their Affiliates shall report, act and file Tax Returns (including, but not
limited to Internal Revenue Service Form 8594) in all respects and for all
purposes consistent with the allocation of the Purchase Price set forth in this
Section 3.5. Neither Parent, Buyer nor Seller shall take any position (whether
in audits, Tax returns or otherwise) which is inconsistent with such allocation
unless required to do so by applicable law..

                                    ARTICLE 4
                                     CLOSING

         Section 4.1 Closing. Unless this Agreement shall have been terminated
or abandoned pursuant to the terms of that certain Closing Letter Agreement,
dated as of the date hereof, by and among Buyer, Seller and Parent (the "Closing
Letter"), the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Buyer's counsel at a time agreed
to by Buyer and Seller on the Business Day upon which all of the conditions set
forth in the Closing Letter to each of Buyer's, Parent's and Seller's
obligations thereunder have been satisfied or waived, but in any event no
earlier than July 1, 2004 (the "Closing Date"). "Business Day" shall mean a day,
other than a Saturday, Sunday or legal holiday on which banks are permitted to
close in the Cities of Dallas and Houston, Texas.

                                    ARTICLE 5
                    REPRESENTATIONS AND WARRANTIES OF SELLER

         As of the date hereof, Seller (subject to the limitations on survival
and liability contained in Article 8 below) represents and warrants to Parent
and Buyer, subject to such exceptions as are specifically disclosed in the
schedules attached hereto supplied by Seller to Parent and Buyer dated as of the
date hereof and certified as complete and correct on the Closing Date by Murphy
Lents in his capacity as a Manager of the General Partner of Seller, as follows;
provided, however, that none of the following representations and warranties of
Seller shall apply to or otherwise include the Excluded Assets or Retained
Liabilities:

         Section 5.1 Organization and Qualification. Seller (a) is duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (b) has all requisite power to carry on its business as it is now
being conducted, and (c) is in good standing and duly qualified to do business
in each jurisdiction in which the transaction of the Business makes such
qualification necessary, except to the extent the failure to be in good standing
or so qualified would not have a Material Adverse Effect. Except for Seller's
investment in the Bosnia Assets, Seller does not own or lease property in any
jurisdiction other than Texas.

                                      -6-
<PAGE>

         Section 5.2 Authorization and Noncontravention.

                  (a) Seller has full partnership power and authority to enter
into this Agreement and the agreements contemplated hereby being executed and
delivered by Seller on the date hereof and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and all other agreements and transactions contemplated hereby being
executed and delivered by Seller on the date hereof have been duly authorized by
the general and limited partners of Seller and no other partnership proceedings
on either of their part are necessary to authorize this Agreement and the
agreements contemplated hereby being executed and delivered by Seller on the
date hereof and the transactions contemplated hereby and thereby. This Agreement
and all other agreements contemplated hereby being executed and delivered by
Seller on the date hereof each constitutes a legal, valid and binding obligation
of Seller enforceable against Seller in accordance with its terms, except where
as enforceability may be limited by bankruptcy, reorganization, moratorium and
similar laws at the time in effect affecting the rights of creditors generally.

                  (b) Except as set forth in Schedule 5.2(b) hereto, the
execution, delivery and performance by Seller of this Agreement, and all other
agreements contemplated hereby to be executed and delivered by Seller on the
date hereof, and the fulfillment of and compliance with the respective terms
hereof and thereof by Seller, do not and will not (a) conflict with or result in
a breach of the terms, conditions or provisions of, (b) constitute a default or
event of default under (whether with or without due notice, the passage of time
or both), (c) result in the creation of any Lien upon Seller's assets pursuant
to, (d) give any third party the right to modify, terminate or accelerate any
obligation under, (e) result in a violation of, or (f) require any
authorization, consent, approval, exemption or other action by, notice to, or
filing with any third party or Authority pursuant to, the Certificate of Limited
Partnership or Partnership Agreement of Seller or any applicable Regulation
(including, without limitation, approvals pursuant to the Hart-Scott-Rodino
Act), Order or Contract to which Seller or its respective properties are
subject, except for any of the same that would not result in a Material Adverse
Effect. Seller has complied with all applicable Regulations and Orders in
connection with the execution, delivery and performance of this Agreement and
the agreements contemplated hereby to be executed by Seller on the date hereof.

         Section 5.3. Certificate of Limited Partnership and Partnership
Agreement. The copies of the Certificate of Limited Partnership and Partnership
Agreement of Seller, and all amendments to each through the date hereof, which
have been delivered or made available to Buyer are true, correct and complete
and in effect as of the date hereof.

         Section 5.4 Financial Statements.

                  (a) Attached as Schedule 5.4(a) hereto are (i) audited
year-end balance sheets of Seller as of December 31, 2001, 2002 and 2003 and the
related audited statements of operations, partners' capital and cash flows of
Seller for each of the fiscal years then ended (such financial statements,
including the notes thereto, the "Audited Financial Statements") and (ii) an
unaudited balance sheet of Seller as of April 30, 2004 and the related unaudited
statements of operations, partners' capital and cash flows of Seller for the
four months ended April 30, 2004 (such financial statements, including the notes
thereto, the "Unaudited Financial Statements"). The items referred to in
subsections (i) and (ii) are sometimes hereinafter referred to collectively as
the "Financial Statements." The Audited Financial Statements present fairly, in
all material respects, the financial position of Seller at December 31, 2001,
2002 and 2003, respectively, and the results of its operations and cash flows
for the years then ended in conformity with GAAP applied on a consistent basis.

                                      -7-
<PAGE>

The Unaudited Financial Statements were prepared from the books and records of
Seller and present fairly, in all material respects, Seller's financial position
at April 30, 2004, and the results of its operations and cash flows for the four
months then ended in conformity with GAAP applied on a consistent basis, subject
to normal year-end adjustments, which are not material in amount. Seller does
not utilize any percentage of completion or similar method of accounting for
revenue, income or cost recognition purposes. Except as described in Schedule
5.4(a) hereto or reflected in the Financial Statements (including the notes
thereto), Seller has not in the past 5 fiscal years written off any research and
development costs, incurred any reorganization, restructuring or similar costs
or changed the book value of any assets, liabilities or goodwill of any business
acquired by Seller. Seller has no obligation to make any additional Investments
in any other Person. All properties used in the Business during the period
covered by the Financial Statements, including the Purchased Assets and all
liabilities of the Business, are reflected in the Financial Statements in
accordance with and to the extent required by GAAP. The date of April 30, 2004,
is herein referred to as the "Financial Statement Date."

                  (b) No general partner of Seller and no officer or management
employee of Seller or its general partner has ever refused to execute any
certification, of any nature whatsoever, required by law, or required by any
accounting, banking, financial or legal counsel in connection with the Financial
Statements.

                  (c) Except as set forth in Schedule 5.4(c) hereto, in the
other Schedules hereto or in the Unaudited Financial Statements, Seller has no
Indebtedness, obligation or liability required to be reflected in the Unaudited
Financial Statements in accordance with GAAP, other than Indebtedness,
liabilities and obligations that have arisen after the Financial Statement Date
in the ordinary course of the Business (none of which is a liability resulting
from breach of a Contract, Regulation, Order or warranty, tort, infringement or
Claim) and the Retained Liabilities.

                  (d) Except as set forth in Schedule 5.4(d) hereto, there is no
Person that has Guaranteed, or provided any financial accommodation of, any
Indebtedness, obligation or liability of Seller or for the benefit of Seller for
the periods covered by the Financial Statements.

         Section 5.5 Employees. Since January 1, 1999, Seller has not employed
any Person. Schedule 5.5 sets forth the name and current base hourly rates for
each of Seller's leased employees (including Seller's partners) and consultants,
exclusive of the amount of the discretionary bonuses and the amount of
commissions payable, other than the percentage of sales or other basis on which
commissions are payable, and Seller's Contracts containing compensation terms
for Seller's sales agents. To the Knowledge of Seller, Seller has conducted its
business in compliance with all Regulations and Orders affecting employment and
employment practices applicable to Seller, including the payment of wages and
hours. Seller is not a party to any collective bargaining agreements and, since
January 1, 1999, there have been no strikes, work stoppages nor any demands for
collective bargaining by any union, labor organization or other Person
representing Seller's employees or, to Seller's Knowledge, Seller's leased
employees. To Seller's Knowledge, there is no dispute or controversy with any
union or other organization of Seller's employees and no arbitration proceedings
thereunder are pending or, to the Knowledge of Seller, threatened involving a
dispute or controversy affecting Seller and its employees or leased employees.
Except as set forth in Schedule 5.5, at the Closing, Seller will not have any
liability or obligation to any of its current or former employees, leased
employees, officers or directors (including unaccrued year end bonuses) other
than for the payment of salaries and payments for leased employees to be paid in
the ordinary course of the Business. Seller has not taken any action, or failed
to take any action, that has resulted in or is expected by Seller to result in
any Claim by an employee or leased employee against Seller that such Person has
been constructively terminated by Seller or due severance payments from Seller.
Upon the consummation of the transactions contemplated hereby, Seller will not
have any "change in control," bonus or other similar obligations arising from a
"change of control" to any of its employees, leased employees, consultants or
other Persons performing services for Seller that are not Retained Liabilities.

                                      -8-
<PAGE>

         Section 5.6 Absence of Certain Changes. Except as set forth on Schedule
5.6, since the Financial Statement Date, and as of the date hereof, there has
not been any: (a) Material Adverse Change; (b) damage, destruction or loss,
whether covered by insurance or not, having a cost of $10,000 or more, with
regard to the Purchased Assets or the Business; (c) increase in the leased
employee payments payable to each officer, general partner, employee, leased
employee, consultant or agent of Seller or any increase by Seller in any
benefits under any bonus, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with any of its officers, partners,
employees, leased employees or any Affiliate of Seller; (d) except as required
by GAAP or applicable Tax laws, change by Seller in accounting methods or
principles or any write-down, write-up or revaluation of any assets of Seller,
except depreciation accounted for in the ordinary course of the Business and
write downs of inventory which reflect the lower of cost or market and which are
in the ordinary course of the Business and in accordance with GAAP applied on a
consistent basis; (e) failure by Seller to pay and discharge current liabilities
in accordance with past practice or agreement by Seller with any Person to
extend the payment of any current liability; (f) sale, assignment, transfer,
lease, license or other placement of a Lien on any of Seller's tangible assets,
except in the ordinary course of the Business consistent with past practice and
Permitted Liens, or cancellation or waiver by Seller of any material debts,
rights or Claims; (g) sale, assignment, transfer, lease, license or other
placement of a Lien on any Seller Intellectual Property or other intangible
assets, disclosure by Seller of any material confidential information relating
to the Business to any Person (other than to Buyer, Parent and their
representatives and to the representatives of Seller and to the partners of
Seller and their Affiliates and their respective representatives) or abandonment
by Seller of any material Intellectual Property used in the Business; (h)
charitable contributions or pledges or commitments to make or pledge by Seller
exceeding in the aggregate $10,000; or (i) agreements by Seller, whether orally
or in writing, to do any of the foregoing.

         Section 5.7 Contracts.

                  (a) Except as set forth in Schedules 1.1(d), 1.1(j), 5.5,
5.7(a), 5.9(a), 5.9(c), 5.13(a), 5.14(b), 5.14(e), 5.15, 5.19, 5.20 or 5.31(a)
hereto, Seller is not a party to any (i) Contract involving any Employee Benefit
Plan, or any Contract with any employee leasing company, labor union or labor
group; (ii) Contract relating to loans to officers or partners of Seller or any
of their Affiliates; (iii) Contract relating to the borrowing of money or the
mortgaging, pledging or otherwise placing a Lien on any asset of Seller; (iv)
Guarantee of any obligation; (v) Contract under which Seller has advanced or
loaned, or agreed to advance or loan, any Person amounts in the aggregate
exceeding $10,000; (vi) Contract pursuant to which Seller permits any third
party to hold or operate any property, real or personal, owned or controlled by
Seller; (vii) warranty Contract with respect to the services rendered or the
products sold or leased containing any material terms other than Seller's
standard warranty terms described in Schedule 5.15; (viii) Contract or
non-competition provision in any Contract prohibiting Seller from freely
engaging in the Business or competing anywhere in the world; (ix) Contract for
the purchase, acquisition or supply of inventory and other property and assets,
whether for resale or otherwise in excess of $25,000; (x) Contract with an
independent agent, broker, dealer or distributor which provides for annual
payments in excess of $10,000; (xi) employment, consulting, sales,
distributorship, depository, management, commissions, advertising or marketing
Contract; (xii) Contract providing for "take or pay" or similar unconditional
purchase or payment obligations; (xiii) Contract with Persons with which,
directly or indirectly to the Knowledge of Seller, a partner of Seller also has
a Contract; (xiv) Contract that requires the consent of any other Person, or
contains any provision that would result in a modification of any rights or
obligation of any other Person thereunder upon a change in control of Seller or
which would provide any other Person any remedy (including rescission or
liquidated damages), in connection with the execution, delivery or performance
of this Agreement and the agreements contemplated hereby and the consummation of
the transactions contemplated hereby and thereby; (xv) nondisclosure or
confidentiality Contract; (xvi) power of attorney, agency or other similar
Contract; (xvii) copyright license, royalty agreement or similar Contract;
(xviii) Contract for the sale of any of Seller's assets or properties other than

                                      -9-
<PAGE>

in the ordinary course of the Business or for the grant to any Person of any
preferential rights to purchase any of Seller's assets or properties; (xix)
joint venture agreement relating to the Purchased Assets or the Business or by
which any of the Purchased Assets are bound or subject; (xx) Contract under
which Seller agrees to indemnify any Person or to share the Tax liability of any
Person; (xxi) Contract providing Seller or any other Person with the exclusive
right to be a provider of specified goods or services; (xxii) Contract
containing any "most favored nation" type provision; (xxiii) to the Seller's
Knowledge, any other Contract that is required to be listed, but not listed in
either Schedule 1.1(d), 1.1(j), 5.5, 5.7(a), 5.9(a), 5.9(c), 5.13(a), 5.14(b),
5.14(e), 5.15, 5.19, 5.20 or 5.31(a) hereto or (xxiv) any other Contract
requiring the receipt or expenditure by Seller of $10,000 or more in any
12-month period.

                  (b) Except as set forth in Schedule 5.7(b), to the Knowledge
of Seller, (i) Seller has performed in all material respects all obligations
required to be performed by it and is not in default in any respect under or in
breach of nor in receipt of any Claim of default or breach under any Contract to
which Seller is subject (including without limitation all performance bonds,
warranty obligations or otherwise); (ii) no event has occurred which with the
passage of time or the giving of notice or both would result in a default,
breach or event of non-compliance by Seller under any Contract to which Seller
is subject (including without limitation all performance bonds, warranty
obligations or otherwise); and (iii) there exists no breach or anticipated
breach by the other party to any such Contract to which Seller is a party.

                  (c) Seller has delivered or made available to Buyer true and
complete copies of all the Contracts listed in the schedules to this Agreement.

                  (d) Schedule 5.7(d) hereto sets forth a complete and accurate
list of each outstanding bid or proposal for business submitted by Seller in
excess of $100,000.

         Section 5.8 Government Contracts.

                  (a) Except as set forth in Schedule 5.8, Seller is not a party
to any Government Contract.

                  (b) (i) Neither Seller nor any of its management employees,
authorized representatives, or general or limited partners is (or during the
last five (5) years has been) under administrative, civil or criminal
investigation or indictment by any Governmental Entity with respect to any
alleged irregularity, misstatement or omission arising under or relating to any
Government Contract; and (ii) during the last five (5) years, Seller has not
conducted or initiated any internal investigation or made a voluntary disclosure
to any Governmental Entity related to the same.

                  (c) To the Knowledge of Seller, there exist (i) no outstanding
Claims against Seller, either by a Governmental Entity or by any prime
contractor, subcontractor, vendor or other third party, arising under or
relating to any Government Contract; and (ii) no disputes between Seller and the
United States government under the Contract Disputes Act or any other federal
Regulation or between Seller and any prime contractor, subcontractor or vendor
arising under or relating to any Government Contract.

                  (d) Neither Seller nor any of its officers, management
employees general or limited partners is (or during the last five (5) years has
been) suspended or debarred from doing business with the United States
government or other Authority or is (or during such period was) the subject to a
finding of nonresponsibility or ineligibility for United States government
contracting.

                                      -10-
<PAGE>

         Section 5.9 Title and Related Matters.

                  (a) Except as set forth in Schedule 5.9(a) hereto and except
for assets of Seller sold, used or disposed of in the ordinary course of the
Business since the Financial Statement Date, (i) Seller has indefeasible title
to all real and personal, tangible and intangible, property and other assets
reflected in the Unaudited Financial Statements as owned by Seller or acquired
by Seller after the Financial Statement Date, including the Purchased Assets,
free and clear of all Liens, except Permitted Liens and (ii) all assets set
forth on the Unaudited Financial Statements or acquired by Seller after the
Financial Statement Date are free from obvious defects, have been maintained in
accordance with Seller's customary practices, are in good operating condition
and repair (subject to normal wear and tear), and suitable for the purposes for
which they presently are used and presently are proposed to be used. Schedule
5.9(a) hereto sets forth a complete and accurate summary of all Operating Leases
of tangible personal property to which Seller is a party that have annual rental
payments in excess of $5,000, describing the expiration date of such lease, the
name of the lessor, the annual rental payment and whether a consent is required
from the lessor to consummate the transactions contemplated hereby.

                  (b) All Operating Leases of Seller are in full force and
effect, and valid and enforceable in accordance with their respective terms.
Seller has not received any written notice of any event of default or event
which constitutes or would constitute (with notice or lapse of time or both) a
default by Seller or any other Person under any Operating Lease of Seller. All
rent and other amounts due and payable on or prior to the date of this Agreement
with respect to Seller's Operating Leases have been paid. Seller has not
received any written notice that the landlord with respect to any Real Property
Lease would refuse to renew such lease upon expiration of the period thereof
upon substantially the same terms, except for rent increases consistent with
past experience or market rentals.

                  (c) None of the Purchased Assets is subject to any Contracts
of sale or lease except as set forth in Schedule 5.9(c), or Contracts for the
sale of inventory in the ordinary and regular course of the Business.

                  (d) Except as set forth in Schedule 5.29, there has not been
since the Financial Statement Date any sale, lease, or any other disposition or
distribution by Seller of any of its assets or properties now owned by it,
except transactions in the ordinary and regular course of the Business.

         Section 5.10 Litigation. Schedule 5.10 hereto sets forth a true and
complete list of all Claims and Orders involving Seller since January 1, 1999
for which Seller has received written notice thereof. Except as set forth in
Schedule 5.10 hereto, to the Seller's Knowledge, there is no Claim or Order
threatened against Seller.

         Section 5.11 Tax Matters.

                  (a) Except as set forth on Schedule 5.11(a), Seller has filed
all Tax Returns required to be filed under applicable Regulations. Except as set
forth in Schedule 5.11(a), Seller has not requested any extension of time within
which to file or send any Tax Return not yet filed. All Taxes applicable for all
periods prior to the date hereof have been paid or adequately reserved against
on the Unaudited Financial Statements in accordance with GAAP. To the Seller's
Knowledge, all Taxes which are required to be withheld or collected by Seller
have been duly withheld or collected and, to the extent required, have been paid
to the proper Taxing Authority or properly segregated or deposited as required
by applicable law and all Forms W-2 and 1099 required with respect to such
withholdings have been properly completed and timely filed. There are no Liens
for Taxes upon any property or assets of Seller, except for Liens for Taxes not
yet due and payable. Seller has not received any Claim by a Taxing Authority in

                                      -11-
<PAGE>

a jurisdiction where Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. Seller has not been a member of an
affiliated group filing consolidated or combined federal, state, local or
foreign income tax returns or has any liability for the Taxes of any other
Person under Treasury Regulation ss. 1.1502-6 (or any similar provision of
state, local or foreign law), as a transferee or successor, by contract, or
otherwise. To the Seller's Knowledge, the basis of any depreciable assets, and
the methods used in determining allowable depreciation (including cost
recovery), of Seller, are correct and in compliance with the Code.

                  (b) Except as described in Schedule 5.11(b), (i) Seller has
not received any written notice from any Taxing Authority that there is
currently pending any issue by any Taxing Authority in connection with any Tax
Returns filed by Seller, (ii) no material issues have been raised with Seller in
any examination by any Taxing Authority with respect to Seller which, by
application of similar principles, is reasonably expected by Seller to result in
a proposed deficiency for any other period not so examined and (iii) to the
Knowledge of Seller, there are no unresolved issues or unpaid deficiencies
relating to such examinations.

                  (c) Seller is not a party to any Tax sharing agreement.

                  (d) Schedule 5.11(a) hereto lists all Tax Returns filed by
Seller for any period ending on or after December 31, 1994, that have been
audited and those that are the subject of audit.

                  (e) Seller is taxed as a partnership for Income Tax purposes
and Seller has not at any time made an election to be taxed as a corporation
under the Code.

         Section 5.12 Compliance with Law and Certifications.

                  (a) Except as set forth on Schedule 5.12(a) and except with
respect to Environmental Laws and Environmental Permits, Seller has operated in
compliance in all material respects with regard to its operations, practices,
real property, plants, structures, machinery, equipment and other property,
employees, leased employees, products and services and all other aspects of the
Business, with all applicable Regulations and Orders. There are no Claims
pending of which Seller has received notice, or to Seller's Knowledge
threatened, nor has Seller received any written notice, regarding any violations
of any Regulations or Orders enforced by any Authority claiming jurisdiction
over Seller.

                  (b) Except as set forth on Schedule 5.12(a) and except with
respect to Environmental Laws and Environmental Permits, Seller holds all
material registrations, accreditations and other certifications required for the
conduct of the Business by any Authority or trade group and Seller has not
received any notice alleging that it has failed to hold or operate in compliance
with any such material registration, accreditation or other certification.

         Section 5.13 ERISA and Related Matters.

                  (a) Plans. Except as set forth in Schedule 5.5 and Schedule
5.13(a), pursuant to Contracts, if any, listed on the other Schedules hereto,
and any Employee Leasing Company Benefit Plan, Seller does not and has never
maintained or sponsored any domestic and foreign Employee Benefit Plan. The term
"Employee Benefit Plan," means, as to any Person, any of the following
maintained or sponsored by such Person: (i) an "employee benefit plan" within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder ("ERISA"); (ii)
incentive, fringe benefit or "voluntary employees' beneficiary associations"
("VEBAs") under Section 501(c)(9) of the Code, profit-sharing, pension or

                                      -12-
<PAGE>

retirement, deferred compensation, medical, life insurance, disability,
accident, salary continuation, severance, accrued leave, vacation, sick pay,
sick leave, supplemental retirement and unemployment benefit plans, programs,
arrangements, commitments and/or practices (whether or not insured); and (iii)
employment, consulting, non-compete, termination, and severance contracts or
agreements; in each case for active, retired or former employees, leased
employees or partners of such Person, whether or not any such plans, programs,
arrangements, commitments, contracts, agreements and/or practices (referred to
in (i), (ii) or (iii) above) are in writing or are otherwise exempt from the
provisions of ERISA, that have been established, maintained or contributed to
(or with respect to which an obligation to contribute has been undertaken) or
with respect to which any potential liability is borne by such Person
(including, for this purpose and for the purpose of all of the representations
in this Section 5.13, any predecessors to such Person and all employers (whether
or not incorporated) that would be treated together with such Person and/or its
general or limited partners as a single employer (1) within the meaning of
Section 414 of the Code, or (2) as a result of such Person and/or its general or
limited partners being or having been a general partner of any such employer),
since September 2, 1974. Each Employee Benefit Plan that has been offered or
provided by either Administaff, Advantech or any other Person through which
Seller currently leases or has leased employees (collectively, an "Employee
Leasing Company") and is applicable to such leased employees is referred to
herein as an "Employee Leasing Company Benefit Plan."

                  (b) Status of Employee Leasing Company Benefit Plans. To
Seller's Knowledge: (i) each Employee Leasing Company Benefit Plan (including
any related trusts) complies in all material respects in form, and has been
maintained and operated in substantial compliance with, the requirements of all
applicable laws, including, without limitation, ERISA and the Code and with such
plans' terms; (ii) no Employee Leasing Company Benefit Plan is or has ever been
offered or provided to any employee leased by Seller which is an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) subject to
Section 412 of the Code or Section 302 or Title IV of ERISA or which is a
"multi-employer plan" (as defined in Section 4001(a)(3) of ERISA); (iii) each
Employee Leasing Company Benefit Plan intended to be qualified under Section
401(a) of the Code has, as currently in effect, been determined to be so
qualified by the Internal Revenue Service and each trust established in
connection with any Employee Leasing Company Benefit Plan that is intended to be
exempt from Federal income taxation under Section 501(a) of the Code has, as
currently in effect, been determined to be so exempt by the Internal Revenue
Service and no event has occurred and no condition or circumstance has existed
that resulted or is likely to result in the revocation of any such determination
or that could adversely affect the qualified status of any such Employee Leasing
Company Benefit Plan; (iv) there are no Claims pending or threatened against
Seller, or anticipated or expected to be asserted against Seller with respect to
any Employee Leasing Company Benefit Plan or the assets of any such plan (other
than routine claims for benefits and appeals of denied routine claims); (v) full
payment has been timely made of all amounts which any Employee Leasing Company
is required, under applicable law or under any Employee Leasing Company Benefit
Plan or any agreement relating to any Employee Leasing Company Benefit Plan to
which any Employee Leasing Company is a party, to have paid as contributions or
premiums thereto as of the last day of the most recent fiscal year of such
Employee Leasing Company Benefit Plan ended prior to the date hereof; (vi) no
Employee Leasing Company Benefit Plan provides post-employment or retiree
health, life insurance and/or other welfare benefits having unfunded liabilities
or has any obligation to provide any such benefits to any retired or former
employees, leased employees or active employees following such employees'
retirement or termination of service; and (vii) no Employee Leasing Company has
any commitment, intention or understanding to create, modify or terminate any of
its Employee Leasing Company Benefit Plans that are or have ever been offered or
provided to any employee leased by Seller.

                  (c) Liabilities. Except pursuant to Seller's Contracts with
the Employee Leasing Companies, Seller has no liability for contributions,
withholding or otherwise to any Employee Leasing Company for any liability or
obligation under any Employee Leasing Company Benefit Plan.

                                      -13-
<PAGE>

                  (d) Triggering Events. To Seller's Knowledge, the execution of
this Agreement and the consummation of the transactions contemplated hereby, do
not constitute a triggering event under any Employee Benefit Plan, policy,
arrangement, statement, commitment or agreement of any Employee Leasing Company,
whether or not legally enforceable, which (either alone or upon the occurrence
of any additional or subsequent event) will or may result in any payment
(whether of severance pay or otherwise), "parachute payment" (as such term is
defined in Section 280G of the Code), acceleration, vesting or increase in
benefits to any current or former employee, or leased employee or director or
partner of Seller. To Seller's Knowledge, no Employee Leasing Company Benefit
Plan provides for the payment by Seller of severance, termination, change in
control or similar-type payments or benefits.

                  (e) Classification. To Seller's Knowledge, Seller and any
Employee Leasing Company have classified all individuals who perform services
for them correctly under each Employee Leasing Company Benefit Plan, ERISA, the
Code and other applicable law as common law employees, independent contractors
or leased employees.

                  (f) Documents. Seller has requested each Employee Leasing
Company deliver to Buyer true and complete copies of all Employee Leasing
Company Benefit Plans listed in Schedule 5.13(f) hereto, including, without
limitation (where applicable): (i) all Employee Leasing Company Benefit Plans as
in effect on the date hereof, together with all amendments thereto, including,
in the case of any Employee Leasing Company Benefit Plan not set forth in
writing, a written description thereof; (ii) all current summary plan
descriptions, summaries of material modifications, and material communications;
(iii) all current trust agreements, declarations of trust and other documents
establishing other funding arrangements (and all amendments thereto and the
latest financial statements thereof); (iv) the most recent Internal Revenue
Service determination letter obtained with respect to each Employee Leasing
Company Benefit Plan intended to be qualified under Section 401(a) of the Code
or exempt under Section 501(a) or 501(c)(9) of the Code; (v) the annual report
on Internal Revenue Service Form 5500-series or 990 for each of the last three
years for each Employee Leasing Company Benefit Plan required to file such form;
and (vi) the most recently prepared financial statements for each Employee
Leasing Company Benefit Plan for which such statements are required.

         Section 5.14 Intellectual Property.

                  (a) Seller owns no domestic or foreign patents, patent
applications, trademarks, service marks and other indicia of origin, trademark
or service mark registrations or applications for registrations thereof,
registered copyrights or applications for registration thereof. Schedule 5.14(a)
sets forth a list of the Internet domain names and URLs, corporate and business
names, trade names, brand names and material computer software programs owned by
Seller or used or held by Seller for use in the Business. Except as set forth in
Schedule 5.14(a), none of Seller's Intellectual Property listed in Schedule
5.14(a) has been registered in, filed in or issued by the United States Patent
and Trademark Office, United States Copyright Office, a duly accredited and
appropriate domain name registrar, any office in the various states of the
United States or any offices of other jurisdictions (foreign or domestic). The
registrations and filings set forth in Schedule 5.14(a) remain in full force and
effect as of the date hereof. Copies of all items of Seller's Intellectual
Property material to the Business which have been reduced to writing or other
tangible form have been delivered by Seller to Buyer (including, without
limitation true and complete copies of all related licenses, and amendments and
modifications thereto).

                  (b) Except as set forth in Schedule 5.14(b), Seller is not a
party to any license or Contract, whether as licensor, licensee, or otherwise
with respect to any Intellectual Property material to the Business. Schedule
5.14(b) hereto sets forth a complete and accurate summary of all Intellectual

                                      -14-
<PAGE>

Property that is licensed by Seller that has annual royalty payments in excess
of $5,000, describing the expiration date of such license, the name of the
licensor, the annual royalty payments and whether a consent is required from the
licensor to consummate the transactions contemplated hereby. Except as set forth
in Schedule 5.14(b), to the extent any Intellectual Property is used by Seller
under license in the Business, no notice of a material default has been sent or
received by Seller under any such license which remains uncured and other than
for the consent of any licensor to transfer any such license set forth in
Schedule 5.14(b) to Buyer, to the Knowledge of Seller, the execution, delivery
or performance of Seller's obligations hereunder will not result in such a
default. Each such license agreement is a legal, valid and binding obligation of
Seller and, to Seller's Knowledge, each of the other parties thereto,
enforceable in accordance with the terms thereof.

                  (c) Except as set forth in Schedule 5.14(c), Seller owns all
of the Seller's Intellectual property or is permitted to use under a license
agreement set forth in Schedule 5.14(b) all of the Intellectual Property that is
material to the Business as presently conducted by Seller, free and clear of any
Liens, (other than Permitted Liens), without obligation to pay any royalty or
any other fees with respect thereto, except in each case as otherwise set forth
in the applicable license or Contract. To Seller's Knowledge, Seller's use of
Seller's Intellectual Property and any other Intellectual Property used in the
Business and owned by any third party (including, without limitation, the
manufacturing, marketing, licensing, sale or distribution of products and the
general conduct and operations of the Business) does not violate, infringe,
misappropriate or misuse any intellectual property rights of any third party.
None of the Seller's Intellectual Property set forth in Schedule 5.14(a) or any
Intellectual Property set forth in Schedule 5.14(b) has been cancelled,
abandoned or otherwise terminated. To the Knowledge of Seller, there are no
actions that must be taken or payments that must be made by Seller within 180
days following the Closing Date that, if not taken, will adversely affect either
Seller's Intellectual Property or any other Intellectual Property licensed by
Seller and used in the Business, other than performance and payments required
under the applicable license or contract. If applicable, to the Knowledge of
Seller, Seller has the exclusive right to file, prosecute and maintain all
applications and registrations with respect to the Seller's Intellectual
Property.

                  (d) Except as set forth in Schedule 5.14(d), Seller has not
received any notice or Claim from any third party challenging the right of
Seller to use any of Seller's Intellectual Property or any other Intellectual
Property used in the Business and owned by any third party. Seller's
Intellectual Property and the Intellectual Property set forth in Schedule
5.14(b) constitutes all the Intellectual Property necessary to operate the
Business as of the Closing Date, in the manner in which it is presently
operated.

                  (e) Except as set forth in Schedule 5.14(e), Seller has not
made any Claim of a violation, infringement, misuse or misappropriation by any
third party (including, without limitation, any employee, leased employee or
former employee or leased employee of Seller) of its rights to, or in connection
with any Seller's Intellectual Property or any other Intellectual Property used
in the Business and owned by any third party, which Claim is still pending.
Except as set forth in Schedule 5.14(e), Seller has not entered into any
Contract to indemnify any other Person against any charge of infringement of any
Intellectual Property, other than indemnification provisions contained in
purchase orders or license agreements arising in the ordinary course of the
Business.

                  (f) Except as set forth in Schedule 5.14(f), to the Knowledge
of Seller, there is no pending or threatened Claim by any Person or Authority of
a violation, infringement, misuse or misappropriation by Seller of any
Intellectual Property owned by any third party, or of the invalidity of any
domain name, or trade name included in Seller's Intellectual Property. To the
Knowledge of Seller, there is no valid basis for any such Claims.

                                      -15-
<PAGE>

                  (g) Except as set forth in Schedule 5.14(g), there are no
interferences or other contested proceedings, either pending or, to the
Knowledge of Seller, threatened, in the United States Copyright Office, the
United States Patent and Trademark Office, or any governmental Authority
(foreign or domestic) relating to any pending application with respect to
Seller's Intellectual Property.

         Section 5.15 Customer Warranties. Except as disclosed in Schedule 5.15,
there are no pending Claims against Seller of which Seller has received notice,
nor to the Knowledge of Seller, threatened Claims against Seller under or
pursuant to any warranty, whether expressed or implied, on products or services
sold by Seller that are not disclosed or referred to in the unaudited Financial
Statements and that are not adequately reserved against in accordance with GAAP.
Set forth hereto on Schedule 5.15 are Seller's standard product and service
warranty terms and the aggregate amount of warranty Claims incurred by Seller in
fulfillment of its obligations under its product and service warranties for the
past three years.

         Section 5.16 Products Liability. Except as set forth in Schedule 5.15
or Schedule 5.16 hereto: (a) Seller has not received any written notice of any
Claim by or before any Authority against or involving Seller or concerning any
product manufactured, shipped, sold, installed or delivered by or on behalf of
Seller relating to or resulting from an alleged defect in design, manufacture,
materials or workmanship of any product manufactured, shipped, sold, installed
or delivered by or on behalf of Seller or any alleged failure to warn, or any
alleged breach of implied warranties or representations, and, to the Knowledge
of Seller, none has been threatened; (b) there have not been any Recalls by
Seller conducted with respect to any product manufactured (or to be
manufactured), shipped, sold, installed or delivered by or on behalf of Seller,
or to the Seller's Knowledge any investigation or consideration of or decision
made by any Person or Authority concerning whether to undertake or not
undertake, any Recalls and (c) there have been no material defects in design,
manufacturing, materials or workmanship including, without limitation, any
failure to warn, or any breach of express or implied warranties or
representations, which involve any product manufactured by Seller; (d) to the
Seller's Knowledge, there have been no material defects in design,
manufacturing, materials or workmanship including, without limitation, any
failure to warn, or any breach of express or implied warranties or
representations, which involve any product manufactured by any Person other than
Seller that have been shipped, sold or delivered by or on behalf of Seller. All
manufacturing standards applied, testing procedures used, and product
specifications disclosed to customers by Seller have complied in all material
respects with all requirements established by any applicable Regulation or Order
of any Authority.

         Section 5.17 Environmental Matters. Except as disclosed in Schedule
5.17 hereto:

                  (a) neither Seller nor the conduct of the Business has
violated any applicable Environmental Law;

                  (b) Seller has possessed all material Environmental Permits
required under any applicable Environmental Law for the conduct or operation of
the Business (or any part thereof), and Seller has operated in compliance with
all of the material requirements and limitations included in such Environmental
Permits, except as such noncompliance would not have a Material Adverse Effect;

                  (c) Seller has not generated, used, treated or stored,
transported to or from, or released or disposed of any Hazardous Substances on
or at any of its property or facilities except in accordance with all applicable
Environmental Permits and Environmental Laws);

                  (d) Seller has not received any written notice from any
Authority or any private Person that the Business or the operation of any of
Seller's facilities is in violation of any Environmental Law or any
Environmental Permit or that it is responsible (or potentially responsible) for

                                      -16-
<PAGE>

the cleanup of any Hazardous Substances at, on or beneath any of Seller's
property, or at, on or beneath any land adjacent thereto or in connection with
any waste or contamination site;

                  (e) Seller has not been the subject of any Federal, state,
local, or private Claim involving a demand for damages or other potential
liability with respect to a violation of Environmental Laws or under any common
law theories relating to operations or the condition of any facilities or
property (including underlying groundwater) owned, leased, or operated by
Seller;

                  (f) Seller has not buried, dumped, disposed, spilled or
released any Hazardous Substances, except in accordance with all applicable
Environmental Laws and Environmental Permits;

                  (g) no by-products of any manufacturing process employed in
the operation of the Business which may constitute Hazardous Substances under
any Environmental Law have been stored (except in compliance with any applicable
Environmental Law) or otherwise located on any of Seller's property;

                  (h) to the Knowledge of Seller, no property now or previously
owned, leased or operated by Seller, is listed or, to Seller's Knowledge,
proposed for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any other federal or state list of sites requiring investigation
or clean-up;

                  (i) to the Knowledge of Seller, there are currently no
Underground Storage Tanks, active or abandoned, including petroleum storage
tanks, on or under any property now or previously owned, leased or operated by
Seller;

                  (j) to the Knowledge of Seller, Seller has not transported or
arranged for the transportation of any Hazardous Substances to any location that
is listed or proposed for listing on the National Priorities List pursuant to
CERCLA, on the CERCLIS or on any federal or state list or which is the subject
of federal, state or local enforcement actions or other investigations which may
lead to material Claims against Seller for any remedial work, damage to natural
resources or personal injury, including Claims under CERCLA;

                  (k) to the Knowledge of Seller, there are no polychlorinated
biphenyls, radioactive materials or friable asbestos present at any property now
or previously owned or leased by Seller;

                  (l) to the Knowledge of Seller, there are no facts or
circumstances, conditions or occurrences that could reasonably be anticipated:
(i) to form the basis of a Claim related to Environmental Laws or Environmental
Permits against Seller or any of the Owned Real Property or any property subject
to any Real Property Lease for which Seller could be reasonably expected to be
liable; and (ii) to cause such properties to be subject to any restrictions on
its ownership, occupancy, use or transferability under any Environmental Law;
and

                  (m) Seller has timely filed all reports required to be filed
with respect to all of its property and facilities and has generated and
maintained all required data, documentation and records under all applicable
Environmental Laws. Seller has delivered to Buyer true, correct and complete
copies and results of the reports, audits, assessments, reviews, studies,
analyses, tests and monitoring listed in Schedule 5.17 pertaining to Hazardous
Substances or related to activities involving Hazardous Substances in, on or
under any of the Purchased Assets or concerning compliance by Seller with
Environmental Laws. To Seller's Knowledge, there are no Liens arising under or

                                      -17-
<PAGE>

pursuant to any Environmental Law or Environmental Permit on any Purchased
Assets and there are no facts, circumstances or conditions that could reasonably
be expected to restrict, encumber or result in the imposition of special
conditions under any Environmental Law with respect to the ownership, occupancy,
development, use or transferability of any of the Purchased Assets.

         Section 5.18 Capital Expenditures and Investments. Seller has
outstanding Contracts and a budget for capital expenditures and investments as
set forth in Schedule 5.18 hereto which includes a schedule of all monies
disbursed on account of capital expenditures and investments made by Seller
since the Financial Statement Date and through the date shown thereon. Other
than as set forth in Schedule 5.18 hereto, Seller does not have any agreement or
commitment to make any loan, advance or capital contributions to, or investment
in, any other Person.

         Section 5.19 Dealings with Affiliates. Schedule 5.19 hereto sets forth
a complete and accurate list and description of the economic terms, including
the parties, of all Contracts to which Seller is or has been a party, at any
time from December 31, 2000, to the Closing Date, and which any one or more of
(a) the partners of Seller, (b) Seller's Affiliates, (c) to Seller's Knowledge,
an Affiliate of any partner of Seller, or (d) to Seller's Knowledge, any Person
in which a partner of Seller, an Affiliate of Seller or a partner of Seller has,
directly or indirectly, made an Investment, is also a party. Except as set forth
on Schedule 5.19, since December 31, 2000, Seller has not made any payments,
loaned or borrowed any funds or property or made any credit arrangement or
accommodation with any partner of Seller, Affiliate of Seller or employee of
Seller, except for the payment of employee salaries, employee loans and
distributions to partners of Seller in the ordinary course of the Business and
pursuant to Seller's Partnership Agreement. With respect to the Indebtedness of
Seller described in Schedules 5.4(c) and 5.19, the proceeds of that Indebtedness
were used by Seller for working capital and general corporate purposes of the
Business and were not specifically used to acquire any of the Excluded Assets.

         Section 5.20 Insurance. Schedule 5.20 hereto sets forth a complete and
accurate summary of all Policies, including name of insurer, the types, dates
and amounts of coverage, any material coverage exclusion and a statement of the
Claims paid out, and Claims pending, as to each Policy for each of the last
three (3) full fiscal years and any interim period.

         Section 5.21 Accounts Receivable; Inventories. The accounts receivable
of Seller reflected in the Unaudited Financial Statements and the accounts
receivable aging report set forth in Schedule 5.21, as well as such additional
accounts receivable as are reflected on the books of Seller on the date hereof,
are (except to the extent reserved in accordance with GAAP) valid, genuine and
subsisting, arise out of bona fide sales and deliveries of goods, performance of
services or other business transactions and to Seller's Knowledge, are not
subject to defenses, deductions, set-offs or counterclaims. The inventories
reflected on the Unaudited Financial Statements and held by Seller on the date
hereof, net of reserves therefor in accordance with GAAP, are usable or saleable
in the ordinary course of Business. Such inventories have been reflected on the
Unaudited Financial Statements at the lower of cost or market value (taking into
account the usability or salability thereof) in accordance with GAAP. None of
such inventories have been written up in value or repurchased by, or returned
to, Seller at an increased value. All such inventories are owned free and clear
and are not subject to any Lien except to the extent reserved against or
reflected in the Financial Statements. Since the Financial Statement Date,
inventories of raw materials, supplies and products have been purchased by
Seller in the ordinary course of the Business, consistent with anticipated
seasonal requirements, and the volumes of purchases thereof and orders therefor
have not been reduced or otherwise changed in anticipation of the transactions
contemplated by this Agreement. Except as set forth in Schedule 5.21 hereto,
Seller does not have any Knowledge of any conditions affecting the supply of
materials or products available to Seller and, to the Knowledge of Seller, the
consummation of the transactions contemplated hereby will not adversely affect
any such supply.

                                      -18-
<PAGE>

         Section 5.22 Brokerage; Other Negotiations. Except as set forth in
Schedule 5.22 and the Retained Liabilities, there are no Claims for brokerage
commissions, investment banking or finders' fees or expenses or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or Contract binding upon Seller. Neither Seller nor any
of its general or limited partners (or their respective Affiliates) have entered
into any agreement with any third party regarding any transaction involving
Seller which could result in Buyer, Parent or any officer, director, employee,
agent or Affiliate of either of them, being subject to any Claim for liability
to said third party as a result of entering into this Agreement or consummating
the transactions contemplated hereby or thereby.

         Section 5.23 Customers and Suppliers. Schedule 5.23 hereto sets forth a
complete and accurate list of (a) the ten (10) largest customers of Seller on
the basis of revenues for goods sold or services provided for the twelve-month
period ending December 31, 2003 and the amount of revenues accounted for by such
customer during each such period, (b) the ten (10) largest suppliers of Seller
on the basis of cost of goods sold or services purchased during the twelve-month
period ending December 31, 2003 and the amount of payments made to each supplier
during such period and (c) each supplier that is the sole supplier of any
significant product or component to Seller. To the Knowledge of Seller, no
customer or supplier listed in Schedule 5.23 has made or is the subject of any
voluntary or involuntary filing or petition for bankruptcy. Except as set forth
in Schedule 5.23, no material customer of Seller has advised Seller in writing
within the past year that it will stop, or decrease the rate of, buying
materials, products or services from Seller. To Seller's Knowledge, no unfilled
customer order or commitment obligating Seller to process, manufacture or
deliver products or perform services will result in a sales price of less than
the cost of goods sold upon completion of performance. Except as set forth in
Schedule 5.23, no material supplier of Seller has advised Seller in writing
within the past year that it will stop, or decrease the rate of, supplying
materials, products, or services to Seller. No purchase order or commitment of
Seller is in excess of normal requirements, nor are prices provided therein in
excess of current market prices for the products or services to be provided
thereunder. To Seller's Knowledge, the consummation of the transactions
contemplated hereby will not have a Material Adverse Effect on Seller's
relationship with any customer or supplier listed on Schedule 5.23.

         Section 5.24 Permits. Except as set forth in Schedule 5.24, the Permits
listed in Schedule 5.24 hereto are the only Permits, other than Environmental
Permits, that have been required for Seller to conduct the Business in
accordance with applicable Regulations and Orders of any Authority. Except as
set forth in Schedule 5.24, Seller has duly and validly held all such Permits,
and each such Permit has been in full force and effect and, to the Knowledge of
Seller, no suspension or cancellation of any such Permit is threatened and there
is no basis for believing that such Permit will not be renewable upon
expiration.

         Section 5.25 Utilities. Seller has sufficient power, fuel oil, natural
gas and water supplies and adequate sewerage and waste disposal systems for the
operation of the Business as presently conducted, and, to the Knowledge of
Seller, all such supplies and systems will be available after the Closing. To
the Knowledge of Seller, except as disclosed in Schedule 5.25 hereto, all such
systems are in compliance with all Regulations.

         Section 5.26 Improper and Other Payments. Except as set forth in
Schedule 5.26 hereto: (a) Seller, any of its general or limited partners,
officers, key employees thereof, and, to Seller's Knowledge, any agent or
representative of Seller and any Person acting on behalf of any of them, has not
made, paid or received any unlawful bribes, kickbacks or other similar payments
to or from any Person or Authority; (b) no contributions have been made by
Seller, directly or indirectly, to a domestic or foreign political party or
candidate in violation of applicable law; (c) no improper foreign payment (as
defined in the Foreign Corrupt Practices Act) has been made by Seller; and (d)

                                      -19-
<PAGE>

the internal accounting controls of Seller are believed by Seller's management
to be adequate to detect any of the foregoing under current circumstances.

         Section 5.27 Projections. The projections relating to operations of
Seller during the fiscal year ending December 31, 2004 (the "Projections"),
heretofore delivered by Seller to Buyer and dated March 2004, have been prepared
in good faith by management based on assumptions which management believes are
reasonable, although such assumptions may not be adequate, correct or complete
and the Projections are not a guarantee of performance or the achievement of
actual results.

         Section 5.28 Entire Investment in the Business; No Other Businesses.
The Purchased Assets constitute all of the rights, interests and other assets
necessary to conduct the Business in substantially the same manner as it has
been heretofore conducted. Seller has never been involved in any other business
other than the Business. Seller has no Subsidiaries.

         Section 5.29 Operations of Seller. Except as set forth on Schedule
5.29, from the Financial Statement Date, through the date hereof, Seller has
not:

                  (a) declared or made any distributions of any kind or any
other payments to any general or limited partner of Seller;

                  (b) reduced its cash or short-term investments or their
equivalent, other than to meet cash needs arising in the ordinary course of the
Business, consistent with past practices;

                  (c) materially changed the Business or any of its policies,
including, without limitation, advertising, marketing, pricing, purchasing,
personnel, sales, returns, budget or product acquisition policies;

                  (d) other than in the ordinary course of the Business and
consistent with past practice, made any wage or salary increase or bonus, or
increase in any other direct or indirect compensation, for or to any officer,
director, employee, partner, consultant or agent of Seller, or any accrual for
or commitment or agreement to make or pay the same;

                  (e) made any payment or commitment to pay any severance or
termination pay to any of its officers, partners, leased employees, consultants
or agents, other than in the ordinary course of the Business;

                  (f) except for inventory, raw materials, equipment and
tangible personal property acquired in the ordinary course of the Business, made
any acquisition of all or any part of the assets, properties, capital stock or
business of any other Person; or

                  (g) made any payments to Brown Brothers Harriman & Co. or
prepaid any other Indebtedness of Seller.

         Section 5.30 Tangible Property. Schedule 5.30 sets forth all interests
owned or claimed by Seller (including, without limitation, options) in or to the
plant, machinery, equipment, furniture, leasehold improvements, fixtures,
structures, any related capitalized items and other tangible property,
including, without limitation, all computer and telecommunications equipment,
material to the Business and which is treated by Seller as depreciable or
amortizable property reflected on the Unaudited Financial Statements and not
sold or disposed of in the ordinary course of the Business since the Financial
Statement Date ("Tangible Property").

                                      -20-
<PAGE>

         Section 5.31 Real Property. (a) Schedule 5.31(a) sets forth a true and
complete list of (i) the Owned Real Property), identifying the address and legal
description of each parcel of Owned Real Property, (ii) all real property and
interests in real property which are leased, directly or indirectly, by or to
Seller or in respect of which Seller has an option to enter a lease
(individually, a "Real Property Lease"), identifying, for each Real Property
Lease, the parties thereto and the address of the property subject thereto, and
(iii) all Liens of which Seller has Knowledge relating to or affecting any
parcel of Owned Real Property or Real Property Lease other than Permitted Liens.
Seller has delivered to the Buyer a true, correct and complete copy of each Real
Property Lease, including all amendments, modifications, supplements, side
letters and consents affecting the obligations of any party thereunder.

                  (b) Except as disclosed in Schedule 5.31(b), Seller has
indefeasible title to, and actual and exclusive possession of, the Owned Real
Property and the leasehold estates in all Real Property Leases (any real
property of which Seller is a fee owner or which Seller has a leasehold interest
in and is specified as a Real Property Lease, the "Acquired Real Property") in
each case free and clear of all Liens of any nature created by, through or under
Seller except Permitted Liens.

                  (c) Except as disclosed on Schedule 5.31(c), no Acquired Real
Property is subject to any lease, sublease, license, concession or other
agreement (written or oral) granted by, through or under Seller granting to any
other Person any right to the use, occupancy or enjoyment of any Acquired Real
Property or any part thereof.

                  (d) To Seller's Knowledge, each Real Property Lease is in full
force and effect and is valid and enforceable in accordance with its terms.
There is no default under any Real Property Lease either by Seller or, to the
Knowledge of Seller, by any other party thereto, and to Seller's Knowledge, no
event has occurred that, with the lapse of time or the giving of notice or both,
would constitute a default thereunder. To Seller's Knowledge, each Real Property
Lease covers the entire estate it purports to cover and, upon the consummation
of the transactions contemplated hereby (including delivery of the landlord
consents listed in Schedule 5.31(d)), will entitle the Buyer to the exclusive
use, occupancy and possession of the real property specified in such Real
Property Lease and for the purposes such property is now being used by Seller.
No previous or current party to any such Real Property Lease has given notice to
Seller of a Claim against Seller with respect to any breach or default
thereunder.

                  (e) To the Knowledge of Seller, (i) there does not exist any
pending imposition of any assessments for public improvements with respect to
any Acquired Real Property, and (ii) no such improvements have been constructed
or planned that would be paid for by means of assessments upon any Acquired Real
Property.

                  (f) To the Knowledge of Seller, the buildings and improvements
located on the Owned Real Property are located within the boundary lines of the
Owned Real Property, and no improvements constituting a part of any Owned Real
Property encroach on real property not leased or owned by Seller, to the extent
that removal of such encroachment would materially impair the manner and extent
of the current use, occupancy and operation of such improvements or cost in
excess of U.S.$5,000 in the aggregate.

                  (g) Except as set forth in Schedule 5.31(g), to the Knowledge
of Seller, (i) no part of any Acquired Real Property is subject to any building
or use restriction that would restrict or prevent the present use and operation
of such Acquired Real Property, (ii) each parcel of Acquired Real Property is
properly and duly zoned for its current use by Seller and the continuation of
such use by the Buyer following the Closing, and (iii) such current use is in
all respects a conforming use by Seller. No Authority having jurisdiction over
any Owned Real Property has issued to Seller or, to the Knowledge of Seller,
threatened to issue any notice or Order that may materially adversely affects

                                      -21-
<PAGE>

the use or operation of such Owned Real Property, or requires, as of the Closing
or a specified date in the future, any material repairs or alterations or
additions or improvements thereto, or the payment or deduction of any money,
fee, exaction or property.

                  (h) To the Knowledge of Seller, there are no physical,
mechanical or structural defects in or concerning the buildings and other
permanent improvements constituting part of the Acquired Real Property that are
occupied, operated or owned by Seller materially and adversely affecting their
current use, occupancy, or value.

                  (i) Seller has not received any written notice from any
insurance company that has issued a Policy with respect to any Acquired Real
Property requesting performance of any structural or other repairs or
alterations to such Acquired Real Property. During the period that Seller has
owned any Owned Real Property, Seller has not granted any encroachment,
easement, encumbrance or other adverse interest in, to or upon the Owned Real
Property except for Permitted Liens.

                  (j) There are no outstanding options or rights of first
refusal to purchase the Owned Real Property, any portion thereof, or any
interest therein, granted by Seller.

                  (k) To the Seller's Knowledge, except for common areas of
office buildings, no Acquired Real Property is dependent for its access,
operation or utility on any land, building or other improvement not part of each
parcel of Acquired Real Property or is dependent for ingress or egress on
third-party interests.

         Section 5.32 Bank Accounts; Lockboxes. Schedule 1.1(j) hereto sets
forth a complete list of all bank accounts and lockboxes where Seller has
deposited all of its cash and where all customer and other receipts are
deposited.

         Section 5.33 Disclosure. The Schedules to this Agreement referred to in
Article 5, taken as a whole, contain all material information required by this
Article 5 to be disclosed, set forth or listed in such Schedules and are true,
complete and accurate in all material respects. Seller has not willfully or
intentionally failed to disclose to Buyer or Parent any fact of which Seller has
Knowledge relating specifically to the Business (and not generally to businesses
of the same or similar type as the Business) which would reasonably be expected
to have a Material Adverse Effect.

         Section 5.34 Disclaimer. EXCEPT FOR SUCH REPRESENTATIONS AND WARRANTIES
AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT, NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, IS MADE REGARDING THE CONDITION, FITNESS OR SERVICEABILITY
OF ANY OF THE PURCHASED ASSETS, INCLUDING, WITHOUT LIMITATION, (A) ANY EXPRESS
OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
(B) ANY EXPRESS OR IMPLIED WARRANTY REGARDING THE DESIGN, ENGINEERING,
CONSTRUCTION OR CONDITION OF ANY PROPERTY, INCLUDING WITHOUT LIMITATION
IMPROVEMENTS LOCATED ON ANY REAL PROPERTY, ANY FIXTURES OR ANY PERSONAL
PROPERTY.

                                    ARTICLE 6
               REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT

         Buyer and Parent jointly and severally represent and warrant to Seller,
as follows:

                                      -22-
<PAGE>

         Section 6.1 Corporate and Partnership Organization, Etc. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware with full corporate power and authority to carry on its business as
it is now being conducted and to own, operate and lease its properties and
assets. Buyer is a limited partnership duly organized, validly existing and in
good standing under the laws of Texas with full partnership power and authority
to carry on its business as it is now being conducted and to own, operate and
lease its properties and assets. Buyer and Parent are each duly qualified or
licensed to do business and are in corporate and Tax good standing in every
jurisdiction in which the conduct of their business, the ownership or lease of
their properties, require each to be so qualified or licensed.

         Section 6.2 Authorization, Etc. Buyer and Parent each have full power
and authority to enter into this Agreement and the agreements contemplated
hereby to which each is a party and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance of this Agreement
and all other agreements and transactions contemplated hereby have been duly
authorized by the Board of Directors and General Partner of Buyer and Parent, as
the case may be, and no other corporate or partnership proceedings on their part
are necessary to authorize this Agreement and the agreements contemplated hereby
and the transactions contemplated hereby and thereby. This Agreement and all
other agreements contemplated hereby to be entered into by Buyer and Parent each
constitutes a legal, valid and binding obligation of each of Buyer and Parent
enforceable against Buyer and Parent in accordance with its terms.

         Section 6.3 No Violation. The execution, delivery and performance by
Buyer and Parent of this Agreement, and all other agreements contemplated
hereby, and the fulfillment of and compliance with the respective terms hereof
and thereof by Buyer and Parent, do not and will not (a) conflict with or result
in a breach of the terms, conditions or provisions of, (b) constitute a default
or event of default under (whether with or without due notice, the passage of
time or both), (c) result in a violation of, or (d) require any authorization,
consent, approval, exemption or other action by, or notice to, or filing with
any third party or Authority pursuant to, the charter, bylaws or partnership
agreement of either Buyer or Parent or any applicable Regulation (including,
without limitation, approvals pursuant to the Hart-Scott-Rodino Act), Order or
Contract to which Buyer or Parent or either of their properties are subject.
Buyer and Parent have complied with all applicable Regulations and Orders in
connection with its execution, delivery and performance of this Agreement, the
agreements contemplated hereby and the transactions contemplated hereby and
thereby.

                                    ARTICLE 7
                                OTHER AGREEMENTS

         The parties further agree as follows:

         Section 7.1 Deliveries After Closing. From time to time after the
Closing, at Buyer's or Parent's request and without expense to Seller and
without further consideration from Buyer or Parent, Seller, shall execute and
deliver such other instruments of conveyance and transfer and take such other
action as Buyer or Parent reasonably may require to convey, transfer to and vest
in Buyer and to put Buyer in possession of any rights or property to be sold,
conveyed, transferred and delivered hereunder; provided that Seller incurs no
additional liability or obligation in connection therewith.

         Section 7.2 Confidentiality. Except as may be required by lawful order
of an Authority of competent jurisdiction, Seller agrees to keep secret and
confidential, after the Closing, all non-public information concerning the
Business, the Purchased Assets and the Assumed Liabilities, except any of the

                                      -23-
<PAGE>

same which: (a) was, is now, or becomes generally available to the public (but
not as a result of a breach of any duty of confidentiality by which Seller and
its Affiliates are bound); or (b) was disclosed to Seller by a third party not
subject to any duty of confidentiality to Seller. Notwithstanding anything
contained in this Agreement or in any other document, agreement or understanding
relating to the transactions contemplated by this Agreement, each party (and
each employee, representative, or other agent of such party) is authorized to
disclose, to the extent required by law, to any and all Persons, beginning
immediately upon commencement of discussions regarding the transactions
contemplated by this Agreement, and without limitation of any kind, the U.S.
federal, state or local tax treatment and tax structure of the transactions
contemplated by this Agreement, and all materials of any kind (including
opinions or other tax analyses) that are provided to such party (or any
employee, representative, or other agent of such party) relating to such tax
treatment and tax structure. For purposes of this authorization, the "tax
treatment" of a transaction means the purported or claimed tax treatment of the
transaction, and the "tax structure" of a transaction means any fact that may be
relevant to understanding the purported or claimed tax treatment of the
transaction. None of the parties to the transactions contemplated by this
Agreement provides U.S. tax advice, and each party shall consult its own
advisors regarding its participation in the transactions contemplated by this
Agreement.

         Section 7.3 Public Announcements. The form, content and timing of all
press releases, public announcements or publicity statements with respect to
this Agreement and transactions contemplated hereby shall be subject to the
prior approval of Seller and Parent, which approval shall not be unreasonably
withheld. No press releases, public announcements or publicity statements shall
be released by either party without such prior mutual agreement, except to the
extent any such disclosure is required by any Regulation or Authority.

         Section 7.4 Tax Cooperation.

                  (a) Closing of the Books. For the Tax year of Seller prior to
and ending on the Closing Date, the items of income, gain, loss, deduction, and
credit allocable to Seller for such Tax year shall be based on a closing of the
books as of the Closing Date pursuant to Section 706 of the Code and the
regulations thereunder.

                  (b) Cooperation on Tax Matters. (i) Buyer, Parent and Seller
shall cooperate fully, as and to the extent reasonably requested by any of them,
in connection with any audit, litigation or other proceeding with respect to
Taxes for any period ending on or prior to the Closing Date. Such cooperation
shall include the retention and (upon another party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees (to the extent such
employees were responsible for the preparation, maintenance or interpretation of
information and documents relevant to Tax matters or to the extent required as
witnesses in any Tax proceedings), available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The parties agree (A) to retain all books and records with respect to
Tax matters pertinent to the Business relating to any taxable period beginning
before the Closing Date until six months after the expiration of the statute of
limitations (and, to the extent notified by Buyer or Seller, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
obligations imposed by law or pursuant to agreements entered into with any
taxing authority, and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if another party so requests, Buyer, Parent or Seller, as the case may be, shall
allow the other to take possession of or copy such books and records.

                                      -24-
<PAGE>

                  (c) Contests.

                  (i) Seller on the one hand, and Buyer or Parent on the other,
         shall notify the other in writing within 30 days or such shorter period
         as may be required thereby of receipt of written notice of any pending
         or threatened Tax examination, audit or other administrative or
         judicial proceeding (a "Tax Contest") that could reasonably be expected
         to result in a liability for Taxes of another party. If the recipient
         of such notice of a Tax Contest fails to provide such notice to such
         other party, and the recipient is entitled to indemnification for Taxes
         under this Agreement, it shall be entitled to indemnification for any
         Taxes arising in connection with such Tax Contest, but only to the
         extent, if any, that such failure or delay shall not have adversely
         affected the indemnifying party's ability to defend against, settle, or
         satisfy any action, suit or proceeding against it, or any damage, loss,
         claim, or demand for which the indemnified party is entitled to
         indemnification hereunder.

                  (ii) If a Tax Contest relates to any Taxes for which Seller is
         liable in full hereunder, Seller shall at its expense control the
         defense and settlement of such Tax Contest. If such Tax Contest relates
         to any Taxes for which Buyer or Parent is liable in full hereunder,
         Buyer or Parent shall at its own expense, control the defense and
         settlement of such Tax Contest. A party not in control of the defense
         shall have the right to observe the conduct of any Tax Contest at its
         expense, including through its own counsel and other professional
         experts. If a Tax Contest relates to Taxes for which Seller and either
         Buyer or Parent or both may be liable hereunder, the parties that may
         have such liability shall jointly control the defense and settlement of
         such Tax Contest.

                  (iii) To the extent that an issue raised in any Tax Contest
         controlled by one party or jointly controlled could materially affect
         the liability for Taxes of another party, the controlling party shall
         not, and no party in the case of joint control shall, enter into a
         final settlement without the written consent of the other party or
         parties, which consent shall not be unreasonably withheld. Where a
         party withholds its consent to any final settlement, that party may
         continue or initiate further proceedings, at its own expense, and the
         liability of the party or parties that wished to settle (as between the
         consenting and the non consenting parties) shall not exceed the
         liability that would have resulted from the proposed final settlement
         including interest, additions to Tax, and penalties that have accrued
         at that time, and the non consenting party or parties shall indemnify
         the consenting party or parties for such Taxes.

         Section 7.5 Liability for Taxes. All Taxes resulting from or payable in
connection with the sale of the Purchased Assets and the assumption of the
Assumed Liabilities in accordance with this Agreement shall be timely paid by
the party on whom the Taxes are imposed by the applicable Taxing Authorities.
All obligations under this Section 7.5 shall survive the Closing Date hereunder
and continue until 30 days following the expiration of the statute of
limitations on assessment of the relevant Tax.

         Section 7.6 Name Change. Seller shall execute and deliver an amendment
to its Certificate of Limited Partnership to change its name to a name other
than Southwest Concrete Products, L.P., or any variant thereof in acceptable
form to be filed with the Delaware Secretary of State's office and any other
jurisdiction where Seller is qualified to do business within 30 days following
the Closing. Further, Seller shall cause its general partner, Southwest Concrete
Management Company, LLC, to change its name to a name other than Southwest
Concrete Management, L.P., or any variant thereof in acceptable form to be filed
with the Delaware Secretary of State's office and any other jurisdiction where
the general partner is qualified to do business within 30 days following the
Closing.

                                      -25-
<PAGE>

         Section 7.7 Rights to Refunds. If Seller, on the one hand, or Buyer,
Parent or any of their Affiliates on the other hand, receives a refund of any
Taxes for which the other has paid such Taxes, then the party receiving such
refund shall, within 30 days after its receipt, remit it to the party who paid
such Taxes; provided, however, that this section shall not affect the liability
of the parties for Taxes as set forth elsewhere herein.

         Section 7.8 Mail Received After Closing. Following the Closing, Buyer
may receive and open all mail addressed to Seller at any of the locations of
Seller acquired hereunder, other than mail that is labeled personal and/or
confidential, and to the extent that such mail and the contents thereof relate
to the Business, the Purchased Assets or the Assumed Liabilities, deal with the
contents thereof in its good faith discretion, subject, however, to Article 8 .
Buyer shall promptly notify Seller of (and provide Seller copies of the relevant
portions of) any mail that obliges Seller to take any action or indicates that
action may be taken against Seller. To the extent that such mail and the
contents thereof do not relate to the Business, the Purchased Assets or the
Assumed Liabilities, such mail and the contents thereof shall be promptly
forwarded to Seller at the address set forth in Section 9.4 below, or such other
address as Buyer is advised of in writing by Seller.

         Section 7.9 Prorations. Unearned insurance premiums, prepaid utility
charges, prepaid rentals, property Taxes and other prepaid expenses with respect
to the Purchased Assets applicable to periods both prior to and after Closing
shall be prorated as of the Closing and amounts owing by Buyer to Seller, or by
Seller to Buyer, resulting from such proration shall be settled within 30 days
after the amounts thereof have been determined and agreed to by Seller and
Buyer. Representatives of Seller and Buyer may take readings or other
measurements of gas, water, electricity and other utilities. Such readings and
measurements, if taken, shall be binding, conclusive and used for purpose of the
apportionment provided herein.

         Section 7.10 Post-Closing Operation of Business. Parent and Buyer
jointly and severally agree that neither of them nor any of their Affiliates
shall intentionally take or omit to take any action that has the effect of
manipulating revenues, net income or expenses of the Business or other
components of EBITDA in any manner, the effect of which decreases the 2005
EBITDA or the 2005 Earn-Out Consideration, by either the diversion of business
or business opportunities, unreasonable increases in expenses, payments to
Affiliates, failure to make necessary capital or maintenance expenditures,
reduction of work force or capacity, reduction of sales and marketing efforts,
dispositions of assets or otherwise actions taken that are not in the ordinary
course of the Business as operated by Seller prior to Closing. It is the
intention of the parties that the Business shall be operated by Buyer from the
date hereof through the twelve months ending December 31, 2005 on a stand-alone
basis and in a manner consistent with the operation of the Business by Seller.

                                    ARTICLE 8
                                 INDEMNIFICATION

         Section 8.1 Survival. The representations and warranties in this
Agreement (including the Schedules hereto) and in any other agreement,
instrument or certificate being executed and delivered by a party hereto on the
date hereof pursuant to or in connection with this Agreement, including, without
limitation the Closing Letter (the "Other Closing Documents") shall terminate on
the 18 month anniversary of the Closing Date; provided that the representations,
warranties and indemnities for breach thereof for which an indemnification Claim
shall be pending as of the 18 month anniversary of the Closing Date, shall
survive with respect to such Claim until the final disposition thereof. The
covenants of the parties contained herein and the Other Closing Documents to be
performed after the Closing Date shall survive the execution of this Agreement
and the Closing Date. The representations and warranties in this Agreement and

                                      -26-
<PAGE>

the Other Closing Documents shall in no event be affected by any investigation,
inquiry or examination made for or on behalf of any party or be affected by the
Knowledge of any officer, director, stockholder, employee, partner or agent of
any party seeking indemnification hereunder or by the acceptance of any
certificate or opinion from any third party. Notwithstanding the foregoing, the
indemnification covenants of the parties in Article 8 with respect to the
Assumed Liabilities and the Retained Liabilities shall survive until all such
Assumed Liabilities and Retained Liabilities and indemnification Claims under
Article 8 with respect thereto are paid in full by the party responsible
therefor pursuant to the terms of this Agreement.

         Section 8.2 Limitations.

                  (a) Absent fraud, Seller shall not be required to indemnify
the Buyer Indemnified Parties under Section 8.3(a) (other than with respect to
the representations and warranties made by Seller in Section 5.17) and Buyer and
Parent shall not be required to indemnify the Seller Indemnified Parties under
Section 8.4(a) until the Indemnifiable Damages incurred thereunder, individually
or in the aggregate, exceed $100,000 (the "Hurdle Amount"), at which point such
indemnifying party or parties shall, subject to Section 8.2(c), and in the case
of Seller, Section 8.6, be responsible for all such Indemnifiable Damages that
may arise in excess of the Hurdle Amount; and provided that such Indemnifiable
Damages shall accumulate until such time as they exceed the Hurdle Amount,
whereupon the party or parties to be indemnified shall be entitled, subject to
Section 8.2(b), and in the case of Seller, Section 8.6, to seek indemnification
for the full amount of such Indemnifiable Damages in excess of the Hurdle
Amount.

                  (b) With respect to the representations and warranties made by
Seller in Section 5.17, absent fraud, Seller shall not be required to indemnify
the Buyer Indemnified Parties under Section 8.3(a) until the Indemnifiable
Damages incurred thereunder, individually or in the aggregate, exceed $100,000
(the "Environmental Hurdle Amount"), at which point Seller shall, subject to
Section 8.2(c) and Section 8.6, be responsible for all such Indemnifiable
Damages that may arise in excess of the Environmental Hurdle Amount; and
provided that such Indemnifiable Damages shall accumulate until such time as
they exceed the Environmental Hurdle Amount, whereupon the Buyer Indemnified
Parties shall be entitled, subject to Section 8.2(b) and Section 8.6, to seek
indemnification for the full amount of such Indemnifiable Damages in excess of
the Environmental Hurdle Amount.

                  (c) Absent fraud, Seller shall not be required to indemnify
the Buyer Indemnified Parties under Section 8.3(a) and Buyer and Parent shall
not be required to indemnify the Seller Indemnified Parties under Section 8.4(a)
for any amount of Indemnifiable Damages incurred thereunder in excess of
$5,200,000.

         Section 8.3 Indemnification by Seller. Subject to Sections 8.1, 8.2 and
8.6, Seller agrees to, and shall indemnify Buyer and Parent and their respective
Affiliates and the officers, directors, employees, stockholders, representatives
and agents of each of them (the "Buyer Indemnified Parties") and hold each of
them harmless against and in respect of any and all Indemnifiable Damages
resulting from, or in respect of, any of the following:

                  (a) Any misrepresentation, breach of warranty, or
non-fulfillment of any covenant on the part of Seller under this Agreement or
any of the Other Closing Documents executed and delivered by Seller, other than
the covenants in Sections 7.2, 7.4, 7.7 and 7.8;

                  (b) Any breach of the covenants in Sections 7.2, 7.4, 7.7 and
7.8 on the part of Seller; and

                                      -27-
<PAGE>

                  (c) The Retained Liabilities.

         Section 8.4 Indemnification by Buyer and Parent. Subject to Sections
8.1 and 8.2, Buyer and Parent agree to, and shall, jointly and severally,
indemnify Seller, its Affiliates and the partners, officers, directors,
employees, representatives, trustees and agents of each of them (the "Seller
Indemnified Parties") and hold each of them harmless, against and in respect of
any and all Indemnifiable Damages resulting from, or in respect of, any of the
following:

                  (a) Any misrepresentation, breach of warranty or
non-fulfillment of any obligation or covenant on the part of Buyer or Parent
under this Agreement or any of the Other Closing Documents executed and
delivered by Buyer or Parent, other than the covenants in Sections 3.2, 3.4(b),
7.4, 7.7, 7.8 and 7.10;

                  (b) Any breach of the covenants in Sections 3.2, 3.4(b), 7.4,
7.7, 7.8 and 7.10 on the part of Buyer or Parent; and

                  (c) The Assumed Liabilities.

         Section 8.5 Third-Party Claims.

                  (a) The following procedures shall be applicable with respect
to indemnification for third-party Claims. Promptly after receipt by the party
seeking indemnification hereunder (hereinafter referred to as the "Indemnitee")
of notice of the commencement of any (i) Tax audit or proceeding for the
assessment of Tax by any Taxing Authority or any other proceeding likely to
result in the imposition of a Tax liability or obligation or (ii) any action or
the assertion of any Claim, liability or obligation by a third party (whether by
legal process or otherwise), against which Claim, liability or obligation any
other party to this Agreement (hereinafter the "Indemnitor") is, or may be,
required under this Agreement to indemnify such Indemnitee, the Indemnitee
shall, if the Indemnitee desires to make a claim for indemnification against the
Indemnitor with respect to such third-party Claim, notify the Indemnitor in
writing of the commencement or assertion of such third-party Claim and give the
Indemnitor a copy of such Claim, process and all legal pleadings in the
possession of the Indemnitee. The Indemnitor shall have the right to (i)
participate in the defense of such action at its expense with counsel of
reputable standing and (ii) assume the defense of such action by agreeing to
assume such defense within 10 days of transmittal of the notice of the Claim by
the Indemnitee, in writing unless such Claim (A) may result in criminal
proceedings, injunctions or other equitable remedies in respect of the
Indemnitee or its business; (B) may result in liabilities which, taken with
other then existing Claims under this Article 8, would not be fully indemnified
hereunder; (C) may have a material adverse effect on the business or financial
condition of the Indemnitee after the Closing Date (including an effect on the
Tax liabilities, earnings or ongoing business relationships of the Indemnitee);
(D) is for an alleged amount of less than $25,000; or (E) upon petition by the
Indemnitee, if an appropriate court rules that the Indemnitor failed or is
failing to vigorously prosecute or defend such Claim, in which events the
Indemnitee shall assume the defense.

                  (b) The Indemnitor and the Indemnitee shall cooperate in the
defense of any third party Claims. In the event that the Indemnitor assumes or
participates in the defense of such third party Claim as provided herein, the
Indemnitee shall make available to the Indemnitor all relevant records and take
such other action and sign such documents as are reasonable necessary to defend
such third party Claim in a timely manner. If the Indemnitee shall be required
by judgment or a settlement agreement to pay any amount in respect of any
obligation or liability against which the Indemnitor has agreed to indemnify the
Indemnitee under this Agreement, the Indemnitor shall promptly reimburse the
Indemnitee in an amount equal to the amount of such payment plus all expenses
(including reasonable legal fees and expenses) incurred by such Indemnitee in

                                      -28-
<PAGE>

connection with such obligation or liability subject to this Article 8. No
Indemnitor, in the defense of any such Claim, shall, except with the consent of
the Indemnitee, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnitee of a release from all liability with
respect to such Claim. In the event that the Indemnitor does not assume the
defense of any matter for which it is entitled to assume as provided above, or
is not entitled to assume such defense, the Indemnitee shall have the full right
to defend such Claim (and, in the cases specified in clauses (A) through (E) of
Section 8.5(a), shall defend such Claim), but shall not settle such Claim
without the prior written consent of the Indemnitor, which consent shall not be
unreasonably withheld.

                  (c) Except as provided in Section 8.5(e), prior to paying or
settling any Claim against which an Indemnitor is, or may be, obligated under
this Agreement to indemnify an Indemnitee, the Indemnitee must first supply the
Indemnitor with a copy of a final court judgment or decree holding the
Indemnitee liable on such Claim or failing such judgment or decree, must first
receive the written approval of the terms and conditions of such settlement from
the Indemnitor, which shall not be unreasonably withheld; provided however, that
no written approval is required from the Indemnitor as to any third party Claim
(i) that results solely in injunctions or other equitable remedies in respect of
the Indemnitee or its business; (ii) that settles liabilities, or portions
thereof, that are not subject to indemnification hereunder; or (iii) is for an
amount of less than $25,000.

                  (d) An Indemnitee shall have the right to employ its own
counsel in any case and the fees and expenses of such counsel shall be at the
expense of the Indemnitee unless (i) the employment of such counsel shall have
been authorized in writing by the Indemnitor in connection with the defense of
such Claim; (ii) the Indemnitor shall not have employed counsel in the defense
of such Claim after 10 days notice; or (iii) such Indemnitee shall have
reasonably concluded that there may be defenses available to it which are
contrary to, or inconsistent with, those available to the Indemnitor; in any of
the foregoing events such fees and expenses shall be borne by the Indemnitor.

                  (e) Each Indemnitor shall pay the indemnification amount
claimed by the Indemnitee in immediately available funds promptly within 10 days
after the Indemnitee provides the Indemnitor with written notice of a Claim
hereunder unless the Indemnitor in good faith disputes such Claim. If the
Indemnitor disputes such Claim in good faith, then after the resolution of such
dispute, the amount finally determined to be due shall be paid by the Indemnitor
to the Indemnitee in immediately available funds within 10 days of such dispute
resolution. In the event the Indemnitor fails to pay the Indemnitee the amount
of such indemnification Claim within such 10 day period the Indemnitor shall pay
the Indemnitee interest on the amount of such indemnification Claim at a rate of
10% per annum, compounded monthly from the date of the original written notice
of such indemnification Claim until the indemnification Claim is paid in full.
If any Indemnitor fails to comply with its obligations to make cash payments to
an Indemnitee in an aggregate amount sufficient to reimburse the Indemnitee for
all the Indemnifiable Damages resulting from an indemnified Claim, the
Indemnitee may pursue any and all rights and remedies against the Indemnitor
available in law or in equity, subject only to the limitations set forth in
Section 8.2 above and Section 8.6 below.

         Section 8.6 Recourse for Certain Seller Indemnification Obligations;
Purchase Price Adjustment; Exclusive Remedy.

                  (a) Absent fraud, any Claims for indemnification by any of the
Buyer Indemnified Parties against Seller under Section 8.3(a) shall be satisfied
by Buyer, on behalf of any of the Buyer Indemnified Parties, solely by recourse
against the Escrow Amount, all in accordance with the terms of the Escrow

                                      -29-
<PAGE>

Agreement, and no Buyer Indemnified Party shall have any other recourse against
Seller, its partners, or its or their successors or assigns or any of their
respective assets (including the 2005 Earn-Out Consideration) for any
Indemnifiable Damages under Section 8.3(a).

                  (b) All payments for Indemnifiable Damages made pursuant to
Sections 8.3(a) or 8.4(a) shall be treated as adjustments to the Purchase Price.

                  (c) Absent fraud, no Buyer Indemnified Party shall have any
recourse against Seller for any breach of this Agreement or any Other Closing
Document by Seller or otherwise in connection with the transactions contemplated
hereby except pursuant to, and subject to the limitations in, this Article 8.
Absent fraud, no Seller Indemnified Party shall have any recourse against Buyer
or Parent for any breach of this Agreement or any Other Closing Document by
Buyer or Parent or otherwise in connection with the transactions contemplated
hereby except pursuant to, and subject to the limitations in, this Article 8.

                                    ARTICLE 9
                            MISCELLANEOUS PROVISIONS

         Section 9.1 Amendment and Modification. This Agreement may be amended,
modified and/or supplemented only by written agreement of all the parties hereto
with respect to any of the terms contained herein. No course of dealing between
or among the parties shall be deemed effective to modify, amend, waive or
discharge any part of this Agreement or any rights or obligations of any party
under or by reason of this Agreement.

         Section 9.2 Waiver of Compliance; Consents. Any failure of any party
hereto to comply with any obligation, covenant, agreement or condition herein
may be waived in writing by the other parties hereto, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing to
be effective.

         Section 9.3 Certain Definitions.

                  "24/7" shall have the meaning set forth in Section 5.14(h).

                  "2005 EBITDA" shall mean the EBITDA of Buyer for the twelve
months ending December 31, 2005.

                  "2005 EBITDA Calculations" shall have the meaning set forth in
Section 3.2.

                  "2005 Earn-Out Consideration" shall mean a cash amount equal
to the product of (a) 5.7 and (b) the difference, if a positive number, between
the 2005 EBITDA and $5,500,000.

                  "Acquired Real Property" shall have the meaning set forth in
Section 5.31(b).

                  "Affiliate" means, with regard to any specified Person, (a)
any other Person, directly or indirectly, Controlled by, under common Control
with, or Controlling such specified Person; (b) any Person, directly or
indirectly, in which such specified Person holds, of record or beneficially,
fifty percent (50%) or more of the equity or voting securities; (c) any Person
that holds, of record or beneficially, fifty percent (50%) or more of the equity
or voting securities of such specified Person; (d) any Person that, through
contract, relationship or otherwise, exerts a substantial influence on the
management of such specified Person's affairs; (e) any Person that, through

                                      -30-
<PAGE>

contract, relationship or otherwise, is influenced substantially in the
management of its affairs by such specified Person; (f) any director, officer,
manager or individual holding a similar position in respect of such Person; or
(g) as to any natural Person, any Person related by blood, marriage or adoption,
including without limitation, any spouse, parent, grandparent, aunt, uncle,
child, grandchild, sibling, cousin or in-law of such natural Person.

                  "Assumed Liabilities" shall have the meaning set forth in
Section 2.1.

                  "Audited Financial Statements" shall have the meaning set
forth in Section 5.4.

                  "Authority" means any governmental, regulatory or
administrative body, agency, commission, board, arbitrator or authority, any
court or judicial authority, any public, private or industry regulatory
authority, whether international, national, federal, state or local.

                  "Bosnia Assets" shall have the meaning set forth in Section
1.2(a).

                  "Business" shall have the meaning set forth in the recitals.

                  "Business Day" shall have the meaning set forth in Section
4.1.

                  "Buyer" shall have the meaning set forth in the preamble.

                  "Buyer Indemnified Parties" shall have the meaning set forth
in Section 8.3.

                  "CERCLA" means Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, and the Regulations
thereunder.

                  "CERCLIS" means Comprehensive Environmental Response,
Compensation, and Liability Information System.

                  "Claim" means any action, suit, claim, lawsuit, demand, suit,
inquiry, hearing, investigation, notice of a violation or noncompliance,
litigation, proceeding, arbitration, appeal or other dispute, whether civil,
criminal, administrative or otherwise.

                  "Closing" shall have the meaning set forth in Section 4.1.

                  "Closing Cash Amount" shall have the meaning set forth in
Section 3.1.

                  "Closing Date" shall have the meaning set forth in Section
4.1.

                  "Closing Letter" shall have the meaning set forth in Section
4.1.

                  "Closing Payment" shall have the meaning set forth in Section
3.3(a).

                  "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the Regulations thereunder.

                  "Contract" means any agreement, contract, commitment,
instrument, document, certificate or other arrangement or understanding, whether
written or oral, legally binding on Seller.

                                      -31-
<PAGE>

                  "Control" means (including, with correlative meanings, the
terms "Controlling," "Controlled By," and "Under Common Control With") shall
mean, with respect to any specified Person, the possession by another Person,
directly or indirectly, of the power to direct or cause the direction of
management of such specified Person, whether through ownership of voting
interests, by agreement or otherwise.

                  "Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing, migrating or emitting, as any of such terms may further
be defined in any Environmental Law, into or through any medium including,
without limitation, ground water, surface water, land, soil or air.

                  "Disputed Matters" shall have the meaning set forth in Section
3.4(b).

                  "EBITDA" shall mean the consolidated net income of the
Business for the twelve months ending December 31, 2005, plus (a) provision for
Taxes based on income or profits of the Business for such period, to the extent
that such provision for Taxes was included in computing such net income, plus
(b) interest expense of the Business for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with capital lease obligations, commissions, discounts and other fees and
charges incurred in respect of letters of credit or bankers' acceptance
financings, and net payments (if any) pursuant to hedging obligations), to the
extent that any such expense was deducted in computing such net income, plus (c)
depreciation, amortization (including amortization of goodwill and other
intangibles) and other non-cash expenses for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such net income, plus (d) except for any selling, general or
administrative expenses of the Business that are paid or assumed by Parent or
any of its Affiliates (other than Buyer) after the Closing that do not exceed
the amounts that would have been paid by Seller prior to Closing on a
stand-alone basis and to the extent any such expense is included as an expense
for purposes of computing such net income, any management or consulting or other
expenses or payments of any kind paid pursuant to any management, consulting or
other agreement or arrangement of any kind with Parent or any of its Affiliates
or any of the stockholders, officers, directors of Parent or any of its
Affiliates or any of their Affiliates to the extent any such fees, expenses or
payments were deducted in computing such net income, plus (e) any expenses or
costs incurred for the preparation of the 2005 EBITDA Calculations, to the
extent any such expenses or costs were deducted in computing such net income,
plus (f) the compensation paid to Murphy Lents and Bobby Lee Whisnant in excess
of $390,000 for the twelve months ending December 31, 2005, less (g) any
selling, general or administrative expenses of the Business that are paid or
assumed by Parent or any of its Affiliates (other than Buyer) after the Closing
that do not exceed the amounts that would have been paid by Seller prior to
closing on a stand-alone basis to the extent any such expenses are not included
as an expense for purposes of computing such net income, in each case determined
in accordance with GAAP on a basis consistent with (except as otherwise provided
in this definition) Seller's Statement of Cash Flows for the year ended December
31, 2003.

                  "Employee Benefit Plan" shall have the meaning set forth in
Section 5.13(a).

                  "Employee Leasing Company" shall have the meaning set forth in
Section 5.13(a).

                  "Employee Leasing Company Benefit Plans" shall have the
meaning set forth in Section 5.13(a).

                  "Environmental Hurdle Amount" shall have the meaning set forth
in Section 8.2(b).

                                      -32-
<PAGE>

                  "Environmental Law" shall mean any applicable Regulation,
Order, settlement agreement or Authority requirement, which relates to or
otherwise imposes liability or standards of conduct concerning the environment,
health, safety or Hazardous Substances, including without limitation,
discharges, emissions, releases or threatened releases of noises, odors or any
Hazardous Substances, whether as matter or energy, into ambient air, water, or
land, or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or handling
of Hazardous Substances, including but not limited to CERCLA, the Superfund
Amendments and Reauthorization Act of 1986, the Hazardous Material
Transportation Act, the Resource Conservation and Recovery Act of 1976, the
Toxic Substances Control Act, the Federal Water Pollution Control Act, the Clean
Water Act, the Clean Air Act, the Occupational Safety and Health Act, any
so-called "Superlien" law, all as now or hereafter amended or supplemented, and
the Regulations promulgated thereunder, and any other similar Federal, state or
local Regulations.

                  "Environmental Permit" shall mean Permits required by any
Environmental Law and necessary for the Business.

                  "ERISA" shall have the meaning set forth in Section 5.13.

                  "Escrow Amount" shall have the meaning set forth in Section
3.3(a).

                  "Excluded Assets" shall have the meaning as set forth in
Section 1.2.

                  "Final EBITDA 2005 Calculations" shall have the meaning set
forth in Section 3.4(b).

                  "Financial Statements" shall have the meaning as set forth in
Section 5.4.

                  "Financial Statement Date" shall have the meaning as set forth
in Section 5.4.

                  "GAAP" means accounting principles generally accepted in the
United States of America.

                  "Government Contract" means any Contract of Seller that is
with any Authority or Government Entity, including, without limitation, all
Contracts and work authorizations directly with any Authority or Government
Entity to supply goods and services to such Authority or Government Entity, but
does not include any Contract with any Person that is not itself an Authority or
Government Entity.

                  "Government Entity" shall mean a federal, state, provincial,
local, county or municipal government, governmental, regulatory or
administrative agency, department, commission, board, bureau, or other Authority
or instrumentality, domestic or foreign.

                  "Guarantee" means any guarantee or other contingent liability
(other than any endorsement for collection or deposit in the ordinary course of
business and any product or service warranty), direct or indirect with respect
to any obligations of another Person, through a Contract or otherwise,
including, without limitation, (a) any endorsement or discount with recourse or
undertaking substantially equivalent to or having economic effect similar to a
guarantee in respect of any such obligations and (b) any Contract (i) to
purchase, or to advance or supply funds for the payment or purchase of, any such
obligations, (ii) to purchase, sell or lease property, products, materials or
supplies, or transportation or services, in respect of enabling such other
Person to pay any such obligation or to assure the owner thereof against loss
regardless of the delivery or nondelivery of the property, products, materials
or supplies or transportation or services or (iii) to make any loan, advance or
capital contribution to or other Investment in, or to otherwise provide funds to

                                      -33-
<PAGE>

or for, such other Person in respect of enabling such Person to satisfy an
obligation (including any liability for a dividend, stock liquidation payment or
expense) or to assure a minimum equity, working capital or other balance sheet
condition in respect of any such obligation.

                  "Hazardous Substances" shall include any toxic or hazardous
substance, material, or waste, any petroleum or petroleum products, radioactive
materials, asbestos in any form that has become friable, ura formaldehyde foam
insulation, dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas, any chemicals, materials or substances defined or included in the
definition of "hazardous substances," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," or words of similar import, under any
applicable Environmental Law, any other chemical, material or substance,
exposure to which is prohibited, limited, or regulated by any governmental
Authority and any other contaminant, pollutant or constituent thereof, whether
liquid, solid, semi-solid, sludge and/or gaseous, including without limitation,
chemicals, compounds, by-products, pesticides, asbestos containing materials,
petroleum or petroleum products or by-products, and polychlorinated biphenyls,
the presence of which requires investigation or remediation under any
Environmental Law.

                  "Hurdle Amount" shall have the meaning set forth in Section
8.2(a).

                  "Income Taxes" means United States federal income taxes.

                  "Indebtedness" with respect to any Person means (a) any
obligation of such Person for borrowed money, but in any event shall include:
(i) any obligation or liabilities for which such Person has liability or which
is secured by a Lien on any property of such Person incurred for all or any part
of the purchase price of property or other assets or for the cost of property or
other assets constructed or of improvements thereto, other than accounts payable
included in current liabilities and incurred in the ordinary course of business;
(ii) the face amount of all letters of credit issued for the account of such
Person and all drafts drawn thereunder; (iii) capitalized lease obligations; and
(iv) all Guarantees of such Person; (b) accounts payable of such Person that
have not been paid within 60 days of their due date and are not being contested;
(c) annual employee bonus obligations that are not accrued on the Financial
Statements; and (d) retroactive insurance premium obligations.

                  "Indemnifiable Damages" means any and all loss, liability,
claim, damage, expense (including out-of-pocket costs of investigation and
defense and reasonable attorneys' fees and expenses), whether or not involving a
third-party claim under Section 8.5, that an indemnified Person may suffer or
incur; provided, however (a) the amount of any Indemnifiable Damages shall be
reduced for any insurance actually received by an indemnified Person in respect
of such loss, liability, claim, damage, expense (including out-of-pocket costs
of investigation and defense and reasonable attorneys' fees and expenses) and
(b) the amount of any Indemnifiable Damages shall be reduced for indemnities
from third parties or in the case of third-party Claims, by any amount actually
recovered by an indemnified Person pursuant to counterclaims directly relating
to the facts giving rise to such third-party Claims.

                  "Indemnitee" shall have the meaning set forth in Section 8.5.

                  "Indemnitor" shall have the meaning set forth in Section 8.5.

                  "Independent Accountants" shall have the meaning set forth in
Section 3.4(b).

                  "Independent Accountants' Final 2005 EBITDA Calculations"
shall have the meaning set forth in Section 3.4(b).

                  "Industrial Revenue Bonds" shall have the meaning set forth in
Section 2.1(a).

                                      -34-
<PAGE>

                  "Intellectual Property" means all domestic and foreign
patents, patent applications, trademarks, service marks and other indicia of
origin, trademark and service mark registrations and applications for
registrations thereof, copyrights, copyright registrations and applications for
registration thereof, Internet domain names and universal resource locators
("URLs"), trade secrets, inventions (whether or not patentable), invention
disclosures, moral and economic rights of authors and inventors (however
denominated), technical data, customer lists, corporate and business names,
trade names, trade dress, brand names, know-how, show-how, maskworks, formulae,
methods (whether or not patentable), designs, processes, procedures, technology,
source codes, object codes, computer software programs, databases, data
collectors and other proprietary information or material of any type, whether
written or unwritten (and all good will associated with, and all derivatives,
improvements and refinements of, any of the foregoing).

                  "Investment" shall mean (a) any direct or indirect ownership,
purchase or other acquisition by a Person of any notes, obligations,
instruments, capital stock, options, securities or ownership interests
(including partnership interests and joint venture interests) of any other
Person; and (b) any capital contribution or similar obligation by a Person to
any other Person.

                  "Knowledge" means (a) with respect to Seller, the actual
knowledge of Bobby Lee Whisnant, Murphy Lents, John Lents or Jim Pouns with
respect to a particular fact or matter in question and all knowledge which would
have been obtained by reasonable inquiry by either Messrs. Whisnant, John Lents
or Murphy Lents and (b) with respect to Buyer or Parent, the actual knowledge of
any officer, director, partner or management employee of either Buyer or Parent.

                  "Lien" means any (a) security interest, lien, mortgage,
pledge, hypothecation, encumbrance, Claim, easement, charge, restriction on
transfer or otherwise, or interest of another Person of any kind or nature,
including any conditional sale or other title retention Contract or lease in the
nature thereof; (b) any filing or agreement to file a financing statement as
debtor under the Uniform Commercial Code or any similar statute; and (c) any
subordination arrangement in favor of another Person.

                  "Material Adverse Change" means any developments or changes
which would have a Material Adverse Effect.

                  "Material Adverse Effect" means any circumstance, state of
facts or matters, changes, developments or effects that has or is reasonably
expected by Seller to have a material adverse effect in respect of the Business
or Seller's properties, assets, results of operations, plans, strategies or
condition (financial or otherwise) of Seller, taken as a whole.

                  "Occurrence" means any accident, happening or event which
occurs or has occurred at any time prior to the Closing Date that is caused or
allegedly caused by any hazard or defect in manufacture, design, materials or
workmanship including, without limitation, any failure or alleged failure to
warn or any breach or alleged breach of express or implied warranties or
representations with respect to a product manufactured, shipped, sold or
delivered by or on behalf of Seller which results or is alleged to have resulted
in injury or death to any Person or damage to or destruction of property
(including damage to or destruction of the product itself) or other
consequential damages, at any time.

                  "Operating Lease" means a lease of tangible property to which
Seller is a party as lessee that is not a capitalized lease under GAAP.

                  "Order" means any writ, decree, order, judgment, injunction,
rule, ruling, Lien, voting right, consent of or by an Authority.

                                      -35-
<PAGE>

                  "Other Closing Documents" shall have the meaning set forth in
Section 8.1.

                  "Owned Real Property" shall have the meaning set forth in
Section 1.1(i).

                  "Parent" shall have the meaning set forth in the preamble.

                  "Permits" means all permits, licenses, registrations,
certificates, Orders, qualifications or approvals required by any Authority.

                  "Permitted Liens" means (a) statutory Liens not yet delinquent
and immaterial in amount; (b) such imperfections or irregularities of title or
Liens as do not materially detract from or interfere with the present use of the
properties or assets subject thereto or affected thereby, otherwise impair
present business operations at such properties, or do not materially detract
from the value of such properties and assets; (c) Liens reflected in the
Financial Statements or the notes thereto; (d) the rights of customers of Seller
with respect to inventory or work in progress under purchase orders or Contracts
entered into by Seller in the ordinary course of business; (e) mechanics',
carriers', workers', repairmen's, warehousemen's, or other similar Liens arising
in the ordinary course of business in respect of obligations not overdue and
immaterial in amount or which are being contested in good faith and covered by a
bond in an amount at least equal to the amount of the Lien; (f) deposits or
pledges to secure workmen's compensation, unemployment insurance, old age
benefits or other social security obligations in connection with, or to secure
the performance of, bids, tenders, trade Contracts not for the payment of money
or leases, or to secure statutory obligations or surety or appeal bonds or other
pledges or deposits for purposes of like nature in the ordinary course of
business and immaterial in amount; and (g) Liens evidenced by the Real Property
Leases, the Operating Leases, the contracts and the Seller's licenses of
Intellectual Property; (h) Liens and encroachments described in any title
insurance policy, survey or title commitment provided to or obtained by Buyer or
Parent; and (i) Liens not created by, through or under Seller.

                  "Person" means any corporation, partnership, joint venture,
limited liability company, organization, entity, Authority or natural person.

                  "Policies" means all Contracts that insure (a) Seller's,
properties, plant and equipment for loss or damage; and (b) Seller or its
officers, directors, employees or agents against any liabilities, losses or
damages (or lost profits) for any reason or purpose.

                  "Prime Rate" shall have the meaning set forth in Section
3.4(c).

                  "Projections" shall have the meaning set forth in Section
5.27.

                  "Purchased Assets" shall have the meaning set forth in Section
1.1.

                  "Purchase Price" shall have the meaning set forth in Section
3.1.

                  "Real Property Lease" shall have the meaning set forth in
Section 5.31(a).

                  "Recalls" means product recall, rework or post-sale warning or
similar action.

                  "Regulation" means any rule, law, code, statute, regulation,
ordinance, requirement, announcement, policy, rule of common law or other
binding action of or by an Authority and any judicial interpretation thereof.

                                      -36-
<PAGE>

                  "Retained Liabilities" shall have the meaning set forth in
Section 2.2.

                  "Seller" shall have the meaning set forth in the preamble.

                  "Seller Indemnified Parties" shall have the meaning set forth
in Section 8.4.

                  "Seller's Intellectual Property" shall mean all Intellectual
Property owned by Seller and used in connection with the Business.

                  "Subsidiary" means, as to Seller, any other Person, a majority
of the outstanding equity or other ownership interests are beneficially owned,
directly or indirectly, by Seller.

                  "Tangible Property" shall have the meaning set forth in
Section 5.30.

                  "Tax Contest" shall have the meaning set forth in Section
7.7(c).

                  "Tax Returns" means federal, state, foreign and local Tax
reports, returns, information returns and other similar documents, but does not
include Income Tax reports, returns, information returns or other similar
documents.

                  "Taxes" means all taxes, however denominated, including ad
valorem, value added, turnover, sales, use, property, personal property
(tangible and intangible), stamp, leasing, lease, user, excise, duty, franchise,
transfer, license, withholding, payroll, employment, foreign, fuel, occupational
and interest equalization, windfall profits, severance, and other similar
charges (including interest and penalties), but shall not include Income Taxes.

                  "Taxing Authority" means the Internal Revenue Service and any
other federal, state, or local authority which has the right to impose Taxes or
Income Taxes on Seller or its partners.

                  "Unaudited Financial Statements" shall have the meaning set
forth in Section 5.4.

                  "Underground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any applicable
Regulation, Order governing underground storage tanks.

                  "VEBAs" shall have the meaning set forth in Section 5.13(a).

                  Section 9.4 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given (a) 1 calendar day after being delivered by hand,
(b) 5 calendar days after being mailed first class or certified with postage
paid or (c) upon receipt if couriered by overnight receipted courier service or
(d) when the party receiving a telecopy shall have confirmed receipt of the
communication:

                  (a) If to Seller, to:

                      Southwest Concrete Products, L.P.
                      2088 FM 949
                      Alleyton, Texas  78930
                      Attention:  Mr. Murphy Lents
                      Telephone:  (979) 732-3040
                      Facsimile:  (979) 732-3013
                      Email:  mlents@swconcrete.com

                                      -37-
<PAGE>

                  with a copy to:
                  (which shall not constitute notice to Seller)

                      Bracewell & Patterson, L.L.P.
                      711 Louisiana Street, Suite 2900
                      Houston, Texas  77002-2781
                      Attention: John L. Bland
                      Telephone: (713) 221-1310
                      Facsimile: (713) 221-2163
                      Email: john.bland@bracepatt.com

                  or to such other Person or address as Seller shall furnish by
notice to Buyer and Parent in writing.

                  (b) If to Buyer or Parent, to:

                       Headwaters Incorporated
                       10653 South River Front Parkway
                       Suite 300
                       South Jordan, UT  84095
                       Attention:        Brett A. Hickman
                       Telephone: (801) 984-9400
                       Facsimile: (801) 984-9430
                       Email:  bhickman@hdwtrs.com

                  with a copy to:
                  (which shall not constitute notice to Buyer or Parent)

                      Sayles, Lidji & Werbner
                      4400 Renaissance Tower
                      1201 Elm Street
                      Dallas, Texas 75270
                      Attention:       Michael R. Dorey
                      Telephone:       (214) 939-8707
                      Facsimile:       (214) 939-8787
                      Email:  mdorey@slw.com

                  or to such other Person or address as Buyer or Parent shall
furnish by notice to Sellers and the Partners in writing.

                  After any notice is made hereunder, the party taking such
action will use its commercially reasonable efforts to deliver a copy of such
notice to the e-mail address of the intended recipients as soon as practical but
in no event later than twelve (12) hours after such action has been taken

         Section 9.5 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,

                                      -38-
<PAGE>

except that Buyer or Parent may, without the prior approval of Seller, grant
Liens in respect of its rights and interests hereunder to its lenders (and any
agent for the lenders), and the parties hereto consent to any exercise by such
lenders (and such agent) of their rights and remedies with respect to such
collateral.

         Section 9.6 Governing Law. The Agreement shall be governed by the
internal laws of the State of Texas as to all matters, including but not limited
to matters of validity, construction, effect and performance.

         Section 9.7 Counterparts. This Agreement may be executed in two or more
counterparts (including by means of telecopied signature pages), each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Counterpart signatures need not be on the same page and
shall be deemed effective upon receipt. If this Agreement is executed by Buyer,
Parent, and Seller, it shall be deemed to be a valid Contract as between and
among such signatories notwithstanding that other parties may be named herein.

         Section 9.8 Headings. The article and section headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.

         Section 9.9 Entire Agreement. This Agreement, including the schedules
and exhibits hereto and the Contracts, documents, certificates and instruments
referred to herein, embodies the entire agreement and understanding of the
parties hereto in respect of the transactions contemplated by this Agreement and
supersedes all prior Contracts, representations, warranties, promises,
covenants, arrangements, communications and understandings, oral or written,
express or implied, between the parties with respect to such transactions. There
are no Contracts, representations, warranties, promises, covenants, arrangements
or understandings between the parties with respect to the transactions
contemplated hereby, other than those expressly set forth or referred to herein.

         Section 9.10 Injunctive Relief. The parties hereto agree that in the
event of a breach of any provision of this Agreement or a failure by a party to
perform in accordance with the specific terms herein, the aggrieved party or
parties may be damaged irreparably and without an adequate remedy at law. The
parties therefore agree that in the event of a breach of any provision of this
Agreement, the aggrieved party or parties may elect to institute and prosecute
proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of such provision without the
requirement of a posting of a bond, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.

         Section 9.11 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party hereto, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party hereto of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.

         Section 9.12 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under

                                      -39-
<PAGE>

applicable Regulations, but if any provision of this Agreement or the
application of any such provision to any Person or circumstance shall be held to
be prohibited by, illegal or unenforceable under applicable law in any respect
by a court of competent jurisdiction, such provision shall be ineffective only
to the extent of such prohibition or illegality or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

         Section 9.13 Expenses. Buyer and Parent shall bear their own expenses,
including without limitation, brokerage or investment banking, accounting, legal
fees and expenses, with respect to this Agreement and the transactions
contemplated hereby. Except as provided below, Seller shall bear its own
expenses, including without limitation, brokerage or investment banking,
accounting and legal fees and expenses, with respect to this Agreement and the
transactions contemplated hereby. If any legal action or other proceeding
relating to this Agreement, the agreements contemplated hereby, the transactions
contemplated hereby or thereby or the enforcement of any provision of this
Agreement or the agreements contemplated hereby is brought against any party,
the prevailing party in such action or proceeding shall be entitled to recover
all reasonable expenses relating thereto (including attorney's fees and
expenses) from the party against which such action or proceeding is brought in
addition to any other relief to which such prevailing party may be entitled.
Notwithstanding the foregoing provisions of this Section 9.13, (a) Parent and
Buyer jointly and severally agree to pay up to $10,000 in consideration to the
holders of the Industrial Revenue Bonds to obtain their consent to transactions
contemplated by this Agreement and up to $25,000 of Seller's reasonable legal
fees incurred in obtaining and documenting such consent and (b) Seller and
Parent each agree to pay one-half of all amounts payable to the title insurer
and surveyors, as the case may be, in respect of the title commitments, copies
of survey exceptions, survey charges and the title policies (including premiums
and endorsements).

         Section 9.14 No Third Party Beneficiaries. Except as provided in
Article 8, this Agreement is for the sole benefit of the parties hereto and
their permitted successors and assigns and nothing herein express or implied
shall be construed to give any Person, other than the parties and such permitted
successors and assigns, any legal or equitable rights hereunder.

         Section 9.15 Schedules. All schedules and exhibits attached hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein.

         Section 9.16 No Strict Construction. The parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties, and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.

         Section 9.17 Interpretation. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

         Section 9.18 Waiver of Jury Trial. EACH OF THE PARTIES HERETO
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY SCHEDULE OR EXHIBIT HERETO,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING OR STATEMENTS (WHETHER VERBAL OR
WRITTEN) RELATING TO THE FOREGOING. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT.

                                      -40-
<PAGE>

         Section 9.19 CONSENT TO JURISDICTION; SERVICE OF PROCESS. BUYER, PARENT
AND SELLER HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE STATE OR FEDERAL
COURTS LOCATED IN THE STATE OF TEXAS, COUNTY OF HARRIS IN CONNECTION WITH ANY
SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED HEREBY, AND HEREBY AGREE NOT TO ASSERT, BY WAY
OF MOTION, AS A DEFENSE, OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING
THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT
THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT
OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED BY SUCH COURTS.

         Section 9.20 EXPRESS NEGLIGENCE. THE INDEMNIFICATION RIGHTS OF A PERSON
ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT EXPRESSLY SHALL APPLY
REGARDLESS OF WHETHER THE DAMAGES TO BE INDEMNIFIED AGAINST ARISE, OR ARE
ALLEGED TO ARISE, FROM SUCH INDEMNIFIED PERSON'S OWN NEGLIGENCE (WHETHER SOLE,
JOINT OR CONCURRENT), GROSS NEGLIGENCE, NEGLIGENCE PER SE AND/OR STRICT
LIABILITY.

                    ***Remainder Intentionally Left Blank***

                                      -41-
<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto duly authorized, as of the date first
written above.

                                 HEADWATERS INCORPORATED

                                 By:  /s/ Brett A. Hickman
                                    --------------------------------------------
                                    Brett A. Hickman, Vice President, Corporate
                                    Development and Administration

                                 ACM BLOCK & BRICK, LP

                                 By: ACM Block & Brick General, Inc., its
                                     general partner

                                 By: /s/ Brett A. Hickman
                                    --------------------------------------------
                                    Brett A. Hickman, President

                                 SOUTHWEST CONCRETE PRODUCTS, L.P.

                                 By: Southwest Concrete Management Company, LLC,
                                     its general partner

                                 By: /s/ Murphy K. Lents
                                    --------------------------------------------
                                    Murphy K. Lents, Manager

                  [Signature page to Asset Purchase Agreement]

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