exv10w18



 





SECOND SUPPLEMENTAL INDENTURE




     THIS SECOND SUPPLEMENTAL INDENTURE (the ''Second Supplemental Indenture’’)
is made as of the 20th day of December, 2001, among AINSWORTH LUMBER CO. LTD.
(the ''Company’’) and The Bank of New York, as trustee (the ''Trustee’’).



     WHEREAS, the Company, Steen River Forest Products Ltd., an Alberta company
and a wholly owned subsidiary of the Company (the “Subsidiary Guarantor”), and
the Trustee are parties to an indenture, dated as of July 10, 1997, as amended
as of February 14, 2001, among the Company, the Subsidiary Guarantor and the
Trustee (as so amended, the ''Indenture’’);



     WHEREAS, pursuant to the Indenture, the Company has issued and the
Subsidiary Guarantor has guaranteed the Company’s 12 1/2% Senior Secured Notes
due July 15, 2007 (the “Securities”);



     WHEREAS, Section 901(5) of the Indenture provides that the Company, when
authorized by a resolution of the Board of Directors, and the Trustee, may
amend the Indenture to cure any ambiguity, to correct or supplement any
provision of the Indenture which may be inconsistent with any other provision
Indenture, or to make any other provisions with respect to matters or questions
arising under the Indenture which shall not be inconsistent with the provisions
of the Indenture, provided such action does not adversely affect the interests
of the Holders in any material respect;



     WHEREAS, Section 902 of the Indenture provides that the Company, when
authorized by a resolution of the Board of Directors, and the Trustee, with the
written consent of the holders of not less than a majority in principal amount
of the Securities outstanding, may amend the Indenture;



     WHEREAS, the Company has heretofore delivered or is delivering
contemporaneously herewith to the Trustee a copy of the Officers’ Certificate
of the Company authorizing the execution, delivery and performance of this
Second Supplemental Indenture; and



     WHEREAS, all conditions necessary to authorize the execution and delivery
of this Second Supplemental Indenture and to make this Second Supplemental
Indenture valid and binding have been complied with or have been done or
performed.



     NOW, THEREFORE, in consideration of the foregoing and notwithstanding any
provision of the Indenture which, absent this Second Supplemental Indenture,
might operate to limit such action, the Company and the Trustee agree as
follows for the equal and ratable benefit of the Holders of the Securities:



1









 





ARTICLE I

DEFINITIONS




     Section 1.01 General. For all purposes of the Indenture and this Second
Supplemental Indenture, except as otherwise expressly provided or unless the
context otherwise requires:



          the
words “herein’’, “hereof’’ and “hereunder’’ and other words of
similar import refer to the Indenture and this Second Supplemental Indenture as
a whole and not to any particular Article, Section or subdivision; and



          capitalized terms used but not defined herein shall have the meanings
assigned to them in the Indenture.



ARTICLE II

AMENDMENT




     Section 2.01 Noteholder Amendments. the Indenture is hereby amended in
the following respects:




Section 101 is hereby amended to add the following defined terms:




“Assignment of Agreement” means the Assignment of Agreement, dated
as of February 12, 2001, between the Company, Steen and the
Security Trustee, pursuant to which the Company and Steen have
assigned to the Security Trustee their interest in the High Level
Memorandum of Agreement, as such agreement may be amended from
time to time.




“Excess Cash” means, with respect to any fiscal quarter, the
amount by which the average daily closing balance of all cash and
cash equivalents held by the Company and its Restricted
Subsidiaries, other than amounts in the High Level Qualified
Account, in such fiscal quarter exceeds $75.0 million.




“Excess Cash Offer Price” means the purchase price (expressed as
percentages of principal amount) set forth below with respect to
an Offer to Purchase made as a result of Excess Cash for a fiscal
quarter during the years indicated below:



	 	 	 	 	 	 	 	 	 
	Year
	 	Purchase Price

	2002
	 	 	108	%
	2003
	 	 	106	%
	2004
	 	 	104	%
	2005
	 	 	102	%
	2006 and thereafter
	 	 	100	%








“High Level Qualified Account” means a bank account that the
holders of New Senior Secured Notes have a security interest in as
part of the collateral under the New Indenture and that the
Company or any Restricted Subsidiary shall only use to fund
obligations of the Company or a Restricted Subsidiary related to
the High Level Project.



2









 






“New Indenture” means the Indenture, dated as of December 20,
2001, between the Company, Steen and The Bank of Nova Scotia Trust
Company of New York, as Trustee, relating to the $95 million
aggregate principal amount of the Company’s 13 7/8% Senior Secured
Notes due July 15, 2007.




“New Senior Secured Notes” means the 13?% Senior Secured Notes due
July 15, 2007, issued pursuant to the New Indenture.




“New Security Documents” means (i) the Debenture, in the principal
amount of $   dated for reference December 20, 2001, created
and issued by the Company to the New Security Trustee, which
creates a mortgage, charge and security interest on certain assets
of the Company, (ii) the Debenture, in the principal amount of
$   dated for reference December 20, 2001, created and issued
by Steen to the New Security Trustee, which creates a mortgage,
charge and security interest on certain assets of Steen, (iii) the
securities pledge agreement, dated as of December 20, 2001, by the
Company in favor of the New Security Trustee, relating to the
pledge by the Company of the shares of Capital Stock of Steen, and
(iv) an assignment of the interest of the Company and Steen in the
High Level Memorandum of Agreement, as such agreements may be
amended from time to time.




“New Security Trustee” means the security trustee under the new
Indenture.




“Non-Guarantor Restricted Subsidiaries” means any Restricted
Subsidiaries which, collectively, do not have total assets in
excess of Cdn$1.0 million.



     Section 101 is hereby amended to delete references to “Clinton Sawmill”
and “High Level Credit Agreement”.



     Section 101 is hereby amended by deleting the definition of “Grant”,
“Inter-Creditor Agreement”, and “Security Documents” and replacing them with
the following:




“Grant” means Grant Forest Products, Inc., an Ontario corporation,
any other Person or Persons who replace Grant and become a
co-owner of the High Level Project, any successor entity thereto
and any Affiliate thereof.




“Inter-Creditor Agreement” means, the Inter-Creditor Agreement,
dated for reference December 20, 2001, among the Company, the
Subsidiary Guarantors, the New Security Trustee and the Security
Trustee, as such agreement may be amended from time to time.




“Security Documents” means the Security Debenture, the Securities
Pledge Agreement and the Assignment of Agreement.



     Section 101 is hereby amended by adding, at the end of the definition of
“Asset Disposition”, the following: “or (iii) a Collateral Asset Disposition”



     Section 1008 of the Indenture is hereby amended by adding the word “and”
at the end of clause (ix) thereof and by deleting clauses (x) and (xi) thereof
and replacing them with the following clause (x):



3









 






“(x) Debt Incurred under the New Senior Secured Notes in an
amount not to exceed US$95 million and any related guarantees.”



     Section 1011 of the Indenture is hereby amended by deleting clause (xvi)
thereof and replacing it with the following clause (xvi):




“(xvi) the New Security Documents; or”



     Section 1013(a) is hereby amended by deleting clause (iii) thereof from
the beginning thereof to, but not including, subclause (1)(B) thereof, and
replacing it with the following:




“and (iii)(1) with respect to assets that do not constitute
Restricted Collateral but which constitute collateral security
under other Debt instruments, and the sale of which is restricted
by such Debt instruments, the Net Available Proceeds are applied
(A) first, in accordance with the requirements of such Debt
instruments,”



     Section 1013(a) is further amended by inserting, at the end of each of
subclause (iii)(1)(B) and (iii) (2)(B) thereof, the following:




“(such purchase of Securities and other Debt to be made pro rata,
based upon the aggregate principal amounts of Securities and such
other Debt tendered to such offer)”



     Section 1013(a) is further amended by inserting in the second paragraph
thereof, immediately after the reference to Section 1014(a), the following:



     “and Section 1028(a)”



     Section 1013(a) is further amended by inserting at the end of the second
paragraph thereof, the following:



     “or Section 1028(a)”



     Section 1014(a) is amended by deleting the reference to “(iii)(2)” therein
and replacing it with “(iii)(1)(B) or (iii)(2)(B)” and inserting, immediately
after the reference to Section 1013(a), the following:



     “and Section 1028(a)”



     Section 1014(a) is further amended by inserting at the end of the second
paragraph thereof, the following:



     “or Section 1028(a)”



     Section 1016 of the Indenture is hereby amended by adding, as a last
sentence thereto, the following:



4









 






“The foregoing requirement shall not apply to any purchase or sale
by the Company or Steen made pursuant to the buy/sell option or
right of first refusal set forth in the High Level Memorandum of
Agreement.”



     Section 1025(a) is hereby deleted and replaced with the following:




“(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, make or incur Capital Expenditures, other than
Capital Expenditures made pursuant to an order or regulation of a
governmental agency related to environmental or occupational
health and safety issues, in any fiscal year in an aggregate
amount in excess of Cdn$21,000,000 (the “Maximum Capital
Expenditures Amount”); provided that, the Maximum Capital
Expenditures Amount for any fiscal year shall be (i) increased by
an amount equal to the excess of the Maximum Capital Expenditures
Amount for the previous fiscal year (without giving effect to any
adjustment in accordance with this proviso) over the actual amount
of Capital Expenditures for such previous fiscal year and (ii)
decreased by an amount equal to the amount by which Capital
Expenditures for the previous fiscal year, including any Capital
Expenditures made pursuant to an order or regulation of a
governmental agency related to environmental or occupational
health and safety issues, exceeded the Maximum Capital
Expenditures Amount for such previous fiscal year.”



     A new Section 1028 is hereby added to the Indenture as follows:




“SECTION 1028. Excess Cash Offers




(a) The Company will be required to make an Offer to Purchase
Securities at the Excess Cash Offer Price, plus accrued and unpaid
interest, if any, to the date of purchase, within five days after
the last day of a fiscal quarter if there was Excess Cash in such
fiscal quarter, commencing with the quarter ending March 31, 2002.
Such Offer to Purchase shall be for Securities in an amount equal
to the Aggregate Excess Cash for such preceding fiscal quarter.
Notwithstanding the foregoing, the Company will not be required to
(i) make such an Offer to Purchase pursuant to this paragraph if
the Excess Cash for such preceding fiscal quarter is less than
$5.0 million, or (ii) purchase Securities to the extent that the
aggregate principal amount of Securities purchased pursuant to
this covenant and clauses (iii)(1)(B) and (iii)(2)(B) of Section
1013(a) and clause (a)(v)(1) of Section 1014(a) would exceed 25%
of the original principal amount of the Securities, prior to the
day following the fifth anniversary of the original issuance of
the Securities to be purchased, and the maximum amount to be
applied to the purchase of the Securities in connection with any
Offer to Purchase made pursuant to this paragraph having a
purchase date prior to the day following the fifth anniversary of
the original issuance of the Securities to be purchased shall be
the lesser of (x) the Excess Cash required to be applied to such
Offer to Purchase and (y) 25% of the original principal amount of
such Securities less the aggregate principal amount of Securities
purchased pursuant to all previous Offers to Purchase made
pursuant to this paragraph, clause (iii)(1)(B) or (iii)(2)(B) of
Section 1013(a) and clause (a)(v)(1) of Section 1014(a), provided,
however, that the Company shall be required, promptly after the
fifth anniversary of the original issuance of such Securities, to
make an Offer to Purchase Securities, in accordance with the
requirements described in this paragraph, in an aggregate amount
equal to the aggregate amount of Net



5









 






Available Proceeds in excess of 25% of the original principal
amount of Securities that was not applied to Offers to Purchase
Securities pursuant to the provisions of this paragraph, or the
second paragraph of Sections 1013(a) or 1014(a).




(b) Any Excess Cash not used pursuant to paragraph (a) above as a
result of clause (a)(ii) above, within five days after the end of
a fiscal quarter or the termination of such Offer to Purchase, at
the Company’s option, shall be (i) used to make an Offer to
Purchase Notes at the Excess Cash Offer Price, or (ii) deposited
in a segregated bank account (the “Excess Cash Account”) that can
only be used to (A) make from time to time Offers to Purchase
Notes at the Excess Cash Offer Price on the date of the deposit
into the Excess Cash Account or (B) pay the principal amount of
the Notes and the New Senior Secured Notes at the earlier of
maturity and redemption thereof on a pro rata basis based on the
then outstanding principal amounts of the Notes and the New Senior
Secured Notes at the time of payment.




(c) Whenever the Company makes an Offer to Purchase pursuant to
paragraph (a) or (b) above, the Company will make a similar Offer
to Purchase New Senior Secured Notes. The Company will purchase
Notes and New Senior Secured Notes on a pro rata basis based on
the aggregate principal amount of the Notes and the New Senior
Secured Notes tendered to such offer.




(d) This covenant shall terminate when there are no New Senior
Secured Notes Outstanding.”



     Section 1204 is hereby amended by adding, after the first reference to
“Restricted Subsidiary” therein, the following: “, other than Non-Guarantor
Restricted Subsidiaries,”.



     Section 1306 of the Indenture is hereby amended to add, at the end
thereof, the following:




“If the Company or a Restricted Subsidiary makes an Asset
Disposition in accordance with clauses (i) and (ii) of Section
1013(a), the Trustee shall, at the written request of the Company
and without the consent of any Holders, direct the Security
Trustee to release the security provided by the Security Documents
in the assets disposed of (but not the proceeds of disposition)
not later than the time of closing of such disposition. When
there are no longer any New Senior Secured Notes Outstanding
(within the meaning of the New Indenture), and the security
provided for under the New Security Documents has been discharged,
the Trustee shall, at the written request of the Company and
without the consent of any Holders, direct the Security Trustee to
enter into an inter-creditor agreement, in form satisfactory to
the Trustee, to provide for a first priority security interest in
Inventory and Accounts Receivable of the Company and its
Subsidiaries and a general security interest, subordinated to the
security interest provided for in the Security Documents, in any
or all of the other assets and undertaking of the Company and its
Subsidiaries, in connection with any Debt and Liens Incurred by
the Company and such Subsidiaries in compliance with the terms of
this Indenture.”



6









 





     Section 2.02 Board Amendments. the Indenture is hereby amended in the
following respects:




Section 101 is hereby amended to add the following defined term:




“Unrestricted Subsidiary” means (1) any Subsidiary designated as
such by the Board of Directors as set forth below where (a)
neither the Company nor any of its other Subsidiaries (other than
another Unrestricted Subsidiary) (i) provides credit support for,
or Guarantee of, any Debt of such Subsidiary or any Subsidiary of
such Subsidiary (including any undertaking, agreement or
instrument evidencing such Debt) or (ii) is directly or indirectly
liable for any Debt of such Subsidiary or any Subsidiary of such
Subsidiary, and (b) no default with respect to any Debt of such
Subsidiary or any Subsidiary of such Subsidiary (including any
right which the holders thereof may have to take enforcement
action against such Subsidiary) would permit (upon notice, lapse
of time or both) any holder of any other Debt of the Company and
its Subsidiaries (other than another Unrestricted Subsidiary) to
declare a default on such other Debt or cause the payment thereof
to be accelerated or payable prior to its final scheduled maturity
and (2) any Subsidiary of an Unrestricted Subsidiary.




     The Board of Directors may designate any Subsidiary to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital
Stock of, or owns or holds any Lien on any property of, any other
Subsidiary of the Company which is not a Subsidiary of the
Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary, provided that either (x) the Subsidiary to be so
designated has total assets of US$1,000 or less or (y) immediately
after giving effect to such designation, the Company could Incur
at least US$1.00 of additional Debt pursuant to the first
paragraph of Section 1008 and, provided further, that the Company
could make a Restricted Payment in an amount equal to the greater
of the fair market value and book value of such Subsidiary
pursuant to Section 1009 and such amount is thereafter treated as
a Restricted Payment for the purpose of calculating the aggregate
amount available for Restricted Payments under Section 1009.




     The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary provided that,
immediately after giving effect to such designation (i) no Event
of Default or event that with the passing of time or the giving of
notice, or both, would constitute an Event of Default shall have
occurred and be continuing; (ii) the Company or any Restricted
Subsidiary could Incur at least US$1.00 of additional Debt
pursuant Paragraph 1008(i) and (iii) all Liens of such Subsidiary
outstanding immediately following such designation would, if
Incurred at that time, have been permitted to be Incurred for all
purposes of the Indenture.




     Any such designation by the Board of Directors shall be
evidenced by filing with the Trustee a certified copy of the
resolution of the Board of Directors giving effect to such
designation and an Officers’ Certificate certifying that such
designation complies with the foregoing conditions.”



7









 





          Section 1015 is hereby amended by deleting from Section 1015 the words “if
as a result of such transaction such Restricted Subsidiary would cease to be a
Restricted Subsidiary” that begin after the word “Company” and end before the
word “unless” in Section 1015.



ARTICLE III

MISCELLANEOUS




     Section 3.01 Effectiveness. This Second Supplemental Indenture shall
become effective upon its execution and delivery by the Company and the
Trustee. Upon the execution and delivery of this Second Supplemental
Indenture by the Company and the Trustee, the Indenture shall be supplemented
in accordance herewith, and this Second Supplemental Indenture shall form a
part of the Indenture for all purposes, and every Holder of Securities
heretofore or hereafter authenticated and delivered under the Indenture shall
be bound thereby.



     Section 3.02 Indenture Remains in Full Force and Effect. Except as
supplemented hereby, all provisions in the Indenture shall remain in full force
and effect.



     Section 3.03 Indenture and Second Supplemental Indenture Construed
Together. This Second Supplemental Indenture is an indenture supplemental to
and in implementation of the Indenture, and the Indenture and this Second
Supplemental Indenture shall henceforth be read and construed together.



     Section 3.04 Confirmation and Preservation of Indenture. The Indenture
as supplemented by this Second Supplemental Indenture is in all respects
confirmed and preserved.



     Section 3.05 Conflict with Trust Indenture Act. If any provision of this
Second Supplemental Indenture limits, qualifies or conflicts with any
provision of the Trust Indenture Act of 1939, as amended (the ''Trust Indenture
Act’’), that is required under the Trust Indenture Act to be part of and govern
any provision of this Second Supplemental Indenture, the provision of the
Trust Indenture Act shall control. If any provision of this Second Supplemental
Indenture modifies or excludes any provision of the Trust Indenture Act that
may be so modified or excluded, the provision of the Trust Indenture Act shall
be deemed to apply to the Indenture as so modified or to be excluded by this
Second Supplemental Indenture, as the case may be.



     Section 3.06 Severability. In case any provision in this Second
Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.



     Section 3.07 Headings. The Article and Section headings of this Second
Supplemental Indenture have been inserted for convenience of reference only,
are not to be considered a part of this Second Supplemental Indenture and
shall in no way modify or restrict any of the terms or provisions hereof.



     Section 3.08 Benefits of Second Supplemental Indenture, etc. Nothing in
this Second Supplemental Indenture or the Securities, express or implied,
shall give to any Person, other than the parties hereto and thereto and their
successors hereunder and thereunder and the Holders of the Securities, any
benefit of any legal or equitable right, remedy or claim under the Indenture,
this Second Supplemental Indenture or the Securities.



     Section 3.09 Successors. All agreements of the Company in this Second
Supplemental Indenture shall bind its successors. All agreements of the
Trustee in this Second



8









 







Supplemental Indenture shall bind its successors.



     Section 3.10 Trustee Not Responsible for Recitals. The recitals
contained herein shall be taken as the statements of the Company and the
Trustee assumes no responsibility for their correctness. The Trustee shall not
be liable or responsible for the validity or sufficiency of this Second
Supplemental Indenture.



     Section 3.11 Certain Duties and Responsibilities of the Trustee. In
entering into this Second Supplemental Indenture, the Trustee shall be
entitled to the benefit of every provision of the Indenture relating to the
conduct or affecting the liability or affording protection to the Trustee,
whether or not elsewhere herein so provided.



     Section 3.12 Governing Law.


THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS SECOND

SUPPLEMENTAL INDENTURE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.


9









 







     Section 3.13
Counterpart Originals. The parties may sign any number of copies of this
Second Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.



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



	 	 	 	 	 
	 	 	AINSWORTH LUMBER CO. LTD.
	 
	 	 	 	 
	

	 	By:
	 	D. Allen Ainsworth
	

	 	 	 	
 
	

	 	Name:
	 	D. Allen Ainsworth
	

	 	Title:
	 	President
	 
	 	 	 	 
	

	 	By:
	 	/s/ Catherine Ainsworth
	

	 	 	 	
 
	

	 	Name:
	 	Catherine Ainsworth
	

	 	Title:
	 	Chief Operating Officer
and Secretary
	 
	 	 	 	 
	 	 	STEEN RIVER FOREST PRODUCTS LTD.
	 
	 	 	 	 
	

	 	By:
	 	D. Allen Ainsworth
	

	 	 	 	
 
	

	 	Name:
	 	D. Allen Ainsworth
	

	 	Title:
	 	President
	 
	 	 	 	 
	

	 	By:
	 	/s/ Catherine Ainsworth
	

	 	 	 	
 
	

	 	Name:
	 	Catherine Ainsworth
	

	 	Title:
	 	Secretary
	 
	 	 	 	 
	 	 	THE BANK OF NEW YORK
as Trustee
	 
	 	 	 	 
	

	 	By:
	 	/s/ Beverley A. Freeney
	

	 	 	 	
 
	

	 	Name:
	 	Beverley A. Freeney
	

	 	Title:
	 	Assistant Vice-President








10