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Exhibit 10.6    
    

 
 

STAKEHOLDERS' AGREEMENT    
    

        This STAKEHOLDERS' AGREEMENT (this "Agreement") is dated as of July 30, 2004, and is made by and among
Copano Energy, L.L.C., a Delaware limited liability company (formerly Copano Energy Holdings, L.L.C.) ("Copano Energy"), Copano Partners, L.P., a
Delaware limited partnership ("Copano Partners"), R. Bruce Northcutt, an individual residing in Spring, Texas
("Mr. Northcutt"), Matthew J. Assiff, an individual residing in Houston, Texas
("Mr. Assiff"), EnCap Energy Capital Fund III, L.P., a Texas limited partnership ("EnCap III"),
EnCap Energy Acquisition III-B, Inc., a Texas corporation ("EnCap III-B"), BOCP Energy Partners, L.P., a Texas limited
partnership ("EnCap BOCP") (EnCap III, EnCap III-B and EnCap BOCP shall be referred to collectively as the "EnCap
Entities"), CEH Holdco, Inc., a Delaware corporation ("CSFB-Holdco"), CEH Holdco II, Inc., a Delaware
corporation ("CSFB-Holdco II"), DLJ Merchant Banking Partners III, L.P., a Delaware limited partnership
("DLJMB"), DLJ Offshore Partners III, C.V., a Netherland Antilles limited company ("DLJOP"), DLJ
Merchant Banking III, Inc., as Advisory General Partner on behalf of DLJ Offshore Partners III, C.V. ("DLJMB III-A"), DLJ Merchant
Banking III, Inc., as Advisory General Partner on behalf of DLJ Offshore Partners III-1, C.V., and as attorney-in-fact for DLJ Merchant Banking III, L.P., as
Associate General Partner of DLJ Offshore Partners III-1, C.V. ("DLJMB III-B"), DLJ Merchant Banking III, Inc., as
Advisory General Partner on behalf of DLJ Offshore Partners III-2, C.V., and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General Partner of
DLJ Offshore Partners III-2, C.V. ("DLJMB III-C"), DLJ MB Partners III GmbH & Co. KG, a German limited partnership
("DLJMB/GMBH"), Millennium Partners II, L.P., a Delaware limited partnership ("Millennium"), and MBP III
Plan Investors, L.P., a Delaware limited partnership ("MBP III") (CSFB-Holdco, CSFB-Holdco II, DLJMB, DLJOP, DLJMB
III-A, DLJMB III-B, DLJMB III-C, DLJMB/GMBH, Millennium and MBP III shall be referred to collectively as the "CSFB
Entities"). Copano Partners, the EnCap Entities, the CSFB Entities, Mr. Northcutt and Mr. Assiff are sometimes referred to herein collectively as the
"Existing Investors." Terms that are capitalized but not defined shall have the meanings assigned to such terms in Article VIII hereof. 

 
 

R E C I T A L S:    
    

        WHEREAS, the Existing Investors include (1) all of the holders of membership interests of Copano Energy governed by the terms of the Amended and Restated
Limited Liability Company Agreement of Copano Energy Holdings, L.L.C. (now "Copano Energy"), dated August 14, 2001, as amended (the
"CEH LLC Agreement"), and (2) all of the holders of warrants to acquire membership interests in Copano Energy; 

        WHEREAS,
Copano Energy proposes to file a registration statement on Form S-1 (the "Registration Statement") with
the United States Securities and Exchange Commission (the "Commission") to effect an initial public offering of Copano Energy's common units (the
"Offering"); 

        WHEREAS,
in connection with the Offering, the parties to this Agreement wish to set forth the following agreements among themselves relating to: (1) the redemption or exchange, as
applicable, of their respective membership interests in or warrants to acquire membership interests in Copano Energy concurrent with the closing of the Offering (the
"Closing"); (2) reimbursement by the Existing Investors of certain general and administrative services expenses of Copano Energy for three years
following the Offering; (3) the corporate governance of Copano Energy, the acquisition of a directors and officers liability insurance policy and the indemnification of employees against
certain liabilities; and (4) registration rights for the benefit of the Existing Investors; and 

        WHEREAS,
the exchange of outstanding equity interests (including the Warrants) in Copano Energy for Common Units and Subordinated Units pursuant to this Agreement is intended to 

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constitute
a tax-free contribution pursuant to Section 721 of the Internal Revenue Code of 1986, as amended (the "Code") for federal
income tax purposes. 

 
 

A G R E E M E N T:    
    

        NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements contained herein, the parties agree as follows: 

 
 

ARTICLE I.
  CONDITIONS TO EFFECTIVENESS

        The
effectiveness of the provisions of this Agreement is subject to (1) the consummation by Copano Energy of the Offering with no material changes to those Offering terms
reflected in the prospectus included in the Registration Statement initially filed with the Commission and (2) the redemption at Closing by Copano Energy of all outstanding Preferred Units in
exchange for a cash payment as set forth in this Agreement. The Existing Investors acknowledge that Section 6.6(d) of the CEH LLC Agreement will remain in full force and effect until the
conditions set forth in clauses (1) and (2) of the preceding sentence are satisfied, at which time this Agreement will control and Section 6.6(d) of the CEH LLC Agreement will be
of no further force or effect. 

 
 

ARTICLE II.
  REDEMPTION OF PREFERRED UNITS

        Section 2.01.
Redemption of Preferred Units. At Closing, all outstanding Preferred Units shall be redeemed for a Redemption Payment
by Copano Energy to the holders of the Preferred Units as set forth in Annex A (the "Preferred Unitholders") equal to the Face Value of the Preferred
Units plus any accrued but unpaid distributions on such units (the "Redemption Payment"). 

        Section 2.02.
Waiver of Rights in Preferred Units. Upon payment of the Redemption Payment to the Preferred Unitholders in
accordance with Section 2.01, the Preferred Unitholders shall forfeit and relinquish any and all claims or entitlements to the Preferred Units. The Preferred Unitholders agree that upon receipt
of the Redemption Payment, (a) they will not be entitled to any further payments or distributions relating to the Preferred Units; and (b) the Preferred Units will be cancelled, null and
void. 

 
 

ARTICLE III.
  RESIDUAL EQUITY

        Section 3.01. Interests of Existing Investors.    The Existing Investors currently own all of the outstanding equity
interests of Copano Energy. The number and class of equity interest held by each of the Existing Investors prior to consummation of the Offering is reflected on Annex A hereto (the
"Current Interests"). 

        Section 3.02.  Residual Equity of Existing Investors. The Common Units and Subordinated Units of Copano Energy not sold to the
public in connection with the Offering (the "Residual Equity") will be allocated among the current holders of Existing Common Units, Common Special
Units, Junior Units, Junior Special Units and Warrants in exchange for their respective Current Interests in accordance with the allocation procedures set forth in Sections 3.03 and 3.04. 

        Section 3.03.  Allocation of Residual Equity Value. At the Closing, the Residual Equity Value will be allocated among the holders of
the Existing Common Units, Junior Units, Common Special Units, 

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Junior
Special Units and Warrants as follows, with the resulting allocations referred to herein as the "Residual Value Allocations": 

        (a)   first, each holder of the outstanding Special Units shall be allocated a portion of the Grossed-Up Residual
Equity Value equal to its Special Capital Account balance, not to exceed $183,000 in the aggregate for all holders of Special Units (representing the amount to be received by the holders of the
Special Units pursuant to Section 10.2(c)(iii)(w) of the CEH LLC Agreement) (the "First Allocation") (See Annex B, "First Allocation"); 

        (b)   second, the holders of all of the outstanding Existing Common Units, Common Special Units and Warrants (with respect to
the underlying Warrant Shares) shall be allocated pro rata a portion of the Grossed-Up Residual Equity Value equal to the product of $20 (representing the amount to be received by each
holder of Common Units prior to making distributions to holders of Junior Units pursuant to Section 10.2(c)(iii)(y) and Section 5.6(b)(i) of the CEH LLC Agreement) multiplied by
the number of outstanding Existing Common Units, outstanding Common Special Units and the number of Warrant Shares (the "Second Allocation"), with the
amount remaining of the Grossed-Up Residual Equity Value after subtracting the total value of the Second Allocation to be referred to as the "Remaining
Grossed-Up Residual Equity Value" (See Annex B, "Second Allocation"); 

        (c)   third, in accordance with Section 10.2(c)(iii)(z) of the CEH LLC Agreement, the holders of all of the outstanding
Existing Common Units, Common Special Units, Warrants, Junior Units and Junior Special Units shall be allocated a portion of the Remaining Grossed-Up Residual Equity Value, if any, equal
to the product of the Remaining Grossed-Up Residual Equity Value multiplied by such holder's percentage interest in Copano Energy prior to the Offering assuming the exercise of all
outstanding Warrants (as reflected on Annex A hereto), (the "Third Allocation"), with the Remaining Grossed-Up Residual Equity Value being
reduced to zero (See Annex B, "Third Allocation"); 

        (d)   fourth, the holders of Common Special Units shall have the distributions allocated to them in the Second Allocation and
Third Allocation reduced pro rata by an amount equal to the product of
154,000 units multiplied by $16, or $2,464,000 in accordance with Section 10.2(c)(iv) of the CEH LLC Agreement (the "Special Unitholder Reduction
Amount") (See Annex B, "Special Unitholder Reduction and Reallocation—Special Unitholder Reduction"); 

        (e)   fifth, in accordance with Section 10.2(c)(iv) of the CEH LLC Agreement, the holders of all of the
outstanding Existing Common Units, Common Special Units, Warrants, Junior Units and Junior Special Units shall be allocated a portion of the Special Unitholder Reduction Amount equal to the product of
the Special Unitholder Reduction Amount multiplied by such holder's percentage interest in Copano Energy prior to the Offering assuming the exercise of all outstanding Warrants (as reflected on Annex
A hereto) (See Annex B, "Special Unitholder Reduction and Reallocation-Reallocation"); provided, however, that in the event that the holders of the outstanding Existing Common Units, Common Special
Units and Warrants (with respect to the underlying Warrant Shares) received less than $20 per unit as a result of the Second Allocation and prior to any allocation under this Section 3.03(e),
such holders shall be allocated that portion of the Special Unitholder Reduction Amount to cause each such holder to receive on a per unit basis the difference between the amount received as a result
of the Second Allocation and $20; and 

        (f)    sixth, the distributions allocated to the holders of Warrants as a result of the Second Allocation, the Third Allocation
and the reallocation of the Special Unitholder Reduction Amount shall be reduced by $60 million, representing the product of the Exercise Price multiplied by the Warrant Shares and reflecting
the consideration the Warrant holders would otherwise be required to pay to receive the Warrant Shares, allowing such holders to receive the "in-the-money" value 

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attributable
to the Warrants (See Annex B, "Preliminary Allocation of Units—Residual Value Allocations"). 

        Section
3.04. Determination of Common Units and Subordinated Units to be Issued to Existing Investors. Following the allocation of the
Residual Equity Value in accordance with Section 3.03 above, and immediately prior to the Offering, each of the Existing Investors shall receive newly-issued Common Units and Subordinated Units
in Copano Energy to be issued to each of the Existing Investors as follows: 

        (a)   first, in exchange for all of the outstanding equity interest in Copano Energy immediately prior to the Offering, each of
the Existing Investors shall receive a number of newly-issued units equal to its Residual Value Allocation divided by the Market Price (See Annex B, "Preliminary Allocation of
Units—Units"); 

        (b)   second, the total number of units to be issued to each of the Existing Investors pursuant to Section 3.04(a) above
shall consist of Common Units and Subordinated Units in the same ratio of
Common Units to Subordinated Units for each Existing Investor such that the ratio of total outstanding Common Units to Subordinated Units after consummation of the Offering is two Common Units for
every one Subordinated Unit. (See Annex B, "Preliminary Allocation of Units—Common Units, Subordinated Units"); and 

        (c)   third, Copano Partners shall allocate a number of its Common Units and Subordinated Units, having an aggregate value of
$1 million based on the Market Price, to the holders of the Warrants on a pro rata basis or, at any holder's election, to an assignee pursuant to the provisions of the final paragraph of this
Section 3.04 (the "Liquidating Event Payment"). Such unit allocation will consist of Common Units and Subordinated Units in the same ratio as
those units are allocated to Copano Partners pursuant to Section 3.04(b) above (See Annex B, "Liquidating Event Payment"). 

        Upon
written notice to Copano Energy at least three Business Days prior to the issuance of Common Units and Subordinated Units in accordance with this Section 3.04, including as a
result of the Liquidating Event Payment, any CSFB Entity or EnCap Entity may assign its right to receive Common Units or Subordinated Units hereunder (i) with respect to a CSFB Entity, to any
DLJMB Permitted Transferee, including another CSFB Entity and (ii) with respect to an EnCap Entity, to any EnCap Permitted Transferee, including another EnCap Entity. 

        Section 3.05. Example of Residual Equity Value Allocation and Equity Exchange. Annex B is provided solely for purposes of
illustrating the method of calculation and allocation of the Residual Equity Value and the exchange of the Residual Equity Value for Common Units and Subordinated Units described in
Section 3.04. To the extent the ultimate terms of the Offering vary from those assumed in Annex B, the actual number of units held by the Existing Investors following completion of the Offering
will vary accordingly, but shall be calculated in accordance with the terms of this Article III. 

        Section 3.06.  Waiver of Rights of Equity Holders. Upon receipt of the Common Units and the Subordinated Units by any of the
Existing Investors pursuant to the provisions of Section 3.04, (i) none of the Existing Investors shall be entitled to any further distributions or payments from Copano Energy nor any
further exercise of rights as unitholders or warrant holders in Copano Energy with respect to the Existing Common Units, Common Special Units, Warrants, Junior Units or Junior Special Units and
(ii) each Existing Investor shall forfeit, cancel and relinquish any and all claims and entitlements to the Existing Common Units, Common Special Units, Warrants, Junior Units or Junior Special
Units. Nothing set forth in this Section 3.06 shall preclude the Existing Investors from any rights to any distributions declared by the Board of Directors of Copano Energy with respect to
Common Units and 

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Subordinated
Units or other rights as a holder of Common Units and Subordinated Units received as a result of the application of the provisions of this Article III. 

        Section 3.07.    Tax Treatment.    The parties hereto agree to (i) report the exchange of
outstanding equity interests (including the Warrants) in Copano Energy for Common Units and Subordinated Units pursuant to this Agreement as a tax-free contribution pursuant to
Section 721 of the Code for federal income tax purposes and (ii) take no action to cause such exchange to fail to so qualify. 

 
 

ARTICLE IV.
  GENERAL AND ADMINISTRATIVE SERVICES

        Section 4.01.
Amendment of CEH LLC Agreement. The Existing Investors agree to amend and restate the CEH LLC Agreement simultaneous
with the Closing to effect the intent of the provisions set forth in this Article IV. Upon execution of the Restated LLC Agreement, the provisions of this Article IV shall no longer have
effect. 

        Section 4.02.
G&A Cap. 

        (a)   Subject
to the limitations set forth in section 4.04, for a period of three years following the Closing (the "Cap
Period"), if Copano Energy's general and administrative expenses (as accrued in accordance with United States Generally Accepted Accounting Principles)
("G&A") for a calendar quarter exceed the applicable quarterly cap for general and administrative expenses (the "G&A
Cap"), the Existing Investors shall reimburse Copano Energy for amounts in excess of the Total G&A Cap (the "Excess G&A
Obligation"). The quarterly G&A Cap for the first, second and third years following the Closing shall be $1.5 million, $1.65 million and $1.8 million,
respectively. For purposes of application of the G&A Cap, all general and administrative expenses of Copano Energy shall be considered, whether incurred directly or by Copano/Operations, Inc.,
except for expenses incurred in connection with potential acquisitions and capital improvements. The Cap Period may be extended beyond its initial three-year term at the same or a higher
level by the affirmative vote of at least 95% of the Common Units and Subordinated Units held by the Existing Investors or their permitted transferees, voting together as a single class. In no event
may the Cap Period be extended with respect to the Excess G&A Obligation of an Existing Investor that holds no Common Units or Subordinated Units immediately prior to any such extension. 

        (b)   If
during the Cap Period, Copano Energy's EBITDA for any quarter exceeds $5.2 million, then the G&A Cap shall be increased for such quarter by 10% of the amount
in excess of $5.2 million (the "Additional G&A Cap"). The G&A Cap, as increased for any Additional G&A Cap, shall be referred to herein as the
"Total G&A Cap". 

        Section 4.03.
Allocation of Excess G&A Obligation. The Excess G&A Obligation shall be allocated among the Existing Investors
holding Common and Subordinated Units in proportion to the fully diluted equity interest of each in Copano Energy immediately prior to the Closing as reflected on Annex A (the
"Allocated Percentage"). 

        Section 4.04.  Mechanics and Limitations on G&A Obligations. Except as provided in Section 4.06 of this Agreement,
reimbursement for the Excess G&A Obligation shall be made on a quarterly basis. An Existing Investor shall only be obligated to pay its Allocated Percentage of the Excess G&A Obligation for any
quarter to the extent of distributions paid to such Existing Investor for that quarter with respect to the Common Units and Subordinated Units held by such Existing Investor following the Offering. On
each date provided for reimbursement of the Excess G&A Obligation, subject to the limitations set forth in this Section 4.04, each Existing Investor shall contribute an amount to Copano Energy,
as a capital contribution, equal to its Allocated Percentage of the Excess G&A Obligation. Any deduction or loss attributable to the Existing Investors' obligation to reimburse Copano Energy for, or
incurred by 

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Copano
Energy and constituting, the Excess G&A Obligation, which the Existing Investors have funded or agreed to fund pursuant to Section 4.02(a) shall be allocated to each of the Existing
Investors in proportion to each of their respective Excess G&A Obligations. 

        Section 4.05.  G&A Budget Approval. During the Cap Period, Copano Energy's annual general and administrative budget (the
"G&A Budget") will require approval of a majority of the members of the Board of Directors, which approval shall not be unreasonably withheld. If the
G&A Budget is not approved by the Board of Directors, then the prior year's G&A Budget will apply. Any change to the G&A Budget which exceeds 10% of the budget for the prior year or any adjustments to
an approved G&A Budget exceeding 5% of the approved amount for such item, or 10% in the aggregate, during the applicable year, will require the unanimous approval of the members of the Board of
Directors affiliated with Copano Partners, the EnCap Entities, and the CSFB Entities, which approval shall not be unreasonably withheld. 

        Section 4.06.
Limitation on Transfer. Neither Copano Partners, the CSFB Entities nor the EnCap Entities shall transfer any portion
of its Common Units or Subordinated Units during the period when the G&A Cap is in effect, unless prior to such Transfer: (i) such transferor deposits an amount into an escrow account for the
benefit of Copano Energy equal to 200% of such transferor's estimated remaining Excess G&A Obligation (based upon the highest G&A subject to the G&A Cap incurred during the previous four quarters and
the applicable quarterly G&A Cap for the quarter in which such units are transferred and for each subsequent quarter prior to expiration of the G&A Cap) multiplied by the percentage of such
transferor's Common Units and Subordinated Units transferred; provided that, if at any time funds remaining in such escrow account are insufficient to
fund such transferor's Excess G&A Obligation, then such transferor shall remain liable to Copano Energy for its portion of the Excess G&A Obligation; provided
further, however, that in no event shall Copano Partners, the CSFB Entities or the EnCap Entities be liable for any Excess G&A
Obligation in excess of any distributions that such transferor would have received in respect of its Common Units and Subordinated Units had such transfer not occurred; or (ii) such transferor
causes the transferee to assume that portion of the transferor's remaining Excess G&A Obligation pursuant to this Agreement equal to such remaining Excess G&A Obligation multiplied by the percentage
of such transferor's Common Units and Subordinated Units transferred. With respect to clause (i) above, such transferor and Copano Energy shall enter into an escrow agreement with a mutually
acceptable bank on terms
reasonably acceptable to both parties; provided, however, any escrow agreement (i) shall detail, by quarter, the amount of funds escrowed to satisfy the transferor's remaining Excess G&A
Obligation for such quarter and shall provide that any funds escrowed for a specific quarter and not required to satisfy the transferor's Excess G&A Obligation for that quarter shall be released from
escrow within 60 days following the end of such quarter (assuming for such purpose that the applicable transferor continues to hold all of the Common Units and Subordinated Units that it holds
as of the effectiveness of this Agreement) and (ii) shall provide that no funds will otherwise be released from escrow prior to the end of the Cap Period except to satisfy the transferor's
Excess G&A Obligation. 

        Section 4.07.
Transfer of G&A Services. The Existing Investors agree that a significant portion of the general and administrative
and operating costs presently incurred by Copano/Operations, Inc. solely on behalf of the Copano Energy's Texas operating subsidiaries will be transferred to a new Texas subsidiary of Copano
Energy beginning January 1, 2005. 

 
 

ARTICLE V.
  CORPORATE GOVERNANCE

        Section 5.01.
Amendment of CEH LLC Agreement. The Existing Investors agree to amend and restate the CEH LLC Agreement simultaneous
with the Closing to effect the intent of the provisions set forth in this Article V and upon such amendment and restatement, to take such actions with respect to the designation of members of
the Board of Directors as described herein. Upon execution of the 

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Restated
LLC Agreement and designation of members of the Board of Directors as described herein, the provisions of this Article V shall no longer have effect except for the provisions of
Section 5.06 hereof with respect to the D&O Policy. 

        Section 5.02.
Board of Directors. Upon Closing, the Board of Directors of Copano Energy will consist of not more than seven
persons. The Board of Directors will meet the applicable requirements established by the Nasdaq National Market and applicable securities laws and regulations, including the Securities Act and the
Exchange Act. Copano Partners, the CSFB Entities and the EnCap Entities shall have the power to each designate one member of the Board of Directors prior to consummation of the Offering (the
"Designated Directors"). 

        Section 5.03.
Election of Directors. At Copano Energy's first annual meeting of unitholders following the Offering, members of the
Board of Directors will be elected by Copano Energy's unitholders and will be subject to re-election on an annual basis at each annual meeting of Copano Energy's unitholders. Members of
the Board of Directors shall be elected through "cumulative voting," which means that: (1) a unitholder will be entitled to a number of votes equal to (i) the number of units that such
unitholder is entitled to vote at the annual meeting (ii) multiplied by the number of directors to be
elected at the annual meeting; and (2) a unitholder may (i) cast all such votes for a single director, (ii) distribute them evenly among the number of directors to be voted for at
the annual meeting or (iii) distribute them among any two or more directors to be voted for at the annual meeting. 

        Section 5.04.
Independent Directors. The four members of the Board of Directors that are not Designated Directors shall satisfy the
independence requirements established by the Nasdaq National Market and applicable securities laws and regulations, including the Securities Act and the Exchange Act, and shall be designated no later
than the times required for same (the "Independent Directors"). Each of these designees shall initially be elected to the Board of Directors only with
the unanimous approval of each of Copano Partners, the CSFB Entities and the EnCap Entities. Following election in accordance with this Section 5.04, each of the Independent Directors shall
thereafter be elected annually in accordance with Section 5.03 of this Agreement. 

        Section 5.05.
Committees of the Board of Directors. The Board of Directors will appoint four functioning committees: (a) an
audit committee, (b) a compensation committee, (c) a conflicts committee and (d) a nominating committee, each of which will have such membership and responsibilities as is
necessary to comply with all applicable standards of the Nasdaq National Market as well as of applicable securities laws and regulations, including the Securities Act and the Exchange Act. 

        Section 5.06.
Insurance; Indemnification. Concurrently with or prior to the Closing, Copano Energy shall purchase insurance on
behalf of any person or entity serving as a director or officer of Copano Energy or its subsidiary entities against any liability asserted against or incurred by such person in that capacity, or
arising out of his or its status as such, subject to customary policy exceptions and regardless of whether or not Copano Energy would have the power or obligation to provide indemnification against
such liability under the provisions of the CEH LLC Agreement, as amended or restated from time to time (the "D&O Policy"). The D&O Policy shall also
provide for insurance for any employee of Copano Energy (as the term "employee" is used in the Registration Statement) or its subsidiary entities against any such liabilities to the extent that such
liability arises from a violation or alleged violation of any law, regulation or rule regulating securities, whether statutory or common law (a "Securities
Claim"). Furthermore, Copano Partners, the EnCap Entities and the CSFB Entities shall cause the Restated LLC Agreement to provide for indemnification of any employee of Copano
Energy (as the term "employee" is used in the Registration Statement) or its subsidiary entities against Securities Claims to the same extent it would indemnify directors and officers for such claims. 

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ARTICLE VI.
  REGISTRATION RIGHTS

        Section 6.01.
Registration Rights. The original investors consist of Copano Partners, the EnCap Entities and the CSFB Entities,
collectively referred to as the "Original Investors" and each individually referred to as a "Registration Rights
Group". Following the Offering and subject to the terms and limitations set forth in this Article VI, each Registration Rights Group shall be entitled to one demand
registration right; provided, however, that no demand registration request shall be made prior to the
expiration of the 180-day "lock-up" period following completion of the Offering. The Existing Investors, and each permitted transferee of registration rights pursuant to
Section 6.12, shall have unlimited piggyback registration rights, each as more fully described in this Article VI. 

        Section 6.02.  Registrable Securities. Any Registrable Security will cease to be a Registrable Security when (a) a
registration statement covering such Registrable Security has been declared effective by the Commission and such Registrable Security has been sold or disposed of pursuant to such effective
registration statement; (b) such Registrable Security has been disposed of pursuant to any section of Rule 144 (or any similar provision then in force under the Securities Act); or
(c) such Registrable Security is held by Copano Energy or one of its subsidiaries. 

        Section 6.03.
Shelf Registration. 

        (a)   Shelf Registration. Within 60 days following receipt of a written request for the benefit of all the Registrable
Securities held by a Registration Rights Group, Copano Energy shall prepare and file a registration statement under the Securities Act to permit the public resale of the Registrable Securities
pursuant to such registration statement, including a registration statement permitting the public resale of the Registrable Securities from time to time pursuant to Rule 415 of the Securities
Act (the "Shelf Registration Statement"). Such written request shall describe the plan of distribution for such Registrable Securities, which plan may
include, without limitation, sales through the facilities of the principal trading market on which securities of the same class as the Registrable Securities are then traded, sales pursuant to an
Underwritten Offering, or both. Copano Energy shall use its commercially reasonable efforts to cause the Shelf Registration Statement to become effective no later than 120 days after the date
of filing such Shelf Registration Statement (the "Shelf Registration"). A Shelf Registration Statement filed pursuant to this Section 6.03(a)
shall be on such appropriate registration form of the Commission as shall be selected by Copano Energy; provided,  however, that if a prospectus supplement
will be used in connection with the marketing of an Underwritten Offering from the Shelf Registration Statement
and the Managing Underwriter at any time notifies Copano Energy in writing that, in the sole judgment of such Managing Underwriter, inclusion of detailed information to be used in such prospectus
supplement is of material importance to the success of the Underwritten Offering of such Registrable Securities, Copano Energy shall use its commercially reasonable efforts to include such information
in the prospectus. Copano Energy will cause the Shelf Registration Statement filed pursuant to this Section 6.03(a) to be continuously effective under the Securities Act until all Registrable
Securities covered by the Shelf Registration Statement have been distributed in the manner set forth and as contemplated in the Shelf Registration Statement or there are no longer any Registrable
Securities outstanding (the "Effectiveness Period"). The Shelf Registration Statement when
declared effective by the Commission (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act
and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not
misleading. 

        (b)   Delay Rights. Notwithstanding anything to the contrary contained herein, Copano Energy: (i) may, upon written
notice to any Registration Rights Group whose Registrable Securities are to 

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be
included in a Shelf Registration Statement, delay its obligation to file any Shelf Registration Statement if (1) Copano Energy intends to effect a public offering within 60 days
following the receipt of a written request from any Registration Rights Group, provided, that prior to the receipt of such request, Copano Energy has
taken affirmative steps in contemplation of such public offering, (2) Copano Energy is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and Copano
Energy determines in good faith that Copano Energy's ability to pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in the
Shelf Registration Statement, or (3) Copano Energy has experienced some other material non-public event the disclosure of which at such time is not required by law or, in the good
faith judgment of Copano Energy, would materially adversely affect Copano Energy, then, in each case, Copano Energy may defer filing the Shelf Registration Statement for up to 60 days;  provided,
however, that Copano Energy shall not exercise its right to delay filing the Shelf
Registration Statement more than once in any 12 month period (excluding any delays in filing a registration statement or post-effective amendment pursuant to Section 6.12
hereof); (ii) may, upon written notice to any Registration Rights Group whose Registrable Securities are included in the Shelf Registration Statement, suspend such Registration Rights Group's
use of any prospectus which is a part of the Shelf Registration Statement (in which event the Registration Rights Group shall discontinue sales of the Registrable Securities pursuant to the Shelf
Registration Statement) for up to 60 days if (1) Copano Energy is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and Copano Energy determines
in good faith that Copano Energy's ability to pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in the Shelf Registration
Statement or (2) Copano Energy has experienced some other material non-public event the disclosure of which at such time is not required by law or, in the good faith judgment of
Copano Energy, would materially adversely affect Copano Energy; provided, however, that Copano Energy
shall not exercise its right to suspend any Registration Rights Group's use of any prospectus more than twice in any 12-month period. Upon disclosure of such information or the termination
of the condition described in this Section 6.03(b), Copano Energy shall provide prompt notice to the Registration Rights Group whose Registrable Securities are included in the Shelf
Registration Statement, and shall promptly terminate any suspension of sales it has put into effect and shall take such other actions to permit registered sales of Registrable Securities as
contemplated in this Agreement. 

        Section 6.04.  Piggyback Registration. 

        (a)   Participation. If Copano Energy at any time proposes to file a registration statement (including a Shelf
Registration Statement and including any registration statement intended to satisfy the requirements of Section 6.03(a) of this Agreement) for the sale of Common Units to the public for its own
account or the account of any Unitholder other than (x) a registration relating solely to employee benefit plans, (y) a registration relating solely to a Rule 145 transaction, or
(z) a registration on any registration form which does not permit secondary sales, then, as soon as practicable following the engagement of counsel to Copano Energy to prepare the registration
statement, Copano Energy shall give notice of such proposed filing for the registration to the Existing Investors and such notice shall offer the Existing Investors the opportunity to include in such
registration such number of Registrable Securities as each such Existing Investor may request in writing (a "Piggyback Registration"). Each Existing
Investor shall have 15 days after receipt of such notice to elect to have all (or such portion as the Existing Investor shall specify) of its Registrable Securities included in such
registration. In addition, if Copano Energy at any time proposes to file a prospectus supplement with respect to an Underwritten Offering to a Shelf Registration Statement under which the
Existing Investors have registered the sale of Registrable Securities, then, as soon as practicable following the engagement of counsel to Copano Energy to prepare the documents to be used in
connection with an Underwritten Offering, Copano Energy 

9

 

shall
give notice of such proposed Underwritten Offering to each Existing Investor and such notice shall offer each Existing Investor the opportunity to include in such Underwritten Offering such
number of Registrable Securities as each such Existing Investor may request in writing; provided,  however, that Copano Energy shall not be required to
offer such opportunity to Existing Investors if Copano Energy has been advised by the Managing
Underwriter that the inclusion of Registrable Securities for sale for the benefit of the Existing Investors will have an adverse effect on the price, timing or distribution of the Common Units. No
Existing Investor may exercise its right to participate in a Piggyback Registration with respect to sales to be made from an effective shelf registration on which such Existing Investors' Registrable
Securities are not registered for resale, except that if Copano Energy's Board of Directors determines that it is in the best interest of Copano Energy, then Copano Energy may use the net proceeds
from any Underwritten Offering to repurchase some or all Registrable Securities from any of the Original Investors. Subject to the provisions in this Section 6.04(a) and Section 6.04(b),
Copano Energy shall include in such Underwritten Offering all such Registrable Securities ("Included Registrable Securities") with respect to which
Copano Energy has received requests within (i) one business day in the event of the filing of a prospectus supplement and (ii) five business days with respect to the use of a preliminary
prospectus supplement after Copano Energy's notice has been delivered in accordance with Section 6.04. If no request for inclusion from an Existing Investor is received within the specified
time, such Existing Investor shall have no further right to participate in such Piggyback Registration. If, at any time after giving written notice of its intention to undertake an Underwritten
Offering and prior to the closing of such Underwritten Offering, Copano Energy shall determine for any reason not to undertake or to delay such Underwritten Offering, Copano Energy may, at its
election, give written notice of such determination to the selling Existing Investors and, (x) in the case of a determination not to undertake such Underwritten Offering, shall be relieved of
its obligation to sell any Included Registrable Securities in connection with such terminated Underwritten Offering, and (y) in the case of a determination to delay such Underwritten Offering,
shall be permitted to delay offering any Included Registrable Securities for the same period as the delay in the Underwritten Offering. 

        (b)   Priority of Piggyback Registration. If the Managing Underwriter or Underwriters of any proposed Underwritten Offering of
Common Units included in a Piggyback Registration advises Copano Energy that the total amount of Common Units which the selling Existing Investors and any other Persons intend to include in such
Underwritten Offering exceeds the number which can be sold in such offering without being likely to have an adverse effect on the price, timing or distribution of the Common Units offered or the
market for the Common Units, then the Common Units to be included in such Underwritten Offering shall include all of the Common Units that Copano Energy intends to include in such Underwritten
Offering, plus the number of Registrable Securities that such Managing Underwriter or Underwriters advises Copano Energy can be sold without having such adverse effect, with such number to be
allocated pro rata among the selling Existing Investors who have requested participation in the Piggyback Registration (based, for each such selling
Existing Investor, on the percentage derived by dividing (A) the number of Registrable Securities proposed to be sold by such selling Existing Investor in such offering; by (B) the
aggregate number of Common Units proposed to be sold by the selling Existing Investors and any other Persons participating in the Piggyback Registration to be included in such offering).
Notwithstanding the foregoing, if the registration statement was filed to meet the requirements of Section 6.03(a), then the Registration Rights Group that requested such registration shall
have priority over Copano Energy and any other selling Existing Investors in determining the number of Common Units that may be included in such Underwritten Offering. 

10

 

        Section 6.05.
Underwritten Offerings. 

        (a)   Shelf Registration. If an Existing Investor elects to dispose of Registrable Securities in an Underwritten Offering,
Copano Energy shall enter into an underwriting agreement in customary form with the Managing Underwriter or Underwriters, which shall include, among other provisions, indemnities to the effect and to
the extent provided in Section 6.10, and shall take all such other reasonable actions as are requested by the Managing Underwriter in order to expedite or facilitate the registration and
disposition of the Registered Securities. 

        (b)   General Procedures. In connection with any Underwritten Offering pursuant to a Shelf Registration Statement filed at the
request of a Registration Rights Group pursuant to Section 6.03 hereof, such Registration Rights Group, with the consent of Copano Energy, shall be entitled to select the Managing Underwriter
or Underwriters. The consent of Copano Energy to the selection of the Managing Underwriter or Underwriters shall not be unreasonably withheld. In all other cases, Copano Energy shall select the
Managing Underwriter or Underwriters. In connection with an Underwritten Offering pursuant to Sections 6.03 or 6.04 hereof, each Existing Investor and Copano Energy shall be obligated to enter into an
underwriting agreement which contains such representations, covenants, indemnities and other rights and obligations as are customary in underwriting agreements for firm commitment offerings of
securities. No Existing Investor may participate in such Underwritten Offering unless such Existing Investor agrees to sell its Registrable Securities on the basis provided in such underwriting
agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. Each Existing Investor
may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, Copano Energy to and for the benefit of such underwriters
also be made to and for such Existing Investor's benefit and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions
precedent to its obligations. If any Existing Investor disapproves of the terms of an underwriting, such Existing Investor may elect to withdraw therefrom by notice to Copano Energy and the Managing
Underwriter; provided, however, that such withdrawal must be made on or before the pricing of any such
Underwritten Offering. No such withdrawal or abandonment shall affect Copano Energy's obligation to pay Registration Expenses. 

        Section 6.06.
Registration Procedures. In connection with its obligations contained in Sections 6.03 and 6.04 hereof, Copano Energy
will, as expeditiously as possible: 

        (a)   prepare
and file with the Commission such amendments and supplements to the Shelf Registration Statement and the prospectus used in connection therewith as may be
necessary to keep the Shelf Registration Statement effective and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by
the Shelf Registration Statement; 

        (b)   furnish
to each Existing Investor (i) as far in advance as reasonably practicable before filing the Shelf Registration Statement or any other registration
statement contemplated by this Agreement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits and
each document incorporated by reference therein to the extent then required by the rules and regulations of the Commission), and provide each such Existing Investor the opportunity to object to any
information pertaining to such Existing Investor and its plan of distribution that is contained therein and make the corrections reasonably requested by such Existing Investor with respect to such
information prior to filing the Shelf Registration Statement or such other registration statement or supplement or amendment thereto, and (ii) such number of copies of the Shelf Registration
Statement or such other registration statement and the prospectus included therein and any supplements and 

11

 

amendments
thereto as such Persons may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such Shelf Registration Statement or
other registration statement; 

        (c)   if
applicable, use its commercially reasonable efforts to register or qualify the Registrable Securities covered by the Shelf Registration Statement or any other
registration statement contemplated by this Agreement under the securities or blue sky laws of such jurisdictions as the Existing Investors or, in the case of an Underwritten Offering, the Managing
Underwriter, shall reasonably request, provided that Copano Energy will not be required to qualify generally to transact business in any jurisdiction
where it is not then required to so qualify or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; 

        (d)   promptly
notify each Existing Investor and each underwriter, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of
(i) the filing of the Shelf Registration Statement or any other registration statement contemplated by this Agreement or any prospectus or prospectus supplement to be used in connection
therewith, or any amendment or supplement thereto, and, with respect to such Shelf Registration Statement or any other registration statement or any post-effective amendment thereto, when
the same has become effective; and (ii) any written comments from the Commission with respect to any filing referred to in clause (i) and any written request by the Commission for
amendments or supplements to the Shelf Registration Statement or any other registration statement or any prospectus or prospectus supplement thereto; 

        (e)   immediately
notify each Existing Investor and each underwriter, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of
(i) the happening of any event as a result of which the prospectus or prospectus supplement contained in the Shelf Registration Statement or any other registration statement contemplated by
this Agreement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; (ii) the issuance or threat of issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration
Statement or any other registration statement contemplated by this Agreement, or the initiation of any proceedings for that purpose; or (iii) the receipt by Copano Energy of any notification
with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice,
Copano Energy agrees to as promptly as practicable amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the prospectus or prospectus supplement does not
include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the
circumstances then existing and to take such other action as is necessary to remove a stop order, suspension, threat thereof or proceedings related thereto; 

        (f)    furnish
to each Existing Investor copies of any and all transmittal letters or other correspondence with the Commission or any other governmental agency or
self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to such offering of Registrable Securities; 

        (g)   in
the case of an Underwritten Offering, furnish upon request, (i) an opinion of counsel for Copano Energy, dated the effective date of the applicable
registration statement or the date of any amendment or supplement thereto, and a letter of like kind dated the date of the closing under the underwriting agreement, and (ii) a "cold comfort"
letter, dated the effective date of the applicable registration statement or the date of any amendment or supplement thereto and a letter 

12

 

of
like kind dated the date of the closing under the underwriting agreement, in each case, signed by the independent public accountants who have certified Copano Energy's financial statements included
or incorporated by reference into the applicable registration statement, and each of the opinion and the "cold comfort" letter shall be in customary form and covering substantially the same matters
with respect to such registration statement (and the prospectus and any prospectus supplement included therein) as are customarily covered in opinions of issuer's counsel and in accountants' letters
delivered to the underwriters in Underwritten Offerings of securities, and such other matters as such underwriters may reasonably request; 

        (h)   otherwise
use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to the Existing Investors, as
soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder; 

        (i)    make
available to the appropriate representatives of the Managing Underwriter and Existing Investors access to such information and Copano Energy personnel as is
reasonable and customary to enable such parties to establish a due diligence defense under the Securities Act; provided that Copano Energy need not
disclose any information to any such representative unless and until such representative has entered into a confidentiality agreement with Copano Energy; 

        (j)    cause
all such Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange or nationally recognized quotation system on which
similar securities issued by Copano Energy are then listed; 

        (k)   use
its commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may
be necessary by virtue of the business and operations of Copano Energy to enable the Existing Investors to consummate the disposition of such Registrable Securities; 

        (l)    provide
a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the effective date of such registration
statement; and 

        (m)  enter
into customary agreements and take such other actions as are reasonably requested by the Existing Investors or the underwriters, if any, in order to expedite or
facilitate the disposition of such Registrable Securities. 

        Each
Existing Investor, upon receipt of notice from Copano Energy of the happening of any event of the kind described in subsection (e) of this Section 6.06, shall
forthwith discontinue disposition of the Registrable Securities until such Existing Investor's receipt of the copies of the supplemented or amended prospectus contemplated by subsection (e) of
this Section 6.06 or until it is advised in writing by Copano Energy that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings
incorporated by reference in the prospectus, and, if so directed by Copano Energy, such Existing Investor will, or will request the Managing Underwriter or Underwriters, if any, to deliver to Copano
Energy (at Copano Energy's expense) all copies in their possession or control, other than permanent file copies then in such Existing Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. 

        Section 6.07.  Cooperation by Existing Investors. Copano Energy shall have no obligation to include in the Shelf Registration
Statement or in a Piggyback Registration units of an Existing Investor who has failed to timely furnish such information which, in the opinion of counsel to Copano Energy, is reasonably required in
order for the registration statement or prospectus supplement, as applicable, to comply with the Securities Act. 

13

 

        Section 6.08.  Restrictions on Public Sale by Existing Investors of Registrable Securities. Each Existing Investor that is a holder
of Registrable Securities that are included in a registration statement agrees not to effect any public sale or distribution of the Registrable Securities, other than in an Underwritten Offering,
during the 90 calendar day period beginning on the date of a prospectus supplement filed with the Commission with respect to the pricing of such Underwritten Offering,  provided that the duration of the
foregoing restrictions shall be no longer than the duration of the shortest restriction generally imposed by the
underwriters on the officers or directors or any other unitholder of Copano Energy on whom a restriction is imposed. 

        Section 6.09.  Expenses. Copano Energy will pay all Registration Expenses in connection with the Shelf Registration Statement filed
pursuant to Section 6.02(a) of this Agreement, and Copano Energy will pay all Registration Expenses in connection with a Piggyback Registration, whether or not the Shelf Registration Statement
becomes effective or any sale is made pursuant to the Shelf Registration Statement or Piggyback Registration. Each Existing Investor shall pay all Selling Expenses in connection with any sale of its
Registrable Securities hereunder. "Registration Expenses" means all expenses incident to Copano Energy's performance under or compliance with this
Agreement to effect the registration of Registrable Securities in a Shelf Registration or a Piggyback Registration, and the disposition of such securities, including, without limitation, all
registration, filing, securities exchange listing and Nasdaq National Market fees, all registration, filing, qualification and other fees and
expenses of complying with securities or blue sky laws, fees of the National Association of Securities Dealers, Inc., transfer taxes and fees of transfer agents and registrars, all word
processing, duplicating and printing expenses, and the fees and disbursements of counsel and independent public accountants for Copano Energy, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and compliance. Except as otherwise provided in Section 6.10 hereof, Copano Energy shall not be responsible for legal fees incurred
by Existing Investors in connection with the exercise of such Existing Investors' rights hereunder. Copano Energy shall not be responsible for any "Selling
Expenses," which means all underwriting fees, discounts and selling commissions allocable to the sale of the Registrable Securities. 

        Section 6.10.
Indemnification. 

        (a)   By Copano Energy. In the event of a registration of any Registrable Securities under the Securities Act pursuant to this
Agreement, Copano Energy will indemnify and hold harmless each Existing Investor thereunder, its directors and officers, and each underwriter, pursuant to the applicable underwriting agreement with
such underwriter, of Registrable Securities thereunder and each Person, if any, who controls such Existing Investor or underwriter within the meaning of the Securities Act and the Exchange Act,
against any losses, claims, damages, expenses or liabilities (including reasonable attorneys' fees and expenses) (collectively, "Losses"), joint or
several, to which such Existing Investor or underwriter or controlling Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Shelf
Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus,
in light of the circumstances under which they were made) not misleading, and will reimburse each such Existing Investor, its directors and officers, each such underwriter and each such controlling
Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss or actions or proceedings;  provided, however, that Copano Energy will not be liable in any such case if and to the extent that any
such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged 

14

 

omission
so made in conformity with information furnished by such Existing Investor, such underwriter or such controlling Person in writing specifically for use in the Shelf Registration Statement or
such other registration statement, or prospectus supplement, as applicable. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Existing
Investor or any such director, officer or controlling Person, and shall survive the transfer of such securities by such Existing Investor. 

        (b)   By Each Existing Investor. Each Existing Investor agrees severally and not jointly to indemnify and hold harmless Copano
Energy, its directors and officers, each Person, if any, who controls Copano Energy within the meaning of the Securities Act or of the Exchange Act, and each other Existing
Investor, its directors, officers, and controlling Persons within the meaning of the Securities Act or of the Exchange Act, to the same extent as the foregoing indemnity from Copano Energy to the
selling Existing Investors, but only with respect to information regarding such Existing Investor furnished in writing by or on behalf of such Existing Investor expressly for inclusion in the Shelf
Registration Statement or prospectus supplement relating to the Registrable Securities, or any amendment or supplement thereto; provided,  however, that the
liability of each Existing Investor shall not be greater in amount than the dollar amount of the proceeds (net of any Selling
Expenses) received by such Existing Investor from the sale of the Registrable Securities giving rise to such indemnification. 

        (c)   Notice. Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to any indemnified party other than under this Section 6.10. In any action brought against any indemnified party, it
shall notify the indemnifying party of the commencement thereof. The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense
thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party under this Section 6.10 for any legal expenses subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided,  however, that, (i) if the
indemnifying party has failed to assume the defense and employ counsel or (ii) if the defendants in any such
action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have concluded that there may be reasonable defenses available to the indemnified party
that are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, then the indemnified party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding any other
provision of this Agreement, no indemnified party shall settle any action brought against it with respect to which it is entitled to indemnification hereunder without the consent of the indemnifying
party, unless the settlement thereof imposes no liability or obligation on, and includes a complete and unconditional release from all liability of, the indemnifying party. 

        (d)   Contribution. If the indemnification provided for in this Section 6.10 is held by a court or government agency of
competent jurisdiction to be unavailable to Copano Energy or any Existing Investor or is insufficient to hold them harmless in respect of any Losses, then each such indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount 

15

 

paid
or payable by such indemnified party as a result of such Losses as between Copano Energy on the one hand and such Existing Investor on the other, in such proportion as is appropriate to reflect
the relative fault of Copano Energy on the one hand and of such Existing Investor on the other in connection with the statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations; provided, however, that in no event shall such Existing Investor be
required to contribute an aggregate amount in excess of the dollar amount of proceeds (net of Selling Expenses) received by such Existing Investor from the sale of Registrable Securities giving rise
to such indemnification. The relative fault of Copano Energy on the one hand and each Existing Investor on the other shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to
this paragraph were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of this
paragraph. The amount paid by an indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably
incurred by such indemnified party in connection with investigating or defending any Loss which is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation. 

        (e)   Other Indemnification. The provisions of this Section 6.10 shall be in addition to any other rights to
indemnification or contribution which an indemnified party may have pursuant to law, equity, contract or otherwise. 

        Section 6.11
Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the
Commission that may permit the sale of the Registrable Securities to the public without registration, Copano Energy agrees to use its commercially reasonable efforts to: 

        (a)   Make
and keep public information regarding Copano Energy available, as those terms are understood and defined in Rule 144 of the Securities Act, at all times from
and after the date hereof; 

        (b)   File
with the Commission in a timely manner all reports and other documents required of Copano Energy under the Securities Act and the Exchange Act at all times from and
after the date hereof; and 

        (c)   So
long as an Existing Investor owns any Registrable Securities, furnish to such Existing Investor forthwith upon request a copy of the most recent annual or quarterly
report of Copano Energy, and such other reports and documents so filed as such Existing Investor may reasonably request in availing itself of any rule or regulation of the Commission allowing such
Existing Investor to sell any such securities without registration. 

        Section 6.12.
Transfer or Assignment of Registration Rights. The rights to cause Copano Energy to register Registrable Securities
granted to the Existing Investors by Copano Energy pursuant to Section 6.03 may be transferred or assigned by the Existing Investors to one or more transferee(s) or assignee(s) of such
Registrable Securities, provided that (a) each such transferee or assignee holds Registrable Securities representing at least 50% (after giving
effect to such transfer) of the Registrable Securities held by the Registration Rights Group transferor at the Closing, (b) Copano Energy is given written notice prior to any said transfer or
assignment, stating the name and address of each such transferee and identifying the securities with respect to which such registration rights are being transferred or assigned, and (c) each
such transferee assumes in writing responsibility for its portion of the obligations of the Existing Investors under this Agreement. The rights granted to the Existing 

16

 

Investors
by Copano Energy pursuant to Section 6.04 with respect to Registrable Securities may be transferred or assigned by the Existing Investors to one or more transferee(s) or assignee(s)
of such Registrable Securities, provided that (a) Copano Energy is given written notice prior to any said transfer or assignment, stating the
name and address of each such transferee and identifying the securities with respect to which such registration rights are being transferred or assigned, and (b) each such transferee assumes in
writing responsibility for its portion of the obligations of the Existing Investors under this Agreement. In no event shall Copano Energy be required to file a post-effective
amendment to a Shelf Registration Statement or a new Shelf Registration Statement for the benefit of such transferee(s) or assignee(s) unless such transferring Existing Investor notifies Copano Energy
in writing that it will pay all of the additional Registration Expenses incurred by Copano Energy in connection with filing a post-effective amendment to a Shelf Registration Statement or
a new Shelf Registration Statement for the benefit of such transferee(s) or assignee(s); provided,  however, that Copano Energy shall be entitled to delay
any such filing as provided in Section 6.03(b) hereof. 

 
 

ARTICLE VII.
  MISCELLANEOUS

        Section 7.01.  Communications. All notices and other communications provided for or permitted hereunder shall be made in writing by
facsimile, courier service or personal delivery: 

	(a)
	if
to the CSFB Entities, at

 
CSFB/Global
Energy Partners

1100 Louisiana, Suite 4600

Houston, TX 77002

Attention: Mr. Robert L. Cabes, Jr.

 

With
a copy to:

DLJ Merchant Banking III, Inc.

Eleven Madison Avenue

New York, NY 10010

Attention: Mr. Ben Silbert

	(b)
	if
to the EnCap Entities, at

EnCap
Investments, L.L.C.

1100 Louisiana, Suite 3150

Houston, TX 77002

Attention: Mr. Wynne M. Snoots, Jr. 

	(c)
	if
to Copano Partners, at

 
1105
North Market Street, Suite 940

Wilmington, Delaware 19801

Attention: Ms. Susan Dubb 

	(d)
	if
to Mr. Northcutt, at

1902
Rycroft Drive

Spring, Texas 77386 

	(e)
	if
to Mr. Assiff, at

17

 

2707
Pittsburgh

Houston, Texas 77005 

	(f)
	if
to Copano Energy, at

 
2727
Allen Parkway, Suite 1200

Houston, Texas 77019

Attention: Mr. John R. Eckel, Jr.

Chairman of the Board and Chief Executive Officer 

        (g)   if
to a transferee of any Existing Investor, to such transferee at the address provided pursuant to Section 6.12 above. 

        All
such notices and communications shall be deemed to have been received at the time delivered by hand, if personally delivered; when receipt acknowledged, if sent via facsimile or sent
via Internet electronic mail; and when actually received, if sent by any other means. 

        Section 7.02.
Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns
of each of the parties, including subsequent transferees of Registrable Securities to the extent permitted by Section 6.12 hereof. 

        Section 7.03.
Limitation of Rights. This Agreement shall not be construed to vest any rights under this Agreement to any individual
or entity other than the Existing Investors and the Existing Investors do not intend for any portion of this Agreement to confer rights upon any Person other than the Existing Investors. 

        Section 7.04.  Assignment of Rights. Except as provided in Sections 3.04, 4.06 and 6.12 of this Agreement, none of the rights and
obligations of the Existing Investors under this Agreement may be transferred or assigned by any Existing Investor. 

        Section 7.05.
Recapitalization, Exchanges, etc. Affecting the Common Units. The provisions of this Agreement shall apply to the
full extent set forth herein with respect to any and all units of Copano Energy or any successor or assign of Copano Energy (whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for combinations, recapitalizations and the like occurring after the date
of this Agreement. 

        Section 7.06.
Specific Performance. Damages in the event of breach of this Agreement by a party hereto may be difficult, if not
impossible, to ascertain, and it is therefore agreed that each such Person, in addition to and without limiting any other remedy or right it may have, will have the right to an
injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the parties hereto
hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will
not preclude any such Person from pursuing any other rights and remedies at law or in equity which such Person may have. 

        Section 7.07.
Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the
same Agreement. 

        Section 7.08.  Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. 

        Section 7.09.
Governing Law. The laws of the State of Delaware shall govern this Agreement without regard to principles of conflict
of laws. 

18

 

        Section 7.10.  Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or
enforceability of such provision in any other jurisdiction. 

        Section 7.11.
Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 

        Section 7.12.
Amendment. This Agreement may be amended only by means of a written amendment signed by all parties to this
Agreement. 

        Section 7.13.
No Presumption. In the event any claim is made by a party relating to any conflict, omission, or ambiguity in this
Agreement, no presumption or burden of proof or persuasion shall be
implied by virtue of the fact that this Agreement was prepared by or at the request of a particular party or its counsel. 

        Section 7.14.  Payment of Expenses. Copano Energy shall pay or reimburse the Existing Investors, to the extent such costs have been
incurred, for all reasonable third-party out-of-pocket costs and expenses (including the reasonable fees and expenses of legal counsel) incurred by them in connection with
(i) negotiations leading to the execution of this Agreement, (ii) the review of the Registration Statement and all amendments thereto and (iii) the amendment and restatement of
the CEH LLC Agreement simultaneous with the Closing. Nothing set forth herein shall obligate Copano Energy to reimburse any Existing Investor with respect to any other costs or expenses incurred with
respect to its investment in Copano Energy or the Offering. 

 
 

ARTICLE VIII.
  DEFINITIONS

        "Additional G&A Cap" has the meaning specified in Section 4.02(b) of this Agreement. 

        "Agreement" has the meaning specified in the Preamble of this Agreement. 

        "Allocated Percentage" has the meaning specified in Section 4.03 of this Agreement. 

        "Board of Directors" means the board of directors of Copano Energy. 

        "Business Day" means any day other than a Saturday, Sunday, or a legal holiday for commercial banks in Wilmington, Delaware. 

        "Cap Period" has the meaning specified in Section 4.02(a) of this Agreement. 

        "CEH LLC Agreement" has the meaning specified in the Recitals of this Agreement. 

        "Closing" has the meaning specified in the Recitals of this Agreement. 

        "Code" has the meaning specified in the Recitals of this Agreement. 

        "Commission" has the meaning specified in the Recitals of this Agreement. 

        "Common Special Units" means common special units of Copano Energy prior to being exchanged for equity securities of Copano Energy in
connection with the Offering. 

        "Common Units" means the common units of Copano Energy that are publicly traded on the Nasdaq National Market. 

19

 

        "Copano Energy" has the meaning specified in the Recitals of this Agreement. 

        "Copano Partners" has the meaning specified in the Preamble of this Agreement. 

        "CSFB Entities" has the meaning specified in the Preamble of this Agreement. 

        "Current Interests" has the meaning specified in Section 3.01 of this Agreement. 

        "Designated Directors" has the meaning specified in Section 5.02 of this Agreement. 

        "DLJMB Permitted Transferee" has the meaning specified in Section 9.2(b) of the CEH LLC Agreement. 

        "D&O Policy" has the meaning specified in Section 5.06 of this Agreement. 

        "EBITDA" means earnings before interest expense, taxes, depreciation and amortization. 

        "Effectiveness Period" has the meaning specified in Section 6.03(a) of this Agreement. 

        "EnCap Entities" has the meaning specified in the Preamble of this Agreement. 

        "EnCap Permitted Transferee" has the meaning specified in Section 9.2(b) of the CEH LLC Agreement. 

        "Excess G&A Obligation" has the meaning specified in Section 4.02(a) of this Agreement. 

        "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated
thereunder. 

        "Exercise Price" means the exercise price of the Warrants. 

        "Existing Common Units" means common units of Copano Energy prior to being exchanged for equity securities of Copano Energy in connection
with the Offering. 

        "Existing Investors" has the meaning specified in the Preamble of this Agreement. 

        "Face Value" means $100 per Preferred Unit. 

        "First Allocation" has the meaning specified in Section 3.03(a) of this Agreement. 

        "G&A" has the meaning specified in Section 4.02(a) of this Agreement. 

        "G&A Budget" has the meaning specified in Section 4.05 of this Agreement. 

        "G&A Cap" has the meaning specified in Section 4.02(a) of this Agreement. 

        "Grossed-Up Residual Equity Value" means (i) the Residual Equity Value plus (ii) the Exercise Price multiplied
by the Warrant Shares (See "Annex B, "Grossed-up Residual Equity Value"). 

        "Included Registrable Securities" has the meaning specified in Section 6.04(a) of this Agreement. 

        "Independent Directors" has the meaning specified in Section 5.04 of this Agreement. 

        "Junior Special Units" means junior special units of Copano Energy prior to being exchanged for equity securities of Copano Energy in
connection with the Offering. 

        "Junior Units" means junior units of Copano Energy prior to being exchanged for equity securities of Copano Energy in connection with the
Offering. 

        "Liquidating Event Payment" has the meaning specified in Section 3.04(c) of this Agreement. 

        "Losses" has the meaning specified in Section 6.10(a) of this Agreement. 

        "Managing Underwriter" means, with respect to any Underwritten Offering, the book running lead manager of such Underwritten Offering. 

20

 

        "Market Price" means the public offering price per unit of Common Units sold in the Offering. 

        "Offering" has the meaning specified in the Recitals of this Agreement. 

        "Original Investors" has the meaning specified in Section 6.01 of this Agreement. 

        "Person" means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company,
unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other form of entity. 

        "Piggyback Registration" has the meaning specified in Section 6.04(a) of this Agreement. 

        "Preferred Unitholders" has the meaning specified in Section 2.01 of this Agreement. 

        "Preferred Units" means preferred units of Copano Energy prior to being redeemed in connection with the Offering. 

        "Redemption Payment" has the meaning specified in Section 2.01 of this Agreement. 

        "Registrable Security" means the Common and Subordinated Units until such time as such securities cease to be Registrable Securities
pursuant to Section 6.02 of this Agreement. 

        "Registration Expenses" has the meaning specified in Section 6.09 of this Agreement. 

        "Registration Rights Group" has the meaning specified in Section 6.01 of this Agreement. 

        "Registration Statement" has the meaning specified in the Recitals of this Agreement. 

        "Remaining Grossed-Up Residual Equity Value" has the meaning specified in Section 3.03(b) of this Agreement. 

        "Residual Equity" has the meaning specified in Section 3.02 of this Agreement. 

        "Residual Equity Value" means the number of Common Units and Subordinated Units comprising the Residual Equity (as reflected in the final
prospectus included in the Registration Statement) multiplied by the Market Price. 

        "Residual Value Allocations" has the meaning specified in Section 3.03 of this Agreement. 

        "Restated LLC Agreement" means the amended and restated limited liability company agreement of Copano Energy to be adopted by the Existing
Investors concurrent with the Closing. 

        "Second Allocation" has the meaning specified in Section 3.03(b) of this Agreement. 

        "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. 

        "Securities Claim" has the meaning specified in Section 5.06 of this Agreement. 

        "Selling Expenses" has the meaning specified in Section 6.09 of this Agreement. 

        "Shelf Registration" has the meaning specified in Section 6.03(a) of this Agreement. 

        "Shelf Registration Statement" has the meaning specified in Section 6.03(a) of this Agreement. 

        "Special Capital Account" has the meaning specified in Section 7.4(d) of the CEH LLC Agreement. 

        "Special Unitholder Reduction Amount" has the meaning specified in Section 3.03(d) of this Agreement. 

        "Special Units" means Common Special Units and Junior Special Units. 

21

 

        "Subordinated Units" mean the subordinated units of Copano Energy to be issued to the Existing Investors at the Closing. 

        "Third Allocation" has the meaning specified in Section 3.03(c) of this Agreement. 

        "Total G&A Cap" has the meaning specified in Section 4.02(b) of this Agreement. 

        "Transfer" means any sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or
otherwise. 

        "Underwritten Offering" means an offering (including an offering pursuant to a Shelf Registration Statement) in which Common Units are
sold to an underwriter on a firm commitment basis for reoffering to the public or an offering that is a "bought deal" with one or more investment banks. 

        "Warrant Certificate" means a certificate representing the right to acquire common units of Copano Energy. 

        "Warrant Shares" means the number of common units of Copano Energy issuable pursuant to the exercise of the Warrants. 

        "Warrants" means warrants to acquire common units of Copano Energy in accordance with the terms of the Warrant Certificate. 

22

	 	 	COPANO ENERGY HOLDINGS, L.L.C.
	

 	
 	

 	
 	

By:	

/s/  JOHN R. ECKEL, JR.      
 Name: John R. Eckel, Jr.

Title: Chairman of the Board of Managers and Chief Executive Officer
	

 	
 	
COPANO PARTNERS, L.P.
	

 	
 	
By:	
 	

COPANO MANAGEMENT PARTNERS, L.L.C., its Managing General Partner
	

 	
 	

 	
 	

By:	

/s/  JOHN R. ECKEL, JR.      
 Name: John R. Eckel, Jr.

Title: President
	

 	
 	

/s/  R. BRUCE NORTHCUTT      
R. Bruce Northcutt
	

 	
 	

/s/  MATTHEW J. ASSIFF      
Matthew J. Assiff

	 	 	ENCAP ENERGY CAPITAL FUND III, L.P.
	

 	
 	

By:	
ENCAP INVESTMENTS L.L.C.,

General Partner
	 	 	By:	ENCAP INVESTMENTS L.P.,
 Manager of EnCap Investments, L.L.C.
	 	 	By:	ENCAP INVESTMENTS GP, L.L.C.,
 General Partner of EnCap Investments L.P.
	

 	
 	

By:	

/s/  WYNNE M. SNOOTS, JR.      
 Name: Wynne M. Snoots, Jr.

Title: Managing Director

	 	 	ENCAP ENERGY ACQUISITION III-B, INC.
	

 	
 	

By:	

/s/  WYNNE M. SNOOTS, JR.      
 Name: Wynne M. Snoots, Jr.

Title: Vice President
	

 	
 	
BOCP ENERGY PARTNERS, L.P.
	

 	
 	
By:	

ENCAP INVESTMENTS L.L.C.,
 Manager
	 	 	By:	ENCAP INVESTMENTS L.P.,
 Manager of EnCap Investments, L.L.C.
	 	 	By:	ENCAP INVESTMENTS GP, L.L.C.,
 General Partner of EnCap Investments L.P.
	

 	
 	

By:	

/s/  WYNNE M. SNOOTS, JR.      
 Name: Wynne M. Snoots, Jr.

Title: Managing Director
	

 	
 	
CEH HOLDCO, INC.
	

 	
 	

By:	

/s/  ROBERT L. CABES, JR.      
 Name: Robert L. Cabes, Jr.

Title: Director
	

 	
 	
CEH HOLDCO II, INC.
	

 	
 	

By:	

/s/  ROBERT L. CABES, JR.      
 Name: Robert L. Cabes, Jr.

Title: Director

	 	 	DLJ MERCHANT BANKING PARTNERS III, L.P.
	

 	
 	

By:	
 	

 	
 	

 	

 
	

 	
 	

 	
 	

By:	
 	

/s/  ROBERT L. CABES, JR.      

	 	 	 	 	 	 	Name:	Robert L. Cabes, Jr.

	 	 	 	 	 	 	Title:	Director

	

 	
 	
DLJ OFFSHORE PARTNERS III, C.V.
	

 	
 	

By:	
 	

 	
 	

 	

 
	

 	
 	

 	
 	

By:	
 	

/s/  ROBERT L. CABES, JR.      

	 	 	 	 	 	 	Name:	Robert L. Cabes, Jr.

	 	 	 	 	 	 	Title:	Director

	

 	
 	
DLJ MERCHANT BANKING III, INC., as Advisory General Partner on behalf of DLJ Offshore Partners III, C.V.
	

 	
 	

By:	
 	

 	
 	

 	

 
	

 	
 	

 	
 	

By:	
 	

/s/  ROBERT L. CABES, JR.      

	 	 	 	 	 	 	Name:	Robert L. Cabes, Jr.

	 	 	 	 	 	 	Title:	Director

	
 	
 	
DLJ MERCHANT BANKING PARTNERS III, INC., as Advisory General Counsel on behalf DLJ Offshore Partners III-1, C.V., and as attorney-in-fact for DLJ Merchant Banking III, L.P., as
Associate General Partner of DLJ Offshore Partners III-1, C.V.
	

 	
 	

By:	
 	

 	
 	

 	

 
	

 	
 	

 	
 	

By:	
 	

/s/  ROBERT L. CABES, JR.      

	 	 	 	 	 	 	Name:	Robert L. Cabes, Jr.

	 	 	 	 	 	 	Title:	Director

	

 	
 	
DLJ MERCHANT BANKING III, INC.,
 as Advisory General Counsel on behalf of DLJ Offshore Partners III-2, C.V., and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate
General Partner of DLJ Offshore Partners III-2, C.V.
	

 	
 	

By:	
 	

 	
 	

 	

 
	

 	
 	

 	
 	

By:	
 	

/s/  ROBERT L. CABES, JR.      

	 	 	 	 	 	 	Name:	Robert L. Cabes, Jr.

	 	 	 	 	 	 	Title:	Director

	

 	
 	
DLJ MB PARTNERS III GMBH & CO. KG
	

 	
 	

By:	
 	

 	
 	

 	

 
	

 	
 	

 	
 	

By:	
 	

/s/  ROBERT L. CABES, JR.      

	 	 	 	 	 	 	Name:	Robert L. Cabes, Jr.

	 	 	 	 	 	 	Title:	Director

	
 	
 	
MILLENNIUM PARTNERS II, L.P.
	

 	
 	

By:	
 	

 	
 	

 	

 
	

 	
 	

 	
 	

By:	
 	

/s/  ROBERT L. CABES, JR.      

	 	 	 	 	 	 	Name:	Robert L. Cabes, Jr.

	 	 	 	 	 	 	Title:	Director

	

 	
 	
MBP III PLAN INVESTORS, L.P.
	

 	
 	

By:	
 	

 	
 	

 	

 
	

 	
 	

 	
 	

By:	
 	

/s/  ROBERT L. CABES, JR.      

	 	 	 	 	 	 	Name:	Robert L. Cabes, Jr.

	 	 	 	 	 	 	Title:	Director

	Annex A

Copano Energy Holdings, L.L.C.

Unit Ownership
 
	 	 
	 	As of July 30, 2004
	 
	 	 
	 	Redeemable

Preferred

Units
	 	Common

Equivalent

Units*
	 	Fully

Diluted

Ownership*
	 
	CEH Holdco, Inc.	 	29.8	%	110,139.206	 	—	 	 	 
	

CEH Holdco II, Inc.	
 	

70.2	
%	

259,711.949	
 	

—	
 	

 	
 
	

DLJ Merchant Banking Partners III, L.P.	
 	

 	
 	

 	
 	

1,316,643	
 	

23.47	
%
	

DLJ Offshore Partners III, C.V.	
 	

 	
 	

 	
 	

61,831	
 	

1.10	
%
	

DLJ Merchant Banking III, Inc., as Advisory General Partner on behalf of DLJ Offshore Partners III, C.V.	
 	

 	
 	

 	
 	

10,079	
 	

..18	
%
	

DLJ Merchant Banking III, Inc. as Advisory General Partner on behalf of DLJ Offshore Partners III-1, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General Partner of DLJ Offshore Partners III-1, C.V.	
 	

 	
 	

 	
 	

24,008	
 	

..43	
%
	

DLJ Merchant Banking III, Inc., as Advisory General Partner on behalf of DLJ Offshore Partners III-2, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General Partner of DLJ Offshore Partners III-2, C.V.	
 	

 	
 	

 	
 	

17,102	
 	

..30	
%
	

DLJ MB Partners III GmbH & Co. KG	
 	

 	
 	

 	
 	

11,346	
 	

..20	
%
	

Millennium Partners II, L.P.	
 	

 	
 	

 	
 	

2,253	
 	

..04	
%
	

MBP III Plan Investors, L.P.	
 	

 	
 	

 	
 	

431,738	
 	

7.69	
%
	 	
 Total CSFB Entities	
 	

100.0	
%	

369,851.155	
 	

1,875,000

(Warrants	

)	

33.41	
%
	

EnCap Energy Capital Fund III, L.P.	
 	

50.0	
%	

184,837.610	
 	

937,037	
 	

16.70	
%
	EnCap Energy Acquisition III — B, Inc.	 	37.8	%	139,792.732	 	708,683	 	12.63	%
	BOCP Energy Partners, L.P.	 	12.2	%	45,220.813	 	229,280	 	4.08	%
	 	Total EnCap Entities	 	100.0	%	369,851.155	 	1,875,000

(Warrants	
)	33.41	%
	

Copano Partners, L.P. — Common Units	
 	

 	
 	

—	
 	

1,030,000	
 	

18.36	
%
	Copano Partners, L.P. — Junior Units	 	 	 	—	 	620,000	 	11.05	%
	 	Total Copano Partners, L.P. Units	 	 	 	 	 	1,650,000	 	29.41	%
	

R. Bruce Northcutt — Common Special Units	
 	

 	
 	

 	
 	

100,000	
 	

1.78	
%
	R. Bruce Northcutt — Junior Special Units	 	 	 	 	 	40,000	 	.71	%
	 	Total R. Bruce Northcutt Special Units	 	 	 	 	 	140,000	 	2.49	%
	

Matthew J. Assiff — Common Special Units	
 	

 	
 	

 	
 	

54,000	
 	

..96	
%
	Matthew J. Assiff — Junior Special Units	 	 	 	 	 	18,000	 	.32	%
	 	Total Matthew J. Assiff Special Units	 	 	 	 	 	72,000	 	1.28	%
	Total	 	 	 	 	 	5,612,000	 	100	%

*
Includes Common Units, Junior Units, Common Special Units, Junior Special Units and Warrants 

ANNEX B  

Allocation of Units of Copano Energy, L.L.C. to Existing Investors

	 
	 	Gross Residual Equity Value

	 
	 	Non-public

units
	 	Market Price
	 	 

	Residual Equity Value	 	4,598.4	 	$	20.00	 	$	91,968
	Warrant Exercise Value	 	 	 	 	 	 	$	60,000
	 	 	 	 	 	 	 	

	Grossed-up Residual Equity Value for Allocation	 	 	 	 	 	 	$	151,968

First Allocation  

	 
	 	CEH Units
	 	Special Capital

Account Balance
	 	First

Allocation
	 
	Common Special Units	 	154	 	$	33.3	 	$	33.3	 
	Junior Special Units	 	58	 	 	6.7	 	 	6.7	 
	 	 	 	 	
	 
	 	 	 	 	$	40.0	 	$	40.0	 
	Gross Residual Equity Value	 	 	 	 	 	 	$	151,968	 
	First Allocation	 	 	 	 	 	 	$	(40	)
	 	 	 	 	 	 	 	
	 
	Remaining Grossed-up Residual Equity Value	 	 	 	 	 	 	$	151,928	 

Second Allocation  

	 
	 	CEH Units
	 	Allocation

per Unit
	 	Second

Allocation

	Existing Common Units	 	1,030	 	$	20.00	 	$	20,600
	Warrants	 	3,750	 	$	20.00	 	 	75,000
	Junior Units	 	—	 	 	 	 	 	—
	Common Special Units	 	154	 	$	20.00	 	 	3,080
	Junior Special Units	 	—	 	 	 	 	 	—
	 	 	
	 	 	 	 	

	 	 	4,934	 	 	 	 	$	98,680

	Grossed-up Residual Equity Value less First Allocation	 	$	151,928	 
	Second Allocation	 	 	(98,680	)
	 	 	
	 
	Remaining Grossed-up Residual Equity Value	 	$	53,248	 

Third Allocation  

	 
	 	CEH Units
	 	Third

Allocation

	Existing Common Units	 	1,030	 	$	9,773
	Warrants	 	3,750	 	 	35,581
	Junior Units	 	620	 	 	5,883
	Common Special Units	 	154	 	 	1,461
	Junior Special Units	 	58	 	 	550
	 	 	
	 	

	 	 	5,612	 	$	53,248

Special Unitholder Reduction and Reallocation  

	 
	 	CEH Units
	 	Special

Unitholder

Reduction
	 	Reallocation

	Existing Common Units	 	1,030	 	 	 	 	$	452
	Warrants	 	3,750	 	 	 	 	 	1,646
	Junior Units	 	620	 	 	 	 	 	272
	Common Special Units	 	154	 	$	(2,464	)	 	68
	Junior Special Units	 	58	 	 	 	 	 	25
	 	 	
	 	 	 	 	

	 	 	5,612	 	 	 	 	$	2,464

Preliminary Allocation of Units  

	 
	 	Distributions*
	 	Reduction for

Exercise

Price
	 	Residual Value

Allocations
	 	Units
	 	Common

Units **

30.4%
	 	Subordinated

Units **

69.6%

	Existing Common Units	 	$	30,825	 	$	—	 	$	30,825	 	1,541.3	 	468.9	 	1,072.4
	Warrants	 	 	112,227	 	 	(60,000	)	 	52,227	 	2,611.4	 	794.4	 	1,816.9
	Junior Units	 	 	6,155	 	 	 	 	 	6,155	 	307.7	 	93.6	 	214.1
	Common Special Units	 	 	2,178	 	 	 	 	 	2,178	 	108.9	 	33.1	 	75.8
	Junior Special Units	 	 	582	 	 	 	 	 	582	 	29.1	 	8.9	 	20.3
	 	 	
	 	
	 	
	 	
	 	
	 	

	 	 	$	151,968	 	$	(60,000	)	$	91,968	 	4,598.4	 	1,398.9	 	3,199.5

Liquidating Event Payment  

	 
	 	Value
	 	Unit Price
	 	Units

	Unit Adjustment	 	$	1,000	 	$	20.00	 	50

	 
	 	Common

Units **

30.4%
	 	Subordinated

Units

69.6%
	 	Total
	 
	Existing Common Units	 	(15.2	)	(34.8	)	(50	)
	Warrants	 	15.2	 	34.8	 	50	 

Final Allocation of Common Units and Subordinated Units  

	 
	 	Units
	 	Common

Units **

30.4%
	 	Subordinated

Units

69.6%

	Existing Common Units	 	1,491.3	 	453.7	 	1,037.6
	Warrants	 	2,661.4	 	809.6	 	1,851.7
	Junior Units	 	307.7	 	93.6	 	214.1
	Common Special Units	 	108.9	 	33.1	 	75.8
	Junior Special Units	 	29.1	 	8.9	 	20.3
	 	 	
	 	
	 	

	 	Total Existing Investors Units	 	4,598.4	 	1,398.9	 	3,199.5

	*
	For
each class of unitholder, the sum of the First Allocation, Second Allocation, Third Allocation, Special Unitholder Reduction and the Reallocation, as applicable

	**
	Assumes
Public equity of 5 million common units and total outstanding common units to subordinated units post-IPO in the ratio of 2 common units for every 1 subordinated unit. 

QuickLinks

Exhibit 10.6

STAKEHOLDERS' AGREEMENT

R E C I T A L S

A G R E E M E N T

ARTICLE I. CONDITIONS TO EFFECTIVENESS

ARTICLE II. REDEMPTION OF PREFERRED UNITS

ARTICLE III. RESIDUAL EQUITY

ARTICLE IV. GENERAL AND ADMINISTRATIVE SERVICES

ARTICLE V. CORPORATE GOVERNANCE

ARTICLE VI. REGISTRATION RIGHTS

ARTICLE VII. MISCELLANEOUS

ARTICLE VIII. DEFINITIONSExhibit
4.1

 

 

 

BLOUNT, INC.,

As Issuer

 

$175,000,000

 

 

[  ]% SENIOR SUBORDINATED NOTES DUE 2012

 

 

 

INDENTURE

Dated as of August [  ], 2004

 

 

 

 

The Bank of New
York,

As Trustee

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01.

  	
  DEFINITIONS

  	
   

  
	
  SECTION 1.02.

  	
  OTHER DEFINITIONS

  	
   

  
	
  SECTION 1.03.

  	
  INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT

  	
   

  
	
  SECTION 1.04.

  	
  RULES OF CONSTRUCTION

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2. THE NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01.

  	
  FORM AND DATING

  	
   

  
	
  SECTION 2.02.

  	
  EXECUTION AND AUTHENTICATION

  	
   

  
	
  SECTION 2.03.

  	
  REGISTRAR AND PAYING AGENT

  	
   

  
	
  SECTION 2.04.

  	
  PAYING AGENT TO HOLD MONEY IN TRUST

  	
   

  
	
  SECTION 2.05.

  	
  HOLDER LISTS

  	
   

  
	
  SECTION 2.06.

  	
  TRANSFER AND EXCHANGE

  	
   

  
	
  SECTION 2.07.

  	
  REPLACEMENT NOTES

  	
   

  
	
  SECTION 2.08.

  	
  OUTSTANDING NOTES

  	
   

  
	
  SECTION 2.09.

  	
  TREASURY NOTES

  	
   

  
	
  SECTION 2.10.

  	
  TEMPORARY NOTES

  	
   

  
	
  SECTION 2.11.

  	
  CANCELLATION

  	
   

  
	
  SECTION 2.12.

  	
  DEFAULTED INTEREST

  	
   

  
	
  SECTION 2.13.

  	
  CUSIP NUMBERS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3. REDEMPTION AND PREPAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01.

  	
  NOTICES TO TRUSTEE

  	
   

  
	
  SECTION 3.02.

  	
  SELECTION OF NOTES TO BE REDEEMED

  	
   

  
	
  SECTION 3.03.

  	
  NOTICE OF REDEMPTION

  	
   

  
	
  SECTION 3.04.

  	
  EFFECT OF NOTICE OF REDEMPTION

  	
   

  
	
  SECTION 3.05.

  	
  DEPOSIT OF REDEMPTION PRICE

  	
   

  
	
  SECTION 3.06.

  	
  NOTES REDEEMED IN PART

  	
   

  
	
  SECTION 3.07.

  	
  OPTIONAL REDEMPTION

  	
   

  
	
  SECTION 3.08.

  	
  MANDATORY REDEMPTION

  	
   

  
	
  SECTION 3.09.

  	
  OFFER TO PURCHASE BY APPLICATION OF EXCESS
  PROCEEDS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4. COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01.

  	
  PAYMENT OF NOTES

  	
   

  
	
  SECTION 4.02.

  	
  MAINTENANCE OF OFFICE OR AGENCY

  	
   

  
	
  SECTION 4.03.

  	
  REPORTS

  	
   

  
	
  SECTION 4.04.

  	
  COMPLIANCE CERTIFICATE

  	
   

  
	
  SECTION 4.05.

  	
  TAXES

  	
   

  
	
  SECTION 4.06.

  	
  SALE AND LEASEBACK TRANSACTIONS

  	
   

  
	
  SECTION 4.07.

  	
  RESTRICTED PAYMENTS

  	
   

  
	
  SECTION 4.08.

  	
  DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
  SUBSIDIARIES

  	
   

  
	
  SECTION 4.09.

  	
  INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED
  STOCK

  	
   

  
	
  SECTION 4.10.

  	
  ASSET SALES

  	
   

  
	
  SECTION 4.11.

  	
  TRANSACTIONS WITH AFFILIATES

  	
   

  
	
  SECTION 4.12.

  	
  LIENS

  	
   

  
	
  SECTION 4.13.

  	
  ADDITIONAL SUBSIDIARY GUARANTEES

  	
   

  
	
  SECTION 4.14.

  	
  CORPORATE EXISTENCE

  	
   

  
	
  SECTION 4.15.

  	
  OFFER TO REPURCHASE UPON CHANGE OF CONTROL

  	
   

  
	
  SECTION 4.16.

  	
  NO SENIOR SUBORDINATED DEBT

  	
   

  
	
  SECTION 4.17.

  	
  DESIGNATION OF RESTRICTED AND UNRESTRICTED
  SUBSIDIARIES

  	
   

  
	
  SECTION 4.18.

  	
  BUSINESS ACTIVITIES

  	
   

  

 

i

 

	
  ARTICLE 5. SUCCESSORS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01.

  	
  MERGER, CONSOLIDATION, OR SALE OF ASSETS

  	
   

  
	
  SECTION 5.02.

  	
  SUCCESSOR CORPORATION SUBSTITUTED

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6. DEFAULTS AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01.

  	
  EVENTS OF DEFAULT

  	
   

  
	
  SECTION 6.02.

  	
  ACCELERATION

  	
   

  
	
  SECTION 6.03.

  	
  OTHER REMEDIES

  	
   

  
	
  SECTION 6.04.

  	
  WAIVER OF PAST DEFAULTS

  	
   

  
	
  SECTION 6.05.

  	
  CONTROL BY MAJORITY

  	
   

  
	
  SECTION 6.06.

  	
  LIMITATION ON SUITS

  	
   

  
	
  SECTION 6.07.

  	
  RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT

  	
   

  
	
  SECTION 6.08.

  	
  COLLECTION SUIT BY TRUSTEE

  	
   

  
	
  SECTION 6.09.

  	
  TRUSTEE MAY FILE PROOFS OF CLAIM

  	
   

  
	
  SECTION 6.10.

  	
  PRIORITIES

  	
   

  
	
  SECTION 6.11.

  	
  UNDERTAKING FOR COSTS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7. TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01.

  	
  DUTIES OF TRUSTEE

  	
   

  
	
  SECTION 7.02.

  	
  RIGHTS OF TRUSTEE

  	
   

  
	
  SECTION 7.03.

  	
  INDIVIDUAL RIGHTS OF TRUSTEE

  	
   

  
	
  SECTION 7.04.

  	
  TRUSTEE’S DISCLAIMERS

  	
   

  
	
  SECTION 7.05.

  	
  NOTICE OF DEFAULTS

  	
   

  
	
  SECTION 7.06.

  	
  REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES

  	
   

  
	
  SECTION 7.07.

  	
  COMPENSATION AND INDEMNITY

  	
   

  
	
  SECTION 7.08.

  	
  REPLACEMENT OF TRUSTEE

  	
   

  
	
  SECTION 7.09.

  	
  SUCCESSOR TRUSTEE BY MERGER, ETC.

  	
   

  
	
  SECTION 7.10.

  	
  ELIGIBILITY; DISQUALIFICATION

  	
   

  
	
  SECTION 7.11.

  	
  PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8. DISCHARGE OF INDENTURE; DEFEASANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.01.

  	
  SATISFACTION AND DISCHARGE

  	
   

  
	
  SECTION 8.02.

  	
  OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
  DEFEASANCE

  	
   

  
	
  SECTION 8.03.

  	
  LEGAL DEFEASANCE AND DISCHARGE

  	
   

  
	
  SECTION 8.04.

  	
  COVENANT DEFEASANCE

  	
   

  
	
  SECTION 8.02.

  	
  CONDITIONS TO LEGAL OR COVENANT DEFEASANCE

  	
   

  
	
  SECTION 8.03.

  	
  DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE
  HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS

  	
   

  
	
  SECTION 8.04.

  	
  REPAYMENT TO COMPANY

  	
   

  
	
  SECTION 8.05.

  	
  REINSTATEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9. 
  AMENDMENT, SUPPLEMENT AND WAIVER

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.01.

  	
  WITHOUT CONSENT OF HOLDERS OF NOTES

  	
   

  
	
  SECTION 9.02.

  	
  WITH CONSENT OF HOLDERS OF NOTES

  	
   

  
	
  SECTION 9.03.

  	
  COMPLIANCE WITH TRUST INDENTURE ACT

  	
   

  
	
  SECTION 9.04.

  	
  REVOCATION AND EFFECT OF CONSENTS

  	
   

  
	
  SECTION 9.05.

  	
  NOTATION ON OR EXCHANGE OF NOTES

  	
   

  
	
  SECTION 9.06.

  	
  TRUSTEE TO SIGN AMENDMENTS, ETC.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10. SUBORDINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.01.

  	
  AGREEMENT TO SUBORDINATE

  	
   

  
	
  SECTION 10.02.

  	
  LIQUIDATION; DISSOLUTION; BANKRUPTCY

  	
   

  
	
  SECTION 10.03.

  	
  DEFAULT ON DESIGNATED SENIOR DEBT

  	
   

  
	
  SECTION 10.04.

  	
  ACCELERATION OF SECURITIES

  	
   

  
	
  SECTION 10.05.

  	
  WHEN DISTRIBUTION MUST BE PAID OVER

  	
   

  

 

ii

 

	
  SECTION 10.06.

  	
  NOTICE BY COMPANY

  	
   

  
	
  SECTION 10.07.

  	
  SUBROGATION

  	
   

  
	
  SECTION 10.08.

  	
  RELATIVE RIGHTS

  	
   

  
	
  SECTION 10.09.

  	
  SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY

  	
   

  
	
  SECTION 10.10.

  	
  DISTRIBUTION OR NOTICE TO REPRESENTATIVE

  	
   

  
	
  SECTION 10.11.

  	
  RIGHTS OF TRUSTEE AND PAYING AGENT

  	
   

  
	
  SECTION 10.12.

  	
  AUTHORIZATION TO EFFECT SUBORDINATION

  	
   

  
	
  SECTION 10.13.

  	
  AMENDMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11. GUARANTEES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.01.

  	
  GUARANTEES

  	
   

  
	
  SECTION 11.02.

  	
  SUBORDINATION OF GUARANTEE

  	
   

  
	
  SECTION 11.03.

  	
  EXECUTION AND DELIVERY OF GUARANTEE

  	
   

  
	
  SECTION 11.04.

  	
  GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN
  TERMS

  	
   

  
	
  SECTION 11.05.

  	
  RELEASES OF GUARANTEES

  	
   

  
	
  SECTION 11.06.

  	
  LIMITATION ON GUARANTOR LIABILITY; CONTRIBUTION

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12. MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.01.

  	
  TRUST INDENTURE ACT CONTROLS

  	
   

  
	
  SECTION 12.02.

  	
  NOTICES

  	
   

  
	
  SECTION 12.03.

  	
  COMMUNICATIONS BY HOLDERS OF NOTES WITH OTHER
  HOLDERS OF NOTES

  	
   

  
	
  SECTION 12.04.

  	
  CERTIFICATE AND OPINION AS TO CONDITIONS
  PRECEDENT

  	
   

  
	
  SECTION 12.05.

  	
  STATEMENTS REQUIRED IN CERTIFICATE OR OPINION

  	
   

  
	
  SECTION 12.06.

  	
  RULE BY TRUSTEE AND AGENTS

  	
   

  
	
  SECTION 12.07

  	
  NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
  EMPLOYEES AND STOCKHOLDERS

  	
   

  
	
  SECTION 12.08.

  	
  GOVERNING LAW

  	
   

  
	
  SECTION 12.09.

  	
  NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS

  	
   

  
	
  SECTION 12.10.

  	
  SUCCESSORS

  	
   

  
	
  SECTION 12.11.

  	
  SEVERABILITY

  	
   

  
	
  SECTION 12.12.

  	
  COUNTERPART ORIGINALS

  	
   

  
	
  SECTION 12.13.

  	
  TABLE OF CONTENTS, HEADINGS, ETC.

  	
   

  

 

iii

 

EXHIBITS

 

EXHIBIT
A           FORM OF NOTE

 

EXHIBIT
B            FORM OF NOTATION OF SENIOR
SUBORDINATED NOTE RELATING TO GUARANTEE

 

EXHIBIT
C            FORM OF SUPPLEMENTAL
INDENTURE

 

iv

 

Cross-Reference Table*

 

	
  Trust
  Indenture Act Section

  	
   

  	
  Indenture Section

  
	
   

  	
   

  
	
  310

  	
  (a)(1)

  	
  7.10

  
	
   

  	
  (a)(2)

  	
  7.10

  
	
   

  	
  (a)(3)

  	
  N.A.

  
	
   

  	
  (a)(4)

  	
  N.A.

  
	
   

  	
  (a)(5)

  	
  7.10

  
	
   

  	
  (b)

  	
  7.10

  
	
   

  	
  (c)

  	
  N.A.

  
	
  311

  	
  (a)

  	
  7.11

  
	
   

  	
  (b)

  	
  7.11

  
	
   

  	
  (c)

  	
  N.A.

  
	
  312

  	
  (a)

  	
  2.05

  
	
   

  	
  (b)

  	
  12.03

  
	
   

  	
  (c)

  	
  12.03

  
	
  313

  	
  (a)

  	
  7.06

  
	
   

  	
  (b)(1)

  	
  N.A.

  
	
   

  	
  (b)(2)

  	
  7.06

  
	
   

  	
  (c)

  	
  7.06;12.02

  
	
   

  	
  (d)

  	
  7.06

  
	
  314

  	
  (a)

  	
  4.03;12.02

  
	
   

  	
  (b)

  	
  N.A.

  
	
   

  	
  (c)(1)

  	
  12.04

  
	
   

  	
  (c)(2)

  	
  12.04

  
	
   

  	
  (c)(3)

  	
  N.A.

  
	
   

  	
  (d)

  	
  N.A.

  
	
   

  	
  (e)

  	
  12.05

  
	
   

  	
  (f)

  	
  N.A.

  
	
  315

  	
  (a)

  	
  7.01

  
	
   

  	
  (b)

  	
  7.05, 12.02

  
	
   

  	
  (c)

  	
  7.01

  
	
   

  	
  (d)

  	
  7.01

  
	
   

  	
  (e)

  	
  6.11

  
	
  316

  	
  (a)(last sentence)

  	
  2.09

  
	
   

  	
  (a)(1)(A)

  	
  6.05

  
	
   

  	
  (a)(1)(B)

  	
  6.04

  
	
   

  	
  (a)(2)

  	
  N.A.

  
	
   

  	
  (b)

  	
  6.07

  
	
   

  	
  (c)

  	
  2.12

  
	
  317

  	
  (a)(1)

  	
  6.08

  
	
   

  	
  (a)(2)

  	
  6.09

  
	
   

  	
  (b)

  	
  2.04

  
	
  318

  	
  (a)

  	
  12.01

  
	
   

  	
  (b)

  	
  N.A.

  
	
   

  	
  (c)

  	
  12.01

  
				

 

N.A. means not
applicable.

 

* This Cross-Reference
Table is not part of the Indenture.

 

v

 

This INDENTURE
dated as of August [  ], 2004, is
among Blount, Inc., a Delaware corporation (“Blount” or the “Company”) and Blount International, Inc., a
Delaware corporation (“Blount International”), BI, L.L.C., a
Delaware limited liability company, Omark Properties, Inc., an Oregon
corporation, 4520 Corp., Inc., a Delaware corporation, Gear Products, Inc., an
Oklahoma corporation, Dixon Industries, Inc., a Kansas corporation, Windsor
Forestry Tools LLC, a Tennessee limited liability company, Frederick
Manufacturing Corporation, a Delaware corporation and Fabtek Corporation, a
Michigan corporation (collectively, the “Guarantors”), and The Bank of New York, a
New York banking corporation, as trustee (the “Trustee”).

 

The Company, the
Guarantors and the Trustee agree as follows for the benefit of each other and
for the equal and ratable benefit of the Holders of the [  ]% Senior Subordinated Notes due 2012 (the “Notes”):

 

ARTICLE 1.

DEFINITIONS AND INCORPORATION

BY REFERENCE

 

SECTION 1.01.            DEFINITIONS.

 

“Acquired
Debt”  means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, whether or
not such Indebtedness is incurred in connection with, or in contemplation of,
such other Person merging with or into, or becoming a Subsidiary of such
specified Person; and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.

 

“Additional
Assets”  means (i) any property or assets (other than Capital Stock,
Indebtedness or rights to receive payments over a period greater than 180 days)
that are used by or useful to Blount International or a Restricted Subsidiary
of Blount International in a Permitted Business; or (ii) the Capital Stock of a
Person that either is already at the time a Restricted Subsidiary of Blount
International or becomes a Restricted Subsidiary of Blount International as a
result of the acquisition of such Capital Stock by Blount International or
another Restricted Subsidiary of Blount International.

 

“Additional
Notes” means additional Notes that the Company may issue from time
to time (other than the Initial Notes) under this Indenture in accordance with
Sections 2.02 and 4.09 hereof.

 

“Adjusted Net
Assets” of a Guarantor at any date means the lesser of the amount by
which (i) the fair value of the property of such Guarantor exceeds the total
amount of liabilities, including, without limitation, contingent liabilities
(after giving effect to all other fixed and contingent liabilities incurred or
assumed on such date), but excluding liabilities under its Guarantee, of such
Guarantor at such date and (ii) the present fair salable value of the assets of
such Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities incurred or assumed on such date and
after giving effect to any collection from any Subsidiary of such Guarantor in
respect of the obligations of such Subsidiary under such Guarantee), excluding
debt in respect of such Guarantee, as they become absolute and matured.

 

“Affiliate”  of
any specified Person means any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control with such specified
Person. For purposes of this definition, “control,” as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise; provided
that beneficial ownership of 10% or more of the Voting Stock of such Person
shall be deemed to be control. For purposes of this definition, the terms
“controlling,” “controlled by” and “under common control with” shall have
correlative meanings.

 

“Agent”
means any Registrar, Paying Agent or co-registrar.

 

 

“Applicable
Procedures”  means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Clearstream that apply to such
transfer or exchange.

 

“Asset
Disposition”  means the sale, lease, conveyance or
other disposition of any assets or rights (including by way of a sale and
leaseback) of Blount International or any of its Restricted Subsidiaries in one
or more related transactions.

 

“Asset Sale”  means
(i) the sale, lease, conveyance or other disposition of any assets or rights
(including by way of a sale and leaseback); provided that the sale, lease, conveyance
or other disposition of all or substantially all of the assets of Blount
International and its Restricted Subsidiaries taken as a whole shall be
governed by Section 4.15 hereof and/or Section 5.01 hereof and not by
Section 4.10 hereof, and (ii) the issuance of Equity Interests in any of
Blount International’s Restricted Subsidiaries or the sale of Equity Interests
in any of such Restricted Subsidiaries. Notwithstanding the foregoing, the
following items shall not be deemed to be Asset Sales:  (i) any single transaction or series of
related transactions that (A) involves assets having a fair market value of
less than $2,000,000 or (B) results in net proceeds to Blount International and
its Restricted Subsidiaries of less than $2,000,000; (ii) a transfer of assets
by Blount International to one of its Restricted Subsidiaries or by a
Restricted Subsidiary of Blount International to Blount International or to
another Restricted Subsidiary of Blount International; (iii) an issuance of
Equity Interests by a Restricted Subsidiary of Blount International to Blount International
or to another Restricted Subsidiary of Blount International; (iv) the sale,
lease or other disposition of equipment, inventory, accounts receivable or
other assets in the ordinary course of business; (v) the sale or other
disposition of cash or Cash Equivalents; (vi) the sale, conveyance or other
transfer of accounts receivable and related assets customarily transferred in
an asset securitization transaction involving accounts receivable to a
Receivables Subsidiary or by a Receivables Subsidiary, in connection with a
Qualified Receivables Transaction; and (vii) foreclosures on assets; and (viii)
a Restricted Payment permitted by or a Permitted Investment that is not
prohibited by Section 4.07 hereof.

 

“Attributable
Debt”  in respect of a sale and leaseback transaction means, at
the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. The present
value shall be calculated using a discount rate equal to the rate of interest
borne by the Notes, compounded annually.

 

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

 

“Beneficial
Owner”  has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular “person” (as that term is used in
Section 13(d)(3) of the Exchange Act), that “person” shall be deemed to
have beneficial ownership of all securities that the “person” has the right to
acquire by conversion or exercise of other securities, whether the right is
currently exercisable or is exercisable only upon the occurrence of a
subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned”
shall have a corresponding meaning.

 

“Board of
Directors”  means: 
(i) with respect to a corporation, the board of directors of the
corporation or any committee thereof duly authorized to act on behalf of the
board; (ii) with respect to a partnership, the board of directors of the
general partner of the partnership; and (iii) with respect to any other Person,
the board or committee of such Person serving a similar function.

 

“Board
Resolution”  means, with respect to any Person, a copy
of a resolution certified by the Secretary or Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and
to be in full force and effect on the date of such certification, and delivered
to the Trustee.

 

“Business Day”  means
any day other than a Legal Holiday.

 

2

 

“Canadian
Term Loan Facility” means the $5,200,000 Canadian term loan facility
provided under the Credit Agreement.

 

“Capital
Lease Obligation”  means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at such time be required to be capitalized on a balance sheet
in accordance with GAAP.

 

“Capital
Stock”  means: (i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited); and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.

 

“Cash
Equivalents”  means: 
(i) United States dollars; (ii) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than one
year from the date of acquisition; (iii) certificates of deposit and eurodollar
time deposits with maturities of one year or less from the date of acquisition
and overnight bank deposits, in each case, with any lender party to any Credit
Facility or with any domestic commercial bank having capital and surplus in
excess of $500,000,000; (iv) repurchase obligations of any lender party to
any Credit Facility or of any commercial bank satisfying the requirements of
clause (iii) of this definition, having a term of not more than 90 days with
respect to securities issued or fully guaranteed or insured by the United
States government; (v) commercial paper of a domestic issuer rated at least P-2
by Moody’s or A-2 by S&P, or carrying an equivalent rating by a nationally
recognized rating agency if both of Moody’s and S&P cease publishing
ratings of investments; (vi) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moody’s; (vii) securities with maturities
of one year or less from the date of acquisition backed by standby letters of
credit issued by any lender party to any Credit Facility or any commercial bank
satisfying the requirements of clause (iii) of this definition; (viii) in the
case of Foreign Subsidiaries operating in Europe, available cash invested in
interest bearing accounts, certificates of deposit and eurodollar time deposits
with maturities of one year or less from the date of acquisition and overnight
bank deposits, in each case, with any commercial bank having a class of debt
securities rated at least A- by S&P or A-3 by Moody’s; (ix) in the case of
Foreign Subsidiaries operating in Brazil, available cash invested in (A)
interest bearing accounts and certificates of deposit with maturities of one
year or less from the date of acquisition and overnight bank deposits, in each
case, with any Brazilian commercial bank having a class of debt securities
rated at least B+ by S&P or B-1 by Moody’s or (B) export notes in U.S.
dollars issued by a Brazilian commercial bank with maturities of 90 days or
less from the date of acquisition; provided that if export notes are not
available, available cash may be invested in certificates of deposit issued by
a Brazilian commercial bank with maturities of one year or less from the date
of acquisition and denominated in Brazilian reals swapped for U.S. dollars
pursuant to an agreement related to Hedging Obligations to protect against
currency devaluation; provided, further, that the aggregate
principal amount of available cash invested pursuant to this clause (ix) at any
time outstanding shall not exceed $10,000,000; or (x) money market funds at
least 95% of the assets of which constitute Cash Equivalents of the kinds
described in clauses (i) through (vii) of this definition.

 

“Change of
Control”  means the occurrence of any of the
following:  (i) the direct or indirect
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the properties or assets of Blount International and its
Restricted Subsidiaries taken as a whole to any “person” (as such term is used
in Section 13(d)(3) of the Exchange Act) other than the Principal or its
Related Parties; (ii) the adoption of a plan relating to the liquidation or
dissolution of Blount International, other than a plan solely relating to the
liquidation or dissolution of the Company into Blount International; (iii) the
consummation of any transaction (including any merger or consolidation) the
result of which is that any “person” (as defined above), other than the
Principal and its Related Parties, becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the Voting Stock of Blount International,
measured by voting power rather than number of shares; (iv) the first day on
which a majority of the members of the Board of Directors of Blount
International are not Continuing Directors; or (v) the consolidation or merger
of Blount International with

 

3

 

or into, any Person, or the consolidation or merger of any Person with
or into, Blount International, pursuant to a transaction in which any of the
outstanding Voting Stock of Blount International or the other Person is
converted into or exchanged for cash, securities or other property, other than
any transaction where the Voting Stock of Blount International outstanding
immediately prior to that transaction is converted into or exchanged for Voting
Stock (other than Disqualified Stock) of the surviving or transferee Person
constituting at least a majority of the outstanding shares of the Voting Stock
of the surviving or transferee Person (immediately after giving effect to the
issuance).  For the purpose of this
definition, any transfer of any equity of an entity that was formed for the
purpose of acquiring Voting Stock of Blount International will be deemed to be
a transfer of equity interest in Blount International.

 

“Clearstream”  means
Clearstream Banking, société anonyme.

 

“Commission”  means
the Securities and Exchange Commission.

 

“Consolidated
Cash Flow”  means, with respect to any specified
Person for any period, the Consolidated Net Income of such Person for such
period plus:  (i) an amount equal to any
extraordinary loss plus any net loss realized by such Person or any of its
Restricted Subsidiaries in connection with an Asset Sale (to the extent such
losses were deducted in computing such Person’s Consolidated Net Income); plus
(ii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision for
taxes was deducted in computing such Person’s Consolidated Net Income; plus
(iii) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and without duplication,
and whether or not capitalized (including amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred
in respect of letter of credit or bankers’ acceptance financings, and net of
the effect of all payments made or received pursuant to Hedging Obligations),
to the extent that any such expense was deducted in computing such Person’s
Consolidated Net Income; plus (iv) all one-time fees, costs, expenses
(including cash compensation payments), in each case incurred by Blount
International and its Restricted Subsidiaries incurred in connection with or
resulting from any merger, consolidation, recapitalization, refinancing or
acquisition; plus (v) depreciation, amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash expenses
(excluding any non-cash expense to the extent that it represents an accrual of
or reserve for cash expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash expenses were deducted in computing such Person’s
Consolidated Net Income; plus (vi) any unrealized non-cash losses or charges in
respect of Hedging Obligations (including those resulting from the application
of FAS 133); plus (vii) any non-cash compensation charge arising from any
grant of stock, stock options or other equity based awards; plus (viii)
unrealized non-cash losses resulting from foreign currency balance sheet
adjustments required by GAAP to the extent such losses were deducted in
computing Consolidated Net Income of such person; minus (ix) non-cash items
increasing such Consolidated Net Income for such period, other than the accrual
of revenue in the ordinary course of business, in each case, on a consolidated
basis and determined in accordance with GAAP.

 

Notwithstanding
the preceding, the provision for taxes based on the income or profits of, and
the depreciation and amortization and other non-cash expenses of, a Subsidiary
of Blount International shall be added to Consolidated Net Income to compute
Consolidated Cash Flow of Blount International only to the extent that a
corresponding amount would be permitted at the date of determination to be
directly or indirectly dividended to Blount International by such Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Subsidiary or its stockholders.

 

“Consolidated
Net Income”  means, with respect to any specified
Person for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that: 
(i) the Net Income (but not loss) of any Person that is not the
specified Person or a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a
Restricted Subsidiary of such Person; (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the

 

4

 

extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Restricted Subsidiary or its
stockholders; and (iii) the cumulative effect of a change in accounting
principles shall be excluded.

 

Notwithstanding
the foregoing, for the purposes of Section 4.07 hereof only, there shall
be excluded from Consolidated Net Income (i) any nonrecurring charges related
to any premium or penalty paid, write-off of deferred finance costs or other
charges in connection with redeeming or retiring any Indebtedness prior to or
at its Stated Maturity and (ii) any repurchases, repayments or redemptions
of Investments and proceeds realized on the sale of the Investments or return
of capital to Blount International or a Restricted Subsidiary of Blount
International to the extent such repurchases, repayments, redemptions, proceeds
or returns increase the amount of Restricted Payments permitted under such
Section 4.07 pursuant to clause (c)(iii) thereof.

 

“Continuing
Director”  means, as of any date of determination,
any member of the Board of Directors of the Company or Blount International, as
applicable, who (i) was a member of such Board of Directors on the Issue Date
hereof; or (ii) was nominated for election or elected to such Board of
Directors of the Company or Blount International, as applicable, with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election.

 

“Corporate
Trust Office of the Trustee”  shall be located at 700 S. Flower St.,
Suite 500, Los Angeles, CA 90017, or such other address as to which the Trustee
may give notice to the Company.

 

“Credit Agreement” means the credit agreement, dated as of
May 15, 2003, as amended and restated as of
           , 2004, by
and among Blount International, the Company and each of the subsidiaries of the
Company signatory thereto, the lenders and other financial institutions or
entities from time to time parties thereto, General Electric Capital
Canada, Inc. or any affiliate thereof, as Canadian Administrative Agent,
and General Electric Capital Corporation, as Administrative Agent and
Collateral Agent, including any related notes, collateral documents, letters of
credit and related documentation, and guarantees and any appendices, exhibits,
or schedules to any of the foregoing (as the same may be in effect from time to
time), in each case, as any or all of such agreements may be amended, restated,
modified or supplemented from time to time, or renewed, refunded, refinanced,
restructured, replaced, repaid or extended from time to time (whether with the
original agents and lenders or other agents and lenders or otherwise, and
whether provided under the original credit agreement or one or more other
credit agreements or otherwise).

 

“Credit
Facilities”  means one or more debt facilities
(including the Credit Agreement) or commercial paper facilities, in each case
with banks, insurance companies, mutual funds or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
entities formed to borrow from such lenders against such receivables) or
letters of credit, in each case as amended, restated, modified, supplemented,
renewed, refunded, refinanced, restructured, replaced, repaid or extended
(including any agreement to extend the maturity thereof and adding additional
borrowers or guarantors and whether upon termination or otherwise) in whole or
in part from time to time (including by means of Debt Issuances) under the same
or any other agent, lender, investor, or group of lenders or investors and
including an increase in the amount of available borrowings thereunder; provided
that such increase is permitted by Section 4.09 hereof.

 

“Debt
Issuances” means, with respect to the Company or any Guarantor, one
or more issuances after the Issue Date of Indebtedness evidenced by notes,
debentures, bonds or other similar securities or instruments.

 

“Default”  means
any event that is, or with the passage of time or the giving of notice or both
would be, an Event of Default.

 

“Definitive
Note”  means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Article 2 hereof,
substantially in the form of Exhibit A hereto, except that such Note shall not
bear the Global Note Legend and shall not have the “Schedule of Exchanges
of Interests in the Global Note” attached thereto.

 

5

 

“Depositary”  means,
with respect to the Notes issuable or issued in whole or in part in global
form, the Person specified in Section 2.03 hereof as the Depositary with
respect to the Notes, until a successor shall have been appointed and become
such pursuant to the applicable provision of this Indenture, and, thereafter,
“Depositary” shall mean or include such successor.

 

“Designated
Noncash Consideration”  means the fair market value of noncash
consideration received by Blount International or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers’ Certificate, setting
forth the basis of such valuation, less the amount of cash or Cash Equivalents
received in connection with a sale of the Designated Noncash Consideration.

 

“Designated
Senior Debt”  means (i) any Indebtedness under the
Credit Agreement and (ii) if the Credit Agreement (including any refinancing
thereof) is no longer in existence, any other Senior Debt permitted under this
Indenture the principal amount of which is $25,000,000 or more and that has
been designated by the Company as a “Designated Senior Debt.”

 

“Disqualified
Stock”  means any Capital Stock that, by its terms (or by the terms
of any security into which it is convertible, or for which it is exchangeable,
in each case at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the Holder thereof,
in whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature. Notwithstanding the preceding sentence, any Capital
Stock that would constitute Disqualified Stock solely because the holders
thereof have the right to require the Company or Blount International, as
applicable, to repurchase such Capital Stock upon the occurrence of a Change of
Control or an Asset Sale shall not constitute Disqualified Stock if the terms
of such Capital Stock provide that the Company or Blount International, as
applicable, may not repurchase or redeem any such Capital Stock pursuant to
such provisions unless such repurchase or redemption complies with
Section 4.07 hereof.

 

“Domestic
Subsidiary”  means any Subsidiary of Blount
International that was formed under the laws of the United States or any state
thereof or the District of Columbia.

 

“Equity
Interests”  means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).

 

“Equity
Offering”  means any public or private offering of
Capital Stock (excluding Disqualified Stock) made for cash by the Company or
Blount International, other than (i) any offering in connection with the
Refinancing Transactions or (ii) any private sales to an Affiliate of the Company
or Blount International.

 

“Euroclear”  means
Euroclear Bank S.A./N.V., as operator of the Euroclear system.

 

“Exchange Act”  means
the Securities Exchange Act of 1934, as amended.

 

“Existing
Indebtedness”  means Indebtedness of Blount and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Issue Date, until such amounts are repaid.

 

“Fixed
Charges”  means, with respect to any specified
Person or any of its Restricted Subsidiaries for any period, the sum, without
duplication, of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, when first paid or accrued and without
duplication (including amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers’ acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations); plus (ii) the
consolidated interest of such Person and its Restricted Subsidiaries that was capitalized
during such period; plus (iii) any interest expense on Indebtedness of another
Person that is guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries (whether or not such Guarantee or Lien is called upon); plus (iv)
the product of (A) all

 

6

 

dividends, whether paid or accrued, whether or not in cash, on any
series of Preferred Stock of such Person or any of its Restricted Subsidiaries,
other than dividends on Equity Interests payable solely in Equity Interests of
the Company (other than Disqualified Stock) or to the Company or a Restricted
Subsidiary of the Company, times (B) a fraction, the numerator of which is one
and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.

 

“Fixed Charge
Coverage Ratio”  means with respect to any specified
Person and its Restricted Subsidiaries for any period, the ratio of the
Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such
period to the Fixed Charges of such Person and its Restricted Subsidiaries for
that period; provided, however, that: 
(i) if (x) the specified person or any of its Restricted Subsidiaries
has issued, assumed, guaranteed, incurred or otherwise becomes directly or
indirectly liable, contingently or otherwise, for any Indebtedness, (y) the
specified person or any of its subsidiaries has issued any Disqualified Stock,
or (z) the specified person or any of its Subsidiaries has issued any Preferred
Stock, in each case, since the beginning of such period that remains
outstanding, or if the transaction giving rise to the need to calculate the
Fixed Charge Coverage Ratio is an incurrence of Indebtedness or an issuance of
Disqualified Stock or Preferred Stock, or any combination of the above,
Consolidated Cash Flow and Fixed Charges for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness, Disqualified
Stock or Preferred Stock as if such Indebtedness, Disqualified Stock or
Preferred Stock had been incurred or issued on the first day of such period;
(ii) if the specified person or any of its Subsidiaries has repaid,
repurchased, redeemed, defeased or otherwise discharged any Indebtedness,
Disqualified Stock or Preferred Stock since the beginning of such period or if
any Indebtedness, Disqualified Stock or Preferred Stock is to be repaid, repurchased,
redeemed, defeased or otherwise discharged (in each case other than
Indebtedness incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the date
of the transaction giving rise to the need to calculate the Fixed Charge
Coverage Ratio, Consolidated Cash Flow and Fixed Charges for such period shall
be calculated on a pro forma basis as if that repayment, repurchase,
redemption, defeasance or discharge had occurred on the first day of that
period; (iii) if since the beginning of such period the specified person or any
of its Restricted Subsidiaries shall have made any Asset Disposition, the
Consolidated Cash Flow for such period shall be reduced by an amount equal to
the Consolidated Cash Flow (if positive) directly attributable to the assets
which are the subject of such Asset Disposition for such period, or increased
by an amount equal to the Consolidated Cash Flow (if negative), directly
attributable thereto for such period and Fixed Charges for such period shall be
reduced by an amount equal to the Fixed Charges directly attributable to any
Indebtedness, Disqualified Stock or Preferred Stock of such specified person or
any of its Restricted Subsidiaries repaid, repurchased, redeemed, defeased or
otherwise discharged with respect to such specified person and its continuing
Restricted Subsidiaries in connection with the Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary of such specified
person is sold, the Fixed Charges for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent such specified person
and its continuing Restricted Subsidiaries are no longer liable for the
Indebtedness after that sale); (iv) if since the beginning of such period the
specified person or any of its Restricted Subsidiaries (by merger,
consolidation or otherwise) shall have made an Investment in any Restricted
Subsidiary of such specified person (or such Person which becomes a Restricted
Subsidiary of such specified person) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction requiring a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, Consolidated Cash Flow and Fixed Charges for
such period shall be calculated after giving pro forma effect thereto
(including the incurrence of any Indebtedness or the issuance of any
Disqualified Stock or Preferred Stock) as if such Investment or acquisition
occurred on the first day of such period; and (v) if since the beginning of
such period such Person (that subsequently became a Restricted Subsidiary of
the specified person, or was merged or consolidated with or into such specified
person or any of its Restricted Subsidiaries, since the beginning of such
period) shall have made any Asset Disposition, any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (iii) or (iv)
above if made by such specified person or a Restricted Subsidiary of such
specified person, during such period, Consolidated Cash Flow and Fixed Charges
for such period shall be calculated after giving pro forma effect thereto as if
such Asset Disposition, Investment or acquisition occurred on the first day of
such period.

 

For purposes of
this definition, whenever pro forma effect is to be given to an
acquisition of assets, including through merger, consolidated or otherwise, the
amount of income or earnings relating thereto and the amount of Fixed Charges
associated with any Indebtedness incurred or Disqualified Stock or Preferred
Stock issued in connection therewith, the pro forma calculations shall be
determined in good faith by a responsible

 

7

 

financial or accounting officer of the specified person (regardless of
whether these calculations (including any cost reductions or cost savings)
could then be reflected in pro forma financial statements in accordance with
Regulation S-X of the Securities Act or any other regulation or policy of the
Commission related thereto). If any Indebtedness, Disqualified Stock or
Preferred Stock bears a floating rate of interest or dividends and is being
given pro forma effect, such interest or dividends shall be calculated as if
the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any agreement related to Hedging
Obligations applicable to the Indebtedness, Disqualified Stock or Preferred
Stock if the agreement related to Hedging Obligations has a remaining term in
excess of 12 months).

 

“Foreign
Subsidiary”  means a Restricted Subsidiary that is not
a Domestic Subsidiary.

 

“GAAP”  means
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
have been approved by a significant segment of the accounting profession, which
are in effect on the Issue Date.

 

“Global Notes”  means,
individually and collectively, each of the Global Notes, substantially in the
form of Exhibit A hereto issued in accordance with Article 2 hereof.

 

“Global Note
Legend”  means the legend set forth in Section 2.06(g)(ii)
hereof to be placed on all Global Notes issued under this Indenture.

 

“Government
Securities”  means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of
which guarantee or obligations the full faith and credit of the United States
is pledged.

 

“guarantee”  means
a guarantee, other than by endorsement of negotiable instruments for collection
in the ordinary course of business, direct or indirect, in any manner including
by way of a pledge of assets or through letters of credit or reimbursement
agreements in respect thereof, of all or any part of any Indebtedness.

 

“Guarantee”
means the Guarantee of the Notes by each of the Guarantors pursuant to Article 11
hereof and in the form of Notation on Senior Subordinated Note Relating to
Guarantee attached as Exhibit B hereto and any additional Guarantee of the
Notes to be executed by any Restricted Subsidiary of Blount International
pursuant to Section 4.13 hereof.

 

“Guarantors”  means
each of (i) Blount International; (ii) BI, L.L.C., a Delaware limited liability
company; Omark Properties, Inc., an Oregon corporation; 4520 Corp., Inc., a
Delaware corporation; Gear Products, Inc., an Oklahoma corporation; Dixon
Industries, Inc., a Kansas corporation; Windsor Forestry Tools LLC, a Tennessee
limited liability company; Frederick Manufacturing Corporation, a Delaware
corporation; and Fabtek Corporation., a Michigan corporation; and (iii) any
other Subsidiary of Blount International that executes a Guarantee in
accordance with the provisions of this Indenture; and their respective
successors.

 

“Hedging
Obligations”  means, with respect to any specified
Person, the obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements; (ii) foreign
exchange contracts and currency swap agreements; and (iii) other agreements or
arrangements entered into in the ordinary course of business and designed to
protect such Person against fluctuations in interest rates or currency exchange
rates.

 

“Holder”  means
a Person in whose name a Note is registered.

 

“Indebtedness”  means,
with respect to any specified Person, any indebtedness of such Person, whether
or not contingent, (i) in respect of borrowed money; (ii) evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof); (iii) in respect of banker’s acceptances; (iv)
representing Capital Lease Obligations; (v) in respect of all obligations of
such Person issued or

 

8

 

assumed as the deferred purchase price of property, all conditional
sale obligations of such Person and all obligations of such Person under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); or (vi) representing any Hedging Obligations, if
and to the extent any of the preceding items (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP. In addition, the term “Indebtedness”
includes all Indebtedness of others secured by a Lien on any asset of such
Person (whether or not such Indebtedness is assumed by such Person), the amount
of such obligation being deemed to be the lesser of the value of such property
or assets and the amount of the obligation so secured. The term “Indebtedness”
also includes, to the extent not otherwise included, the guarantee by such
Person of any Indebtedness of any other Person, but excluding from the
definition of “Indebtedness,” any of the foregoing that constitutes (A) an
accrued expense, (B) trade payables and (C) Obligations in respect of workers’
compensation, pensions and retiree health care, in each case to the extent not
overdue for more than 90 days. Notwithstanding the foregoing, the term
“Indebtedness” will also exclude customary earn-out arrangements entered into
in connection with the purchase by Blount International or any Restricted
Subsidiary of Blount International of any business pursuant to which the seller
may become entitled to additional consideration depending on the performance of
such business; provided, however, that at the time the arrangement is
entered into the amount of that consideration is contingent upon future events
(other than the lapse of time) and, to the extent that consideration thereafter
becomes a fixed amount payable by Blount International or a Restricted
Subsidiary of Blount International, the amount is paid within 30 days
thereafter.

 

The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness issued with original issue discount;
and (ii) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.

 

“Indenture”  means
this Indenture, as amended or supplemented from time to time.

 

“Indirect
Participant”  means a Person who holds a beneficial
interest in a Global Note through a Participant.

 

“Initial Notes” means $175,000,000 in
aggregate principal amount of Notes issued under this Indenture on the date
hereof.

 

“Investments”  means,
with respect to any Person, all investments by such Person in other Persons
(including Affiliates) in the forms of direct or indirect loans (including
guarantees or other obligations), advances or capital contributions (excluding
(x) commission, travel and similar advances to officers and employees made in
the ordinary course of business and (y) advances to customers in the ordinary
course of business that are recorded as accounts receivable on the balance
sheet of the lender) or other similar extensions of credit, purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If Blount
International or any Restricted Subsidiary of Blount International sells or
otherwise disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of Blount International such that, after giving effect to any such
sale or disposition, such Person is no longer a Restricted Subsidiary of Blount
International, Blount International shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Equity Interests of such Restricted Subsidiary not sold or disposed of in
an amount determined as provided in the penultimate paragraph of
Section 4.07 hereof.

 

“Issue Date”  means
the date on which the Notes are originally issued under this Indenture.

 

“Legal
Holiday”  means a Saturday, a Sunday or a day on
which banking institutions in The City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that
place on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period.

 

“Lehman
Brothers Merchant Banking Partners”  means Lehman Merchant
Banking Partners II L.P. and its affiliated co-investors.

 

9

 

“Lien”  means,
with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset, whether or not
filed, recorded or otherwise perfected under applicable law, including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the
Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

 

“Marketable
Securities”  means, with respect to any Asset Sale,
any readily marketable equity securities that are (i) traded on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market; and
(ii) issued by a corporation having a total equity market capitalization of not
less than $250,000,000; provided that the excess of: (A) the
aggregate amount of securities of any one such corporation held by Blount
International and any of its Restricted Subsidiaries over (B) ten times the
average daily trading volume of the securities during the 20 immediately
preceding trading days will be deemed not to be Marketable Securities; in each
case as determined on the date of the contract relating to such Asset Sale.

 

“Moody’s”  means
Moody’s Investors Service, Inc. or any successor to its rating agency business.

 

“Net Income”  means,
with respect to any specified Person, the net income (loss) of such Person,
determined in accordance with GAAP and before any reduction in respect of
Preferred Stock dividends, excluding, however, (i) any gain (and loss),
together with any related provision for taxes on such gain (loss), realized in
connection with: (A) any Asset Sale (including dispositions pursuant to sale
and leaseback transactions); or (B) the disposition of any securities by such
Person or any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries; and (ii) any
extraordinary gain (and loss), together with any related provision for taxes on
such extraordinary gain (and loss).

 

“Net Proceeds”  means
the aggregate cash proceeds received by Blount International or any of its
Restricted Subsidiaries (i) in respect of any issuance or sale of any Capital
Stock and (ii) in respect of any Asset Sale (including in each case any cash
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise and proceeds from the sale or other
disposition of any securities received as consideration, but only as and when
received, but excluding any other consideration received in the form of an
assumption by the acquiring Person of Indebtedness or other obligations
relating to such properties or assets or received in any other noncash form),
in each case net of:  (A) all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be accrued and as a liability under GAAP, as a consequence of such Asset
Sale, after taking into account any available tax credits or deductions and any
tax sharing arrangements; (B) all distributions and other payments required to
be made to minority interest holders in Restricted Subsidiaries as a result of
such Asset Sale; (C) all direct costs, including all legal, accounting and
investment banking fees, and sales commissions, and any relocation expenses
incurred as a result; and (D) amounts required to be applied to the repayment
of Indebtedness secured by a Lien on the asset or assets that were the subject
of such Asset Sale and any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP.

 

“Non-Recourse
Debt”  means Indebtedness: 
(i) as to which neither Blount International nor any of its Restricted
Subsidiaries (A) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness) other
than a pledge of the Equity Interests of any Unrestricted Subsidiaries, (B) is
directly or indirectly liable as a guarantor or otherwise, or (C) constitutes
the lender; (ii) no default with respect to which (including any rights that
the holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of any
other Indebtedness (other than the Notes) of Blount International or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and (iii) the incurrence of which will not result in any recourse to
the stock or assets of Blount International or any of its Restricted
Subsidiaries other than to Equity Interests of Unrestricted Subsidiaries
pledged for the benefit of lenders to those Unrestricted Subsidiaries.

 

“Non-U.S.
Person”  means a Person who is not a U.S. Person.

 

“Note
Custodian”  means the Trustee, as custodian with
respect to the Notes in global form, or any successor entity thereto.

 

10

 

“Notes” means $175,000,000 in aggregate
princpal amount of notes issued under this Indenture on the date hereof.

 

“Obligations”  means
any principal, premium, if any, interest, penalties, fees, indemnifications,
guarantees, reimbursements, damages and other liabilities payable under the
documentation governing any Indebtedness (including interest, fees and expenses
accruing on or after the filing of any petition in bankruptcy or for
reorganization, whether or not a claim for post-filing interest, fees and
expenses is allowed in such proceeding).

 

“Officer”  means,
with respect to any Person, the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary,
any Assistant Secretary or any Vice-President of such Person.

 

“Officers’
Certificate”  means a certificate signed on behalf of
Blount International or the Company by two Officers of Blount International or
the Company, as the case may be, one of whom must be the principal executive
officer, the principal financial officer or such other officer authorized by
Blount International or the Company, as the case may be, that meets the
requirements of Section 12.05 hereof.

 

“Opinion of
Counsel”  means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of
Section 12.05 hereof. The counsel may be an employee of or counsel to
Blount International or the Company, any Subsidiary of Blount International or
the Company or the Trustee.

 

“Participant”  means,
with respect to DTC, Euroclear or Clearstream, a Person who has an account with
DTC, Euroclear or Clearstream, respectively (and, with respect to DTC, shall
include Euroclear and Clearstream).

 

“Permitted
Business”  means the businesses conducted (or
proposed to be conducted, including activities referred to as being
contemplated by Blount International, as described or referred to in the
Prospectus) by Blount International and its Restricted Subsidiaries as of the
Issue Date and any and all other businesses that in the good faith judgment of
the Board of Directors of Blount International are reasonably related,
ancillary or complementary businesses, including (i) reasonably related
extensions or expansions thereof and (ii) businesses that employ reasonably
comparable manufacturing processes.

 

“Permitted
Investments”  means: 
(i) any Investment in Blount International or in a Restricted Subsidiary
of Blount International; (ii) any Investment in Cash Equivalents; (iii) any
Investment by Blount International or any Restricted Subsidiary of Blount
International in a Person engaged in a Permitted Business, if as a result of
such Investment:  (A) such Person
becomes a Restricted Subsidiary of Blount International; or (B) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, Blount International
or a Restricted Subsidiary of Blount International; (iv) any Investment made as
a result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with Section 4.10 hereof or the
disposition of assets not constituting an Asset Sale; (v) guarantees (including
Guarantees) of Indebtedness permitted under Section 4.09 hereof; (vi) any
Investment acquired by Blount International or any of its Restricted
Subsidiaries (A) in exchange for any other Investment or accounts receivable
held by Blount International or any of its Restricted Subsidiaries in
connection with or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or accounts receivable
or (B) as a result of the transfer of title with respect to any secured
Investment in default as a result of a foreclosure by Blount International or
any of its Restricted Subsidiaries with respect to such secured Investment;
(vii) any Investment by Blount International or a Restricted Subsidiary of
Blount International in connection with deferred compensation trust
arrangements existing, and as in effect, on the Issue Date and as amended
thereafter; provided,
however, that any future amendment to any such existing arrangements
will only be permitted pursuant to this clause (vii) to the extent that the
terms of the amendment are not otherwise disadvantageous to the Holders of Notes
in any material respect; (viii) any acquisition of assets solely in exchange
for the issuance of Equity Interests (other than Disqualified Stock) of Blount
International; (ix) Hedging Obligations permitted to be incurred under
Section 4.09 hereof; (x) loans and advances to employees and officers of
Blount International and its Restricted Subsidiaries in the ordinary course of
business for bona fide business purposes not to exceed an aggregate of
$2,500,000 at any one time outstanding; (xi) any Investment by Blount
International or a Restricted Subsidiary of Blount International in a
Receivables Subsidiary or any Investment by a Receivables Subsidiary in any
other Person, in each case, in

 

11

 

connection with a Qualified Receivables Transaction, provided, that the
Investment in any Person is in the form of a Purchase Money Note, an equity
interest or an interest in accounts receivable generated by Blount
International or a Restricted Subsidiary of Blount International and
transferred to any Person in connection with a Qualified Receivables
Transaction or any Person owning those accounts receivable; (xii) any
Investment in a Permitted Business (whether or not an Investment in an
Unrestricted Subsidiary) having an aggregate fair market value that, when taken
together with all other outstanding Investments made pursuant to this clause
(xii), does not exceed in aggregate amount 10% of Total Assets at the time of
this Investment (with the fair market value of each Investment being measured
at the time made and without giving effect to subsequent changes in value); and
(xiii) any Investment (whether or not an Investment in an Unrestricted
Subsidiary) having an aggregate fair market value that, when taken together
with all other outstanding Investments made pursuant to this clause (xiii),
does not exceed in aggregate amount $25,000,000 at the time of this Investment
(with the fair market value of each Investment being measured at the time made
and without giving effect to subsequent changes in value).

 

“Permitted
Junior Securities”  means: 
(i) Equity Interests in the Company or any Guarantor; or (ii) debt
securities that are subordinated to all Senior Debt and any debt securities
issued in exchange for Senior Debt to substantially the same extent as, or to a
greater extent than, the Notes and the Guarantees are subordinated to Senior
Debt under this Indenture.

 

“Permitted
Liens”  means:  (i) Liens on
assets of Blount International, the Company and any Restricted Subsidiary of
Blount International securing Senior Debt, including under the Credit
Agreement, that was permitted by the terms of this Indenture to be incurred;
(ii) Liens in favor of the Company or the Guarantors or, in the case of a
Foreign Subsidiary, Liens securing Indebtedness or other obligations of such
Foreign Subsidiary owing to Blount International, the Company or any Restricted
Subsidiary thereof; (iii) Liens on property or shares of Capital Stock of a
Person existing at the time such Person is merged with or into or consolidated
with Blount International or any Restricted Subsidiary of Blount International; provided
that such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with Blount International or such Restricted
Subsidiary (other than assets and property affixed or appurtenant thereto);
(iv) Liens on property existing at the time of acquisition thereof by Blount
International or any Restricted Subsidiary of Blount International, provided
that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or letters of credit permitted by
clause (vi) of the second paragraph of Section 4.09 hereof, or other
obligations of a like nature incurred in the ordinary course of business; (vi)
pledges or deposits by Blount International or any Restricted Subsidiary of
Blount International under worker’s compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which Blount International or such Restricted Subsidiary is a party, or deposits
to secure public or statutory obligations of Blount International or such
Restricted Subsidiary or deposits of cash or United States government bonds to
secure surety or appeal bonds to which Blount International or such Restricted
Subsidiary is a party, or deposits as security for contested taxes or import
duties or for the payment of rent, in each case incurred in the ordinary course
of business; (vii) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of the second paragraph of
Section 4.09 hereof, covering only the assets acquired with such
Indebtedness; (viii) Liens existing on the Issue Date; (ix) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (x) Liens on the assets of Unrestricted Subsidiaries, or on
the Equity Interests of Unrestricted Subsidiaries, that secure Non-Recourse
Debt of Unrestricted Subsidiaries not otherwise prohibited by this Indenture;
(xi) Liens on accounts receivable and related assets of a Receivables
Subsidiary arising in connection with a Qualified Receivables Transaction;
(xii) Liens imposed by law, such as carriers’, warehousemen’s and mechanics’
Liens, in each case for sums not yet due or being contested in good faith by
appropriate proceedings or other Liens arising out of judgments or awards
against Blount International or any Restricted Subsidiary of Blount
International with respect to which Blount International or such Restricted
Subsidiary shall then be proceeding with an appeal or other proceedings for
review and Liens arising solely by virtue of any statutory or common law
provision relating to banker’s Liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided, however, that (A) such deposit
account is not a dedicated cash collateral account and is not subject to
restrictions against access by Blount International or such Restricted
Subsidiary in excess of those set forth by regulations promulgated by the
Federal Reserve Board and (B) such deposit account is not intended by Blount

 

12

 

International or such Restricted Subsidiary to provide collateral to
the depository institution; (xiii) judgment Liens not giving rise to an Event
of Default so long as any appropriate legal proceeding that may have been duly
initiated for the review of such judgment shall not have been finally
terminated or the period within which such legal proceeding may be initiated
shall not have expired; (xiv) easements, rights-of-way, minor survey
exceptions, zoning and similar restrictions and other similar encumbrances or
title defects incurred or imposed, or Liens incidental to the conduct of the
business of Blount International or its Subsidiaries or to the ownership of its
properties, as applicable, which, in the aggregate, are not substantial in
amount, and which do not in any case materially detract from the value of the
property subject thereto (as such property is used by Blount International or
its Subsidiaries) or interfere with the ordinary conduct of the business of
Blount International or its Subsidiaries; provided, however, that any such Liens are
not incurred in connection with any borrowing of money or any commitment to
loan any money or to extend any credit; (xv) Liens securing Hedging
Obligations; provided that such Liens are only secured by property or
assets that secure the Indebtedness related to the Hedging Obligation or the
property securing Indebtedness under clause (i) of the second paragraph of
Section 4.09 hereof; (xvi) Liens to secure Indebtedness permitted by
clause (xv) of the second paragraph of Section 4.09 hereof; (xvii) Liens
to secure any refinancings, extensions, renewals, refunds, repayments,
prepayments, redemptions, defeasance, retirements, exchanges or replacements
(collectively “refinancings”) (or successive refinancings) as a whole, or in
part, of any Indebtedness secured by any Lien referred to in the foregoing
clauses (iii), (iv), (vii) or (viii); provided, however, that: (A) such new Lien
shall be limited to all or part of the same property and assets that secured
or, under the written agreements pursuant to which the original Lien arose,
could secure the original Lien (plus improvements and accessions to, such
property or proceeds or distributions thereof); and (B) the Indebtedness
secured by such Lien at such time is not increased to any amount greater than
the sum of (x) the outstanding principal amount or, if greater, committed
amount of the Indebtedness described under clause (iii), (iv), (vii) or (viii)
above at the time the original Lien became a Permitted Lien and (y) an amount
necessary to pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement.

 

Notwithstanding
the foregoing, “Permitted Liens” will not include any Lien described in clause
(iii), (iv) or (vii) above to the extent such Lien applies to any Additional
Assets acquired directly or indirectly from Net Proceeds pursuant to
Section 4.10 hereof.  For purposes
of this definition, the term “Indebtedness” shall be deemed to include interest
on such Indebtedness.

 

“Permitted
Refinancing Indebtedness”  means any Indebtedness of Blount
International or any of its Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of Blount International or any of its
Restricted Subsidiaries (other than intercompany Indebtedness); provided
that:  (i) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not
exceed the principal amount (or accreted value, if applicable), of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus all accrued interest thereon and the amount of all expenses and premiums
incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded, and is
subordinated in right of payment to the Notes on terms at least as favorable to
the Holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is incurred either by Blount International or by
the Restricted Subsidiary of Blount International who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.

 

“Person”  means
an individual, partnership, corporation, limited liability company,
unincorporated organization, association, joint-stock company, trust, joint
venture, government, or any agency or political subdivision thereof or any
other entity.

 

“Preferred Stock”
means any Capital Stock of a Person, however designated, which entitles the
holder thereof to a preference with respect to dividends, distributions or
liquidation proceeds of such Person over the holders of the other Capital Stock
issued by such Person.

 

13

 

“Principal”  means
Lehman Brothers Merchant Banking Partners and any of its Affiliates.

 

“Prospectus” means the Prospectus of the
Company dated August [    ], 2004 with respect ot he
Notes.

 

“Purchase
Money Note”  means a promissory note evidencing a line
of credit, or evidencing other Indebtedness owed to Blount International or any
Restricted Subsidiary of Blount International in connection with a Qualified
Receivables Transaction, which note shall be repaid from cash available to the
maker of such note, other than amounts required to be established as reserves
pursuant to agreement, amounts paid to investors in respect of interest,
principal and other amounts owing to such investors and amounts paid in
connection with the purchase of newly generated accounts receivable.

 

“Qualified
Receivables Transaction”  means any transaction or series of
transactions that may be entered into by Blount International or any Restricted
Subsidiary of Blount International pursuant to which Blount International or any
Restricted Subsidiary of Blount International may sell, convey or otherwise
transfer to (A) a Receivables Subsidiary (in the case of a transfer by Blount
International or any Restricted Subsidiary of Blount International) and (B) any
other Person (in the case of a transfer by a Receivables Subsidiary), or may
grant a security interest in, any accounts receivable (whether now existing or
arising in the future) of Blount International or any Restricted Subsidiary of
Blount International and any asset related thereto including all collateral
securing the accounts receivable, all contracts and all guarantees or other
obligations in respect of the accounts receivable, proceeds of the accounts
receivable and other assets which are customarily transferred, or in respect of
which security interests are customarily granted, in connection with asset
securitization transactions involving accounts receivable.

 

“Receivables
Subsidiary”  means a directly or indirectly
wholly-owned Subsidiary of Blount International (other than the Company or a
Guarantor) which engages in no activities other than in connection with the
financing of accounts receivables and which is designated by the Board of
Directors of Blount International (as provided below) as a Receivables
Subsidiary:  (i) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of which (A) is
guaranteed by Blount International or any other Restricted Subsidiary of Blount
International (excluding guarantees of Obligations (other than the principal
of, and interest on, Indebtedness) pursuant to Standard Securitization
Undertakings), (B) is recourse to or obligates Blount International or any
other Restricted Subsidiary of Blount International in any way other than
pursuant to Standard Securitization Undertakings, or (C) subjects any property
or asset of Blount International or any other Restricted Subsidiary of Blount
International, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings; (ii) with which neither Blount International nor any other
Restricted Subsidiary of Blount International has any material contract,
agreement, arrangement or understanding (except in connection with a Purchase
Money Note or Qualified Receivables Transaction) other than on terms no less
favorable to Blount International or the other Restricted Subsidiary of Blount
International than those that might be obtained at the time from Persons that
are not Affiliates of Blount International, other than fees payable in the
ordinary course of business in connection with servicing accounts receivable;
and (iii) as to which neither Blount International nor any other Restricted
Subsidiary of Blount International has any obligation to maintain or preserve
such entity’s financial condition or cause such entity to achieve certain
levels of operating results.

 

Any designation of
a Subsidiary of Blount International as a Receivables Subsidiary shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution of the Board of Directors of Blount International giving
effect to such designation and an Officers’ Certificate certifying that such
designation complied with the preceding conditions and was permitted by this Indenture.

 

“Refinancing Transactions” means,
collectively, the offering by the Company of the Notes pursuant to this
Indenture, an offering of 10,000,000 shares of common stock by Blount
International (and any additional shares of common stock pursuant to the
exercise of any over-allotment option with respect thereto), an amendment and
restatement of the Company’s credit facilities, the redemption in full of the
Company’s 7% Senior Notes due 2005, the redemption in full of the Company’s 13%
Senior Subordinated Notes due 2009 and the prepayment of Blount International’s
12% Convertible Preferred Equivalent Security due 2012.

 

14

 

“Related
Party”  means (i) any controlling stockholder, 80% (or more) owned
Subsidiary, or immediate family member (in the case of an individual) of any
Principal or (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding
an 80% or more controlling interest of which consist of the Principal and/or such
other Persons referred to in the immediately preceding clause (i).

 

“Representative”
means the Trustee or other trustee, agent or representative for any Senior
Debt.

 

“Responsible
Officer”  when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) 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.

 

“Restricted
Investment”  means an Investment other than a
Permitted Investment.

 

“Restricted
Subsidiary”  means, with respect to any Person, any
Subsidiary of such Person that is not an Unrestricted Subsidiary.

 

“S&P”  means
Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., or any successor to its rating agency business.

 

“Securities
Act”  means the Securities Act of 1933, as amended.

 

“Senior Debt”  means:  (i) all Indebtedness of Blount International
or any of its Restricted Subsidiaries outstanding under Credit Facilities,
including under the Credit Agreement, and all Hedging Obligations with respect
thereto; (ii) any other Indebtedness of the Company, Blount International or
any of their respective Restricted Subsidiaries permitted to be incurred under
the terms of this Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes or any Guarantee; and (iii) all
Obligations with respect to the items listed in the preceding clauses (i) and
(ii).

 

Notwithstanding anything
to the contrary in the preceding, Senior Debt will not include:  (i) any liability for Federal, state, local
or other taxes owed or owing by the Company or Blount International; (ii) any
Indebtedness of the Company or Blount International to any of its Subsidiaries
or other Affiliates; (iii) any trade payables; (iv) the portion of any
Indebtedness that is incurred in violation of this Indenture; or (v) any
Indebtedness of Blount International or any of its Subsidiaries that is
Non-Recourse Debt.

 

“Significant
Subsidiary”  means any Restricted Subsidiary that
would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Act, as such Regulation is in
effect on the date hereof; provided that all Unrestricted
Subsidiaries of Blount International shall be excluded from all calculations
under Rule 1-02(w) of Regulation S-X.

 

“Standard
Securitization Undertakings”  means representations, warranties,
covenants and indemnities entered into by Blount International or any
Restricted Subsidiary of Blount International which are reasonably customary in
an accounts receivable transaction.

 

“Stated
Maturity”  means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase such interest or principal prior to
the date originally scheduled for the payment thereof.

 

“Subsidiary”  means,
with respect to any specified Person: 
(i) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of such Person

 

15

 

(or a combination thereof); and (ii) any partnership (A) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (B) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination thereof).

 

“TIA”  means
the Trust Indenture Act of 1939 (15  U.S.C. §§ 77aaa-77bbbb) as in effect
on the date on which this Indenture is qualified under the TIA.

 

“Total Assets”  means,
as of any date, Blount International’s total consolidated assets as of that
date, as determined in accordance with GAAP. To the extent that information is
not available as to the amount of total consolidated assets as of a specific
date, Blount International may utilize the most recent available information
for purposes of calculating Total Assets.

 

“Trustee”  means
the party named as such above until a successor replaces it in accordance with
the applicable provisions of this Indenture and thereafter means the successor
serving hereunder.

 

“Unrestricted
Subsidiary”  means any Subsidiary of Blount
International (other than the Company) that is designated by the Board of
Directors of Blount International as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:  (i) has no Indebtedness other than
Non-Recourse Debt; (ii) is not party to any agreement, contract, arrangement or
understanding with Blount International or any Restricted Subsidiary of Blount
International (other than in connection with the pledge of the Equity Interests
of such Unrestricted Subsidiary) unless the terms of such agreement, contract,
arrangement or understanding are no less favorable to Blount International or
its Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of Blount International; (iii) is a Person with
respect to which neither Blount International nor any of its Restricted
Subsidiaries has any direct or indirect obligation (A) to subscribe for
additional Equity Interests or (B) to maintain or preserve such Person’s
financial condition or to cause such Person to achieve any specified levels of
operating results; (iv) has not guaranteed or otherwise directly or indirectly
provided credit support for such Indebtedness of Blount International or any of
its Restricted Subsidiaries; and (v) has at least one director on its Board of
Directors that is not a director or executive officer of Blount International
or any of its Restricted Subsidiaries and has at least one executive officer
that is not a director or executive officer of Blount International or any of
its Restricted Subsidiaries.

 

Any designation of
a Subsidiary of Blount International as an Unrestricted Subsidiary shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution of the Board of Directors of Blount International giving
effect to such designation and an Officers’ Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section 4.07
hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of Blount International as of such date and, if such Indebtedness is
not permitted to be incurred as of such date under Section 4.09 hereof,
Blount International shall be in default of such covenant. The Board of
Directors of Blount International may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of Blount International; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of Blount International of any outstanding Indebtedness
of such Unrestricted Subsidiary and such designation shall only be permitted if
(i) such Indebtedness is permitted under Section 4.09 hereof, calculated
on a pro forma basis as if such designation had occurred at the beginning of
such four-quarter reference period; and (ii) no Default would be continuing
following such designation.

 

“U.S. Person”  means
a U.S. person as defined in Rule 902(o) under the Securities Act.

 

“Voting Stock”  of
any Person as of any date means the Capital Stock of such Person that is at the
time entitled to vote in the election of the Board of Directors of such Person.

 

“Weighted
Average Life to Maturity”  means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:  (i) the sum of the products obtained by
multiplying (A) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including payment at
final maturity, in respect thereof, by (B) the number of years (calculated to
the nearest one-twelfth) that will

 

16

 

elapse between such date and the making of such payment; by (ii) the
then outstanding principal amount of such Indebtedness.

 

SECTION 1.02.            OTHER
DEFINITIONS.

 

	
  Term

  	
   

  	
  Defined in

  Section

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Affiliate Transaction”

  	
   

  	
  4.11

  	
   

  
	
  “Asset Sale Offer”

  	
   

  	
  4.10

  	
   

  
	
  “Change of Control
  Offer”

  	
   

  	
  4.15

  	
   

  
	
  “Change of Control
  Payment”

  	
   

  	
  4.15

  	
   

  
	
  “Change of Control
  Payment Date”

  	
   

  	
  4.15

  	
   

  
	
  “Covenant Defeasance”

  	
   

  	
  8.04

  	
   

  
	
  “DTC”

  	
   

  	
  2.03

  	
   

  
	
  “Event of Default”

  	
   

  	
  6.01

  	
   

  
	
  “Funding Guarantor”

  	
   

  	
  11.06

  	
   

  
	
  “Global Note Legend”

  	
   

  	
  2.06

  	
   

  
	
  “Excess Proceeds”

  	
   

  	
  4.10

  	
   

  
	
  “incur”

  	
   

  	
  4.09

  	
   

  
	
  “Legal Defeasance”

  	
   

  	
  8.03

  	
   

  
	
  “Offer Amount”

  	
   

  	
  3.09

  	
   

  
	
  “Offer Period”

  	
   

  	
  3.09

  	
   

  
	
  “Paying Agent”

  	
   

  	
  2.03

  	
   

  
	
  “Payment Blockage
  Notice”

  	
   

  	
  10.03

  	
   

  
	
  “Purchase Date”

  	
   

  	
  3.09

  	
   

  
	
  “Permitted Debt”

  	
   

  	
  4.09

  	
   

  
	
  “Payment Default”

  	
   

  	
  6.01

  	
  (f)

  
	
  “Registrar”

  	
   

  	
  2.03

  	
   

  
	
  “Restricted Payments”

  	
   

  	
  4.07

  	
   

  

 

SECTION 1.03.            INCORPORATION
BY REFERENCE OF TRUST INDENTURE ACT.

 

Whenever this
Indenture refers to a provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture.

 

The following TIA
terms used in this Indenture have the following meanings:

 

“indenture
securities” means the Notes;

 

“indenture
security Holder” means a Holder of a Note;

 

“indenture to
be qualified” means this Indenture;

 

“indenture
trustee” or “institutional trustee” means the Trustee;

 

“obligor”  on
the Notes means the Company and any successor obligor upon the Notes.

 

All other terms
used in this Indenture that are defined by the TIA, defined by TIA reference to
another statute or defined by Commission rule under the TIA have the meanings
so assigned to them.

 

SECTION 1.04.            RULES
OF CONSTRUCTION.

 

Unless the context
otherwise requires:

 

17

 

(1)           a term has the meaning assigned to
it;

 

(2)           an
accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;

 

(3)           “or” is not exclusive;

 

(4)           words in the singular include the
plural, and in the plural include the singular;

 

(5)           provisions apply to successive events
and transactions;

 

(6)           references
to sections of or rules under the Securities Act shall be deemed to include
substitute, replacement or successor sections or rules adopted by the
Commission from time to time; and

 

(7)           “including”
means including without limitation.

 

ARTICLE 2.

THE NOTES

 

SECTION 2.01.            FORM
AND DATING.

 

(a)           General. 
The Notes and the Trustee’s certificate of authentication shall be
substantially in the form of Exhibit A hereto. 
The Notes may have notations, legends or endorsements required by law,
stock exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof.

 

The terms and
provisions contained in the Notes shall constitute, and are hereby expressly
made, a part of this Indenture, and the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby. However, to the extent any provision of any
Note conflicts with the express provisions of this Indenture, the provisions of
this Indenture shall govern and be controlling.

 

(b)           Global Notes.  Notes issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the Global Note Legend and the
“Schedule of Exchanges in the Global Note” attached thereto). Notes issued
in definitive form shall be substantially in the form of Exhibit A attached
hereto (but without the Global Note Legend and without the “Schedule of
Exchanges of Interests in the Global Note” attached thereto). Each Global Note
shall represent such of the outstanding Notes as shall be specified therein and
each shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby shall be made by the Trustee or the Note Custodian, at the direction of
the Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.

 

SECTION 2.02.            EXECUTION
AND AUTHENTICATION.

 

Two Officers shall
sign the Notes for the Company by manual or facsimile signature.

 

If an Officer
whose signature is on a Note no longer holds that office at the time a Note is authenticated,
the Note shall nevertheless be valid.

 

A Note shall not
be valid until authenticated by the manual signature of the Trustee. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.

 

18

 

The Trustee shall,
upon a written order of the Company signed by two Officers, authenticate Notes
for original issue up to the aggregate principal amount stated in paragraph 4
of the Notes. The aggregate principal amount of Notes outstanding at any time
may not exceed such amount except as provided in Section 2.07 hereof.

 

The Trustee may
appoint an authenticating agent acceptable to the Company to authenticate
Notes. An authenticating agent may authenticate Notes whenever the Trustee may
do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as an Agent to deal with Holders or an Affiliate of the Company.

 

The Notes will
have an initial maximum aggregate principal amount to $175,000,000.  The Company may issue Additional Notes from
time to time after the offering of the Initial Notes, provided that any
Additional Notes shall be fungible with the Notes for U.S. Federal income tax
purposes.  Any offering of Additional
Notes is subject to Section 4.09 hereof. 
The Initial Notes and any Additional Notes subsequently issued under
this Indenture shall be treated as a single class for all purposes under this
Indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase.

 

SECTION 2.03.            REGISTRAR
AND PAYING AGENT.

 

The Company shall
maintain an office or agency where Notes may be presented for registration of
transfer or for exchange (“Registrar”)  and an office or agency
where Notes may be presented for payment (“Paying Agent”). The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company may
appoint one or more co-registrars and one or more additional paying agents. The
term “Registrar” includes any co-registrar and the term “Paying Agent” includes
any additional paying agent. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company shall notify the Trustee in
writing of the name and address of any Agent not a party to this Indenture. If
the Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company or any of its Subsidiaries
may act as Paying Agent or Registrar.

 

The Company
initially appoints The Depository Trust Company (“DTC”)  to act as Depositary with
respect to the Global Notes.

 

The Company
initially appoints the Trustee to act as the Registrar and Paying Agent and to
act as Note Custodian with respect to the Global Notes.

 

SECTION 2.04.            PAYING
AGENT TO HOLD MONEY IN TRUST.

 

The Company shall
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Holders or the Trustee all
money held by the Paying Agent for the payment of principal, premium, if any,
or interest on the Notes, and will notify the Trustee in writing of any default
by the Company in making any such payment. While any such default continues,
the Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Company at any time may require a Paying Agent to pay all money held by it
to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than the Company or a Subsidiary) shall have no further liability for the
money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent. Upon any bankruptcy or reorganization proceedings
relating to the Company, the Trustee shall serve as Paying Agent for the Notes.

 

SECTION 2.05.            HOLDER
LISTS.

 

The Trustee shall
preserve in as current a form as is reasonably practicable the most recent list
available to it of the names and addresses of all Holders and shall otherwise
comply with TIA § 312(a). If the Trustee is not the Registrar, the Company
shall furnish to the Trustee at least five Business Days before each interest
payment date and at such other times as the Trustee may request in writing, a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of the Holders of Notes and the Company shall otherwise
comply with TIA § 312(a).

 

19

 

SECTION 2.06.            TRANSFER
AND EXCHANGE.

 

(a)           Transfer
and Exchange of Global Notes.  A
Global Note may not be transferred as a whole except by the Depositary to a
nominee of the Depositary, by a nominee of the Depositary to the Depositary or
to another nominee of the Depositary, or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary.  All Global Notes will be exchanged by the
Company for Definitive Notes if (i) the Company delivers to the Trustee written
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by
the Company within 120 days after the date of such notice from the Depositary;
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee or (iii) there shall have occurred
and be continuing a Default or Event of Default with respect to the Notes.  Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.06, 2.07
and 2.10 hereof. Every Note authenticated and made available for delivery in
exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to
Section 2.06, 2.07 or 2.10 hereof, shall be authenticated and made available
for delivery in the form of, and shall be, a Global Note. A Global Note may not
be exchanged for another Note other than as provided in this
Section 2.06(a); however beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b) or (f) hereof.

 

(b)           Transfer
and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this Indenture
and the Applicable Procedures. 
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well
as one or more of the other following subparagraphs as applicable:

 

(i)            Transfer
of Beneficial Interests in the Same Global Note.  Beneficial interests in any Global Note may be
transferred to Persons who take delivery thereof in the form of a beneficial
interest in the same Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers described in
this Section 2.06(b)(i).

 

(ii)           All Other Transfers and Exchanges of Beneficial
Interests in Global Notes. 
In connection with all transfers and exchanges of beneficial interests
(other than transfers of beneficial interests in a Global Note to Persons who
take delivery thereof in the form of a beneficial interest in the same Global
Note), the transferor of such beneficial interest must deliver to the Registrar
either (A)(1) a written order from a Participant or an Indirect Participant
given to the Depositary in accordance with the Applicable Procedures directing
the Depositary to credit or cause to be credited a beneficial interest in the
specified Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant account
to be credited with such increase or (B)(1) a written order from a Participant
or an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be transferred
or exchanged and (2) instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such Definitive Note
shall be registered to effect the transfer or exchange referred to in (B)(1)
above. Upon satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture, the Notes and
otherwise applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to
Section 2.06(f) hereof.

 

(iii)          Beneficial Interests in Global Notes to Definitive
Notes.  If any holder of a
beneficial interest in a Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof,
the Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(f) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Definitive Notes issued

 

20

 

in exchange for a
beneficial interest pursuant to this Section 2.06(b)(iii) shall be
registered in such names and in such authorized denominations as the holder
shall instruct the Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such Definitive
Notes to the Persons in whose names such Notes are so registered.

 

(c)           Transfer or Exchange of Definitive Notes for
Beneficial Interests.

 

(i)            Definitive Notes to Beneficial Interests in Global
Notes.  A Holder of
Definitive Notes may exchange such Notes for a beneficial interest in the
Global Note or transfer such Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in the Global Note. Upon receipt
of a request for such an exchange or transfer, the Trustee shall cancel the
Definitive Notes and increase or cause to be increased the aggregate principal
amount of the Global Note.

 

(ii)           Issuance of Global Notes. If any such
exchange or transfer from a Definitive Note to a beneficial interest is
effected pursuant to subparagraph (i) above at a time when a Global Note has
not yet been issued, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Global Notes in an aggregate principal amount equal to
the principal amount of beneficial interests transferred pursuant to
subparagraph (i) above.

 

(d)           Transfer and Exchange of Definitive Notes.  Upon request by a Holder of Definitive
Notes and such Holder’s compliance with the provisions of this
Section 2.06(d), the Registrar shall register the transfer or exchange of
Definitive Notes. Prior to such registration of transfer or exchange, the
requesting Holder shall present or surrender to the Registrar the Definitive
Notes duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such Holder or by his
attorney-in-fact, duly authorized in writing. In addition, the requesting
Holder shall provide any additional certifications, documents and information,
as applicable, pursuant to the provisions of this Section 2.06(d).

 

(i)            Definitive Notes to Definitive Notes.  A Holder of Definitive Notes may
transfer such Notes to a Person who takes delivery thereof in the form of a
Definitive Note. Upon receipt of a request for such a transfer, the Registrar
shall register the Definitive Notes pursuant to the instructions from the
Holder thereof.

 

(e)           Legends.
The following legends shall appear on the face of all Global Notes
and issued under this Indenture unless specifically stated otherwise in the
applicable provisions of this Indenture.

 

Global Note
Legend.  Each Global Note shall bear a
legend in substantially the following form:

 

“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.”

 

(f)            Cancellation
and/or Adjustment of Global Notes.  At
such time as all beneficial interests in a particular Global Note have been
exchanged for Definitive Notes or a particular Global Note has been redeemed,
repurchased or canceled in whole and not in part, each such Global Note shall
be returned to or retained and canceled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal amount of Notes

 

21

 

represented by
such Global Note shall be reduced accordingly and an endorsement shall be made
on such Global Note, by the Trustee or by the Depositary at the direction of the
Trustee, to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note, by the Trustee or by the Depositary at the direction of the Trustee, to
reflect such increase.

 

(g)           General Provisions Relating to Transfers and
Exchanges.

 

(i)            To permit registrations of transfers
and exchanges, the Company shall execute and the Trustee shall authenticate
Global Notes and Definitive Notes upon the Company’s order or at the
Registrar’s request.

 

(ii)           No service charge shall be made to a
holder of a beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 2.10, 3.06, 4.10, 4.15 and 9.05 hereof).

 

(iii)          The Registrar shall not be required to
register the transfer of or exchange any Note selected for redemption in whole
or in part, except the unredeemed portion of any Note being redeemed in part.

 

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

 

(v)           The Company shall not be required (A)
to issue, to register the transfer of or to exchange Notes during a period
beginning at the opening of business 15 days before the day of any selection of
Notes for redemption under Section 3.02 hereof and ending at the close of
business on the day of selection, (B) to register the transfer of or to
exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part or (C) to register the
transfer of or to exchange a Note between a record date and the next succeeding
Interest Payment Date.

 

(vi)          Prior to due presentment for the
registration of a transfer of any Note, the Trustee, any Agent and the Company
may deem and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of principal
of and interest on such Notes and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to the contrary.

 

(vii)         The Trustee shall authenticate Global
Notes and Definitive Notes in accordance with the provisions of
Section 2.02 hereof.

 

SECTION 2.07.            REPLACEMENT
NOTES.

 

If any mutilated
Note is surrendered to the Trustee or the Company and the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Note, the
Company shall issue and the Trustee, upon the written order of the Company
signed by two Officers of the Company, shall authenticate a replacement Note if
the Trustee’s requirements are met. If required by the Trustee or the Company,
an indemnity bond must be supplied by the Holder that is sufficient in the
judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may
suffer if a Note is replaced. The Company may charge for its expenses in
replacing a Note.

 

22

 

Every replacement
Note is an additional obligation of the Company and shall be entitled to all of
the benefits of this Indenture equally and proportionately with all other Notes
duly issued hereunder.

 

SECTION 2.08.            OUTSTANDING
NOTES.

 

The Notes
outstanding at any time are all the Notes authenticated by the Trustee except
for those canceled by it, those delivered to it for cancellation, those
reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this
Section 2.08 as not outstanding. Except as set forth in Section 2.09
hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note.

 

If a Note is
replaced pursuant to Section 2.07 hereof, it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Note is
held by a bona fide purchaser.

 

If the principal
amount of any Note is considered paid under Section 4.01 hereof, it ceases
to be outstanding and interest on it ceases to accrue.

 

If the Paying
Agent (other than the Company, a Subsidiary thereof or an Affiliate of any
thereof) holds, on a redemption date or maturity date, money sufficient to pay
Notes payable on that date, then on and after that date such Notes shall be
deemed to be no longer outstanding and shall cease to accrue interest.

 

SECTION 2.09.            TREASURY
NOTES.

 

In determining
whether the Holders of the required principal amount of Notes have concurred in
any direction, waiver or consent, Notes owned by the Company, or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company, shall be considered as though not outstanding,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Notes that
a Trustee has actual knowledge are so owned shall be so disregarded.

 

SECTION 2.10.            TEMPORARY
NOTES.

 

Until Definitive
Notes are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Notes upon a written order of the Company signed by two
Officers of the Company. Temporary Notes shall be substantially in the form of
Definitive Notes but may have variations that the Company considers appropriate
for temporary Notes and as shall be reasonably acceptable to the Trustee.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive Notes in exchange for temporary Notes.

 

Holders of
temporary Notes shall be entitled to all of the benefits of this Indenture.

 

SECTION 2.11.            CANCELLATION.

 

The Company at any
time may deliver Notes to the Trustee for cancellation. The Registrar and
Paying Agent shall forward to the Trustee any Notes surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else
shall cancel all Notes surrendered for registration of transfer, exchange,
payment, replacement or cancellation and shall destroy canceled Notes (subject
to the record retention requirements of the Exchange Act). Certification of the
destruction of all canceled Notes shall be delivered to the Company. The
Company may not issue new Notes to replace Notes that it has paid or that have
been delivered to the Trustee for cancellation.

 

SECTION 2.12.            DEFAULTED
INTEREST.

 

If the Company
defaults in a payment of interest on the Notes, it shall pay the defaulted
interest in any lawful manner plus, to the extent lawful, interest payable on
the defaulted interest, to the Persons who are

 

23

 

Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.01 hereof. 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. The Company shall fix or
cause to be fixed each such special record date and payment date, provided that
no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to be
mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.

 

SECTION 2.13.            CUSIP
NUMBERS.

 

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

 

ARTICLE 3.

REDEMPTION AND PREPAYMENT

 

SECTION 3.01.            NOTICES
TO TRUSTEE.

 

If the Company
elects to redeem Notes pursuant to the optional redemption provisions of
Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but
not more than 60 days before a redemption date, an Officers’ Certificate
setting forth (i) the clause of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of Notes
to be redeemed and (iv) the redemption price.

 

SECTION 3.02.            SELECTION
OF NOTES TO BE REDEEMED.

 

If less than all
of the Notes are to be redeemed at any time, selection of Notes for redemption
shall be made by the Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed,
or, if the Notes are not so listed, on a pro rata basis, by lot or by such method
as the Trustee shall deem fair and appropriate; provided that no Notes of
less than $1,000 shall be redeemed in part. Notices of redemption shall be
mailed by first class mail at least 30 but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at its registered
address.  If any Note is to be redeemed
in part only, the notice of redemption that relates to such Note shall state
the portion of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof shall be issued in the name of
the Holder thereof upon cancellation of the original Note. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption, unless the Company defaults in payment of the redemption price
thereof.

 

The Trustee shall
promptly notify the Company in writing of the Notes selected for redemption
and, in the case of any Note selected for partial redemption, the principal
amount thereof to be redeemed. Notes and portions of Notes selected shall be in
amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes
of a Holder are to be redeemed, the entire outstanding amount of Notes held by
such Holder, even if not a multiple of $1,000, shall be redeemed. Except as
provided in the preceding sentence, provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption.

 

As of the date hereof,
the Notes are not listed on any national securities exchange.  The Company shall give written notice to the
Trustee of any such listing promptly after it becomes effective.

 

24

 

SECTION 3.03.            NOTICE
OF REDEMPTION.

 

Subject to the
provisions of Section 3.09 hereof, at least 30 days but not more than 60
days before a redemption date, the Company shall mail or cause to be mailed, by
first class mail, a notice of redemption to each Holder whose Notes are to be
redeemed at its registered address.

 

The notice shall
identify the Notes to be redeemed (including CUSIP, CINS or ISIN numbers, if
any) and shall state:

 

(a)           the redemption date;

 

(b)           the redemption price;

 

(c)           if any Note is being redeemed in
part, the portion of the principal amount of such Note to be redeemed and that,
after the redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;

 

(d)           the name and address of the Paying
Agent;

 

(e)           that Notes called for redemption must
be surrendered to the Paying Agent to collect the redemption price;

 

(f)            that, unless the Company defaults in
making such redemption payment, interest on Notes called for redemption ceases
to accrue on and after the redemption date;

 

(g)           the paragraph of the Notes and/or
Section of this Indenture pursuant to which the Notes called for
redemption are being redeemed; and

 

(h)           that no representation is made as to
the correctness or accuracy of the CUSIP, CINS or ISIN number, if any, listed
in such notice or printed on the Notes.

 

At the Company’s
request, the Trustee shall give the notice of redemption in the Company’s name
and at its expense; provided, however, that the Company shall
have delivered to the Trustee, at least 45 days prior to the redemption date,
an Officers’ Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.

 

SECTION 3.04.            EFFECT
OF NOTICE OF REDEMPTION.

 

Once notice of
redemption is mailed in accordance with Section 3.03 hereof, Notes called
for redemption become irrevocably due and payable on the redemption date at the
redemption price.

 

SECTION 3.05.            DEPOSIT
OF REDEMPTION PRICE.

 

Prior to 11:00
a.m. on the Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess
of the amounts necessary to pay the redemption price of, and accrued interest
on, all Notes to be redeemed.

 

If the Company complies
with the provisions of the preceding paragraph, on and after the redemption
date, interest shall cease to accrue on the Notes or the portions of Notes
called for redemption. If a Note is redeemed on or after an interest record
date but on or prior to the related interest payment date, then any accrued and
unpaid interest shall be paid to the Person in whose name such Note was
registered at the close of business on such record date. If any Note called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest shall
be paid on the unpaid principal,

 

25

 

from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case
at the rate provided in the Notes and in Section 4.01 hereof.

 

SECTION 3.06.            NOTES
REDEEMED IN PART.

 

Upon surrender of
a Note that is redeemed in part, the Company shall issue and, upon the
Company’s written request, the Trustee shall authenticate for the Holder at the
expense of the Company a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.

 

SECTION 3.07.            OPTIONAL
REDEMPTION.

 

(a)           Except as set forth in clause (b) of
this Section 3.07, the Notes shall not be redeemable at the Company’s
option prior to [      ], 2008. Thereafter, the
Notes shall be subject to redemption at any time at the option of the Company,
in whole or in part, upon not less than 30 nor more than 60 days’ notice, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on
[      ] of the years indicated below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2008

  	
   

  	
  [          ]

  	
  %

  
	
  2009

  	
   

  	
  [          ]

  	
  %

  
	
  2010
  and thereafter

  	
   

  	
  100.000

  	
  %

  

 

(b)           Notwithstanding the foregoing clause
(a), on or prior to
[          ], 2007, the
Company may on any one or more occasions redeem up to an aggregate of 35% of
the Notes originally issued at a redemption price of
[      ]%  of the principal amount thereof, plus
accrued and unpaid interest and any other amounts due, if any, on the Notes to
the redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date),
with the net cash proceeds of one or more Equity Offerings by the Company or
the net cash proceeds of one or more Equity Offerings by Blount International
that are contributed to the Company as common equity capital; provided that
at least 65%of the Notes originally issued remain outstanding immediately after
the occurrence of each such redemption (excluding Notes held by Blount
International, the Company and their Subsidiaries); and provided, further, that any
such redemption must occur within 90 days of the date of the closing of such
Equity Offering.

 

SECTION 3.08.            MANDATORY
REDEMPTION.

 

Except as set
forth under Sections 4.10 and 4.15 hereof, the Company is not required to make
mandatory redemption or sinking fund payments with respect to the Notes.  The Company may at any time and from time to
time purchase Notes in the open market or otherwise, although the terms of its
Indebtedness may prohibit the Company from making such purchases.

 

SECTION 3.09.            OFFER
TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.

 

In the event that,
pursuant to Section 4.10 hereof, the Company shall be required to commence
an Asset Sale Offer to all Holders to purchase Notes, it shall follow the procedures
specified below.

 

The Asset Sale
Offer shall remain open for a period of 20 Business Days following its
commencement and no longer, except to the extent that a longer period is
required by applicable law (the “Offer Period”). No later than five Business
Days after the termination of the Offer Period (the “Purchase Date”), the
Company shall purchase the principal amount of Notes required to be purchased
pursuant to Section 4.10 hereof (the “Offer Amount”)  or, if less than the Offer
Amount has been tendered, all Notes tendered in response to the Asset Sale
Offer. Payment for any Notes so purchased shall be made in the same manner as
interest payments are made.

 

If the Purchase
Date is on or after an interest record date and on or before the related interest
payment date, any accrued and unpaid interest shall be paid to the Person in
whose name a Note is registered at the

 

26

 

close of business on such record date, and no additional interest shall
be payable to Holders who tender Notes pursuant to the Asset Sale Offer.

 

Upon the
commencement of an Asset Sale Offer, the Company shall send, by first class
mail, a notice to the Trustee and each of the Holders, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset
Sale Offer shall be made to all Holders. The notice, which shall govern the
terms of the Asset Sale Offer, shall state:

 

(a)           that the Asset Sale Offer is being
made pursuant to this Section 3.09 and Section 4.10 hereof and the
length of time the Asset Sale Offer shall remain open;

 

(b)           the Offer Amount, the purchase price
and the Purchase Date;

 

(c)           that any Note not tendered or
accepted for payment shall continue to accrete or accrue interest;

 

(d)           that, unless the Company defaults in
making such payment, any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest after the Purchase Date;

 

(e)           that Holders electing to have a Note
purchased pursuant to an Asset Sale Offer may only elect to have all of such
Note purchased and may not elect to have only a portion of such Note purchased;

 

(f)            that Holders electing to have a Note
purchased pursuant to any Asset Sale Offer shall be required to surrender the
Note, with the form entitled “Option of Holder to Elect Purchase” on the
reverse of the Note completed, or transfer by book-entry transfer, to the
Company, a depositary, if appointed by the Company, or a Paying Agent at the
address specified in the notice at least three days before the Purchase Date;

 

(g)           that Holders shall be entitled to
withdraw their election if the Company, the depositary or the Paying Agent, as
the case may be, receives, not later than the expiration of the Offer Period, a
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such Note purchased;

 

(h)           that, if the aggregate principal
amount of Notes surrendered by Holders exceeds the Offer Amount, the Company
shall select the Notes to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Company so that only Notes in denominations of
$1,000, or integral multiples thereof, shall be purchased); and

 

(i)            that Holders whose Notes were
purchased only in part shall be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered (or transferred by book-entry
transfer).

 

On or before the
Purchase Date, the Company shall, to the extent lawful, accept for payment, on
a pro
rata basis to the extent necessary, the Offer Amount of Notes or
portions thereof tendered pursuant to the Asset Sale Offer, or if less than the
Offer Amount has been tendered, all Notes tendered, and shall deliver to the
Trustee an Officers’ Certificate stating that such Notes or portions thereof
were accepted for payment by the Company in accordance with the terms of this
Section 3.09. The Company, the Depositary or the Paying Agent, as the case
may be, shall promptly (but in any case not later than five days after the
Purchase Date) mail or deliver to each tendering Holder an amount equal to the
purchase price of the Notes tendered by such Holder and accepted by the Company
for purchase, and the Company shall promptly issue a new Note, and the Trustee,
upon written request from the Company shall authenticate and mail or deliver
such new Note to such Holder, in a principal amount equal to any unpurchased
portion of the Note surrendered. Any Note not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Asset Sale Offer on the Purchase Date.

 

Other than as
specifically provided in this Section 3.09, any purchase pursuant to this
Section 3.09 shall be made pursuant to the provisions of Sections 3.01
through 3.06 hereof.

 

27

 

ARTICLE 4.

COVENANTS

 

SECTION 4.01.            PAYMENT
OF NOTES.

 

The Company shall
pay or cause to be paid the principal of, premium, if any, and interest on the
Notes on the dates and in the manner provided in the Notes. Principal, premium,
if any, and interest shall be considered paid on the date due if the Paying
Agent, if other than Blount International or a Subsidiary thereof, holds as of
10:00 a.m. Eastern Time on the due date, money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due.

 

SECTION 4.02.            MAINTENANCE
OF OFFICE OR AGENCY.

 

The Company shall
maintain in the Borough of Manhattan, The City of New York, an office or agency
(which may be an office of the Trustee or an affiliate of the Trustee,
Registrar or co-registrar) where Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon the Company
in respect of the Notes and this Indenture may be served. The Company shall
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.

 

The Company may
also from time to time designate one or more other offices or agencies where
the Notes may be presented or surrendered for any or all such purposes and may
from time to time rescind such designations; provided, however, that no
such designation or rescission shall in any manner relieve the Company of their
obligations to maintain an office or agency in the Borough of Manhattan, The
City of New York for such purposes.  The
Company shall 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.

 

The Company hereby
designates the Corporate Trust Office of the Trustee as one such office or
agency of the Company in accordance with Section 2.03 hereof.

 

SECTION 4.03.             REPORTS.

 

So long as any
Notes are outstanding, Blount International shall furnish to the Trustee and
the Holders of Notes, within 15 days after the time Blount International would
be required to file such information with the Commission, if it were subject to
Section 13 or 15(d) of the Exchange Act: 
(a) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
(or any successor forms) if Blount International were required to file those
forms, including a “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and, with respect to the annual information only, a
report on the annual financial statements by Blount International’s certified
independent accountants; and (b) all current reports that would be required to
be filed with the Commission on Form 8-K (or any successor form) if Blount
International were required to file such reports.

 

If Blount
International has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation,
either on the face of the financial statements or in the footnotes, and in
Management’s Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of Blount
International and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of Blount
International.

 

In addition,
Blount International shall file a copy of all information and reports referred
to in clauses (a) and (b) above with the Commission for public availability
within the time periods specified in the Commission’s rules and regulations
(unless the Commission will not accept that filing) and make that information
available to securities analysts and prospective investors upon request.  Blount International and the Guarantors have

 

28

 

also agreed that, if the Notes are not freely transferable under the
Securities Act, they will furnish to the Holders of the Notes and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

 

Blount
International will be deemed to have furnished such reports to the Trustee and
the Holders of Notes if it has filed such reports with the Commission via the
EDGAR filing system and such reports are publicly available.

 

SECTION 4.04.            COMPLIANCE
CERTIFICATE.

 

(a)           Blount International shall deliver to
the Trustee, within 90 days after the end of each fiscal year, an Officers’
Certificate stating that a review of the activities of Blount International and
its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether Blount
International and the Company have kept, observed, performed and fulfilled
their obligations under this Indenture, and further stating, as to each such
Officer signing such certificate, that to the best of his or her knowledge,
Blount International and the Company have kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and are not in
default in the performance or observance of any of the terms, provisions and
conditions of this Indenture (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he or she
may have knowledge and what action Blount International or the Company are
taking or propose to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action Blount International or the Company are taking or propose to take with respect
thereto.

 

(b)           So long as not contrary to the then
current recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered pursuant to
Section 4.03 hereof shall be accompanied by a written statement of Blount
International’s independent public accountants (who shall be a firm of
established national reputation) that in making the examination necessary for
certification of such financial statements, nothing has come to their attention
that would lead them to believe that Blount International or the Company has
violated any provisions of Article 4 or Article 5  hereof or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.

 

(c)           The Company shall, so long as any of
the Notes are outstanding, deliver to the Trustee, as soon as possible and in
any event within five Business Days after any Officer becomes aware of any
Default or Event of Default, an Officers’ Certificate specifying such Default
or Event of Default and what action Blount International or the Company is
taking or proposes to take with respect thereto.

 

SECTION 4.05.            TAXES.

 

Blount
International shall pay, and shall cause each of its Subsidiaries to pay, prior
to delinquency, all material taxes, assessments, and governmental levies except
such as are contested in good faith and by appropriate proceedings or where the
failure to effect such payment is not adverse in any material respect to the
Holders of the Notes.

 

SECTION 4.06.            SALE
AND LEASEBACK TRANSACTIONS.

 

Blount
International shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided
that Blount International or any Restricted Subsidiary may enter into a sale
and leaseback transaction if: 
(i) Blount International or such Restricted Subsidiary, as
applicable, could have incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction under the
Fixed Charge Coverage Ratio test in the first paragraph of Section 4.09
hereof; (ii) the gross cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value, as (if in excess of $20,000,000)
determined in good faith by Blount International and set forth in an Officers’
Certificate delivered to the Trustee, of the property that is the subject of
such sale and leaseback transaction; and (iii) the transfer of assets in
such sale and

 

29

 

leaseback transaction is permitted by, and Blount International or that
Restricted Subsidiary applies the proceeds of such transaction in compliance
with Section 4.10 hereof.

 

SECTION 4.07.            RESTRICTED
PAYMENTS.

 

Blount
International shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: 
(i) declare or pay any dividend or make any other payment or
distribution on account of Blount International’s or any of its Restricted
Subsidiaries’ Equity Interests (including any distribution, dividend or payment
in connection with any merger or consolidation involving Blount International
or any of its Restricted Subsidiaries) or to the direct or indirect holders of
Blount International’s or any of its Restricted Subsidiaries’ Equity Interests
in their capacity as such, except for dividends or distributions that are
payable in Equity Interests (other than Disqualified Stock) of Blount
International or payable to Blount International or a Restricted Subsidiary of
Blount International; (ii) purchase, redeem or otherwise acquire or retire
for value (including, without limitation, in connection with any merger or
consolidation involving Blount International) any Equity Interests of the
Company, Blount International or any direct or indirect parent of Blount
International; (iii) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Notes or the Guarantees, except the scheduled payment of
principal, premium, if any, and interest on such Indebtedness at the Stated
Maturity of the Indebtedness that is subordinated to the Notes or the
Guarantees or Indebtedness that is permitted under clause (viii) of
Section 4.09 hereof, or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as “Restricted Payments”), unless, at the time
of and after giving effect to such Restricted Payment:

 

(a)           no Default shall have occurred and be
continuing or would occur as a consequence thereof;

 

(b)           at the date of such Restricted
Payment and after giving pro forma effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period, Blount
International would have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof;

 

(c)           the aggregate amount of such
Restricted Payment and all other Restricted Payments made since the Issue Date
(excluding Restricted Payments permitted by clauses (ii), (iii), (iv),
(vi), (vii) and (viii) of the next succeeding paragraph) is less than or equal
to the sum, without duplication, of (i) 50% of the Consolidated Net Income
of Blount International for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing on January 1, 2004
through the last full fiscal quarter of Blount International for which internal
financial statements are available at the time of that Restricted Payment (or,
if the Consolidated Net Income for that period is a deficit, minus 100% of the
deficit); plus (ii) 100% of the aggregate net cash proceeds or the fair
market value of property other than cash received by Blount International since
January 1, 2004 as a contribution to its common equity capital or from the
issue or sale of Equity Interests of Blount International (other than
Disqualified Stock) or from the issue or sale of convertible or exchangeable
Disqualified Stock or convertible or exchangeable debt securities of Blount
International that have been converted into or exchanged for such Equity Interests
(other than Equity Interests (or Disqualified Stock or debt securities) sold to
a Subsidiary of Blount International); plus (iii) an amount equal to the
lesser of (A) the sum of the net reduction in the Restricted Investments
made by Blount International or any of its Restricted Subsidiaries in any
Person resulting from repurchases, repayments or redemptions of the Restricted
Investment by such Person, proceeds realized on the sale of the Restricted
Investment and proceeds representing the return of capital (excluding dividends
and distributions), in each case received by Blount International or any of its
Restricted Subsidiaries and (B) the initial amount of such Restricted
Investments; plus (iv) if any Unrestricted Subsidiary is redesignated by
Blount International as a Restricted Subsidiary of Blount International after
the Issue Date, an amount equal to the lesser of (A) the net book value of
Blount International’s Investment in the Unrestricted Subsidiary at the time of
the redesignation and (B) the fair market value of Blount International’s
Investment in the Unrestricted Subsidiary at the time of the redesignation.

 

The preceding
provisions shall not prohibit: 
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration, the dividend would have
complied with the provisions of this Indenture; (ii) the making of any
Investment or the redemption, repurchase, retirement, defeasance or other
acquisition of any Indebtedness of the Company or any Guarantor that is
subordinated to the Notes or the

 

30

 

Guarantees or of any Equity Interests of Blount International or any
Restricted Subsidiary of Blount International in exchange for, or out of the
net cash proceeds of the sale (other than to a Subsidiary of Blount
International) of, Equity Interests of Blount International (other than
Disqualified Stock); provided that the amount of any net cash
proceeds that are utilized for any such Restricted Payment shall be excluded
from clause (c)(ii) of the preceding paragraph; provided, further, that in
the case of any such sale of Equity Interests of Blount International, the net
cash proceeds from the sale (x) are used to make any such Investment within 270
days of the sale or (y) are used to effect any other transaction contemplated
by this clause (ii) within 90 days of the sale; (iii) the defeasance,
redemption, repurchase or other acquisition of Indebtedness of Blount
International or any Guarantor that is subordinated to the Notes or the Guarantees
with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness; (iv) the payment of any dividend or distribution by a
Restricted Subsidiary of Blount International to the holders of such Restricted
Subsidiary’s common Equity Interests so long as Blount International or a
Restricted Subsidiary of Blount International receives at least its pro rata
share (and in like form) of the dividend or distribution in accordance with its
common Equity Interests; (v) the payment of dividends on Blount International’s
common stock, following the first Equity Offering after the Issue Date, of up
to 3% per annum of the net cash proceeds of the Equity Offering by Blount
International other than an Equity Offering with respect to common stock
registered on Form S-8; (vi) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of Blount
International or any Restricted Subsidiary of Blount International held by any
member of Blount International’s (or any of its Restricted Subsidiaries’)
management, employees and directors pursuant to any management equity
subscription agreement, stock option agreement, employment agreement or any
other management or employee benefit plan, trust arrangement or agreement; provided that
the price paid for all repurchased, redeemed, acquired or retired Equity
Interests in all cases, other than as a result of death or disability, does not
exceed $2,500,000 in the aggregate in any twelve-month period (with unused
amounts in any calendar year being carried over to succeeding calendar years
subject to a maximum of $5,000,000 in any calendar year); (vii) the deemed
repurchase of Capital Stock by Blount International on the exercise of stock
options; and (viii) Restricted Payments, when taken together with all
other Restricted Payments made pursuant to this clause (viii), in an
aggregate amount since the Issue Date not to exceed $25,000,000;

 

provided
that Blount
International will not and will not permit any of its Restricted Subsidiaries
to make any Restricted Payment contemplated by clauses (iii), (iv),
(v), (vii) and (viii) above so long as an Event of Default has occurred
and is continuing.

 

The Board of
Directors of Blount International may designate any Restricted Subsidiary of
Blount International to be an Unrestricted Subsidiary if that designation would
not cause a Default.  If a Restricted
Subsidiary of Blount International is designated as an Unrestricted Subsidiary,
the aggregate fair market value of all outstanding Investments owned by Blount
International and its Restricted Subsidiaries in the newly designated
Unrestricted Subsidiary will be deemed to be an Investment made as of the time
of that designation and will either reduce the amount available for Restricted
Payments under this Section 4.07 or reduce the amount available for future
Investments under one or more clauses of the definition of Permitted
Investments, as Blount International shall determine.  Such designation shall only be permitted if that Investment would
be permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. 
The Board of Directors of Blount International may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary of Blount International
if the redesignation would not cause a Default.  The Company shall be a Restricted Subsidiary of Blount
International and may not be designated as an Unrestricted Subsidiary.

 

The amount of all
Restricted Payments (other than cash) shall be the fair market value of the
assets or securities proposed to be transferred or issued to or by Blount
International or a Restricted Subsidiary of Blount International, as the case
may be, pursuant to the Restricted Payment on the date of such Restricted
Payment.  The fair market value of any
assets or securities that are required to be valued by this Section 4.07
shall be determined in good faith by Blount International.  Not later than the date of making any
Restricted Payment in an aggregate amount which exceeds $20.0 million, Blount
International shall deliver to the Trustee an Officers’ Certificate stating
that the Restricted Payment is permitted and setting forth the basis upon which
the calculations required by this Section 4.07 were computed.

 

If any Restricted
Investment is sold or otherwise liquidated or repaid or any dividend or payment
is received by Blount International or any of its Restricted Subsidiaries and
such amounts may be credited to clause (c)(i) or (iii) of the first
paragraph of this Section 4.07, then such amounts will be credited only to
the extent

 

31

 

of amounts that do not otherwise increase the amount available as a
Permitted Investment pursuant to clause (xii) in the definition of
“Permitted Investments.”

 

SECTION 4.08.            DIVIDEND
AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.

 

Blount
International shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary of Blount International that is not a Guarantor to:  (i) pay dividends or make any other
distributions on its Capital Stock to Blount International or any of its
Restricted Subsidiaries, or with respect to any other interest or participation
in, or measured by, its profits; (ii) pay any indebtedness owed to Blount
International or any of its Restricted Subsidiaries; (iii) make loans or
advances to Blount International or any of its Restricted Subsidiaries; or (iv) transfer
any of its properties or assets to Blount International or any of its
Restricted Subsidiaries.

 

However, the
preceding restrictions will not apply to encumbrances or restrictions existing
under or by reason of: 
(i) Existing Indebtedness as in effect on the Issue Date and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in that Existing Indebtedness, as in effect on the Issue Date;
(ii) the Credit Agreement as in effect on the Issue Date and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof or such other Credit Facility,
provided
that those amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings, and such other Credit Facility, are
no more restrictive, taken as a whole, with respect to dividend and other
payment restrictions than those contained in the Credit Agreement, as in effect
on the Issue Date; (iii) this Indenture and the Notes or any other
indenture governing debt securities that are no more restrictive, taken as a
whole, with respect to dividend and other payment restrictions than those
contained in this Indenture and the Notes; (iv) applicable law or any
applicable rule, regulation or order; (v) any instrument governing
Indebtedness or Capital Stock of a Person acquired by Blount International or
any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent that Indebtedness was incurred in connection with or in
contemplation of that acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided
that, in the case of Indebtedness, such Indebtedness was permitted to be
incurred by the terms of this Indenture; (vi) customary non-assignment
provisions in leases entered into in the ordinary course of business; (vii) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions on the property so acquired of the nature described in
clause (iv) of the preceding paragraph; (viii) any agreement for the
sale or other disposition of a Restricted Subsidiary of Blount International
that restricts distributions by that Restricted Subsidiary pending its sale or
other disposition; (ix) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing that Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(x) Liens securing Indebtedness that limit the right of the debtor to dispose
of the assets subject to that Lien; (xi) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements,
asset sale agreements, stock sale agreements and other similar agreements
entered into in the ordinary course of business; (xii) any Purchase Money
Note or other Indebtedness or contractual requirements incurred with respect to
a Qualified Receivables Transaction relating to a Receivables Subsidiary;
(xiii) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(xiv) secured Indebtedness otherwise permitted to be incurred pursuant to
the provisions of Section 4.12 hereof that limits the right of the debtor
to dispose of the assets securing the Indebtedness; and (xv) any
encumbrances or restrictions imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancing of the contracts, instruments or obligations referred to in
clauses (i) through (xiv) above, provided that the amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are, in the good faith judgment of Blount
International’s Board of Directors not materially more restrictive in the
aggregate with respect to the dividend and other payment restrictions than
those (considered as a whole) contained in the dividend or other payment
restrictions prior to the applicable amendment, modification, restatement, renewal,
increase, supplement, refunding, replacement or refinancing.

 

32

 

SECTION 4.09.            INCURRENCE
OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.

 

Blount
International shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to (collectively, “incur”) any Indebtedness (including
Acquired Debt), and Blount International and the Company shall not issue any
Disqualified Stock and will not permit any of their respective Subsidiaries
(other than the Company) to issue any shares of Preferred Stock; provided,
however, that Blount International and the Company may incur
Indebtedness (including Acquired Debt), Blount International and the Company
may issue Disqualified Stock, and Restricted Subsidiaries of Blount
International that are Guarantors may incur Indebtedness or issue Preferred
Stock, if the Fixed Charge Coverage Ratio for Blount International’s most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or Preferred
Stock is issued would have been at least 2.0 to 1.0, determined on a pro forma
basis (including pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or Disqualified Stock or
Preferred Stock had been issued, as the case may be, at the beginning of such
four quarter period.

 

The first
paragraph of this Section 4.09 shall not prohibit any of the following
(collectively, “Permitted Debt”):

 

(i)            the incurrence by Blount
International, the Company and any Restricted Subsidiary of Blount International
that is a Guarantor of Indebtedness and letters of credit under one or more
Credit Facilities in an aggregate principal amount at any one time outstanding
under this clause (i) (with letters of credit being deemed to have a
principal amount equal to the maximum potential reimbursement liability
(excluding interest and fees) of Blount International and its Restricted
Subsidiaries thereunder) not to exceed $425,000,000;

 

(ii)           the incurrence by Blount
International and its Restricted Subsidiaries of Existing Indebtedness;

 

(iii)          the incurrence by the Company and the
Guarantors of Indebtedness represented by the Initial Notes to be issued on the
Issue Date (and the Guarantees of such Initial Notes on the Issue Date);

 

(iv)          the incurrence by Blount International
or any of its Restricted Subsidiaries of Indebtedness represented by Capital
Lease Obligations, mortgage financings or purchase money obligations, in each
case, incurred for the purpose of financing all or any part of the purchase
price or lease expense or cost of construction or repair, improvement or
addition to property, plant or equipment used in the business of Blount
International or such Restricted Subsidiary, in an aggregate principal amount,
including all Permitted Refinancing Indebtedness incurred to refund, refinance
or replace any Indebtedness incurred pursuant to this clause (iv), not to
exceed, in aggregate principal amount at any one time outstanding, 5% of Total
Assets on a pro forma basis (including a pro forma application of the net proceeds
of such Indebtedness), as if such Indebtedness had been incurred on the date of
calculation;

 

(v)           the incurrence by Blount
International or any of its Restricted Subsidiaries of Permitted Refinancing
Indebtedness in exchange for, or the net proceeds of which are used to refund,
refinance or replace Indebtedness (other than intercompany Indebtedness) that
was incurred under the first paragraph of this Section 4.09 or
clause (ii), (iii) or (v) of this paragraph;

 

(vi)          Indebtedness incurred by Blount International
or any of its Restricted Subsidiaries constituting reimbursement obligations
with respect to (A) letters of credit issued in the ordinary course of business
in respect of workers’ compensation claims or self-insurance, or other
Indebtedness with respect to reimbursement type obligations regarding workers’
compensation claims or (B) commercial letters of credit issued in the ordinary
course of business; provided, however, that upon the drawing
of such letters of credit or the incurrence of the Indebtedness, these
obligations are reimbursed within 30 days following such drawing or incurrence;

 

33

 

(vii)         Indebtedness arising from agreements of
Blount International or a Restricted Subsidiary of Blount International
providing for indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection with the
disposition of any business, assets or a Subsidiary of Blount International,
other than guarantees of Indebtedness incurred by any Person acquiring all or
any portion of such business, assets or a Subsidiary of Blount International
for purpose of financing such acquisition;

 

(viii)        the incurrence by Blount International
or any of its Restricted Subsidiaries of intercompany Indebtedness between or
among Blount International and any of its Restricted Subsidiaries; provided,
however, that (A) Indebtedness must be expressly subordinated
to the prior payment in full in cash of all Obligations with respect to the
Notes and this Indenture, in the case of the Company, or its Guarantee, in the
case of a Guarantor and (B)(1) any subsequent issuance or transfer of
Equity Interests that results in such Indebtedness being held by a Person other
than Blount International or any of its Restricted Subsidiaries and (2) any
sale or other transfer of such Indebtedness to a Person that is not either
Blount International or any of its Restricted Subsidiaries shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by Blount
International or its Restricted Subsidiary, as the case may be, that was not
permitted by this clause (viii);

 

(ix)           the incurrence by Blount
International or any of its Restricted Subsidiaries of Hedging Obligations that
are incurred in the ordinary course of business (and not for speculative
purposes) for the purpose of (A) hedging interest rate risk with respect
to any Indebtedness that is permitted to be outstanding by the terms of this
Indenture or (B) hedging exposure with respect to foreign currency
fluctuations;

 

(x)            (A) the guarantee by Blount or any
of the Guarantors of Indebtedness of Blount International or a Restricted
Subsidiary of Blount International or (B) the incurrence of Indebtedness
of Blount International or a Restricted Subsidiary of Blount International to
the extent that such Indebtedness is supported by a letter of credit, in each
case that was permitted to be incurred by another provision of this
Section 4.09;

 

(xi)           the incurrence of Non-Recourse Debt
by Unrestricted Subsidiaries, provided, however, that if such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such
event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of Blount International that was not permitted by this
clause (xi), and the issuance of Preferred Stock by Unrestricted
Subsidiaries;

 

(xii)          the accrual of interest, the accretion
or amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and
the payment of dividends on Disqualified Stock or Preferred Stock in the form
of additional shares of the same class of Disqualified Stock or Preferred
Stock, as the case may be, which will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock or Preferred Stock, as the
case may be, for purposes of this Section 4.09; provided, in each case, that
the amount thereof is included in the Fixed Charges of Blount International and
its Restricted Subsidiaries as accrued;

 

(xiii)         the incurrence by Blount International
or any of its Restricted Subsidiaries of Indebtedness in respect of performance
and surety bonds and completion guarantees provided in the ordinary course of
business to the extent that the incurrence does not result in the incurrence of
any obligation for the payment of borrowed money to others;

 

(xiv)        the incurrence by a Receivables
Subsidiary of Indebtedness that is not recourse to Blount International or any
other Restricted Subsidiary of Blount International (other than with respect to
Standard Securitization Undertakings) in connection with a Qualified
Receivables Transaction; and

 

(xv)         the incurrence by Blount International
or any of its Restricted Subsidiaries of additional Indebtedness in an
aggregate principal amount (or accreted value, as applicable) at any time
outstanding, not to exceed $50,000,000.

 

34

 

For purposes of
determining compliance with this Section 4.09, in the event that an item
of proposed Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (i) through (xv) above, or is
entitled to be incurred pursuant to the first paragraph of this
Section 4.09, Blount International shall be permitted to classify all or a
portion of such item of Indebtedness on the date of its incurrence, or
reclassify at a later date all or a portion of such item of Indebtedness, in
any manner that complies with this Section 4.09.

 

For purposes of
determining compliance with any U.S. dollar denominated restriction on the
incurrence of Indebtedness denominated in a foreign currency other than the
U.S. dollar, the U.S. dollar-equivalent principal amount of such Indebtedness
incurred pursuant thereto shall be calculated based on the relevant currency
exchange rate in effect on the date that such Indebtedness was incurred.

 

SECTION 4.10.            ASSET
SALES.

 

Blount
International shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) Blount International
(or the Restricted Subsidiary of Blount International, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or otherwise
disposed of; (ii) the fair market value is determined by the Board of
Directors of Blount International and evidenced by a resolution of that Board
of Directors set forth in an Officers’ Certificate delivered to the Trustee in
the event such Asset Sale involves aggregate consideration in excess of
$20,000,000 million; and (iii) at least 75% of the consideration therefor
received by Blount International or the Restricted Subsidiary of Blount
International is in the form of cash or Cash Equivalents or Marketable
Securities.  For purposes of this
provision, each of the following shall be deemed to be cash:  (A) any liabilities of Blount
International (or the Restricted Subsidiary of Blount International, as the
case may be), as shown on its most recent balance sheet (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes
or any Guarantee) that are assumed by the transferee of the assets pursuant to
a customary novation agreement that releases the transferor from further
liability; (B) any securities, notes or other obligations received from
the transferee that are within 90 days converted by Blount International or the
Restricted Subsidiary of Blount International into cash (to the extent of the
cash received in that conversion); (C) any Designated Noncash
Consideration received by Blount International or any of its Restricted
Subsidiaries in the Asset Sale; provided that the aggregate fair market
value (as determined above) of the Designated Noncash Consideration, taken
together with the fair market value at the time of receipt of all other
Designated Noncash Consideration received pursuant to this clause (C) less
the amount of Net Proceeds previously realized in cash from prior Designated
Noncash Consideration is less than 10% of Total Assets at the time of the
receipt of the Designated Noncash Consideration (with the fair market value of
each item of Designated Noncash Consideration being measured at the time
received and without giving effect to subsequent changes in value); and
(D) Additional Assets received in an exchange of assets transaction.

 

Within 18 calendar
months after the receipt by Blount International or a Restricted Subsidiary of
Blount International of any Net Proceeds from an Asset Sale, the Company or
Blount International may apply those Net Proceeds at its option, (i) to
repay Senior Debt; (ii) to acquire all or substantially all of the assets
or a majority of the Voting Stock of another company that is engaged in a
Permitted Business; (iii) to make a capital expenditure in a Permitted
Business; or (iv) to acquire Additional Assets; provided that Blount
International will have complied with this clause (iv) if, within 18
calendar months of the Asset Sale, Blount International has entered into an
agreement covering the acquisition which is thereafter completed within 180
days after the date of the agreement. 
Pending the final application of any such Net Proceeds, the Company or
Blount International may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Indenture.  Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the preceding paragraph
shall be deemed to constitute “Excess Proceeds”.  When the aggregate amount of Excess Proceeds
exceeds $10,000,000, the Company shall make an offer to all Holders of Notes,
as well as all holders of other Indebtedness that ranks pari passu in right of
payment with the Notes and that has the benefit of provisions requiring the
Company to make a similar offer (an “Asset Sale Offer”), to purchase the
maximum principal amount of Notes and such other pari passu Indebtedness that
may be purchased out of the Excess Proceeds. 
The offer price will be equal to 100% of the principal amount of Notes
and other Indebtedness to be purchased or the lesser amount required under
agreements governing such other Indebtedness, plus accrued and unpaid interest
and any other amounts due, if any, on the Notes to the date of purchase.  Blount International or the Company may use
any Excess Proceeds remaining after consummation of an Asset Sale Offer for any
purpose not otherwise prohibited by this Indenture.  If the aggregate

 

35

 

principal amount of Notes and other pari passu Indebtedness tendered into such
Asset Sale Offer exceeds the amount of Excess Proceeds, the Company shall
select the Notes and other pari passu Indebtedness to be purchased on a pro
rata basis based on the principal amount of Notes and other pari passu Indebtedness
so tendered.  Upon completion of each
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

 

The Company will
comply with the requirements of Rule 14e-1 under the Exchange Act and all other
applicable securities laws and regulations in connection with each purchase of
Notes pursuant to an Asset Sale Offer. 
If the provisions of any securities laws or regulations conflict with
this Section 4.10, the Company will comply with the applicable securities
laws and regulations and by so doing will not be deemed to have breached its
obligations under this Section 4.10.

 

SECTION 4.11.            TRANSACTIONS
WITH AFFILIATES.

 

Blount
International shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate of such Person (each, an “Affiliate Transaction”), unless
(i) the Affiliate Transaction is on terms that are no less favorable to
Blount International or the relevant Restricted Subsidiary than terms that
would have been obtained in a comparable transaction by Blount International or
such Restricted Subsidiary with an unrelated Person and (ii) Blount
International delivers to the Trustee (A) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $10,000,000, a resolution of its Board of Directors
set forth in an Officers’ Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of its Board of
Directors and (B) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$25,000,000, Blount International obtains an opinion from an accounting,
appraisal or investment banking firm of national standing to the effect that
the Affiliate Transaction is fair to Blount International or the relevant
Restricted Subsidiary of Blount International from a financial point of view or
that the terms of the Affiliate Transaction are at least as favorable to Blount
International or the relevant Restricted Subsidiary of Blount International as
might reasonably be obtained in a comparable arm’s length transaction with an
unaffiliated third party.

 

The following
items shall not be deemed to be Affiliate Transactions and, therefore, will not
be subject to the provisions of the prior paragraph:  (i) any employment agreement entered into by Blount
International or any of its Restricted Subsidiaries in the ordinary course of
business; (ii) transactions between or among Blount International and/or its
Restricted Subsidiaries; (iii) payment of reasonable fees to officers,
directors, employees or consultants of Blount International or to Persons who
are not otherwise Affiliates of Blount International; (iv) any sale, conveyance
or other transfer of accounts receivable and other related assets customarily
transferred in an asset securitization transaction involving accounts
receivable to a Receivables Subsidiary in a Qualified Receivables Transaction;
(v) Restricted Payments that are permitted by, and Investments that are
not prohibited by Section 4.07 hereof; (vi) indemnification payments
made to officers, directors and employees of Blount International or any of its
Restricted Subsidiaries pursuant to charter, bylaw, statutory or contractual
provisions; (vii) the payment of customary annual management, consulting
and advisory fees and related expenses to Lehman Brothers Merchant Banking
Partners and its Affiliates; (viii) payments by Blount International or
any of its Restricted Subsidiaries to Lehman Brothers Merchant Banking Partners
and its Affiliates made for any financial advisory, financing, underwriting or
placement services or in respect of other investment banking activities,
including in connection with acquisitions or divestitures, which payments are
approved by a majority of the Board of Directors of Blount International in
good faith; (ix) the existence of, or the performance by Blount
International or any of its Restricted Subsidiaries of its obligations under
the terms of, any stockholders’ agreement (including any registration rights
agreement or purchase agreement related thereto) to which it is a party as of
the Issue Date and any similar agreements which it may enter into thereafter; provided,
however, that the existence of, or the performance by Blount
International or any of its Restricted Subsidiaries of obligations under any
future amendment to, any such existing agreement or under any similar agreement
entered into after the Issue Date will only be permitted by this
clause (ix) to the extent that the terms of the amendment or new agreement
are not otherwise disadvantageous to the Holders of Notes in any material
respect; (x) transactions pursuant to the terms of the agreements entered
into in connection with the Refinancing Transactions, including the issuance of
the Notes and Guarantees, on the Issue Date, as such agreements are in effect
on the Issue Date, as amended thereafter; provided, however, that transactions

 

36

 

pursuant to the terms of any future amendment to any such agreements
will only be permitted pursuant to this clause (x) to the extent that the
terms of the amendment are not otherwise disadvantageous to the Holders of
Notes in any material respect; (xi) transactions with Unrestricted Subsidiaries,
customers, clients, suppliers, joint venture partners, joint ventures,
including their members or partners, or purchasers or sellers of goods or
services, in each case in the ordinary course of business (including pursuant
to joint venture agreements) and otherwise in compliance with the terms of this
Indenture which are, in the aggregate (taking into account all the costs and
benefits associated with such transactions), materially no less favorable to
Blount International or the applicable Restricted Subsidiary of Blount
International than those that would have been obtained in a comparable
transaction by Blount International or the applicable Restricted Subsidiary of
Blount International with an unrelated Person, in the reasonable determination
of the Board of Directors of Blount International or the senior management
thereof, or are on terms at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party; (xii) guarantees of
performance by Blount International and its Restricted Subsidiaries of
Unrestricted Subsidiaries in the ordinary course of business, except for
guarantees of Obligations in respect of borrowed money; (xiii) pledges of
Equity Interests of Unrestricted Subsidiaries for the benefit of lenders of
Unrestricted Subsidiaries; (xiv) any issuance of securities, or other
payments, awards or grants in cash, securities, options or otherwise pursuant
to, or the funding of, employment arrangements, stock option and stock
ownership plans approved by the Board of Directors of Blount International;
(xv) the issuance or sale of Equity Interests (other than Disqualified
Stock) to, or receipt of capital contributions from, Affiliates of Blount
International; (xvi) transactions with a person that is an Affiliate of Blount
International solely because Blount International owns an Equity Interest in,
or controls, such person; and (xvii) transactions between Blount International
or any of its Restricted Subsidiaries and any person, a director of which is
also a director of Blount International or such Restricted Subsidiary, as the
case may be; provided, however that such director abstains from voting as
a director of Blount International or such Restricted Subsidiary on any matter
involving such other person.

 

SECTION 4.12.            LIENS.

 

Blount
International shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind securing Indebtedness, Attributable Debt or trade
payables on any asset now owned or hereafter acquired, or any income or profits
therefrom or assign or convey any right to receive income therefrom, except
Permitted Liens, unless :

 

(a)           in the case of Liens securing
Indebtedness that ranks pari passu
in right of payment with the Notes or a Guarantee, the Notes or such Guarantee
are secured on an equal and ratable basis in the same assets securing such
Liens to the same extent as such pari passu
obligations; or

 

(b)           in the case of Liens securing
Indebtedness that is subordinated in right of payment to the Notes or a
Guarantee, such Lien is subordinated to a Lien securing the Notes or such
Guarantee in the same assets securing such Liens to the same extent as such
subordinated obligations are subordinated to the Notes or such Guarantee, as
the case may be,

 

in each case, until such time as such obligations are no longer secured
by a Lien.

 

SECTION 4.13.            ADDITIONAL
SUBSIDIARY GUARANTEES.

 

Blount
International shall not permit any of its Restricted Subsidiaries, directly or
indirectly, to guarantee or pledge any assets to secure the payment of any
Credit Facility of Blount International or any Restricted Subsidiary of Blount
International unless (i) all of the obligors, guarantors or pledgors under
that Credit Facility are Foreign Subsidiaries or (ii) that Restricted
Subsidiary is a Guarantor or that Restricted Subsidiary becomes a Guarantor by
simultaneously executing and delivering to the Trustee an Opinion of Counsel
and a supplemental indenture providing for a Guarantee of the payment of the
Notes by such Restricted Subsidiary which Guarantee shall be (A) in the case of
Indebtedness that is subordinated to the Notes or a Guarantee of the Notes,
senior to such Restricted Subsidiary’s guarantee of or pledge to secure such
other Indebtedness to the same extent as such Indebtedness is subordinated to
the Notes or a Guarantee; (B) in the case of Indebtedness that is pari passu with
the Notes or a Guarantee of the Notes, pari passu with that Restricted
Subsidiary’s guarantee of or pledge to secure such other Indebtedness; and (C)
in the case of Indebtedness that is Senior Debt, subordinated to that
Restricted

 

37

 

Subsidiary’s guarantee of or pledge to secure such Senior Debt to the
same extent as the Notes or a Guarantee of the Restricted Subsidiary is
subordinated to such Senior Debt.

 

This
Section 4.13 shall not apply to any Subsidiary of Blount International
that has been properly designated as an Unrestricted Subsidiary or as a
Receivables Subsidiary or to any Foreign Subsidiary of Blount International
that guarantees or pledges assets to secure the payment of the Canadian Term
Loan Facility.

 

SECTION 4.14.            CORPORATE
EXISTENCE.

 

Subject to
Article 5 hereof, Blount International shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Restricted Subsidiaries, including the Company, in accordance with the
respective organizational documents (as the same may be amended from time to
time) of Blount International or any such Restricted Subsidiary and (ii) the
rights (charter and statutory), licenses and franchises of Blount International
and its Restricted Subsidiaries, including the Company; provided, however, that
Blount International shall not be required to preserve any such right, license
or franchise, or the corporate, partnership or other existence of any of its
Restricted Subsidiaries, including the Company, if the Board of Directors of
Blount International shall determine that the preservation thereof is no longer
desirable in the conduct of the business of Blount International and its
Restricted Subsidiaries, including the Company, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the
Notes.

 

SECTION 4.15.            OFFER
TO REPURCHASE UPON CHANGE OF CONTROL.

 

(a)           Upon the occurrence of a Change of
Control, each Holder of Notes shall have the right to require the Company to
purchase all or any part (equal to $1,000 or an integral multiple thereof) of
that Holder’s Notes pursuant to the offer on the terms described below (the “Change of
Control Offer”).  In the
Change of Control Offer, the Company will offer a payment in cash equal to 101%
of the aggregate principal amount of Notes purchased plus accrued and unpaid
interest and any other amounts due, if any, on the Notes to the date of
purchase (the “Change of Control Payment”).  Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to purchase Notes on the date
specified in such notice (the “Change of Control Payment Date”).  The Change of Control Payment Date may not
be earlier than 30 days nor later than 60 days from the date such notice is
mailed. Such notice, which shall govern the terms of the Change of Control
offer, shall state: (i) that the Change of Control Offer is being made pursuant
to this Section 4.15 and that all Notes tendered will be accepted for
payment; (ii) the purchase price and the purchase date; (iii) that any Note not
tendered will continue to accrue interest; (iv) that, unless Blount
International defaults in the payment of the Change of Control Payment, all Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date; (v) that Holders
electing to have any Notes purchased pursuant to a Change of Control Offer will
be required to surrender the Notes, with the form entitled “Option of Holder to
Elect Purchase” on the reverse of the Notes completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (vi) that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the second Business Day preceding the
Change of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of Notes
delivered for purchase, and a statement that such Holder is withdrawing his
election to have the Notes purchased; and (vii) that Holders whose Notes are
being purchased only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered, which unpurchased portion
must be equal to $1,000 in principal amount or an integral multiple thereof.

 

The Company shall
comply with the requirements of Rule 14e-1 under the Exchange Act and all other
applicable securities laws and regulations in connection with the repurchase of
the Notes as a result of a Change of Control. 
If the provisions of any securities laws or regulations conflict with
this Section 4.15, the Company will comply with the applicable securities
laws and regulations and by so doing will not be deemed to have breached its
obligations under the Change of Control provisions of this Indenture.

 

(b)           On the Change of Control Payment
Date, the Company shall, to the extent lawful, (i) accept for payment all
Notes or portions thereof properly tendered pursuant to the Change of Control
Offer;

 

38

 

(ii) deposit
with the Paying Agent an amount equal to the Change of Control Payment in
respect of all Notes or portions thereof so tendered; and (iii) deliver or
cause to be delivered to the Trustee the Notes so accepted.  The Paying Agent shall promptly mail to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the Trustee shall promptly authenticate and mail (or cause to be transferred by
book-entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such new
Note shall be in a principal amount of $1,000 or an integral multiple
thereof.  Prior to complying with any of
the provisions of this Section 4.15, but in any event within 90 days
following a Change of Control, the Company will either repay all outstanding
Senior Debt or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Debt to permit the repurchase of Notes required by
this Section 4.15.  The Company
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.

 

The provisions
described above that require the Company to make a Change of Control Offer
following a Change of Control will be applicable regardless of whether or not
any other provisions of this Indenture are applicable.

 

(c)           If the Credit Agreement (which
currently prohibit Blount International and the Company from redeeming or
purchasing any Notes, and also provides that the occurrence of certain change
of control events with respect to Blount International and the Company would
constitute a default under such Credit Agreement) are in effect, or any future
credit agreements or other agreements relating to Indebtedness to which the
Company becomes a party containing similar restrictions are in effect, at the
time of the occurrence of a Change in Control when the Company is prohibited by
such agreements from purchasing Notes, the Company shall obtain the requisite
consent of its lenders to the purchase of Notes or refinance the borrowings
under the agreement containing such prohibition.  The Company shall first comply with the covenant described in the
preceding sentence before it shall be required to purchase Notes in the event
of a Change of Control; provided that the Company’s failure to
purchase Notes in the event of a Change of Control after complying with the
covenant described in this Section 4.15 constitutes an Event of Default
described in clause (d) under Section 6.01 hereof if not cured within
30 days after the notice required by such clause.

 

(d)           Notwithstanding anything to the
contrary in this Section 4.15, the Company shall not be required to make a
Change of Control Offer upon a Change of Control if a third party offers to
purchase the Notes in the manner, at the times and otherwise in compliance with
the requirements set forth in this Indenture applicable to a Change of Control
Offer by the Company and that third party purchases all Notes validly tendered
to it in response to that offer.

 

SECTION 4.16.            NO
SENIOR SUBORDINATED DEBT.

 

Blount International
shall not incur, create, issue, assume, guarantee or otherwise become liable
for any Indebtedness that is subordinate or junior in right of payment to any
Senior Debt of Blount International and senior in any respect in right of
payment to the Notes (other than Senior Debt incurred under clause (i) of the
second paragraph of Section 4.09 hereof that is subordinated to other
Senior Debt).  No Guarantor shall incur,
create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to the Senior
Debt of such Guarantor and senior in any respect in right of payment to such
Guarantor’s Guarantee (other than Senior Debt incurred under clause (i) of the
second paragraph of Section 4.09 hereof that is subordinated to other
Senior Debt).

 

SECTION 4.17.            DESIGNATION
OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES.

 

The Board of Directors of
Blount International may designate any Restricted Subsidiary of Blount
International to be an Unrestricted Subsidiary if that designation would not
cause a Default.  If a Restricted
Subsidiary of Blount International is designated as an Unrestricted Subsidiary,
the aggregate fair market value of all outstanding Investments owned by Blount
International and its Restricted Subsidiaries in the newly designated
Unrestricted Subsidiary will be deemed to be an Investment made as of the time
of that designation and will either reduce the amount available for Restricted
Payments under the first paragraph of Section 4.07 hereof or reduce the
amount available for future Investments under one or more clauses of the
definition of Permitted Investments, as Blount International shall
determine.  That designation will only
be permitted if that Investment would be permitted

 

39

 

at that time and if that
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.  The Board of Directors of
Blount International may redesignate any Unrestricted Subsidiary to be a
Restricted Subsidiary of Blount International if the redesignation would not
cause a Default.  Blount shall be a
Restricted Subsidiary of Blount International and shall not be designated as an
Unrestricted Subsidiary.

 

SECTION 4.18.            BUSINESS
ACTIVITIES.

 

Blount
International shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any business other than Permitted Businesses, except
to an extent that would not be material to Blount International and its
Restricted Subsidiaries taken as a whole.

 

ARTICLE 5.

SUCCESSORS

 

SECTION 5.01.            MERGER,
CONSOLIDATION, OR SALE OF ASSETS.

 

Neither Blount
International nor the Company shall, directly or indirectly, consolidate or
merge with or into another Person (whether or not Blount International or the
Company, as the case may be, is the surviving corporation); or sell, assign,
transfer, convey, lease or otherwise dispose of all or substantially all of the
properties or assets of Blount International or the Company, as the case may
be, and their respective Restricted Subsidiaries taken as a whole, in one or
more related transactions, to another Person unless (i) either
(A) Blount International or the Company, as the case may be, is the
surviving corporation, limited liability company, business trust or limited
partnership; or (B) the Person formed by or surviving any such consolidation or
merger (if other than Blount International or the Company, as the case may be)
or to which such sale, assignment, transfer, conveyance, lease or other
disposition shall have been made is a corporation, limited liability company,
business trust or limited partnership organized or existing under the laws of
the United States, any state thereof or the District of Columbia; provided
that in the case of (A) or (B) above, if the surviving Person is a limited
liability company, business trust or limited partnership, a corporation of
which all of the Equity Interests are owned by the surviving Person shall act
as joint and several obligor with respect to the Notes; (ii) the Person
formed by or surviving any such consolidation or merger (if other than Blount
International or the Company, as the case may be) or the Person to which such
sale, assignment, transfer, conveyance, lease or other disposition shall have
been made (A) assumes all the obligations of Blount International or the
Company, as the case may be, under this Indenture and the Notes (if other than
the Company) or the Guarantee (if other than Blount International), as the case
may be, pursuant to a supplemental indenture and such other agreements
reasonably satisfactory to the Trustee; and (B) delivers to the Trustee an
Officers’ Certificate and an Opinion of Counsel, each stating that such
transaction and any supplemental indenture entered into in connection therewith
complies with all of the terms of this Section 5.01, and that all
conditions precedent provided for in this Section 5.01 relating to such
transaction or series of related transactions have been complied with, and with
respect to such Opinion of Counsel, that any such supplemental indenture is
legal, valid and binding; (iii) immediately after such transaction no
Default exists; and (iv) immediately after giving pro forma effect to such
transaction and any related financing transactions as if such transactions had
occurred at the beginning of the most recently ended four-quarter period for
which internal financial statements are available immediately preceding such
transaction either:  (A) the entity
surviving such consolidation or merger would be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.09 hereof; or
(B) the Fixed Charge Coverage Ratio for Blount International or the
Company, as the case may be, or the Person formed by or surviving such consolidation
or merger (if other than Blount International or the Company, as the case may
be), or to which such sale, assignment, transfer, conveyance, lease or other
disposition has been made, would, immediately after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, not be less than the Fixed Charge Coverage Ratio for
Blount International or the Company, as the case may be, and any of their
respective Restricted Subsidiaries immediately prior to such transaction.

 

The person formed by or
surviving that consolidation or merger (if other than Blount International or
the Company, as the case may be) or the person to which that sale, assignment,
transfer, conveyance, lease or other

 

40

 

disposition has been made
will succeed to, and be substituted for, and may exercise every right and power
of Blount International or the Company, as the case may be, under this
Indenture.

 

SECTION 5.02.            SUCCESSOR
CORPORATION SUBSTITUTED.

 

Upon any consolidation
or merger, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the assets of Blount International
or the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which Blount
International or the Company, as the case may be, is merged or to which such
sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to “Blount International” or the
“Company” or “Blount”, as the case may be, shall refer instead to the successor
corporation and not to Blount International or the Company, as the case may
be), and may exercise every right and power of Blount International or the
Company, as the case may be, under this Indenture with the same effect as if
such successor Person had been named as Blount International or the Company, as
the case may be, herein; provided, however, that the predecessor
Person, Blount International or the Company, as the case may be, shall not be
relieved from the obligation to pay the principal of and interest on the Notes
except in the case of a sale of all of Blount International’s or the Company’s,
as the case may be, assets that meets the requirements of Section 5.01
hereof.

 

ARTICLE 6.

DEFAULTS AND REMEDIES

 

SECTION 6.01.            EVENTS
OF DEFAULT.

 

An “Event of
Default” occurs if:

 

(a)           the Company defaults for 30 days in
the payment, when due, of interest on the Notes whether or not prohibited by
Article 10 hereof;

 

(b)           the Company defaults in payment, when
due, of the principal of, or premium, if any, on the Notes whether or not
prohibited by Article 10 hereof;

 

(c)           Blount International or any of its
Restricted Subsidiaries fails to purchase any of the Notes as required under
the provisions of Section 4.10 or 4.15 hereof, or comply with the
provisions of Section 5.01 hereof;

 

(d)           Blount International or any of its
Restricted Subsidiaries fails to comply with the provisions of Sections 4.10
(other than a failure to purchase Notes), 4.15 (other than a failure to
purchase Notes), 4.07 and 4.09 for 30 days after notice of such failure has
been given;

 

(e)           Blount International or any of its
Restricted Subsidiaries fails to comply with any of the other agreements in
this Indenture or the Notes for 60 days after notice of such failure has been
given;

 

(f)            a default occurs under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by Blount
International or any of its Significant Subsidiaries (or the payment of which
is guaranteed by Blount International or any of its Significant Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the
Issue Date, if such default (i) is caused by a failure to pay principal of such
Indebtedness at final maturity and after giving effect to the applicable grace
period, if any, provided in such Indebtedness on the date of such default (a “Payment
Default”); or (ii) results in the acceleration of such Indebtedness
prior to its express maturity; and, in each case, the principal amount of such
Indebtedness, together with the principal amount of any other Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates without duplication $25,000,000 or more;

 

41

 

(g)           Blount International or any of its
Significant Subsidiaries fails to pay final judgments aggregating in excess of
$25,000,000, which judgments are not paid, discharged or stayed for a period of
60 consecutive days;

 

(h)           except as permitted by this
Indenture, if any Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason (other than in
accordance with the terms of such Guarantee and this Indenture) to be in full
force and effect or any Guarantor, or if any Person acting on behalf of any
Guarantor, shall deny or disaffirm its obligations under its Guarantee;

 

(i)            Blount International or any of its
Significant Subsidiaries pursuant to or within the meaning of Bankruptcy Law:

 

(i)            commences a
voluntary case,

 

(ii)           consents to the
entry of an order for relief against it in an involuntary case,

 

(iii)          consents to the appointment of a
custodian of it or for all or substantially all of its property,

 

(iv)          makes a general
assignment for the benefit of its creditors, or

 

(v)           generally is not
paying its debts as they become due; or

 

(j)            a court of competent jurisdiction
enters an order or decree under any Bankruptcy Law that:

 

(i)            is for relief against Blount
International or any of its Significant Subsidiaries in an involuntary case;

 

(ii)           appoints a custodian of Blount
International or any of its Significant Subsidiaries or for all or
substantially all of the property of Blount International or any of its
Significant Subsidiaries; or

 

(iii)          orders the liquidation of Blount
International;

 

and the order or
decree remains unstayed and in effect for 60 consecutive days.

 

The Holders of a
majority in aggregate principal amount of the Notes then outstanding may, on
behalf of the Holders of all of the Notes, by written notice to the Trustee,
waive any existing Default and its consequences under this Indenture except a
continuing Default in the payment of interest on, or the principal of, the
Notes.

 

If an Event of Default described in clause (f) of Section 6.01
hereof has occurred and is continuing, such Event of Default shall be
automatically annulled if the payment default triggering such Event of Default
pursuant to clause (f) of Section 6.01 hereof shall be remedied or
cured by Blount International or the applicable Significant Subsidiary or
waived by the holders of the relevant Indebtedness within 60 days of its
occurrence and all other Events of Default, if any, under the Indenture have
been cured and waived.

 

SECTION 6.02.            ACCELERATION.

 

If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately; provided that so long as any Indebtedness
permitted to be incurred pursuant to the Indebtedness under the Credit
Agreement shall be outstanding, the acceleration shall not be effective until
the earlier of (i) an acceleration of any Indebtedness under the Credit
Agreement or (ii) five Business Days after receipt by the Company of written
notice

 

42

 

of the acceleration of the Notes. 
Notwithstanding the foregoing, in the case of an Event of Default
specified in Section 6.01(i) or (j) hereof, with respect to Blount
International or the Company, all outstanding Notes will become due and payable
immediately without further action or notice. Holders of the Notes may not
enforce this Indenture or the Notes except as provided in this Indenture.  Subject to the limitations described in this
Article 6, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.

 

In the case of any
Event of Default occurring by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding
payment of the premium that the Company would have had to pay upon an Optional
Redemption, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law upon the acceleration of the Notes. If
an Event of Default occurs prior to [      ],
2008 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to [     ],
2008, then the premium specified below shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the Notes
during the twelve-month period ending on
[       ] of the years indicated below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2005

  	
   

  	
  [     ]

  	
  %

  
	
  2006

  	
   

  	
  [     ]

  	
  %

  
	
  2007

  	
   

  	
  [     ]

  	
  %

  
	
  2008

  	
   

  	
  [     ]

  	
  %

  

 

SECTION 6.03.            OTHER
REMEDIES.

 

If an Event of
Default occurs and is continuing, the Trustee may pursue any available remedy
to collect the payment of principal, premium, if any, and interest on the Notes
or to enforce the performance of any provision of the Notes or this Indenture.

 

The Trustee may
maintain a proceeding even if it does not possess any of the Notes or does not
produce any of them in the proceeding. A delay or omission by the Trustee or
any Holder of a Note in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. All remedies are cumulative to the extent
permitted by law.

 

SECTION 6.04.            WAIVER
OF PAST DEFAULTS.

 

Holders of not
less than a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of the Holders of all of
the Notes waive an existing Default or Event of Default and its consequences
hereunder, except a continuing Default or Event of Default in the payment of
the principal of, premium, if any, and interest on, the Notes (including in
connection with an offer to purchase) (provided, however, that the Holders of a
majority in aggregate principal amount at maturity of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration). 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 6.05.            CONTROL
BY MAJORITY.

 

Holders of a
majority in principal amount of the then outstanding Notes may, by written
notice, direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.

 

43

 

The Trustee may
take any other action which it deems proper and which is not inconsistent with
any such direction.  In the event the
Trustee takes any action or follows any direction pursuant to the Indenture,
the Trustee shall be entitled to indemnification reasonably satisfactory to it
in its sole discretion against any loss or expense caused by taking such action
or following such direction.

 

SECTION 6.06.            LIMITATION
ON SUITS.

 

A Holder of a Note
may pursue a remedy with respect to this Indenture or the Notes only if:

 

(a)           the Holder of a Note gives to the
Trustee written notice of a continuing Event of Default;

 

(b)           the Holders of at least 25% in
principal amount of the then outstanding Notes make a written request to the
Trustee to pursue the remedy;

 

(c)           such Holder of a Note or Holders of
Notes offer and, if requested, provide to the Trustee indemnity satisfactory to
the Trustee against any loss, liability or expense;

 

(d)           the Trustee does not comply with the
request within 60 days after receipt of the request and the offer and, if
requested, the provision of indemnity; and

 

(e)           during such 60-day period the Holders
of a majority in principal amount of the then outstanding Notes do not give the
Trustee a written direction inconsistent with the request.

 

A Holder
of a Note may not use this Indenture to prejudice the rights of another Holder
of a Note or to obtain a preference or priority over another Holder of a Note.

 

SECTION 6.07.            RIGHTS
OF HOLDERS OF NOTES TO RECEIVE PAYMENT.

 

Notwithstanding
any other provision of this Indenture, the right of any Holder of a Note to
receive payment of principal, premium, if any, and interest on the Note, on or
after the respective due dates expressed in the Note (including in connection
with an offer to purchase), or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.

 

SECTION 6.08.            COLLECTION
SUIT BY TRUSTEE.

 

If an Event of
Default specified in Section 6.01(a) or (b) hereof occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and 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.

 

SECTION 6.09.            TRUSTEE
MAY FILE PROOFS OF CLAIM.

 

The Trustee is
authorized to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the Holders of the Notes allowed in
any judicial proceedings relative to the Company (or any other obligor upon the
Notes), its creditors or its property and shall be entitled and empowered to
collect, receive and distribute any money or other property payable or
deliverable on any such claims and any custodian 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 to 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 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under

 

44

 

Section 7.07 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained 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, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.

 

SECTION 6.10.            PRIORITIES.

 

If the Trustee
collects any money pursuant to this Article, it shall pay out the money in the
following order:

 

First:                      to the Trustee, its agents and attorneys
for amounts due under Section 7.07 hereof, including payment of all
compensation, expense and liabilities incurred, and all advances made, by the
Trustee and the costs and expenses of collection;

 

Second:                 to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium, if any, and interest, ratably, without preference
or priority of any kind, according to the amounts due and payable on the Notes
for principal, premium, if any, and interest, respectively; and

 

Third:                     to the Company or to such party as a
court of competent jurisdiction shall direct.

 

The Trustee may fix
a record date and payment date for any payment to Holders of Notes pursuant to
this Section 6.10.

 

SECTION 6.11.            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 or omitted by it as a Trustee, a court
in its discretion may require the filing by any party litigant in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorneys’ fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant.  This Section 6.11 does not apply to a suit by the Trustee, a
suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by
Holders of more than 10% in principal amount of the then outstanding Notes.

 

ARTICLE 7.

TRUSTEE

 

SECTION 7.01.            DUTIES
OF TRUSTEE.

 

(a)           If 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
its exercise, as a prudent Person would exercise or use under the circumstances
in the conduct of his or her own affairs.

 

(b)           Except during the continuance of an
Event of Default:

 

(i)            the duties of the Trustee shall be
determined solely by the express provisions of this Indenture and the Trustee
need perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and

 

(ii)           in the absence of bad faith or
negligence on its part, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the

 

45

 

Trustee shall
examine the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein).

 

(c)           The Trustee may not be relieved from
liabilities for its own negligent action, its own negligent failure to act, or its
own willful misconduct, except that:

 

(i)            this paragraph does not limit the
effect of paragraph (b) of this Section 7.01;

 

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

 

(iii)          the Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 6.05  hereof.

 

(d)           Whether or not therein expressly so
provided, every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c), (e) and (f) of this Section.

 

(e)           No provision of this Indenture shall
require the Trustee to expend or risk its own funds or incur any liability. The
Trustee shall be under no obligation to exercise any of its rights and powers
under this Indenture at the request of any Holders, unless such Holder shall
have offered to the Trustee security and indemnity satisfactory to it in its
sole discretion against any loss, liability or expense.

 

(f)            The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree in writing
with the Company. Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.

 

SECTION 7.02.            RIGHTS
OF TRUSTEE.

 

(a)           The Trustee may conclusively rely
upon any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Trustee need not investigate any fact or
matter stated in such document.

 

(b)           Before the Trustee acts or refrains
from acting, it may consult with counsel and it may require an Officers’
Certificate or an Opinion of Counsel or both. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
Officers’ Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.

 

(c)           The Trustee may act through its
attorneys and agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.

 

(d)           The Trustee shall not be liable for
any action it takes or omits to take in good faith that it believes to be
authorized or within the rights or powers conferred upon it by this Indenture.

 

(e)           Unless otherwise specifically
provided in this Indenture, any demand, request, direction or notice from the
Company shall be sufficient if signed by an Officer of the Company.

 

(f)            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 unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in compliance with
such request or direction.

 

46

(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.

 

(h)           The Trustee shall not be deemed to
have notice of any Default or Event of Default unless a Responsible Officer of
the Trustee has actual knowledge thereof or unless written notice of any event
which is in fact such a default is received by a Responsible Officer of the
Trustee at the Corporate Trust Office of the Trustee, and such notice
references the specific Default or Event of Default, the Notes and this
Indenture.

 

(i)            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 in writing with the
Company.

 

SECTION 7.03.            INDIVIDUAL
RIGHTS OF TRUSTEE.

 

The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company or any Affiliate of the Company with the same
rights it would have if it were not Trustee. However, in the event that the
Trustee acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue as trustee
or resign. Any Agent may do the same with like rights and duties. The Trustee
is also subject to Sections 7.10 and 7.11 hereof.

 

SECTION 7.04.            TRUSTEE’S
DISCLAIMERS.

 

The Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Company’s use of the proceeds from the Notes or any money paid to the Company
or upon the Company’s direction under any provision of this Indenture, it shall
not be responsible for the use or application of any money received by any
Paying Agent other than the Trustee, and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.

 

SECTION 7.05.            NOTICE
OF DEFAULTS.

 

If a Default or
Event of Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail to Holders of Notes in the manner and to the extent provided
in TIA §313(c) a notice of the Default or Event of Default within 90 days after
it occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers
in good faith determines that withholding the notice is in the interests of the
Holders of the Notes.

 

SECTION 7.06.            REPORTS
BY TRUSTEE TO HOLDERS OF THE NOTES.

 

Within 60 days
after each May 15 beginning with the May 15 following the date of this
Indenture, and for so long as Notes remain outstanding, the Trustee shall mail
to the Holders of the Notes a brief report dated as of such reporting date that
complies with TIA §313(a) (but if no event described in TIA §313(a) has
occurred within the twelve months preceding the reporting date, no report need
be transmitted). The Trustee also shall comply with TIA §313(b)(2). The Trustee
shall also transmit by mail all reports as required by TIA §313(c).

 

A copy of each
report at the time of its mailing to the Holders of Notes shall be mailed to
the Company and filed with the Commission and each stock exchange on which the
Notes are listed in accordance with TIA §313(d). The Company shall promptly
notify the Trustee when the Notes are listed on any stock exchange.

 

SECTION 7.07.            COMPENSATION
AND INDEMNITY.

 

The Company shall
pay to the Trustee from time to time such compensation as the Company and the
Trustee shall from time to time agree in writing for its acceptance of this
Indenture and services hereunder. The

 

47

 

Trustee’s compensation shall not be limited by any law on compensation
of a trustee of an express trust. The Company shall reimburse the Trustee
promptly upon request for all reasonable disbursements, advances and expenses
incurred or made by it in addition to the compensation for its services. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee’s agents and counsel.

 

The Company shall
indemnify the Trustee or any predecessor Trustee against any and all losses,
claims, damages, penalties, fines, liabilities or expenses, including
incidental and out-of-pocket expenses and reasonable attorneys fees (“losses”)
incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Company (including this
Section 7.07) and defending itself against any claim (whether asserted by the
Company or any Holder or any other Person) or liability in connection with the
exercise or performance of any of its powers or duties hereunder, except to the
extent any such losses may be attributable to its negligence or bad faith. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.

 

The obligations of
the Company under this Section 7.07 shall survive the satisfaction and
discharge of this Indenture and, to the extent permitted by law, any rejection
or termination under any bankruptcy plan.

 

When the Trustee
incurs expenses or renders services after an Event of Default specified in
Section 6.01(i) or (j) hereof occurs, the expenses and the compensation
for the services (including the fees and expenses of its agents and counsel)
are intended to constitute expenses of administration under any Bankruptcy Law.

 

To secure the
Company’s and the Guarantor’s payment obligations to the Trustee, the Trustee
shall have a lien prior to the Notes on all money or property held or collected
by the Trustee other than money or property held in trust to pay principal of
and interest on particular Notes.  The
Trustee’s rights to receive payment of any amounts due under this
Section 7.07 shall not be subordinate to any other liability or
Indebtedness of the Company or the Guarantors.

 

The Trustee shall
comply with the provisions of TIA §313(b)(2) to the extent applicable.

 

SECTION 7.08.            REPLACEMENT
OF TRUSTEE.

 

A resignation or
removal of the Trustee and appointment of a successor Trustee shall become
effective only upon the successor Trustee’s acceptance of appointment as provided
in this Section 7.08.

 

The Trustee may
resign in writing at any time and be discharged from the trust hereby created
by so notifying the Company. The Holders of Notes of a majority in principal
amount of the then outstanding Notes may remove the Trustee by so notifying the
Trustee and the Company in writing. The Company may remove the Trustee if:

 

(a)           the Trustee fails to comply with
Section 7.10 hereof;

 

(b)           the Trustee is adjudged a bankrupt or
an insolvent or an order for relief is entered with respect to the Trustee
under any Bankruptcy Law;

 

(c)           a custodian or public officer takes
charge of the Trustee or its property; or

 

(d)           the Trustee becomes incapable of
acting.

 

If the Trustee
resigns or is removed or if a vacancy exists in the office of Trustee for any
reason, the Company shall promptly appoint a successor Trustee. Within one year
after the successor Trustee takes office,

 

48

 

the Holders of a majority in principal amount of the then outstanding
Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.

 

If a successor
Trustee does not take office within 30 days after the retiring Trustee resigns
or is removed, the retiring Trustee, the Company, or the Holders of Notes of at
least 10% in principal amount of the then outstanding Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee.

 

If the Trustee,
after written request by any Holder of a Note who has been a Holder of a Note
for at least six months, fails to comply with Section 7.10, such Holder of
a Note may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.

 

A successor
Trustee shall deliver a written acceptance of its appointment to the retiring
Trustee and to the Company. Thereupon, the resignation or removal of the
retiring Trustee shall become effective, and the successor Trustee shall have
all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Holders of the
Notes. The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee, provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in
Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company’s obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.

 

SECTION 7.09.            SUCCESSOR
TRUSTEE BY MERGER, ETC.

 

If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.

 

SECTION 7.10.            ELIGIBILITY;
DISQUALIFICATION.

 

There shall at all
times be a Trustee hereunder that is a corporation organized and doing business
under the laws of the United States of America or of any state thereof that is
authorized under such laws to exercise corporate trustee power, that is subject
to supervision or examination by federal or state authorities and that has a
combined capital and surplus of at least $150,000,000 as set forth in its most
recent published annual report of condition.

 

This Indenture
shall always have a Trustee who satisfies the requirements of TIA §310(a)(1),
(2) and (5).  The Trustee is subject to
TIA §310(b).

 

SECTION 7.11.            PREFERENTIAL
COLLECTION OF CLAIMS AGAINST COMPANY.

 

The Trustee is
subject to TIA §311(a), excluding any creditor relationship listed in TIA
§311(b).  A Trustee who has
resigned or been removed shall be subject to TIA §311(a) to the extent
indicated therein.

 

ARTICLE 8.

DISCHARGE OF INDENTURE; DEFEASANCE

 

SECTION 8.01.            SATISFACTION
AND DISCHARGE.

 

This Indenture shall be discharged
and shall cease to be of further effect as to all Notes issued hereunder, when
(i) either (a) all Notes that have been authenticated, except lost, stolen or
destroyed Notes that have been replaced or paid and Notes for whose payment
money has been deposited in trust and thereafter repaid to the Company, have
been delivered to the Trustee for cancellation; or (b) all Notes that have not
been delivered to the Trustee for cancellation have become due and payable by
reason of the mailing of a notice of redemption or otherwise or will become due
and payable within one year and the Company or any Guarantor has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust
solely for the benefit of the Holders, cash in U.S. dollars,

 

49

 

non-callable Government
Securities, or a combination of cash in U.S. dollars and non-callable
Government Securities, in amounts as will be sufficient without consideration
of any reinvestment of interest, to pay and discharge the entire Indebtedness
on the Notes not delivered to the Trustee for cancellation for principal,
premium, if any, and accrued interest to the date of maturity or redemption;
(ii) no Default has occurred and is continuing on the date of the deposit or
will occur as a result of the deposit and the deposit will not result in a
breach or violation of, or constitute a default under, any other instrument to
which the Company or any Guarantor is a party or by which the Company or any
Guarantor is bound; (iii) the Company or any Guarantor has paid or caused to be
paid all sums payable by it under this Indenture; and (iv) the Company has
delivered irrevocable instructions to the Trustee under this Indenture to apply
the deposited money toward the payment of the Notes at maturity or the
redemption date, as the case may be.

 

In addition, the Company must deliver an Officers’ Certificate and an
Opinion of Counsel to the Trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.

 

SECTION 8.012.          OPTION
TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.

 

The Company may,
at its option and at any time, elect to have either Section 8.03 or 8.04
hereof be applied to all outstanding Notes and all obligations of the
Guarantors with respect to their Guarantees upon compliance with the conditions
set forth below in this Article 8.

 

SECTION 8.03.            LEGAL
DEFEASANCE AND DISCHARGE.

 

Upon the Company’s
exercise under Section 8.02 hereof of the option applicable to this
Section 8.03, the Company shall, subject to the satisfaction of the
conditions set forth in Section 8.05 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes and all
obligations of the Guarantors with respect to their Guarantees on the date the
conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this
purpose, Legal Defeasance means that the Company shall be deemed to have paid
and discharged the entire Indebtedness represented by the outstanding Notes and
Guarantees, which shall thereafter be deemed to be “outstanding” only for the
purposes of Section 8.06 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on written
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Notes to receive payments in respect of the principal
of, premium, if any, or interest on such Notes when such payments are due
solely from the trust fund described in Section 8.05 hereof, (b) the
Company’s obligations with respect to such Notes under Sections 2.06, 2.07,
2.10 and 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of
the Trustee hereunder and the Company’s obligations in connection therewith and
(d) this Article 8. Subject to compliance with this Article 8, the
Company may exercise its option under this Section 8.03 notwithstanding
the prior exercise of its option under Section 8.04 hereof.

 

SECTION 8.04.            COVENANT
DEFEASANCE.

 

Upon the Company’s
exercise under Section 8.02 hereof of the option applicable to this
Section 8.04, the Company shall, subject to the satisfaction of the
conditions set forth in Section 8.05 hereof, be released from its
obligations under Sections 4.03, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12,
4.13, 4.15, 4.16, 4.17 and 4.18 and Articles 5 and 10 hereof with respect to
the outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, “Covenant Defeasance”), and the Notes shall
thereafter be deemed not “outstanding” for the purposes of any direction, waiver,
consent or declaration or act of Holders (and the consequences of any thereof)
in connection with such covenants, but shall continue to be deemed
“outstanding” for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
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 covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof,
but, except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby. In addition, upon the Company’s exercise under

 

50

 

Section 8.02 hereof of the option applicable to this
Section 8.04 hereof, subject to the satisfaction of the conditions set
forth in Section 8.05 hereof, Sections 6.01(c) through 6.01(h) hereof
shall not constitute Events of Default.

 

SECTION 8.02.            CONDITIONS
TO LEGAL OR COVENANT DEFEASANCE.

 

The following
shall be the conditions to the application of either Section 8.03 or 8.04
hereof to the outstanding Notes:

 

In order to
exercise either Legal Defeasance or Covenant Defeasance:

 

(a)           the Company must irrevocably deposit
with the Trustee, in trust, for the benefit of the Holders, cash in United
States dollars, non-callable Government Securities, or a combination of cash in
U.S. dollars and non-callable Government Securities, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the outstanding Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date;

 

(b)           in the case of an election under
Section 8.03 hereof, the Company shall have delivered to the Trustee an
Opinion of Counsel reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the Issue Date, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;

 

(c)           in the case of an election under
Section 8.04 hereof, the Company shall have delivered to the Trustee an
Opinion of Counsel reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant Defeasance had not
occurred;

 

(d)           no Event of Default under
Section 6.01(i) or 6.01(j) hereof shall have occurred and be continuing at
any time in the period ending on the 91st day after the date of the
deposit;

 

(e)           such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or constitute a
default under, any material agreement or instrument (other than this Indenture)
to which Blount International or any of its Restricted Subsidiaries is a party
or by which Blount International or any of its Subsidiaries is bound;

 

(f)            the Company shall have delivered to
the Trustee an Opinion of Counsel to the effect that, assuming no intervening
bankruptcy of the Company or any Guarantor between the date of deposit and the
91st day following the deposit and assuming that no Holder is an “insider” of
the Company under applicable Bankruptcy Law, after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally;

 

(g)           the Company shall have delivered to
the Trustee an Officers’ Certificate stating that the deposit was not made by
the Company with the intent of preferring the Holders over any other creditors
of the Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company; and

 

(h)           the Company shall have delivered to
the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.

 

51

 

SECTION 8.03.            DEPOSITED
MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS
PROVISIONS.

 

Subject to
Section 8.07 hereof, all money and non-callable Government Securities
(including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.06, the
“Trustee”) pursuant to Section 8.05 hereof in respect of the outstanding
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as 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, premium, if any, and interest, but
such money 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 cash or non-callable Government Securities deposited pursuant
to Section 8.05 hereof 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 the outstanding Notes.

 

Anything in this
Article 8 to the contrary notwithstanding, the Trustee shall deliver or
pay to the Company from time to time upon the request of the Company any money
or non-callable Government Securities held by it as provided in
Section 8.05 hereof which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under
Section 8.05a) hereof), are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.

 

SECTION 8.04.            REPAYMENT
TO COMPANY.

 

Subject to
Section 7.07, 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,
premium, if any, or interest on any Note and remaining unclaimed for two years
after such principal, and premium, if any, or interest has become due and
payable shall be paid to the Company on its written request or (if then held by
the Company) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as a secured 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 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 The New York Times and The Wall Street
Journal (national edition), 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 notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.

 

SECTION 8.05.            REINSTATEMENT.

 

If the Trustee or
Paying Agent is unable to apply any United States dollars or non-callable
Government Securities in accordance with Section 8.03 or 8.04 hereof, as
the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company’s obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.03 or 8.04 hereof until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 8.03 or
8.04 hereof, as the case may be; provided, however, that, if the Company
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent.

 

52

 

ARTICLE 9.

AMENDMENT, SUPPLEMENT AND WAIVER

 

SECTION 9.01.            WITHOUT
CONSENT OF HOLDERS OF NOTES.

 

Notwithstanding
Section 9.02 hereof, the Company and the Trustee may amend, modify or
supplement this Indenture or the Notes without the consent of any Holder of a
Note:

 

(a)           to cure any ambiguity, defect or
inconsistency;

 

(b)           to provide for uncertificated Notes
in addition to or in place of certificated Notes;

 

(c)           to provide for the assumption of the
Company’s or any Guarantor’s obligations to the Holders of the Notes in the
case of a merger or consolidation or sale of all or substantially all of the
Company’s or such Guarantor’s assets, in any case permitted hereby;

 

(d)           to make any change that would provide
any additional rights or benefits to the Holders of the Notes;

 

(e)           to provide for the issuance of
Additional Notes in accordance with the provisions set forth in this Indenture;

 

(f)            to comply with requirements of the
Commission in order to effect or maintain the qualification of this Indenture under
the TIA; or

 

(g)           to make any other change, provided
that such other change does not adversely affect the legal rights hereunder of
any Holder of the Notes or to surrender any right or power conferred upon
Blount or the Guarantors;

 

(h)           to comply with the rules of any
applicable securities depository; or

 

(i)            to add Guarantees with respect to
the Notes or to secure the Notes.

 

The consent of the
Holders of the Notes is not necessary hereunder to approve the particular form
of any proposed amendment; it is sufficient if such consent approves the
substance of the proposed amendment.

 

Upon the request
of the Company accompanied by a resolution of its Board of Directors
authorizing the execution of any such amended or supplemental Indenture, and
upon receipt by the Trustee of the documents described in Section 7.02(b)
hereof, the Trustee shall join with the Company in the execution of any amended
or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that, by its express terms, affects its
own rights, duties or immunities under this Indenture or otherwise.

 

SECTION 9.02.            WITH
CONSENT OF HOLDERS OF NOTES.

 

Except as provided
below in this Section 9.02, the Company and the Trustee may amend, modify
or supplement this Indenture (including Sections 3.09, 4.10 and 4.15 hereof)
and the Notes may be amended, modified or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection
with a tender offer or exchange offer for the Notes), and, subject to Sections
6.04 and 6.07 hereof, any existing Default or Event of Default (other than a
Default or Event of Default in the payment of the principal of, premium, if
any, or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the

 

53

 

Notes).  Without the consent of
at least 75% in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, such Notes), no waiver or amendment to this Indenture may make any
change in the provisions of Article 10 hereof that adversely affects the
rights of any Holder of Notes. 
Section 2.08 hereof shall determine which Notes are considered to
be “outstanding” for purposes of this Section 9.02.

 

Upon the request
of the Company accompanied by a resolution of its Board of Directors
authorizing the execution of any such amended or supplemental Indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee
of the documents described in Section 7.02(b) hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental
Indenture unless such amended or supplemental Indenture, by its express terms,
affects the Trustee’s own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.

 

The Company may,
but shall not be obligated to, fix a record date for the purpose of determining
the Persons entitled to consent to any indenture supplemental hereto. If a
record date is fixed, the Holders on such record date, or their duly designated
proxies, and only such Persons, shall be entitled to consent to such
supplemental indenture, whether or not such Holders remain Holders after such
record date; provided that unless such consent shall have become
effective by virtue of the requisite percentage having been obtained prior to
the date which is 180 days after such record date, any such consent previously
given shall automatically and without further action by any Holder be canceled
and of no further effect.

 

It shall not be
necessary for the consent of the Holders of Notes under this Section 9.02
to approve the particular form of any proposed amendment or waiver, but it
shall be sufficient if such consent approves the substance thereof.

 

After an
amendment, supplement or waiver under this Section becomes effective, the
Company shall mail to the Holders of Notes affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such amended or supplemental Indenture or waiver.
Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in
aggregate principal amount of the Notes then outstanding may waive compliance
in a particular instance by the Company with any provision of this Indenture or
the Notes. However, without the consent of each Holder affected, an amendment
or waiver may not (with respect to any Notes held by a non-consenting Holder):

 

(a)           reduce the principal amount of Notes
whose Holders must consent to an amendment, supplement or waiver;

 

(b)           reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes;

 

(c)           reduce the rate of or change the time
for payment of interest on any Note;

 

(d)           waive a Default or Event of Default
in the payment of principal of or premium, if any, or interest on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes and a
waiver of the payment default that resulted from such acceleration);

 

(e)           make any Note payable in currency
other than that stated in the Notes;

 

(f)            make any change in the provisions of
this Indenture relating to waivers of past Defaults or the rights of Holders of
Notes to receive payments of principal of, or interest or premium, if any, on
the Notes;

 

(g)           waive a redemption payment with
respect to any Note;

 

54

 

(h)           release any Guarantor from any of its
obligations under its Guarantee or this Indenture, except in accordance with
the terms of this Indenture; or

 

(i)            make any change in the foregoing
amendment and waiver provisions.

 

SECTION 9.03.            COMPLIANCE
WITH TRUST INDENTURE ACT.

 

Every amendment or
supplement to this Indenture or the Notes shall be set forth in an amended or
supplemental Indenture that complies with the TIA as then in effect.

 

SECTION 9.04.            REVOCATION
AND EFFECT OF CONSENTS.

 

Until an
amendment, supplement or waiver becomes effective, a consent to it by a Holder
of a Note is a continuing consent by the Holder of a Note and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder’s Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.

 

SECTION 9.05.            NOTATION
ON OR EXCHANGE OF NOTES.

 

The Trustee may
place an appropriate notation about an amendment, supplement or waiver on any
Note thereafter authenticated. The Company in exchange for all Notes may issue
and the Trustee shall authenticate new Notes that reflect the amendment,
supplement or waiver.

 

Failure to make
the appropriate notation or issue a new Note shall not affect the validity and
effect of such amendment, supplement or waiver.

 

SECTION 9.06.            TRUSTEE
TO SIGN AMENDMENTS, ETC.

 

The Trustee shall
sign any amended or supplemental Indenture authorized pursuant to this
Article 9 if the amendment or supplement does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. The Company may not
sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be
fully protected in relying upon, an Officer’s Certificate and an Opinion of
Counsel stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture and that the supplemental indenture
will be valid and binding on the Company.

 

ARTICLE 10.

SUBORDINATION

 

SECTION 10.01.          AGREEMENT
TO SUBORDINATE.

 

The Company
agrees, and each Holder by accepting a Note agrees, that the Indebtedness
evidenced by the Notes is subordinated in right of payment, to the extent and
in the manner provided in this Article 10, to the prior payment in full in
cash or Cash Equivalents of all Obligations in respect of Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.

 

SECTION 10.02.          LIQUIDATION;
DISSOLUTION; BANKRUPTCY.

 

The holders of
Senior Debt shall be entitled to receive payment in full in cash of all Obligations
due in respect of Senior Debt before the Holders of Notes will be entitled to
receive any payment with respect to the

 

55

 

Notes (except that Holders of Notes may receive and retain Permitted
Junior Securities and payments made from the trust described in
Article 8), in the event of any distribution to creditors of the Company:
(i) in a liquidation or dissolution of Blount; (ii) in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to
Blount or its property; (iii) in an assignment for the benefit of creditors; or
(iv) in any marshaling of the Company’s assets and liabilities.

 

SECTION 10.03.          DEFAULT
ON DESIGNATED SENIOR DEBT.

 

The Company may
not make any payment or distribution to the Trustee or any Holder in respect of
Obligations with respect to the Notes and may not acquire from the Trustee or
any Holder any Notes for cash or property (other than (i) Permitted Junior
Securities and (ii) payments and other distributions made from any defeasance
trust created pursuant to Section 8.02 hereof) until all principal and
other Obligations with respect to the Senior Debt have been paid in full if:

 

(i)            a default in the payment of any
principal or other Obligations with respect to Designated Senior Debt occurs
and is continuing beyond any applicable grace period; or

 

(ii)           a default, other than a payment
default, on any series of Designated Senior Debt occurs and is continuing that
then permits holders of such series of Designated Senior Debt to accelerate its
maturity and the Trustee receives a written notice of the default (a “Payment
Blockage Notice”) from the holders of or a Representative with
respect such series of Designated Senior Debt. If the Trustee receives any such
Payment Blockage Notice, no subsequent Payment Blockage Notice shall be
effective for purposes of this Section unless and until (i) at least 360
days shall have elapsed since the delivery of the immediately prior Payment
Blockage Notice and (ii) all scheduled payments of principal, interest and premium,
if any, on the Notes that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice unless such default shall have been cured
or waived for a period of not less than 90 days.

 

The Company may
and shall resume payments on and distributions in respect of the Notes and may
acquire them upon the earlier of:

 

(1)           in the case of a payment default, the
date upon which such default is cured or waived, and

 

(2)           in the case of a nonpayment default
referred to in Section 10.03(ii) hereof, unless the maturity of any
Designated Senior Debt has been accelerated, upon the earliest of the dates on
which one of the following events occurs:

 

(a)           the Person who gave the Payment
Blockage Notice terminates the blockage period by written notice to the Trustee
and the Company;

 

(b)           the default giving rise to the
Payment Blockage Notice is cured, waived or otherwise no longer continuing (so
long as no other default in respect of such Designated Senior Debt exists);

 

(c)           the Designated Senior Debt has been
discharged or paid in full; or

 

(d)           179 days after the date on which the
applicable Payment Blockage Notice has been received,

 

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

 

56

 

SECTION 10.04.          ACCELERATION
OF SECURITIES.

 

If payment of the
Securities is accelerated because of an Event of Default, the Company shall
promptly notify holders of Senior Debt of the acceleration.

 

SECTION 10.05.          WHEN
DISTRIBUTION MUST BE PAID OVER.

 

In the event that
the Trustee or any Holder receives any payment of any Obligations with respect
to the Notes at a time when the Trustee or such Holder, as applicable, has
actual knowledge that such payment is prohibited by this Article 10, such
payment shall be held by the Trustee or such Holder, in trust for the benefit
of, and shall be paid forthwith over and delivered, upon written request, to,
the holders of Senior Debt as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to
which Senior Debt may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to
Senior Debt remaining unpaid to the extent necessary to pay such Obligations in
full in accordance with their terms, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Debt.

 

With respect to
the holders of Senior Debt, the Trustee undertakes to perform only such
obligations on the part of the Trustee as are specifically set forth in this
Article 10, and no implied covenants or obligations with respect to the
holders of Senior Debt shall be read into this Indenture against the Trustee.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Debt, and shall not be liable to any such holders if the Trustee shall
pay over or distribute to or on behalf of Holders or the Company or any other
Person money or assets to which any holders of Senior Debt shall be entitled by
virtue of this Article 10, except if such payment is made as a result of
the willful misconduct or negligence of the Trustee.

 

SECTION 10.06.          NOTICE
BY COMPANY

 

The Company shall
promptly notify in writing the Trustee and the Paying Agent of any facts known
to the Company that would cause a payment of any Obligations with respect to
the Notes to violate this Article 10, but failure to give such notice
shall not affect the subordination of the Notes to the Senior Debt as provided
in this Article 10.

 

SECTION 10.07.          SUBROGATION.

 

After all Senior
Debt is paid in full in cash and until the Notes are paid in full, Holders of
Notes shall be subrogated (equally and ratably with all other Indebtedness pari passu
with the Notes) to the rights of holders of Senior Debt to receive
distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the Holders of Notes have been applied to the payment of
Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on the Notes.

 

SECTION 10.08.          RELATIVE
RIGHTS.

 

This
Article 10 defines the relative rights of Holders of Notes and holders of
Senior Debt. Nothing in this Indenture shall:

 

(1)           impair, as between the Company and
Holders of Notes, the obligation of the Company, which is absolute and
unconditional, to pay principal of and interest on the Notes in accordance with
their terms;

 

(2)           affect the relative rights of Holders
of Notes and creditors of the Company other than their rights in relation to
holders of Senior Debt; or

 

(3)           prevent the Trustee or any Holder of
Notes from exercising its available remedies upon a Default or Event of
Default, subject to (i) the rights of holders and owners of

 

57

 

Senior Debt to
receive distributions and payments otherwise payable to Holders of Notes and
(ii) the notice provisions of Section 6.02 hereof.

 

If the Company
fails because of this Article 10 to pay principal of or interest on a Note
on the due date, the failure is still a Default or Event of Default.

 

SECTION 10.09.          SUBORDINATION
MAY NOT BE IMPAIRED BY COMPANY.

 

No right of any
holder of Senior Debt to enforce the subordination of the Indebtedness
evidenced by the Notes shall be impaired by any act or failure to act by the
Company or any Holder or by the failure of the Company or any Holder to comply
with this Indenture.

 

SECTION 10.10.          DISTRIBUTION
OR NOTICE TO REPRESENTATIVE.

 

Whenever a
distribution is to be made or a notice given to holders of Senior Debt, the
distribution may be made and the notice given to their Representative.

 

Upon any payment
or distribution of assets of the Company referred to in this Article 10,
the Trustee and the Holders of Notes shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction or upon any certificate
of such Representative or of the liquidating trustee or agent or other Person
making any distribution to the Trustee or to the Holders of Notes for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this
Article 10.

 

SECTION 10.11.          RIGHTS
OF TRUSTEE AND PAYING AGENT.

 

Notwithstanding
the provisions of this Article 10 or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts that would prohibit the making of any payment or distribution by the
Trustee, and the Trustee and the Paying Agent may continue to make payments on
the Notes, unless the Trustee shall have received at its Corporate Trust Office
at least three Business Days prior to the date of such payment written notice
of facts (in the form of an officer’s certificate) that would cause the payment
of any Obligations with respect to the Notes to violate this Article 10.
Only the Company or a Representative may give the notice. Nothing in this
Article 10 shall impair the claims of, or payments to, the Trustee under
or pursuant to Section 7.07 hereof.

 

The Trustee in its
individual or any other capacity may hold Senior Debt with the same rights it
would have if it were not Trustee. Any Agent may do the same with like rights.

 

SECTION 10.12.          AUTHORIZATION
TO EFFECT SUBORDINATION.

 

Each Holder of
Notes, by the Holder’s acceptance thereof, authorizes and directs the Trustee
on such Holder’s behalf to take such action as may be necessary or appropriate
to effectuate the subordination as provided in this Article 10, and
appoints the Trustee to act as such Holder’s attorney-in-fact for any and all
such purposes. If the Trustee does not file a proper proof of claim or proof of
debt in the form required in any proceeding referred to in Section 6.09
hereof at least 30 days before the expiration of the time to file such claim,
the credit agents are hereby authorized to file an appropriate claim for and on
behalf of the Holders of the Notes.

 

SECTION 10.13.          AMENDMENTS.

 

The provisions of
this Article 10 shall not be amended or modified without the written
consent of the holders of at least 75% in aggregate principal amount of the
Notes then outstanding if such amendment would adversely affect the rights of
Holders of Notes.

 

58

 

ARTICLE 11.

GUARANTEES

 

SECTION 11.01.          GUARANTEES.

 

Subject to
Section 11.04 hereof, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its successors and assigns,
the Notes and the Obligations of the Company hereunder and thereunder, that:
(a) the principal of, premium, if any, and interest on the Notes will be
promptly paid in full when due, subject to any applicable grace period, whether
at maturity, by acceleration, redemption or otherwise, and interest on the
overdue principal, premium, if any (to the extent permitted by law) and
interest on any interest, if any, on the Notes, and all other payment
Obligations of the Company to the Holders or all other obligations of the
Company to the Trustee hereunder or thereunder will be promptly paid in full
and performed, all in accordance with the terms hereof and thereof; and (b) in
case of any extension of time of payment or renewal of any Notes or any of such
other Obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, subject to any
applicable grace period, whether at stated maturity, by acceleration,
redemption or otherwise.  Failing
payment when so due of any amount so guaranteed or any performance so
guaranteed for whatever reason the Guarantors will be jointly and severally
obligated to pay the same immediately. 
An Event of Default under this Indenture or the Notes shall constitute
an event of default under the Guarantees, and shall entitle the Holders to
accelerate the obligations of the Guarantors hereunder in the same manner and
to the same extent as the Obligations of the Company.

 

The Guarantors
hereby agree that their obligations hereunder shall be unconditional,
irrespective of the validity or enforceability of the Notes or this Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder with respect to any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a Guarantor.  Each Guarantor
hereby waives diligence, presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that its Guarantee will not be discharged except by
complete performance of the Obligations contained in the Notes and this
Indenture.  If any Holder or the Trustee
is required by any court or otherwise to return to the Company, the Guarantors,
or any Note Custodian, Trustee, liquidator or other similar official acting in
relation to either the Company or the Guarantors, any amount paid by the
Company or any Guarantor to the Trustee or such Holder, the Guarantees, to the
extent theretofore discharged, shall be reinstated in full force and effect.  Each Guarantor agrees that it shall not be
entitled to, and hereby waives, any right of subrogation in relation to the
Holders in respect of any Obligations guaranteed hereby.  Each Guarantor further agrees that, as
between the Guarantors, on the one hand, and the Holders and the Trustee, on
the other hand, (x) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in Article 6 hereof for the purposes of its
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the Obligations guaranteed thereby, and (y) in
the event of any declaration of acceleration of such Obligations as provided in
Article 6 hereof, such Obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantor for the purpose of its
Guarantee.  The Guarantors shall have
the right to seek contribution from any non-paying Guarantor as provided in
Section 11.06 hereof so long as the exercise of such right does not impair
the rights of the Holders or the Trustee under the Guarantees or this
Indenture.

 

SECTION 11.02.          SUBORDINATION
OF GUARANTEE.

 

The Obligations of
each Guarantor under its Guarantee pursuant to this Article 11 shall be
junior and subordinated to the Senior Debt of such Guarantor on the same basis
as the Notes are junior and subordinated to Senior Debt of the Company.  For the purposes of the foregoing sentence,
the Trustee and the Holders shall have the right to receive and/or retain payments
by any of the Guarantors only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to this Indenture, including
Article 11 hereof.

 

59

 

SECTION 11.03.          EXECUTION
AND DELIVERY OF GUARANTEE.

 

(a)           To evidence its Guarantee set forth
in Section 11.01 hereof, each Guarantor hereby agrees that a notation of
such Guarantee substantially in the form of Exhibit B hereto shall be endorsed
by manual or facsimile signature by an Officer of such Guarantor on each Note
authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of such Guarantor, by manual or facsimile signature, by an
Officer of such Guarantor.

 

(b)           Each Guarantor hereby agrees that its
Guarantee set forth in Section 11.01 hereof shall remain in full force and
effect notwithstanding any failure to endorse on each Note a notation of such
Guarantee.

 

(c)           If an officer whose signature is on
this Indenture or on any Guarantee no longer holds that office at the time the
Trustee authenticates the Note on which such Guarantee is endorsed, such
Guarantee shall be valid nevertheless.

 

(d)           The delivery of any Note by the
Trustee, after the authentication thereof hereunder, shall constitute due
delivery of the Guarantees set forth in this Indenture on behalf of the
Guarantors.

 

(e)           In the event that Blount
International or the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.13
hereof, Blount International or the Company, as the case may be, shall cause
such Subsidiaries to execute supplemental indentures to this Indenture and
Guarantees in accordance with Section 4.13 hereof and this
Article 11, to the extent applicable.

 

SECTION 11.04.          GUARANTORS
MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.

 

(a)           Except as set forth in Articles 4 and
5 hereof, nothing contained in this Indenture shall prohibit a merger between a
Guarantor and another Guarantor or a merger between a Guarantor and the
Company.

 

(b)           No Guarantor shall consolidate with
or merge with or into (whether or not such Guarantor is the surviving Person)
or sell or otherwise dispose of all or substantially all of its assets to,
another Person (other than the Company or another Guarantor) unless (i)
immediately after giving effect to such transaction, no Default exists and (ii)
either (x) the Person formed by or surviving any such merger or consolidation,
or to which such sale of assets shall have been made (if other than such
Guarantor) assumes all the obligations of such Guarantor under this Indenture
and its Guarantee pursuant to a supplemental indenture substantially in the
form of Exhibit C hereto, or (y) the Net Proceeds of such transaction are
applied in accordance with Section 4.10 hereof.  Notwithstanding the foregoing, any Guarantor that is a Subsidiary
of Blount International may merge with another Subsidiary of Blount
International that will be a Guarantor immediately following such merger, has
no significant assets or liabilities and was incorporated solely for the
purpose of reincorporating such Guarantor in another State of the United States
so long as the amount of Indebtedness of Blount International and its
Restricted Subsidiaries is not increased thereby.

 

(c)           In the case of any such
consolidation, merger, sale or conveyance and upon the assumption by the
successor Person, by supplemental indenture, executed and delivered to the
Trustee and substantially in the form of Exhibit C hereto, of the Guarantees
endorsed upon the Notes and the due and punctual performance of all of the
covenants and conditions of this Indenture to be performed by the Guarantor,
such successor Person shall succeed to and be substituted for the Guarantor
with the same effect as if it had been named herein as a Guarantor.  Such successor Person thereupon may cause to
be signed any or all of the Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee.  All of
the Guarantees so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Guarantees
had been issued at the date of the execution hereof.

 

60

 

SECTION 11.05.          RELEASES
OF GUARANTEES.

 

(a)           In the event of (i) a sale or other
disposition of all or substantially all of the assets of any Guarantor that is
a Subsidiary of Blount International, or (ii) a sale or other disposition of
all of the Capital Stock of any Guarantor that is a Subsidiary of Blount
International, in each case to a Person that is not (either before or after
giving effect to such transaction) a Subsidiary of Blount International, then
such Guarantor shall be automatically released and relieved of any obligations
under this Indenture and its Guarantee; provided that (i) the Net Proceeds from
such sale or other disposition are treated in accordance with the provisions of
Section 4.10 hereof and (ii) the Company and Blount International are in
compliance with all other provisions of this Indenture applicable to such
disposition.

 

(b)           Upon the designation of a Guarantor
that is a Subsidiary of Blount International by Blount International as an
Unrestricted Subsidiary or a Receivables Subsidiary in accordance with the
terms of this Indenture, such Guarantor shall be released and relieved of any
obligations under this Indenture and its Guarantee.

 

(c)           In the event of the Company’s
exercise of its option under Section 8.02 hereof, each Guarantor that is a
Subsidiary of Blount International shall be released and relieved of any
obligations under this Indenture and its Guarantee.

 

(d)           Upon delivery by the Company to the
Trustee of an Officers’ Certificate to the effect of any of the foregoing, the
Trustee shall execute any documents reasonably required in order to evidence
the release of any Guarantor that is a Subsidiary of Blount International from
its obligations under its Guarantee. 
Any such Guarantor not released from its obligations under its Guarantee
shall remain liable for the full amount of principal of, premium, if any, and
interest on the Notes and for the other obligations of such Guarantor under
this Indenture as provided in this Article 11.

 

SECTION 11.06.          LIMITATION
ON GUARANTOR LIABILITY; CONTRIBUTION.

 

(a)           For purposes hereof, each Guarantor’s
liability shall be limited to the lesser of (i) the aggregate amount of the
Obligations of the Company under the Notes and this Indenture and (ii) the
maximum amount that will result in the obligations of such Guarantor under its
Guarantee not constituting a fraudulent transfer or conveyance under applicable
law of any relevant jurisdiction; provided that, it will be a presumption in
any lawsuit or other proceeding in which a Guarantor is a party that the amount
guaranteed pursuant to its Guarantee is the amount set forth in clause (i)
above unless any creditor, or representative of creditors of such Guarantor, or
debtor in possession or trustee in bankruptcy of the Guarantor, otherwise
proves in such a lawsuit that the aggregate liability of the Guarantor is the
amount set forth in clause (ii) above. 
In making any determination as to solvency or sufficiency of capital of
a Guarantor in accordance with the previous sentence, the right of such
Guarantor to contribution from other Guarantors as set forth below, and any
other rights such Guarantor may have, contractual or otherwise, shall be taken
into account.

 

(b)           In order to provide for just and
equitable contribution among the Guarantors, the Guarantors agree, inter se,
that in the event any payment or distribution is made by any Guarantor (a “Funding
Guarantor”) under its Guarantee, such Funding Guarantor shall be
entitled to a contribution from all other Guarantors in a pro rata amount based on the
Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in
discharging the Company’s Obligations with respect to the Notes or any other
Guarantor’s obligations with respect to its Guarantee.

 

ARTICLE 12.

MISCELLANEOUS

 

SECTION 12.01.          TRUST
INDENTURE ACT CONTROLS.

 

If any provision
of this Indenture limits, qualifies or conflicts with the duties imposed by TIA
§318(c), the imposed duties shall control.

 

61

 

SECTION 12.02.          NOTICES.

 

Any notice or
communication by the Company or the Trustee to the others is duly given if in
writing and delivered in Person or mailed by first class mail (registered or
certified, return receipt requested), telecopier or overnight air courier
guaranteeing next day delivery, to the others’ address:

 

If to the Company
or any Guarantor:

 

Blount, Inc.

4520 Executive Park Drive

Montgomery, Alabama 36116-1602

Attention: 
Richard H. Irving, III

(Fax: 
334-271-8177)

and John M. Panettiere

(Fax:  334-271-8177)

 

With a copy to:

 

Cravath, Swaine & Moore

Worldwide Plaza

825 Eighth Avenue

New York, New York 10019

Attention: 
Ronald Cami

(Fax:  212-474-3700)

 

If to the Trustee:

 

The Bank of New York

700 S. Flower St., Suite 500

Los Angeles, CA 90017

Attention: Sandee
Parks

(Fax: 213-630-6298)

 

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

 

All notices and
communications (other than those sent to Holders) shall take effect at the time
of receipt thereof.

 

Any notice or
communication to a Holder shall be mailed by first class mail, certified or
registered, return receipt requested, or by overnight air courier guaranteeing
next day delivery to its address shown on the register kept by the Registrar.
Any notice or communication shall also be so mailed to any Person described in
TIA §313(c), to the extent required by the TIA. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.

 

If a notice or
communication is mailed in the manner provided above within the time
prescribed, it is duly given, whether or not the addressee receives it.

 

If the Company
mails a notice or communication to Holders, it shall mail a copy to the Trustee
and each Agent at the same time.

 

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 Noteholders 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.

 

62

 

SECTION 12.03.          COMMUNICATIONS
BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.

 

Holders may
communicate pursuant to TIA §312(b) with other Holders with respect to their
rights under this Indenture or the Notes. The Company, the Trustee, the
Registrar and anyone else shall have the protection of TIA §312(c).

 

SECTION 12.04.          CERTIFICATE
AND OPINION AS TO CONDITIONS PRECEDENT.

 

Upon any request
or application by the Company to the Trustee to take any action under this
Indenture, the Company shall furnish to the Trustee:

 

(a)           an Officers’ Certificate in form and
substance reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 12.05 hereof) stating that, in the opinion
of the signers, all conditions precedent and covenants, if any, provided for in
this Indenture relating to the proposed action have been satisfied; and

 

(b)           an Opinion of Counsel in form and
substance reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 12.05 hereof) stating that, in the opinion
of such counsel, all such conditions precedent have been satisfied.

 

SECTION 12.05.          STATEMENTS
REQUIRED IN CERTIFICATE OR OPINION.

 

Each certificate
or opinion with respect to compliance with a condition or covenant provided for
in this Indenture (other than a certificate provided pursuant to TIA
§314(a)(4)) shall comply with the provisions of TIA §314(e) and shall include:

 

(a)           a statement that the Person making
such certificate or opinion has read such covenant or condition and the
definitions relating thereto;

 

(b)           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;

 

(c)           a statement that, in the opinion of
such Person, he or she 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 satisfied; and

 

(d)           a statement as to whether or not, in
the opinion of such Person, such condition or covenant has been satisfied.

 

SECTION 12.06.          RULE
BY TRUSTEE AND AGENTS.

 

The Trustee may
make reasonable rules for action by or at a meeting of Holders. The Registrar
or Paying Agent may make reasonable rules and set reasonable requirements for
its functions.

 

SECTION 12.07           NO
PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS.

 

No director,
officer, employee, incorporator or stockholder of the Company or any Guarantor,
as such, shall have any liability for any obligations of the Company or the
Guarantors under the Notes, this Indenture, the Guarantees or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.

 

63

 

SECTION 12.08.          GOVERNING
LAW.

 

THE INTERNAL LAW
OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE,
THE NOTES AND THE GUARANTEES.

 

SECTION 12.09.          NO
ADVERSE INTERPRETATION OF OTHER AGREEMENTS.

 

This Indenture may
not be used to interpret any other indenture, loan or debt agreement of the
Company or its Subsidiaries or of any other Person. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.

 

SECTION 12.10.          SUCCESSORS.

 

All agreements of
the Company in this Indenture and the Notes shall bind its successors.  All agreements of the Trustee in this
Indenture shall bind its successors.

 

SECTION 12.11.          SEVERABILITY.

 

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 12.12.          COUNTERPART
ORIGINALS.

 

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

 

SECTION 12.13.          TABLE
OF CONTENTS, HEADINGS, ETC.

 

The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.

 

[Signatures on following pages]

 

64

 

SIGNATURES

 

Dated as of
August [   ], 2004

 

	
   

  	
  BLOUNT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BLOUNT INTERNATIONAL,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   Title:

  
	
   

  	
   

  
	
   

  	
  BI, L.L.C.

  
	
   

  	
   

  	
  By:  Blount, Inc. as Member of BI, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  	
  By:  4520 Corp., Inc. as Member of BI, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OMARK PROPERTIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  4520 CORP., INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GEAR PRODUCTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   Title:

  
					

 

S-1

 

	
   

  	
  DIXON INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WINDSOR FORESTRY TOOLS
  LLC

  
	
   

  	
   

  	
  By:  Blount,
  Inc. as Member of Windsor Forestry

  Tools LLC

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FREDERICK MANUFACTURING
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FABTEK CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  THE
  BANK OF NEW YORK,

  as Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
							

 

S-2

 

EXHIBIT A

(Face of Note)

 

CUSIP/CINS  [   ]

 

[   ]%
Senior Subordinated Notes due 2012

 

	
  No.

  	
   

  	
  $

  	
   

  

 

BLOUNT, INC.

 

promises to pay to

 

or registered assigns,

 

the principal sum of

 

Dollars on
[        ], 2012.

 

Interest Payment
Dates: 
[         ] and
[         ].

 

Record Dates: 
[        ] and
[         ].

 

	
   

  	
  Dated:  [

  	
   

  	
  ]

  
	
   

  	
   

  
	
   

  	
  BLOUNT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  This is one of the
  [Global]

  Notes referred to in the

  	
   

  
	
   

  	
   

  
	
  within-mentioned
  Indenture:

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  THE
  BANK OF NEW YORK,

  as Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
										

 

A1-1

 

(Back of Note)

[  ]% Senior Subordinated Notes due 2012

 

[THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.](1)

 

Capitalized terms
used herein shall have the meanings assigned to them in the Indenture referred
to below unless otherwise indicated.

 

1.             INTEREST.  Blount,
Inc., a Delaware corporation (“Blount” or the “Company”), promises
to pay interest on the principal amount of this Note at [  ]% per
annum from August [  ], 2004 until maturity. The Company will
pay interest semi-annually on
[        ] and
[       ] of each year, or if any such day
is not a Business Day, on the next succeeding Business Day (each, an “Interest
Payment Date”), with the same force and effect as if
made on the date for such payment. Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance; provided that if there is no existing
Default in the payment of interest, and if this Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided,
further, that the first Interest Payment Date shall be
[        ], 2005.  Interest will be computed on the basis of a
360-day year of twelve 30-day months.

 

2.             METHOD OF
PAYMENT.  The Company will
pay interest on the Notes (except defaulted interest) to the Persons who are
registered Holders of Notes at the close of business on the
[       ] or
[        ] next (whether or not a
Business Day) preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date.
The Notes will be payable as to principal, premium, if any, and interest at the
office or agency of the Company maintained for such purpose within The City and
State of New York, or, at the option of the Company, payment of interest may be
made by check mailed to the Holders at their addresses set forth in the
register of Holders; provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest and premium, if any, on, all Global Notes and all other Notes the
Holders of which shall have provided wire transfer instructions to the Company
or the Paying Agent.  Such payment shall
be 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.

 

3.             PAYING AGENT
AND REGISTRAR.  Initially,
The Bank of New York, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any
such capacity.

 

4.             INDENTURE; SUBORDINATION.  The Company issued the Notes under an Indenture dated
as of [        ], 2004 (the “Indenture”)  among
the Company, the Guarantors named therein and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code §§ 77aaa-77bbbb). The Notes are subject to all such terms, and Holders
are referred to the Indenture and the TIA for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Notes issuable under the Indenture are obligations of the Company.

 

The Notes are
subordinated in right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash or Cash Equivalents of all
Obligations in respect of Senior Debt, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed.  The Guarantees in respect of the

 

(1)          This
paragraph should be included only if the Note is issued in global form .

 

A-2

 

Notes will be
subordinated in right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash or Cash Equivalents of all
Senior Debt of each Guarantor, whether outstanding on the date of the Indenture
or thereafter created, incurred assumed or guaranteed.  Each Holder by its acceptance hereof agrees
to be bound by such provisions and authorizes and expressly directs the
Trustee, on its behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee its attorney-in-fact for such purposes.

 

5.             OPTIONAL
REDEMPTION.

 

(a)  Except as set forth in clause (b) of this
paragraph 5,  the
Notes shall not be redeemable at the Company’s option prior to
[       ], 2008. Thereafter, the Notes shall
be subject to redemption at any time at the option of the Company, in whole or
in part, upon not less than 30 nor more than 60 days’ notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and any other amounts due, if any, on the Notes to
the applicable redemption date, if redeemed during the twelve-month period
beginning on [       ] of the years indicated
below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2008

  	
   

  	
  [      ]

  	
  %

  
	
  2009

  	
   

  	
  [      ]

  	
  %

  
	
  2010
  and thereafter

  	
   

  	
  100.000

  	
  %

  

 

(b)  Notwithstanding the foregoing, prior to
[      ], 2007, the Company may on any
one or more occasions redeem up to an aggregate of 35% of the Notes originally
issued at a redemption price of [   ]%
of the principal amount thereof, plus accrued and unpaid interest and any other
amounts due, if any, on the Notes to the redemption date (subject to the right
of Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), with the net cash proceeds of one or more
Equity Offerings by the Company or the net cash proceeds of one or more Equity
Offerings by Blount International that are contributed to the Company as common
equity capital; provided that at least 65%  of the Notes originally
issued remain outstanding immediately after the occurrence of each such
redemption (excluding Notes held by Blount International, the Company and their
Subsidiaries); and provided, further, that any such redemption
must occur within 90 days of the date of the closing of such Equity Offering.

 

6.             MANDATORY
REDEMPTION.

 

Except as set
forth in paragraph 7 below, the Company shall not be required to make mandatory
redemption payments with respect to the Notes.

 

7.             REPURCHASE
AT OPTION OF HOLDER.

 

(a)  If there is a Change of Control, the Company
shall be required to make an offer (a “Change of Control Offer”)  to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
each Holder’s Notes at a purchase price equal to 101% of aggregate principal
amount thereof plus accrued and unpaid interest and any other amounts due, if
any, on the Notes to the date of purchase (in either case, the “Change of
Control Payment”).  Within
30 days following any Change of Control, the Company shall mail a notice to
each Holder setting forth the procedures governing the Change of Control Offer
as required by the Indenture.

 

(b)           If the Company or any of its
Restricted Subsidiaries consummates any Asset Sales, when the aggregate amount
of Excess Proceeds exceeds $20,000,000, the Company will be required to make an offer to all
Holders of Notes and any other Indebtedness that ranks pari passu with the Notes
that, by its terms, requires the Company to offer to repurchase such
Indebtedness with such Excess Proceeds (an “Asset Sale Offer”), to purchase the
maximum principal amount of Notes and such other pari passu Indebtedness that
may be purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount of Notes and other Indebtedness to
be purchased or the lessor amount required under agreements governing such
other Indebtedness, plus accrued and unpaid interest to the date of purchase,
in accordance with the procedures set forth in the Indenture. To the extent
that the aggregate amount of Notes or pari passu Indebtedness tendered pursuant
to an Asset Sale

 

A-3

 

Offer is less than the Excess Proceeds, the Company
may use any Excess Proceeds for any purpose not prohibited by the Indenture. If
the aggregate principal amount of Notes or pari passu Indebtedness surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis.  Holders
of Notes that are the subject of an offer to purchase will receive an Asset
Sale Offer from the Company prior to any related purchase date and may elect to
have such Notes purchased by completing the form entitled “Option of Holder to
Elect Purchase” on the reverse of the Notes.

 

8.             NOTICE OF
REDEMPTION. Notice of redemption will be mailed at least 30 days but
not more than 60 days before the redemption date to each Holder whose Notes are
to be redeemed at its registered address. Notes in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000, unless
all of the Notes held by a Holder are to be redeemed. On and after the
redemption date interest ceases to accrue on Notes or portions thereof called
for redemption.

 

9.             DENOMINATIONS,
TRANSFER, EXCHANGE. The Notes are in registered form without coupons
in denominations of $1,000 and integral multiples of $1,000. The transfer of
Notes may be registered and Notes may be exchanged as provided in the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the transfer
of any Note or portion of a Note selected for redemption, except for the
unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date
and the corresponding Interest Payment Date.

 

10.           PERSONS DEEMED OWNERS.  The registered Holder of a Note
may be treated as its owner for all purposes.

 

11.           AMENDMENT, SUPPLEMENT AND WAIVER.  Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the Indenture
or the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes. Without the consent of any
Holder of a Note, the Indenture or the Notes may be amended or supplemented to
cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company’s obligations to Holders of the Notes in case of a
merger or consolidation or sale of all or substantially all of the Company’s
assets, to provide for the assumption of Blount International’s obligations to
Holders of Notes in respect of the Guarantees in the case of a merger or
consolidation or sale of all or substantially all of Blount International’s assets,
to make any change that would provide any additional rights or benefits to the
Holders of the Notes or any other change that does not adversely affect the
legal rights under the Indenture of any such Holder or to surrender any right
or power conferred upon the Company or Blount International, to provide for the
issuance of Additional Notes in accordance with the Indenture, or to comply
with the requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.

 

12.           DEFAULTS AND REMEDIES. An “Event of
Default”  occurs if: (i) the Company defaults
in the payment when due of interest on the Notes and such default continues for
a period of 30 days whether or not prohibited by Article 10 of the Indenture;
(ii) the Company defaults in the payment when due of the principal of or
premium, if any, on the Notes whether or not prohibited by Article 10 of
the Indenture; (iii) Blount International or any of its Restricted
Subsidiaries fails to purchase any of the Notes as required under the
provisions of Section 4.10 or 4.15 of the Indenture, or comply with the
provisions of Section 5.01 of the Indenture; (iv) Blount
International or any of its Restricted Subsidiaries fails to comply with the provisions
of Sections 4.10 (other than a failure to purchase Notes), 4.15 (other than a
failure to purchase Notes), 4.07 and 4.09 for 30 days after notice of such
failure has been given; (v) Blount International or any of its Restricted
Subsidiaries fails to observe or perform any other agreements in the Indenture
or the Notes for 60 days after notice of such failure has been given;
(vi) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Blount International or any of its
Significant Subsidiaries (or the payment of which is guaranteed by Blount
International or any of its Significant Subsidiaries), whether such
Indebtedness or guarantee now exists, or is created after the Issue Date, which
default (A) is caused by a failure to pay principal of such Indebtedness at
final maturity and after giving effect to the applicable grace period, if any,
provided in such Indebtedness on the date of such default (a “Payment
Default”), or (B) results in the acceleration of

 

A-4

 

such Indebtedness
prior to its express maturity and, in each case, the principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates without duplication $25,000,000 or more;
(vii) Blount International or any of its Significant Subsidiaries fails to
pay final judgments aggregating in excess of $25,000,000, which judgments are
not paid, discharged or stayed for a period of 60 consecutive days;
(viii) except as permitted by the Indenture, if any Guarantee is held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason (other than in accordance with the terms of such Guarantee and the
Indenture) to be in full force and effect or any Guarantor, or if any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations
under its Guarantee; and (ix) certain events of bankruptcy or insolvency with
respect to Blount International or any of its Significant Subsidiaries.

 

In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Blount International or the Company,
all outstanding Notes will become due and payable without further action or
notice.  If any other Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately, provided that so long as any Indebtedness
permitted to be incurred pursuant to the Indebtedness under the Credit
Agreement shall be outstanding, the acceleration shall not be effective until
the earlier of (i) an acceleration of any Indebtedness under the Credit
Agreement or (ii) five Business Days after receipt by the Company of
written notice of the acceleration of the Notes.  Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default (except a Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.

 

If an Event of Default described in clause (vi) above has occurred
and is continuing, such Event of Default shall be automatically annulled if the
payment default triggering such Event of Default pursuant to clause (vi)
above shall be remedied or cured by Blount International or the applicable
Significant Subsidiary or waived by the holders of the relevant Indebtedness
within 60 days of its occurrence and all other Events of Default, if any,
under the Indenture have been cured and waived.

 

In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
[   ], 2008 by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding
the prohibition on redemption of the Notes prior to
[          ], 2008, then the
premium specified in the Indenture shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the Notes.

 

The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default and its consequences under the
Indenture except a continuing Default in the payment of interest on, or the
principal of, the Notes.

 

The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.

 

13.           TRUSTEE DEALINGS WITH COMPANY.  The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.

 

14.           NO RECOURSE AGAINST OTHERS.  A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any liability
for any obligations of the Company under the Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.

 

15.           AUTHENTICATION.  This Note shall not be valid
until authenticated by the manual signature of the Trustee or an authenticating
agent.

 

A-5

 

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

 

17.           CUSIP NUMBERS.  Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP, CINS and/or ISIN numbers to be printed on the Notes
and the Trustee may use CUSIP, CINS and/or ISIN numbers in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the Notes or as contained in any
notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.

 

18.           GOVERNING LAW.  The internal law of the State of New York
shall govern and be used to construe this Note.

 

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

 

Blount, Inc.

4909 SE International Way

Portland, Oregon 97222-4679

Attention: 
Richard H. Irving, III

(Fax: 
503-653-4593)

and [      ]

(Fax: 
[     ])

 

A-6

 

ASSIGNMENT FORM

 

To assign this Note, fill
in the form below:  (I) or (we) assign
and transfer this Note to

 

	
   

  
	
  (Insert
  assignee’s soc. sec. or tax I.D. no.)

  

 

 

 

 

 

 

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

and irrevocably appoint

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

 

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Your Signature:

  	
   

  
	
   

  	
    (Sign
  exactly as your name appears on the face of this Note)

  
	
   

  	
   

  
	
   

  	
  Tax Identification No.:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIGNATURE GUARANTEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

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

  
							

 

A-7

 

Option of Holder to Elect Purchase

 

If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:

 

	
  o 
  Section 4.10

  	
   

  	
  o 
  Section 4.15

  

 

If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture,
state the amount you elect to have purchased: 
$

 

	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
  (Sign exactly as your
  name appears on the Note)

  
	
   

  	
   

  
	
   

  	
  Tax Identification No.:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIGNATURE GUARANTEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

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

  
							

 

A-8

 

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL
NOTE(2)

 

The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note,
have been made:

 

	
  Date of Exchange

  	
   

  	
  Amount of decrease

  in Principal Amount

  of this Global Note

  	
   

  	
  Amount of increase

  in Principal Amount

  of this Global Note

  	
   

  	
  Principal Amount of

  this Global Note

  following such

  decrease

  (or increase)

  	
   

  	
  Signature of

  authorized officer of

  Trustee or Note

  Custodian

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(2)          This
should be included only if the Note is issued in global form.

 

A-9

 

EXHIBIT B

 

FORM OF NOTATION ON SENIOR SUBORDINATED NOTE RELATING
TO GUARANTEE

 

Subject to
Section 11.06 of the Indenture, each Guarantor hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its successors and assigns,
the Notes and the Obligations of the Company under the Notes or under the
Indenture, that: (a) the principal of, premium, if any, and interest on the
Notes will be promptly paid in full when due, subject to any applicable grace
period, whether at maturity, by acceleration, redemption or otherwise, and
interest on overdue principal, premium, if any (to the extent permitted by
law), and interest on any interest, if any, on the Notes and all other payment
Obligations of the Company to the Holders or the Trustee under the Indenture or
under the Notes will be promptly paid in full and performed, all in accordance
with the terms thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other payment Obligations, the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, subject to any applicable grace period, whether at stated
maturity, by acceleration, redemption or otherwise.  Failing payment when so due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors will be jointly
and severally obligated to pay the same immediately.

 

The obligations of
the Guarantors to the Holders and to the Trustee pursuant to this Guarantee and
the Indenture are expressly set forth in Article 11 of the Indenture, and
reference is hereby made to such Indenture for the precise terms of this
Guarantee.  The terms of Article 11
of the Indenture are incorporated herein by reference.  This Guarantee is subject to release as and
to the extent provided in Section 11.05 of the Indenture.

 

This is a
continuing Guarantee and shall remain in full force and effect and shall be
binding upon each Guarantor and its respective successors and assigns to the
extent set forth in the Indenture until full and final payment of all of the
Company’s Obligations under the Notes and the Indenture and shall inure to the
benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges herein conferred upon that party shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions hereof.  This is a
Guarantee of payment and not a guarantee of collection.

 

Each Guarantor
hereby waives diligence, presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that this Guarantee will not be discharged except by
complete performance of the Obligations contained in the Notes and the
Indenture.

 

This Guarantee
shall not be valid or obligatory for any purpose until the certificate of
authentication on the Note upon which this Guarantee is noted shall have been
executed by the Trustee under the Indenture by the manual signature of one of
its authorized officers.

 

This Guarantee is
subordinated in right of payment to the extent set forth in the Indenture.

 

For purposes
hereof, each Guarantor’s liability shall be limited to the lesser of (i) the
aggregate amount of the Obligations of the Company under the Notes and the
Indenture and (ii) the maximum amount that will result in the obligations of
such Guarantor under its Guarantee not constituting a fraudulent transfer or
conveyance under applicable law of any relevant jurisdiction.

 

Capitalized terms
used herein have the same meanings given in the Indenture unless otherwise
indicated.

 

B-1

 

	
  Dated:

  	
   

  
	
   

  	
   

  
	
   

  	
  BLOUNT INTERNATIONAL,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BI, L.L.C.

  
	
   

  	
   

  	
  By:  Blount,
  Inc. as Member of BI, L.L.C.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  	
  By:  4520
  Corp., Inc. as Member of BI, L.L.C.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OMARK PROPERTIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  4520 CORP., INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GEAR PRODUCTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DIXON INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

B-2

 

	
   

  	
  WINDSOR FORESTRY TOOLS
  LLC

  
	
   

  	
   

  	
  By:  Blount,
  Inc. as Member of Windsor Forestry

  Tools LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FREDERICK MANUFACTURING
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FABTEK CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

B-3

 

EXHIBIT C

 

FORM OF SUPPLEMENTAL INDENTURE

 

SUPPLEMENTAL
INDENTURE (this “Supplemental Indenture”), dated as of
                                  ,
                  
among Blount, Inc., a Delaware corporation (the “Company”) and Blount
International, Inc., a Delaware corporation (“Blount International”), and
BI, L.L.C., a Delaware limited liability company, Omark Properties, Inc., an
Oregon corporation, 4520 Corp., Inc., a Delaware corporation, Gear Products,
Inc., an Oklahoma corporation, Dixon Industries, Inc., a Kansas corporation,
Windsor Forestry Tools LLC, a Tennessee limited liability company, Frederick
Manufacturing Corporation, a Delaware corporation, Fabtek Corporation, a
Michigan corporation and [     ] (the “New Guarantor”)
(collectively, the “Guarantors”) and The Bank of New York, a
New York banking corporation, as trustee under the indenture referred to below
(the “Trustee”).  Capitalized terms used herein and not
defined herein shall have the meaning ascribed to them in the Indenture (as
defined below).

 

W I T N E S S E T H

 

WHEREAS, the
Company and the Guarantors have heretofore executed and delivered to the
Trustee an indenture (the “Indenture”), dated as of [              ],
2004, initially providing for the issuance of an aggregate principal amount of
$175,000,000 of [    ]% Senior Subordinated Notes due 2012
(together with any additional notes issued thereunder, the “Notes”);

 

WHEREAS,
Section 4.13 and Article 10 of the Indenture provides that under
certain circumstances Blount International or the Company may or must cause
certain of its Subsidiaries to execute and deliver to the Trustee a
supplemental indenture pursuant to which such respective Subsidiaries shall
unconditionally guarantee all of Blount International’s and the Company’s
Obligations under the Notes pursuant to a Guarantee on the terms and conditions
set forth herein; and

 

WHEREAS, pursuant
to Section 9.01 of the Indenture, the Trustee is authorized to execute and
deliver this Supplemental Indenture.

 

NOW THEREFORE, in
consideration of the foregoing and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the Company, the Guarantors
(including the New Guarantor) and the Trustee mutually covenant and agree for
the equal and ratable benefit of the Holders of the Notes as follows:

 

1.             CAPITALIZED TERMS.  Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.

 

2.             AGREEMENT TO GUARANTEE.  The New Guarantor hereby agrees, jointly and
severally with all other Guarantors, to guarantee the Company’s Obligations
under the Notes and the Indenture on the terms and subject to the conditions
set forth in Article 11 of the Indenture and to be bound by all other
applicable provisions of the Indenture.

 

3.             NO RECOURSE AGAINST OTHERS.  No past, present or future director,
officer, employee, incorporator, partner, member, shareholder or agent of any
Guarantor, as such, shall have any liability for any obligations of the Company
or any Guarantor under the Notes, any Guarantees, the Indenture or this
Supplemental Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. 
Each Holder by accepting a Note waives and releases all such
liability.  The waiver and release are
part of the consideration for issuance of the Notes.

 

4.             NEW YORK LAW TO GOVERN.  THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE.

 

C-1

 

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

 

6.             EFFECT OF HEADINGS.  The Section headings herein are for
convenience only and shall not affect the construction hereof.

 

7.             THE TRUSTEE.  The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the correctness of the recitals
of fact contained herein, all of which recitals are made solely by the New
Guarantor.

 

C-2

 

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

 

	
  Dated:

  	
  [NEW GUARANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BLOUNT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BLOUNT INTERNATIONAL,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BI, L.L.C.

  
	
   

  	
   

  	
  By:  Blount,
  Inc. as Member of BI, L.L.C.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  	
  By:  4520
  Corp., Inc. as Member of BI, L.L.C.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OMARK PROPERTIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  4520 CORP., INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

C-3

 

	
   

  	
  GEAR PRODUCTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DIXON INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WINDSOR FORESTRY TOOLS
  LLC

  
	
   

  	
   

  	
  By:  Blount,
  Inc. as Member of Windsor Forestry

  Tools LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FREDERICK MANUFACTURING
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FABTEK CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
  THE BANK OF NEW YORK,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
									

 

C-4

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