Document:

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                                                                    EXHIBIT 10.3

                                                                  EXECUTION COPY

                            GROUND LEASE AGREEMENT
                            ----------------------

     THIS GROUND LEASE AGREEMENT ("Lease") is made as of May 31, 2001, by and
between HERCULES INCORPORATED, a Delaware corporation ("Hercules" or Landlord")
and GEO SPECIALTY CHEMICALS, INC., an Ohio corporation ("GEO" or "Tenant").

                                   RECITALS

     A.   Hercules is the owner of certain land situated in the town of
Greenwich, Gloucester County, New Jersey, more particularly described in
Schedule A attached hereto and made a part hereof (the "Hercules Land").
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     B.   Pursuant to the terms of that certain Sale and Purchase Agreement
dated as of March 27, 2001, entered into by Hercules and GEO, Hercules has
agreed to sell to GEO, and GEO has agreed to purchase from Hercules, inter alia,
the peroxides business (the "Peroxides Business") of Hercules located on the
Hercules Land (the Sale and Purchase Agreement and all schedules, supplemental
or exhibits thereto, and including the Environmental Annex which is a part
thereof (the "Environmental Annex"), are herein collectively referred to as the
"SPA").  Only a portion of the Hercules Land is utilized for the Peroxides
Business, and the land so utilized for the Peroxides Business is more
particularly described on Schedule B attached hereto (the "Premises").
                          ----------

     C.   The SPA provides, inter alia, that (i) the Hercules Land is to be
subdivided so that the Premises shall consist of a separate tax parcel (the
"Subdivision"), (2) if the Subdivision has been fully effected and completed
prior to the Closing Date under the SPA (the "Initial Closing"), then the
Premises are to be conveyed by Hercules to GEO on the Initial Closing, (3) if
the Subdivision has not been fully effected and completed by the Initial
Closing, then the parties are to enter into this Ground Lease, which is to
remain in effect until the Subdivision is completed and the Premises are
conveyed to GEO pursuant to the SPA, and (4) the balance of the Hercules Land
(i.e. all of the Hercules Land except the Premises) is to be retained by
Hercules (herein, the "Retained Land").

     D.   Hercules has not completed the Subdivision by the Initial Closing, and
the parties desire to enter into this Lease as contemplated by the SPA.

     NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

     1.   Demise; Easements; Reserved Rights.  (a) Landlord hereby demises and
          ----------------------------------
lets the Premises to Tenant, and Tenant leases the Premises from Landlord, on
the terms and conditions set forth herein.
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     (b)  In addition, Landlord hereby grants and conveys to Tenant the
following perpetual, non-exclusive easements pertaining to the right to use (in
common with others entitled to the use thereof) certain improvements and
utilities on and over the Retained Land which are appurtenant to and an integral
part of the use and operation of the Peroxides Business at the Premises:

          (i)  the right of ingress and egress over and through the  "Reciprocal
Access Easement" to and from the Premises, which Reciprocal Access Easement is
identified on the Site Plan attached hereto and made a part hereof as in
Schedule 1(b)(i) (the "Reciprocal Access Easement "); and
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          (ii) the exclusive right to use, operate, maintain, repair and replace
the waste water pipeline which extends from the waste water treatment plant on
Premises to the Delaware River, which pipeline is described on Schedule 1(b)(ii)
                                                               -----------------
attached hereto and made a part hereof (the "Waste Water Effluent Pipeline
Easement").

The Reciprocal Access Easement and the Waste Water Effluent Pipeline Easement
(collectively the "Tenant Easements") may be used by Tenant and its officers,
directors, employers, agents, servants, employees, agents, visitors and invitees
(collectively "Permittees").  Such use shall be governed and controlled by the
terms and conditions of separate [easement agreements /declaration of easements]
to be executed concurrently herewith and filed of record in the applicable land
records, and no other right, privilege, license, easement or other interest is
granted or created by this Lease so as to authorize or permit Tenant to utilize,
occupy (for storage or other purposes) or access any other area or part of the
Retained Land.

          (c)  Landlord reserves the right to enter upon the Premises for the
purpose of performing its obligations under the Environmental Annex and as
provided in the Declaration of Easements and Restrictions made by Landlord and
dated of even date herewith, and agrees that such entry shall not unreasonably
interfere with Tenant's beneficial use and occupancy of the Premises.

     2.   Lease Term.    (a) The initial term of this Lease (the "Initial Term")
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shall be for ninety eight (98) years, commencing on the date hereof (the
"Commencement Date") and automatically terminating without further notice or
demand on the expiration of the ninety eighth (98th) anniversary of the
Commencement Date; provided, that this Lease shall terminate on such earlier
date that Tenant acquires fee simple title to the Premises as provided in the
SPA.

          (b)  Provided that no Event of Default has occurred which remains
uncured by Tenant, Tenant shall have the right and option to extend the Term of
this Lease for an unlimited number of successive terms of Ninety Eight (98)
years each (each an "Extension Term") (the Initial Term and any Extension Term,
as applicable, are collectively referred to as the "Term"), upon the same terms
and conditions applying to the Initial Term. Tenant shall exercise such option
to extend the Term by providing written notice to Landlord no less than one (1)
year prior to the expiration of the Initial Term or the then current Extension
Term, as applicable. Notwithstanding the foregoing, the parties desire to avoid
the inadvertent failure of Tenant of exercising the option to extend the Term.
Accordingly, Landlord agrees that, if Tenant

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does not give written notice to Landlord of its election to exercise the
extension option prior to the notice deadline set forth above, such option to
extend shall remain in effect until the later of one year prior to the
expiration of the Initial Term or the then current Extension Term, as
applicable, or the expiration of thirty (30) days following Tenant's receipt of
written notice from Landlord stating that Tenant's option to extend must be
exercised or will lapse; provided, further, that Landlord may provide such
reminder notice at any time within three (3) years prior to the scheduled
expiration of the Initial Term or the then current Extension Term, as the case
may be.

     (c)  Notwithstanding anything contained herein to the contrary, in the
event any of the Extension Term rights granted under this Lease shall be
unlawful or void for violation of (a) the rule against perpetuities or some
analogous common law or statutory provision, (b) the rules restricting
restraints on alienation, or (c) any other statutory or common law rule imposing
time limits, then Landlord and Tenant acknowledge and agree that any such rights
or provisions contained in this Lease shall be amended, modified, or changed so
as to comply with any such common law or statutory provision(s), including, but
not limiting to modifying the term of this Lease to the period calculated by the
death of President George W. Bush plus twenty (20) years.

     3.   Rent.  (a) The base rent for the Premises during the Term (the "Base
          ----
Rent") shall be the sum of One Dollar ($1.00) per annum, payable in advance on
the Commencement Date of this Lease.  Landlord acknowledges receipt of the sum
of Ninety Eight Dollars ($98.00), representing payment of Base Rent for the
entire Term.

          (b)  This is a "triple net" lease. Therefore, the payment of the Base
Rent shall be net to the Landlord and shall be in addition to and over and above
all other sums, charges or amounts of whatever nature to be paid by Tenant to
Landlord pursuant to this Lease (the "Additional Rent"). Additional Rent shall
include and encompass all costs, expenses and obligations of every kind and
nature whatsoever relating to the use and occupancy of the Premises by Tenant
and the conduct of the Peroxides Business by Tenant, together with any and all
actual costs and expenses incurred by or imposed upon Landlord with respect to
or arising out of the following:

               (i)  real and personal property taxes assessed against the
Premises and/or the Tenant Assets (as defined below) or this Lease (including
penalties for late payment). All real estate taxes imposed upon the Premises and
the improvements thereon shall, if the same are not separately assessed for real
property tax purposes, be prorated as follows: (A) real estate taxes imposed
upon the land value of the Premises shall be determined by multiplying the total
tax on the land by a fraction, the numerator of which is the area of land
included in the Premises, and the denominator of which is the total land area
covered by the applicable tax bill, and (B) real estate taxes imposed upon the
improvements situated on the Premises shall be determined by multiplying the
total tax on the improvements by a fraction, the numerator of which is the value
of the improvements on the Premises, and the denominator of which is the total
value of the improvements covered by the applicable tax bill, as determined by
reference to the assessed value of improvements as established by the applicable
taxing authority, or, if such separate assessment is not made by such taxing
authority, as determined by the mutual agreement of the parties. In the event of
any dispute concerning the allocation and proration of real property taxes that
is not resolved in accordance with the foregoing, then the parties agree that
such

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dispute shall be determined by arbitration at a mutually agreeable location in
the Commonwealth of Virginia in accordance with the Commercial Arbitration Rules
of the American Arbitration Association (the "AAA"), and each party shall pay
one half of any fees of the AAA in connection therewith.  Any determination by
the AAA shall be final and shall be binding and enforceable in any court of law.

               (ii) charges, costs, expenses and assessments, if any, which are
allocated to Tenant as generally outlined and set forth in SPA.

Each party shall be indemnified and held harmless by the other party from and
against all costs, charges, expenses, assessments and obligations pertaining to
the Premises which a party has not otherwise expressly agreed to accept
responsibility for or control of under this Lease or the SPA.

          (c)  The Base Rent and any Additional Rent shall be considered and
characterized as  "Rent" for purposes of this Agreement.  Tenant shall pay all
Rent to the Landlord without notice, demand, setoff, deduction, counterclaim or
abatement, except as specifically and expressly (and not impliedly) provided in
this Lease, in lawful money to Landlord at the notice address stated herein.
Tenant covenants and agrees to pay to Landlord all Additional Rent within thirty
(30) days after the issuance of a written statement from Landlord documenting
the amounts due directed to Tenant at the notice address states herein.

          (d)  Tenant shall be liable for all taxes levied against the Tenant
Assets as well as any other personal property and trade fixtures owned by and
placed by Tenant in, on or about the Premises. Notwithstanding the foregoing,
Tenant reserves the right to contest any and all such assessments, either in its
own name or that of Landlord, at its own cost and expense, and Landlord will
reasonable cooperate with Tenant in connection therewith. Tenant covenants and
agrees to timely file all personal property returns in its own name with all
applicable taxing and governmental authorities having jurisdiction thereof.
Tenant further agrees to make all such tax payments required directly to the
appropriate taxing authority.

     4.   Condition of Premises.  (a) SUBJECT TO ALL OTHER TERMS AND PROVISIONS
          ---------------------
OF THIS LEASE AND THE SPA, INCLUDING THE PERFORMANCE OF ALL OBLIGATIONS OF
LANDLORD UNDER THE ENVIRONMENTAL ANNEX, THE PREMISES ARE LEASED TO TENANT AND
POSSESSION IS TENDERED AND ACCEPTED BY TENANT IN ITS CURRENT "AS IS, WHERE IS"
CONDITION AS OF THE COMMENCEMENT DATE, AND WITH NO OTHER REPRESENTATIONS AND/OR
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THOSE OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR OF ANY FUTURE BENEFIT.

          (b)  ALL RIGHTS, DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE
PARTIES HERETO WITH RESPECT TO ANY ENVIRONMENTAL CONDITIONS OR MATTERS
PERTAINING TO THE PREMISES, INCLUDING REMEDIATION OF CONTAMINATION AND
COMPLIANCE WITH ENVIRONMENTAL LAWS, SHALL BE GOVERNED BY THE ENVIRONMENTAL ANNEX
ATTACHED TO THE SPA WHICH IS INCORPORATED HEREIN BY REFERENCE. EACH PARTY AGREES
TO PERFORM ALL ITS RESPECTIVE

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OBLIGATIONS UNDER THE ENVIRONMENTAL ANNEX. Notwithstanding any contrary
provision in this Lease, at its expense, Landlord shall comply with, and
Landlord retain all liability arising under, the New Jersey Industrial Site
Recovery Act, N.J.S.A. 13:1K-6 et seq. ("ISRA") arising with respect to the
Premises, including, without limitation, any obligations under ISRA to be
complied with by a lessee or lessor of real property or improvements upon the
expiration or earlier termination of the lease demising such real property or
improvements as required in the Environmental Annex.

     5.   Title to Tenant Assets.  (a) All buildings, facilities, fixtures,
          ----------------------
equipment, inventory and other improvements and personal property located on the
Premises have been conveyed to Tenant on the date hereof by [Bill of Sale]
pursuant to the SPA (the "Tenant Assets") and all such assets are held and owned
by Tenant.  At all times during the Term, title to the Tenant Assets, together
with all other buildings, facilities, fixtures, equipment, inventory and all
other improvements and personal property now or hereafter located, installed or
erected on the Premises shall be and remain vested in Tenant.  It is the
intention of Tenant and Landlord that the retention by Landlord of  fee simple
title to the Premises, and the conveyance to Tenant of title to the Tenant
Assets shall not change the character of the Tenant Assets as real property to
the extent that any of the Tenant Assets constitute real property under
applicable law.

          (b)  Pursuant to the SPA, Landlord has retained title and ownership of
all those certain improvements and facilities located on the Premises which have
been or will be installed, operated and maintained by Landlord with respect to
the environmental remediation as more fully set forth in the Environmental
Annex.

     6.   Use of Premises.  Tenant shall have the right to use and occupy the
          ---------------
Premises for the purpose of manufacturing, distribution and related office uses
and other purposes related to the Peroxides Business and any other business
operations conducted on the Premises (the "Permitted Use"); provided that any
use of the Premises shall (a) be in compliance with all applicable zoning,
subdivision, health and other governmental regulations, ordinances, laws and
similar enactments, and (b) not materially adversely affect Landlord's
environmental remediation activities and responsibilities pursuant to the
Environmental Annex on either the Premises or the Retained Land.

     7.   Quiet Enjoyment; Access.  (a) If and so long as Tenant shall keep,
          -----------------------
observe and perform all covenants, conditions and terms requested to be kept,
observed or performed by it hereunder, taking into account all applicable cure
or grace periods permitted hereunder, then Landlord warrants that it will not
take or permit any action which results in the disturbance of the peaceful and
quiet occupation and enjoyment of the Premises by Tenant; provided, however,
Landlord and its agents may enter upon and inspect the Premises upon twenty-four
(24) hours' prior written notice, except in the event of an Emergency (defined
below) in the exercise of its rights or the performance of its obligations
reserved, granted or imposed under this Lease.  For the purpose of this Lease,
the term "Emergency" means an event, circumstance or condition created or
arising out of the use or occupancy of the Premises by Tenant or its Permittees
which may, in the absence of immediate action by Landlord, pose an immediate
threat to Landlord or to Landlord's property.

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          (b)  Landlord covenants and warrants to Tenant that Landlord shall, at
its expense, provide to Tenant, its employees, agents and invitees vehicular and
pedestrian access to and from the Premises and a public street. In connection
with the Subdivision as provided under Section 7.9.1 of the SPA, Landlord shall,
at its expense, obtain the consent of the Grantor under that certain Deed of
Easement dated September 28, 1984, and recorded in Book 1509, page 782 of the
Glouchester County Records, so that Tenant may obtain the rights, benefits and
privileges afforded the Grantee under such Deed of Easement.

     8.   Maintenance, Repairs and Replacements.  (a) Subject to the terms and
          -------------------------------------
conditions of the SPA, Tenant shall immediately upon possession of the Premises
and throughout the Term, assume sole responsibility for all costs and expenses
relative to the use, operation, maintenance, repair and replacement of all or
any part of the Premises, together with the Tenant Assets, including necessary
or appropriate replacements, renewals, upgrades, and repairs (structural as well
as non-structural) required to keep and maintain the Premises and the Tenant
Assets in good order and condition.

          (b)  Notwithstanding anything contained in this Lease to the contrary,
in the event Landlord reasonably determines that a condition or circumstance
exists on, in, under or above the Premises with respect to the maintenance,
repair and or replacement obligations of Tenant, which condition or circumstance
constitutes an Emergency, then Landlord shall have the right, but not the
obligation, to take whatever action may be reasonably necessary to address the
risk posed by such emergency.

     9.   Casualty.  (a) In the event the Premises or the Tenant Assets situated
          --------
thereon are partially or totally destroyed by fire or other casualty or damage
(a "Casualty"), Tenant shall have the right, but not the obligation, to cause
such damage to be repaired and restored at Tenant's sole cost and expense. There
shall be no abatement of any Rent or any other payments due Landlord hereunder
on account of any such Casualty, except to the extent of any Additional Rent
which Landlord is able to economically abate without (i) incurring any
unreimbursed costs or expenses to the Landlord (which shall be prepaid by Tenant
to Landlord as a condition precedent to any such abatement, together with such
other assurances of performance if such costs and expenses cannot be precisely
and definitively ascertained at the time) or (ii) causing a material adverse
impact on the operations of the Landlord or other parties, if applicable, within
the Premises or the Retained Land in connection with the Environmental Annex
(the "Casualty Loss Abatement"). Landlord shall have no obligation or
responsibility to repair, maintain or replace any part or all of the Premises or
the Tenant Assets as a result of any such Casualty, except to the extent caused
by the negligence or willful misconduct of Landlord or its Related Parties
(defined below).

          (b)  In the event all or any portion of the Access Road is partially
or totally destroyed by any casualty or damage, Landlord shall have the right,
but not the obligation, to cause such damage to be repaired and restored at
Landlord's sole cost and expense except to the extent that any such casualty or
damage was caused by the negligent acts or omissions of Tenant or its
Permittees, in which event Tenant shall be solely responsible and liable for any
such costs and expenses. In such case, Tenant's liability for the payment of the
Rent and the

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performance of all the covenants, conditions and terms hereof on Tenant's part
to be performed shall continue unabated.

     10.  Compliance with Laws.  Tenant shall not cause or allow any waste on
          --------------------
the Premises or the Access Road or any other portion of the Hercules Land, and
shall at Tenant's expense comply with all applicable laws, rules, ordinances,
orders and regulations of any federal, state and local authority, now or
hereafter applicable to Tenant's use and occupancy thereof, subject, however, to
the covenants and obligations of Landlord under the Environmental Annex.

     11.  Utilities.  Tenant shall pay the cost of all utilities and utility
          ---------
services furnished to the Premises throughout the Term.  Landlord shall pay all
charges incurred with respect to the period prior to the Commencement Date.

     12.  Alterations and Improvements.  Tenant shall have the right to make any
          ----------------------------
alterations, additions or improvements to the Premises (the "Additions"),
provided any such Additions (a) are done at Tenant's sole cost and expense; (b)
comply with and are performed and completed in accordance with all applicable
laws and ordinances of all public authorities having jurisdiction over the
Premises and in accordance with the building, zoning and related codes, rules
and regulations of any such authority; and (c) do not materially adversely
affect Landlord's environmental remediation activities and responsibilities
pursuant to the Environmental Annex at both the Premises and the Retained Land.
Unless otherwise provided herein, or agreed to in writing between Landlord and
Tenant, all Additions, when made, installed in or attached to the Premises,
shall, become part of the Tenant Assets and shall be disposed of as set forth in
Section 20 of this Lease, captioned "Surrender of Premises".
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     13.  Signs.  Tenant shall comply with all local, state and federal
          -----
ordinances, laws or regulations concerning signage on the Premises.

     14.  Indemnity and Waiver.  (a) Except as otherwise provided in the SPA,
          --------------------
Tenant agrees to defend, indemnify and save harmless Landlord, its officers,
directors, employees, agents and servants (collectively, "Related Parties") from
and against all liability, loss or expenses (including, but not limited to
penalties, costs and attorneys' fees) for any suit, cause of action, claim,
demand, settlement, award or judgment (hereinafter referred to singly or
collectively as "Claim") to the extent arising out of (i) default by Tenant in
the performance of any of its covenants or obligations hereunder; or (ii) the
incorrectness or incompleteness of any representation or warranty of Tenant made
herein; or (iii) any personal injury, loss or damage to property, including loss
of use thereof, or involving damage to the environment (including (A) releases
of contaminants into or onto the air, water or land, (B) violation of any
federal, state or other environmental statute, law, regulation or other legal
requirement or duty, (C) penalties for such violations and (D) natural resource
damages), sustained by any person or persons (including third parties or
contractors or subcontractors employees, agents or servants), arising out of,
resulting from or in consequence of Tenant's occupancy and use of the Premises
or the Access Road, except to the extent caused by the negligence or willful
misconduct of Landlord or its Related Parties; provided, however, with respect
to any such claim brought against Landlord, Tenant shall, upon Landlord's
request, permit Landlord to participate in the defense or negotiate

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settlement thereof. This indemnification shall survive the expiration or earlier
termination of this Lease.

          (b)  Except as otherwise provided in the SPA, Landlord agrees to
defend, indemnify and save harmless Tenant and its Related Parties from and
against all liability, loss or expenses (including, but not limited to
penalties, costs and attorneys' fees) for any suit, causes of action, claim,
demand, settlement, award or judgment (hereinafter referred to singly or
collectively as "claim") to the extent arising out of (i) default by Landlord in
the performance of any of its covenants or obligations hereunder; or (ii) the
incorrectness or incompleteness of any representation or warranty of Landlord
made herein; or (iii) any personal injury, loss or damage to property, including
loss of use thereof, or involving damage to the environment (including (A)
releases of contaminants into or onto the air, water or land, (B) violation of
any federal, state or other environmental statute, law, regulation or other
legal requirement or duty, (C) penalties for such violations and (D) natural
resource damages), sustained by any person or persons (including third parties
or contractors or subcontractors employees, agents or servants), arising out of,
resulting from or in consequence of Landlord's occupancy and use of the Hercules
Land, except to the extent caused by the negligence or willful misconduct of
Tenant; provided, however, with respect to any such claim brought against
Tenant, Landlord shall, upon Tenant's request, permit Tenant to participate in
the defense or negotiate settlement thereof. This indemnification shall survive
the expiration or earlier termination of this Lease.

          (c)  Notwithstanding any provision of this lease to the contrary, but
subject to the terms and provisions of the SPA, Landlord and Tenant hereby waive
any and all right of recovery, claim, action or cause of action by the waiving
party, or anyone claiming through or under the waiving party by way of
subrogation or otherwise, against the other party, its agents or employees, or
any person or party to which or to whom coverage is afforded under any policy
required to be maintained under Section 15 of this Lease, for any loss or damage
to the Premises, as a result of fire or other cause which could be insured
against under the terms of a standard fire, vandalism, malicious mischief and
extended coverage insurance policy or policies, building contents and business
interruption insurance policies, or for which the waiving party may be
reimbursed as a result of insurance coverage affecting any loss suffered by
either party to this Lease, regardless of cause or origin, even if the fire or
other cause shall have been the result of negligent conduct of the other party.

     15.  Insurance.  (a)  Tenant shall during the Term hereof at its cost and
          ---------
expense, maintain valid and enforceable insurance of the following character:

               (i)  commercial general liability insurance with minimum limits
of $2,000,000 per occurrence and $5,000,000 annual aggregate, covering the legal
liability of Tenant against claims for bodily injury, personal injury or
property damage, occurring on, in or about the Premises or as a result of
products or materials manufactured, processed, constructed or sold, or services
rendered, on the Premises. Coverage shall include "premises and operations",
"products and completed operations", "contractual liability", "explosion,
collapse and underground hazards", "personal injury liability" and "independent
contractors";

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               (ii)   "all risks" or "special causes of loss" property
insurance, or their equivalent in such amount as Tenant may elect;

               (iii)  business automotive liability insurance (covering owned
and leased vehicles) with minimum limits of $2,000,000 combined single limit or
$2,000,000 per occurrence and $2,000,000 annual aggregate; and

               (iv)   workers' compensation insurance in accordance with
applicable laws, unless Tenant is authorized by the appropriate regulatory
agency to self-insure workers' compensation claims in the state where the
Premises is located.

          (b)  Landlord shall during the Term at its cost and expense, maintain
valid and enforceable insurance of the following character:

               (i)    commercial general liability insurance with minimum limits
of $2,000,000 per occurrence and $5,000,000 annual aggregate, covering the legal
liability of Landlord against claims for bodily injury, personal injury or
property damage, occurring on, in or about the Retained Land or as a result of
the use of products or materials manufactured, processed, constructed or sold,
or services rendered, on the Retained Land. Coverage shall include "premises and
operations", "products and completed operations", "contractual liability",
"explosion, collapse and underground hazards", "personal injury liability" and
"independent contractors";

               (ii)   business automotive liability insurance (covering owned
and leased vehicles) with minimum limits of $2,000,000 combined single limit or
$2,000,000 per occurrence and $2,000,000 annual aggregate; and

               (iii)  workers' compensation insurance in accordance with
applicable laws unless Landlord is authorized by the appropriate regulatory
agency to self-insure workers' compensation claims in the state where the
Premises is located.

          (c)  The insurance required by Sections 15(a) and (b) of this Lease
shall be written by companies of recognized financial standing which are rated
at least "A" by A.M. Best rating services. Such insurance may be obtained by
Tenant or Landlord by endorsement on their respective blanket insurance policies
which cover risks at the subject property and other properties of such party.
Tenant and Landlord may maintain self-insurance programs sufficient to provide
the amounts and types of coverage required to be maintained by such party under
this Section 15, provided such party has a net worth equal to or greater than
$50,000,000.

          (d)  Each of Landlord and Tenant shall deliver to the other party,
upon the execution and delivery of this Lease, certificates of insurance or
letters of self insurance, reasonably satisfactory to Landlord and Tenant, as
the case may be, evidencing all the insurance which is then required to be
maintained by Tenant and Landlord, and each party shall, upon written notice,
deliver certificates of insurance evidencing the renewal of such insurance.

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          16.  Assignment and Subletting.  Each of Landlord and Tenant shall be
               -------------------------
entitled to assign all or any part of its respective rights and obligations
under this Lease to any other party without the consent of the other.  Upon an
assignment of this lease by either Landlord or Tenant, the assignor shall be
released from all liability hereunder arising following the date of such
assignment.  Tenant shall also have the right to sublease the Premises or any
part thereof to any other party without the consent of Landlord.

          17.  Condemnation. If the whole or part of the Premises shall be taken
               ------------
or condemned by any competent authority for any public use or purpose during the
Term, or any extension or renewal, or if such authority shall take title to the
Premises in lieu of condemnation, Tenant reserves the right to claim and
prosecute its claim at its own cost and expense in all appropriate courts and
agencies for an award or damages for the taking, based upon its leasehold
interest and ownership of all improvements on the Premises, including the Tenant
Assets, interruption of business, moving expenses and other damages available
under applicable law, without impairing any rights of Landlord for the taking of
or injury to the reversion. Landlord shall assign to Tenant all rights of
Landlord in and to any awards or other proceeds payable by reason of any taking.
Tenant shall have the sole right (in the name of Tenant and Landlord or both) to
negotiate for, to agree to and to contest all offers and awards.

          In the event of the taking by eminent domain of the whole or any part
of the Premises to such an extent as to render the remainder of the Premises
untenantable and Tenant is unable to conduct its business thereon, in Tenant's
judgment, then this Lease shall terminate as of the date of the final,
nonappealable award of possession to the condemning authority for the portion of
the Premises so condemned. In any such event, all Rent and other charges payable
hereunder as rent shall be apportioned to the date of termination of this Lease,
and Tenant waives all claims against Landlord for or on account of or incident
to such taking. In the event of a partial taking which does not render the
remainder of the Premises untenantable, then Base Rent and Additional Rent shall
be equitably adjusted as a result of such condemnation.

          18.  Leasehold Mortgages.  (a) Tenant shall have the right, without
               -------------------
Landlord's prior consent, to mortgage all or any part or part of the leasehold
interest created by this Lease, and to refinance the same, at any time and from
time to time, under a leasehold mortgage or deed of trust  on Tenant's leasehold
estate (herein referred to as a "Leasehold Mortgage"; the holder of any such
Leasehold Mortgage is referred to herein as a "Leasehold Mortgagee"), provided
that all rights acquired under such Leasehold Mortgage shall be subject to each
of the covenants, conditions and restrictions set forth in this Lease.

               (b)  Landlord agrees that, after its receipt of notice of the
existence of a Leasehold Mortgage and the name and address of the holder
thereof, and thereafter for so long as any such Leasehold Mortgage remains
unsatisfied of record, the following provisions shall apply:

                    (i)  There shall be no cancellation, surrender or
modification of this Lease by joint action of Landlord and Tenant without the
prior written consent of the Leasehold Mortgagee, except as the Leasehold
Mortgage or any other agreement between Tenant and the Leasehold Mortgagee may
provide or permit.

                                       10
<PAGE>

               (ii)   Any notice given to Tenant by Landlord shall
simultaneously be given to the Leasehold Mortgagee at the address furnished to
the Landlord. If such notice pertains to a default or defaults by Tenant, then
any Leasehold Mortgagee shall have the right to cure the default complained of
within the same period from the date of notice to the Leasehold Mortgagee as is
given Tenant pursuant to the applicable provisions of this Lease, and Landlord
agrees to accept the Leasehold Mortgagee's performance in curing the default as
fully as if Tenant had cured the default. If a notice advises that Landlord had
attempted to terminate this Lease because of the default or defaults of Tenant,
then, notwithstanding any provision of this Lease to the contrary, any Leasehold
Mortgagee shall have, at its election, the right:

                      (1)  provided that the default or defaults of Tenant can
be cured by the payment of money, to nullify any attempted termination as fully
as if no default had ever occurred by paying all Rent and other monetary amounts
then in default to Landlord within thirty (30) days after the Leasehold
Mortgagee's receipt of Landlord's notice of termination; or

                      (2) to postpone indefinitely any attempted termination of
this Lease by giving Landlord, within thirty (30) days after the Leasehold
Mortgagee's receipt of Landlord's notice, notice of its intention to foreclose
its Leasehold Mortgage, accompanied by its payment of all Rent and other sums
payable hereunder then in default, and thereafter, commencing and proceeding
with reasonable diligence, to cure any defaults reasonably susceptible of being
cured without actual possession of the Premises and to foreclose its Leasehold
Mortgage, meanwhile paying all amounts due Landlord under this Lease; such
postponement shall continue until confirmation of the foreclosure sale,
whereupon such notice of termination shall be deemed nullified as fully as if no
default had occurred.

               (iii)  Landlord agrees that in the event of any termination of
this Lease not approved by Leasehold Mortgagee and upon notice from the
Leasehold Mortgagee given within sixty (60) days after the date upon which
Leasehold Mortgagee receives written notice of any such termination from
Landlord, Landlord will enter into a new Lease for the Premises with the
Leasehold Mortgagee holding the highest priority, or its designee, for the
remainder of the Term, commencing as of the date this Lease is terminated as to
Tenant but effective as of the date of this Lease and in any event prior to the
interest of any subsequent transferee of Landlord's interest in the Premises, at
the Rent and otherwise upon the same terms and provisions as are herein
contained. Notwithstanding the foregoing, it shall be a condition to Landlord's
obligation to enter into such new Lease that the Leasehold Mortgagee, or its
designee, pay to Landlord, at the time of execution of such new Lease, all sums
due Landlord by reason of Tenant's default hereunder and perform all other
obligations which reasonably can be performed without being in possession,
together with Landlord's reasonable costs and expenses in terminating this
Lease, including reasonable attorneys' fees.

               (iv)   The Leasehold Mortgagee shall be given notice of any
actions or proceedings in bankruptcy or under the United States Bankruptcy Code
by the parties hereto as required by law, and shall have the right to intervene
therein and be made a party to such proceedings at its sole cost and expense.
Any Leasehold Mortgagee which elects not to

                                       11
<PAGE>

intervene or become a party to such proceeding shall have the right to receive
from Tenant a copy of any award or decision made therein.

     19.  Estoppel Certificate.  (a) Tenant agrees at any time and from time to
          --------------------
time, within fifteen (15) days after Landlord's written request, to execute,
acknowledge and deliver to Landlord a written instrument in recordable form
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, that it is in full force and effect as modified
and stating the modifications), and the dates to which rent and any other
charges have been paid in advance, if any, and stating whether or not to the
best knowledge of the signer of such certificate the Landlord is in default in
the performance of any covenant, agreement or condition contained in this Lease
and, if so, specifying each such default of which the signer may have knowledge
and the date the Landlord was notified of such default, it being intended that
any such statement delivered pursuant to this section may be relied upon by any
prospective purchaser of the fee or any assignee of Landlord's interest in this
Lease.

          (b)  Landlord agrees at any time and from time to time, within fifteen
(15) days after Tenant's written request, to execute, acknowledge and deliver to
Tenant a written instrument in recordable form certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that it is in full force and effect as modified and stating the modifications),
and the dates to which rent and any other charges have been paid in advance, if
any, and stating whether or not to the best knowledge of the signer of such
certificate the Tenant is in default in the performance of any covenant,
agreement or condition contained in this Lease and, if so, specifying each such
default of which the signer may have knowledge and the date the Tenant was
notified of such default, it being intended that any such statement delivered
pursuant to this section may be relied upon by any prospective purchaser of
Tenant's interest in this Lease or any Leasehold Mortgagee.

     20.  Surrender of Premises/Removal of Property.  The foregoing provisions
          -----------------------------------------
shall apply under this Section only in the event the Lease is not terminated as
a result of the Subdivision of the Premises and the conveyance of fee simple
title to the Premises from Landlord to Tenant as provided in the SPA.

          (a)  Upon the expiration or sooner termination of the Term, Tenant
shall quit and surrender to Landlord possession of the Premises and, unless
otherwise provided herein, all rights of the Tenant under this Lease shall
terminate. In addition, Tenant shall tender possession of the Premises to
Landlord free and clear of all liens and encumbrances created by or through
Tenant.

          (b)  Upon such expiration or sooner termination of the Term of this
Lease, Landlord shall have the following options with respect to the physical
improvements and structures (excluding all personal property and removal trade
fixtures belonging to Tenant) on the Premises:

               (i)  Tenant, at its sole cost and expense, shall convey to
Landlord all buildings and other improvements on the Premises by deed and bill
of sale free and clear of all liens and security interests securing Tenant's
obligations; or

                                       12
<PAGE>

               (ii)      Within twelve (12) months of any such expiration or
termination, Tenant shall, at its sole cost and expense raze and remove all
buildings and other above grade structures and improvements, leaving the
Premises completely in an unimproved and level ground surface condition, clear
of all debris (the "Land Only Condition"). In the event possession of the
Premises is not delivered to Landlord as provided above, then Tenant shall be
liable for all costs and expenses incurred by Landlord to bring the Premises to
the Land Only Condition. The foregoing obligations of Tenant with respect to the
Land Only Condition shall survive the expiration of earlier termination of the
Term.

          (c)  Tenant shall, within sixty (60) days following the termination of
this Lease, remove all equipment, inventory and other personal property from the
Premises unless otherwise approved by Landlord. If Tenant shall fail to remove
any such personal property which Tenant is required to remove as set forth
above, Landlord may remove same without any liability to Tenant. In addition,
any of such personal property which is required to be removed from the Premises
by Tenant but which is not so removed shall be conclusively presumed to have
been abandoned by Tenant and title to such property shall pass to Landlord
without any payment or credit, and Landlord may, at its option and at Tenant's
expense, store, keep and/or dispose of such property.

     21.  Events of Default by Tenant and Remedies of Landlord.
          ----------------------------------------------------

          (a)  It shall be an event of default under this Lease ("Event of
Default") if Tenant:

               (i)    does not pay in full when due and without demand any and
all installments of Rent or any other charges or payments whether or not herein
included as rent and fails to cure such default within sixty (60) days following
the receipt of written notice by Tenant from Landlord thereof; or

               (ii)   violates or fails to perform or otherwise breaches any
agreement, term, covenant or condition herein contained or any other obligation
herein imposed upon Tenant and fails to cure such default within one hundred
twenty (120) days following the receipt of written notice by Tenant from
Landlord thereof (provided, that if such default cannot reasonably be cured
within such time period, and if Tenant commences the cure of such default within
such time period, then the time period for cure shall be extended so long as
Tenant diligently prosecutes the cure of same); or

               (iii)  becomes insolvent or bankrupt or makes an assignment for
the benefit of creditors, or offers a composition or settlement to creditors, or
calls a meeting of creditors for any such purpose, or files a petition in
bankruptcy or for reorganization or for an arrangement with creditors under any
federal or state act, or files a bill in equity or otherwise initiates
proceedings in any court for the appointment of a receiver, trustee, liquidator,
custodian, conservator or similar official for any of Tenant's assets, or if any
of the real or personal property of Tenant shall be levied upon by any sheriff,
marshal or constable; or

                                       13
<PAGE>

                    (iv)   A petition in bankruptcy or for reorganization or for
an arrangement with creditors under any federal or state act is filed against
Tenant, or if a bill in equity or other proceeding is filed in any court by any
creditor of Tenant for the appointment of a receiver, trustee, liquidator,
custodian, conservator or similar official for any of Tenant's assets.

               (b)  In the event of a breach or threatened breach by Tenant of
any of the covenants or provisions hereof, Landlord may recover from Tenant all
damages it may incur by reason of such breach, and shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity,
except that Landlord shall have no right to terminate this Lease or Tenant's
possession of the Leased Premises. Tenant acknowledges that the remedy of
injunction is an essential remedy in instances in which Tenant's acts or failure
to act may cause damage to Landlord or its property and specifically agrees not
to interpose any objections to Landlord's motions for injunction in such
instances. Mention in this Lease of any particular remedy shall not preclude
Landlord from any other remedies under this Lease, or now or hereafter existing
at law or in equity or by statute.

               (c)  If Tenant is in default hereunder, Landlord, after the lapse
of any time period and notice as may be applicable thereto, shall also have the
right, without prejudice to any other right or remedy provided for hereunder or
otherwise available, to cure the default; and in such case, all of Landlord's
cost and expenses in so doing, plus interest thereon at a rate of 8% per annum,
shall be due and payable to Landlord, upon written demand, as Additional Rent
hereunder.

               (d)  Except as provided above, each right and remedy provided for
in this Lease shall be cumulative and shall be in addition to every other right
or remedy provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise, and the exercise by either party of any one
or more of the rights or remedies provided for in this Lease or now or hereafter
existing at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by such party of any or all other rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise. Nor shall this Lease abrogate or diminish
Tenant's responsibilities to Landlord under any other agreement, nor Landlord's
responsibilities to Tenant, under any other agreement.

          22.  Events of Default by Landlord and Remedies of Tenant.
               ----------------------------------------------------

               (a)  It shall be an event of default under this Lease if
Landlord:

                    (i)   does not pay in full when due and without demand any
payments or sums due Tenant and fails to cure such default within sixty (60)
days following the receipt of written notice by Landlord from Tenant thereof; or

                    (ii)  violates or fails to perform or otherwise breaches any
agreement, term, covenant or condition herein contained or any other obligation
herein imposed upon Landlord and fails to cure such default within one hundred
twenty (120) days following the receipt of written notice by Landlord from
Tenant thereof (provided, that if such default cannot reasonably be cured within
such time period, and if Landlord commences the cure of such default

                                       14
<PAGE>

within such time period, then the time period for cure shall be extended so long
as Landlord diligently prosecutes the cure of same).

                    (b)  In the event of a breach or threatened breach by
Landlord of any of the covenants or provisions hereof, Tenant shall have the
right of injunction and the right to invoke any remedy allowed at law or in
equity. Landlord acknowledges that the remedy of injunction is an essential
remedy in instances in which Landlord's acts or failure to act may cause a
default and specifically agrees not to interpose any objections to Tenant's
motions for injunction in such instances. Mention in this Lease of any
particular remedy shall not preclude Tenant from any other remedies under this
Lease, or now or hereafter existing at law or in equity or by statute.

                    (c)  Notwithstanding the foregoing, if Landlord is in
default hereunder, Tenant, after the lapse of any time period and notice as may
be applicable thereto, shall have the right, without prejudice to any other
right or remedy provided for hereunder or otherwise available, to cure the
default; and in such case, all of Tenant's cost and expenses in so doing, plus
interest thereon at a rate of 8% per annum shall be due and payable to Tenant,
upon written demand.

               23.  Non-Liability.  (a) Landlord shall not be liable for any
                    -------------
damage or injury which may be sustained by Tenant or any third party, as a
consequence of the failure, breakage, leakage or obstruction of any utility
lines or facilities, or consequence thereof, except to the extent resulting from
the gross negligence or willful misconduct of Landlord or Landlord's agents or
employees.

                    (b)  Tenant shall not be liable for any damage or injury
which may be sustained by Landlord or any third party, as a consequence of the
failure, breakage, leakage or obstruction of any utility lines or facilities, or
consequence thereof, except to the extent resulting from the gross negligence or
willful misconduct of Tenant or Tenant's agents or employees.

               24.  Non-Waiver.  The various rights, remedies, options and
                    ----------
elections of the parties, expressed herein, are cumulative. The failure or
either party to enforce strict performance by the other of the conditions and
covenants of this Lease, or to exercise any election or option, or to resort to
or have recourse to any remedy herein conferred, shall not be construed or
deemed to be a waiver or a relinquishment for the future by the non-breaching
party of any such conditions and covenants, options, elections or remedies, but
such conditions and covenants shall continue in full force and effect.

               25.  Validity and Interpretation of Lease.  The terms,
                    ------------------------------------
conditions, covenants and provisions of this Lease shall be deemed to be
severable. If any clause, provision of section herein contained shall be
adjudged to be invalid or unenforceable by a court of competent jurisdiction or
by operation of any applicable law, it shall not affect the validity of any
other clause, provision or section herein, but such other clauses, provisions or
sections shall remain in full force and effect. Each party accepts equal
responsibility for the preparation of this Lease so there shall be no
presumption against either party as the sole drafter of this Lease.

                                       15
<PAGE>

          26.  Attorneys' Fees.
               ---------------

               (a)  Each party shall pay upon demand all of the other party's
costs, charges and expenses including the reasonable fees and out-of-pocket
expenses of counsel, agents and others retained by the other party incurred in
enforcing the party's obligations hereunder, if the other party obtains an
enforceable judgment against the party.

               (b)  Should Landlord be named as a defendant or other party in
any suit brought against Tenant in connection with or arising out of Tenant's
occupancy or use hereunder, Tenant shall pay, except to the extent of Landlord's
fault found in such suit, to Landlord, as Additional Rent hereunder, Landlord's
costs and expenses incurred in such suit, including a reasonable attorney's fee.

          27.  Mechanics' Liens.  If any mechanics' or other liens shall be
               ----------------
created or filed against the Premises or any other portion of the Hercules Land
by reason of labor performed or materials furnished for Tenant in the erection,
construction, completion, alteration, repair or addition of any existing
improvement, or Additions or other improvements, Tenant shall, within twenty-one
(21) days thereafter, at Tenant's own cost and expense, cause such lien or liens
to be satisfied and discharged of record, together with any notices of intention
that may have been filed. Failure to do so shall entitle Landlord to such
remedies as are provided herein in the case of any default of this Lease, in
addition to such as are permitted by law or equity.

          28.  Entire Contract; Superseding Effect.  This Lease and the SPA
               -----------------------------------
and the instruments referenced herein contain the entire agreement between the
parties with respect to the Premises. No representative, agent or employee of
Landlord has been authorized to make any representations or promises with
reference to the within letting or to vary, alter or modify the terms hereof. No
additions, changes or modification, renewals or extensions of this Lease shall
be binding unless reduced to writing and signed by Landlord and Tenant. In the
event of any conflict between the terms of the Environmental Annex and the terms
of this Lease, the Environmental Annex shall govern and control.

          29.  Force Majeure.  (a) In the event that Landlord shall be delayed,
               -------------
or hindered or prevented from the performance of any act required hereunder, by
reason of a force majeure, including an act of God, fire, casualty, action of
the elements, strikes, lockouts, other labor troubles, inability to procure, or
general shortage of labor, equipment, facilities, materials or supplies, failure
of transportation or of power, restrictive governmental laws or regulations,
riots, insurrection, war or any other cause beyond the control of Landlord (a
"Force Majeure Event") the time for performance of such act shall be extended
for a reasonable period of time not to exceed sixty (60) days following
cessation of the Force Majeure Event.

               (b)  In the event that Tenant shall be delayed, or hindered or
prevented from the performance of any act required hereunder, by reason of a
Force Majeure Event, the time for performance of such act shall be extended for
a reasonable period of time not to exceed sixty (60) days following cessation of
the Force Majeure Event.

                                       16
<PAGE>

     30.  No Merger.  The leasehold created hereby shall not merge with the fee
          ---------
notwithstanding the fact that such interests may be held by the same person,
unless the holder of such interests and all holders of mortgages upon such
interest shall consent to the merger.

     31.  Landlord's Access.  Tenant shall permit Landlord or its authorized
          -----------------
representatives to enter upon the Premises during regular business hours of
Tenant or subtenant, as the case may be, and upon reasonable notice for the
purposes of: (a) performing engineering and scientific testing and inspections
required for Landlord to comply with any environmental laws, regulations or
orders applicable to the Premises as provided under this Lease; and (b) making
any necessary repairs to the Premises and performing any work thereon that may
be necessary to comply with any laws or orders and to prevent waste or
deterioration and as required under the Environmental Annex (collectively, the
"Access Activities"). Only such notice as is reasonable under the circumstances
shall be required for the Access Activities in case of an Emergency (defined
above).

     32.  Successors and Assigns.  All the terms, covenants and conditions
          ----------------------
herein contained shall inure to the benefit of and shall bind the respective
parties hereto and their successors and assigns.

     33.  Landlord's Reservation of Rights Regarding Subdivision of Premises.
          ------------------------------------------------------------------

          (a)  The parties covenant and agree to cooperate with each other to
effect the Subdivision and shall execute and deliver such documents as may be
necessary in order to complete the approval and recordation of the Subdivision,
including but not limited to the execution and delivery of a subdivision plan,
applications, documents, easements, undertakings and agreements as are
reasonably required to complete the proposed Subdivision.

          (b)  Notwithstanding the foregoing, Landlord shall assume full
responsibility for obtaining the Subdivision, any paying all costs therefor,
including, but not limited to:

               (i)   the preparation of and obtaining all governmental approvals
and authorizations;

               (ii)  the issuance by all controlling governmental bodies or
authorities of such permits, licenses, certificates or authorizations for the
continued operation and use of the existing utilities which service the
Premises;

               (iii) the issuance by all controlling governmental bodies of
authorities of such final, irrevocable, incontestable and unappealable permits
and approvals (all being referred to herein as the "Permits") including, without
limitation (i) the approval and recordation of the subdivision plan of the
Premises as prepared by Landlord and its agents pursuant to the applicable
local, county and state subdivision ordinances, laws, enactments and codes; (ii)
and any other licenses and other approvals, certificates, exceptions,
authorizations, changes, variances and special exceptions, from any local,
county, state or federal governmental entity having jurisdiction over the
Hercules Land, which may be required or reasonably necessary in connection with
the Subdivision. Tenant hereby covenants and agrees to cooperate with

                                       17
<PAGE>

Landlord and to execute and deliver all necessary documents in connection with
application for and processing of the Permits, and any appeals in connection
therewith, each of which shall be sought in Landlord's name;

               (iv)  resolving any actual or officially proposed moratoriums,
restrictions or regulations prohibiting, limiting or placing special charges or
conditions upon the availability or use of sewer, water, electricity, roads, new
construction, building materials, increased traffic, or the rental, use or
occupancy of the Premises or the Hercules Land with respect to the Subdivision;
and

               (v)   resolving any exactions required by any governmental agency
or department, by any utility, or by any civic or homeowners association, as a
condition to favorable governmental action for the Subdivision.

          (c)  Landlord shall be responsible for all expenses associated with
the Subdivision including legal, civil engineering and application fees. All
other costs and expenses associated with the transfer of fee simple title to the
Premises subsequent to the Subdivision such as preparation of the deed, title
insurance, recording fees, transfer taxes and stamp taxes shall be allocated and
paid for as provided in the SPA.

          (d)  The parties acknowledge and agree that the cooperation of the
Tenant with respect to the Subdivision shall not be unreasonably withheld or
delayed; provided, however, that the cooperation of the Tenant will not directly
or indirectly cause a material adverse affect on the equitable or leasehold
interest of the Tenant in the Premises or the legal interest of the Tenant
subsequent to the transfer of fee simple title to the Premise or the use and
enjoyment of the Premises as it exists on the date of this Lease. Landlord
covenants and agrees that the exercise of the rights and activities by Landlord
under this Section with respect to the Subdivision shall be performed and
conducted in such a manner as to not interfere with the use and occupancy of the
Premises by Tenant as provided under this Lease, nor shall the zoning applicable
to the Premises be changed.

          (e)  Landlord and Tenant further covenant and agree to cooperate and
assist each other in the creation, establishment, granting or conveying, either
by easement, declaration, license or any other instrument or agreements (whether
recorded or unrecorded) as the parties may deem necessary or reasonably
advisable (and subject to the consent of the other party, which consent shall
not be unreasonably withheld, conditioned or delayed) to provide for the
continued and uninterrupted use of the existing utilities, services and roadways
which are appurtenant to and a part of the current or proposed operation and use
of the Premises, which shall include a non-exclusive and perpetual waterline
easement in favor of Tenant to operate, use, maintain, repair and replace the
existing waste water pipeline (owned by Tenant) from the waste water treatment
plant on Premises to the Delaware River (the "Tenant's Agreements and
Easements"), and as may be required or necessary with respect to the performance
of Landlord's environmental remediation obligations at the Premises and the
Hercules Land as more fully set forth in the Environmental Annex (the
"Landlord's Agreements and Easements"). The Tenant's Agreements and Easements
and the Landlord's Agreements and Easements are sometimes collectively referred
to as the "Subdivision Agreements and Easements."

                                       18
<PAGE>

               (f)  The Parties covenant and agree to fully cooperate and assist
the other in creating, establishing or granting of the Subdivision Agreements
and Easements and all related or associated activities or undertakings as may be
necessary with respect to the Subdivision.

          34.  Miscellaneous Provisions.
                ------------------------

               (a)  Construction.  In all references herein to any parties,
                    ------------
persons, entities or corporations, the use of any particular gender or the
plural or singular number is intended to include the appropriate gender or
number as the text of this Lease may require. The term "including," when used in
this Lease, shall mean "including, without limitation" and shall be construed as
a term of illustration and not a term of limitation.

               (b)  Headings.  The Section headings shall not be a substantive
                    --------
part of this Lease and shall not be used to interpret the meaning hereof. The
headings are for convenience in reference only.

               (c)  Recording.  This Lease shall be recorded in the appropriate
                    ---------
 land records in Gloucester County, New Jersey.

               (d)  Notices.  Any notice, request, instruction or other
                    -------
document to be given hereunder by any party to any other party shall be in
writing and delivered personally, by telecopy and confirmed by mail, or sent by
registered or certified mail, postage prepaid, or sent by overnight courier
(e.g., Federal Express, Airborne or UPS) (a "Notice"):

                               (i)  if to Hercules to:

                               Hercules Incorporated
                               Hercules Plaza
                               1313 North Market Street
                               Wilmington, Delaware  19894-0001
                               Telecopier: (302) 594-7252
                               Attention: Israel J. Floyd,
                               Executive Vice President,
                               Secretary and General Counsel

                               with copies to:

                               Hercules Incorporated
                               Hercules Plaza
                               1313 North Market Street
                               Wilmington, Delaware  19894-0001
                               Telecopier: (302) 594-5210
                               Attention: Director of Corporate Real Estate

                                       19
<PAGE>

                          (ii) if to Tenant to:
                               Geo Specialty Chemicals, Inc.
                               28601 Chagrin Boulevard, Suite 210
                               Cleveland, Ohio 44122
                               Telecopier: (216) 765-1307
                               Attention: Mr. George Ahearn

                               and with a copy to:
                               Thompson Hine LLP
                               127 Public Square
                               3900 Key Center
                               Cleveland, Ohio  44114
                               Telecopier: (216) 566-5800
                               Attention: Stuart Welburn, Esq.

or at such other address for a party as shall be specified by like Notice.  Any
Notice which is delivered in the manner provided herein shall be deemed to have
been duly given to the party to whom it is directed upon actual receipt by such
party (evidenced, in the case of a telecopy, by the receipt of the correct
telecopier confirmation).

               (e)  Holding Over.  Any holding over after the expiration or
                    ------------
earlier termination of the Lease, or of any extension or renewal thereof,
without the written consent of Landlord shall, at Landlord's option, be
construed to be a tenancy from month to month and shall otherwise be on the same
terms and conditions hereinbefore specified.

               (f)  Further Documentation.  Landlord and Tenant shall each
                    ---------------------
execute and deliver any and all documents, in recordable form if required, as
may be reasonably necessary for either party hereto to carry out the intent and
purpose of this Lease.

               (g)  Governing Law.  This Lease and all covenants contained
                    -------------
herein shall be construed in accordance with the laws of the State of New
Jersey.

               (h)  Counterparts.  This Lease may be executed in two
                    ------------
counterparts, which together shall constitute one and the same instrument.

                            [Signature Page Follows]

                                       20
<PAGE>

     IN WITNESS WHEREOF, this instrument has been duly executed by the parties
as of the date first set forth above.

                                           TENANT:

                                           GEO SPECIALTY CHEMICALS, INC., an
                                           Ohio corporation

Attest:___________________________         By:_______________________________

Name:_____________________________         Name:_____________________________

Title:____________________________         Title:____________________________

                                           LANDLORD:

                                           HERCULES INCORPORATED, a
                                           Delaware corporation

Attest:___________________________         By:_______________________________

Name:_____________________________         Name:_____________________________

Title:____________________________         Title:____________________________

                                       21
<PAGE>

                                 ACKNOWLEDGMENT
                                 --------------

STATE OF DELAWARE        )
-----------------
                         ) SS.
COUNTY OF NEW CASTLE     )

     Be it remembered that on May _____, 2001, ____________________________ and

                                appeared before me, and each such person

acknowledged under oath, to my satisfaction, that:

     (a)  they did sign, seal, deliver and/or attest to the attached document on
behalf of HERCULES INCORPORATED, a Delaware corporation, the grantor named in
this document; and

     (b)  this document was signed and made by the grantor as its duly
authorized and voluntary act and deed.

                                                 ________________________(SEAL)

                                      NOTARY PUBLIC

                                      PRINT NAME:_________________________

                                      COMMISSION EXPIRES:_________________

                                       22
<PAGE>

                                ACKNOWLEDGMENT
                                --------------

STATE OF                      )

                              ) SS.

COUNTY OF                     )

          Be it remembered that on May _____, 2001, _______________________ and

                                appeared before me, and each such person

acknowledged under oath, to my satisfaction, that:

     (a)  they did sign, seal, deliver and/or attest to the attached document on
behalf of GEO SPECIALTY CHEMICALS, INC., the Grantee named in this document; and

     (b)  this document was signed and made by said grantee as its duly
authorized and voluntary act and deed.

                                                ________________________(SEAL)

                                        NOTARY PUBLIC

                                        PRINT NAME:_______________________

                                        COMMISSION EXPIRES:_______________

                                       23<PAGE>

                                                                    Exhibit 10.4

                                                               Execution Version

                           PLANT OPERATING AGREEMENT
                               Franklin, Virginia

     This Plant Operating Agreement ("Agreement") is made effective as of May
31, 2001 by and between HERCULES INCORPORATED, a corporation organized under the
laws of the State of Delaware, with its principal offices at Hercules Plaza,
1313 N. Market Street, Wilmington, Delaware 19894 ("Operator") and GEO SPECIALTY
CHEMICALS, INC., a corporation organized under the laws of Ohio, with its
principal offices at 28601 Chagrin Boulevard, Suite 210, Cleveland, Ohio 44122
("Buyer"). Hercules and Buyer are sometimes referred to herein as a "Party" and
collectively as the "Parties" to this Agreement.

     WHEREAS, Operator and Buyer are parties to a Sale and Purchase Agreement
dated as of March 27, 2001 (the "Sale Agreement") pursuant to which Operator as
of the date hereof (the "Closing Date") sold to Buyer certain assets and rights,
and Buyer assumed certain liabilities, primarily associated with Hercules'
Peroxides strategic business unit and products (the "Peroxides Business") on the
terms set forth in the Sale Agreement; and

     WHEREAS, Operator's employees are skilled and experienced in the operation
and maintenance of the Peroxy Area Facility, as more fully described in the
Lease Agreement between the parties dated as of the date hereof (the "Peroxy
Area Facility"), located at Operator's Franklin, Virginia Facility (the
"Franklin Facility"), and Buyer desires Operator to provide substantially all
labor services in connection with the operation and maintenance thereof and
certain other services described herein;

     NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the Parties, intending to be legally bound, hereby agree as
follows:

1.   OPERATION OF PLANT - SCOPE OF WORK

     1.01  Operator hereby agrees to operate and maintain the Peroxy Area
Facility on behalf of Buyer in accordance with the terms and conditions of this
Agreement. The Peroxy Area Facility is located on land leased by Buyer
comprising part of the Franklin Facility.

     1.02  The scope of work and services to be performed by Operator under this
Agreement is described and more fully provided for in Exhibit A attached hereto
and incorporated by reference. Exhibit B attached hereto and incorporated herein
by reference lists the direct charges ("Direct Charges"), allocated charges
("Allocated Charges"), and fixed cost charges ("Fixed Charges") that will be
paid by Buyer in accordance with the terms of this Agreement, and lists the
charges allocated to the Peroxides Business prior to

                                       1
<PAGE>

the Closing Date that will not be allocated to Buyer under this Agreement.
Attached hereto as Exhibit C, for illustrative purposes, is a summary of the
charges comprising the fixed fee for the Fixed Charges set forth in Section
8.01, which is based on the forecast for such charges for 2001.

     1.03  All services supplied under this Agreement shall be performed under
the direct supervision of Operator's personnel.

2.   TERM AND TERMINATION

     The term of this Agreement shall commence on the date first written above
and shall continue for a period of three (3) years, and thereafter shall be
automatically renewed for two additional one (1) year periods unless either
party provides the other party with advance written notice at least six (6)
months prior to the end of the then-current term of its election to not renew
the Agreement.

3.   OBLIGATIONS OF BUYER

     In addition to the other obligations of Buyer contained in this Agreement,
Buyer undertakes the following obligations:

     3.01  Buyer shall designate a representative ("Buyer's Representative") who
shall be Buyer's employee. The Buyer's Representative shall act as the point of
contact for Operator on matters concerning this Agreement. The Buyer's
Representative shall primarily work at the Peroxy Area Facility. The Buyer's
Representative shall leave standing instructions for the Peroxy Area Facility's
shift supervisor for each shift during which the Buyer's Representative will not
be present ("Buyer's Standing Instructions"). If Buyer desires to make any
changes to such standing instructions for any particular shift, the Buyer's
Representative shall communicate the changes to the applicable shift supervisor
prior to the beginning of the shift. Buyer may designate an alternate Buyer's
Representative or change the Buyer's Representative at any time upon advance
written notice to Operator.

     3.02  Buyer shall prepare annually a sales and production forecast
("Production Forecast"), which shall forecast the products and corresponding
production levels and budgetary requirements anticipated for the forthcoming
calendar year. A Production Forecast shall be issued to Operator at least one
hundred and twenty (120) days prior to the beginning of each calendar year.
Buyer shall give Operator advance notice when any significant deviations from
the Production Forecast are required to be implemented during any calendar year,
which notice must be sufficient to permit Operator to make any operational
adjustments required to meet such deviations.

     3.03  Buyer shall determine product formulations, operating procedures,
product specifications and product quality analysis procedures which it shall
provide to Operator in operating instructions ("Operating Instructions") issued
from time to time. It is the intent of the parties that Buyer shall initially
adopt the specifications and quality analysis

                                       2
<PAGE>

and inspection procedures which were used in the Peroxy Area Facility as of the
Closing Date, to the extent consistent with the past practice of the Peroxides
Business.

     3.04  All raw materials used by the Peroxy Area Facility, all goods-in-
process at the Peroxy Area Facility, and all products manufactured at the Peroxy
Area Facility shall be the property of Buyer. Buyer shall be fully responsible
for, and shall assume all title to and liability and risk of loss arising out of
the production, presence, use, storage or sale of such raw materials, goods-in-
process or products. Operator may, upon Buyer's request, provide Buyer with
technical advice and assistance; provided, however, that in no event will the
rendering of such advice and assistance cause Operator to be liable to Buyer for
any claims, damage or loss arising out of the production, presence, use or sale
or such raw materials, goods-in-process or products, except as provided in
Section 12.

     3.05  Buyer shall provide Operator with instructions for the shipment of
product ("Shipping Instructions"). The Shipping Instructions shall specify
customers' names, specific destination, special customer requirements (such as
packaging or labeling) and terms of shipment. In the event any Shipping
Instruction is ambiguous or incomplete, Operator shall not ship against it until
Operator has obtained all necessary information from a representative of Buyer,
which Operator shall promptly seek to obtain.

     3.06  Operator shall operate the Peroxy Area Facility in compliance with,
and Buyer shall comply with, Buyer's environmental and safety rules and site
regulations as they currently exist or may be revised by Buyer from time to time
("Safety Rules"). It is the intent of the parties that Buyer shall initially
adopt the environmental and safety rules and site regulations which were used in
the Peroxy Area Facility as of the Closing Date.

4    OBLIGATIONS OF OPERATOR

     In addition to the other obligations of Operator contained in this
Agreement, Operator undertakes the following obligations:

     4.01  Operator shall designate a supervisory employee (herein
"Superintendent") to act as the primary point of contact for Buyer's
Representative with respect to Operator's performance under this Agreement.
Operator shall also designate an alternate to be contacted in the absence of the
Superintendent.

     4.02  In performing the work provided in this Agreement, Operator shall
operate, supervise and maintain the Plant as reasonably directed by Buyer in
accordance with Buyer's Production Forecast, Operating Instructions and Shipping
Instructions, subject to the provisions of Section 4.06. Operator shall follow
and employ those operating procedures, quality analysis and inspection
procedures and product specifications until Operator receives notice of changes
thereto.

     4.03  Within sixty (60) days of receipt of Buyer's Production Forecast,
Operator shall prepare and deliver to Buyer an operating budget ("Operating
Budget") for the forthcoming year. The Operating Budget shall include forecasts
of the Direct Charges,

                                       3
<PAGE>

Allocated Charges and Fixed Charges detailed in Exhibit B hereto, consumption of
raw materials and packaging materials, energy and utilities costs, capital
spending and raw materials and finished products inventories, all subject to the
approval of Buyer. The contents and format of such Operating Budget shall be
developed by the Parties. The parties shall use reasonable best efforts to agree
upon the final form of each Operating Budget; provided that if the parties are
unable to reach agreement, then the Operating Budget for the prior calendar year
shall apply and be followed until such time as the parties reach agreement on a
new Operating Budget.

     4.04  Operator shall not make capital expenditures for the Peroxy Area
Facility on behalf of Buyer without Buyer's prior written consent. In the event
capital expenditure is desirable as a result of maintenance, expansion or other
production requirements, Operator shall, upon request by Buyer, prepare
appropriate papers for Buyer's consideration in evaluating such proposed
expenditure.

     4.05  Operator shall record production and maintenance data as before the
sale of the Peroxides Business unless otherwise instructed by Buyer, except that
such production and maintenance data will not longer be recorded in SAP.

     4.06  Operator reserves the right to refuse to perform any obligations or
service under this Agreement, or refuse to modify any process or procedure, if,
in Operator's reasonable judgment, such performance would present an
unacceptable risk to the Franklin Facility or personnel safety or would be
reasonably likely to violate any Applicable Law (as defined in the Sale
Agreement), including any Environmental Law (as defined in the Environmental
Annex to the Sale Agreement) and any employee health or safety law or
regulation, in which case Operator will notify Buyer immediately. Upon any such
notice, Operator and Buyer shall cooperate in attempting to develop a method of
completing the applicable objective in a mutually acceptable manner.

5    IMPROVEMENTS

     5.01  Direct Improvements. Buyer may, in its sole discretion, choose to
           -------------------
make capital expenditures for the maintenance, expansion or improvement of the
Peroxy Area Facility ("Direct Improvements"), and Operator shall either make
such Direct Improvements or arrange, or permit Buyer to arrange, for the
completion of such Direct Improvements by a third party contractor. Buyer shall
pay for such Direct Improvements, either by reimbursing Operator or paying the
third party contractor directly, if applicable.

     5.02  Common Area Improvements and Maintenance. Operator shall (a) make all
           ----------------------------------------
necessary capital expenditures for the maintenance of the common areas and
facilities shared by Buyer and the Franklin Facility as a whole ("Common Area
Maintenance"), and (b) make capital expenditures to expand or improve such
common areas and facilities which are ordinary or routine in nature and
consistent with the historic operation of the Franklin Facility (collectively
"Common Area Improvements"). Buyer shall pay an annual fixed fee to Operator for
all Common Area Maintenance, which Buyer shall pay in twelve (12) equal monthly
installments in arrears. The annual fee for Common Area

                                       4
<PAGE>

Maintenance shall initially be $75,000, and shall be adjusted annually in
accordance with the method described in Section 8.03. Buyer shall pay an annual
fixed fee to Operator for all Common Area Improvements, which Buyer shall pay in
twelve (12) equal monthly installments in arrears. The annual fee for Common
Area Improvements shall initially be $67,000, and shall be adjusted annually in
accordance with the method described in Section 8.03.

     5.03  Special Improvements. For productivity and cost reduction
           --------------------
capital investment or other improvements not covered by Section 5.01 or 5.02,
Operator may, from time to time, propose capital investment opportunities
constituting an improvement, upgrade or enhancement ("Special Improvements") to
the Facility, and thereafter shall make the capital investment. Operator will,
by written notice to Buyer, clearly and in detail describe the Special
Improvement, identify the source (base cost or variable cost efficiency) of the
expected savings from the project, why the Special Improvements are desirable,
the cost of the Special Improvements, how the Special Improvements will affect
and benefit the operations of both the Parties, and the proposed allocation of
the cost of the Special Improvements. Buyer may elect to opt-in to any Special
Improvement on terms to be agreed to between the parties. Buyer shall not pay
any portion of any Special Improvement except to the extent it opts-in to such
Special Improvement and agrees to pay a portion of the cost. As a general
principle, Buyer shall not receive the benefit of any Special Improvement to
which it does not opt-in; provided that Buyer shall not be denied the right to
use any facility, common area, service or utility that it is otherwise entitled
to use pursuant to this Agreement or any other agreement with Operator or
pursuant to Applicable Law.

     5.04  Capacity; Expansion Activities. Operator is not required to supply
           ------------------------------
services or work beyond the capacity level consistent with recent past practice
of the Business, subject to the reasonable growth of the Peroxides Business as
agreed to in the Operating Budgets, or as contemplated by the strategic plan
relating to the Peroxides Business provided by Operator to Buyer prior to the
Closing Date, with respect to both production increases and new products
(subject to Buyer's payment of capital expenditures required to sustain the
growth contemplated by such strategic plan).

6.   MAINTENANCE

     6.01  Obligations to Maintain. Except as otherwise specifically stated
           -----------------------
herein, Operator shall have the obligation to maintain in good working order and
perform maintenance upon all facilities, lines and service systems which are
jointly used by the Parties. The cost of maintenance to dedicated facilities or
lines shall be borne solely by the Party owning or using the dedicated line or
facility. Operator shall maintain in good working order and perform maintenance
upon Franklin Facility and to the extent necessary so as not to adversely affect
Buyer's occupation or use of the Peroxy Area Facility or the operation of the
Peroxides Business.

     6.02  Failure to Maintain. In the event that Operator fails to complete in
           -------------------
a timely manner any maintenance required to be performed by it, Buyer shall have
the right to

                                       5
<PAGE>

perform the necessary maintenance or engage a third party contractor to complete
the applicable services.

7.   SHUTDOWNS

     7.01  Buyer Shutdowns. If Buyer elects to undertake a shutdown of the
           ---------------
Peroxy Area Facility, whether a partial or full shutdown, for any reason and for
any period of time, other than routine shutdowns included in a Production
Forecast (a "Buyer Shutdown"), Buyer shall provide Operator with as much advance
notice of any such Buyer Shutdown as is practicable under the circumstances,
provided that Buyer shall use best efforts to provide at least ninety (90) days
advance notice to Operator. Buyer shall pay all direct costs incurred in
connection with implementing the Buyer Shutdown, and will continue to pay,
during the continuance of such Buyer Shutdown, all Direct Charges for a period
of four (4) months after the effective date of such Buyer Shutdown and all
Allocated Charges and Fixed Charges for a period of fifteen (15) months after
the effective date of such Buyer Shutdown; provided that (a) Operator shall use
best efforts, commencing as of the date Buyer provides notice to Operator of the
Buyer Shutdown, to mitigate and reduce all such Direct Charges, Allocated
Charges and Fixed Charges during such periods, and (b) Buyer's payment of Fixed
Charges during such fifteen (15) month period shall not in any month exceed
eighty-five percent (85%) of the then-applicable monthly Fixed Charge fee. Buyer
shall pay all expenses and bear all costs reasonably necessary to commence
operations after a Buyer Shutdown, including but not limited to all hiring,
severance, retraining and other applicable expenses mandated by (i) Operator's
collective bargaining agreement which then applies to the employees at the
Peroxy Area Facility or (ii) Operator's then-existing standard severance policy;
provided that Operator shall use best efforts to mitigate and reduce all such
expenses. Buyer and Operator shall cooperate in the coordination of all Buyer
Shutdowns.

     7.02  Operator Shutdowns. Operator shall not be permitted to cease
           ------------------
providing services during the term of this Agreement, pursuant to a full or
partial shutdown of the Franklin Facility or otherwise, for any reason or for
any period of time (exclusive of (a), (b) and (c) below, an "Operator
Shutdown"), except for (a) short-term shutdowns undertaken with the written
consent of Buyer or provided for in an Operating Forecast or Operating Budget,
and carried out in accordance with such agreement, Operating Forecast or
Operating Budget, as applicable; (b) short-term shutdowns, arising out of
accidents or other unexpected events, for which Operator has obtained the
consent of Buyer's Representative or other representative of Buyer designated in
Buyer's Standing Instructions, which shall include contact information for
Buyer's Representative and two additional representatives of Buyer to be
contacted in the case of any such accident or event; or (c) the cessation of
services or shutdown during the subsistence of a Force Majeure Event. During the
pendency of any Operator Shutdown, Buyer shall not make any payments under this
Agreement for any services not received, including for Direct Charges, Allocated
Charges and Fixed Charges, and Operator shall be liable to Buyer for all direct
losses suffered by Buyer.

8.   COMPENSATION OF OPERATOR; PAYMENT

                                       6
<PAGE>

     8.01  Buyer shall make the following payments to Operator during the term
of this Agreement: (a) for Direct Charges invoiced to Buyer in accordance with
the applicable Operating Budget and Exhibit B, as the same may be modified by
the parties from to time in a written document signed by each party; (b) for the
Fixed Charges, in the amount of $360,000 per year, payable in twelve (12) equal
monthly installments; (c) for the Allocated Charges, in the amount of $185,000
per year, payable in twelve (12) equal monthly installments; and (d) for Common
Area Maintenance, Common Area Improvements and Special Improvements (in
accordance with and to the extent provided by Section 5).

     8.02  Operator shall invoice to Buyer, and Buyer shall remit to Operator,
on a monthly basis, in arrears, the amount to be reimbursed by Buyer to Operator
pursuant to Section 8.01 above. Payment for the monthly amounts due which are so
invoiced shall be due thirty (30) days from the date of invoice. Interest shall
accrue on late payments from the due date at the rate of eight percent (8%) per
annum.

     8.03  The fees payable by Buyer to Hercules pursuant to this Agreement for
(a) Fixed Charges, (b) Allocated Charges, (c) Common Area Maintenance, and (d)
Common Area Improvements will be adjusted: (i) at the beginning of each year of
this Agreement by the percentage of change from the preceding and current Fourth
Quarter Producer Price Index for Chemicals and Allied Products; and (ii) in the
event of a change in any Environmental Law (as defined in the Environmental
Annex to the Sale Agreement) after the date of this Agreement which requires
capital expenditures that would benefit the Peroxy Area Facility, in an amount
equal to an allocation to Buyer in accordance with Exhibit A.

     8.04  Operator's computations of Direct Charges and/or applicable Special
Improvements and the books and records of Operator underlying such computations
may be reviewed, on an annual basis during normal business hours and upon
reasonable notice, by Buyer's auditors, at Buyer's cost and to the extent
necessary to verify Operator's computation of such charges; provided that such
auditors shall be permitted to share the information gleaned from such books and
records only to the extent required for such auditors to perform their functions
in accordance with GAAP and Applicable Law, including without limitation all
applicable rules and regulations of the Securities and Exchange Commission.

9.   PLANT PERSONNEL AND COLLECTIVE BARGAINING AGREEMENTS

     9.01  Personnel provided by Operator to perform services under this
Agreement shall at all times remain employees of Operator. Operator shall have
the right to determine the job qualifications and the identity of employees who
perform services under this Agreement; provided that Operator shall to the
extent permitted under its collective bargaining agreement generally maintain as
employees at the Peroxy Area Facility the employees located at such facility
prior to the Closing Date. Operator, exercising commercially reasonable
discretion, reserves the exclusive right to determine the selection, salaries,
wages, benefits, promotion, discipline, discharge and supervision

                                       7
<PAGE>

of Operator's employees employed at the Peroxy Area Facility. The provision of
employee services under this Agreement is subject to any collective bargaining
agreement which may be now or in the future binding upon Operator. Operator,
exercising commercially reasonable discretion, also reserves the exclusive right
to negotiate, resolve grievances and otherwise deal with the employees and their
collective bargaining representatives. It is the intent of the Parties hereto
that Operator's discretion in dealing with its employees and any of their
collective bargaining representatives shall be unimpaired by Buyer. Operator
shall not be required to perform any obligation under this Agreement where such
performance would be reasonably likely to directly result in a violation of
Operator's collective bargaining agreement then in effect. In the course of
negotiating any applicable collective bargaining agreement or any amendment of
any collective bargaining agreement during the term of this Agreement or any
renewal period, Operator shall have due regard to the provisions of this
Agreement and the intent of the parties to operate the Peroxy Area Facility in
the manner provided herein.

     9.02  Operator's employees employed at the Peroxy Area Facility shall
be, in the good faith judgment of Operator, qualified and competent to perform
the tasks for which they were engaged. Operator shall use its best efforts to
ensure that all services supplied by Operator shall be provided in accordance
with good engineering and/or industry practices used by persons knowledgeable
about that particular service or industry.

     9.03  Throughout the term of this Agreement, Buyer shall report to Operator
on a periodic basis the quality of services being provided by Operator's
employees assigned to the Peroxy Area Facility. In the event that Buyer raises
concerns or issues about the quality of labor, personnel problems or other labor
issues, Operator shall take all actions reasonably available to it to resolve
the concerns or issues so raised. If Buyer proposes in any Production Forecast
to increase the number of employees employed at the Peroxy Area Facility,
Operator shall cooperate with Buyer in hiring additional personnel or assigning
additional personnel to the Peroxy Area Facility. Operator shall provide prompt
notice to Buyer of any labor issues that would be reasonably expected to affect
the Peroxides Business, including any increase in labor costs or discussions or
agreements with any labor union or actions taken or proposed to be taken by any
labor union.

10.  BOOKS AND RECORDS

     Each party shall keep and make available to the other Party and its
representatives records and accounts of all transactions pertaining to the
obligations hereunder and shall preserve them for a period of three (3) years
following the end of the fiscal year to which they pertain except for such
records as may have a longer retention period under applicable statute,
regulation or other authority. The Parties may review these books and records
upon reasonable notice during normal business hours.

11.  COMPLIANCE WITH LAWS AND REGULATIONS

     Both parties hereto shall comply with all applicable federal, state and
local laws, regulations, ordinances, rules and orders in the performance of
their respective rights and

                                       8
<PAGE>

obligations under this Agreement. The Parties, in their respective capacities as
owner and operator of the Peroxy Area Facility, shall maintain and file any
records and notices, and obtain all licenses and permits, pertaining to the
operation of the Peroxy Area Facility as may be lawfully required by any
federal, state or local government agency or office. Each party shall cooperate
with the other in such compliance efforts.

12.  INDEMNIFICATION

     12.01  Buyer shall defend, indemnify and save Operator, its officers,
directors, employees, agents and servants (hereinafter for the purposes of this
Section referred to as "Operator") harmless from and against all liabilities,
losses, obligations, expenses, damage or penalties of any kind or nature
(including without limitation, reasonable attorneys' and experts' fees and
expenses) for any suit, claim, settlement, award, penalty, fine, judgment,
judicial order or consent order (hereinafter collectively referred to as
"Claims") (a) arising out of the production, presence, sale or use of any
product manufactured or of any raw material used at or waste or by-products
produced by the Peroxy Area Facility or arising out of the operation of the
Peroxy Area Facility under this Agreement (including, without limitation,
products liability claims); (b) because of personal injury (including death at
any time resulting therefrom) or loss of or damage to property sustained by any
person or persons (including third parties, and Operator's or Buyer's officers,
directors, employees, agents or servants), to the extent arising out of,
resulting from or in consequence of the performance of the services under this
Agreement, (c) because of contamination of, adverse effects on, or damage to the
environment, (including, but not limited to, (i) releases of contaminants into
or onto the air, water or land; (ii) violations of or cost of compliance with
any obligations imposed by any federal, state, or other environmental statute,
law, regulation or other legal requirement or duty; (iii) penalties for such
violations; (iv) natural resource damage), sustained or brought by any person or
persons (including government agencies, third parties, or Operator's or Buyer's
officers, directors, employees, agents or servants), to the extent arising out
of, resulting from or in consequence of the performance of the services under
this Agreement, or (d) arising out of any Claim which is asserted by any
Operator employee for injury or alleged injury to the extent related to his or
her employment with Operator related to the operation or maintenance of the
Peroxy Area Facility, including Workers' Compensation claims. Operator agrees to
use commercially reasonable efforts to defend questionable or inappropriate
claims, and Buyer agrees that the cost of such defense shall be reimbursed to
Operator. Operator shall mitigate any losses for which it may claim
indemnification hereunder. Buyer shall reimburse Operator on a quarterly basis
for actual costs properly paid by Operator for all Workers' Compensation
benefits, voluntary compensation benefits, medical and hospital expenses and
other related industrial injury expenses for those employees injured or alleging
injuries incurred during the term of this Agreement to the extent arising out
of, resulting from or in consequence of the performance of the services under
this Agreement. Such quarterly reimbursements shall not be limited by the term
of this Agreement.

     12.02  Operator shall not be entitled to indemnification hereunder to the
extent that Claims arise out of (a) the acts or omissions of Operator at the
Franklin Facility

                                       9
<PAGE>

unrelated to its performance of services under this Agreement; (b) gross
negligence or deliberate misconduct on the part of Operator; or (c) matters
subject to indemnification claims by Buyer pursuant to Section 12.03. Operator
may not recover amounts pursuant to Section 12.01 which have already been
absorbed by Buyer, whether as Direct Charges, Allocated Charges or Fixed Charges
or otherwise.

     12.03  Operator shall defend, indemnify and save Buyer, its officers,
directors, employees, agents and servants (hereinafter for the purposes of this
Section referred to as "Buyer") harmless from and against all Claims (a) arising
out of any matter described in Section 12.02(a) or (b) above; (b) arising out of
Operator's failure to comply with the provisions of any applicable collective
bargaining agreement or Applicable Law (other than Claims which could be made by
Buyer against Operator under the Environmental Annex (as defined in the Sale
Agreement)); (c) arising out of actions by Operator in the performance of the
services which are taken in disregard of specific lawful and commercially
reasonable instructions given by Buyer's Representative to Operator's
Superintendent; (d) arising out of a breach by Operator of any provision of this
Agreement; or (e) any direct action taken or claim made against Buyer by any
employee of Operator arising out of such employee's employment at the Peroxy
Area Facility, other than actions or claims based primarily on the actions of
Buyer's Representative (subject to Buyer's obligation to reimburse Operator for
the expenses set forth in the penultimate sentence of Section 12.01). Buyer
shall mitigate any losses for which it may claim indemnification hereunder.

     12.04  Buyer shall not be entitled to indemnification hereunder to the
extent that Claims arise out of (a) the gross negligence or deliberate
misconduct on the part of Buyer, or (b) matters subject to indemnification
claims by Operator pursuant to Section 12.01.

     12.05  An indemnifying Party shall, upon request by the indemnified Party,
permit the indemnified Party to participate in the defense or settlement of any
Claim against the indemnified Party which is subject to the provisions of this
Section.

13   INSURANCE

     13.01  Buyer shall, until the expiration or termination of this Agreement,
procure and maintain insurance of the type and with the minimum limits
hereinafter set forth:

            a) Worker's Compensation - Including coverage for Occupational
               ---------------------
               Disease

                                             Minimum Limits
                                             --------------
                  Worker's Compensation      Statutory Benefits
                  Employer's Liability       $100,000 each occurrence

            b) Comprehensive General Liability - Including coverage for
               -------------------------------
               Contractual Liability assumed by Buyer under Section 12
               (Indemnity), Premises - Operations, Products - Completed
               Operations, Independent

                                       10
<PAGE>

               Contractors and explosion, collapse and underground property
               damage hazards (otherwise known as "XCU").

                                        Minimum Limits
                                        --------------
                    Bodily Injury       $500,000 each occurrence
                                        $500,000 annual aggregate
                    Property Damage     $500,000 each occurrence
                                        $500,000 annual aggregate

The above policy(ies) shall include Operator as a named insured with respect to
any claims arising out of, resulting from or in consequence of the performance
of work under this Agreement.

            c) Comprehensive Automobile Liability - Including coverage for
               ----------------------------------
Owned, Hired andNon-owned Automobiles.
                                        Minimum Limits
                                        --------------
                    Bodily Injury       $500,000 each person
                                        $500,000 each accident

                    Property Damage     $500,000 each accident

            Umbrella Liability - Providing limits which, in addition to the
            ------------------
primary limits described in subparagraphs (b) and (c) above, shall total, for
each such coverage respectively, a minimum of Two Million Dollars ($2,000,000)
annual aggregate. This coverage may be subject to a retained limit of Ten
Thousand Dollars ($10,000) per occurrence for those losses it covers which are
not covered by the policies obtained in accordance with subparagraphs (b) and
(c) above. The above policy(ies) shall include Operator as a named insured with
respect to any claims arising out of, resulting from or in consequence of the
performance of work under this Agreement.

     13.02  Coverage. The coverages referred to above are set forth in full in
            --------
the respective policy forms, and the foregoing descriptions of such policies are
not intended to be complete.

     13.03  Certificate of Insurance. Buyer shall furnish, before commencing any
            ------------------------
work under this Agreement, Certificates of Insurance indicating (1) types and
amounts of insurance as required by the above; (2) insurance company or
companies carrying said coverage; (3) effective and expiration dates of
policies; (4) that Operator is a named insured under the Comprehensive General
Liability and Umbrella Liability policies with respect to any claims arising out
of, resulting from or in consequence of the performance of work under this
Agreement; and (5) that thirty (30) days advance written notice will be given to
Operator of any material change or cancellation. Throughout the course of work
under this Agreement, Operator shall supplement such Certificate as needed and
provide current Certificates of Insurance which certify that the insurance
required by this Section is being renewed seasonably and maintained in force.

                                       11
<PAGE>

14   CONFIDENTIALITY

     14.01  For purposes hereof, "Confidential Information" means any and all
information of either Party that might reasonably be considered confidential,
secret, sensitive, proprietary or private. To the extent practical, Confidential
Information shall be marked "proprietary" or "confidential". Confidential
Information shall include the following:

          (1)  data, know-how, formulae, processes, designs, sketches,
photographs, plans, drawings, specifications, samples, reports, lists, financial
information, studies, findings, inventions and ideas, or proprietary information
relating to either party or the methods or techniques used by either party;

          (2)  data, documents or proprietary information employed in connection
with the marketing and implementation of each party's products, including cost
information, business policies and procedures, revenues and markets, distributor
and customer lists, and similar items of information;

          (3)  any other data or information obtained by either party during the
term of this Agreement which is not generally known to and not readily
ascertainable by proper means by third persons who could obtain economic value
from its use or disclosure;

     14.02  Operator shall treat as confidential all Confidential Information of
Buyer that comes to Operator's knowledge through this Agreement. Operator shall
take such steps to prevent disclosure of such Confidential Information to any
third person as it would take in protecting its own proprietary or confidential
information and shall not use any portion of such Confidential Information for
any purpose not authorized herein.

     14.03  Operator shall not be under any obligations with respect to any
Confidential Information:

            (1)     which is, at the time of disclosure, available to the
                    general public;
            (2)     which becomes at a later date available to the general
                    public through no fault on its part and then only after said
                    later date;
            (3)     which it can demonstrate was in its possession before
                    receipt from Buyer (except by virtue of Operator's ownership
                    of the Peroxides Business prior to the Closing Date);
            (4)     which is disclosed to it without restriction on disclosure
                    by a third party who has the lawful right to disclose such
                    information; or
            (5)     after the date that is three (3) years after the date of
                    termination of this Agreement for any reason.

     14.04  SUBJECT TO SECTION 14.03, THE CONFIDENTIALITY AND NON-DISCLOSURE
OBLIGATIONS OF THIS ARTICLE SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS
AGREEMENT.

                                       12
<PAGE>

15   FORCE MAJEURE

     15.01  Force Majeure Event. Neither Party shall be liable for any loss or
            -------------------
damage for delay or non-performance of any obligations under this Agreement to
the extent such delay or non-performance is caused by (a) the operation of any
applicable law, rule, ordinance or regulation of any governmental entity or
regulatory agency, (b) any requirement or intervention of civil, naval or
military authorities or other agencies of the government, or (c) any other
causes whatsoever not reasonably within the control of such Party, including,
but not limited to, acts of God, war, riot, insurrection, civil violence or
disobedience, blockages, embargoes, sabotage, epidemics, fire, strikes, lock-
outs or other industrial or labor disturbances, lightening, hurricanes, floods,
explosions and delay of carriers (for purposes of this Agreement, a "Force
Majeure Event").

     15.02  Notice of Force Majeure Event and Obligation to Recommence Service.
            ------------------------------------------------------------------
In the event of either Party being rendered unable by a Force Majeure Event to
carry out its obligations under this Agreement such Party shall give notice to
the other Party with full particulars including the expected duration of such
Force Majeure Event, promptly after (but no later than seventy-two (72) hours
after) becoming aware of the occurrence of the cause relied on, and upon the
giving of such notice the obligations of the Party giving such notice, so far as
they are affected by such Force Majeure Event shall be suspended during the
continuance of any inability so caused. The party giving notice shall exert best
efforts to overcome such Force Majeure Event and to resume performance under
this Agreement; provided, however, that the settlement of strikes, lock-outs and
other industrial or labor disturbances shall be entirely within the reasonable
discretion of Operator, and Operator shall not be required to settle any strike,
lock-out or other industrial labor dispute by acceding to any opposing third
party's demands which Operator reasonably determines to not be in the business
interests of Operator. Upon the cessation of the cause or causes for any such
failure or delay, performance hereof shall be resumed, but such delay shall not,
except by mutual agreement, operate to extend the term of this Agreement.

     15.03  In the event of a Force Majeure Event, Buyer shall continue to pay
all Direct Charges, Allocated Charges and Fixed Charges; provided that Operator
shall use reasonable efforts to mitigate and reduce all such Direct Charges,
Allocated Charges and Fixed Charges. If any Force Majeure Event prevents
Operator from performing any of its obligations under this Agreement, Buyer may
to the extent practicable obtain replacement services from a third party during
the subsistence of Force Majeure Event and cease making payments to Operator for
the applicable Direct Charges, Allocated Charges and Fixed Charges, and Operator
shall provide all such assistance as is reasonably required by Buyer to obtain
and utilize such third party services.

     15.04  Allocation in Event of Shortage. In the event of a Force Majeure
            -------------------------------
Event in which there are shortages of particular services such that all
requirements of the Peroxides Business and other operating businesses at the
Franklin Facility cannot be met, the Parties will allocate the affected
service(s) or resources as follows:

                                       13
<PAGE>

     (a)  first, so as to avoid danger or injury to human health or safety or
          the environment to the maximum extent possible under the
          circumstances, then any excess of the services or resources thereover,
     (b)  so as to avoid damage to tangible property, real or personal of both
          Parties to the maximum extent possible under the circumstances, then
          any excess of the services or resources thereover,
     (c)  in proportion to the then-current average annual anticipated usage
          among the Parties and other third persons also carrying on business at
          the Franklin Facility for the services or resources affected, then any
          excess thereover,
     (d)  as mutually agreed.

16.  [intentionally omitted]

17.  [intentionally omitted]

18.  DISPOSITION OF PERSONNEL UPON TERMINATION

     On expiration or earlier termination of this Agreement, Buyer may offer
employment to such Operator personnel as have been providing labor to the Peroxy
Area Facility pursuant to this Agreement. In the event, however, that such
personnel are not offered employment with Buyer and become redundant to
Operator, Buyer agrees to reimburse Operator for all severance and other
applicable expenses mandated by (a) Operator's collective bargaining agreement
which then applies to the employees at the Peroxy Area Facility or (b)
Operator's then-existing standard severance policy.

19.  NOTICES

     All notices given by either Party shall be in writing and shall be
delivered by courier, hand, mail (postage prepaid) or by facsimile promptly
confirmed by letter to the addresses set forth below, or to such other addresses
as either party shall have designated by notice:

If to Buyer:                              If to Operator:
-----------                               --------------
GEO Specialty Chemicals, Inc.             Hercules Incorporated
28601 Chagrin Boulevard, Suite 210        1313 N. Market Street
Cleveland, Ohio 44122                     Wilmington, DE 19894
Telecopier: (216) 765-1307                Telecopier: (302) 594-7252
Attention: George P. Ahearn, President    Attention: General Counsel

And with a copy to:                       And with a copy to:
Thompson Hine  LLP                        Hercules Incorporated
3900 Key Center                           27123 Shady Brook Trail
127 Public Square                         Courtland, VA 23837
Cleveland, Ohio 44114                     Telecopier: (757) 562-5660
Attention: Stuart Welburn                 Attention: Plant Manager

                                       14
<PAGE>

20.  INDEPENDENT CONTRACTOR

     Operator is and shall remain at all times an independent contractor in the
performance of this Agreement. Neither Operator nor anyone employed by Operator
shall be deemed a partner, joint venturer, agent, representative, employee or
servant of Buyer by virtue of this Agreement. All persons employed by Operator
to perform the work hereunder shall be and remain employees solely of Operator
and subject to the supervision of Operator's supervisory personnel. Operator
shall pay all wages, salaries and benefits and all social security, employment
and similar taxes and contributions applicable to wages and salaries of all
persons employed by Operator.

21.  LIMITED WARRANTY & DISPUTE RESOLUTION

     21.01  In General. The services and work to be performed under this
            ----------
Agreement shall be subject to the provisions of the exhibits hereto, the
Operating Instructions, the Shipping Instructions and the Safety Rules.

     21.02  Quality of Service. Buyer is generally entitled to a quality of
            ------------------
service equal to that which was being enjoyed by the Peroxides Business prior to
the date of this Agreement. In the event of documented service quality
deterioration, Operator will use best efforts to resolve the issue.

     21.03  In the event of any dispute between the Parties under this
Agreement, the Parties shall in good faith attempt to resolve such dispute
between themselves and, should the parties fail to so resolve such dispute
within seven (7) days, shall follow the procedure set forth in Article 13
(Resolution of Disputes) of the Sale Agreement.

     21.04  In no event under this Agreement or in connection with the
activities contemplated by this Agreement shall either party be liable to the
other party for any special, incidental or consequential damages.

22.  MISCELLANEOUS

     22.01  This Agreement (which incorporates certain provisions of the Sale
Agreement) constitutes the entire understanding, and is intended as a final
expression of the agreement between the Parties with respect to the subject
matter hereof. This Agreement may not be changed, altered, modified or amended
except in writing signed by the Parties.

     22.02  The terms and conditions of this Agreement will inure to the benefit
of, and be binding upon the respective successors and assigns of the Parties
hereto. Except as provided below, this Agreement may not be assigned, in whole,
in material part or otherwise by either Party without the prior written consent
of the other Party.

                                       15
<PAGE>

            (1)  Notwithstanding the foregoing, each Party to this Agreement
will be entitled to assign all or any part of its rights and obligations under
this Agreement to one or more of its Affiliates which, in the reasonable opinion
of the relevant assignor, is capable of discharging the liabilities or
obligations so assigned, and any or all rights and interests under this
Agreement to: (i) any purchaser or acquirer of the Party or to any purchaser or
acquirer of a Party's assets or business to which this Agreement relates, and to
any successors or assigns thereof, (ii) as a matter of applicable law, the
surviving entity in any merger, consolidation, equity exchange or reorganization
involving the Party or any of its successors or assigns, and (iii) any lender,
lenders or agent therefore as collateral security.

            (2)  Nothing in this Agreement, express or implied, is intended to
confer any rights or remedies hereunder on any Person other than Buyer or
Operator and their respective Affiliates or any of their respective successors
and permitted assigns.

     22.03  Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall be ineffective to the extent of such prohibition or
unenforceability without affecting, impairing or invalidating the remaining
provisions hereof or the enforceability hereof. To the extent legally
permissible, the Parties shall negotiate in good faith such amendment of this
Agreement as may be necessary to fairly and equitably achieve in a legally
permissible manner the substance of the provision which was so prohibited or
unenforceable.

     22.04  This Agreement may be executed in one (1) or more counterparts, each
of which shall be deemed to be an original and all of which shall constitute one
and the same instrument.

     22.05  The captions in this Agreement are for convenience and reference
only and shall not limit in any way or otherwise affect any of the terms or
provisions hereof.

     22.06  The failure of either Party to demand strict performance of the
terms hereof, or to exercise any right conferred herein shall not be construed
as a waiver or relinquishment of its right to assert or rely on any such term or
right in the future. Waiver by either party of any term, provision or condition
of this Agreement shall not be construed to be a waiver of any other term,
provision or condition nor shall such waiver be deemed to be a waiver of a
subsequent breach of the same term, provision or condition. Failure of delay by
either Party to require performance of any provision of this Agreement will not
affect or impair such Party's right to require full performance with such
provision at any time thereafter.

     22.07  This Agreement shall be construed under and governed by the laws of
Virginia, and the venue of all actions hereunder shall be in the State of
Virginia.

                                       16
<PAGE>

     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the day and year first above written.

GEO SPECIALTY CHEMICALS, INC.                HERCULES INCORPORATED

By:  __________________________              By:  _____________________________
Name Printed: George P. Ahearn               Name Printed: Dominick W. DiDonna
Title: President & Chief Executive Officer   Title: Executive Vice President

                                       17

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