TRIAD GUARANTY INC.

                                       To

                              BANKERS TRUST COMPANY
                                     Trustee


                       ----------------------------------

                                    INDENTURE

                          DATED AS OF JANUARY 15, 1998

                       ----------------------------------



                                   $35,000,000

                        7.90% Notes Due January 15, 2028





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                                TABLE OF CONTENTS

ARTICLE ONE - Definitions and Other Provisions of General Application.........1
         SECTION 101.    Definitions..........................................1
               Act      ......................................................2
               Affiliate......................................................2
               Board of Directors.............................................2
               Board Resolution...............................................2
               Business Day...................................................2
               Company  ......................................................2
               Company Request or Company Order...............................2
               Control  ......................................................3
               Corporate Trust Office.........................................3
               Corporation....................................................3
               Covenant Defeasance............................................3
               Defaulted Interest.............................................3
               Defeasance.....................................................3
               Depositary.....................................................3
               Designated Subsidiary..........................................3
               Event of Default...............................................3
               Exchange Act...................................................3
               Expiration Date................................................3
               Global Note....................................................3
               Holder   ......................................................3
               Indenture......................................................3
               Interest Payment Date..........................................4
               Lien     ......................................................4
               Maturity,......................................................4
               Note Register..................................................4
               Officers' Certificate..........................................4
               Opinion of Counsel.............................................4
               Outstanding,...................................................4
               Paying Agent...................................................5
               Person   ......................................................5
               Predecessor Note...............................................5
               Redemption Date................................................5
               Regular Record Date............................................5
               Responsible Officer............................................5
               Special Record Date............................................5
               Stated Maturity................................................6
               Subsidiary.....................................................6

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               Trustee  ......................................................6
               Trust Indenture Act............................................6
               U.S. Government Obligation.....................................6
               Vice President.................................................6
               Voting Stock...................................................6
               Wholly-Owned Subsidiary........................................6
      SECTION 102. Compliance Certificates and Opinions.......................6
      SECTION 103. Form of Documents Delivered to Trustee.....................7
      SECTION 104. Acts of Holders; Record Dates..............................8
      SECTION 105. Notices, Etc., to Trustee and Company.....................10
      SECTION 106. Notice to Holders; Waiver.................................10
      SECTION 107. Conflict with Trust Indenture Act.........................10
      SECTION 108. Effect of Headings and Table of Contents..................11
      SECTION 109. Successors and Assigns....................................11
      SECTION 110. Separability Clause.......................................11
      SECTION 111. Benefits of Indenture.....................................11
      SECTION 112. Governing Law.............................................11
      SECTION 113. Legal Holidays............................................11

ARTICLE TWO - Note Forms.....................................................12
      SECTION 201. Forms Generally...........................................12
      SECTION 202. Form of Face of Note......................................12
      SECTION 203. Form of Reverse of Note...................................14
      SECTION 204. Form of Trustee's Certificate of Authentication...........16
      SECTION 205. Form of Legend for Global Notes...........................16

ARTICLE THREE - The Notes....................................................17
      SECTION 301. Title and Terms...........................................17
      SECTION 302. Denominations.............................................17
      SECTION 303. Execution, Authentication, Delivery and Dating............17
      SECTION 304. Temporary Notes...........................................18
      SECTION 305. Registration, Registration of Transfer and
                   Exchange; Global Notes....................................19
      SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes...............20
      SECTION 307. Payment of Interest; Interest Rights Preserved............21
      SECTION 308. Persons Deemed Owners.....................................22
      SECTION 309. Cancellation..............................................22
      SECTION 310. Computation of Interest...................................22
ARTICLE FOUR - Satisfaction and Discharge....................................23
      SECTION 401. Satisfaction and Discharge of Indenture...................23
      SECTION 402. Application of Trust Money................................24

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ARTICLE FIVE - Remedies......................................................24
      SECTION 501. Events of Default.........................................24
      SECTION 502. Acceleration of Maturity; Rescission and Annulment........25
      SECTION 503. Collection of Indebtedness and Suits for Enforcement by
                   Trustee...................................................26
      SECTION 504. Trustee May File Proofs of Claim..........................27
      SECTION 505. Trustee May Enforce Claims Without Possession of Notes....28
      SECTION 506. Application of Money Collected............................28
      SECTION 507. Limitation on Suits.......................................28
      SECTION 508. Unconditional Right of Holders to Receive Principal
                   and Interest..............................................29
      SECTION 509. Restoration of Rights and Remedies........................29
      SECTION 510. Rights and Remedies Cumulative............................29
      SECTION 511. Delay or Omission Not Waiver..............................29
      SECTION 512. Control by Holders........................................30
      SECTION 513. Waiver of Past Defaults...................................30
      SECTION 514. Undertaking for Costs.....................................30
      SECTION 515. Waiver of Stay or Extension Laws..........................31

ARTICLE SIX - The Trustee....................................................31
      SECTION 601. Certain Duties and Responsibilities.......................31
      SECTION 602. Notice of Defaults........................................32
      SECTION 603. Certain Rights of Trustee.................................32
      SECTION 604. Not Responsible for Recitals or Issuance of Notes.........33
      SECTION 605. May Hold Notes............................................33
      SECTION 606. Money Held in Trust.......................................34
      SECTION 607. Compensation and Reimbursement............................34
      SECTION 608. Disqualification; Conflicting Interests...................35
      SECTION 609. Corporate Trustee Required; Eligibility...................35
      SECTION 610. Resignation and Removal; Appointment of Successor.........35
      SECTION 611. Acceptance of Appointment by Successor....................36
      SECTION 612. Merger, Conversion, Consolidation or Succession to
                   Business..................................................37
      SECTION 613. Preferential Collection of Claims Against Company.........37

ARTICLE SEVEN - Holders' Lists and Reports by Trustee and Company............37
      SECTION 701. Company to Furnish Trustee Names and Addresses of
                   Holders...................................................37
      SECTION 702. Preservation of Information; Communications to Holders....38
      SECTION 703. Reports by Trustee........................................38
      SECTION 704. Reports by Company........................................38


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ARTICLE EIGHT - Consolidation, Merger, Conveyance, Transfer or Lease.........39
      SECTION 801. Company May Consolidate, Etc., Only on Certain Terms......39
      SECTION 802. Successor Substituted.....................................40

ARTICLE NINE - Supplemental Indentures.......................................40
      SECTION 901. Supplemental Indentures Without Consent of Holders........40
      SECTION 902. Supplemental Indentures with Consent of Holders...........41
      SECTION 903. Execution of Supplemental Indentures......................41
      SECTION 904. Effect of Supplemental Indentures.........................42
      SECTION 905. Conformity with Trust Indenture Act.......................42
      SECTION 906. Reference in Notes to Supplemental Indentures.............42

ARTICLE TEN - Covenants......................................................42
      SECTION 1001.Payment of Principal and Interest.........................42
      SECTION 1002.Maintenance of Office or Agency...........................42
      SECTION 1003.Money for Note Payments to Be Held in Trust...............43
      SECTION 1004.Statement by Officers as to Default.......................44
      SECTION 1005.Corporate Existence.......................................44
      SECTION 1006.Maintenance of Properties.................................44
      SECTION 1007.Payment of Taxes and Other Claims.........................45
      SECTION 1008.Limitations on Liens and Dispositions of Capital
                   Stock of a Designated Subsidiary..........................45
      SECTION 1009.Waiver of Certain Covenants...............................45

ARTICLE ELEVEN - Defeasance and Covenant Defeasance..........................46
      SECTION 1101.Company's Option to Effect Defeasance or Covenant
                   Defeasance................................................46
      SECTION 1102.Defeasance and Discharge..................................46
      SECTION 1103.Covenant Defeasance.......................................46
      SECTION 1104.Conditions to Defeasance or Covenant Defeasance...........47
      SECTION 1105.Deposited Money and U.S. Government Obligations to
                   Be Held in Trust; Miscellaneous Provisions................49
      SECTION 1106.Reinstatement.............................................49


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     INDENTURE,  dated as of January 15, 1998,  between Triad  Guaranty  Inc., a
corporation  duly organized and existing under the laws of the State of Delaware
(herein  called  the  "Company"),  having  its  principal  office  at 101  South
Stratford Road,  Suite 500,  Winston-Salem,  North Carolina  27104,  and Bankers
Trust Company, a New York banking corporation, as Trustee (herein called the
"Trustee").

                             RECITALS OF THE COMPANY

     The Company has duly authorized the creation of an issue of its 7.90% Notes
due January 15, 2028 (herein called the "Notes") of substantially  the tenor and
amount  hereinafter  set forth,  and to provide  therefor  the  Company has duly
authorized the execution and delivery of this Indenture.

     All things  necessary to make the Notes,  when  executed by the Company and
authenticated and delivered hereunder and duly issued by the Company,  the valid
obligations of the Company,  and to make this Indenture a valid agreement of the
Company, in accordance with their and its terms, have been done.

                   NOW, THEREFORE, THIS INDENTURE WITNESSETH:

     For and in  consideration  of the premises and the purchase of the Notes by
the Holders  thereof,  it is mutually  agreed,  for the equal and  proportionate
benefit of all Holders of the Notes, as follows:

                                   ARTICLE ONE

                        DEFINITIONS AND OTHER PROVISIONS
                             OF GENERAL APPLICATION

SECTION 101.  DEFINITIONS.

     For all purposes of this Indenture,  except as otherwise expressly provided
or unless the context otherwise requires:

          (1) the terms  defined in this Article  have the meanings  assigned to
     them in this Article and include the plural as well as the singular;

          (2) all  other  terms  used  herein  which  are  defined  in the Trust
     Indenture Act, either directly or by reference  therein,  have the meanings
     assigned to them therein;


          (3) all  accounting  terms  not  otherwise  defined  herein  have  the
     meanings assigned to them in accordance with generally accepted  accounting
     principles,  and, except as otherwise herein expressly  provided,  the term
     "generally accepted accounting  principles"with  respect to any computation
     required or permitted  hereunder shall mean such  accounting  principles as
     are generally accepted at the date of such computation; and


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          (4) the words  "herein,"  "hereof" and  "hereunder" and other words of
     similar import refer to this Indenture as a whole and not to any particular
     Article, Section or other subdivision.

     "Act," when used with respect to any Holder,  has the meaning  specified in
Section 104.

     "Affiliate"  of any  specified  Person means any other  Person  directly or
indirectly  Controlling  or  Controlled  by or under  direct or indirect  common
Control with such specified  Person;  and the term  "Affiliated"  shall have the
meaning correlative to the foregoing.

     "Board of Directors"  means either the board of directors of the Company or
any duly authorized committee of that board.

     "Board Resolution" means a copy of a resolution  certified by the Secretary
or an Assistant  Secretary of the Company to have been duly adopted by the Board
of  Directors  and  to be  in  full  force  and  effect  on  the  date  of  such
certification, and delivered to the Trustee.

     "Business Day" means each Monday, Tuesday,  Wednesday,  Thursday and Friday
which  is  not a day on  which  banking  institutions  in  Winston-Salem,  North
Carolina or New York,  New York are  authorized or obligated by law or executive
order to close.

     "Capital  Stock"  of any  Person  means  any  and  all  shares,  interests,
participations or other equivalents  (however  designated) of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person.

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

     "Company" means the Person named as the "Company" in the first paragraph of
this instrument  until a successor Person shall have become such pursuant to the
applicable  provisions of this  Indenture,  and thereafter  "Company" shall mean
such successor Person.

     "Company  Request"  or  "Company  Order"  means a written  request or order
signed  in the  name of the  Company  by its  Chairman  of the  Board,  its Vice
Chairman of the Board, its President or a Vice President,  and by its Treasurer,
an Assistant Treasurer,  its Secretary or an Assistant Secretary,  and delivered
to the Trustee.


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     "Control" when used with respect to any specified Person means the power to
direct the  management  and  policies of such  Person,  directly or  indirectly,
whether  through the ownership of voting  securities,  by contract or otherwise;
and the terms "Controlling" and "Controlled" shall have meanings  correlative to
the foregoing.

     "Corporate Trust Office" means the principal  corporate trust office of the
Trustee  in New York,  New York at which at any  particular  time its  corporate
trust  business  shall be  administered,  which office,  on the date hereof,  is
located at Four Albany Street, New York, New York 10006.

     "Corporation"  means  a  corporation,   association,  company,  joint-stock
company or business trust.

     "Covenant Defeasance" has the meaning specified in Section 1103.

     "Defaulted Interest" has the meaning specified in Section 307.

     "Defeasance" has the meaning specified in Section 1102.

     "Depositary" means The Depository Trust Company or, if The Depository Trust
Company shall cease to be a clearing agency  registered  under the Exchange Act,
any other clearing agency  registered  under the Exchange Act that is designated
as the successor Depositary in a Company Order delivered to the Trustee.

     "Designated Subsidiary" means (i) Triad Guaranty Insurance Corporation,  so
long as it remains a Subsidiary,  or any Subsidiary which is a successor thereto
and (ii) any other  subsidiary  of the Company  with assets  equal to or greater
than 20% of the consolidated assets of the Company and its subsidiaries computed
in accordance with generally accepted accounting principles.

     "Event of Default" has the meaning specified in Section 501.

     "Exchange Act" refers to the Securities  Exchange Act of 1934, as it may be
amended and any successor act thereto.

     "Expiration Date" has the meaning specified in Section 104(c).

     "Global  Note"  means a Note  that  evidences  all or part of the Notes and
bears the legend set forth in Section 205.

     "Holder"  means a Person  in whose  name a Note is  registered  in the Note
Register.

     "Indenture" means this instrument as originally  executed or as it may from
time to time be supplemented  or amended by one or more indentures  supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all  purposes  of this  instrument  and any  such  supplemental  indenture,  the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively.

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<PAGE>



     "Interest  Payment  Date"  means the Stated  Maturity of an  instalment  of
interest on the Notes.

     "Lien" means a mortgage,  pledge, security interest or other encumbrance of
any nature.

     "Maturity," when used with respect to any Note, means the date on which the
principal  of such Note  becomes due and payable as therein or herein  provided,
whether at the Stated Maturity or by declaration of acceleration or otherwise.

     "Note Register" and "Note Registrar" have the respective meanings specified
in Section 305.

     "Officers'  Certificate"  means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board,  the President or a Vice President,  and by
the Treasurer, an Assistant Treasurer,  the Secretary or an Assistant Secretary,
of the Company,  and  delivered to the Trustee.  One of the officers  signing an
Officers'  Certificate  given  pursuant to Section  1004 shall be the  principal
executive, financial or accounting officer of the Company.

     "Opinion of Counsel" means a written opinion of counsel,  who may be inside
counsel for the Company, and who shall be acceptable to the Trustee.

     "Outstanding,"  when used with respect to Notes,  means,  as of the date of
determination,  all Notes  theretofore  authenticated  and delivered  under this
Indenture, except:

               (i) Notes  theretofore  canceled by the Trustee or ordered to the
          Trustee for cancellation;

               (ii) Notes for whose payment  money in the  necessary  amount has
          been theretofore deposited with the Trustee or any Paying Agent (other
          than the Company) in trust or set aside and segregated in trust by the
          Company  (if the  Company  shall act as its own Paying  Agent) for the
          Holders of such Notes; and

               (iii) Notes in exchange  for or in lieu of which other Notes have
          been  authenticated  and delivered  pursuant to this Indenture,  other
          than any  such  Notes  in  respect  of which  there  shall  have  been
          presented to the Trustee proof  satisfactory to it that such Notes are
          held by a bona fide  purchaser  in whose  hands  such  Notes are valid
          obligations of the Company;

provided,  however,  that in  determining  whether the Holders of the  requisite
principal  amount of the  Outstanding  Notes  have  given any  request,  demand,
authorization,  direction,  notice, consent or waiver hereunder,  Notes owned by
the Company or any other  obligor upon the Notes or any Affiliate of the Company
or of such other obligor shall be disregarded  and deemed not to be Outstanding,
except that,  in  determining  whether the Trustee shall be protected in relying


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upon any such request,  demand,  authorization,  direction,  notice,  consent or
waiver,  only  Notes  which  the  Trustee  knows  to be  so  owned  shall  be so
disregarded.  Notes so owned  which  have  been  pledged  in good  faith  may be
regarded as Outstanding if the pledgee  establishes to the  satisfaction  of the
Trustee the  pledgee's  right so to act with  respect to such Notes and that the
pledgee is not the Company or any other  obligor upon the Notes or any Affiliate
of the Company or of such other obligor.

     "Paying  Agent"  means any  Person  authorized  by the  Company  to pay the
principal of or interest on any Notes on behalf of the Company.

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

     "Predecessor  Note"  of any  particular  Note  means  every  previous  Note
evidencing  all or a  portion  of the  same  debt  as  that  evidenced  by  such
particular   Note;  and,  for  the  purposes  of  this   definition,   any  Note
authenticated  and  delivered  under Section 306 in exchange for or in lieu of a
mutilated,  destroyed,  lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.

     "Redemption Date," when used with respect to any Note to be redeemed, means
the date fixed for such redemption by or pursuant to this Indenture.

     "Regular Record Date" for the interest payable on any Interest Payment Date
means the January 1 or July 1 (whether or not a Business  Day),  as the case may
be, next preceding such Interest Payment Date.

     "Responsible  Officer,"  when used with respect to the  Trustee,  means any
officer  assigned  to the  Corporate  Trust  Office,  including  any  principal,
managing  director,   vice  president,   assistant  vice  president,   assistant
treasurer,  assistant  secretary or any other officer of the Trustee customarily
performing  functions  similar to those performed by any of the above designated
officers and also means,  with respect to a particular  corporate  trust matter,
any other  officer to whom such matter is referred  because of his  knowledge of
and familiarity with the particular subject.

     "Special  Record Date" for the payment of any  Defaulted  Interest  means a
date fixed by the Trustee pursuant to Section 307.

     "Stated  Maturity," when used with respect to any Note or any instalment of
interest  thereon,  means the date  specified  in such Note as the fixed date on
which the  principal  of such Note or such  instalment  of  interest  is due and
payable.


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<PAGE>

     "Subsidiary"  means a corporation  more than 50% of the outstanding  Voting
Stock of which is owned,  directly  or  indirectly,  by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.

     "Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable  provisions of this  Indenture,  and thereafter  "Trustee" shall mean
such successor Trustee.

     "Trust Indenture Act" means the Trust Indenture Act of 1939,  including the
Trust  Indenture  Reform Act of 1990,  as amended and in force at the date as of
which this  instrument was executed;  provided,  however,  that in the event the
Trust  Indenture Act of 1939 is amended after such date,  "Trust  Indenture Act"
means, to the extent required by any such amendment,  the Trust Indenture Act of
1939 as so amended.

     "U.S. Government Obligation" has the meaning specified in Section 1104.

     "Vice  President",  when used with  respect to the Company or the  Trustee,
means any vice  president,  whether or not  designated  by a number or a word or
words added before or after the title "vice president".

     "Voting  Stock" means Capital Stock which  ordinarily  has voting power for
the  election  of  directors  (or,  in  the  case  of a  Person  that  is  not a
corporation, persons performing similar functions), whether at all times or only
so long as no senior  class of Capital  Stock has such voting power by reason of
any contingency.

     "Wholly-Owned  Subsidiary"  of any Person means a Subsidiary of such Person
all of the  outstanding  Capital  Stock or other  ownership  interests  of which
(other than  directors'  qualifying  shares)  shall at the time be owned by such
Person or by one or more  Wholly-Owned  Subsidiaries  of such  Person or by such
Person and one or more Wholly-Owned Subsidiaries of such Person.

SECTION 102.   COMPLIANCE CERTIFICATES AND OPINIONS.

     Upon any  application  or request by the Company to the Trustee to take any
action under any provision of this  Indenture,  the Company shall furnish to the
Trustee  such  certificates  and  opinions  as may be  required  under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers'  Certificate,  if to be  given by an  officer  of the  Company,  or an
Opinion  of  Counsel,  if to be given by  counsel,  and  shall  comply  with the
requirements of the Trust  Indenture Act and any other  requirement set forth in
this Indenture.

     Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include


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               (1) a statement that each individual  signing such certificate or
          opinion has read such covenant or condition and the definitions herein
          relating thereto;

               (2) a brief statement as to the nature and scope of the
         examination  or  investigation  upon which the  statements  or opinions
         contained in such certificate or opinion are based;

               (3) a statement that, in the opinion of each such individual,  he
          has made such  examination or  investigation as is necessary to enable
          him to express an informed  opinion as to whether or not such covenant
          or condition has been complied with; and

               (4) a  statement  as to  whether,  in the  opinion  of each  such
          individual, such condition or covenant has been complied with.

SECTION 103.   FORM OF DOCUMENTS DELIVERED TO TRUSTEE.

     In any case where  several  matters  are  required to be  certified  by, or
covered by an opinion of, any specified  Person,  it is not  necessary  that all
such  matters  be  certified  by, or covered by the  opinion  of,  only one such
Person,  or that they be so certified or covered by only one  document,  but one
such Person may certify or give an opinion  with respect to some matters and one
or more other such Persons as to other matters,  and any such Person may certify
or give an opinion as to such matters in one or several documents.

     Any  certificate  or opinion of an  officer  of the  Company  may be based,
insofar as it relates to legal  matters,  upon a  certificate  or opinion of, or
representations  by,  counsel,  unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or  representations
with respect to the matters upon which his  certificate  or opinion is based are
erroneous.  Any such certificate or opinion of counsel may be based,  insofar as
it  relates  to  factual   matters,   upon  a  certificate  or  opinion  of,  or
representations  by, an officer or  officers  of the  Company  stating  that the
information  with respect to such factual  matters is in the  possession  of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know,  that the certificate or opinion or  representations  with respect to such
matters are erroneous.

     Where  any  Person  is  required  to  make,  give  or  execute  two or more
applications,  requests, consents,  certificates,  statements, opinions or other
instruments  under this Indenture,  they may, but need not, be consolidated  and
form one instrument.


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<PAGE>
SECTION 104.   ACTS OF HOLDERS; RECORD DATES.

     (a) Any request, demand, authorization,  direction, notice, consent, waiver
or other action  provided by this  Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent duly appointed in writing;
and, except as herein  otherwise  expressly  provided,  such action shall become
effective when such  instrument or instruments are delivered to the Trustee and,
where it is hereby  expressly  required,  to the  Company.  Such  instrument  or
instruments (and the action embodied  therein and evidenced  thereby) are herein
sometimes  referred to as the "Act" of the Holders  signing such  instrument  or
instruments.  Proof  of  execution  of  any  such  instrument  or  of a  writing
appointing  any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.

     (b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate  of a notary  public  or  other  officer  authorized  by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a  signer  acting  in a  capacity  other  than  his  individual  capacity,  such
certificate  or  affidavit  shall  also  constitute   sufficient  proof  of  his
authority. The fact and date of the execution of any such instrument or writing,
or the  authority of the Person  executing  the same,  may also be proved in any
other manner which the Trustee deems sufficient.

     (c) The Company may, but shall not be obligated to, set any day as a record
date for the purpose of determining the Holders of Outstanding  Notes,  entitled
to make or take any request, demand, authorization,  direction, notice, consent,
waiver or other action provided or permitted by this Indenture to be given, made
or taken by Holders of Notes,  provided  that the  Company  may not set a record
date for, and the provisions of this  paragraph  shall not apply with respect to
the giving or making of any notice,  declaration,  request or direction referred
to in the next paragraph.  If any record date is set pursuant to this paragraph,
the Holders of  Outstanding  Notes on such record  date,  and no other  Holders,
shall be  entitled  to take the  relevant  action,  whether or not such  Holders
remain  Holders  after such record date;  provided  that no such action shall be
effective  hereunder unless taken on or prior to the applicable  Expiration Date
by Holders of the requisite principal amount of Outstanding Notes on such record
date.  Nothing in this paragraph  shall be construed to prevent the Company from
setting a new record date for any action for which a record date has  previously
been set pursuant to this paragraph  (whereupon  the record date  previously set
shall  automatically  and with no action by any  Person  be  canceled  and of no
effect),  and nothing in this paragraph shall be construed to render ineffective
any action taken by Holders of the  requisite  principal  amount of  Outstanding
Notes on the date such  action is taken.  Promptly  after any record date is set
pursuant to this paragraph,  the Company, at its own expense, shall cause notice
of such  record  date,  the  proposed  action  by  Holders  and  the  applicable
Expiration  Date to be given to the  Trustee  in writing  and to each  Holder of
Notes in the manner set forth in Section 106.

                                        8

<PAGE>



     The Trustee may set any day as a record date for the purpose of determining
the Holders of Outstanding Notes entitled to join in the giving or making of (i)
any Notice of  Default,  (ii) any  declaration  of  acceleration  referred to in
Section 502, (iii) any request to institute  proceedings  referred to in Section
507(2) or (iv) any  direction  referred to in Section 512. If any record date is
set pursuant to this paragraph,  the Holders of Outstanding Notes on such record
date,  and no  other  Holders,  shall  be  entitled  to  join  in  such  notice,
declaration,  request or direction,  whether or not such Holders  remain Holders
after  such  record  date;  provided  that no such  action  shall  be  effective
hereunder unless taken on or prior to the applicable  Expiration Date by Holders
of the  requisite  principal  amount of  Outstanding  Notes on such record date.
Nothing in this paragraph shall be construed to prevent the Trustee from setting
a new record date for any action for which a record date has previously been set
pursuant  to this  paragraph  (whereupon  the record date  previously  set shall
automatically  and with no action by any Person be  canceled  and of no effect),
and nothing in this  paragraph  shall be  construed  to render  ineffective  any
action taken by Holders of the requisite  principal amount of Outstanding  Notes
on the date such action is taken. Promptly after any record date is set pursuant
to this paragraph,  the Trustee,  at the Company's expense shall cause notice of
such record date, the proposed  action by Holders and the applicable  Expiration
Date to be given to the  Company in writing  and to each  Holder of Notes in the
manner set forth in Section 106.

     With  respect to any record date set  pursuant to this  Section,  the party
hereto  which sets such record  date may  designate  any day as the  "Expiration
Date" and from time to time may change  the  Expiration  Date to any  earlier or
later day;  provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing,  and
to each  Holder of Notes in the manner set forth in Section  106, on or prior to
the existing  Expiration  Date. If any Expiration  Date is not  designated  with
respect to any record date set pursuant to this Section,  the party hereto which
set such record date shall be deemed to have initially  designated the 180th day
after such record date as the Expiration Date with respect  thereto,  subject to
its  right  to  change  the  Expiration  Date as  provided  in  this  paragraph.
Notwithstanding the foregoing,  no Expiration Date shall be later than the 180th
day after the applicable record date.

     (d) The ownership of Notes shall be proved by the Note Register.

     (e) Any request, demand, authorization,  direction, notice, consent, waiver
or other Act of the Holder of any Note shall  bind  every  future  Holder of the
same Note and the Holder of every Note issued upon the  registration of transfer
thereof or in exchange  therefor or in lieu thereof in respect of anything done,
omitted  or  suffered  to be done by the  Trustee  or the  Company  in  reliance
thereon, whether or not notation of such action is made upon such Note.


                                        9

<PAGE>



SECTION 105.   NOTICES, ETC., TO TRUSTEE AND COMPANY.

     Any request, demand,  authorization,  direction, notice, consent, waiver or
Act of Holders or other  document  provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,

               (1)  the  Trustee  by any  Holder  or by  the  Company  shall  be
          sufficient for every purpose  hereunder if made,  given,  furnished or
          filed in writing to or with the Trustee at its Corporate Trust Office,
          Attention: Corporate Market Services, or

               (2)  the  Company  by the  Trustee  or by  any  Holder  shall  be
          sufficient  for  every  purpose  hereunder  (unless  otherwise  herein
          expressly  provided)  if in writing  and mailed,  first-class  postage
          prepaid,  to  the  Company  addressed  to it at  the  address  of  its
          principal  office  specified in the first paragraph of this instrument
          or at any other address previously furnished in writing to the Trustee
          by the Company.

SECTION 106.   NOTICE TO HOLDERS; WAIVER.

     Where this  Indenture  provides  for  notice to Holders of any event,  such
notice shall be sufficiently given (unless otherwise herein expressly  provided)
if in writing and mailed,  first-class  postage prepaid, to each Holder affected
by such event, at his address as it appears in the Note Register, not later than
the latest  date (if any),  and not  earlier  than the  earliest  date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail,  neither the failure to mail such  notice,  nor any defect in any
notice so mailed,  to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders.  Where this Indenture  provides for notice
in any manner,  such  notice may be waived in writing by the Person  entitled to
receive such notice,  either before or after the event, and such waiver shall be
the equivalent of such notice.  Waivers of notice by Holders shall be filed with
the Trustee,  but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.

     In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall  constitute
a sufficient notification for every purpose hereunder.

SECTION 107.   CONFLICT WITH TRUST INDENTURE ACT.

     This  Indenture  will not be  qualified  under  the  Trust  Indenture  Act.
However,  certain  provisions of the Trust  Indenture  Act will be  specifically
incorporated  herein.  If any  provision of this  Indenture  conflicts  with the
provisions of the Trust Indenture Act specifically incorporated herein, then the
provisions of the Trust Indenture Act incorporated herein shall control.


                                       10

<PAGE>



SECTION 108.   EFFECT OF HEADINGS AND TABLE OF CONTENTS.

     The Article and Section  headings  herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.

SECTION 109.   SUCCESSORS AND ASSIGNS.

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

SECTION 110.   SEPARABILITY CLAUSE.

     In case any  provision in this  Indenture or in the Notes 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 111.   BENEFITS OF INDENTURE.

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

SECTION 112.   GOVERNING LAW.

     This  Indenture  and the  Notes  shall  be  governed  by and  construed  in
accordance  with the laws of the State of New York without regard to conflict of
laws principles thereof.

SECTION 113.   LEGAL HOLIDAYS.

     In any case where any Interest  Payment Date or the Stated  Maturity of any
Note shall not be a Business Day, then  (notwithstanding  any other provision of
this  Indenture or of the Notes)  payment of interest or  principal  need not be
made on such date, but may be made on the next succeeding  Business Day with the
same force and effect as if made on the Interest  Payment Date, or at the Stated
Maturity,  provided that no interest  shall accrue for the period from and after
such Interest Payment Date or Stated Maturity, as the case may be.


                                       11

<PAGE>



                                   ARTICLE TWO

                                   NOTE FORMS

SECTION 201.   FORMS GENERALLY.

     The Notes and the  Trustee's  certificates  of  authentication  shall be in
substantially  the  forms  set  forth in this  Article,  with  such  appropriate
insertions,  omissions,  substitutions  and other  variations as are required or
permitted by this Indenture,  and may have such letters,  numbers or other marks
of  identification  and such legends or  endorsements  placed  thereon as may be
required to comply with the rules of any  securities  exchange or the Depositary
or as may,  consistently  herewith, be determined by the officers executing such
Notes, as evidenced by their execution of the Notes.

     The definitive Notes shall be printed, lithographed or engraved or produced
by any combination of these methods on steel engraved borders or may be produced
in any other manner  permitted by the rules of any securities  exchange on which
the Notes may be listed, all as determined by the officers executing such Notes,
as evidenced by their execution of such Notes.

SECTION 202.   FORM OF FACE OF NOTE.

                               TRIAD GUARANTY INC.

                         7.90% Note Due January 15, 2028

No. __________                                                         $________

CUSIP No.________

     Triad  Guaranty  Inc., a corporation  duly organized and existing under the
laws of Delaware (herein called the "Company", which term includes any successor
Person under the Indenture hereinafter referred to), for value received,  hereby
promises to pay to __________________,  or registered assigns, the principal sum
of  _____________________  Dollars  on January  15,  2028,  and to pay  interest
thereon from January 29, 1998 or from the most recent  Interest  Payment Date to
which interest has been paid or duly provided for,  semi-annually  on January 15
and July 15 in each year,  commencing  July 15,  1998,  at the rate of 7.90% per
annum,  until the principal  hereof is paid or made  available for payment.  The
interest so payable,  and punctually  paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose
name this Note (or one or more Predecessor  Notes) is registered at the close of
business  on the  Regular  Record  Date for such  interest,  which  shall be the
January 1 or July 1 (whether  or not a Business  Day),  as the case may be, next
preceding such Interest  Payment Date. Any such interest not so punctually  paid
or duly  provided for will  forthwith  cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this Note

                                       12

<PAGE>



(or one or more  Predecessor  Notes) is registered at the close of business on a
Special  Record Date for the payment of such  Defaulted  Interest to be fixed by
the Trustee,  notice whereof shall be given to Holders of Notes not less than 10
days  prior to such  Special  Record  Date,  or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities  exchange
on which the Notes may be listed,  and upon such  notice as may be  required  by
such  exchange,  all as more fully  provided in said  Indenture.  Payment of the
principal  of and  interest on this Note will be made at the office or agency of
the Company  maintained  for that purpose in New York,  New York in such coin or
currency  of the  United  States of  America  as at the time of payment is legal
tender for  payment of public and  private  debts [in the case of a Note that is
not a Global  Note  insert -- ;  provided,  however,  that at the  option of the
Company  payment of interest  may be made by check  mailed to the address of the
Person entitled thereto as such address shall appear in the Note Register].

     [If applicable,  insert -- THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD  WITHIN  THE UNITED  STATES OR TO, OR FOR THE  ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING  SENTENCE.  BY ITS
ACQUISITION  HEREOF,  THE  HOLDER  (1)  REPRESENTS  THAT (A) IT IS A  "QUALIFIED
INSTITUTIONAL  BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES  ACT) OR (B)
IT IS AN "INSTITUTIONAL ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D OF THE SECURITIES ACT (AN  "INSTITUTIONAL  ACCREDITED
INVESTOR"), (2) AGREES THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE LATER OF THE
ORIGINAL  ISSUANCE  OF THIS NOTE OR THE LAST DATE ON WHICH THIS NOTE WAS HELD BY
TRIAD GUARANTY INC., OR AN AFFILIATE OF TRIAD GUARANTY INC., RESELL OR OTHERWISE
TRANSFER  THIS NOTE EXCEPT (A) TO TRIAD  GUARANTY INC. OR ANY AFFILIATE OF TRIAD
GUARANTY INC., (B) INSIDE THE UNITED STATES TO A QUALIFIED  INSTITUTIONAL BUYER,
AS DEFINED IN AND IN COMPLIANCE  WITH,  RULE 144A UNDER THE SECURITIES  ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL  ACCREDITED INVESTOR THAT, PRIOR TO
SUCH  TRANSFER  FURNISHES TO THE INDENTURE  TRUSTEE A SIGNED  LETTER  CONTAINING
CERTAIN  REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS NOTE AND,  IF  REQUESTED,  AN OPINION OF  COUNSEL,  (D)  PURSUANT TO THE
EXEMPTION  FROM  REGISTRATION  PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE)  OR (E) PURSUANT TO AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
SECURITIES  ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE IS  TRANSFERRED  A NOTICE  SUBSTANTIALLY  TO THE EFFECT OF THIS LEGEND.  IN
CONNECTION  WITH ANY  TRANSFER  OF THIS NOTE WITHIN TWO YEARS AFTER THE LATER OF
THE ORIGINAL  ISSUANCE OF THIS NOTE OR THE LAST DATE ON WHICH THIS NOTE WAS HELD
BY TRIAD  GUARANTY INC., OR AN AFFILIATE OF TRIAD GUARANTY INC., THE HOLDER MUST
IDENTIFY IN A SIGNED WRITING THE MANNER OF SUCH TRANSFER AND SUBMIT SUCH WRITING
AND  THIS  NOTE TO THE  INDENTURE  TRUSTEE.  IF THE  PROPOSED  TRANSFEREE  IS AN

                                       13

<PAGE>



INSTITUTIONAL  ACCREDITED  INVESTOR,  THE HOLDER MUST,  PRIOR TO SUCH  TRANSFER,
FURNISH TO THE INDENTURE  TRUSTEE AND TRIAD GUARANTY INC., AN OPINION OF COUNSEL
IN  RESPECT  OF  COMPLIANCE  WITH U.S.  SECURITIES  LAWS  SATISFACTORY  TO TRIAD
GUARANTY INC., IF SO REQUESTED BY TRIAD  GUARANTY INC. THE INDENTURE  CONTAINS A
PROVISION  REQUIRING THE INDENTURE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS  NOTE IN  VIOLATION  OF THE  FOREGOING  RESTRICTIONS.  THIS NOTE MAY NOT BE
TRANSFERRED  DIRECTLY OR INDIRECTLY TO AN EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE
I OF THE EMPLOYEE  RETIREMENT  INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")
OR SECTION 4975 OF THE INTERNAL  REVENUE CODE OF 1986,  AS AMENDED (THE "CODE"),
OR  ENTITIES  WHICH  MAY  BE  DEEMED  TO  HOLD  THE  ASSETS  OF  ANY  SUCH  PLAN
(COLLECTIVELY,  "PLANS"). PROVIDED, HOWEVER, THAT THIS NOTE MAY BE ACQUIRED BY A
PLAN IF (A) THE COMPANY IS NOT DEEMED TO BE A PARTY IN INTEREST UNDER ERISA OR A
DISQUALIFIED  PERSON  UNDER  THE  CODE  WITH  RESPECT  TO  SUCH  PLAN OR (B) THE
CONDITIONS OF PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23, PTCE 95-60,
PTCE 91-38, PTCE 90-1 OR PTCE 84-14 ARE SATISFIED.]

     Reference is hereby made to the further  provisions  of this Note set forth
on the reverse hereof,  which further provisions shall for all purposes have the
same effect as if set forth at this place.

     Unless the  certificate of  authentication  hereon has been executed by the
Trustee referred to on the reverse hereof by manual  signature,  this Note shall
not be entitled to any benefit under the Indenture or be valid or obligatory for
any purpose.

     IN WITNESS  WHEREOF,  the  Company has caused  this  instrument  to be duly
executed under its corporate seal.

                               TRIAD GUARANTY INC.

                               By
                                   --------------------------------
Attest:

-----------------------------

SECTION 203.   FORM OF REVERSE OF NOTE.

     This  Note  is one of a duly  authorized  issue  of  Notes  of the  Company
designated as its 7.90% Notes Due January 15, 2028 (herein  called the "Notes"),
limited in aggregate  principal  amount to $35,000,000,  issued and to be issued
under  an  Indenture,   dated  as  of  January  15,  1998  (herein   called  the

                                       14

<PAGE>


("Indenture"), between the Company and Bankers Trust Company, as Trustee (herein
called the  "Trustee",  which term  includes  any  successor  trustee  under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights,  limitations of rights,
duties and immunities  thereunder of the Company, the Trustee and the Holders of
the  Notes  and  of  the  terms  upon  which  the  Notes  are,  and  are  to be,
authenticated and delivered.

     The Notes are not subject to  redemption  prior to maturity and do not have
the benefit of any sinking fund obligations.

     The Indenture contains  provisions for defeasance at any time of the entire
indebtedness of this Note or certain restrictive covenants and Events of Default
with respect to this Note, in each case upon compliance with certain  conditions
set forth in the Indenture.

     If an Event of Default shall occur and be continuing,  the principal of all
the Notes may be  declared  or become due and payable in the manner and with the
effect provided in the Indenture.

     The Indenture  permits,  with certain  exceptions as therein provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Company and the rights of the Holders of the Notes  under the  Indenture  at any
time by the  Company  and the  Trustee  with the  consent  of the  Holders  of a
majority in aggregate principal amount of the Notes at the time Outstanding. The
Indenture  also  contains  provisions  permitting  the  Holders of a majority in
aggregate  principal amount of the Notes at the time  Outstanding,  on behalf of
the Holders of all the Notes,  to waive  compliance  by the Company with certain
provisions of the  Indenture  and certain past defaults  under the Indenture and
their consequences.  Any such consent or waiver by the Holder of this Note shall
be conclusive  and binding upon such Holder and upon all future  Holders of this
Note and of any Note  issued  upon the  registration  of  transfer  hereof or in
exchange  herefor or in lieu hereof,  whether or not notation of such consent or
waiver is made upon this Note.

     No reference  herein to the  Indenture  and no provision of this Note or of
the  Indenture  shall alter or impair the  obligation  of the Company,  which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency, herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set
forth,  the  transfer of this Note is  registrable  in the Note  Register,  upon
surrender of this Note for  registration  of transfer at the office or agency of
the  Company  in New  York,  duly  endorsed  by,  or  accompanied  by a  written
instrument  of  transfer  in form  satisfactory  to the  Company  and  the  Note
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing,  and thereupon one or more new Notes, of authorized  denominations  and
for the same  aggregate  principal  amount,  will be  issued  to the  designated
transferee or transferees.


                                       15

<PAGE>


     The  Notes  are  issuable  only  in  registered  form  without  coupons  in
denominations of $1,000 and any integral  multiple  thereof.  As provided in the
Indenture  and  subject  to certain  limitations  therein  set forth,  Notes are
exchangeable  for a like  aggregate  principal  amount  of Notes of a  different
authorized denomination, as requested by the Holder surrendering the same.

     No service  charge shall be made for any such  registration  of transfer or
exchange,  but the Company may require  payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     Prior to due  presentment of this Note for  registration  of transfer,  the
Company,  the  Trustee and any agent of the Company or the Trustee may treat the
Person in whose  name  this  Note is  registered  as the  owner  hereof  for all
purposes,  whether or not this Note be overdue,  and neither  the  Company,  the
Trustee nor any such agent shall be affected by notice to the contrary.

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

     All terms used in this Note which are defined in the  Indenture  shall have
the meanings assigned to them in the Indenture.

SECTION 204.   FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.

     This is one of the Notes referred to in the within-mentioned Indenture.

Dated:  
      -----------------
                             Bankers Trust Company,
                                   as Trustee

                             By
                                -------------------------
                                  Authorized Signatory

 SECTION 205.  FORM OF LEGEND FOR GLOBAL NOTES.

     Every Global Note authenticated and delivered hereunder shall bear a legend
in substantially the following form:

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"),  TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE  OF DTC (AND ANY  PAYMENT  IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED  REPRESENTATIVE  OF DTC),  ANY TRANSFER,

                                       16

<PAGE>



PLEDGE  OR OTHER  USE  HEREOF  FOR  VALUE OR  OTHERWISE  BY OR TO ANY  PERSON IS
WRONGFUL  INASMUCH AS THE REGISTERED  OWNER HEREOF,  CEDE & CO., HAS AN INTEREST
HEREIN.

                                  ARTICLE THREE

                                    THE NOTES

SECTION 301.   TITLE AND TERMS.

     The  aggregate  principal  amount of Notes which may be  authenticated  and
delivered  under this  Indenture  is limited  to  $35,000,000,  except for Notes
authenticated  and delivered  upon  registration  of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 304, 305, 306 or 906.

     The Notes shall be known and designated as the "7.90% Notes Due January 15,
2028" of the Company.  Their Stated Maturity shall be January 15, 2028, and they
shall bear  interest  at the rate of 7.90% per annum,  from  January 29, 1998 or
from the most recent  Interest  Payment Date to which  interest has been paid or
duly provided for, as the case may be, payable  semi-annually  on January 15 and
July 15,  commencing July 15, 1998, until the principal  thereof is paid or made
available for payment.

     The  principal  of and interest on the Notes shall be payable at the office
or agency of the Company in New York, New York,  maintained for such purpose and
at any other  office or  agency  maintained  by the  Company  for such  purpose;
provided,  however,  that, at the option of the Company,  payment of interest in
respect of any Note that is not a Global Note may be made by check mailed to the
address of the Person entitled  thereto as such address shall appear in the Note
Register.

     The Notes shall not be redeemable  prior to maturity and shall not have the
benefit of any sinking fund obligations.

SECTION 302.   DENOMINATIONS.

     The Notes shall be issuable  only in  registered  form without  coupons and
only in denominations of $1,000 and any integral multiple thereof.

SECTION 303.   EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

     The Notes shall be executed on behalf of the Company by its Chairman of the
Board,  its  Vice  Chairman  of the  Board,  its  President  or one of its  Vice
Presidents,  attested by its Secretary or one of its Assistant Secretaries.  The
signature of any of these officers on the Notes may be manual or facsimile.

                                       17

<PAGE>




     Notes bearing the manual or facsimile signatures of individuals who were at
any  time  the  proper   officers  of  the  Company   shall  bind  the  Company,
notwithstanding  that such  individuals  or any of them have ceased to hold such
offices prior to the  authentication  and delivery of such Notes or did not hold
such offices at the date of such Notes.

     At any time and from time to time after the  execution and delivery of this
Indenture,  the Company may deliver Notes executed by the Company to the Trustee
for  authentication,  together with a Company Order for the  authentication  and
delivery of such Notes;  and the Trustee in  accordance  with such Company Order
shall  authenticate  and  make  available  for  delivery  such  Notes as in this
Indenture provided and not otherwise.

     Each Note shall be dated the date of its authentication.

     No Note shall be entitled to any benefit  under this  Indenture or be valid
or obligatory for any purpose unless there appears on such Note a certificate of
authentication  substantially  in the form  provided for herein  executed by the
Trustee  by  manual  signature,  and such  certificate  upon  any Note  shall be
conclusive  evidence,  and the only  evidence,  that  such  Note  has been  duly
authenticated  and  delivered  hereunder.  The  Trustee  shall have the right to
decline to  authenticate  and make  available  for delivery any Notes under this
Section if the Trustee,  being advised by counsel,  determines  that such action
may not lawfully be taken or if the Trustee in good faith shall  determine  that
such action would expose the Trustee to personal liability to existing Holders.

SECTION 304.   TEMPORARY NOTES.

     Pending the preparation of definitive  Notes, the Company may execute,  and
upon  Company  Order the  Trustee  shall  authenticate  and make  available  for
delivery,  temporary  Notes  which  are  printed,   lithographed,   typewritten,
mimeographed   or   otherwise   produced,   in  any   authorized   denomination,
substantially  of the tenor of the  definitive  Notes in lieu of which  they are
issued and with such appropriate insertions, omissions,  substitutions and other
variations as the officers  executing such Notes may determine,  as evidenced by
their execution of such Notes.

     If temporary Notes are issued,  the Company will cause  definitive Notes to
be prepared  without  unreasonable  delay.  After the  preparation of definitive
Notes,  the temporary  Notes shall be  exchangeable  for  definitive  Notes upon
surrender  of the  temporary  Notes  at any  office  or  agency  of the  Company
designated  pursuant  to  Section  1002,  without  charge  to the  Holder.  Upon
surrender for  cancellation of any one or more temporary Notes the Company shall
execute and the Trustee shall  authenticate  and make  available for delivery in
exchange  therefor a like  principal  amount of  definitive  Notes of authorized
denominations.  Until so exchanged the temporary  Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.


                                       18

<PAGE>



SECTION 305.  REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE; GLOBAL NOTES.

     The Company  shall cause to be kept at the  Corporate  Trust  Office of the
Trustee a register  (the  register  maintained  in such  office and in any other
office or agency  designated  pursuant to Section  1002 being  herein  sometimes
collectively  referred  to as the "Note  Register")  in which,  subject  to such
reasonable  regulations as it may  prescribe,  the Company shall provide for the
registration of Notes and of transfers of Notes. The Trustee is hereby appointed
"Note Registrar" for the purpose of registering  Notes and transfers of Notes as
herein provided.

     Upon  surrender  for  registration  of transfer of any Note at an office or
agency of the Company designated pursuant to Section 1002 for such purpose,  the
Company shall execute, and the Trustee shall authenticate and make available for
delivery, in the name of the designated  transferee or transferees,  one or more
new Notes of any  authorized  denominations  and of a like  aggregate  principal
amount.

     At the option of the Holder,  Notes may be exchanged for other Notes of any
authorized  denominations  and  of  a  like  aggregate  principal  amount,  upon
surrender of the Notes to be  exchanged  at such office or agency.  Whenever any
Notes are so  surrendered  for  exchange,  the Company  shall  execute,  and the
Trustee shall authenticate and make available for delivery,  the Notes which the
Holder making the exchange is entitled to receive.

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

     Every Note presented or  surrendered  for  registration  of transfer or for
exchange  shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written  instrument of transfer in form  satisfactory  to
the Company and the Note Registrar  duly executed,  by the Holder thereof or his
attorney duly authorized in writing.

     No  service  charge  shall  be made for any  registration  of  transfer  or
exchange of Notes,  but the Company may require  payment of a sum  sufficient to
cover any tax or other  governmental  charge  that may be imposed in  connection
with any  registration  of transfer or exchange of Notes,  other than  exchanges
pursuant to Section 304 or 906 not involving any transfer.

     The  Notes  may be  issued  in  whole or in part in the form of one or more
Global Notes.  The provisions of Clauses (1), (2), (3) and (4) below shall apply
only to Global Notes.

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


                                       19

<PAGE>



               (2)  Notwithstanding  any other provisions in this Indenture,  no
          Global Note may be exchanged in whole or in part for Notes registered,
          and  no  transfer  of a  Global  Note  in  whole  or in  part  may  be
          registered,  in the name of any Person other than the  Depositary or a
          nominee thereof unless (A) the Depositary (i) has notified the Company
          that it is  unwilling  or unable to  continue as  Depositary  for such
          Global  Note or (ii) has  ceased to be a  clearing  agency  registered
          under the Exchange  Act, (B) the Company  executes and delivers to the
          Trustee a Company Order that such Global Note shall be so exchangeable
          or (C)  there  shall  have  occurred  and be  continuing  an  Event of
          Default.

               (3)  Subject to Clause (2) above,  any  exchange of a Global Note
          for other Notes may be made in whole or in part,  and all Notes issued
          in  exchange  for a  Global  Note  or any  portion  thereof  shall  be
          registered in such names as the Depositary shall direct.

               (4) Every Note authenticated and made available for delivery upon
          registration  of  transfer  of,  or in  exchange  for or in lieu of, a
          Global Note or any portion thereof,  whether pursuant to this Section,
          Section 304, 306 or 906 or otherwise,  shall be authenticated and made
          available  for  delivery in the form of, and shall be, a Global  Note,
          unless such Note is  registered in the name of a Person other than the
          Depositary or a nominee thereof.

SECTION 306.   MUTILATED, DESTROYED, LOST AND STOLEN NOTES.

     If any  mutilated  Note is  surrendered  to the Trustee,  the Company shall
execute and the Trustee shall  authenticate  and make  available for delivery in
exchange  therefor a new Note of like tenor and  principal  amount and bearing a
number not contemporaneously outstanding.

     If there shall be  delivered to the Company and the Trustee (i) evidence to
their  satisfaction of the destruction,  loss or theft of any Note and (ii) such
security  or  indemnity  as may be required by them to save each of them and any
agent of either of them harmless,  then, in the absence of notice to the Company
or the Trustee that such Note has been  acquired by a bona fide  purchaser,  the
Company shall execute and the Trustee shall  authenticate and make available for
delivery, in lieu of any such destroyed, lost or stolen Note, a new Note of like
tenor  and  principal   amount  and  bearing  a  number  not   contemporaneously
outstanding.

     In case any such mutilated, destroyed, lost or stolen Note has become or is
about to become due and payable,  the Company in its discretion may,  instead of
issuing a new Note, pay such Note.

     Upon the  issuance  of any new Note under this  Section,  the  Company  may
require the payment of a sum  sufficient to cover any tax or other  governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.


                                       20

<PAGE>



     Every new Note issued  pursuant to this  Section in lieu of any  destroyed,
lost  or  stolen  Note  shall  constitute  an  original  additional  contractual
obligation  of the Company,  whether or not the  destroyed,  lost or stolen Note
shall be at any time  enforceable  by anyone,  and shall be  entitled to all the
benefits of this Indenture  equally and  proportionately  with any and all other
Notes duly issued hereunder.

     The  provisions of this Section are  exclusive  and shall  preclude (to the
extent lawful) all other rights and remedies with respect to the  replacement or
payment of mutilated, destroyed, lost or stolen Notes.

SECTION 307.   PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.

     Interest  on any Note  which is  payable,  and is  punctually  paid or duly
provided for, on any Interest  Payment Date shall be paid to the Person in whose
name that Note (or one or more Predecessor  Notes) is registered at the close of
business on the Regular Record Date for such interest.

     Any interest on any Note which is payable,  but is not  punctually  paid or
duly  provided  for, on any  Interest  Payment Date  (herein  called  "Defaulted
Interest")  shall  forthwith  cease to be payable to the Holder on the  relevant
Regular  Record Date by virtue of having been such  Holder,  and such  Defaulted
Interest may be paid by the Company,  at its election in each case,  as provided
in Clause (1) or (2) below:

               (1) The  Company  may  elect  to make  payment  of any  Defaulted
          Interest to the Persons in whose names the Notes (or their  respective
          Predecessor  Notes)  are  registered  at the  close of  business  on a
          Special Record Date for the payment of such Defaulted Interest,  which
          shall be fixed in the following  manner.  The Company shall notify the
          Trustee in writing of the amount of Defaulted  Interest proposed to be
          paid on each  Note and the date of the  proposed  payment,  and at the
          same time the  Company  shall  deposit  with the  Trustee an amount of
          money equal to the aggregate  amount proposed to be paid in respect of
          such Defaulted Interest or shall make arrangements satisfactory to the
          Trustee for such deposit  prior to the date of the  proposed  payment,
          such money when  deposited  to be held in trust for the benefit of the
          Persons  entitled  to  such  Defaulted  Interest  as  in  this  Clause
          provided.  Thereupon the Trustee  shall fix a Special  Record Date for
          the payment of such Defaulted Interest which shall be not more than 15
          days and not  less  than 10 days  prior  to the  date of the  proposed
          payment  and not less than 10 days after the receipt by the Trustee of
          the notice of the proposed payment.  The Trustee shall promptly notify
          the  Company of such  Special  Record Date and, in the name and at the
          expense of the Company,  shall cause notice of the proposed payment of
          such  Defaulted  Interest and the Special  Record Date  therefor to be
          mailed,  first-class postage prepaid, to each Holder at his address as
          it appears in the Note  Register,  not less than 10 days prior to such
          Special Record Date.  Notice of the proposed payment of such Defaulted
          Interest and the Special  Record Date therefor  having been so mailed,
          such  Defaulted  Interest  shall be paid to the Persons in whose names

                                       21

<PAGE>



          the Notes (or their  respective  Predecessor  Notes) are registered at
          the close of business on such Special  Record Date and shall no longer
          be payable pursuant to the following Clause (2).

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

     Subject to the foregoing  provisions of this Section,  each Note  delivered
under this Indenture upon  registration  of transfer of or in exchange for or in
lieu of any other Note shall  carry the rights to  interest  accrued and unpaid,
and to accrue, which were carried by such other Note.

SECTION 308.   PERSONS DEEMED OWNERS.

     Prior  to due  presentment  of a Note for  registration  of  transfer,  the
Company,  the  Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Note is  registered  as the owner of such Note for the
purpose of  receiving  payment of  principal  of and  (subject  to Section  307)
interest on such Note and for all other purposes whatsoever, whether or not such
Note be  overdue,  and  neither  the  Company,  the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.

SECTION 309.   CANCELLATION.

     All Notes  surrendered  for payment,  registration  of transfer or exchange
shall, if surrendered to any Person other than the Trustee,  be delivered to the
Trustee  and shall be  promptly  canceled  by it.  The  Company  may at any time
deliver to the Trustee for cancellation any Notes previously  authenticated  and
delivered   hereunder  which  the  Company  may  have  acquired  in  any  manner
whatsoever,  and all  Notes so  delivered  shall  be  promptly  canceled  by the
Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes
canceled as provided in this  Section,  except as  expressly  permitted  by this
Indenture.  All  canceled  Notes held by the  Trustee  shall be  disposed  of as
directed by a Company  Order,  except that the Trustee  shall not be required to
destroy such Notes.

SECTION 310.   COMPUTATION OF INTEREST.

     Interest on the Notes  shall be computed on the basis of a 360-day  year of
twelve 30-day months.


                                       22

<PAGE>



                                  ARTICLE FOUR

                           SATISFACTION AND DISCHARGE

SECTION 401.   SATISFACTION AND DISCHARGE OF INDENTURE.

     This  Indenture  shall  cease to be of  further  effect  (except  as to any
surviving  rights of  registration  of  transfer  or  exchange  of Notes  herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company,  shall  execute  proper  instruments  acknowledging   satisfaction  and
discharge of this Indenture, when

     (1)  either

               (A) all Notes theretofore authenticated and delivered (other than
          (i) Notes  which  have been  destroyed,  lost or stolen and which have
          been  replaced  or paid as  provided in Section 306 and (ii) Notes for
          whose  payment  money  has  theretofore  been  deposited  in  trust or
          segregated and held in trust by the Company and  thereafter  repaid to
          the  Company or  discharged  from such  trust,  as provided in Section
          1003) have been delivered to the Trustee for cancellation; or

               (B) all such Notes not  theretofore  delivered to the Trustee for
          cancellation

                    (i) have become due and payable, or

                    (ii) will  become due and payable at their  Stated  Maturity
                         within one year,

          and the Company,  in the case of (i) or (ii) above,  has  deposited or
          caused to be deposited with the Trustee in trust an amount  sufficient
          to pay  and  discharge  the  entire  indebtedness  on such  Notes  not
          theretofore  delivered to the Trustee for cancellation,  for principal
          and  interest to the date of such  deposit (in the case of Notes which
          have become due and  payable) or to the Stated  Maturity,  as the case
          may be;

               (2) the Company  has paid or  caused  to be paid all  other  sums
          payable hereunder by the Company; and

               (3)  the  Company  has  delivered  to the  Trustee  an  Officers'
          Certificate  and  an  Opinion  of  Counsel,   each  stating  that  all
          conditions  precedent herein provided for relating to the satisfaction
          and discharge of this Indenture have been complied with.

Notwithstanding   the  satisfaction   and  discharge  of  this  Indenture,   the
obligations  of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee  pursuant to subclause (B) of Clause (1) of

                                       23

<PAGE>



this  Section,  the  obligations  of the Trustee  under Section 402 and the last
paragraph of Section 1003 shall survive.

SECTION 402.   APPLICATION OF TRUST MONEY.

     Subject to the  provisions of the last paragraph of Section 1003, all money
deposited  with the  Trustee  pursuant to Section 401 shall be held in trust and
applied  by it,  in  accordance  with  the  provisions  of the  Notes  and  this
Indenture,  to  the  payment,  either  directly  or  through  any  Paying  Agent
(including  the  Company  acting as its own  Paying  Agent) as the  Trustee  may
determine,  to the Persons entitled  thereto,  of the principal and interest for
whose payment such money has been deposited with the Trustee.

                                  ARTICLE FIVE

                                    REMEDIES

SECTION 501.   EVENTS OF DEFAULT.

     "Event of Default",  wherever  used herein,  means any one of the following
events  (whatever  the reason for such Event of Default  and whether it shall be
voluntary or  involuntary  or be effected by operation of law or pursuant to any
judgment,  decree or order of any court or any order,  rule or regulation of any
administrative or governmental body):

               (1) default in the payment of any interest upon any Note when
         it becomes  due and  payable,  and  continuance  of such  default for a
         period of 30 days; or

               (2)  default in the payment of the  principal  of any Note at its
          Maturity; or

               (3) default in the  performance,  or breach,  of any  covenant or
          warranty  of the Company in this  Indenture  (other than a covenant or
          warranty a default in whose  performance  or whose breach is elsewhere
          in this Section  specifically  dealt with),  and  continuance  of such
          default or breach for a period of 60 days after  there has been given,
          by registered  or certified  mail, to the Company by the Trustee or to
          the  Company  and  the  Trustee  by the  Holders  of at  least  25% in
          principal amount of the Outstanding  Notes a written notice specifying
          such  default or breach and  requiring  it to be remedied  and stating
          that such notice is a "Notice of Default" hereunder; or

               (4) the  occurrence  of an  event  of  default  under  any  bond,
          debenture,  note or other evidence of indebtedness  for money borrowed
          by the  Company  or any  Designated  Subsidiary,  if (i) such  default
          either (A) results  from the failure to pay the  principal of any such
          indebtedness  at its stated  maturity or (B) relates to an  obligation
          other than the obligation to pay the principal of such indebtedness at
          its stated maturity and results in such indebtedness becoming or being
          declared due and payable prior to the date on which it would otherwise

                                       24

<PAGE>



          have  become  due and  payable,  (ii)  the  principal  amount  of such
          indebtedness,  together  with the  principal  amount of any other such
          indebtedness  in default  for failure to pay  principal  at its stated
          maturity or the maturity of which has been so accelerated,  aggregates
          $2,000,000  or  more  at any  one  time  outstanding  and  (iii)  such
          indebtedness is not discharged,  or such acceleration is not rescinded
          or  annulled,  within a period of 10  Business  Days after there shall
          have been given,  by registered  or certified  mail, to the Company by
          the  Trustee or to the  Company  and the  Trustee by the Holders of at
          least  25% in  principal  amount  of the  Outstanding  Notes a written
          notice specifying such default and requiring the Company to cause such
          indebtedness  to  be  discharged  or  cause  such  acceleration  to be
          rescinded  or annulled  and  stating  that such notice is a "Notice of
          Default" hereunder; or

               (5) the entry by a court having  jurisdiction  in the premises of
          (A) a decree  or order for  relief in  respect  of the  Company  in an
          involuntary case or proceeding  under any applicable  Federal or State
          bankruptcy,  insolvency,  reorganization or other similar law or (B) a
          decree or order  adjudging  the  Company a bankrupt or  insolvent,  or
          approving  as  properly  filed  a  petition  seeking   reorganization,
          arrangement, adjustment or composition of or in respect of the Company
          under any applicable  Federal or State law, or appointing a custodian,
          receiver, liquidator, assignee, trustee, sequestrator or other similar
          official of the Company or of any substantial part of its property, or
          ordering  the  winding  up or  liquidation  of its  affairs,  and  the
          continuance  of any such  decree or order for relief or any such other
          decree or order  unstayed and in effect for a period of 60 consecutive
          days; or

               (6)  the  commencement  by the  Company  of a  voluntary  case or
          proceeding   under  any  applicable   Federal  or  State   bankruptcy,
          insolvency,  reorganization  or other similar law or of any other case
          or  proceeding  to be  adjudicated  a bankrupt  or  insolvent,  or the
          consent  by it to the entry of a decree or order for relief in respect
          of  the  Company  in an  involuntary  case  or  proceeding  under  any
          applicable Federal or State bankruptcy, insolvency,  reorganization or
          other  similar  law  or to  the  commencement  of  any  bankruptcy  or
          insolvency  case or  proceeding  against  it, or the filing by it of a
          petition or answer or consent seeking  reorganization  or relief under
          any  applicable  Federal  or State  law,  or the  consent by it to the
          filing of such petition or to the appointment of or taking  possession
          by a custodian, receiver, liquidator,  assignee, trustee, sequestrator
          or other similar official of the Company or of any substantial part of
          its property,  or the making by it of an assignment for the benefit of
          creditors,  or the  admission by it in writing of its inability to pay
          its debts  generally  as they become  due, or the taking of  corporate
          action by the Company in furtherance of any such action.

SECTION 502.   ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

     If an Event of Default (other than an Event of Default specified in Section
501(5) or (6)) occurs and is continuing, then and in every such case the Trustee
or the Holders of not less than 25% in principal amount of the Outstanding Notes
may declare the principal of all the Notes to be due and payable immediately, by

                                       25

<PAGE>



a notice in writing to the Company (and to the Trustee if given by Holders), and
upon any such  declaration  such principal and any accrued interest shall become
immediately due and payable.  If an Event of Default specified in Section 501(5)
or (6)  occurs,  the  principal  of any  accrued  interest  on  the  Notes  then
Outstanding  shall ipso facto  become  immediately  due and payable  without any
declaration or other act on the part of the Trustee or any Holder.

     At any time  after such a  declaration  of  acceleration  has been made and
before a judgment  or decree for  payment of the money due has been  obtained by
the Trustee as hereinafter in this Article  provided,  the Holders of a majority
in principal  amount of the Outstanding  Notes, by written notice to the Company
and the Trustee, may rescind and annul such declaration and its consequences if

               (1) the  Company  has paid or  deposited  with the  Trustee a sum
          sufficient to pay

                    (A) all overdue interest on all Notes,

                    (B)  the  principal  of any  Notes  which  have  become  due
               otherwise than by such  declaration of acceleration  and interest
               thereon at the rate borne by the Notes,

                    (C) to the extent that  payment of such  interest is lawful,
               interest  upon  overdue  interest at the rate borne by the Notes,
               and

                    (D) all sums paid or advanced by the Trustee  hereunder  and
               the reasonable compensation, expenses, disbursements and advances
               of the Trustee, its agents and counsel;

and

               (2) all  Events of  Default,  other than the  non-payment  of the
          principal of Notes which have become due solely by such declaration of
          acceleration, have been cured or waived as provided in Section 513.

No such  rescission  shall  affect  any  subsequent  default or impair any right
consequent thereon.

SECTION 503.   COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.

     The Company covenants that if

          (1)  default is made in the  payment of any  interest on any Note when
     such  interest  becomes due and payable and such  default  continues  for a
     period of 30 days, or


                                       26

<PAGE>



          (2) default is made in the payment of the principal of any Note at the
     Maturity thereof,

the Company will, upon demand of the Trustee,  pay to it, for the benefit of the
Holders of such Notes,  the whole  amount then due and payable on such Notes for
principal and interest,  and, to the extent that payment of such interest  shall
be legally  enforceable,  interest on any overdue  principal  and on any overdue
interest, at the rate borne by the Notes, and, in addition thereto, such further
amount as shall be  sufficient  to cover the costs and  expenses of  collection,
including the reasonable compensation,  expenses,  disbursements and advances of
the Trustee, its agents and counsel.

     If the Company fails to pay such amounts  forthwith  upon such demand,  the
Trustee,  in its own name and as trustee of an express  trust,  may  institute a
judicial  proceeding for the  collection of the sums so due and unpaid,  and may
prosecute such proceeding to judgment or final decree,  and may enforce the same
against the Company or any other  obligor  upon the Notes and collect the moneys
adjudged  or decreed to be  payable  in the  manner  provided  by law out of the
property of the Company or any other obligor upon the Notes, wherever situated.

     If an Event of Default  occurs and is  continuing,  the  Trustee may in its
discretion  proceed  to  protect  and  enforce  its rights and the rights of the
Holders by such appropriate  judicial proceedings as the Trustee shall deem most
effectual  to protect  and  enforce any such  rights,  whether for the  specific
enforcement  of any  covenant or  agreement  in this  Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.


SECTION 504.   TRUSTEE MAY FILE PROOFS OF CLAIM.

     In case of any  judicial  proceeding  relative to the Company (or any other
obligor upon the Notes),  its property or its  creditors,  the Trustee  shall be
entitled and empowered, by intervention in such proceeding or otherwise, to take
any and all actions  authorized  under the Trust  Indenture Act in order to have
claims  of the  Holders  and the  Trustee  allowed  in any such  proceeding.  In
particular, the Trustee shall be authorized to collect and receive any moneys or
other  property  payable or deliverable on any such claims and to distribute the
same; and any custodian,  receiver, assignee, trustee, liquidator,  sequestrator
or other similar official in any such judicial  proceeding is hereby  authorized
by each Holder to make such  payments to the Trustee  and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation,  expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.

     No provision of this Indenture  shall be deemed to authorize the Trustee to
authorize  or  consent to or accept or adopt on behalf of any Holder any plan of
reorganization,  arrangement,  adjustment or composition  affecting the Notes or
the rights of any Holder  thereof or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.

                                       27

<PAGE>



SECTION 505.   TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.

     All rights of action and claims  under this  Indenture  or the Notes may be
prosecuted  and  enforced by the Trustee  without the  possession  of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation,  expenses, disbursements and advances of
the Trustee,  its agents and counsel,  be for the ratable benefit of the Holders
of the Notes in respect of which such judgment has been recovered.

SECTION 506.   APPLICATION OF MONEY COLLECTED.

     Any money  collected  by the  Trustee  pursuant  to this  Article  shall be
applied in the following  order,  at the date or dates fixed by the Trustee and,
in case of the  distribution  of such money on account of principal or interest,
upon  presentation of the Notes and the notation  thereon of the payment if only
partially paid and upon surrender thereof if fully paid:

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

          SECOND:  To the  payment  of the  amounts  then  due  and  unpaid  for
     principal  of and  interest  on the  Notes in  respect  of which or for the
     benefit of which such money has been collected, ratably, without preference
     or priority of any kind,  according  to the amounts due and payable on such
     Notes for principal and interest, respectively.

SECTION 507.   LIMITATION ON SUITS.

     No Holder of any Note shall  have any right to  institute  any  proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless

          (1) such Holder has previously  given written notice to the Trustee of
     a continuing Event of Default;

          (2) the  Holders  of not less  than  25% in  principal  amount  of the
     Outstanding  Notes  shall  have made  written  request  to the  Trustee  to
     institute  proceedings  in respect of such Event of Default in its own name
     as Trustee hereunder;

          (3) such  Holder or Holders  have  offered to the  Trustee  reasonable
     indemnity  against the costs,  expenses and  liabilities  to be incurred in
     compliance with such request;

          (4) the Trustee for 60 days after its receipt of such notice,  request
     and offer of indemnity has failed to institute any such proceeding; and


                                       28

<PAGE>



          (5) no direction inconsistent with such written request has been given
     to the Trustee  during  such 60-day  period by the Holders of a majority in
     principal amount of the Outstanding Notes;

it being  understood  and intended  that no one or more  Holders  shall have any
right in any manner  whatever by virtue of, or by availing of, any  provision of
this Indenture to affect,  disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain  priority or preference over any other Holders
or to enforce  any right  under  this  Indenture,  except in the  manner  herein
provided and for the equal and ratable benefit of all the Holders.

SECTION 508.   UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST.

     Notwithstanding  any other provision in this  Indenture,  the Holder of any
Note shall have the  right,  which is  absolute  and  unconditional,  to receive
payment of the  principal of and (subject to Section 307)  interest on such Note
on the respective Stated Maturities expressed in such Note and to institute suit
for the  enforcement of any such payment,  and such rights shall not be impaired
without the consent of such Holder.

SECTION 509.   RESTORATION OF RIGHTS AND REMEDIES.

     If the Trustee or any Holder has  instituted  any proceeding to enforce any
right or remedy under this Indenture and such  proceeding has been  discontinued
or abandoned for any reason, or has been determined  adversely to the Trustee or
to such Holder,  then and in every such case,  subject to any  determination  in
such  proceeding,  the  Company,  the Trustee and the Holders  shall be restored
severally and  respectively to their former  positions  hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall  continue as though
no such proceeding had been instituted.

SECTION 510.   RIGHTS AND REMEDIES CUMULATIVE.

     Except as otherwise  provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 306,
no right or remedy  herein  conferred  upon or reserved to the Trustee or to the
Holders is intended  to be  exclusive  of any other  right or remedy,  and every
right and remedy shall,  to the extent  permitted by law, be  cumulative  and in
addition to every other right and remedy  given  hereunder  or now or  hereafter
existing at law or in equity or  otherwise.  The  assertion or employment of any
right or remedy  hereunder,  or  otherwise,  shall not  prevent  the  concurrent
assertion or employment of any other appropriate right or remedy.

SECTION 511.   DELAY OR OMISSION NOT WAIVER.

     No  delay  or  omission  of the  Trustee  or of any  Holder  of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or  constitute  a waiver of any such Event of Default or an

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<PAGE>


acquiescence therein.  Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised  from time to time,  and as often
as may be deemed  expedient,  by the Trustee or by the Holders,  as the case may
be.

SECTION 512.   CONTROL BY HOLDERS.

     The  Holders of a majority in  principal  amount of the  Outstanding  Notes
shall have the right to direct  the time,  method  and place of  conducting  any
proceeding  for any remedy  available to the Trustee or exercising  any trust or
power conferred on the Trustee, provided that

          (1) such  direction  shall not be in conflict  with any rule of law or
     with this Indenture, and

          (2) the Trustee may take any other action deemed proper by the Trustee
     which is not inconsistent with such direction.

SECTION 513.   WAIVER OF PAST DEFAULTS.

     The  Holders  of not  less  than a  majority  in  principal  amount  of the
Outstanding  Notes may on behalf of the  Holders of all the Notes waive any past
default hereunder and its consequences, except a default

          (1) in the payment of the principal of or interest on any Note, or

          (2) in respect of a covenant or provision  hereof which under  Article
     Nine  cannot be  modified  or amended  without the consent of the Holder of
     each Outstanding Note affected.

     Upon any such waiver,  such default shall cease to exist,  and any Event of
Default arising  therefrom shall be deemed to have been cured, for every purpose
of this  Indenture;  but no such waiver shall extend to any  subsequent or other
default or impair any right consequent thereon.

SECTION 514.   UNDERTAKING FOR COSTS.

     In any  suit  for  the  enforcement  of any  right  or  remedy  under  this
Indenture,  or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file  an  undertaking  to pay  the  costs  of such  suit,  including  reasonable
attorneys'  fees and  expenses,  and may  assess  costs  against  any such party
litigant,  in the manner and to the extent  provided in the Trust Indenture Act;
provided,  that neither this Section nor the Trust Indenture Act shall be deemed
to  authorize  any  court to  require  such an  undertaking  or to make  such an
assessment in any suit instituted by the Trustee, the Company, a Holder pursuant
to Section  508 hereof or  Holders of more than 10% in  principal  amount of the
then Outstanding Notes.

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<PAGE>



SECTION 515.   WAIVER OF STAY OR EXTENSION LAWS.

     The Company  covenants  (to the extent that it may  lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage  of, any stay or extension  law wherever  enacted,
now or at any time  hereafter  in force,  which may affect the  covenants or the
performance  of this  Indenture;  and the  Company  (to the  extent  that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and  covenants  that it will not hinder,  delay or impede the  execution  of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

                                   ARTICLE SIX

                                   THE TRUSTEE

SECTION 601.   CERTAIN DUTIES AND RESPONSIBILITIES.

     (a) The duties and  responsibilities  of the Trustee  shall be as set forth
herein  and  as  provided  by  the  Trust  Indenture  Act.  Notwithstanding  the
foregoing, no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its  duties  hereunder,  or in the  exercise  of any of its  rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate  indemnity  against such risk or  liability is not  reasonably
assured to it.

     (b) Except  during the  continuance  of an Event of  Default,  the  Trustee
undertakes to perform such duties and only such duties as are  specifically  set
forth in this Indenture,  and no implied  covenants or obligations shall be read
into this Indenture against the Trustee.

     (c) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise,  as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.

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

          (1) this  Subsection  shall not be  construed  to limit the  effect of
     Subsection (a) of this Section;

          (2) the Trustee  shall not be liable for any error of judgment made in
     good faith by a  Responsible  Officer,  unless it shall be proved  that the
     Trustee was negligent in ascertaining the pertinent facts; and

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<PAGE>



          (3) the Trustee  shall not be liable with  respect to any action taken
     or omitted to be taken by it in good faith in accordance with the direction
     of the Holders of a majority in principal  amount of the Outstanding  Notes
     relating to the time, method and place of conducting any proceeding for any
     remedy available to the Trustee, or exercising any trust or power conferred
     upon the Trustee, under this Indenture.

     (e) Whether or not therein  expressly so provided,  every provision of this
Indenture  relating to the conduct or  affecting  the  liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.

SECTION 602.   NOTICE OF DEFAULTS.

     The Trustee shall give the Holders  notice of any default  hereunder as and
to the extent provided by the Trust Indenture Act;  provided,  however,  that in
the case of any default of the character  specified in Section  501(3),  no such
notice to Holders  shall be given  until at least 30 days  after the  occurrence
thereof.  For the purpose of this Section,  the term  "default"  means any event
which is, or after  notice or lapse of time or both  would  become,  an Event of
Default.

SECTION 603.   CERTAIN RIGHTS OF TRUSTEE.

     Subject to the provisions of Section 601:

          (a) the  Trustee  may  rely  and  shall  be  protected  in  acting  or
     refraining  from  acting  upon  any  resolution,   certificate,  statement,
     instrument,  opinion, report, notice, request,  direction,  consent, order,
     bond,  debenture,  note,  other evidence of  indebtedness or other paper or
     document  believed by it to be genuine and to have been signed or presented
     by the proper party or parties;

          (b) any request or direction of the Company  mentioned herein shall be
     sufficiently  evidenced  by a  Company  Request  or  Company  Order and any
     resolution  of the Board of Directors  may be  sufficiently  evidenced by a
     Board Resolution;

          (c) whenever in the administration of this Indenture the Trustee shall
     deem it desirable that a matter be proved or  established  prior to taking,
     suffering  or omitting  any action  hereunder,  the Trustee  (unless  other
     evidence  be herein  specifically  prescribed)  may,  in the absence of bad
     faith on its part, rely upon an Officers' Certificate;

          (d) the Trustee  may consult  with  counsel of its  selection  and the
     written  advice of such counsel or any Opinion of Counsel shall be full and
     complete  authorization  and  protection  in respect  of any action  taken,
     suffered or omitted by it hereunder in good faith and in reliance thereon;


                                       32

<PAGE>



          (e) the Trustee  shall be under no  obligation  to exercise any of the
     rights or powers vested in it by this Indenture at the request or direction
     of any of the Holders pursuant to this Indenture, unless such Holders shall
     have offered to the Trustee  reasonable  security or indemnity  against the
     costs, expenses and liabilities which might be incurred by it in compliance
     with such request or direction;

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

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

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

SECTION 604.   NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES.

     The  recitals  contained  herein  and in the Notes,  except  the  Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no  responsibility  for their  correctness.  The Trustee
makes no  representations as to the validity or sufficiency of this Indenture or
of the Notes. The Trustee shall not be accountable for the use or application by
the Company of Notes or the proceeds thereof.

SECTION 605.   MAY HOLD NOTES.

     The Trustee, any Paying Agent, any Note Registrar or any other agent of the
Company,  in its  individual  or any other  capacity,  may  become  the owner or
pledgee of Notes and,  subject to Sections 608 and 613, may otherwise  deal with
the Company  with the same rights it would have if it were not  Trustee,  Paying
Agent, Note Registrar or such other agent.


                                       33

<PAGE>



SECTION 606.   MONEY HELD IN TRUST.

     Money held by the Trustee in trust  hereunder  need not be segregated  from
other funds except to the extent  required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.

SECTION 607.   COMPENSATION AND REIMBURSEMENT.

     The Company agrees

          (1) to pay to the  Trustee  from  time  to time  compensation  for all
     services  rendered  by it  hereunder  as such  parties may agree in writing
     (which  compensation shall not be limited by any provision of law in regard
     to the compensation of a trustee of an express trust);

          (2) except as otherwise  expressly  provided herein,  to reimburse the
     Trustee upon its request for all  reasonable  expenses,  disbursements  and
     advances  incurred or made by the Trustee in accordance  with any provision
     of this Indenture  (including the reasonable  compensation and the expenses
     and  disbursements  of its agents and  counsel),  except any such  expense,
     disbursement  or advance as may be  attributable  to its  negligence or bad
     faith; and

          (3) to  indemnify  the Trustee  (which  shall  include  its  officers,
     directors,  employees and agents) for, and to hold it harmless against, any
     loss,  liability or expense  including  taxes (other than taxes based upon,
     measured by or  determined by the income of the Trustee)  incurred  without
     negligence or bad faith on its part,  arising out of or in connection  with
     the  acceptance or  administration  of this trust,  including the costs and
     expenses of  defending  itself  (which  includes  the  reasonable  fees and
     expenses of Trustee's counsel) against any claim or liability in connection
     with the exercise or performance of any of its powers or duties hereunder.

     The  Trustee  shall have a lien prior to the Notes as to all  property  and
funds held by it hereunder  for any amount owing it or any  predecessor  Trustee
pursuant to this Section 607, except with respect to funds held in trust for the
benefit of the Holders of particular Notes.

     When the Trustee incurs expenses or renders  services in connection with an
Event of Default  specified in Section  501(5) or Section  501(6),  the expenses
(including  the  reasonable  charges  and  expenses  of  its  counsel)  and  the
compensation   for  the  services  are  intended  to   constitute   expenses  of
administration  under any applicable Federal or state bankruptcy,  insolvency or
other similar law.

     The  provisions  of this  Section  shall  survive the  termination  of this
Indenture and the resignation or removal of the Trustee.

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<PAGE>




SECTION 608.   DISQUALIFICATION; CONFLICTING INTERESTS.

     If the  Trustee  has or shall  acquire a  conflicting  interest  within the
meaning of the Trust  Indenture  Act, the Trustee  shall either  eliminate  such
interest or resign,  to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.

SECTION 609.   CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

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

SECTION 610.   RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

     (a) No  resignation  or  removal of the  Trustee  and no  appointment  of a
successor  Trustee  pursuant to this Article  shall become  effective  until the
acceptance of appointment by the successor Trustee under Section 611.

     (b) The Trustee may resign at any time by giving  written notice thereof to
the Company.  If an instrument  of  acceptance by a successor  Trustee shall not
have been  delivered  to the  Trustee  within 30 days  after the  giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.

     (c) The  Trustee  may be  removed  at any time by Act of the  Holders  of a
majority in principal amount of the Outstanding Notes,  delivered to the Trustee
and to the Company.  If an instrument of acceptance by a successor Trustee shall
not have been delivered to the Trustee within 30 days after delivery of such Act
of the  Holders,  the  resigning  Trustee may  petition  any court of  competent
jurisdiction for the appointment of a successor Trustee.

     (d) If at any time:

               (1) the  Trustee  shall  fail to comply  with  Section  608 after
          written request  therefor by the Company or by any Holder who has been
          a bona fide Holder of a Note for at least six months, or

               (2) the Trustee shall cease to be eligible  under Section 609 and
          shall fail to resign after written request  therefor by the Company or
          by any such Holder, or

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<PAGE>



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

then,  in any such case,  (i) the Company by a Board  Resolution  may remove the
Trustee,  or (ii)  subject to Section  514,  any Holder who has been a bona fide
Holder of a Note for at least six  months  may,  on  behalf of  himself  and all
others similarly situated,  petition any court of competent jurisdiction for the
removal  of the  Trustee  and the  appointment  of a  successor  Trustee.  If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the date of such Board  Resolution or any order
or decree of such court removing the Trustee,  as the case may be, the resigning
Trustee may petition any court of competent  jurisdiction for the appointment of
a successor Trustee.

     (e) If the Trustee shall resign,  be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company,
by a Board Resolution,  shall promptly appoint a successor  Trustee.  If, within
one year after such resignation,  removal or incapability,  or the occurrence of
such vacancy,  a successor Trustee shall be appointed by Act of the Holders of a
majority in principal  amount of the Outstanding  Notes delivered to the Company
and the retiring Trustee,  the successor  Trustee so appointed shall,  forthwith
upon its  acceptance  of such  appointment,  become the  successor  Trustee  and
supersede  the  successor  Trustee  appointed  by the  Company.  If no successor
Trustee  shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter  provided,  any Holder who has been a bona
fide  Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated,  petition any court of competent jurisdiction for the
appointment of a successor Trustee.

     (f) The Company shall give notice of each  resignation  and each removal of
the Trustee and each  appointment  of a successor  Trustee to all Holders in the
manner  provided  in Section  106.  Each  notice  shall  include the name of the
successor Trustee and the address of its Corporate Trust Office.

SECTION 611.   ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

     Every successor Trustee appointed hereunder shall execute,  acknowledge and
deliver to the Company and to the retiring Trustee an instrument  accepting such
appointment,  and thereupon the  resignation or removal of the retiring  Trustee
shall become effective and such successor Trustee, without any further act, deed
or  conveyance,  shall  become  vested with all the rights,  powers,  trusts and
duties of the retiring Trustee;  but, on request of the Company or the successor
Trustee,  such retiring Trustee shall, upon payment of its charges,  execute and
deliver an instrument  transferring  to such  successor  Trustee all the rights,
powers and trusts of the retiring  Trustee and shall duly  assign,  transfer and
deliver to such  successor  Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Company shall

                                       36

<PAGE>



execute  any and all  instruments  for more fully and  certainly  vesting in and
confirming to such successor Trustee all such rights, powers and trusts.

     No successor  Trustee  shall accept its  appointment  unless at the time of
such  acceptance  such  successor  Trustee shall be qualified and eligible under
this Article.

SECTION 612.   MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

     Any  corporation  into which the Trustee may be merged or converted or with
which it may be  consolidated,  or any  corporation  resulting  from any merger,
conversion  or  consolidation  to which  the  Trustee  shall be a party,  or any
corporation  succeeding to all or substantially all the corporate trust business
of the Trustee,  shall be the successor of the Trustee hereunder,  provided such
corporation  shall be  otherwise  qualified  and  eligible  under this  Article,
without the  execution  or filing of any paper or any further act on the part of
any of the parties hereto. In case any Notes shall have been authenticated,  but
not  delivered,  by the  Trustee  then  in  office,  any  successor  by  merger,
conversion  or  consolidation  to such  authenticating  Trustee  may adopt  such
authentication and deliver the Notes so authenticated with the same effect as if
such successor Trustee had itself authenticated such Notes.

SECTION 613.   PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

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

                                  ARTICLE SEVEN

                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 701.   COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.

     The Company will furnish or cause to be furnished to the Trustee

               (a)  semi-annually,  not more  than 15 days  after  each  Regular
          Record  Date,  a list,  in such  form as the  Trustee  may  reasonably
          require,  of the names and addresses of the Holders as of such Regular
          Record Date, and

               (b) at such other  times as the  Trustee  may request in writing,
          within 30 days after the receipt by the Company of any such request, a
          list of  similar  form and  content as of a date not more than 15 days
          prior to the time such list is furnished;


                                       37

<PAGE>



excluding from any such list names and addresses  received by the Trustee in its
capacity as Note Registrar.

SECTION 702.   PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.

     (a) The  Trustee  shall  preserve,  in as  current a form as is  reasonably
practicable,  the names and  addresses  of Holders  contained in the most recent
list  furnished  to the  Trustee as  provided  in Section  701 and the names and
addresses of Holders  received by the Trustee in its capacity as Note Registrar.
The Trustee may destroy any list furnished to it as provided in Section 701 upon
receipt of a new list so furnished.

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

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

SECTION 703.   REPORTS BY TRUSTEE.

     (a) The Trustee  shall  transmit to Holders  such  reports  concerning  the
Trustee and its actions under this Indenture as may be required  pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.

     (b) A copy of each such report shall,  at the time of such  transmission to
Holders,  be filed by the Trustee with each stock  exchange upon which the Notes
are listed,  with the Commission  and with the Company.  The Company will notify
the Trustee when the Notes are listed on any stock exchange.

SECTION 704.   REPORTS BY COMPANY.

     The Company shall file with the Trustee and the Commission, and transmit to
Holders,  such  information,  documents and other  reports,  and such  summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act; provided that any such information,
documents  or reports  required  to be filed  with the  Commission  pursuant  to
Section 13 or 15(d) of the Exchange  Act shall be filed with the Trustee  within
15 days after the same is so required to be filed with the Commission.


                                       38

<PAGE>



                                  ARTICLE EIGHT

              CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 801.   COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.

     The  Company  shall  not,  in a single  transaction  or a series of related
transactions  (a) consolidate  with or merge with or into any other Person,  (b)
sell,  assign,  transfer or lease, or otherwise dispose of, all or substantially
all of its properties  and assets to any Person or group of affiliated  Persons,
or (c) permit any of its  Subsidiaries  to enter  into any such  transaction  or
transactions if such transaction or transactions entered into by such Subsidiary
or Subsidiaries, in the aggregate, would result in a sale, assignment, transfer,
lease or disposal of all or  substantially  all of the  properties and assets of
the Company and its Subsidiaries on a consolidated  basis to any other Person or
group of Affiliated Persons, unless:

          (1) in a transaction in which the Company  consolidates with or merges
     with  or  into  another  Person  and is not the  surviving  entity  of such
     consolidation  or merger or in which the  Company  directly  or  indirectly
     sells,  assigns,   transfers,  leases  or  otherwise  disposes  of  all  or
     substantially  all of its  properties  and assets as an  entirety,  (a) the
     Person  formed by such  consolidation  or with or into which the Company is
     merged or the Person that acquires by sale, assignment,  transfer, lease or
     other  disposition all or substantially all of the properties and assets of
     the  Company  as an  entirety  (for  purposes  of  this  Article  Eight,  a
     "Successor Company") shall be a corporation, partnership or trust, shall be
     organized  and  validly  existing  under the laws of the  United  States of
     America,  any  State  thereof  or the  District  of  Columbia  and  (b) the
     Successor  Company  shall  expressly  assume by an  indenture  supplemental
     hereto executed and delivered to the Trustee,  in form  satisfactory to the
     Trustee,  the due and punctual  payment of the principal of and interest on
     all the Notes and the  performance  of every  covenant of this Indenture on
     the part of the Company to be performed or observed;

          (2) immediately after giving effect to such  transaction,  no Event of
     Default,  and no event which, after notice or lapse of time, or both, would
     become an Event of Default, shall have occurred and be continuing;

          (3) if,  as a result  of any such  transaction,  Capital  Stock of any
     Designated  Subsidiary  (or any  Subsidiary of the Company having direct or
     indirect  Control of any Designated  Subsidiary)  would become subject to a
     Lien  prohibited  by the  covenant in Section  1008(a),  the Company or the
     Successor  Company  shall  have  secured  the  Notes  as  required  by such
     covenant; and

          (4) the Company has delivered to the Trustee an Officers'  Certificate
     and an Opinion of Counsel,  each stating that such  consolidation,  merger,
     sale,  assignment,  transfer or lease and, if a  supplemental  indenture is
     required in connection with such transaction,  such supplemental  indenture

                                       39

<PAGE>



     comply with this Article and that all conditions  precedent herein provided
     for relating to such transaction have been complied with.

SECTION 802.   SUCCESSOR SUBSTITUTED.

     Upon any  consolidation of the Company with, or merger of the Company into,
any other Person or any sale,  assignment,  transfer or lease of the  properties
and assets of the  Company  substantially  as an  entirety  in  accordance  with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or the  transferee  or lessee to which such sale,  assignment,
transfer or lease is made shall  succeed  to, and be  substituted  for,  and may
exercise  every right and power of, the Company  under this  Indenture  with the
same effect as if such  successor  Person had been named as the Company  herein,
and thereafter,  except in the case of a lease, the predecessor  Person shall be
relieved of all obligations and covenants under this Indenture and the Notes.

                                  ARTICLE NINE

                             SUPPLEMENTAL INDENTURES

SECTION 901.   SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.

     Without the consent of any Holders, the Company, when authorized by a Board
Resolution,  and the Trustee,  at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:

          (1) to evidence the  succession  of another  Person to the Company and
     the assumption by any such successor of the covenants of the Company herein
     and in the Notes; or

          (2) to add to the  covenants  of the  Company  for the  benefit of the
     Holders,  or to  surrender  any right or power  herein  conferred  upon the
     Company; or

          (3) to add additional Events of Default; or

          (4) to cure any  ambiguity,  to correct or  supplement  any  provision
     herein  which may be  defective or  inconsistent  with any other  provision
     herein,  or to make  any  other  provisions  with  respect  to  matters  or
     questions arising under this Indenture,  provided that such action pursuant
     to this Clause (4) shall not adversely  affect the interests of the Holders
     in any material respect.


                                       40

<PAGE>



SECTION 902.   SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.

     With the consent of the  Holders of not less than a majority  in  principal
amount of the Outstanding Notes, by Act of said Holders delivered to the Company
and the Trustee,  the Company,  when authorized by a Board  Resolution,  and the
Trustee may enter into an indenture or  indentures  supplemental  hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the  provisions of this Indenture or of modifying in any manner the rights of
the Holders under this Indenture;  provided,  however, that no such supplemental
indenture  shall,  without  the consent of the Holder of each  Outstanding  Note
affected thereby,

          (1) change the Stated Maturity of the principal of, or any installment
     of interest on, any Note, or reduce the principal  amount  thereof,  or the
     rate of interest thereon, or change the place of payment where, or the coin
     or  currency in which,  the  principal  of any Note or interest  thereon is
     payable,  or impair the right to institute suit for the  enforcement of any
     such payment on or after the Stated Maturity thereof, or

          (2) reduce  the  percentage  in  principal  amount of the  Outstanding
     Notes,  the consent of whose Holders is required for any such  supplemental
     indenture,  or the consent of whose  Holders is required for any waiver (of
     compliance  with certain  provisions of this Indenture or certain  defaults
     hereunder and their consequences) provided for in this Indenture, or

          (3)  modify any of the  provisions  of this  Section  or Section  513,
     except to increase any such  percentage  or to provide  that certain  other
     provisions  of this  Indenture  cannot be  modified  or waived  without the
     consent of the Holder of each Outstanding Note affected thereby.

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

SECTION 903.   EXECUTION OF SUPPLEMENTAL INDENTURES.

     In  executing,   or  accepting  the  additional   trusts  created  by,  any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture,  the Trustee shall be entitled to receive,
and  (subject  to Section  601) shall be fully  protected  in relying  upon,  an
Opinion of Counsel stating that the execution of such supplemental  indenture is
authorized  or  permitted by this  Indenture.  The Trustee may, but shall not be
obligated  to,  enter into any such  supplemental  indenture  which  affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.


                                       41

<PAGE>



SECTION 904.   EFFECT OF SUPPLEMENTAL INDENTURES.

     Upon the execution of any supplemental  indenture under this Article,  this
Indenture  shall be  modified in  accordance  therewith,  and such  supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter  authenticated and delivered  hereunder shall
be bound thereby.

SECTION 905.   CONFORMITY WITH TRUST INDENTURE ACT.

     No  supplemental  indenture  will be qualified or executed  pursuant to the
Trust  Indenture Act unless this Indenture is so qualified.  Every  supplemental
indenture so  qualified or executed  shall  conform to the  requirements  of the
Trust Indenture Act as then in effect.

SECTION 906.   REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.

     Notes  authenticated  and delivered after the execution of any supplemental
indenture  pursuant to this  Article  may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such  supplemental  indenture.  If the Company shall so determine,  new Notes so
modified as to conform,  in the opinion of the Trustee and the  Company,  to any
such  supplemental  indenture  may be prepared  and  executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.

                                   ARTICLE TEN

                                    COVENANTS

SECTION 1001.  PAYMENT OF PRINCIPAL AND INTEREST.

     The Company will duly and  punctually  pay the principal of and interest on
the Notes in accordance with the terms of the Notes and this Indenture.

SECTION 1002.  MAINTENANCE OF OFFICE OR AGENCY.

     The Company will maintain in New York City, an office or agency where Notes
may be presented or surrendered for payment,  where Notes may be surrendered for
registration  of transfer or exchange  and where  notices and demands to or upon
the  Company  in  respect of the Notes and this  Indenture  may be  served.  The
Company will give prompt written notice to the Trustee of the location,  and any
change in the  location,  of such  office or agency.  If at any time the Company
shall  fail to  maintain  any such  required  office or agency or shall  fail to
furnish the Trustee with the address thereof,  such  presentations,  surrenders,
notices and demands may be made or served at the  Corporate  Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.


                                       42

<PAGE>



     The Company may also from time to time  designate one or more other offices
or agencies  (in or outside New York City) where the Notes may be  presented  or
surrendered  for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in New York City, for such purposes. The Company will give prompt written notice
to the Trustee of any such  designation  or rescission  and of any change in the
location of any such other office or agency.

SECTION 1003.  MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.

     If the Company shall at any time act as its own Paying  Agent,  it will, on
or before  each due date of the  principal  of or  interest on any of the Notes,
segregate  and hold in trust for the benefit of the Persons  entitled  thereto a
sum  sufficient to pay the principal or interest so becoming due until such sums
shall be paid to such  Persons or otherwise  disposed of as herein  provided and
will promptly notify the Trustee of its action or failure so to act.

     Whenever the Company shall have one or more Paying  Agents,  it will, at or
prior to 10:00 a.m.  in the place of  business  of the Paying  Agent on each due
date of the principal of or interest on any Notes, deposit with a Paying Agent a
sum sufficient to pay such amount,  such sum to be held as provided by the Trust
Indenture  Act,  and (unless  such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.

     The Company  will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an  instrument in which such Paying Agent shall agree
with the Trustee,  subject to the  provisions of this Section,  that such Paying
Agent will (i) comply with the provisions of the Trust  Indenture Act applicable
to it as a Paying  Agent and (ii) during the  continuance  of any default by the
Company  (or any other  obligor  upon the Notes) in the making of any payment in
respect of the Notes, upon the written request of the Trustee,  forthwith pay to
the Trustee all sums held in trust by such Paying Agent as such.

     The Company may at any time, for the purpose of obtaining the  satisfaction
and  discharge of this  Indenture or for any other  purpose,  pay, or by Company
Order  direct any Paying  Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying  Agent,  such sums to be held by the Trustee upon the
same  trusts as those  upon  which  such sums were held by the  Company  or such
Paying Agent;  and,  upon such payment by any Paying Agent to the Trustee,  such
Paying Agent shall be released from all further  liability  with respect to such
money.

     Any money  deposited with the Trustee or any Paying Agent,  or then held by
the  Company,  in trust for the payment of the  principal  of or interest on any
Note and remaining  unclaimed for two years after such principal or interest has
become due and payable shall be paid to the Company on Company  Request,  or (if
then held by the Company) shall be discharged from such trust; and the Holder of
such Note shall thereafter,  as an unsecured general creditor,  look only to the
Company for payment  thereof,  and all  liability  of the Trustee or such Paying
Agent with  respect to such trust  money,  and all  liability  of the Company as

                                       43

<PAGE>



trustee thereof, shall thereupon cease;  provided,  however, that the Trustee or
such Paying Agent, before being required to make any such repayment,  may at the
expense of the Company cause to be published  once, in a newspaper  published in
the English language,  customarily published on each Business Day and of general
circulation in New York City, notice that such money remains unclaimed and that,
after a date  specified  therein,  which shall not be less than 30 days from the
date of such  publication,  any unclaimed  balance of such money then  remaining
will be repaid to the Company.

SECTION 1004.  STATEMENT BY OFFICERS AS TO DEFAULT.

     The Company will  deliver to the Trustee,  within 120 days after the end of
each fiscal year of the  Company  ending  after the date  hereof,  an  Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions  and conditions of this  Indenture  (without  regard to any period of
grace or requirement of notice provided  hereunder) and, if the Company shall be
in default,  specifying  all such defaults and the nature and status  thereof of
which they may have knowledge.

SECTION 1005.  CORPORATE EXISTENCE.

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

SECTION 1006.  MAINTENANCE OF PROPERTIES.

     The Company will cause all properties  used or useful in the conduct of its
business or the business of any  Subsidiary  to be  maintained  and kept in good
condition,  repair and working order and supplied  with all necessary  equipment
and  will  cause  to be made  all  necessary  repairs,  renewals,  replacements,
betterments and improvements  thereof, all as in the judgment of the Company may
be necessary  so that the business  carried on in  connection  therewith  may be
properly and  advantageously  conducted at all times;  provided,  however,  that
nothing in this  Section  shall  prevent  the  Company  from  discontinuing  the
operation or maintenance of any of such properties if such discontinuance is, in
the  judgment of the  Company,  desirable  in the conduct of its business or the
business of any Subsidiary and not  disadvantageous  in any material  respect to
the Holders.


                                       44

<PAGE>



SECTION 1007.  PAYMENT OF TAXES AND OTHER CLAIMS.

     The Company will pay or discharge or cause to be paid or discharged, before
the same shall become  delinquent,  (1) all taxes,  assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or upon the income,
profits or property of the Company or any Subsidiary,  and (2) all lawful claims
for labor,  materials and supplies which, if unpaid,  might by law become a lien
upon the property of the Company or any Subsidiary;  provided, however, that the
Company  shall  not be  required  to pay or  discharge  or  cause  to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.

SECTION 1008.  LIMITATIONS ON LIENS AND DISPOSITIONS OF CAPITAL STOCK OF A
               DESIGNATED SUBSIDIARY.

     So long as any Notes shall remain Outstanding:

          (a) the Company  shall not,  and shall not permit any  Subsidiary  to,
     directly or  indirectly,  create,  issue,  assume,  incur or guarantee  any
     indebtedness  for money  borrowed  which is secured by a Lien on any of the
     present  or  future  Capital  Stock  of a  Designated  Subsidiary  (or  any
     Subsidiary  of  the  Company  having  direct  or  indirect  Control  of any
     Designated Subsidiary), which Capital Stock is directly or indirectly owned
     by the Company,  unless the Notes and, if the Company so elects,  any other
     indebtedness  of the  Company  ranking  at least pari passu with the Notes,
     shall be secured  equally and ratably with (or prior to) such other secured
     indebtedness for money borrowed so long as it is outstanding; and

          (b) The Company  shall not,  and shall not permit any  Subsidiary  to,
     sell,  transfer or otherwise  dispose of any shares of Capital Stock of any
     Designated  Subsidiary  (or of any  corporation  having  direct or indirect
     Control of any Designated Subsidiary) except (subject to Article Eight) for
     (i) a sale,  transfer  or other  disposition  of any  Capital  Stock of any
     Designated  Subsidiary to a Wholly-Owned  Subsidiary of the Company; (ii) a
     sale,  transfer or other  disposition  of the entire  Capital  Stock of any
     Designated  Subsidiary  for at least fair value (as determined by the Board
     of  Directors  acting in good  faith);  or (iii) a sale,  transfer or other
     disposition of the Capital Stock of any Designated  Subsidiary for at least
     fair value (as determined by the Board of Directors  acting in good faith),
     if, after giving effect thereto, the Company and its Subsidiaries would own
     more than 80% of the issued and outstanding Voting Stock of such Designated
     Subsidiary.

SECTION 1009.  WAIVER OF CERTAIN COVENANTS.

     The Company may omit in any particular instance to comply with any covenant
or condition set forth in Sections 1005 to 1008,  inclusive,  if before the time
for such  compliance  the Holders of at least a majority in principal  amount of
the  Outstanding  Notes  shall,  by Act  of  such  Holders,  either  waive  such

                                       45

<PAGE>



compliance in such instance or generally waive  compliance with such covenant or
condition,  but no such  waiver  shall  extend to or  affect  such  covenant  or
condition except to the extent so expressly waived, and, until such waiver shall
become  effective,  the obligations of the Company and the duties of the Trustee
in respect of any such  covenant  or  condition  shall  remain in full force and
effect.

                                 ARTICLE ELEVEN

                       DEFEASANCE AND COVENANT DEFEASANCE

SECTION 1101.  COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE.

     The Company may elect,  at its option at any time,  to have Section 1102 or
Section  1103  applied  to  the  Outstanding  Notes  upon  compliance  with  the
conditions set forth below in this Article.

SECTION 1102.  DEFEASANCE AND DISCHARGE.

     Upon the Company's  exercise of its option to have this Section  applied to
the Outstanding  Notes, the Company shall be deemed to have been discharged from
its  obligations  with  respect to the  Outstanding  Notes as  provided  in this
Section  on and after the date the  conditions  set  forth in  Section  1104 are
satisfied  (hereinafter called "Defeasance").  For this purpose, such Defeasance
means that the Company  shall be deemed to have paid and  discharged  the entire
indebtedness  represented  by such  Notes  and to have  satisfied  all its other
obligations  under  such  Notes and this  Indenture  insofar  as such  Notes are
concerned (and the Trustee, at the expense of the Company,  shall execute proper
instruments  acknowledging  the same),  subject to the  following,  which  shall
survive until otherwise  terminated or discharged  hereunder:  (1) the rights of
Holders of such  Notes to  receive,  solely  from the trust  fund  described  in
Section 1104 and as more fully set forth in such Section, payments in respect of
the  principal  of and  interest on such Notes when  payments  are due,  (2) the
Company's  obligations  with respect to such Notes under Sections 304, 305, 306,
1002 and 1003,  (3) the rights,  powers,  trusts,  duties under this Article and
immunities of the Trustee hereunder (including the obligations of the Company to
the Trustee under Section 607) and (4) this Article.  Subject to compliance with
this Article,  the Company may exercise its option (if any) to have this Section
applied to the  Outstanding  Notes  notwithstanding  the prior  exercise  of its
option to have Section 1103 applied to such Notes.

SECTION 1103.  COVENANT DEFEASANCE.

     Upon the Company's  exercise of its option to have this Section  applied to
the Outstanding  Notes, the Company shall be released from its obligations under
Section 801, Sections 1006 through 1008,  inclusive,  and any covenants provided
pursuant  to Section  901(2) for the benefit of the Holders of the Notes and the
occurrence  of any event  specified in Sections  501(3) (with  respect to any of
Sections 1006 through 1008, inclusive,  and any such covenants provided pursuant

                                       46

<PAGE>



to Section 901(2)) and 501(4) shall be deemed not to be or result in an Event of
Default  on and after the date the  conditions  set  forth in  Section  1104 are
satisfied  (hereinafter called "Covenant  Defeasance").  For this purpose,  such
Covenant  Defeasance  means that the  Company  may omit to comply with and shall
have no liability in respect of any term,  condition or limitation  set forth in
any such  specified  Section,  whether  directly or  indirectly by reason of any
reference  elsewhere herein to any such Section or by reason of any reference in
any such Section to any other provision herein or in any other document, but the
remainder of this Indenture and such Notes shall be unaffected thereby.

SECTION 1104.  CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.

     The following shall be the conditions to the application of Section 1102 or
Section 1103 to the Outstanding Notes:

          (1) The  Company  shall  irrevocably  have  deposited  or caused to be
     deposited  with  the  Trustee  (or  another  trustee  which  satisfies  the
     requirements  contemplated  by Section  609 and  agrees to comply  with the
     provisions  of this Article  applicable  to it) as trust funds in trust for
     the  purpose  of making the  following  payments,  specifically  pledged as
     security for, and dedicated  solely to, the benefits of the Holders of such
     Notes, (A) money in an amount,  or (B) U.S.  Government  Obligations  which
     through the scheduled  payment of principal and interest in respect thereof
     in accordance with their terms will provide,  not later than one day before
     the due date of any  payment,  money  in an  amount,  or (C) a  combination
     thereof, in each case sufficient, in the opinion of a nationally recognized
     firm of independent public accountants expressed in a written certification
     thereof delivered to the Trustee, to pay and discharge,  and which shall be
     applied by the  Trustee (or any such other  qualifying  trustee) to pay and
     discharge,  the principal of and interest on the  Outstanding  Notes on the
     respective  Stated  Maturities,  in  accordance  with  the  terms  of  this
     Indenture  and such Notes.  As used herein,  "U.S.  Government  Obligation"
     means  (x) any  security  which is (i) a direct  obligation  of the  United
     States of America for the payment of which the full faith and credit of the
     United  States of  America is  pledged  or (ii) an  obligation  of a Person
     controlled or supervised by and acting as an agency or  instrumentality  of
     the  United  States of  America  the  payment  of which is  unconditionally
     guaranteed  as a full faith and credit  obligation  by the United States of
     America,  which,  in either case (i) or (ii), is not callable or redeemable
     at the option of the issuer thereof,  and (y) any depositary receipt issued
     by a bank (as defined in Section  3(a)(2) of the Securities Act of 1933, as
     amended) as custodian with respect to any U.S. Government  Obligation which
     is  specified  in Clause (x) above and held by such bank for the account of
     the holder of such  depositary  receipt,  or with  respect to any  specific
     payment of principal of or interest on any U.S. Government Obligation which
     is so specified  and held,  provided  that (except as required by law) such
     custodian is not  authorized to make any deduction  from the amount payable
     to the holder of such  depositary  receipt from any amount  received by the
     custodian  in respect of the U.S.  Government  Obligation  or the  specific
     payment of principal or interest evidenced by such depositary receipt.

                                       47

<PAGE>



          (2) In the event of an  election  to have  Section  1102  apply to the
     Outstanding  Notes,  the  Company  shall have  delivered  to the Trustee an
     Opinion of Counsel stating that (A) the Company has received from, or there
     has been published by, the Internal  Revenue  Service a ruling or (B) since
     the date of this  Indenture,  there  has been a  change  in the  applicable
     federal  income tax law, in either case (A) or (B) to the effect that,  and
     based thereon such opinion  shall  confirm that,  the Holders of such Notes
     will not recognize gain or loss for federal income tax purposes as a result
     of the deposit,  Defeasance  and  discharge to be effected  with respect to
     such Notes and will be subject to federal income tax on the same amount, in
     the same manner and at the same times as would be the case if such deposit,
     Defeasance and discharge were not to occur.

          (3) In the event of an  election  to have  Section  1103  apply to the
     Outstanding  Notes,  the  Company  shall have  delivered  to the Trustee an
     Opinion of Counsel  to the effect  that the  Holders of such Notes will not
     recognize  gain or loss for federal  income tax purposes as a result of the
     deposit and Covenant  Defeasance  to be effected with respect to such Notes
     and will be subject to federal  income tax on the same amount,  in the same
     manner  and at the same  times as  would  be the case if such  deposit  and
     Covenant Defeasance were not to occur.

          (4) The  Company  shall have  delivered  to the  Trustee an  Officer's
     Certificate to the effect that the Notes,  if then listed on any securities
     exchange, will be delisted as a result of such deposit.

          (5) No event which is, or after  notice or lapse of time or both would
     become,  an Event of Default  shall have  occurred and be continuing at the
     time of such  deposit  or,  with  regard  to any such  event  specified  in
     Sections  501(5) and (6), at any time on or prior to the 90th day after the
     date of such deposit (it being  understood that this condition shall not be
     deemed satisfied until after such 90th day).

          (6) Such Defeasance or Covenant Defeasance shall not cause the Trustee
     to have a conflicting  interest  within the meaning of the Trust  Indenture
     Act (assuming all Notes are in default within the meaning of such Act).

          (7) Such  Defeasance  or  Covenant  Defeasance  shall not  result in a
     breach or violation of, or constitute a default under,  any other agreement
     or instrument to which the Company is a party or by which it is bound.

          (8) The  Company  shall have  delivered  to the  Trustee an Opinion of
     Counsel to the effect that such Defeasance or Covenant Defeasance shall not
     result in the trust  arising from such deposit  constituting  an investment
     company  within  the  meaning of the  Investment  Company  Act of 1940,  as
     amended,  unless  such trust shall be  registered  under such Act or exempt
     from registration thereunder.


                                       48

<PAGE>



          (9) The  Company  shall have  delivered  to the  Trustee an  Officer's
     Certificate  and an Opinion of Counsel,  each stating  that all  conditions
     precedent with respect to such Defeasance or Covenant  Defeasance have been
     complied with.

SECTION 1105.  DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD
               IN TRUST; MISCELLANEOUS PROVISIONS.

     Subject to the  provisions of the last paragraph of Section 1003, all money
and U.S. Government  Obligations (including the proceeds thereof) deposited with
the Trustee or other qualifying trustee (solely for purposes of this Section and
Section  1106,   the  Trustee  and  any  such  other  trustee  are  referred  to
collectively  as the  "Trustee")  pursuant  to  Section  1104 in  respect of the
Outstanding  Notes  shall  be held in  trust  and  applied  by the  Trustee,  in
accordance with the provisions of the Notes and this Indenture,  to the payment,
either directly or through any Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such Notes, of
all sums due and to become due thereon in respect of principal and interest, but
money so held in trust need not be  segregated  from other  funds  except to the
extent required by law.

     The Company  shall pay and  indemnify  the Trustee  against any tax, fee or
other  charge  imposed on or assessed  against the U.S.  Government  Obligations
deposited  pursuant to Section 1104 or the  principal  and interest  received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Notes.

     Anything in this Article to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon  Company  Request any money
or U.S.  Government  Obligations  held by it as  provided  in Section  1104 with
respect  to  the  Outstanding  Notes  which,  in  the  opinion  of a  nationally
recognized  firm  of  independent  public  accountants  expressed  in a  written
certification  thereof  delivered  to the  Trustee,  are in excess of the amount
thereof which would then be required to be deposited to effect the Defeasance or
Covenant Defeasance, as the case may be, with respect to such Notes.

SECTION 1106.  REINSTATEMENT.

     If the  Trustee  or the  Paying  Agent  is  unable  to apply  any  money in
accordance with this Article with respect to the Outstanding  Notes by reason of
any  order  or  judgment  of any  court  or  governmental  authority  enjoining,
restraining or otherwise  prohibiting  such  application,  then the  obligations
under this  Indenture and such Notes from which the Company has been  discharged
or released  pursuant to Section 1102 or 1103 shall be revived and reinstated as
though no deposit had  occurred  pursuant to this  Article  with respect to such
Notes,  until such time as the Trustee or Paying Agent is permitted to apply all
money  held in trust  pursuant  to  Section  1105 with  respect to such Notes in
accordance with this Article;  provided,  however, that if the Company makes any
payment  of  principal  of  or  interest  on  any  such  Note   following   such
reinstatement of its obligations,  the Company shall be subrogated to the rights

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<PAGE>



of the Holders of such Notes to receive  such  payment from the money so held in
trust.

                            -------------------------

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



                                       50

<PAGE>


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

                                TRIAD GUARANTY INC.



                                By:
                                     ---------------------------
                                     Name: 
                                          ----------------------
                                     Its:  
                                          ----------------------

                                BANKERS TRUST COMPANY, as Trustee



                                By:
                                     ---------------------------
                                     Name: 
                                          ----------------------
                                     Its:  
                                          ----------------------



                                   

                                      51